Archive for July, 2012

Charles Murray on Capitalism

July 31, 2012 Leave a comment

Charles Murray is a controversial guy, to say the least. His past and current books (the Bell Curve, Coming Apart to name two) are routinely debated in the public sphere with gusto. His latest op-ed in the Wall Street Journal is a must read:

Why Capitalism Has an Image Problem – Charles Murray

“Capitalism is the economic expression of liberty. The pursuit of happiness, with happiness defined in the classic sense of justified and lasting satisfaction with life as a whole, depends on economic liberty every bit as much as it depends on other kinds of freedom.”

Two Kings of the Gilded Age

July 20, 2012 Leave a comment

I consistently lament the decline and fall of oratory. There are few great orators to go and see any longer. Instead, live comedians or stage actors are a good alternative. Two of the great American communicators (by way of speaking and various forms of literature) were Mark Twain and Theodore Roosevelt. They also happened to be rivals, and had vastly different styles of writing and speaking—both extremely popular and successful. It’s worth noting how both men honed styles that fit their personality types—speaking/writing is never a one size fits all proposition. A new book on this topic is a fun way to explore the era, the rivalry, and to also learn about better mass communication. A great summer diversion.

The Two Kings of the Gilded Age – The Wall Street Journal

Mark Twain called Theodore Roosevelt the “most popular human being that has ever existed in the United States “; he also called him “far and away the worst president we have ever had.” Twain made these observations in his autobiography in 1906 but ordered them embargoed for 100 years.

Both were famous orators, and both preached. But Roosevelt ‘s style was direct and often bombastic, exhorting men to live a “strenuous life” and to fulfill their duty to their families and their country. Twain’s approach was sly and slow and full of Southern drawl; he lulled listeners with his pauses and slayed them with his punch lines.

Mr. McFarland has an especially keen ear for Twain’s speeches. He recounts a dinner talk at the Lotos Club in Manhattan just after the November 1900 elections that elevated Roosevelt from governor of New York to vice president. Twain said: “And now, for a while anyway, we shall not be stammering and embarrassed when a stranger asks us, “What is the name of the vice-president?’ [general laughter]. This one is known, this one is pretty well known [pause], pretty widely known [longer pause], and in some quarters [pause] favorably [much laughter over that last].”

The Path to Cheaper Healthcare Starts with Information

July 19, 2012 Leave a comment

If you wanna lower the cost of healthcare, it ain’t gonna come from insurance machinations or government mandates. It’ll come from the private sector, and it will come from the efficiencies of information technology, creating competitive prices:

“Imagine going to a supermarket where none of the prices was posted or checking into a hotel without knowing the room rate. That, in a nutshell, is what purchasing health care is like for millions of Americans covered by private health insurance. Your doctor tells you to get an MRI but fails to mention, usually because she doesn’t know, that it’ll cost you hundreds of dollars more to get it at the hospital next door than if you go to the clinic 2 miles away. No one is likely to tell a patient that a colonoscopy performed by the same gastroenterologist can cost $2,800 more at one hospital than another.

“This lack of price transparency costs Americans billions of dollars a year in unnecessary spending. A study by Thomson Reuters’ health care arm put the tab of such wasted dollars at $36 billion annually. Donald Berwick, the former head of the federal Centers for Medicare & Medicaid Services, says the lack of transparency and competitive pricing was responsible for between $84 billion and $174 billion in wasteful spending last year. Americans often pay several times more for MRIs and CT scans than people pay in other countries. “At some point the public will realize that it’s all their money,” says Berwick, now a senior fellow at the Center for American Progress.”

The Startup That Is X-Raying The Doctor BillsForbes

These sorts of things will be a great boon to consumers in the decades ahead, and will drive down costs in ways we can barely fathom now.

Life Imitates the Onion

July 17, 2012 Leave a comment

Well, if this doesn’t encapsulate the plight of newspaper media in the last decade, I’m not sure what does:

Economically Healthy ‘Daily Planet’ Now Most Unrealistic Part Of Superman Universe

“Other fans said The Daily Planet—which for some strange reason has not been acquired by multimillionaire Lex Luthor with a promise to give readers shorter articles with more sizzle—is so deeply woven into the Superman universe that they had no choice but to avoid the comic altogether. They said even the most exciting stories are routinely marred by absurd depictions of a publication that somehow flourishes in print and whose millions of loyal readers seem oblivious to the idea of getting news online faster and for free.

“The least they could do is have [Daily Planet editor-in-chief] Perry White be forced into retirement by an MBA 25 years his junior,” Taft continued. “It’d be a start.”

Note: the ramifications of this (that newspapers have been in decline for some years) very likely distorts their worldviews toward the dour. That is, if you worked in a world that was in a long-term recession, you’d probably have difficultly identifying the positives of the economy/world too. Don’t expect newspaper headlines to turn positive any time soon.

Don’t Think Like an Economist on Europe Anymore

July 13, 2012 Leave a comment

One of my largest recurring gripes is the way economic and financial theory hems folks in to narrow modes of thinking. Every single day for the last two years there have been oodles and oodles of economic analyses on the Europe situation in attempt to figure out how capital markets will react. Stop thinking like an economist—this is a political issue now.

It’s a common debate, as old as economics itself, to ask: Which trumps the other—economics or politics? This is a world where many unfathomable things take place regularly. Virtually no one could envision the LTRO, the EFSF, or any of the other creative “solutions” of the last couple years. And even if you could predict what the next jury-rigged mechanism will be, there’s no telling who or how or when it’ll happen. That’s because, yes, economics are forcing the hands of Europe ’s politicians, but in the end decisions are being made in the political forum.

There is no model or theory that guides here.

Tail Risk Is Not What You Think It Is

July 12, 2012 Leave a comment

“Tail risk” is all the rage today. There are products and prophesies galore on this supposed new topic.

To my mind, most don’t understand what tail risk is. The point of tail risk is that you can’t predict it, and so you then hedge nebulously to guard against the seemingly improbable. So let’s be clear: euro dissolution is not tail risk, though many believe it is. If you, and the rest of the civilized earth believe the euro will die, and that’s widely discussed in all corners of the galaxy, then that’s not a tail risk. Tail risk has an ineffable/unpredictable feature to it. Otherwise, it’s just fear-sodden doom and gloom that you can buy insurance against, often chopping expected returns and raising portfolio costs.

I guess you could sort of define Lehman Brothers as a tail risk. Except that banks fail pretty darn often through history—investment bank failures are not “8 standard deviation events.”  Sorry. I’ve seen a lot of banks fail and I’m relatively young.

Folks are chasing their tails all over the place tied to risk these days. Even if you do recognize tail risk as a real category, no event in the modern era has kept equity markets down for very long. Even 2008. Perpetually hedging against the ineffable has never been a great pathway to wealth, and still isn’t.

Ken Fisher and the Singularity

July 11, 2012 Leave a comment

I’m a fan of futurism. I don’t think most of it applies to how capital markets work (which price in 18 to 24 months into the future at the most), but contemplating theories of the future is, well, fun.

Here’s Ken Fisher’s take: Fisher Investments CEO heralds ‘the singularity

Some say the Singularity is hogwash. I don’t much care either way about the “singularity” part. What’s interesting is how regular and consistent the concept of accelerating change is throughout world history. Read more about Singularities in Ray Kurzweil’s book on the topic. It’s a great book, if dense.

This is a needed perspective: most artistic visions of the future are dystopic—it’s seldom we contemplate our future with true optimism, which we should do more often.



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