Tuesday, January 26, 2010

Randian Confusion

"Bernanke took over the Fed when Greenspan was considered a rock star, inhaling his libertarian, free-market, Ayn Rand inspired philosophy in great giant gulps."
- madhedgefundtrader

It always confuses me when I read about how "Randian", free-market, and libertarian Greenspan was. I don't recall anywhere that she commented extensively about how the Federal Reserve should let banks borrow money from the people at extraordinarily low rates to be used for the creation of proprietary speculative derivatives markets. In fact, most Rand followers seem to be in favor of the abolition of the Fed and allowing the market to set interest rates.

Monday, January 25, 2010

Everybody's Starry Eyed

Still not sick of this. Next thing, we're touching.

Oh, oh, starry eyed
Hit, hit, hit, hit, hit me with lightning

Handle bars, and then I let go, let go for anyone
Take me in, and throw out my heart and get a new one

Next thing we're touching
You look at me it's like you hit me with lightning

Oh, everybody's starry-eyed
And everybody goes
Oh, everybody's starry-eyed
And my body goes
Whoa oh oh ah ah
Whoa oh oh ah ah
Whoa oh oh

So we burst into colors, colors and carousels,
Fall head first like paper planes in playground games

Next thing we're touching
You look at me it's like you hit me with lightning

Oh, everybody's starry-eyed
And everybody goes
Oh, everybody's starry-eyed
And my body goes
Whoa oh oh ah ah
Whoa oh oh ah ah
Whoa oh oh

Next thing we're touching (x8)

Hit me with lightning

Oh, everybody's starry-eyed
And everybody goes
Oh, everybody's starry-eyed
And my body goes (x2)

whoa oh oh ah ah (x3) 

Ideas on Econ- an evolving set

Prices reflect opinions.

Buying assets from others with the intention of selling them later for more money is fundamentally weird. Buying a share of a company's profits makes sense- you are buying the dividend stream. Buying existing shares of a growth stock doesn't really benefit anyone- you are basically betting that you can predict better than the seller what the future value of the company should be. Buying new issuance, investing in ventures results is money that does something.  So does selling bonds.

Think about buying a home as an investment (versus as a place to live). You buy an investment home for the income stream it can provide. Let's say you put $50k down on a $350k property. It has an annual payment to the bank of $24k and a rental value of $20k. Is this a good deal? If the price of the home does not rise at faster than 8% per year, it is not a good deal, on the face of it. However, you are leveraged at 6:1, so it only needs to rise 2% per year.

Policy results - low tax on dividends and bond interest? I guess we have that, but people still invest in the lottery.


Sometimes I wonder if "school comparisons" are just nonsense.  It's usually clear that they are comparisons of students, not of the quality of instruction, except perhaps to the degree that they influence each other. There is a certain percentage of kids out the there that are auto-didacts. They are going to learn the stuff just by being given a reasonable textbook and some time to practice. They make schools that have more kids that can do this look better than they are, and vice versa. Maybe that's what we should be teaching, teach people how to learn on their own.

Sunday, January 24, 2010

Short sighted partisans

Sadly, this blog post [nsfw] illustrates the short sighted, partisan thinking that drives our policy- on both sides of the aisle. The most popular health care plans are not transformational reforms, they are expansions of what we already have. They are mostly going to make the cost control problem worse, with a few notable exceptions. If we don't attack costs now, we won't even be able to save the risk protections we have in place today from the onslaught of baby boomer retirements. We obviously need to raise money as well, just to pay for what we already have, and completely removing the income tax exclusion on health insurance benefits would be a great place to start.

It's easy to attack the insurance companies and their ridiculous rescission clauses, but the problems we face are much deeper than that. The cost of insurance is driven by the cost of health care services. I'm not angry, but I differ from the implied view here that taxing people to pay the providers insane amounts (that we aren't even allowed to see before we have to incur them) is better than making the costs public and letting the consumer drive the system towards value. When you don't know if an MRI is costing us collectively $350 or $750, even if you had an incentive to choose the better value, you wouldn't have the information to make a good decision. Of course, the question as to whether Americans get too many MRIs is generally sidestepped.

We need to create the incentive for all of us to work together for lower cost care- and make the information available to enable that. I'll go to a different grocery store to save $2 on bananas. I'd definitely go to a different doctor if I could save $100 the next time one of the kids gets sick. It is that sort of behavior that drives prices down for most other things we buy, and it can work for health care too. The reason there is no low cost provider of health care, providing popular goods at low prices, is that there is no advantage to the insured consumer of trying to save money.

The generally naive response to this, which was my initial thought as well, is that we can just cap provider costs once we have a monosopony. Of course, the general response to that is that the providers stop offering options that are money losers, and you end up with something like the Canadian wait for your MRI. Markets, for whatever flaws they have, are good at one thing, setting prices. Without a market, determining a fair price is simply not possible.

Before we lose all of the energy and attention that we have currently focused on health, let's work together to find a way to make what we have cost less, so we can afford to get it to more people. We need to sell $1.7T of Treasuries this year to pay for our current deficit. Demand is likely to fall far short of that, meaning that the interest we pay on our debt will rise, along with other interest rates as government borrowing crowds out other lending. Reducing the cost of health care is a serious concern of every party, Tea, Democrat, Green, and Libertarian (have to leave out the Republicans responsible for the Medicare Part D monstrosity). Enacting benefits without caps will just put us in the Massachusetts situation, where they are struggling to figure out how to contain the rising costs. Looking at options like Health Savings Accounts, and high deductible plans give us better coverage on the big risks, and ways to cut spending on the most common costs. There are still hard choices out there- we'll probably need the "death panels" at some point since we outspend the rest of the world so much in the last six months of life.

There are hundreds of disruptive ideas out there to revolutionize health care in America so that everyone can afford some, let's set path out there to make it happen. I'd suggest reading "The Innovator's Prescription" if you want a good picture of how our policy is preventing the best ideas from coming forward.

Monday, January 04, 2010


The intensity is about to move up. It's not the time to procrastinate. Things are going to start flying at you faster and faster. It doesn't slow down for a long time, and when it does, that's not good. That's the end. This is the new speed. Get with it or get off the bus, because if we slow down we die. Just get on with it and make it happen. What's the worst case scenario? Once you accept that, there's not much left in your way. Get it done.

Happy to be Hardcore.

Sunday, January 03, 2010

The NY Times Editorial Page Fails Logic

Avoiding a Japanese Decade

"The green shoots are barely out of the ground and Republicans and conservative Democrats in Congress are already demanding that the administration “do something” to cut the budget gap. We worry that the political drumbeat may be too hard to resist. In 1997, after three years of tepid growth, the Japanese government stopped its stimulus: it raised a consumption tax, ended a temporary income tax cut, increased social security premiums and nipped recovery in the bud."

What an inane counterfactual. The idea that it is the government's job to spend us out of a recession is conveniently popular with the government that gets to spend all of that money to increase their own influence, power, and status. We've been overstimulating the economy for 10 years, using deficit spending to pay for all sorts of nonsense like full price prescription drugs and wars against countries that couldn't attack us. Adding more stimulus is so unbelievably risky, it risks the very status of our currency and out ability to borrow money.

Of course, we have genius bankers making these decisions, guys that are so full of ego they think they can completely orchestrate the economy by moving the fed funds rate.

Stimulus doesn't work- we tried it from 2001-2009, and look what we got. On the other hand, government fiscal discipline will allow more money to go into the job creating sectors of the economy, not make work to siphon tax dollars.

Saturday, January 02, 2010

You keep it all in.

There are those things that you just can't tell, without committing yourself to a certain direction forever. People keep their thinking on subjects like politics and religion quiet, because people feel so strongly about those things that you might make an enemy of someone whom you enjoy a mutually beneficial relationship.  But what if you feel that people shouldn't care so strongly about anything that they it would prevent them from getting along with someone that has opposing views? You keep it all in.