Coyote Blog

A prior version of this article was published accidentally before it was complete.

I know I swore not to write about Tesla here and to confine myself to talking about Tesla on Twitter, but I can't help myself.  This is the company that is going to spawn a thousand business school case studies.  It is Enron but in the Internet Age with more transparency (or at least less sophistication in hiding their problems).

Over the weekend I re-read "The Smartest Guys in the Room" about the collapse of Enron.  I will admit I was an Enron fanboy at the time -- I drank the Kool-Aid and totally overlooked the problems.  I knew Jeff Skilling a little and worked for him on Enron when we were at McKinsey.  I believed he was brilliant and was doing what he said he was doing.  The crash of Enron took me years to accept, and only on my recent second reading of that book did I have the distance and objectivity to really understand it.  And I realized something else -- I was the same guy back then that I criticize today.  Skeptics of Tesla (including me) make fun of Tesla fanboys and their cult of Elon Musk and their belief of everything he says and their certainty he is the smartest guy in the room.  I understand them because I was that guy with Enron and Skilling.  Maybe Tesla is my chance to correct my past gullibility.

Anyway, just when I thought the story couldn't get any more dramatic (or weird), Elon Musk raises the bar.  Apparently Tesla is now only tangentially and largely irrelevantly an automobile manufacturer.  Instead, it is an autonomous ride-sharing company:

Citigroup and Goldman Sachs, who are underwriting Tesla’s latest effort to raise $2 billion in new funds, held a “broad investor call” on Thursday, where CEO Elon Musk and CFO Zach Kirkhorn answered brokers’ questions about their plans for the electric vehicle maker.

According to two invitees who attended the call, CEO Elon Musk talked up Tesla’s self-driving strategy right off the bat, expanding what he and other execs said at a recent event for investors that the company dubbed “Autonomy Day. ”

Musk confidently told investors on the call that autonomous driving will transform Tesla into a company with a $500 billion market cap, these people said. Its current market cap stands around $42 billion. He also said that existing Teslas will increase in value as self-driving capabilities are added via software, and will be worth up to $250,000 within three years.

This call was in the context of Tesla's offering this week of about $2 billion in new stock and convertible bonds.  The really interesting thing about the call:  Virtually 100% of the discussion on the call was about ride-sharing and autonomy, while neither word was even mentioned in the official written prospectus for the offering.

Before we can understand what the hell is going on here, and why Tesla is going all-in on a business it was barely talking about 60 days ago, we need to do some review.  I want to review where Tesla was last time I wrote about them, and also discuss new Tesla news and actions over the last 3-4 months.  From there, we will try to dissect what Elon Musk is doing.  TL;DR: I believe Musk is doing exactly what Jeff Skilling did at Enron, chasing new business strategies based on what stories he thinks will most likely goose the stock in the short term, rather than which strategies make the most sense in the long-term for his investors.

Where I was on Tesla at year end 2018

I had a lot of criticisms about Tesla's strategy towards the end of last year (here and here, for example).  But let me summarize some of the key points

• Tesla has taken what was already a risky entry into a capital-intensive industry and has made it even more expensive and risky by choosing to own both the dealer network and fueling networks for its cars -- this means it has to invest not only in auto manufacturing capacity but also in a world-wide network of sales and service centers and in a global network of charging stations
• Inexplicably, just as its production volume began ramping up in mid-2018 with the introduction of the mid-priced model 3, Tesla ramped down on its capital spending, R&D, and SG&A spending.  By the first quarter of this year, capital spending was no longer even keeping up with maintenance needs.  This was absolutely inexplicable for a growth company that has promised many new products in the near future (new coupe, semi truck, model Y crossover), all of which will need a plant and equipment to produce.  Further, Tesla slowed investment in its sales, service, and charging networks at the exact time its fleet size exploded, leading to a lot of customer dissatisfaction
• The decrease in these expenditures was likely tied to Tesla's hard to fathom (I seem to be searching for a lot of synonyms for "inexplicable")  decision not to raise capital last year.  Its stock was over $350 a share and it had huge momentum from its first two profitable and cash flow positive quarters.  By almost everyone's analysis, they should have raised $5 billion or more, which might have only created 10% dilution.  (Instead they waited until this week after a terrible quarter and after the stock had fallen to about $235 to raise just $2 billion, barely enough even to fill their accounts payable hole).
• Tesla and Musk claimed that the growth and performance of the 3rd and 4th quarters of 2018 were harbingers of the future and he extrapolated hockey sticks from these data points.  Skeptics like myself believe that this was merely a one-time bulge, that Tesla had sold through 2-3 years of demand in their order book in just 2 quarters, and that the first quarter would be a disaster now that the tank was dry.  In addition, Tesla has culled its order book of all the highest margin variants where it could actually make money, leaving what remained of the unfilled orders as low-margin variants it was barely worth selling.  [By the way, I figured none of this out on my own, and owe a lot to the great folks at $TSLAQ on Twitter, who bring a lot of free research to bear that made it easy to see these patterns].
• My admiration for Musk as having really shown the automobile world that electric cars can sell at high price points (and not as little sh*tboxes) and for his space entrepreneurship really ended with the SolarCity deal.  In that deal, Tesla shareholders overpaid for a failing business simply to bail out Musk and his family from a sinking ship.  The acquisition made absolutely no strategic sense and Tesla has done zero to try to develop it, and in fact has been slowly shutting it down from the moment it was purchased.
• Elon Musk has steadily lost any credibility he might have had by initiating product launches of products he claims are nearly ready for sale but never get introduced.  Tesla got a higher level of subsidy from California based on a single suspicious battery swap demo that has never been repeated or even discussed since.  Musk sold SolarCity to Tesla in part based on a flashy reveal of a solar shingle product that still has not seen the light of day.  Musk had a big reveal of the Tesla semi and started taking customer deposits but there are still no clear plans for its production.

What has happened at Tesla this year

• The first quarter of 2019 was a disaster, with deliveries down despite initiation of Model 3 sales in Europe.  Worse, since the Model 3 seems to be cannibalizing Model S and X sales, Tesla was not only selling fewer cars but its mix shifted to lower priced less profitable cars.  It lost an enormous amount of money, and only after the conference call with analysts about first quarter results did Tesla reveal that this loss would have been far worse without a huge sale of government EV credits
• Tesla burned a staggering amount of cash in the first quarter, and was forced to pay off nearly a billion dollars in debt when the stock price did not remain high enough for the debt to convert.  While Tesla's cash balance at the end of the quarter looked OK, there were two huge red flags. First, the cash barely covered a huge hole Tesla had in its net working capital.  Second, given the large number of vehicles Tesla sold in its end of quarter push in the last 2 weeks of the quarter, it appears that Tesla was nearly out of cash in Mid-March and perhaps days away from a default (analysis below).
• The Tesla financial statements still include a number of unexplained oddities, including a billion dollars of accounts receivable, or about 20% of quarterly revenues.  How does a company that demands payment in advance before delivery have 20% of its quarterly revenues tied up in receivables?
• Tesla announced, out of the blue, that it was closing all its retail stores and going online only.  Given the drop in demand for the quarter, it was a head-scratcher as to why eliminating the sales force was going to help.  The decision seemed to be almost off the cuff, as Tesla seemed surprised that they would still have to continue paying their expensive long-term mall leases.  After this was revealed, Tesla partially reversed the closure decision, but no one -- including their own retail folks -- seems to know what the plan is now.
• Tesla constantly fiddled with its prices and model lineup.  It cut prices several times, but also announced a small raise as well.  It eliminated certain options for cars, added new ones, and then reintroduced eliminated ones.  Even long-time Tesla watchers are confused about the model lineup today.
• Tesla continued to see an outflow of executive talent, including the exit of their very well-respected new General Counsel after just over one month on the job  (Mr. Buttswinkas returned to his old law firm and purged Tesla from his resume).  This seemed to parallel the rapid exit of an outside chief accounting officer last year who gave up millions of dollars to exit in just 60 days.
• April car deliveries stayed on the same pace as the first quarter -- ie, way worse than Tesla's guidance
• Elon Musk continued to get in trouble with the SEC, firing off production and sales guidance on Twitter that was different from Tesla's official published guidance.  Mr. Musk and Tesla are still guiding to a total delivery number for the next year that is well in excess of what most anyone else looking at the first four months believes is possible
• Tesla announced a reveal of their Model Y crossover that will not go on sale until at least the end of 2020.  Unlike past Tesla reveals, this one seemed hastily set up and the prototypes shown were weird.  They looked more like the existing Model 3 with a few modifications than a promised crossover that could incorporate a third row of seats.  Tesla asked customers to start making deposits (skeptics will argue that the whole point of the reveal was just to get some free financing from Tesla fanboys) but unlike past reveals, this one fell flat.  There was apparently little interest in making deposits, though Tesla (unlike with past products) has not revealed the deposit numbers.
• Lyft went public for over $20 billion and Uber is planning a $70+ billion IPO, despite having a history of negative earnings and promising investors they may not make money for 10 years (more on this in a minute)
• After the Model Y went nowhere, Tesla set up what they called "investor autonomy day."  Tesla outlined their strategy for creating a fleet of self-driving cars, and promised fully autonomous cars by the end of 2020.  With these fully autonomous cars, Musk promised that Teslas would become an appreciating asset in that they earned income for their owners as autonomous taxis when the owners were sleeping.  He also said Tesla would own a fleet of taxis itself, using off-lease model 3's for this purpose.
• As described at the top of the article, Tesla raised over $2 billion on verbal promises by Tesla (not echoed in the deal prospectus) that Tesla was soon to be a $500 billion autonomous taxi company

So what is Tesla doing?

Having written all of the above, I realize I have left so much out -- the product quality problems, the worker lawsuits, the autonomous driving deaths, the spontaneous car fires -- but I only have so much time.  If you are interested, @teslacharts on Twitter is a good place to follow Tesla from the skeptic side.  But given all this, what the hell is going on?  The following is my theory.

I think in the 3rd quarter last year, Elon Musk honestly believed that the huge ramp in sales and profits at Tesla represented Tesla permanently turning the corner.  He extrapolated from that growth and believed it would continue for years -- he did not see it as simply the one time working through of years of pent-up orders and demand.  As a result, he put off the capital raise he should have been doing, and instead had dreams of taking the company private and getting away from all the scrutiny by analysts and shorts that seem to irritate him.  Thus was launched the ill-considered "420" tweet when he claimed he had funding secured for a go-private transaction at $420 a share, when in fact this was an outright lie.  Once the SEC stepped in to investigate, a new funding round was almost impossible.

Then, in the first quarter, reality hit Tesla in the face.  For all their public optimism, Musk had to see that the demand he expected was not there and Tesla was likely running low on cash.  I think Musk had convinced himself the convertible bonds due in the first quarter would surely convert (and would have at the third quarter stock price) but now Tesla was doing the opposite of raising capital, it had to pay off debt.  Cash was going out the door and demand was weak.  What to do?

Musk has a demonstrated pattern that whenever he needs the stock price to be higher, or he needs to sell stock, or he needs some other kind of favorable financial outcome, he will do a new product demo. It worked for battery swap and the solar shingle and the model 3 and the semi, so it would work again.  The model 3 reveal had collected hundreds of millions of dollars of cash in the form of deposits.  That's what he needed now.  The problem is, they didn't have a prototype to show.  I believe Musk had the company hastily create a Model Y prototype built on top of a model 3.  It did not really have to work, it just had to be something he could talk about.  Interestingly, his VP of engineering quit at exactly this time, for reasons unknown -- was their some internal dissention about this Y prototype?

Anyway, the Model Y reveal was essentially a flop, and likely garnered few deposits.  Certainly not enough to fill in Tesla's growing cash hole.  And by Mid-March, Tesla may have been almost out of cash.  Tesla says it delivered half its vehicles for the quarter in the last 10 days of March, so about 31,500 were delivered in those hectic days.  At an average price of $50,000 each that would mean Tesla brought in nearly $1.6 billion in cash those last 10 days (this is conservative, may have been more if the average price was higher).  But they only had $2.2 billion at the end of the quarter, meaning Tesla was scraping bottom in mid-March, particularly since hundreds of millions of that cash is restricted and not supposed to be spent.

Somewhere in this period of March-April, after his usual product reveal trick with the Y did not work, I think Musk came to the conclusion that the Tesla car business as currently defined was not going to work.  Or, more accurately, it was never going to make enough money to support its sky-high stock valuation.  I have always said that Tesla would make a fine $10 billion niche car company, but nothing about it justifies a $50 or $60 billion valuation.  But at this point Musk can't accept a $10 billion company, even though that would ostensibly still leave him a very rich man.  But like Ken Lay at Enron, Musk has borrowed against at least half his Tesla stock and a falling stock price could lead to financial death by margin call (Musk, for some reason, also mortgaged all his multi-million dollar homes last December). His other investments are also struggling -- SpaceX has been unable to attract the capital it needs of late and Musk has poured a lot of money into the Boring company, an absolute embarrassment of a company that helps refute, in my mind, his "smartest guy in the world" rep.

As Musk looked around for a way to save the stock valuation, the Lyft and Uber IPO's must have had an influence.  Uber is losing as much money as Tesla and folks are talking about it IPO-ing at a market cap of $70 billion.  What if Tesla could call itself a ride-sharing company, only better.  Wouldn't that garner Tesla an even higher valuation?

So I see investor autonomy day and Musk's autonomy soliloquy on the capital raise call the other day as evidence that Musk has, in his mind, capitulated on auto manufacturing and has decided the way to keep Tesla's stock price up is to promise it will -- in just 20 months -- sell fully autonomous vehicles and be making tons of money selling taxi rides.  In other words, it is a robotaxi company that happens to be backward integrated into manufacturing the taxis.

I am skeptical for a number of reasons.

• This reeks of desperation and capitulation.  If Dell says they are going to reinvent themselves as a search engine, it's time to sell the company
• There is no evidence that Tesla can achieve full autonomy by end of next year and a lot of reasons to think they can't.  Most experts think full autonomy is decades away, and when they rank companies on their progress on autonomy, Tesla is usually near the bottom (e.g here).  Waymo and GM, the leaders, often go thousands of miles between driver interventions.  Tesla is hundreds of times worse.   Even over the short course at Investor Autonomy Day (where Tesla likely trained and practiced in advance) investors reported a driver intervention was needed.  Now imagine the same car with no driver.  In snow with the road markings obscured.  Driving through construction where new routes are confusingly marked off with cones.
• The basic business numbers Musk throws around are absurd.  Just as one example, he extrapolates from current ride-share prices and assumes Tesla will make a ton of money because they will get the same price but not pay the driver.  But this is crazy.  If Tesla suddenly throws a million taxis into the rideshare supply equation, rates are going to fall.  Already, since 2012, Uber reports its average fare per mile has been reduced by over half.  If everyday folks are having their cars drive autonomously at night to earn extra money, the fee per mile is going to be competed down close to the cost per mile of operating the vehicle (or even lower, since most folks underestimate their all-in cost per mile on their vehicle).  Musk is basically proposing to commoditize the market but still reap premium margins.  Not going to happen.

Warning

Note that this article is simply my analysis and in some cases my guesses.  I think the story holds together but I can be wrong.  I am short TSLA via put options but note that this is a modest investment that is a small percentage of my portfolio.  Tesla is a dangerous stock to short.  Right through the bad news, individual investors at RobinHood have been loading up on the theory they are buying the dip.  20,000 people added TSLA to their portfolio at RobinHood just AFTER the horrible first quarter report.  Be very careful

Bonus -- Tesla's Largest Mistakes

No matter what happens, Tesla will always be remembered as the company that brought EV's mainstream.  But like any tragedy, they have made some fatal mistakes.  This is my attempt to get out ahead of future business school cases and rank their largest mistakes:

1. The Model 3.  Tesla could have been a profitable luxury car maker but with the Model 3 tried to go for the low to mid end of the market.  But it does not have the manufacturing expertise or cost position (it assembles in California, for God sakes) to pull it off.  The quality problems it encountered have reduced its brand luster, and the volumes of cars have overwhelmed its service and charging networks.  Investments in the Model 3 have distracted it from real refreshes of its S and X and in fact the Model 3 has cannibalized those more profitable cars.  A higher end crossover would have been a better choice
2. No third party dealers.  Tesla chose to bring the sales and service function in house.  This was a mistake.  Not only did it eat up capital, but it robbed it of valuable marketing partners such as Penske that could have really helped its sales ramp.
3. No 2018 capital raise.  Rather than tweeting 420, Musk should have been raising capital based on its third quarter results.  The money was there to be had and Tesla needed it.  $5billion at least could have been raised with little dilution effect
4. SolarCity Purchase.  This was a complete sham to bail out the Musk family and friends.  Did absolutely nothing for Tesla except drain billions of valuable capital
5. In-house Manufacturing.  Musk often says he wants to be like Apple, but Apple is a design company.  It does not manufacture and for quite a while did not do its own retail.  Tesla would have been better off finding a manufacturing partner rather than manufacturing itself in the highest cost location in the country
6. No Charging Partner. I think Tesla had to build out its charging network at first to eliminate one of the greatest consumer barriers to purchasing an EV.  But they should be partnering to share the costs.  Instead, Tesla still thinks of its charging stations as a competitive moat.  But as other car makers form consortia for charging networks based on faster charging technologies, Tesla is stuck with an expensive network that needs upgrading.  Its more of an anchor now than a moat

2nd Bonus -- Another Musk parallel if you are tired of Enron comparisons

Even more than Skilling and Enron, the person Musk most reminds me of is Ferdinand de Lesseps, whose attempt at building a French canal in Panama ended in spectacular failure.  I highly recommend the book "Path Between the Seas" for folks who want the whole story.  When I have time, I may post on the parallels. I presume Tesla critic @ElonBachman would agree since he uses de Lesseps' picture as his twitter icon but I have never seen him discuss it.

I am not a Lady Gaga fan.  I could probably name a few of her songs if you put a gun to my head -- Poker face, uh that one in A Star is Born, uh, something something Romance.  And I was actually a tad resentful of even going -- we were in Las Vegas during the freaking Superbowl and we are skipping the game and going to Lady Gaga?

She had two shows in Vegas at the Park Theater (by the way best large theater I have ever been in for a concert -- WAY better than some hockey rink).  One show was her regular show with her pop music and one was a jazz show with American songbook classics.  We saw the latter.

And it was amazing.  In a world of autotune and pop singers who can't actually sing *cough* Katie Perry *cough*, Lada Gaga can sing her ass off.  It was tremendously impressive.  I don't know if she is doing this show again or in other locations but it is highly recommended.

PS-  The night before we went to a little Italian restaurant that had Pia Zadora singing in the lounge.  Spent the evening sitting at the bar chatting with the Liza Minnelli impersonator who spelled Pia from time to time.  A very old-school Vegas evening.  And did you know Pia Zadora has a freaking Warhol of her? And it's good.  Way more flattering than most paintings Warhol did of women.  Which is likely the product of her billionaire husband turning the screws on the artist.

PPS- Apparently we didn't miss much in the Superbowl.

Tesla agreed to give Elon Musk what is potentially the richest executive compensation package ever.  I will give my (*gasp*) cynical reason why I think they did this.  I can show you in one chart (Tesla Model 3 production, from Bloomberg):

I would argue that Elon Musk is the only one in the world who can run a company with so many spectacular failures to meet commitments and still have investors and customers coming back and begging for more.  A relatively large percentage of Teslas get delivered with manufacturing defects and their customers sing their praises (even while circulating delivery defect checklists).  Tesla keeps publishing Model 3 production hockey sticks (apparently with a straight face) and consistently miss (each quarter pushing back the forecast one quarter) and investors line up to buy more stock.  Tesla runs one of the least transparent major public companies in this country (so much so that people like Bloomberg have to spend enormous efforts just to estimate what is going on there) and no one is fazed.  Competitors like Volvo and Volkswagon and Toyota and even GM have started to push their EV technology past Tesla and actually sell more EV's than does Tesla (with the gap widening) and investors still treat Tesla like it has a 10-year unassailable lead on competition.

All because Elon Musk can stand up at a venue like SXSW, wave his hands, spin big visions, and the stock goes up $3 billion the next day.   Exxon-Mobil has a long history of meeting promises, reveals its capital spending plans in great detail, but misses on earnings by a few cents and loses $40 billion in market cap.  GE lost over half its market value when investors got uncomfortable with their lack of transparency and their failures to meet commitments.   Not so at Tesla, in large part because Elon Musk is PT Barnum reincarnated, or given the SpaceX business, he is Delos D. Harriman made real.

Disclosure:  I don't currently have any position in TSLA but over the last 2 years I have sold short when it reaches around $350 (e.g. after Elon Musk speaks) and buy to cover around $305 (e.g. when actual operational or financial data is released).  Sort of the mirror image of BTFD.

As a former hater, I have really enjoyed the World Cup this year.  I think an unsung part of why so many people have been coming around in the States is having ESPN broadcast every game, instead of just seeing two or three here.  Seeing all the games lets one start getting to know the players and the teams, develop favorites, etc.

However, like most Americans, I do find it, at best, humorous to watch folks act like they have been gut-shot every time someone brushes their jersey.  I talked to a friend of mine who used to manage NHL teams, and said that it would be funny to do a parody with ice hockey players falling and writhing on the ground every time they were touched.  There would be 10 guys laying on the ice in about 30 seconds.

Not quite the same idea, but I thought this parody was pretty funny

This chart illustrates a data analysis mistake that is absolutely endemic to many of the most famous climate charts.  Marc Morano screencapped this from a new EPA web site  (update:  Actually originally from Pat Michaels at Cato)

The figure below is a portion of a screen capture from the “Heat-Related Deaths” section of the EPA’s new “Climate Change Indicators” website. It is labeled “Deaths Classified as ‘Heat-Related’ in the United States, 1979–2010.”

The key is in the footnote, which says

Between 1998 and 1999, the World Health Organization revised the international codes used to classify causes of death. As a result, data from earlier than 1999 cannot easily be compared with data from 1999 and later.

So, in other words, this chart is totally bogus.  There is an essentially flat trend up to the 1998 switch in data definition and an essentially flat trend after 1998.  There is a step-change upwards in 1998 due to the data redefinition.  This makes this chart useless unless your purpose is to fool generally ignorant people that there is an upwards trend, and then it is very useful.  It is not, however, good science.

Other examples of this step change in a metric occurring at a data redefinition or change in measurement technique can be found in

• The hockey stick  (and here)
• Ocean heat content  (sorry, can't find the link but the shift from using thermometers in pails dipped from ships to the ARGO floats caused a one time step change in ocean heat content measurements)
• Tornadoes
• Hurricanes

I have written here any number of times about the crazy ongoing subsidies by Glendale, Arizona (a 250,000 resident suburb of Phoenix) to an NHL franchise.  The city last year was teetering at the edge of bankruptcy from past hockey subsidies, but decided to double down committing to yet more annual payments to the new ownership of the team.

Surprisingly, throwing more money into an entreprise that has run through tens of millions of taxpayer money without any hint of a turnaround turns out to be a bad investment

Revenue from the Phoenix Coyotes is coming up short for Glendale, which approved a $225 million deal to keep the National Hockey League franchise in 2013.

City leaders expected to see at least $6.8 million in revenue annually from the team to help offset the $15 million the city pays each year for team owners to manage Jobing.com Arena. The revenue comes from ticket surcharges, parking fees and a split of naming rights for the arena.

Halfway through the fiscal year, the city has collected $1.9 million from those sources, and nearly $2.3 million when including sales-tax revenue from the arena.

Even including the rent payments on the publicly-funded stadium, Glendale is still losing money each year on the deal.

The source of the error in forecasting is actually pretty funny.  Glendale assumed that it could charge very high monopoly parking fees for the arena spaces ($10-$30 a game).  In some circumstances, such fees would have stuck.  But in this case, two other entities (a mall and another sports stadium) have adjoining lots, and once parking for hockey was no longer free, these other entities started competing parking operations which held down parking rates and volumes (I always find it hilarious when the government attempts to charge exorbitant monopoly prices and the free market undercuts them).

Had the parking rates stuck at the higher level, one can assume they still would have missed their forecast.  The Coyotes hockey team already has among the worst attendance numbers in the league, and hockey ticket buyers are particularly price sensitive, such that a $20 increase in the cost of attending a game likely would have driven attendance, and thus parking fees and city ticket surcharges and sales taxes, down.  Many private companies who are used to market dynamics still fail to forecast competitive and customer reaction to things like price increases well, and the government never does it well.

I won't repeat the analysis, you need to see it here.  Here is the chart in question:

My argument is that the smoothing and relatively low sampling intervals in the early data very likely mask variations similar to what we are seeing in the last 100 years -- ie they greatly exaggerate the smoothness of history and create a false impression that recent temperature changes are unprecedented (also the grey range bands are self-evidently garbage, but that is another story).

Drum's response was that "it was published in Science."  Apparently, this sort of appeal to authority is what passes for data analysis in the climate world.

Well, maybe I did not explain the issue well.  So I found a political analysis that may help Kevin Drum see the problem.  This is from an actual blog post by Dave Manuel (this seems to be such a common data analysis fallacy that I found an example on the first page of my first Google search).  It is an analysis of average GDP growth by President.  I don't know this Dave Manuel guy and can't comment on the data quality, but let's assume the data is correct for a moment.  Quoting from his post:

Here are the individual performances of each president since 1948:

1948-1952 (Harry S. Truman, Democrat), +4.82%

1953-1960 (Dwight D. Eisenhower, Republican), +3%

1961-1964 (John F. Kennedy / Lyndon B. Johnson, Democrat), +4.65%

1965-1968 (Lyndon B. Johnson, Democrat), +5.05%

1969-1972 (Richard Nixon, Republican), +3%

1973-1976 (Richard Nixon / Gerald Ford, Republican), +2.6%

1977-1980 (Jimmy Carter, Democrat), +3.25%

1981-1988 (Ronald Reagan, Republican), 3.4%

1989-1992 (George H. W. Bush, Republican), 2.17%

1993-2000 (Bill Clinton, Democrat), 3.88%

2001-2008 (George W. Bush, Republican), +2.09%

2009 (Barack Obama, Democrat), -2.6%

Let's put this data in a chart:

Look, a hockey stick , right?   Obama is the worst, right?

In fact there is a big problem with this analysis, even if the data is correct.  And I bet Kevin Drum can get it right away, even though it is the exact same problem as on his climate chart.

The problem is that a single year of Obama's is compared to four or eight years for other presidents.  These earlier presidents may well have had individual down economic years - in fact, Reagan's first year was almost certainly a down year for GDP.  But that kind of volatility is masked because the data points for the other presidents represent much more time, effectively smoothing variability.

Now, this chart has a difference in sampling frequency of 4-8x between the previous presidents and Obama.  This made a huge difference here, but it is a trivial difference compared to the 1 million times greater sampling frequency of modern temperature data vs. historical data obtained by looking at proxies (such as ice cores and tree rings).  And, unlike this chart, the method of sampling is very different across time with temperature - thermometers today are far more reliable and linear measurement devices than trees or ice.  In our GDP example, this problem roughly equates to trying to compare the GDP under Obama (with all the economic data we collate today) to, say, the economic growth rate under Henry the VIII.  Or perhaps under Ramses II.   If I showed that GDP growth in a single month under Obama was less than the average over 66 years under Ramses II, and tried to draw some conclusion from that, I think someone might challenge my analysis.  Unless of course it appears in Science, then it must be beyond question.

Three cheers for Greg Patterson holding the media accountable for their past support of costly corporate welfare.

You may have seen the recent Wall Street Journal Story about the financial fiasco that is Glendale Arizona.

Here's the Republic's take on it. 

Glendale ranked second in the U.S., according to the story, thanks to a $26.6 million negative fund balance at the close of fiscal 2012, due largely to sports-related debt.

Glendale has made a lot of mistakes, but I think that there is near universal agreement that the critical error was their decision to build the hockey arena.

Yep.  I have written about the egregious hockey deals that have bankrupted Glendale on several occasions.  George Will even quoted me on the topic.

Greg Patterson went back and looked at what the Arizona Republic was writing before the Glendale deals went so noticeably bad.  I have written before about how the media goes into full cheerleader mode on those crony stadium deals.

Before Glendale bankrupted itself to subsidize the hockey team, Scottsdale was offered the "opportunity" to do so and turned it down.  The local paper Arizona Republic excoriated Scottsdale for passing on the chance to subsidize rich sports team owners, saying that "Once-in-a-lifetime projects are just that".  Here is the best quote from the 2004 Republic editorial:

Our view is that Scottsdale's mishandling of the arena idea was a leadership blunder of biblical proportions. Enough with the blame game. We hope that Scottsdale at least has learned some tough lessons from the disaster.

And this is classic:

Some city officials seemed content to nitpick, complain, second-guess and haggle over details. They're right to be diligent. Certainly nobody endorses a Pollyanna-ish panel of rubber-stampers. But at the same time, people who are forever looking for stuff to complain about always seem to find it.

I bet Glendale wishes it had more second-guessers on its city council.  The whole thing is worth reading.

Postscript:  This is one recommendation from the Republic I can agree with:

Think twice about ever launching a redevelopment effort like this again. Sensing that the Los Arcos Mall area was hurting economically, the council formed the Los Arcos Redevelopment District in December 1995. The council adopted a redevelopment plan the following July, and the Ellman Cos. subsequently acquired the 42-acre site. Not too surprisingly, Ellman was the only one to answer the city's request for proposals.

Ellman owns the Los Arcos property. That gives him a lot of advantages, including a position of negotiating authority. It allows him to stoke political outrage by wearing down the patience of neighbors who would like to see something built on this key corner. Got a great idea about what should be done at Los Arcos? Too bad. Ellman still owns it. Condemnation is not a viable political or financial course for the city, and Ellman knows it.

Redevelopment almost always means "crony giveaway" nowadays.

The other day, the City of Glendale approved a deal which has the city subsidizing (more in a second) the buyers of the Phoenix Coyotes hockey team to get them to actually stay in town rather than move to Seattle.  The deal is arguably better than deals it was offered in the past (it gets shares of parking and naming rights it did not have before) and may even be a rational deal given where it is today.

But that is the catch -- the phrase "where it is today."  At some level it is insane for a city of 250,000 people to pony up even more subsidies for a team that has the lowest attendance in the league.  The problem is that the city built the stadium in the first place -- a $300 million dollar palace for a metropolitan area that already had a major arena downtown and which was built (no disrespect to Glendale) on the ass-end of the metropolitan area, a good 90 minute round trip drive for the affluent Scottsdale and east-side corporate patrons who typically keep a sports franchise afloat.

Building this stadium was a terrible decision, and I and many others said so at the time.  But once the decision was made, it drove all the future decisions.  Because the hockey team is the only viable tenant to pay the rent in that building, the city rationally will kick back subsidies to the team to keep it in place to protect its rent payments and sales taxes from businesses supported by the team and the arena.  The original decision to build that stadium has handcuffed Glendale's fiscal situation for decades to come.  One can only hope that cities considering major stadium projects will look to Glendale's and Miami's recent experiences and think twice about building taxpayer funded facilities for billionaires.

The deal the other night to keep the team went down in the only way it could have.  As I had written, the NHL was insisting on selling the team for its costs when it took it over in bankruptcy, which were about $200 million, which was well north of the $100 million the team was worth, creating a bid-ask gap.  Several years ago, the city tried to just hand $100 million to a buyer to make up the gap, but failed when challenged by the Goldwater Institute.  The only real avenue it had left was to pass the value over to the buyers in the form of an above-market-rate stadium management contract.

And that is what happened, and I guess I will say at least it was all moderately transparent.  The NHL came down to a price of $175 million, still $75 million or so above what the team is worth.   The City had already sought arms-length bids for the stadium management contract, and knew that a fair market price for that contract would be $6 million per year.  It ended up paying the buying group $15 million per year for the 15-year contract, representing a subsidy of $9 million a year for 15 years.  By the way, the present value of $9 million over 15 years at 8% is... $75 million, exactly what was needed to make up the bid-ask gap.  Again, I think the city almost had to do it, because the revenue stream it was protecting is likely higher than $9 million.  But this is the kind of bad choices they saddled themselves with by building the stadium in the first place.

Let me bring you up to speed:  The NHL owns the Phoenix Coyotes hockey team, having taken them over in bankruptcy.  It needs to sell the team and is demanding $200 million for the team, having promised the league owners it would not accept anything less (so they will not take a loss in the investment).  The team is worth, however, something like $100 million, at least if it stays in Arizona.

The team plays in a stadium built by the relatively small city (250,000 people) of Glendale, which put something like $300 million of taxpayer money into the stadium and has provided operating subsidies to the team the last several years that probably total another $100 million, at least.  The city has a bad hand, but keeps doubling down on its bet to try to retain the team.

The problem, of course, is the $100 million difference in the bid-ask for the team.  Glendale first tried to fix this by agreeing in a previous deal couple of years ago to basically give the buyer $100 million of taxpayer money to bridge the bid-ask gap.  The Goldwater Institute sued, saying that the Arizona Constitution pretty clearly states the government can't directly subsidize commercial interests.  They prevailed (before it ever reached court) and the deal died.

The only way left for Glendale to make the deal happen was to give a buyer $100 million in taxpayer money but to do so in a more disguised manner.  The one option they had was in the stadium management contract.  If they agreed, say, to pay the buyer $10 million a year over market rates for the stadium management contract, over 15 years that has about a $100 million present value.  They can get away with this because there is no objective valuation of what a management contract would cost on the open market.

But their ability to do this is, thankfully, about to die.  Under intense pressure, and in a fit of good government that I am sure Glendale regrets, it actually went out and sought arms-length contracts for stadium management from third parties.  It is enormously unlikely the city will accept any of these bids, because it needs the stadium contract as a carrot for someone to buy the Coyotes at the NHL's inflated price.  Besides, I bid on large contracts a lot and I have often been presented with bid packages from an entity that had no intention of awarding, but wanted me to go through all the bid effort just to establish an internal price benchmark or to keep their preferred provider honest.  I can smell these from a mile away now.

The problem Glendale will have, though, is that when these 3rd party bids become public (which they inevitably will), it will then be impossible to hide the implicit subsidy in the management contract.  Presumably, taxpayers then will push back on any future deals using this dodge, though Glendale citizens seem pretty supine so one never knows.  Also, the city can also tweak the responsibilities of the stadium contract, thereby allowing them to claim that comparisons against these past bids are apples and oranges (though this will be hard as I expect arms-length bids around $5 million a year vs. $15 million they propose to pay the team buyer).

PS-  It is hilarious to see worried comments from Gary Bettman (NHL Commissioner) about how hard on Glendale it will be if the Coyotes leave town.  Merely lowering his asking price to something less than 2x the market price would solve the problem in an instant.

Via the AZ Republic

The true cost to operate Jobing.com Arena ranges from $5.1 million to $5.5 million a year, which is about $10 million to $20 million a year less than the Glendale City Council has agreed to pay hockey-related interests to manage the facility in recent years.

The net management costs, included in documents recently published on the city’s website, are bundled in the city’s solicitation for a new company to operate the city-owned arena.

Glendale council members interviewed by The Arizona Republic said they hadn’t reviewed the documents and were surprised by the figures.

“I wasn’t aware of that,” Mayor Jerry Weiers said. “Then again, I know damn good and well that the way it’s been run, they’re not putting anything extra into it whatsoever.”

This is unbelievably easy to understand .  It is a hidden subsidy, and everyone knows it.  The pictures of politicians running around saying "what, we had not idea" is just hilarious.  The Phoenix Coyotes hockey team has the lowest attendance in the league, and loses money.  In addition, the NHL, which owns the team, has committed to its members that it will not take a loss on the team, meaning that it needs to sell the team for north of $200 million.  The team is worth over $200 million, but only if moved to Canada.  In Glendale, it is worth $100 million or less.

The city was close to a deal a few years ago to sell the team.  It tackled the team value problem by basically throwing $100 million in taxpayer money into the pot for the sale (to make up for the difference in value between the asking price and actual worth).  When this encountered a Constitutional challenge (under the AZ Constitution corporate welfare is illegal though you would never know it living here) the city council disguised the subsidy in the form of an above-market-rate payment for running the arena.

So absolutely everyone knows what is going on here.  This has become a massive black hole for the town of 250,000 people that achieves nothing but the self-aggrandizement of the local politicians, who feel like bigshots if they have a real major sports franchise in town.  Oh, you heard that this all actually pays for itself in tax money?  Hah!

The justifications for previous management deals revolved around a commitment to keeping the team in Glendale. Loyal fans pleaded with council members for the team’s future. And a council majority saw advantages, including thousands of fans trekking to their city 41 nights a year to watch hockey and spend money in the city’s restaurants and shops.

The city collects revenue associated with the team and arena through leases, parking fees and tax collections for food and merchandise sales in the nearby Westgate Entertainment District. Those figures have been on the upswing, particularly since an outlet mall opened last fall.

Total collections were $4.7 million in fiscal 2011, and reached $6.4 million through just the first eight months of the 2013 fiscal year, according to the city. That money helps pay, but doesn’t fully cover, the city’s debt to build the arena.

The town spent $300 million on a stadium and subsidized the team between $25 and $40 million a year, depending on how you count it, all to get an "incremental" $6-8 million in tax money.  And by the way, just because they collect it in this area does not make it incremental -- these sales could well have cannibalized another area of town.

I found this article in the Arizona Republic, our local rag, almost criminal.  As far as it goes, I think the facts are correct.  What is amazing is what it leaves out.  First, the article:

Glendale administrators propose cutting nearly a quarter of the city's employees, or 249 positions, if voters approve a ballot measure in November to repeal a sales-tax hike.

Repeal of the 0.7 percentage-point tax hike that took effect last month would mean the loss of $11 million this year and $25 million annually through 2017, according to city estimates.

The City Council had approved the temporary increase to shore up its deficit-ridden general fund after laying off 49 employees and cutting $10 million from departments at the start of this fiscal year....

Proposed cuts include shuttering two of the three city libraries, one of its two aquatic centers, the TV station and all city festivals, including Glendale Glitters.

The article continues with the usual panic about cuts in police and firefighters and libraries and parks,  etc. etc.  What the article does not mention except in passing in paragraph 12 is the reason for the tax increase and the budget problems in the first place.  Over heated opposition in the community, the City Council, which has enjoyed pretending to be big shot Donald Trumps over the last few years with taxpayer money, handed a private individual $25 million a year to keep the ice hockey team in town, an ice hockey team that has the lowest attendance in the league despite doing fairly well the last few years.  This is on top of years of other subsidies and the taxpayer-funded $300 million stadium.   The numbers line up exactly -- a new $25 million a year subsidy and a new $25 million a year tax, and the paper cannot even connect these dots, even when they were directly connected in real time (ie the tax was specifically justified to pay for the subsidy).

What the article entirely fails to mention is that, given no voice in these corporatist extravagances in Glendale (the tiny town of 250,000 has also subsidized an NFL franchise and a couple of MLB teams), the only way the citizens of this town have any way to exercise accountability is to vote down the tax that enables this corporate handout.  They were not allowed to vote on the deal itself.  This is not a bunch of wacky red-staters voting to decimate the parks departments, as the city and the paper would like you to believe, but a citizenship that is tired of the idiotic corporate cronyism in the Glendale city council and are looking for some way, any way, to enforce some accountability.

This is the media and the state in bed together promoting the larger state.  Glendale's problems are entirely self-imposed, spending huge amounts of tax money on subsidizing sports teams and real estate ventures.  When these all failed like so many Solyndras, they are trying to make this out to be a tax shortfall, when in fact it is spending idiocy.

The media always seems to participate as a cheerleader in this statism, but local papers have a special interest in promoting this sort of sports corporatism.  Just about the only thing that sells dead-tree newspapers any more is the sports section.  I would love to see what would happen to circulation rates if they cut the sports section.  So any state actions that add professional sports franchises or keeps them in town contribute directly to the newspapers' survival.

Well, it looks like the NHL may have a buyer for the Phoenix Coyotes.  I have not seen all the terms, but the problem in finding a buyer has been this:  based on comps from other recent sales (e.g. Atlanta) the price for sunbelt teams is something like $100 million max, but the NHL has promised its owners it would not sell it for less than $200 million.  The NHL has to find a sucker, and if billionaire buyers are not willing to be a sucker, then they have to find a third party sucker to just kick in $1oo million of present value to make the deal work.

Enter the city of Glendale.  It has tried very hard on multiple occasions to be that sucker, and only was stopped from doing so by efforts of the Goldwater Institute to enforce a state Constitutional injunction on corporate welfare.

Glendale has apparently found a new way to subsidize the transaction by promising to pay an above-market stadium management fee.  I have talked to some sports executives, including one very familiar with this stadium, and they have all said that in a free market, a third party might take the stadium management contract for free, because though it carries operational costs, it also yields offsetting revenues (like stadium rentals for concerts).

By paying an above-market rate for stadium management services, Glendale can provide a corporate subsidy but retain the fiction that this is a service contract rather than crony welfare.  Over the last two years, Glendale has paid the NHL $25 million a year in stadium management fees, a payment everyone understands to actually be a subsidy to keep the team in town.

I presume the new buyer has met the NHL's $200 million price tag.  But that is obvriously overpaying.  So Glendale is going to kick a bunch of money back to the buyer to make it work, in the form of $306 million in stadium management fees.  Via the Sporting News:

Longtime Glendale city councilor Phil Lieberman on Monday, in an interview with Sportsnet.ca, estimated that arena management fees paid by the city to Jamison under terms of the deal would total $306 million over the next 21 years, or an average of $14.6 million. A large chunk of that money, Lieberman says, is front-loaded, with Glendale on the hook for $92 million over the next five years. Nearby University of Phoenix Stadium, home to the Arizona Cardinals of the NFL, carries a $9.2-million management fee annually.

By the way, University of Phoenix Stadium is far larger and more expensive to operate, so one would expect the Coyotes arena management payment to be less than $9.2 million.   And the $9.2 million, since it comes from Glendale as well, likely has a subsidy built in.  But let's for a second assume something like $8 million a year is the high end for what a market rate for such a contract would be.  This would be $168 million over 21 years, implying $138 million minimum in subsidy built into the management contract.  There you go, there is the sucker payment to make up the difference between market value of the team and the NHL's price.

In fact, according to numbers at the WSJ, the city would have been better off leaving the stadium empty and just paying off the note  (and they certainly would have been better taking Jim Balsillie's offer to move the team but help them pay down their note).

The NHL has announced a tentative sale to a group headed by former San Jose Sharks executive Greg Jamison, under terms that would essentially institutionalize Glendale's commitments. Under the proposal that the NHL has laid out for city council members, the city would continue paying an arena-management fee that would average about $14.5 million a year.

On top of the city's average $12.6 million in debt service, that amounts to annual expenses of about $27.1 million—to be offset by anticipated Coyotes-related revenue of $14.2 million, according to projections by Glendale's city management department. That adds up to a projected annual loss for Glendale of $12.9 million.

Of course, Glendale wants to keep the team because it cut a crony deal with a few real estate developers to build a retail and condo complex around the stadium.  Of course, these ventures have also gone bankrupt.  So the city is trying to bail out and keep a bankrupt hockey team to sustain an already bankrupt retail developer.

The logic of course is that Glendale wants to attract retail businesses to Glendale from nearby Peoria and Phoenix.  But in the end, they are just messing up their own goal:

Some Glendale business owners may also oppose the deal, including David Kimmerle, owner of Sanderson Ford car dealership in Glendale. A longtime sponsor and fan of the Coyotes, Kimmerle felt betrayed when Glendale officials recently proposed raising the city's sale tax, in large part to support the cost of the team. The proposed increase would make a $30,000 car on Kimmerle's lot $330 more expensive than in the neighboring suburb of Peoria. "No one is going to pay a premium to shop in Glendale," Kimmerle said. "If it is choosing between the Coyotes or a business that is been in my family since 1955 and employs 500 people, I have to choose my business."

So, which would you bet on:  That retail buyers will choose a location based on prices and taxes, or based on its proximity to a hockey team?  Glendale is betting hundreds of millions of dollars its the latter.  Which is why they are idiots.

Oh, and those Goldwater folks.  Per the Sporting News article:

As for Goldwater Institution opposition to the deal, the league, Jamison and Glendale are aggressively striving to craft a sale that avoids Goldwater opposition and possible legal action.

And how are they doing this?

The NHL, city and Jamison are also not producing public documents on their deal so they can avoid records falling into Goldwater's hands.

Your transparent government at work.  Its not breaking the law if no one can prove it.

For years now I have lampooned the crazy money Glendale, AZ has thrown at the Phoenix ice hockey team in a desperate attempt to trade taxpayer money for prestige.  Let me bring you up to date:

Years ago a town of about 250,000 people committed about $200 million in taxpayer money to build a stadium for a professional ice hockey team, to attract it away from Scottsdale or downtown Phoenix to what is frankly the ass-end of the metropolitan area  (I have no problems with the west side of town, but from a geographic, demographic, and economic logic standpoint this was roughly equivalent to moving the LA Lakers to Riverside or San Bernardino).

For some weird reason, moving an ice hockey team to the desert with no base of hockey fans and locating it a good 45 minutes from the wealthier parts of town caused the team to go bankrupt.  Lots of people were willing to pay good money to haul the team back to Canada where there are, you know, ice hockey fans, but few wanted to pay good money to keep it on the west side of Phoenix.

So enter the NHL, which took the team over.  The NHL commissioner promised the other owners that it would not lose money on the deal, so it set the price of the team not at the market price (which appears to be around $100 million based on the Atlanta sale) but based on its costs, which were about $200 million.   It has agreed to try to keep the team in Glendale, but only if the city covers its operating losses of $25 million each year, which incredibly, the city has done for two years (note this is $100 a year for every man, woman, and child in the city to subsidize a hockey team).

The team may be worth $200 million in Canada, but it is only worth $100 million in Glendale (at most) so it does not sell.  The city agreed to make up the $100 million difference  with a bond issue (and throw another $90+ million in to boot), which almost closed the deal with one buyer until the Goldwater Institute pointed out that this kind of subsidy was illegal under the AZ constitution.  And so the situation sits.  The asking price is still $200 million, which no one will pay if they have to keep the team in Glendale.  And the city keeps forking over $25 million a year to the NHL to keep the team running.

OK, so that is the background.  Here is the new news.

The league, which purchased the Phoenix Coyotes at a bankruptcy court auction in 2009, has been managing the team and city-owned arena until an owner willing to keep the team in Glendale can be found. The city paid $25 million to the NHL during the 2010-11 season and pledged another $25 million for the current season, which is expected to come due in May.

To fulfill that pledge, the city put $20 million in escrow and still needs to come up with $5 million.

The hefty payouts have nearly drained the city's reserves, leading to a recent drop in the city's bond rating.

And the city is looking at a deficit next fiscal year that one councilwoman has estimated could reach $30 million. A possible sales-tax hike, furloughs and program cuts are on the table to close the spending gap....

During Tuesday's budget talks, [Glendale Mayor] Scruggs asked council members to join her in signing a letter to NHL Commissioner Gary Bettman to "release us from that $20 million in escrow and let us pay over time."

None of the councilmembers responded to her request. Councilman Manny Martinez later told The Republic he would "have to think about it in light of what is going on."

Scruggs said if the city can get back the $20 million from escrow and pay the NHL an initial $5 million, "our problems and everything our employees are fearful of would pretty much go away."

Translation:  Dear NHL, we are idiots and committed a bunch of money to a stupid purpose that we can't really afford.  Would you pretty please let us out of our commitment?  Hilarious and pathetic.  The chickens are coming home to roost by the millions.

Even funnier, the Glendale mayor is trying to blame the NHL for bad faith

The mayor said she and four others councilmembers pledged the second payout last May because city staff and NHL Deputy Commissioner Bill Daly said a deal with a team owner was nearly complete and that "we should never have to pay that $25 million."

Scruggs said the city was told the money was just a place holder so that the NHL wouldn't move the team out of Glendale.

"Given the stress that our budget is under, there should be a payment plan developed," Scruggs said. "They have no right to that money. They held us hostage for a year."

She said the NHL never intended to do business with Chicago businessman Matt Hulsizer, who wanted to buy the team but walked away from the negotiation table in frustration just weeks after the council pledged the second payment to the NHL....

Scruggs said the NHL last spring "misled us and they can't do this to our city."

In fact, the NHL was totally serious about the Hulsizer deal.  That deal fell through not because the NHL screwed up, but because Glendale did.  The deal fell through because Glendale had committed to a subsidy of the deal which may not have been Constitutional, and even if it had proved legal, became impossible when Glendale's bond ratings started tanking and they realized they could not move the paper.  Glendale officials have been amateurish and dishonest through this entire process.

By the way, several years ago, Jim Balsillie offered a deal worth over $200 million for the team, PLUS he offered to pay off something like $150 million of Glendale's stadium debt.  Glendale opposed the deal, because they would have been left with an empty stadium and tens of millions in debt (given the crash in RIM's fortunes, the offer is unlikely to be renewed).

Glendale is likely going to wish they had taken the first offer.  There is a very good chance that Glendale will lose the team without any sort of payment on their debt and after paying $25 million a year to the NHL.  Glendale will end up with hundreds of millions in debt, an empty stadium, a junk-level bond rating and a busted budget.

There is a saying in the investment world - your first loss is your best loss.  Glendale is about to learn this very expensive lesson.

In the Climategate 2.0 emails, Michael Mann confirms what we already knew - there is absolutely no tolerance for dissent, even the scientifically thoughtful sort, among climate alarmists.  Writing about their mother-site, RealClimate, Mann says

 I suspect you've both seen the latest attack against [Keith Briffa's] Yamal work by McIntyre.    Gavin and I (having consulted also w/ Malcolm) are wondering what to make of this, and what sort of response---if any---is necessary and appropriate. So far, we've simply deleted  all of the attempts by McIntyre and his minions to draw attention to this at RealClimate.

Note that the knee-jerk, default action is to purge, hide, and delete criticism, even before it is understood.  They make absolutely no attempt to understand the argument, reading it just enough to know that it is critical and therefore must be deleted.  The second action is to find someone to refute it, again even before the critique is understood.  It is critical of us so it must be wrong.  QED.

Here is one of the original McIntyre posts where he outlines the problem he found in Briff's work.  He argues that the findings in Briffa are not very robust, as substitution of a larger sample of trees (this is a tree-ring temperature reconstruction study, like the hockey stick) from the same area for Briffa's apparently small, hand-picked sample have an astoundingly large effect on the study's findings (the red study line below, McIntyre's reconstruction in black).

Perhaps McIntyre was missing something (though over the 2 years since no one involved has suggested what that might be).  But the tone of the article is certainly scientific and thoughtful.   It has no resemblance to the unscientific polemic that alarmists often use as an excuse to excise skeptical comments from their web sites.

on this blog of how Glendale, Arizona has been throwing wads of taxpayer money at the Phoenix Coyotes hockey team and at any rich person who might be willing to buy the team.  The city of 225,000 citizens spent nearly $200 million on a stadium, promised to hand a buyer of the team $100 million to help with the purchase, plus hand the new buyer a stadium contract worth about $100 million over five years.  While this all plays out, Glendale paid the NHL $25 million last year to help cover the team's losses and has agreed to pay another $25 million this year.

Wow.  This is just amazing, written all in one place.  But its not just hockey that the small corporate-state suburb on Phoenix wants to subsidize.  Here is the latest recipient of largess:

Bechtel Corp., one of Glendale's largest employers, has agreed to stay until 2018 after city officials offered the company about $1 million in incentives.

By next year, the global engineering and construction company, with the city's financial help, will move from north Glendale to a new, vacant building not far from the city's sports district called the Glendale Corporate Center....

Under the agreement, Glendale would give $576,000 over the next two years to Bechtel for its costs to outfit the building shell for offices.

The incentive package also includes a waiver of $50,000 in city permit fees and a job-retention incentive of $1,250 per employee, up to $400,000. Each eligible employee must earn a salary of at least $50,000 per year.

Glendale offered a sports perk as well.

Bechtel can use the city's suites, both at Camelback Ranch Glendale and Jobing.com Arena, for free twice.

LOL, Jobing.com arena is the hockey rink the city built, so it is giving tickets from its subsidized hockey club to its subsidized engineering firm.  The article includes the usual consultant figures who reliably take money from cities to report on all the indirect benefits and revenues and economic activity that result from their subsidies.

However, these are not the first subsidies paid to Bechtel by Glendale

The corporation first came to Glendale in 2002. Bechtel moved to Talavi Corporate Center from Phoenix after Glendale promised $1 million in incentives. The staff at the time was expected to grow to 500 from 300.

Bechtel's staffing is only at 320 today, not 500, but this failure to actually grow jobs after getting subsidies for job growth is pretty typical of these deals.    My interpretation of this is that this is yet another move to get more tenants around its sports complex, to raise the stakes and apparent costs if the hockey team moves.  Glendale will cry that they can't lost the hockey team, think of all the tenants in the surrounding real estate, when it was the city itself that spent money to put all its eggs in this one basket.

The only funny part of the article is the Talavi real estate folks.  They were thrilled to gain a new tenant in 2002 due to the city's relocation subsidies, but now suddenly think such subsidies are unfair.

Bechtel's landlords at Talavi aren't happy about the move.

"We were actually a little surprised to hear Glendale was offering incentives," said Damon Elder, spokesman for Daymark Realty Advisers, which was negotiating a lease extension with Bechtel for Talavi's owners.

"We would think the city would be fair-minded with all of their corporate citizens. . . . I don't know why the city would be pitting one location against another."

For those of us who simply think of ourselves as residents of the Phoenix metropolitan area, or even broader just as Americans, we are surprised about the earlier subsidy as well, wondering why taxpayers of a small suburb are paying big bucks to move businesses back and forth a few miles across the town line.

But of course, this is not the worst example. A few years ago, Phoenix tried to spend $100 million in subsidies to move a Nordstrom and a Bloomingdales one mile and one freeway exit (out of Scottsdale).

By the way, Glendale's economic development director has made it official, we live in a corporate state:

"[government relocation incentives are] just a modern, Fortune 100 corporate expectation," Friedman said. "If you have a top-notch, world-class company in your community, your absolute goal should be to make sure they are successful and are content in your community and want to remain."

The other day I was listening to a national sports-talk radio show and they were discussing an prominent athelete's recent injury.  They were expressing concern that the doctor who was treating the athlete (succesfully, it seemed) had treated other non-ahtlete patients with HGH and steroids.

Well, duh.  This is what has driven me crazy about the whole steroid craze.  Steroids were not invented to as sports performance enhancing drugs.  They were invented because they had a variety of medical uses, including aiding recovery from certain injuries.   Is the sports world really better off if we deny, say, Tiger Woods the injury-recovery tools that any non-athlete would have access to?

I will add here, just to tick people off and highlight yet another area where I am grossly out of step from the rest of America, that I have no particular problem with PED's in sports.  It's fine if governing bodies for whatever reason want to ban them, but its not a straight forward case to me.  These drugs have dangers, but getting our panties in a knot about people's informed choices on these dangers seems hypocritical to me as we routinely attend sports that have been demonstrated to cause, for example, major brain damage in athletes (e.g. football, hockey, boxing).

I suppose I get the comparability issue (people like records from 1900 to be comparable to those today) but to some extent this is outright hypocrisy as well.  Don't modern training techniques, like altitude sleeping chambers, equally make a mockery of comparability?  Baseball cries the most about steroids messing up the record books, then it does stuff like lower the pitching mound to help hitters and add the DH.

On the plus side, isn't there value to seeing our athletes play longer?  Wouldn't it be nice (if you are not a Red Sox fan) to see Derek Jeter play a little longer?  To see Tiger Woods return quicker from injuries?

And don't even get me started on the government's campaign to throw steroid users like Barry Bonds in jail.  As I said earlier, I don't have a particular problem if private governing bodies choose, for competitive or marketing reasons, to ban PED's and enforce that ban within their community.  But throwing Barry Bonds in jail for choice he made with his own body?

The title of this post comes from something my son said, after a few hours on Facebook with everyone in that forum dancing on Osama's grave.  He said he just couldn't work up the excitement felt, by, say folks on the local news last night chanting "USA, USA."

I know how he feels.  Certainly Osama is a mass murderer and deserves to die.  And I suppose it is important from a foreign policy standpoint that if we say we are going to do something, we do it, even if it takes ten years or so.  And Kudos to the military team that got him.

But I heard commentators say that this was another Kennedy moment when we would always remember where we would be when Osama was killed -- that seems a gross exaggeration.   I don't think I was in need of or received a nationalist ego boost last night.  The reaction almost reminded me of the US Olympic hockey victory in 1980, when people frustrated with internal and external problems found release in the victory on the ice over the Russians.   But cheering about killing a guy, even a bad buy, in the same way as one might for a sports team victory just leaves me a bit queasy.

Besides, isn't Bin Laden largely irrelevant now?  If he is the spider at the center of the global web of terrorism, I have certainly missed the evidence.  Frankly, this whole thing feels like grabbing the Kaiser out of the Netherlands in 1938 and hanging him.  Not only a  bit late, but  a diversion of attention from the source of current problems.

Update: How Bin Laden Changed America.  Example:  without Bin Laden, we probably would not have  a progressive Democratic President who claims the right to assassinate American citizens.

Update #2: It has been made increasingly evident to me that I am out of step with America on this.  Fine, not the first time.  Let me just say, then, that the precedent of sending US troops into a sovereign nation without that nation's permission or knowledge and kidnapping/assassinating a foreign national based on the President's say-so based on intelligence gathered in part from torture of people detained indefinitely without due process in secret CIA prisons is, well, a precedent we may some day rue.  From time to time Presidents may need to make such calls, but I am not going to be celebrating in the street.  If a Pakistani team did the same, even to, say, raid a California prison and kill Charles Manson, I still think we might be pissed off about it.

Update #3: After a few days introspection, I don't know why I am brooding so much about this.  I must admit it was a good move to go in and knock him off, and while I hate precedents for expansion of executive power, this particular move was entirely justified.   I am not sure why the initial response to this rubbed me the wrong way -- perhaps because the celebration seemed to be excessive vs. the strategic value.    I suppose I am not big on symbolic victories.  Had I been alive in 1942 I probably would have reacted negatively to the Doolittle raid.

Spend a few nights listening to the news on TV, and you will quickly discover the one of the bedrock logical fallacies of political discourse:

If it's good, the government should subsidize it.  If it's bad, the government should ban it.  If outcomes are in any way perceived by any group to be sub-optimal, then the government should regulate it.  Anyone who opposes these bans, subsidies, and regulations must therefore be a supporter of bad outcomes, hate poor people, want people to get sick and die, etc.

Just last night, I was watching the local news (something I almost never do) and saw a story of one of those kids' bouncy houses that blew out of someone's backyard into a road.  There was a girl inside who was scared but unhurt  (after all, she was surrounded on six sides by giant airbags).   Of course the conclusion of the story was a call for more government regulation of tie downs for private backyard bouncy houses.  And those of us who think it's absurd for the government to micro-regulate such things, particularly after a single freak accident when no one was hurt -- we just want to see children die, of course.

Which brings me to this little gem in a local blog, which reflects a feeling held by many area sports fans.  Remember that I have supported the Goldwater Institute in their opposition to the city of Glendale giving a rich guy $200 million to buy our NHL ice hockey team and keep it here.    My (and I presume Goldwater's) motivation has been opposition to a huge government subsidy that equates to nearly $1000 for every man, woman, and child in Glendale.  This subsidy appears illegal under the Arizona Constitution.  But that is not how political discourse works.  We are not defending the Constitution, we just hate hockey (emphasis added)

If you believe Canadian newspapers, tonight's game against the Detroit Red Wings will be the Phoenix Coyotes last game in the desert.

Canadians like hockey. Judging by attendance at Coyotes games, Phoenicians don't (at least not enough to drive to west side), which is why Canadians are so optimistic that their beloved Winnipeg Jets will be returning to our overly polite neighbors to the north.

The Coyotes ended the season with the second worst attendance in the NHL. That, coupled with the Goldwater Institute's crusade to drive the team out of the Valley, is not helping the city of Glendale's attempt to keep the team.

A few facts to remember:

• As the article states, local residents have already voted with their feet, since the team has nearly the lowest attendance in the league despite going to the playoffs both last year and this year.  They have trouble selling out playoff games.
• The team has lost money every year it has been here.  It lost something like $40 million this year
• The team is worth $100 million here in Phoenix.  That is the going rate for warm-market teams.  The buyer is willing to pay $100 million of his own money for the team.   So why is a subsidy needed?  The NHL insists on selling the team for $200 million or more.  Though it piously claims to want to keep hockey in Arizona, it is selling the team for price than can only be paid by buyers who want to move the team.
• The City of Glendale appears to have lied outright in selling this deal to the public.  In particular, it claimed the $100 million was not a giveaway, but a payment for the team's rights to charge for parking.  But many insiders say the City always retained this right, and it strains credulity that while losing money for seven years, the team would not have exercised this right if it really owned it.
• Glendale has only itself to blame, confounding an already difficult marketing task (ice hockey in the desert) by putting the stadium on the far end of a sprawling city.   The location is roughly the equivalent in terms of distance and relationship to the metropolitan area of moving the Chicago Blackhawks or Bulls stadium to Gary, Indiana.  The stadium ended up in Glendale because neither Tempe, Scottsdale, nor Phoenix was willing to make a $200 million, 30-year taxpayer-funded bet on the profitability of ice hockey.

I wanted to leave Glendale's proposed $100 million subsidy of the purchase of the Phoenix Coyotes hockey team by Matthew Hulzinger behind for a while, but I had to comment on something in the paper yesterday.

The Arizona Republic, which is an interested party given that a good part of their revenues depend on having major sports teams in town, had an amazing editorial on Tuesday.  Basically, it said that Goldwater, who has sued to bock the bond issue under Arizona's gift clause,  needed to stop being so pure in its beliefs and defense of the Constitution and that it should jump down in the political muck with everyone else.

I encourage you to read the article and imagine that it involved defense of any other Constitutional provision, say free-speech rights or civil rights.  The tone of the editorial would be unthinkable if aimed at any other defense of a Constitutional protection.  Someone always has utilitarian arguments for voiding things like free speech protections -- that is why defenders of such rights have to protect them zealously and consistently.  The ACLU doesn't get into arguments whether particular speech is right or wrong or positive or negative -- it just defends the principle.  Can't Goldwater do the same?

My thoughts on the Coyotes deal are here and her.  Rather than dealing with the editorial line by line, which spends graph after graph trying to convince readers that Darcy Olsen, head of the Goldwater Institute, is "snotty,"  here are some questions that the AZ Republic could be asking if it were not in the tank for this deal

• How smart is it for the taxpayers of Glendale to have spent $200 million plus the proposed $100 million more to keep a team valued at most at $117 million? (several other teams have sold lately for less than $100 million)  And, despite $300 million in taxpayer investments, the city has no equity in the team -- just the opposite, it has promised a sweetheart no-bid stadium management deal of an additional $100 million over 5 years on top of the $300 million.
• The Phoenix Coyotes has never made money in Arizona, and lost something like $40 million last year.  Why has no one pushed the buyer for his plan to profitability?  The $100 million Glendale taxpayers are putting up is essentially an equity investment for which it gets no equity.  If the team fails, the revenue to pay the bonds goes away.   The team needs to show a plan that makes sense before they get the money -- heck the new owners admit they will continue to lose money in the foreseeable future.     I have heard folks suggest that the Chicago Blackhawks (Hulzinger's home town team) are a potential model, given that they really turned themselves around.  But at least one former NHL executive has told me this is absurd.  The Blackhawks were a storied franchise run into the ground by horrible management.  Turning them around was like turning around the Red Sox in baseball.  Turning around the Coyotes is like turning around the Tampa Bay Rays.  The fact is that the team lost $40 million this year despite the marketing value of having been in the playoffs last year and having the second lowest payroll in the league.  The tickets are cheap and there is (at least for now) free parking and still they draw the lowest attendance in the NHL.  Part of the problem is Glendale itself, located on the ass-end of the metro area  (the stadium is 45 minutes away for me, and I live near the centerline of Phoenix).
• If taxpayers are really getting items worth $100 million in this deal (e.g. parking rights which Glendale probably already owns, a lease guarantee, etc) why can't the team buyer use this same collateral to get the financing privately?  I have seen the AZ Republic write article after article with quote after quote from Hulzinger but have not seen one reporter ask him this obvious question.  I have asked Hulzinger associates this question and have never gotten anything but vague non-answers.  A likely answer is what I explained yesterday, that Hulzinger is a smart guy and knows the team is not worth more than $100 million, but the NHL won't sell it for less than $200 million (based on a promise the Commissioner made to other owners when they took ownership of the team).  Hulzinger needed a partner who was desperate enough to make up the $100 million the NHL is trying to overcharge him -- enter the City of Glendale, who, like a losing gambler, keeps begging for more credit to double down to try to make good its previous losses.
• Glendale often cites a $500 million figure in losses if the team moves.  Has anyone questioned or shown any skepticism for this number?  My presumption is that it includes lost revenue at all the restaurants and stores around the stadium, but is that revenue really going to go away entirely, or just move to other area businesses?  If your favorite restaurant goes out of business, do you stop going out to eat or just go somewhere different?
• We hear about government subsidies to move businesses from other countries to the US, or other states to Arizona, and these tend to be of dubious value.  Does it really make sense for Glendale taxpayers to pay $400 million to move business to another part of the Phoenix metropolitan area?
• Why do parties keep insisting that Goldwater sit down and "negotiate?"  Goldwater does not have the power to change the Constitutional provision.  Do folks similarly call on the NAACP to "negotiate" over repeal of Jim Crow laws?  Call on the ACLU to negotiate over "don't ask, don't tell"?  This may be the way Chicago politics works, with community organizers holding deals ransom in return for a negotiated payoff, but I am not sure that is why Goldwater is in this fight.  The Gift Clause is a fantastic Constitutional provision that the US Constitution has, and should be defended.
• Jim Balsillie offered to buy out the team (and move it to Canada) without public help and to pay off $50 million of the existing Glendale debt as an exit fee.  Thus the city would have had $150 in debt and no team.  Now, it will be $300 million in debt and on the hook for $100 million more and may still not have a team in five years when, almost inevitably, another hubristic rich guy finds he is not magically smarter about hockey and can't make the team work in Arizona.   Has anyone compared these two deals?  Private businesses cut losses all the time -- politicians almost never do, in part because they are playing with house money (ours).

Over the last few weeks I have been following the story of the city of Glendale, AZ, in order to protect a previous $200 million public investment in our hockey team, proposing to issue another $100 million bond issue to help subsidize the purchase of the hockey team out of bankruptcy.

The real furor began when the Goldwater Institute, a local libertarian-conservative think tank, said they were considering suing over the bond issue because it violates the gift clause of the Arizona Constitution, which basically bans municipal governments from providing direct subsidies or lending their credit to private institutions.  The gift clause has been frequently breached in the past (politicians do love to subsidize high-profile businesses), but of late Goldwater has successfully challenged several public expenditures under the gift clause.

I won't rehash the whole argument, but I found this bit from Senator McCain interesting

He called on the Goldwater Institute, a Valley watchdog that intends to sue to block the deal, to sit down and negotiate to keep the team

The buyer Matthew Hulsizer and his staff have taken this position throughout the deal -- they have lamented that they are more than willing to "negotiate" with Goldwater, and they are frustrated Goldwater won't come to the table with them.

This claim seems bizarre to me. If Goldwater thinks the deal is un-Constitutional, what is to "negotiate?" I don't know Hulsizer or anything about him, but it strikes me that he is working from a Chicago paradigm, and is treating Goldwater as if it were a community organizer. In Chicago, community organizers try to use third parties to protest various deals, like the opening of a Wal-Mart or a new bank. These third-parties are nominally protesting on ideological grounds, but in fact they are merely trying to throw a spanner in the works in order to get a pay off from the deal makers, almost like a protection racket. The payoff might be money or some concession for the group (e.g. guarantee of X% jobs for this group in project, $X in loans earmarked for group, etc).

Everything I have seen tells me Hulsizer is approaching Goldwater in this paradigm.  Even going out and rounding up the most prominent politician in the state (McCain) to put pressure on Goldwater is part of this same Chicago paradigm.

Here by the way  is what Hulsizer is apparently offering

As one part of the deal, Glendale would sell bonds to pay Hulsizer $100 million, which the Chicago investor would use to purchase the team for $210 million from the National Hockey League.

Hulsizer said he notified Goldwater he would guarantee the team will pay Glendale at least $100 million during its lease on the city's Jobing.com Arena through $75 million in team rent and fees and by covering $25 million in team losses that the city promised to pay the NHL this season, which is included in the hockey team's purchase price.

"We need to move forward now," he said. "I expect that Goldwater and other people who have come out against this deal will hopefully recognize the benefits of it and will now use all of that energy and tenacity and aggressiveness to go out and help us sell these bonds and make hockey work in the desert forever."

Hulsizer said Goldwater had not yet responded to him.

By the way, I hesitate to trust the Arizona Republic to report such deal terms correctly, but if what is reported above is correct, the offer appears to be non-sense

1. What kind of guarantee is he offering?  Is it a guarantee by the corporate vehicle buying the team, because if it is, this is worthless.   The last team ownership group promised to pay the lease for 30 years -- what does that mean once they went bankrupt?  I am sure Borders Books promised to pay a lot of real estate owners money for leases, and many of them are going to end up empty-handed in the bankruptcy.  If this is a personal guarantee, that is a nice step forward, though not enough because....
2. The $75 million in rent is largely irrelevant to the new bond issue -- these rents support the old $200 million bond issue.  What they are saying is "issue a new $100 million bond issue for us and we will guarantee you can make 40% of the payments for the old bond issue."   So?  When Balsillie wanted to move the team, he didn't ask for an additional bond issue and agreed to pay off $50 million of the old one as an exit fee.
3. At the end of the day, if the $100 million is not a subsidy, not at risk, and fully backed by guaranteed cash flows, then Hulsizer should go out and get a $100 million private loan.  Period.

Unfortunately, this might be enough to get the deal through the courts.  Glendale will argue that for the $100 million, they will get $100 million paid against their existing bond issues that would not otherwise be paid if the team folds or leaves town.  This may fly with the courts, unfortunately, but it still sucks for taxpayers.   At the end of the day, nothing about this offer makes the $100 million bond issue any safer.   If the team goes bankrupt, it is lost.  That is an equity risk the city is taking with taxpayer funds, and equity risk for which we are getting no equity.  See here for full discussion of the risks and problems.

Postscript: The following is pure speculation, but I think it is close to correct.  The team is worth about $110 million at best (remember, it has never made money in AZ).  Forbes values it at $117 million but several similar franchises have sold for under $100 million lately.   The reason it is selling for $210 million is that the NHL, which bought it out of bankruptcy, guaranteed its other owners the league would not lose a penny on the team.   But the team has been racking up losses, and the accumulated cost to the NHL is now $210 million.  The NHL is insisting on a price that is $100 million north of where it should be.  In effect, the taxpayers of Glendale are bailing out the NHL for this crazy promise to its owners.

I can just see the negotiation.  Hulsizer, who by every evidence is a savvy financial guy, is not going to pay $210 million for an asset worth $110 million.  Glendale has way too many chips on the table to fold now, so it rides in and says it will contribute the $100 million difference.  In fact, the best evidence this is a subsidy is the difference between the purchase price and any reasonable team value.  Someone has to make up the ridiculous gap between the NHL asking price and reality, and Hulsizer is too smart to do it.   I have been calling this a subsidy of Hulsizer, but in fact this is really a subsidy of the NHL.   The NHL has Glendale by the short hairs, because Glendale knows (from the Balsillie offer, among others) that the only way the NHL can get a $210 million price is from a buyer who wants to move the team.

This, by the way, is EXACTLY the reason I opposed the original stadium funding deal.  Once they built the stadium, and then went further and lured businesses to develop around it, they were wide open to blackmail of this sort.

The problem with doubling down at this point is that the team has never made money and has no real public plan for doing so.  I have talked to NHL executives and none of them see how the turnaround is possible.  So how many years will it be before the new owners tire of their plaything and throw the team back into bankruptcy, so that Glendale will be in the exact same spot except $300 million, rather than $200 million, in debt.

Several days ago, I wrote how our local paper, the Arizona Republic, was engaging in a coordinated campaign to get the city of Glendale to subsidize the private purchase of our professional hockey team with a $200 million bond issue.  The logic of this is mainly to save the previous $180 million bond issue the city unwisely issued several years ago to build an arena for this same hockey time as well as the sweetheart commercial real estate deals it has cut adjacent to the stadium.   All in all, the city proposes to spend a cumulative $380 million of public money to hold on to an asset valued by third parties at $ 116 million.  And through all of this spending, taxpayers will end up with not a dime of equity in this asset.

At the time, I thought the campaign had been relentless, going on day after day with both editorials and news articles making cases to subsidize the team, and hammering the Goldwater Institute for actually questioning the legality of transaction.  I mean God forbid anyone would actually interpret the Arizona Constitution "gift clause" that says governments in the state cannot give money to private businesses as potentially barring Glendale from giving money to a private investor so he can buy the hockey team.

But when I called the campaign relentless, little did I know it would continue day after day through the rest of the week.  Every day we get a new article that is basically an editorial in disguise, with the opposing position, if included, down around paragraph 25.   Today's is just a masterpiece of such yellow journalism, which includes no opposing viewpoint at all, and includes this classic gem that is almost a caricature of itself:

Rick Myers and his wife have worked as part-time ticket-takers since 2004, the year after Jobing.com Arena opened and they visited for the first time.

"This arena is not brick and mortar, ice and air-conditioning. This arena is a family," he said.

Craig Van Kessel, a disabled military veteran, agreed.

He said six months after getting a job with the team, when he had major surgery, his co-workers called, sent cards and offered help. The team also donates prizes each year for a Western Amputee Golf Association tournament that Kessel helps organize.

If the team leaves, he said, it affects "us little people."

John Minor, a guest services employee, said he counts friendships among the fans he meets at the arena, while Kyle Olson, director of arena events, said he's taught his toddler to howl like a coyote.

Can I barf now?  Seriously, if you were doing a caricature of bad anecdotal arguments for a typical concentrated-benefits-diffuse-costs government program, could you do any better than this?  We are talking about $200 freaking million dollars here.

Nowhere in any of its editorials or news articles acting as thinly veiled editorials does the AZ Republic reveal that it is an enormously interested party to the transaction.  The Sports Section sells papers, and the presence of an additional major league franchise adds a hard to measure but most definite contribution to the paper's bottom line.

Postscript: The key issue that spurred this is that the city's bond issue is facing higher than expected interest costs.  The city and the AZ Republic are trying to lay the blame on this on Goldwater for stirring up bad karma.  But in fact there are at least six factors for why bond interest rates might be higher:

• The major bond ratings agencies recently put the city of Glendale on a credit watch list
• Sales tax revenues that pay for the bonds are way down in AZ and Glendale
• The city is investing $200 million in a $116 million dollar asset without getting any equity
• The city has a history of failed bond issues, as evidenced by the previous $180 bond issue they are trying to bail out with this one
• There is a general sense of wariness nationwide in government finances being overdrawn that may be spilling over into the bond market
• A local think tank has raised legal questions about the deal — legal questions that turned out to be correct in a parallel case.

Incredibly, our paper has spend over a week harping on just one of these, which to my mind seems the most trivial.

Postscript #2: And by the way, this team is in bankruptcy.  Where is the plan for how that will be avoided in the future?  Won't we be in the same spot five years from now, just with twice as much bond debt?

If you had told me last week that half the media would be blaming Sarah Palin for the actions of a leftish nutcase, or that Keith Olberman would be accusing, well, anybody, of being too immoderate in their rhetoric, I would have said you were crazy.  Seldom have I found the tone and tenor of the media coverage of any event to be less satisfactory than with the Giffords shooting this weekend.  So of course, I have joined the fray with my own column on Forbes.

We libertarians cringe when presented with a “national tragedy” like the shooting of Gabriella Giffords.  Not because we are somehow more or less sensitive to vilence and loss of life, but because we begin bracing for the immediate, badly thought-out expansion of state power that nearly always follows any such tragedy, whether it be 9/11 or Columbine or Oklahoma City or even Pearl Harbor.  Those looking to expand the power of the state, and of state officials, make their greatest progress in the emotional aftermath of a such a tragedy.  These tragedies are the political equivilent of the power play in ice hockey, when defenders of liberty find themselves temporarily shorthanded, and those wishing to expand state power rush to take advantage.

Here is one example from later in the piece:

After 9/11, Republicans argued that it was time to put away political differences to rally around the President in a time of war.  They implied that criticizing the President in such a time was somehow unpatriotic and counter-productive.   Was this true?  I thought the opposite — that the momentous decisions to be made post-9/11 demanded more rather than less debate.  America would eventually wake up from this celebration of unity with a hangover in the form of the TSA, the Patriot Act, detention at Guantanamo Bay, and wars in Iraq and Afghanistan.

The fact is that politicians, particularly those in power, find every excuse to ask Americans to “moderate their public discourse,” in large part because this request translates in the real world to “reduce the criticisms of those in power.”    So it should not be surprising that many of those who represent our current ruling party blamed the Giffords shooting on the hate-filled rhetoric of the opposition party, even before we knew the name of the killer,.

From a larger historical perspective, I would argue that current political discourse is really rather tame.   Even the wackiest cable opinion show pales in comparison to the fire-breathing political attacks that could be found in nearly any 19th century newspaper.  In the 1960’s, political discourse became so heated that it spilled out into the streets in the form of urban riots.  In fact, what we should fear far more than our rhetoric is the current threats by politicians like Jim Clyburn of South Carolina to use this tragedy as an excuse to put new restrictions on speech.  A number of high-profile comentators have spent more time blaming this shooting on Sarah Palin than on the shooter himself.   Given the complete lack of evidence for any such connection, such efforts can only be viewed as an effort by those on power to silence a prominent opposition leader.

When I was at HBS, a bunch of us who sat in the back row (the "skydeck" in HBS parlance) would play buzzword bingo based on the class discussion.

Google books has a way of querying their books database for word frequency.  I laughed when I saw this chart for "incentivize."  It's the hockey stick!

I have this same problem all the time now in Arizona:

To understand how badly we're doing the most basic work of journalism in covering the law enforcement beat, try sitting in a barbershop. When I was getting my last haircut, the noon news on the television"”positioned to be impossible to avoid watching"”began with a grisly murder. The well-educated man in the chair next to me started ranting about how crime is out of control.

But it isn't. I told Frank, a regular, that crime isn't running wild and chance of being burglarized today is less than one quarter what it was in 1980.

The shop turned so quiet you could have heard a hair fall to the floor had the scissors not stopped. The barbers and clients listened intently as I next told them about how the number of murders in America peaked back in the early 1990's at a bit south of 25,000 and fell to fewer than 16,000 in 2009. When we take population growth into account, this means your chance of being murdered has almost been cut in half.

Its almost impossible to convince folks that AZ is not in the middle of some sort of Road Warrior-style immigrant-led wave of violence.  In fact, our crime levels in AZ have steadily dropped for over a decade, in part because illegal immigrants trying to hang on to a job are the last ones to try to stir up trouble with the law (charts here, with update here)

In Phoenix, police spokesman Trent Crump said, "Despite all the hype, in every single reportable crime category, we're significantly down." Mr. Crump said Phoenix's most recent data for 2010 indicated still lower crime. For the first quarter of 2010, violent crime was down 17% overall in the city, while homicides were down 38% and robberies 27%, compared with the same period in 2009.

Arizona's major cities all registered declines. A perceived rise in crime is one reason often cited by proponents of a new law intended to crack down on illegal immigration. The number of kidnappings reported in Phoenix, which hit 368 in 2008, was also down, though police officials didn't have exact figures. [see charts above, these are continuation of decade-long trends]

But over Thanksgiving my niece visited from the Boston area for a national field hockey tournament and her teachers and coaches had carefully counselled them that they were  walking into a virtual anarchy, and kidnapping or murder would await any teen who wandered away from the group.