Coyote Blog

Electro-Luminescent wire.

I am a little late to the game on this stuff -- apparently hobbyists have been using it for crafting.  For example, who wouldn't want a Tron outfit?

To date, I have mostly sheltered readers from the geekiest of my hobbies: model railroading  (Yeah, I know what you are saying -- how can anyone who spends hours a day at a computer writing on arcane bits of business and economics issues possibly be anything but cool?)  This may soon change, as I am starting a new N-scale layout and I will probably inflict some in-progress photos on you folks.  To get an idea just how crazy I am, I build my own track from wood strips and bundles of rail and tiny, tiny spikes -- so we are not just talking about putting the old Lionel out on a green table cloth.

Anyway, for some time I have wanted to build a layout that is primarily meant to be run in the dark as a night scene.  So I am experimenting with a lot of technologies, from florescent paint to tiny LED's to small bulbs to get ideas for various scenes.  The EL wire turns out to be a dead ringer for scaled down neon, so I expect to use a lot in the city part of the layout.

I will leave you with a photo of the layout that probably inspired more people (including myself) into the hobby than any other  -  by the master, John Allen:

If you get intrigued with his work, more photos are here.

I wish I had more pictures of my old work, but they seem to have been lost in a move.  All I have left is a few poor-quality, poorly-scanned under-construction photos of my first layout from years and years ago.

Postscript: Can a hobby be geeky if Rod Stewart shares it?  He has built an absolutely stunning layout - one photo below and more here. 

And yes, the work really is his own, he didn't just pay someone to build it for him.

This is pretty incredible, even by the general standard for Illinois scandals:

In one e-mail exchange, University of Illinois Chancellor Richard Herman forced the law school to admit an unqualified applicant backed by then- Gov. Rod Blagojevich while seeking a promise from the governor's go-between that five law school graduates would get jobs. The applicant, a relative of deep-pocketed Blagojevich campaign donor Kerry Peck, appears to have been pushed by Trustee Lawrence Eppley, who often carried the governor's admissions requests.

When Law School Dean Heidi Hurd balked on accepting the applicant in April 2006, Herman replied that the request came "Straight from the G. My apologies. Larry has promised to work on jobs (5). What counts?"

Hurd replied: "Only very high-paying jobs in law firms that are absolutely indifferent to whether the five have passed their law school classes or the Bar."

Props to Heidi Hurd for such a sharp response.  The scale is pretty staggering:

Gov. Pat Quinn convened a state commission to investigate the U. of I. admissions process after the Tribune revealed that more than 800 undergraduate applicants in the last five years received special consideration because they were backed by U. of I. trustees, legislators and others in powerful posts.

That's 160 a year!  I don't know how large the law school is, but that must be a respectable portion of the class.  via Glenn Reynolds

Postscript: Remember what I said on January 20th:

There is some sort of weird mass self-hypnosis going on, made even odder by the fact that a lot of people seem to know they are hypnotized, at least at some level.  I keep getting shushed as I make fun of friends' cult behavior watching the proceedings today, as if by jiggling someone's elbow too hard I might break the spell.  Never have I seen, in my lifetime, so much emotion invested in a politician we know nothing about.   I guess I am just missing some gene that makes the rest of humanity receptive to this kind of stuff, but just for a minute snap your fingers in front of your face and say "do I really expect a fundamentally different approach from a politician who won his spurs in "¦. Chicago?  Do I really think the ultimate political outsider is going to be the guy who bested everyone at their own game in the Chicago political machine?"

Government officials have mastered the cost-cutting game, or should I say the cost-non-cutting game.  The trick they have learned is that whenever budget or tax cuts are proposed, they threaten to cut the most critical expenditures.

Now, as I have pointed out, such behavior in a private company would result in one's termination.

When I was in the corporate world, if I wanted extra funds for my projects, I would have to go in and say "Here are all my projects.  I have ranked them from 1-30 from the most to least valuable.  Right now I have enough money for the first 12.  I would like funding for number 13.  Here is my case."

But the government works differently.  When your local government is out of money, and wants a tax increase, what do they threaten to cut?  In Seattle, it was always emergency services.  "Sorry, we are out of money, we have to shut down the fire department and ambulances."  I kid you not "” the city probably has a thirty person massage therapist licensing organization and they cut ambulances first.   In California it is the parks.   "Sorry, we are out of money.  To meet our budget, we are going to have to close down our 10 most popular parks that get the most visitation."  The essence of government budgeting brinkmanship is not to cut project 13 when you only have money for 12 projects, but to cut project #1.

I can just see me going to Chuck Knight at Emerson Electric and saying "Chuck, I don't have enough money.  If you don't give me more, we are going to have to cut the funds for the government-mandated frequency modification on our transmitters, which means we won't have any product to sell next month."  I would be out on my ass in five minutes.  It just floors me that this seems to keep working in the government.  Part of it is that the media is just so credulous when it comes to this kind of thing, in part because scare stories of cut services fit so well into their business model.

Matt Welch has a great 8-point takedown of similar scare story on the current California budget crisis.  You should definitely read it, but I wanted to add a #9 -- this idea that the core, rather than the marginal, expense is always the first to be cut.  From the LA Times:

Gov. Arnold Schwarzenegger has proposed slashing state spending on education by $3 billion to help close the budget gap, and the state would pay dearly for canceling classes, firing instructors, cutting class days and shortening the school year, experts said.

Promising students would go to other states, taking their future skills, earnings and, possibly, Nobel Prizes elsewhere. California companies would then find it harder to attract high-value employees who might be dubious about moving to a state with sub-par schools. [...]

John Sedgwick, co-founder of Santa Clara solar-energy company Solaicx, agreed.

"When you think about the genesis of Silicon Valley, it really started from its superior educational base" at Stanford and UC Berkeley, said Sedgwick, whose company makes the building blocks for photovoltaic cells. "That indicates that you don't want to kill the goose that's laying the golden eggs." [...]

The only way the most "promising" students would be affected is if, when the schools cut back, the best professors (rather than the worst) are fired and the most promising students (rather than the most marginal) are denied admission for limited spots.  Really?  If Berkeley has 10 fewer spots, it's going to start cutting admissions with the Physics wiz kid who had a 2400 on her SAT?

Further, is it really true that California only attracts people to its work force who went to school in California?  A top Michigan or Harvard grad won't do just as well?  I went to college in New Jersey yet have never held a job in that state.

Now, I understand that part of the argument is that workers may not come if the local primary schools for their kids are bad.  And that is true.  But California has had poor performing schools despite years of high and increasing spending.  Matt has much more on this in his piece.

Postscript: Of course, as crazy as it seems, there may be some reality to this threat.  I could easily see the University of California system, when faced with the choice of cutting back on some post-modernist social science program or a physics program that has produced 7 Nobel Laureates, choosing the latter to cut in a fit of outrageous political correctness.

At the primary level, it is very possible that the bloated school administrations filled with rafts of useless assistant principals will choose to fire teachers rather than themselves.  So unfortunately the plans to cut the most useful spending in a crisis and keep the most useless is not just a threat, it is a reality.

... because an Arizona Cardinal will be on the cover of EA's Madden 10 game.  Actually, Larry Fitzgerald of the Cardinals will share the cover with Troy Polamalu of the Steelers.  I suppose believers in the Madden curse can take heart that it may not have much affect on the Cardinals, who have historically been dogged by plenty of curses of their own making.   Maybe there is some sort of acquired immunity.  Great choice, though, as Larry Fitzgerald is not only rediculously talented and exciting to watch, but also seems to be as good of a guy as one can find in professional sports.

My son got to play a high school baseball game today at Chase Field, right after the Diamondbacks game was over.  It was really cool to see the kids on a major league field, though unfortunately his team ran into a buzz saw and lost.

Asked after the game what he thought, he said " We gotta play 'em one day at a time.  I'm just happy to be here. Hope I can help the ballclub.  I just want to give it my best shot, and the good Lord willing, things will work out."

I have no vocal chords as I screamed them out yesterday at the game as the Cardinals beat the Eagles to win the NFC championship.  Yesterday's game was one of the more unlikely events I have ever personally witnessed, and caps an incredible playoff run where a team that just 45 days ago was absolutely pathetic somehow found themselves in week 16 of the season.   During the final Eagle drive (the one around 2 minutes to go, not the pathetic last play) the crowd was the loudest I have ever heard at any sporting event  (the previous personal best was probably some games at the old Palestra in Philly, the home of "Big 5" basketball).

Anyway, this screen shot from weather.com  seemed appropriate:

Click the ball to change the color

Via.

And yes, it does change color.  It is not a practical joke.

Update: I mean what I say in the title. I posted this because it was irritating, not because it was fun.

First, I want to preface that I absolutely loved Casino Royale.  I had expected not to like it, being skeptical of Daniel Craig and the apparently trendy substitution of Texas Hold'em for Baccarat.  But the movie was fabulous, easily the best Bond ever, and a long-overdue retooling of the franchise.  In comparison, the campy Roger Moore 70's Bond movies are almost embarassing.

All that said, I was disapointed in Quantum of Solace.  The movie was entertaining and worth the price of admission, but two aspects really hurt the movie for me:

1. The directors have adopted the currently popular edgy filming style of action sequences which involve lightning quick cuts and jerky camera pans (used in the Bourne movies, for example).  The style really increases the confusion of the moment, and has its place in creating tension and giving a first person feel to the action, but it gets tiring and confusing after a time.  Compare the opening chase sequences in this movie to the absolutely fabulous chase scene through the construction site near the beginning of Casino Royale.  I thought the Casino Royale sequence was much a better, but I must admit I am a big fan of long tracking shots over quick cuts, so I guess your mileage may very.  There was one shot I thought really cool in the new movie.  Bond and mystery villain #3 or 4 fall through a glass ceiling, and you fall with them POV-style. 
2. The movie seems to be a return to the WTF-style plot of a lot of modern action movies, especially sequels, that put one-upping the action sequences of the previous movie over having a coherant plot.  I don't mind twists and turns, but in the end, all the motivations have to make sense.  I mean, how many mystery guys can Bond chase, kill, and then say, well, I guess we'll never figure out who that guy was.  The early parts were like the Seinfeld version of action movies -- they are not about anything, they are just chase scenes.  And, I still don't understand why the bad guys in QoS are doing what they are doing.  Its another one of those "spend a billion dollars in a vast conspiracy to make $100 million" Bond villain plans.  In contrast, Casino Royale was anchored to what I think was the best Ian Fleming book, and it stuck close to the book.  Even when it deviated, for example with the shift from bacarrat to Texas Hold'em, it actually improved the plot, as it shifted to a game that at least involves some skill.

Update:  I feel I need to clarify one thing.  I am a huge fan of the old Bond movies.  Goldfinger, Thunderball, Diamonds are Forever, Goldeneye -- all great.  Despite my comments above, I even like most of the Roger Moore films, though you have to take a different approach to them.  But the formula was tired.  The Survivor formula was hugely popular at first, but in season 9 or 10 or whatever, it's just done.  You either are repeating the same tired cliches, because you feel locked into a formula by your fans who will get pissed (as they did with Casino Royale) when you violate the formula, or you fall into the trap of trying to top yourself with goofier and goofier plots.  I actually thought the series was dead around about View to a Kill, but Pierce Brosnan really brought new life to the series for a while. 

Update #2:  Tigerhawk has similar thoughts

In a post earlier today on the mortgage market meltdown, I wrote:

And that is what the argument usually boils down to - someone smart should have been watching them.  But lots of smart people were watching all the time.  You can see one such person featured in Lewis's article.  Guys run all over Wall Street looking every day for some single digit basis point spread they can make money off of.  But untold wealth was just sitting there for someone who was willing to call bullshit on the whole CDO/CDS pyramid game.  These guys playing this game were searching for people to bet against them.

And despite this, despite untold wealth as an incentive, and companies looking for folks to take the other side of their transactions, only a handful saw the opportunity.  Thousands of people steeped in the industry with near-perfect incentives to identify these issues ... did not.  What, then, were our hopes of having some incremental government bureaucrats do so?  Usually, after this kind of crisis, there are lines of pundits and writers ready to suggest, with perfect hindsight, new regulations to avert the prior crisis.  But, tellingly, I have heard very few suggestions.

So in this context, I found these comments by leftish Kevin Drum, certainly no knee-jerk advocate of free markets, quite interesting:

No argument on the greed and ideology front, but I'm curious: was there really anyone who made the right call on all this at a policy level? There were, of course, plenty of people who recognized the housing bubble for the idiocy that it was (Alan Greenspan notably not one of them), but were there any major voices making specific policy proposals to slow down the bubble? Or rein in the mortgage market? Or regulate the CDO/CDS market in a way that would have prevented some of
the damage? I'm talking specifics here, not just general observations that the FIRE sector was out of control. Arguments about interest rates being too low count, if they were made for the right reason, but I'm interested mainly in more detailed recommendations.

I don't have any big point to make here. I'm genuinely curious. There were many moments in the past few years when perhaps something could have been done, but what? And who was proposing serious measures that would have helped? Any major Dems? Economic pundits? Wall Street mucky mucks? Who were the unsung heroes? Help me out here.

The technocratic compulsion is very seductive to a lot of people (including, I think, our President-elect).  I can't tell you how often I hear "if we just had one smart person to clean up the mess..."  But it never works.  Just think about this auto czar idea being trial-ballooned this week.  Even if you could find someone brilliant enough to perfectly discern and synthesize the diverse buying interests of a hundred million consumers, he can never have the right incentives sitting in that government job.  Pretty soon he has group A insisting that he needs to mandate more fuel economy and group B that he needs to protect union jobs and group C that he needs to save jobs in Michigan in preference to Ohio and group D advocating for Ohio over Michigan and... you get the point.  All rolled up with the incentive problem that if he actually solves the problem at hand, he will be out of a job, so you can bet the problem is never fully solved.

My wife read the Michael Lewis article and comes back to me and says "I can't imagine how you can read that and still oppose government intervention and increased regulation."  I said, "why?"  Sure, people screwed up and did stupid stuff, but no defender of capitalism promises that won't happen.  Besides, what regulation would you propose?  "I don't know, but someone smart should have been watching them."

And that is what the argument usually boils down to - someone smart should have been watching them.  But lots of smart people were watching all the time.  You can see one such person featured in Lewis's article.  Guys run all over Wall Street looking every day for some single digit basis point spread they can make money off of.  But untold wealth was just sitting there for someone who was willing to call bullshit on the whole CDO/CDS pyramid game.  These guys playing this game were searching for people to bet against them. 

And despite this, despite untold wealth as an incentive, and companies looking for folks to take the other side of their transactions, only a handful saw the opportunity.  Thousands of people steeped in the industry with near-perfect incentives to identify these issues ... did not.  What, then, were our hopes of having some incremental government bureaucrats do so?  Usually, after this kind of crisis, there are lines of pundits and writers ready to suggest, with perfect hindsight, new regulations to avert the prior crisis.  But, tellingly, I have heard very few suggestions. 

Back in the 1980's, everyone was freaked out about junk bond-financed hostile takeovers, greenmail, leveraged buyouts and the like.   Since, while this activity has not disappeared, the wackiest of this behavior has really died down.  Do you remember that act of Congress and subsequent regulation that really curtailed this behavior?  Yeah, neither do I.  The fact is that, if they are allowed -- and if they are not shielded by taxpayer-funded bailouts from the consequences of their actions -- individuals learn from their excesses.  Or they go bankrupt.

Channel surfing last night, I ran into the Running Man, an unfortunate movie "adaption" of  a pretty good Steven King (as Richard Bachman) book.  For those who have seen one and not the other, they have little in common with each other. 

What I hadn't realized before was just how bizarre the casting for this movie was -- Richard Dawson, the cheesy game show host as a ... cheesy game show host.  Jim Brown, Dweezil Zappa and Mick Fleetwood?  The latter, by the way, as himself but in the future.  Whatever.

But the best part is that the movie has two United States governors in substantial roles -- Arnold Schwarzenegger (California) in the title role and Jesse Ventura (Minnesota) as one of the "stalkers" trying to kill Arnold.  Is this a great country or what?

Do ya'll know any others?  I know Sonny Bono did a Love Boat guest appearance, so there must have been two Congressmen  in one TV episode (with Fred Grandy of Iowa).  There may be a Fred Thompson +1 out there I can't think of.  And of course there were probably some Ronald Reagan matchups, but that is before my time.

Update:  Rob reminds me that the Ventura-Schwarzenegger team can also be found in Predator. 

The media is really bending over backwards to find ways to twist earnings data for average Americans to try to make the point that real income for many folks has stagnated or dropped.  They are doing this to support a two-pronged legislative strategy in the next Obama administration:

1. Use the power of the government to further tilt the balance towards unions and against employers in wage negotiations  (this strategy having worked out so well to create prosperity in the automobile and airline industries)
2. Further modify the income and Social Security tax structures to make them even more regressive than they are today.

They are firing on all cylinders behind this strategy.  They are even mobilizing the neo-Keynesians to make the pitch that the Great Depression and the current financial crisis were caused by a shift in wealth from laborers to the capital classes, and that the only way to prevent future crises and depressions is to, wait for it, increase the power of unions and institute more wealth redistribution  (Example here, via Kevin Drum).

I was going to do a post fisking the James Livingston article linked above on Kevin Drum's site, but Livingston's hypothesis was such a mess that it was just going to take too much of my day.  But in doing some research, I found this chart from a couple of years ago in the NY Times that really caught my attention:

Talk about chutzpuh -- look at the lede on the chart and then look at the chart itself.  Yes, the lede is correct, but only if you choose the totally meaningless number of "cash wages" rather than total compensation.  If one looks at total compensation (or what they call "overall" compensation), the entire argument falls apart.   Workers have maintained about their same "share" of the economy.

Sure, a large percentage of that is now in health care benefits, but that's a choice workers have made (and the government has encouraged through tax policy).  In fact, this compensation mix has been driven in large part by the Left's beloved unions, so on what basis can folks say that these other benefits somehow "don't count?"  Certainly, they cost their employers equally, whether it is cash or health care.  Corporate profits are up a bit, but in line with their normal historical levels in the 1950s and 1960s, the golden age of the US economy, according to the Left.  (By the way, the pattern of falling wage shares and rising profit shares after recessions is a well-documented one.  Wage-earners do best at the end of an economic cycle, employers more towards the beginning.  The chart cut off after 1997 would look about the same as the last several years).

I will tell you right now that every time you hear someone bemoaning the stagnation of wages, they will never, ever, ever be talking about total compensation per individual.  Having, through government policy and union activity pushed the compensation mix to non-cash elements, they then play a heads-I-win-tails-you-lose game of not giving any credit for those compensation elements.

Other games that are played to try to make the case that real earnings have stagnated include:

• Time frame selection. Everyone making this argument will choose 2000 as a starting point.  They justify it by saying it is the beginning of the Bush years, but 2000 is really selected because it is a pre-recession peak, and they have to measure peak-to-trough of the economic cycle to try to make their point.  Just as an example, if you look at the household income numbers below, you can see there is very typically a 5-year drop after a recession followed by net gains.  If we chose, say, the first Clinton term we could play the same game, showing a peak-to-trough drop in real incomes.
• Household income game. The household income numbers are fraught with peril, because companies don't pay households, they pay individuals.  And household makeups are changing simultaneous to income changes.  For example, imagine the economy was just my household.  If my wife were to get fed up with my shtick and divorce me tomorrow, average household income would drop by 50% in one day (as our total income stays the same but we go from one to two households).  If my wife were to go back to her high-paying pre-kids job tomorrow (if only it were so!) our household income would go way up, in part because the labor department does not capture the value of the labor she provides at home.Mark Perry has a lot more on the household income numbers here, but he shows that the household size number has been changing a lot, causing the metric to understate income changes per individual:

• Individuals matter. Median income looks at the middle person on the ranked list of US incomes.  So, for example, if there are 100 million income earners, the median income is the income of number 50 million on this list.  But whoever the person is at spot 50 million is almost certainly not the same person who was at spot 50 million last year.  They might have fallen on the list, but the odds are they moved up.  As folks age and gain experience and/or seniority, they tend to increase income faster than inflation.  Most minimum wage earners, for example, tend to be under 25.  The number of families supporting three kids on minimum wage (at least of the primary bread-winner) at the age of 45 is really, really low, despite the anecdotes we are bombarded with in the media.

• Immigration has a huge effect. The total number of foreign born people in the labor force is estimated around 21 million, of which perhaps 6.3 million are illegal immigrants.  Positing that at least 10 million of these arrived in the last two decades, and that many of these folks began at relatively low, below-median incomes, means that median incomes are hugely affected by immigration.  Leaving immigrants out so the comparison is close to apples and apples, to find the true median income gain over the last 20 years one would have to count up 10 million or so spots on the list.  Again, as in the previous point, most individuals can be better off even if the median stagnates  (presumably immigrants coming in at the bottom are also better off, even at the bottom, than where they were before, or they would not have come.  We often forget that much of our bottom quartile of income in this country would be upper middle class in many other nations).  This is a classic mix problem that most people, and the media, almost always get wrong.  In a situation with a changing mix of multiple groups, each of the groups can be improving on some metric, but the overall metric can go down.  You can see the income stats by race here.  Every race group has increasing median income, but since the Hispanic group has grown 8x faster than the anglo population in the US, the total results are mixed downwards.Here is a quick example.  Group A has values of 5,6,6,7.  Group B has values of 1,2,3.  Ten years later Group A is the same size and has values of 6,7,7,8.  Group B has doubled in size, and now has values of 2,3,4,2,3,4.  In these examples, every single individual has a higher value.  Also, Group A's median has increased from 6 to 7, and Group B's has increased from 2 to 3.  But the median for the whole combined group A+B has dropped from 5 to 4.  Both medians (and averages) can do funny things when mix is shifting.
• Even the NY Times. The NY Times actually makes two of these points for me in another article, arguing that historic median income drops were concentrated in areas of high immigration, and reported drops were due to the choice of the economic peak as a starting point.  WOW?  Is this the same NY Times I began this post criticizing.  Yes it is, the only difference is that this article ran in 2001, when they were reporting on the economy during a Democratic administration.
  
• Income taxes are already wildly progressive.  While I would love to be in that top 1% group, I don't really begrudge them their success.  Besides, who can look at the chart below, again from Mark Perry, and come to the conclusion that the top 1% are being treated unfairly generously.

• Every country that has implemented this plan (government-backed unions and wildly progressive tax policy), including most of Western Europe, is demonstrable worse off than the US on absolute measures.  This is both the median, but also in every quintile, including the poorest.  While it is true the poorest quintile has a bigger gap from the riches in the US vs. France for example, on an absolute basis our poorest are at least as well off  (particularly when differences in immigration policy are taken into account).

Reader Tim Allen writes:

I wanted you to consider that in a recent previous post you had
mentioned that people are filling up their gas tanks before they
previously would, and they are filling up all their other cars, and
spare gas tanks because of the fear of not having enough necessary gas.
This is a market reality and is completely rational considering the way
the game's rules are set up (no gouging, as per the govt).

I would like you to consider that I, as a small business man,
maxed out all my lines of credit and deposited the money in my bank
accounts. If fear is driving this market, and if it causes banks to dry
up credit, I want to be the first to be tanked up on money,
so-to-speak. The negotiated rate of interest is not high enough for me
to be disinclined to borrow, at least until this credit storm blows
over. I know I am not the first person to have this idea and I won't be
the last, and we (together) will create the situation that you think
can't happen. The tighter credit gets, the more people will borrow, if
just to have the cash on hand, to not need to borrow in the future.

I have done the same thing.  I am maxed on my line of credit, because the interest rate is low and I would rather have the money in hand and pay the interest rather than find out later my line is somehow revoked or frozen.  The money is not needed for near term expenses, but I want to have resources in hand if the recession creates a business opportunity that requires funding.  Does this worsen the near term crunch, the same way panic buying of gas worsens local gas shortages?  Probably.  And again, price is the key.  Like with gas, I would rather rationing by price rather than shortage.  In other words, I would rather my line of credit go up to a 15% interest rate, if that what it takes to put things in balance, than to be revoked entirely so a few businesses can still have 6% money.

I have never said that letting banks fail was without cost.  I just think the cost is going to be there, one way or another, and the cheapest and quickest solution is to let the whole mess sort itself out.

By the way, the notion that small business lives on short term credit is a hoot.  ExxonMobil may have access to the commercial paper market on short notice, but borrowing for our company, even in good times, generally takes a panzer division and a long war of attrition.  Even layup deals have taken me 6 months or more to finance.  Stephen Fairfax, via Mises, makes this point:

None of the small business owners I know depend upon easy credit to
make their payroll. When things get to the point where you need to
borrow to pay your employees, the end is near. Most small businesses
fail in the first few years, in large part because business is not
easy, it is hard. Not everyone is good at it. But it is an essential
part of free trade and the market economy that businesses fail, so that
new, better ones can arise in their place.

Few small businesses depend upon easy credit. Banks are generally
reluctant to lend to small businesses, with good reason. Most small
businesses are funded by owner's savings. Sometimes start-up money
comes from loans by parents or friends. While I can understand that
small businesses involved in building houses might profit from easy
credit, the market is sending unmistakable signals that there are too
many houses that are too expensive. Flooding the system with still more
easy credit can't be the cure, it is the problem.

So, apparently the US government is going to authorize up to $700 billion taxpayer dollars to purchase distressed financial assets.  I had an email today that said, to paraphrase, couldn't the government make money off these assets if they buy them for the right price?

My first thought was that this was theoretically possible, though my internal cynic found it unlikely in a pricing game run by elected officials between the taxpayer and powerful Wall Street interests that taxpayers would get the upper hand.

But then I realized there was no possible way this will end well for taxpayers.  Because the government cannot exercise discretion in day to day financial decisions.  It establishes rules and benchmarks and the typical bureaucrat is punished far worse for violating these processes and rules than he/she ever is for reaching a bad result.  So the government will establish rules and benchmarks for what price at which they will buy assets (this will be all the more true given the great rush everyone seems to be in).  And having set this in place, do you know what assets will be put to them?  All the ones that the current holders think are worth less than the benchmark.  This is the winners curse on steroids.

Update from Megan McArdle:

there's a gigantic asymmetrical information problem:  the owners of
these securities know much more about them than the Fed.  And there
isn't (obviously) a large liquid market for the Fed to check against.
So the Fed is likely to overpay, because there won't be a lot of
bidders in any one auction.

Megan, of course, reluctantly supports the bailout where I do not.  But she has her eyes open about what she is buying into. 

I liked this bit in particular:

Think of Wall Street as a poker game and Goldman as the
smartest player. It's sad when you think about it this way that
so much of the dumb money on Wall Street has been forced out of
the game. There's no one left to play with. Just as Goldman was
about to rake in its winnings and head home, the U.S. government
stumbles in, fat and happy and looking for some action. I imagine
the best and the brightest inside Goldman are right this moment
trying to figure out how it uses the Treasury not only to sell
their own crappy assets dear but also to buy other people's
crappy assets cheap

Update:  LOL, via Q&O:

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy. 

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

Could these be the dumbest guys in the room?   

I really enjoyed the game last night in Green Bay.  It is impossible on TV to communicate the energy and decibel level of that crowd, particularly in the first half before Dallas opened up a large lead.  But even with victory pretty much out of reach with 5 minutes to play, virtually no one left  (our Arizona fans would already have been out of the parking lot by then).

The game featured a 72,000 person crowd in a town of 100,000.  In a world where traditional groups are increasingly fragmented, the entire town is united in their dedication to the team.  The Packers are ubiquitous in town, so much so I can't even think of any good major-city analogy.  The best analogy I can come up with is that the game was more like a
high school football game in west Texas than a typical NFL game.  Even the cheerleaders look like a high-school cheer squad with girls in jumpers and guys with megaphones, in a world where the other 30+ teams all have pinup girls with breast enhancement. 

I am here in Green Bay checking off another item on my sports bucket list: seeing a game at Lambeau Field.  And it should be a really good one. 

We went out last night on the town to various bars, mostly on Washington street, after a ritual visit to "fuzzy's."  (Packers fans can tell me later if we were on the right track with these choices).  My friend (who lives in DC) and I were shocked to pay only $2 a beer at the first bar we were at.  It turned out that this was virtual price gouging in the local market.  We never paid more the rest of the evening than $1 for a mug of draft, on a Saturday night yet.  Yet another good reason to stay off the coasts.

For the record, Green Bay is really a very nice, tidy little town.  Kind of quiet, like many small towns -- they set all the traffic lights to flashing yellow last night about 8PM.  The only difference between it and any other nice midwestern town is that every single business has "packers" in its name somehow and roughly 30% of the population at any one time is wearing something with "FAVRE" on the back.  Who is this Favre guy?  I thought he played in New York  ;=)

I was just volume-gouged on gasoline today in Atlanta.  I was returning my rent car, and needed to fill the tank.   Stations here seem to fear a hurricane-related gas shortage, to the first station would only sell me 10 gallons maximum.  The second claimed to be out of gas.  At the third I was able to fill my tank the rest of the way.  These stations gouged me on volume, simply because they didn't have the simple courtesy to re-price their product upwards in a shortage in order to ensure continued availability of supply.

By the way, memo to news guys -- telling everyone to run out and fill their tanks RIGHT NOW in order to avoid a possible gasoline shortage will only precipitate said shortage.  If everyone fills his or her tank at the same time, this shifts inventory from large regional reservoirs to individual reservoirs (e.g. gas tanks), the most inefficient of inventory storage models.  Having every car's gas tank go nearly instantaneously from 5/8 full to full requires something like 600 million gallons of draw down from retail and wholesale inventory to car fuel tanks.  The system cannot survive that in 24 hours, and the hypothesized shortage becomes a reality.

Postscript:  By the way, the question of whether to run out and fill your tank tonight is a classic prisnoners dilemma game.  We are all better off if no one does it, but each invidividual probably maximizes his or her well-being by deciding to fill up, so everyone does it.

My son and I like to play Guitar Hero together, though he kicks my butt, of course.  To show him that I was cool and "knew stuff," I showed him this YouTube posted by Megan McCardle showing a guy scoring 100% on "Through the Fire and Flames" on expert.  (If you don't know what this means, just trust me that Neo from the Matrix loaded with amphetamines in full bullet-dodging twitch reflex mode would struggle with completing this level of the game).

About 5 seconds in, my son says "It's a bot.  He's faking."  And then he walked away.

"Huh? Really?"  I stared at it for a while, and realized that he was very probably correct.  So when did I become more credulous than my teenager?

What are the London Olympic organizers thinking right now?  In the immortal words of Bill Paxton,"That's it man, game over man, game over." 

I was amazed by the opening ceremonies last night.  I am not sure how that will ever be topped, particularly since most democracies cannot reasonably pour several billion dollars into a single three or four hour show.  I guess one could make some Triumph of the Will allusions, but it was really the most amazing meld of technology and showmanship I have ever seen.

OK, here is the story to date:  Paradise Valley is a small, very wealthy town within the boundaries of Phoenix.  There is no commercial development allowed in the town except for a series of golf resorts, of which there are a number.  The town had one last large tract of unbuilt land, owned by the Wrigley heirs, I believe, that has for years been zoned for a resort.  There was an auction several years ago in which the land was sold for some figure north of $70 million to a group who wants to build a Ritz-Carlton resort, a hotel chain notorious for bringing riff-raff into communities ;=).  The Ritz group unanimously obtained all the town council and planning board approvals it needed to build.

Except now a ballot initiative will be voted on by the town residents in November as to whether to allow them to build a resort on their own land that is zoned for a resort (my previous report, complete with Zillow maps).  This action is consistent with the absolute resistence that every resident's attempt to do a major remodel of their house encounters from various community groups and zoning bodies.

One lesson, of course, is that local participative democracy can be just as much a threat to individual rights as the worst dictatorship  (though this is not a new lesson -- it was in fact learned in Athens when it was first tried).  But a second lesson is just how short-sighted this is.  I am sure residents convince themselves in each such individual effort that they are somehow protecting their property values.  But in sum, the effect of multiple such efforts is to make people reluctant to invest in property in the town, fearful that some citizens group or zoning body will take control of what they can do with their land. 

I live about 4 houses away from the Town of Paradise Valley in the city of Phoenix, though most of my neighbors and even the US Postal Service think I live in PV.  It used to be, about 10 years ago when I moved in, that living outside the PV boundary was considered a negative.  There was a big enormous value gradient between the nearest PV home and mine, based as much on snob appeal of the address as anything else.  Now, however, the gradient is reversing (hurray for my home equity!)  Real estate agents in my neighborhood who used to hide the fact that the homes are not actually in tony PV (shame on them) now use it as a selling point.  My remodel contractor breathed an enormous sigh of relief when he found out that I was, in fact, not in the town of PV.

Help me out, readers.  I seem to remember there was a name for an economic game where the profit maximizing strategy when playing once was different than if one were playing multiple times in sequence.

PS - If you are confused why a town would consider a Ritz to be bringing down the neighborhood, see here, complete with Zillow maps where not a single surrounding home is going for less than $1.8 million. 

Arizona voters will have a chance to raise the price of a new home and reduce the choice they have in the marketplace with an initiative on the ballot this November:

The proposed measure, which requires more than 153,000 certified
signatures to qualify for the statewide ballot, includes a 10-year
warranty on new homes and gives homeowners the right to choose which
contractors with a decade-long, complaint-free record do repair work.

Having shopped from time to time for a new home, I can say that such homes with extended warranties from quality companies do exist in the marketplace - some builders offer this kind of warranty, and some do not.  All this bill is doing is reducing choice.  It is requiring that consumers no longer be offered the choice of a new home without a 10-year warranty, and will require that all homes carry this more expensive option.  I am sure that what people voting for this bill will hope for is that they will be getting today's less expensive house but with a 10-year warranty added, but that is not the way it works.

Second, this will virtually eliminates the small independent builder.  Though they do not produce a large percentage of the total homes, small builders, often individual investors with a single property, are still an important part of the market.  You might say, surely this is just an unintended consequence!  Well, what if I told you the AFL-CIO, the largest organizer of construction workers in large home builders, is the #1 financial supporter of this bill?  That information might change this from an unintended consequence to the #1 rationale behind the bill.

Finally, one can easily argue that the law is forcing people to pay for something that may well have no value.  Individuals trying to game the system can easily start a company, build some houses, pay off owners, fold up the tent, and move on to a new entity.  Consumers are left with a 10-year warranty from a company that no longer exists.  Which is how the roofing game is played by the bottom-fishers in that industry.  Which means customers have to shop around for well-established companies with long track records and good products, which, if they did so, would obviate the need for the bill in the first place.

Provisions give homeowners the ability to sue without the threat of
being responsible for a builder's attorney and expert fees and require
builders to disclose their relationships with financial institutions.

Just what we need - another industry where the plaintiffs have zero cost to launch any frivolous suit they want.

Yet another would require that model homes reflect the types of properties that are for sale.

I have no idea what this means.  Are there really buyers who are dumb enough to walk through a model, say this is the house they want, and then blandly accept a home that is totally different?

What I perhaps found funniest about the article was this bit of political positioning:

The campaign, called the Arizona Homeowners Bill of Rights
Committee, formed in the midst of this year's housing-mortgage
meltdown. And the committee has attempted to draw links between
financing and construction troubles.

"These same companies that build shoddily also were involved in the
housing-mortgage crisis. They were on both sides of this equation. They
were financing homes above people's means and selling homes that were
defective," said Richard McCracken, an attorney for the measure's
sponsor, the Sheet Metal Workers' International Association, Local
Union 359.

This is kind of a hilarious stretch - talk about guilt by association.  Of course, the bill has nothing to day about mortgages, but since homebuilders were associated with those bad mortgage guys, we should feel free to do anything we want to them.

Often, government interventionism is like a wack-a-mole game, with one set of regulations that create unintended consequences that are the justification for more regulation, and so on.

On the bad-worse scale of government interventionism, this is probably one of the better ideas, the State of Florida's buyout of US Sugars cane growing operations around the Everglades  (via bird dog).

Not mentioned anywhere in the article is the fact that sugar-cane production in the US likely would not even exist at all were it not for the substantial import quotas and tariffs placed on foreign sugar.  The US government has had a policy of propping up US Sugar via enforced higher prices.  So after years of the government in effect paying US Sugar to grow cane around the Everglades, the Florida government is now paying it not to.

I went to see the movie Wanted today, mainly because I am home alone and tried to pick the movie I was least likely to take my wife or kids to.

If you like non-stop action movies with computer game physics and lots of CGI close-ups of bullets drilling through people's skulls that were fired by a smoking-hot assassin babe played by Angelina Jolie who actually had to add tats rather than hide them for this role (and, really, who doesn't?), then you will probably enjoy the movie.  The lost opportunity in the film was the very beginning, which sortof tried to be Office Space without being nearly as good.  But there is certainly a big hint that Office Space was on the director's mind -  don't miss the red stapler, though it didn't look like a classic Swingline.

As an additional note, I see from the previews that someone has done a remake of Death Race 2000, though it seems to bear about the same resemblance to the original as the Running Man did to the original Steven King / Richard Bachman book.  The whole fight-against-the-dystopic-state thing seems to have been lost.  By the way, can't they find any actor other than Jason Statham to portray someone who drives cars fast?

As a final shout-out to SF geeks out there, trolling around on IMDB led me, via Morgan Freeman of all people, to this page which seems to imply a Rendezvous with Rama movie is in the works.

Postscript:  I will never be mistaken for a social conservative, but I did find it odd today that in a preview that was supposedly "approved for all audiences" there were numerous F-bombs dropped.  Update:  OK, I can't be sure that this particular preview was "all audiences."  All the ones that followed were, but it may be they have grittier versions of previews they show before R-rated features. 

Clarification:  Sorry if it was not clear, but I actually did enjoy the movie.  Sort of a guilty pleasure.  Fixed Jason Statham's name, thanks to commenter.

I am a bleeding edge guy when it comes to home theater, so I have had a Blu-Ray high-def disk player for over a year.  I am currently looking for a second player to replace the first, and I thought I might share a couple of thoughts.

The press has declared the high-def DVD format war over, with Toshiba pulling the plug on the HD-DVD format.  This makes it much easier to figure out what software to buy (though it is still really expensive -- some Blu-Ray disks are going for $40!)

However, the hardware issue is still a minefield.  This is related to how the Blu-ray standard is being run, which presents problems and opportunities.  Unlike your CD or DVD player, the Blu-ray standard continues to evolve.  A lot.  It is much more like a computer standard, and I suspect in fact that the computer guys (or at least the game console guys) are running the show here.  This means that new features continue to evolve and be added.  And these are not just add-on features, like additional hardware inputs, but software features that create compatibility issues between versions.   As a result, there are already at least 3 generations of players out there.  The original profile 1.0, and then profile 1.1, and now profile 2.0.  And even within these profiles, individual players may vary in their conformance to them.   Sometimes you can do a firmware upgrade to a newer spec, and sometimes you can't, but such upgrades are not a piece of cake, and involve burning a DVD from the Internet and running certain codes from the Blu-ray remote to make the firmware upload.

The net result is that the features on a certain disk may not work on your player, or the disk may not work in your player at all (Newer movies like Pirates of the Carib. III have multimedia title pages that won't load on my player, and when the title page won't load, there was no way to play the movie.)  My advice is if you have waited this long, hold out until this summer for the newer profile 2.0 machines.  Also, you should confirm the player supports HDMI 1.3, so it can take advantage of the wider color gamut of newer TV's.  Players of this spec will start showing up in the next months -- the Sony BDP-S350 will likely be a good choice available this summer.

By the way, good luck finding anything on the box or in a Best Buy store that says what profile the player conforms to.  Hardware makers have created a really compatibility mess with Blu-ray (its seems to be a very poorly run standard) but they want to hide this fact from consumers because the are only just now recovering from the format war with HD-DVD and don't want consumers to have another reason to wait to purchase.  So there is not way they are going to put the profile number on the box, I guess, so you need to do your research.

As a final thought, and maybe I am just old and out of step here, but I really find the insistence on multimedia content and bitchin-cool menu screens on Blu-ray disks to be tiresome.  I just want to watch the movie in beautiful high-resolution, and having my software not work right because the menu doesn't work is just stupid.  Further, the addition of all these features has caused most blu-ray players to have a boot up cycle longer than Windows.  It can take 45 seconds for a blu-ray player to boot up, and a similar amount of time to get the software to start playing.  Add in the time to plow through stupid menu screens, and it can take several minutes to get a movie started.

Tonight I watched Cloverfield on blu-ray and it was awesome.  I was surprised the reviews on Amazon were so bad for Cloverfield, because I really liked it.  Yea, its different, but unlike movies like Bourne Ultimatum, there is actually a explanable reason for the jerky (and sometimes nauseating, I will admit) camera work. I did not pay much attention to it when it came out in theaters -- is this one of those geek litmus-test videos that only a few of us hard-core nerds like (a la Serenity?)