Time

Read an annoying Scott Adams piece this morning, where he makes a simple metaphysical linguistic error.

"Given that science can't find evidence for either God or time, it takes a leap of faith to assume either one exists. Therefore, anything in our daily life that depends on either God or time is built on a foundation of faith and not science."

The simple error is three separate applications of the word "exists". It is obvious that the normal meaning is to say whether something physically exists or not. My computer exists. My yacht does not exist. Time is obviously different from a physical thing. Time is not something that exists in the same way. "Time" is a term that describes an aspect of the way the physical things that do exist change. Therefore, no leap of faith exists in believing in time, because no one ever said time "exists" in the same way as my computer.

Adams furthers the equivocation by suggesting that belief in gods is of a similar nature. However, most people suggest that gods exist in some way that is different than describing a property of the arrangement of physical things. Neither term applies, so there must be some third meaning of exists, if it were to be true.

So what? A Wittgenstein-style diagnosis of equivocal statements, which attempt to fuzzy the use of terms is quite productive in exposing most philosophical blatherings as pure nonsense.

Typical Healthcare Nonsense

http://www.cnbc.com/id/30940076

"As a freelancer, Tolliver could work from wherever she and take playground breaks with her daughters. But a $1,200 monthly healthcare bill ultimately led her to take a job where insurance only costs her $200 per month."


It does not only cost her $200 per month, her employer is including the extra $1000 in her total compensation. I pay about $1200 per month for family healthcare- and I am taxed on it as income, as the owner of an S Corporation. If there was a government healthcare system that was similarly efficient, she would be paying $1200 in taxes per month for the healthcare. There is no magic fairy dust available from rearranging who pays whom.  And, offering luxurious benefits to more people only makes this problem worse.


My five point plan for saving money now still stands:
1) Introduce malpractice liability limits to get malpractice insurance costs under control. (Fight ABA)
2) Increase the number of doctors by increasing the number of medical schools. (Fight AMA)
3) Negotiate Medicare/Medicaid drug prices with manufacturers. (Fight PhRMA)
4) Providing sliding scale premiums based on patient efforts at healthiness (smoking, exercise, diet), like life insurance does.
5) Limit over-treatment.

The Education Bubble

The education bubble is the number of people willing to borrow nearly $200,000 for a BA (or PhD) in Anthropology or whatever subject that exceeds the number of positions available that require that degree at that price. I read an article yesterday that mentioned a detective with a PhD in Anthropology. While it seems to be working for him, I just don't see it as economically efficient. If we look at the causes of this inefficiency and bubble, we see similar government incentives and payouts to those that drive up the price of houses and medical care.  

At some point, maybe soon, all of that money being borrowed to pay for college education is going to be hard to get.  If we keep expanding grants and loan programs supported by the taxpayer, the government will distort the market and prevent costs from dropping to match demand.

So how should the government spend its money? If public universities were run in a lean fashion, with a passion for getting rid of wasteful spending, without a distasteful focus on athletics and other distractions, they would provide more than adequate competition for private universities at fair prices. By focusing on subjects that are in demand in the economy, they could support the progress of humanity.  By virtue of selective admissions, they could continue to avoid the fate of bland ineffectiveness that has befallen public primary and secondary education. 

Low interest rates

It seems that a fundamental problem with our economy is the Federal Reserve driving the interest rate environment.

The current interest rate on Bank of America savings accounts is... 0.20%. I just don't get it. If I am a bank, I make fundamentally make money by loaning people money at a rate higher than what I pay other people for giving it to me (and charging a few fees). But who's going to give me their money at 0.2%?

This rate is extraordinarily low, but interest rates have been really low for years now. The fiscal policy behind this was pushed by Greenspan. We know now it had some weird side effects, like most government fiscal policy, that have basically crushed our economy.

On 60 Minutes last night they had a piece about people "losing" half of their 401k balance. This would mean they were 100% in equities, with maybe some in corporate bonds. Why were they 100% in equities? Especially when they were approaching retirement age?

Maybe it had something to do with the low interest rates. Even with a CD yielding 2%, your money is growing slower than the inflation rate. So, people poured their money into equities, creating a bubble. To make it worse, a lot of prominent companies haven't been paying dividends lately, so they weren't even getting any income from these investments. Stock price to earnings ratios still seem high when you look at all of the companies where the investors don't see any of the earnings, and have to speculate by selling the stock to take advantage of the price.

Lower interest rates drove the price of houses up. Government backed loans drove the price of houses up. Since the price of houses were so high, the government started buying risky loans from banks so that people could keep buying houses.

So, low interest rates may help companies grow, but most large companies sell bonds, they don't borrow from banks like I do. Who exactly are these low interest rates helping? Is there someone out there who just loves bubbles?

The sad state of...

It almost seems that people are starting to realize what's happened, but still aren't accepting it. The money's gone. We have a an unbelievably large debt. We're about to go into an inflationary period. So, the paradox of savings is upon us. We need to spend less, which means the GDP shrinks. Good- it was based on leveraged consumerism. I like to think of the shrinkage as a return to realism.

Orszag says the budget shrinks the deficit by half over 4 years, but John Stewart fails to call him on it, just pretends not to get it. That was painful to watch. All of the planned budgets have deficits, which means the total amount borrowed continues to increase. We're still making it worse.

I really didn't mind paying taxes this year. I wish I made more money so we could pay this debt down faster. But then, these guys want to spend more and more and more. Maybe everyone should pay taxes. Maybe they need to make more things to sell to China...that's where the money is.

529 Plans Suck

From the first time I heard about College Savings 529 plans, they seemed awful.  I heard these hucksters on the radio peddling them and they just sounded like a way for them to grab fees. Now people that invested in them are f-ed.

http://online.wsj.com/article/SB123758112211598861.html

Let's just say...any plan that doesn't let you put close to 100% in cash within a year of having to use it is criminal. Yet: "Last April, Oregon doubled the stock exposure in its "1-3 Years to College" portfolio to 40%. In 2004, an in-college student in Rhode Island's aggressive age-based portfolio would have had 40% stocks, 31% bonds and 29% cash. By 2008, the equivalent was 40% stocks (including real estate), 55% bonds and a measly 5% cash."

In these plans, the flexibility to do the right thing was taken away by bureaucrats.  My plan is simple- give the kids their own money.

Why don't all government savings accounts include some kind of commodities choices?

Private Mortgage Insurance

What the heck is private mortgage insurance for? Shouldn't that insulate banks from foreclosure losses? Every loan under with less than 20% should have been paying that... Did that many people really get piggy back loans to avoid it?

Quick portfolio update

I think the market has dropped to the point that I can start looking for dividends again.

I don't know what's going on with TNP, but I might be getting a greater than 10% dividend off of that stock. They are trading well below book value, and I don't know why. I guess no one is going to be shipping oil? Come on, there is some inelasticity of demand there.

Looking at the financials, there is probably no reason to go there. They should move the trading desk of these stocks down to Atlantic City. That said, I jumped into TD Bank. They're Canadian, but they are running a tight operation and took over Commerce Bank, which was a really good acquisition. I am hoping for a steady value and a 7% dividend.

As far as the macroeconomy goes, we are completely screwed. I wish we could let housing prices drop faster without a total disaster.

A small sip of water

A tip from Carl- invest in water. It's getting hot out there (well, not here, but in

the Al Gore PANIC! sense) and people are thirsty. It seems logical. I think there will be a simple desalination solution soon, but it will take a big company to connect it to the infrastructure.

There isn't an easy way to directly invest in water itself, unless you build a resevoir or something, and that's not that easy. So, I bought 250 shares of a global "water industrial complex" ETF today. (CGW). A small sip of water, but the fund seems to be a fairly close proxy for the global stock index, it's not really performing as a sector. Still, the chance of one of the major holdings have a big up year soon seems pretty good.

We'll see how it goes.

Why not give Markopolos a job?

Bloomberg Story on Madoff Proceedings in Congress

"The officials, in joint testimony, said the regulator may stiffen audit requirements for money managers and inspect firms more frequently. The SEC is also examining how it evaluates risk and may require investment advisers to provide more information than it currently requires, according to the testimony."

This ignores the fundamental problem with Markopolos/Madoff. Markopolos gave them everything they needed, they did the investigation, and they still didn't admit that anything was wrong. They don't understand the global financial system. (Really, who does?) They don't understand hedge funds and other complex strategies.  Why don't they just hire Markopolos? Well, for one, he doesn't want to move to DC and they don't pay enough. However, with current financial industry salaries going downward ($500k salary limits!), they could meet in the middle geographically and financially. Pay $300k for SEC employees to live in New Jersey.  I'd move to NJ for $300k.