Coyote Blog

Conservatives rightly criticised the Obama Administration for rewriting rules so frequently and seemingly arbitrarily that businesses were reluctant to make long term investments.  As the WSJ editorialized in 2016:

Pfizer CEO Ian Read defends the company’s planned merger in an op-ed nearby, and his larger point about capricious political power helps explain the economic malaise of the last seven years. “If the rules can be changed arbitrarily and applied retroactively, how can any U.S. company engage in the long-term investment planning necessary to compete,” Mr. Read writes. “The new ‘rules’ show that there are no set rules. Political dogma is the only rule.”

He’s right, as every CEO we know will admit privately. This politicization has spread across most of the economy during the Obama years, as regulators rewrite longstanding interpretations of longstanding laws in order to achieve the policy goals they can’t or won’t negotiate with Congress. Telecoms, consumer finance, for-profit education, carbon energy, auto lending, auto-fuel economy, truck emissions, home mortgages, health care and so much more.

Capital investment in this recovery has been disappointingly low, and one major reason is political intrusion into every corner of business decision-making. To adapt Mr. Read, the only rule is that the rules are whatever the Obama Administration wants them to be. The results have been slow growth, small wage gains, and a growing sense that there is no legal restraint on the political class.

I am willing to believe this is true. On my own smaller scale, our company has disinvested in California because we simply cannot keep up with the changing rules there.

But all this forces me to ask, why doesn't this same Conservative criticism apply to Trump's trade policy?  The rules are changing literally by the day -- Consumers of goods from Mexico are going to be hit by new tariffs, Mexican goods are not going to be hit by new tariffs, China is hit by new tariffs, a China deal is near, a China deal is not near, Company A got a special tariff exemption, Company B did not get a special exemption, etc. How can any company with a global supply chain, which is most any US manufacturer nowadays, plan for new products or investments in this environment when they have no ability to make long-term plans for their supply chain?

A while back on Columbus Day I wrote this on Twitter:

This is not just a SJW thing -- Columbus's European contemporaries thought he was a horrible person. The problem is that Italian-Americans have adopted it as Italian pride day -- let them have it, and celebrate indigenous people day another day, maybe nov 29. https://t.co/jcrFFVHxvh

— Coyoteblog (@Coyoteblog) October 8, 2018

A lot of young SJW's just lump Italians in with white European men and treat them as privileged, but Italians and Irish were ethnic punching bags in this country for decades. They had real reasons to develop a pride day, and for good or for ill this is it.

— Coyoteblog (@Coyoteblog) October 8, 2018

I am reminded of this in a WSJ article I saw today about a lynching of Italian immigrants in New Orleans in 1891

New Orleans Mayor LaToya Cantrell will officially apologize Friday for the largest mass lynching in U.S. history. On March 14, 1891, the city of New Orleans became a charnel house as a mob of as many as 20,000 wantonly slaughtered 11 Italian-Americans. Some of the victims had been charged in the murder of a police chief, but the trials all ended in acquittal or mistrial. A gang descended on the jail where the men were being held, shot them to death, and displayed their bodies for the savage rabble outside. Southern belles in search of souvenirs dipped their lace handkerchiefs in the blood of the butchered Italians.

And the press cheered. The New York Times editorialized on March 16: “These sneaking and cowardly Sicilians, the descendants of bandits and assassins, who have transported to this country the lawless passions, the cut-throat practices, and the oath-bound societies of their native country, are to us a pest without mitigations.”

The Washington Post even extolled the killers as “cool-headed men, lawyers, doctors, merchants, and political leaders, all person of influence and social standing.”

Theodore Roosevelt, then a member of the U.S. Civil Service Commission, wrote to his sister Anna Roosevelt Cowles on March 21: “Monday we dined at the Camerons; various dago diplomats were present, all much wrought up by the lynching of the Italians in New Orleans. Personally I think it rather a good thing, and said so.”

Via the WSJ today

Amazon.com on Tuesday said it was raising the minimum wage it pays all U.S. workers to $15 an hour, a move that comes as the company faced increased criticism about pay and benefits for its warehouse workers.

The new minimum wage will kick in Nov. 1, covering more than 250,000 current employees and 100,000 seasonal holiday employees. The company said it also will start lobbying Congress for an increase in the federal minimum wage, which was set nearly a decade ago and is currently $7.25 an hour.

“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Jeff Bezos, Amazon’s chief executive, in a statement. “We’re excited about this change and encourage our competitors and other large employers to join us.”

Here is the cynical view of this:  Amazon likely is being pressured by the tightening labor market to raise wages anyway.  But its call for a general $15 minimum wage is strategically brilliant.  The largest employers of labor below $15 are Amazon's retail competitors.  If Amazon is successful in getting a $15 minimum wage passed, all retailers will see their costs rise but Amazon's competition will be hit much harder.

(Source)

The reason is that due to its internet sales model, Amazon's revenue per employee is MUCH higher than for most retailers -- you can see this in the chart above in a comparison to Sears.  If we had data on revenues per employee in small retail, the numbers would be even lower.  So a minimum wage increase raises costs to Amazon's competitors by a much larger percentage of revenue than it does for Amazon.  In short, Amazon's cost advantage over bricks and mortar retailers would be enhanced by a $15 minimum wage.

Regulations to limit "fake news" will inevitably be used to limit criticism of the government and individual politicians.  Here is the latest example, from the WSJ

A foreign visitor became the first person convicted and sentenced to jail under a new law to punish those deemed to have published “fake news”after he criticized the police response to the slaying of a Palestinian engineer in Kuala Lumpur.

Salah Salem Saleh Sulaiman, 46 years old, a Danish national of Yemeni origins, pleaded guilty Monday at a court hearing. He was sentenced to a week in jail but opted to serve a  month behind bars in lieu of paying a fine of about $2,600. He wasn’t represented by a lawyer.

The case marked unexpected circumstances for the first use of the law since Parliament passed it April 3 amid criticism by rights groups that it would be wielded to inhibit criticism of the government ahead of elections on May 9. The government has denied that that is its intent, and Mr. Salah is the only person to have been charged under it.....

Mr. Salah appeared in a video posted to YouTube—and since removed—from the scene of the assassination of Palestinian Fadi al-Batsh, an electrical engineer and university lecturer who had lived in Malaysia for a decade. He was gunned down by two men on a motorcycle as he walked to dawn prayers at a mosque. No one has been arrested.

Mr. Salah accused medical services and police of being slow to respond to the shooting. Authorities vehemently rejected the allegations and arrested him. On Monday, he apologized and said he had recently arrived in Malaysia to visit friends and didn’t know the law existed.

Like many folks, including Mark Perry, I would tend to agree with the following statements

• Past performance is not a very good indicator of likely future performance
• One should generally eschew managed funds in favor of low-cost index funds

However, I think a lot of folks who believe these same things are applying confirmation bias when looking at the data in a recent WSJ story on Morningstar.  Morningstar analyzes mutual funds and rates them based on their past 1/3/5/10-years performance in relation to other funds of the same type.  Funds in the upper quintile of past performance get 5 stars, the next quintile gets 4 stars, etc.

Morningstar is sort of coy about whether the ratings are supposed to have predictive value.  They will say that of course they only measure past performance, but there would be no way to sell these ratings to folks for millions of dollars (as they do) without there being some implication the ratings were at least partially indicative of future performance.

So the WSJ did something interesting -- they went back 10 years and took all the 5 star funds and looked at how they have done since (as measured by Morningstar itself with its star ratings).  So how many 5-star funds ten years ago actually had 5-star performance over the subsequent years, and so on.  And it turns out that a lot of the 5-star funds have not performed very well.  This is a good reminder to us all.

BUT.  Look at their own data:

Yes, the 5-star funds from 10 years ago only average 3 today.   Everything regresses towards the mean, as we random walk folks might expect.

But the 5-star funds did better than the 4, which did better than the 3, which did better than the 2, which did better than the 1.  This actually understates the difference, because many of the lowest performing funds in the lower star categories closed in this 10 year period, so are not in the final metrics, which likely raises the scores of some of the lower buckets because they dropped out (59% of the 1-star funds closed or merged in this period while only 22% of the 5-star funds did so).

This is actually -- to someone who doesn't really buy into the whole stock-picking thing -- a pretty impressive achievement.  I challenge you to take stocks or bonds or mutual funds of roughly the same type and divide them into 5 buckets, rank the buckets by expected performance, and actually have this ranking hold for 10 years.

Most folks, even those who say they are data-driven, are not data-driven.  They react to their perception.  If some sort of activity suddenly makes the news more, we assume that activity is increasing, even if all that is happening is that the activity is simply making the news more.

A lot of the folks who want to blame this year's landfalling hurricanes on global warming are making this mistake.  If you are 20, the last major hurricane landfalls were in 2005 when you were 8.  The last decade has seen a nearly unprecedented drought in US major hurricane landfalls, so against the backdrop of this drought, several major Atlantic storms seems highly unusual.  But I grew up in the 1960's to the 1980's on the Gulf Coast and hurricanes were a regular part of our life then.  When I lived in Clear Lake City, Texas, we had so many in a few years in the 1980's that I had a special spot picked out to park my car to keep it above flood waters.  In the 1990's, we had a memorable vacation where we rented a house on the North Carolina coast for a month and got hit by three hurricanes -- we spent the whole trip hiding in the laundry room from tornado warnings and evacuating back and forth to the interior of the state.

For those who like simple charts, the WSJ had a good one the other day:

Making this a chart of hurricane landfalls deals with the public perception issue, as landfalls tend to be the only ones we really remember.  But this is actually a terrible metric (even though it makes my point about Irma and Harvey not representing any sort of upward trend) because landfalls are random and may not really represent actual hurricane activity.  A better metric is accumulated cyclonic energy of tropical storms, which looks at a sort of integral of storm strength over time.  This does not show a trend either, but since I cannot find a chart of ACE updated with recent activity I am not going to put it up here.   Here it was as of June of this year, and this chart only goes back to 1970 -- if we had good data early in the 20th century it would have been much higher.

From the WSJ today, this interesting bit:

In less than two decades, more than half of all publicly traded companies have disappeared. There were 7,355 U.S. stocks in November 1997, according to the Center for Research in Security Prices at the University of Chicago’s Booth School of Business. Nowadays, there are fewer than 3,600....

“Twenty years ago, there were over 4,000 stocks smaller” than the inclusion cutoff for the Russell 2000, says Lubos Pastor, a finance professor at the University of Chicago. “That number is down to less than 1,000 today.”

The article discusses the trend in the context of stock pickers having a smaller palette to work with, as it were, but obviously there are likely some economic implications here as well.  The first words the popped into my head were "Dodd-Frank" but for all the problems with that law, the chart makes clear that most of the decline occurred long before that law was passed.

Postscript:  The title of the article is "Stock Picking Is Dying Because There Are No More Stocks to Pick."  Maybe, but I would have been less charitable by saying that it was because as a group stock pickers have never been able to out-perform the market averages, even when there were twice as many stocks to choose from.

Update:  A reader writes:

Matt Levine, Bloomberg writer, has suggested recently that the reason this has happened is not that regulations on public companies have become especially onerous, it's that access to private money is easier now.

Public company regulations were always kind of onerous, but it was worth it to get access to the money only available in the public market. These days, when you can raise billions of dollars without ever going public, why bother?

In the context of stock-picking, I suppose all the good ones have moved to private equity firms.  As I suppose, have gone the good industry analysts

I find the WSJ to be more readable than most modern newspapers, but that does not mean it doesn't play exactly the same silly media games every other media outlet does.

This article is about a legitimately dangerous dam in California that is being rebuilt to accommodate new learning about how earthen dams behave in seismic events.  The authors attempt to extrapolate from this example to highlight a larger threat to the nation.  They use this chart:

A reader who is not careful and does not read the fine print, which means probably most all of them, will assume that "dangerous" and "hazardous" as used in this chart refers to dams that are somehow deficient.  But in fact, these terms in this chart refer only to the fact that IF a particular dam were to fail, people and property might be at risk.  The data here say nothing about whether these dams are somehow deficient.  Actually, if anything, I am surprised the number by this definition is as small as 30%.

The actual number of deficient dams that are dangerous to human life is actually an order of magnitude smaller than these numbers, as given in the text:

An estimated 27,380 or 30% of the 90,580 dams listed in the latest 2016 National Inventory of Dams are rated as posing a high or significant hazard. Of those, more than 2,170 are considered deficient and in need of upgrading, according to a report by the American Society of Civil Engineers. The inventory by the U.S. Army Corps of Engineers doesn’t break out which ones are deficient.

So if we accept the ASCE numbers as valid (and I am always skeptical of their numbers, they tend to exaggerate in order to try to generate business for their profession) the actual numbers of dams that are really hazardous is no more than 2,170.  That strikes me as a reasonably high number, and certainly a good enough reason to write a story, but the media simply cannot help themselves and insist on exaggerating every risk higher than it is.

From the WSJ, the dying business of picking stocks.

Pension funds, endowments, 401(k) retirement plans and retail investors are flooding into passive investment funds, which run on autopilot by tracking an index. Stock pickers, archetypes of 20th century Wall Street, are being pushed to the margins.

Over the three years ended Aug. 31, investors added nearly $1.3 trillion to passive mutual funds and their brethren—passive exchange-traded funds—while draining more than a quarter trillion from active funds, according to Morningstar Inc.

Advocates of passive funds have long cited their superior performance over time, lower fees and simplicity. Today, that credo has been effectively institutionalized, with government regulators, plaintiffs' lawyers and performance data pushing investors away from active stock picking.

From the WSJ (emphasis added):

Netflix now admits that for the past five years, all through the debate on net neutrality, it was deliberately slowing its videos watched by users on AT&T and Verizon’s wireless networks. The company did so for good reason—to protect users from overage penalties. But it never told users at a time when Netflix was claiming carriers generally were deliberately slowing its service to protect their own TV businesses—a big lie, it turned out.

All this has brought considerable and well-deserved obloquy on the head of Netflix CEOReed Hastings for his role in inviting extreme Obama utility regulation of the Internet. Others deserve blame too. Google lobbied the administration privately but was too chicken to speak up publicly against utility regulation.

But Netfix appears to have acted out of especially puerile and venal motives. Netflix at the time was trying to use political pressure to cut favorable deals to connect directly to last-mile operators like Comcast and Verizon—a penny-ante consideration worth a few million dollars at best, for which Netflix helped create a major public policy wrong-turn.

This is what I wrote about net neutrality a couple of years ago:

Net Neutrality is one of those Orwellian words that mean exactly the opposite of what they sound like.  There is a battle that goes on in the marketplace in virtually every communication medium between content creators and content deliverers.  We can certainly see this in cable TV, as media companies and the cable companies that deliver their product occasionally have battles that break out in public.   But one could argue similar things go on even in, say, shipping, where magazine publishers push for special postal rates and Amazon negotiates special bulk UPS rates.

In fact, this fight for rents across a vertical supply chain exists in virtually every industry.  Consumers will pay so much for a finished product.  Any vertical supply chain is constantly battling over how much each step in the chain gets of the final consumer price.

What "net neutrality" actually means is that certain people, including apparently the President, want to tip the balance in this negotiation towards the content creators (no surprise given Hollywood's support for Democrats).  Netflix, for example, takes a huge amount of bandwidth that costs ISP's a lot of money to provide.  But Netflix doesn't want the ISP's to be be able to charge for this extra bandwidth Netflix uses - Netflix wants to get all the benefit of taking up the lion's share of ISP bandwidth investments without having to pay for it.  Net Neutrality is corporate welfare for content creators....

I am still pretty sure the net effect of these regulations, whether they really affect net neutrality or not, will be to disarm ISP's in favor of content providers in the typical supply chain vertical wars that occur in a free market.  At the end of the day, an ISP's last resort in negotiating with a content provider is to shut them out for a time, just as the content provider can do the same in reverse to the ISP's customers.  Banning an ISP from doing so is like banning a union from striking.

Apparently, Denmark is considering a plan (WSJ, gated) to seize valuables from migrants to offset government costs.  I am sure this will work out just as fairly as do American asset forfeiture laws

Denmark’s minority government has secured cross-party backing for a plan to seize cash and valuables from asylum seekers to help meet the cost of their stay in the Nordic country despite criticism from the United Nations and some Danish lawmakers.

Details of how the plan, which could be adopted by parliament as early as next month, would be put into action remain scant.

Liberal Party lawmakers, who draw up the proposal, have provided few details other than to say that police won’t be taking people’s possessions as they enter the country. Police or other officials would appraise the value of people’s possessions as they check the identity of asylum seeks before deciding what, if anything, the new arrivals should pay.

A while back I wrote a controversial post saying that I don't see any moral difference between building a wall to keep people in a country vs. building a wall to keep them out.  **

For a period of time in the late 1930's, the German government was actually encouraging Jews to leave the country -- the one requirement, though, was that the government stripped them of all their property and valuables on the way out.  So I ask the same question slightly modified.  What is the moral difference between stripping refugees of their assets as the leave a country vs. as they enter a country?

** Several people argued the point by analogy, saying it is OK to lock people out of your house but not to lock them in your house.  Certainly, but this frequent use of exclusionary rights on private property as an analogy for an entire country is deeply flawed.  Essentially, for this to be a valid analogy, one would have to adopt Marxist definitions of state ownership of all property and totalitarian views on individual rights to argue that an entire country is just like a private house.

From the WSJ, an article on how politicians who tried to point out the unsustainability of Greek finances years ago where not only ignored, but villified and marginalized.  Sort of like in places like California and Illinois.

In the past quarter century, Greece has had a handful of reformist politicians who foresaw the problems that are now threatening the nation with bankruptcy.

Their reform proposals were fought by their colleagues in parliament and savaged by the media and labor unions. They invariably found themselves sidelined....

Tassos Giannitsis is no stranger to this kind of war: His tenure as labor minister was more short lived, and the battles against him even more visceral. Mr. Giannitsis in 2001, again in the Pasok government led by Mr. Simitis, put forward a comprehensive proposal to reform the pension system.

Trade unions, opposition parties and Pasok itself unleashed menace on Mr. Giannitsis.

“Giannitsis was annihilated after his pension-reform proposals. There are few precedents for this kind of universal attack on a politician,” said Loukas Tsoukalis, a prominent economics professor here.

Mr. Giannitsis’s proposals, which would have reduced the pension levels Greeks receive and made the system overall more sustainable given the country’s demographic and labor-force trends, were never taken to parliament.

“From the fridge to the bin!” said the front page of newspaper To Vima on April 28, 2001, as the frozen pension-reform plan was scrapped for good.

“When I told my colleagues in the cabinet about the reforms I was proposing—which mind you were not the toughest available—the attitude I got was that I was spoiling the party,” Mr. Giannitsis said in an interview.

“They were, like, ‘everything is going great right now, why are you bothering us with a problem that may implode in a decade?’”

There are many other examples.

The WSJ, like many other media sites, has a headline today that says "U.S. Suspects China in Huge Data Breach of Government Computers."  Then, when you read the article, it says "Chinese hackers" or "hackers in China".

There is an enormous difference between saying China is responsible and saying hackers in China are responsible.  The first would be a very serious affair, implying the Chinese government was engaged in hacking of US Government records.  The latter is virtually meaningless.   It simply means that the hackers happened to be Chinese.  They could have easily been Russian or American.

The media claims to be largely pacifist, but has anyone else noticed that they sure seem to be trying to stir up Americans in some sort of anti-China fever of late?

If one considers the penetration of digital film-making to be the inverse of this chart, I can't remember any technological transformation that occurred this fast.  From the WSJ

Incredibly, this likely understates the speed at which traditional film has been replaced, since some of these Kodak numbers likely include a bump from the exit of their rival Fuji from the film manufacturing business.

I will confess that I was among those who feared this transition, worrying that digital recordings would lose some of the special visual qualities of film.  What I failed to understand, and most people fail to understand in such technical transitions, was that whatever was lost (and it was less than I feared) is more than made up for in new capabilities in the new medium.

The WSJ has an editorial on college tours, wherein they talk about the sameness (and lameness) of most college tours.

Most colleges offer both an information session and a tour.  We always found the tour, given by students, more useful than information sessions given by the admission department.  I came to hate the information sessions in large part because the Q&A seems to be dominated by type A helicopter parents worried that Johnny won't get into Yale because he forgot to turn in an art project in 3rd grade.

My kids and I developed a joke a couple of years ago about information sessions, in which we summarize them in one sentence.  So here it is:

"We are unique in the exact same ways that every other college you visit says they are unique."

Examples:  We are unique because we have a sustainability program, because we have small class sizes, because our dining plans are flexible, because we don't just look at SAT scores in admissions, because our students participate in research, because our Juniors go abroad, etc. etc.

There you go.  You can now skip the information session and go right to the tour.  Actually, there is a (very) short checklist of real differences.  The ones I can remember off hand are:

• Does the school have required courses / distribution requirements or not
• Is admissions need blind or not
• Is financial aid in the form of grants or loans
• Do they require standardized tests or not, and which ones
• If they do, do they superscore or not
• Do they use the common app, and if so do they require a supplement
• Do they require an interview or not

My advice for tour givers (and I can speak from some experience having gone on about 20 and having actually conducted them at my college) is to include a lot of anecdotes that give the school some character.   I particularly remember the Wesleyan story about Joss Whedon's old dorm looking out over a small cemetery and the role this may have played in the development of Buffy the Vampire Slayer.

The biggest fail on most tours is many don't show a typical dorm room, the #1 thing the vast majority of prospective admits want to see.

Via the WSJ (emphasis added)

Nomar may be the most extreme example of a problem plaguing 911 response centers nationwide: false emergency calls made from cellphones that no longer have a contract or prepaid minutes with a wireless carrier and so can avoid being tied to a user. Under federal rules these disabled phones, which can't make ordinary calls, must retain the ability to dial emergency numbers.

Abuse of these phones has become enough of a concern that many 911 officials and some in the telecom industry are urging the Federal Communications Commission to shut off or phase out the emergency feature in the interest of public safety.

In the San Francisco Bay Area alone, anonymous dialers have made tens of thousands of false 911 calls since 2007—with Nomar alone believed responsible for over 30,000. (Call-center operators can detect a disabled phone in part because no phone number shows up on their screen.)

During a 24-hour period on Thanksgiving Day 2012, dispatchers at the city's Department of Emergency Management reported 1,527 false 911 calls—more than one a minute. They believed all the calls came from just five phones, based in part on the cellphone towers from which the calls were connected...

At the root of the problem is a 1997 FCC requirement that all carriers include emergency-dialing capability on cellphones whether they have working service or not. Back then, 911 centers supported the feature as a potential lifeline.

"Cell service was still a new thing," said Trey Forgety, director of government affairs at the National Emergency Number Association, a trade group of 911 centers in Washington. "We wanted people in dire straits to have reliable access to 911."

From Lee Goodman on an opinion piece in the WSJ

This startling assertion of government power became public in December when the FEC released an enforcement file in the case of a Boston television station's regular Sunday-morning news program, "On the Record." The station, WCVB, had invited two congressional candidates (a Democrat and a Republican) into its studio to appear on "On the Record" in the weeks leading up to the 2012 election and formatted the joint appearance as a 30-minute debate.

Another candidate (a libertarian) who was not invited filed a complaint alleging that the value of WCVB's production costs and airtime constituted unlawful corporate contributions to the two candidates who were invited.

Wow, I am sure glad the "libertarian" is pushing for government regulation of speech and government restrictions on the decision-making of private businesses.

Glen Reynolds brings us this bit from a letter to the WSJ about the IRS and 501c4's:

For example, if an IRS official subjects citizens to incredibly burdensome demands for irrelevant information just to harass them for their political or religious beliefs, no 501(c)(4) group could later criticize that official’s nomination to be IRS commissioner, without engaging in restricted activity. That’s because the IRS’s proposed regulation defines even unelected government officials, like agency heads and judges, as “candidates” if they have been nominated for a position requiring Senate confirmation. The IRS’s proposed rules are an attack on the First Amendment that will make it easier for the government to get away with harassing political dissenters and whistleblowers in the future.

The part about classifying Senate-confirmed officials as "candidates" seems to be part of the same initiative as the changes to the filibuster to make it easier for the President to confirm controversial judges and administrators.  I wonder if this is a general effort or battlespace preparation for a specific confirmation battle.

Via the WSJ:

President Barack Obama said Thursday that insurers will be able to continue health-insurance coverage next year for current policy holders that otherwise would be canceled under the new health-care law....

"Insurers can offer consumers the option to renew their 2013 health plans in 2014 without change, allowing these individuals to keep their plans," a senior White House official said, previewing Mr. Obama's announcement. These consumers will be given the opportunity to re-enroll, the official said, essentially extending the so-called grandfather clause in the 2010 health overhaul that allowed people to keep their plans if they were in place before the law passed.

"This step today is in the interest of fixing some of the challenges that have arisen" since then, the official said.

Under the plan, insurers are required to notify consumers whether their renewed plans don't include coverage that was required under the new health law, which set minimum coverage standards. They must tell consumers that new insurance options and possibly tax subsidies may be available for policies bought through online federal marketplace.

1.  The President announced this today to try to head off Congressional legislation to do the same thing.  Have we just given up on the rule of law?  Can the President unilaterally modify any law he pleases?  Shouldn't a modification in existing legislation have to come from the Legislature?  Can we just make it official and change the Constitution to say that the President can alter any legislation he wants as long as his party originally passed it?

2.  How is this even going to be possible?   My understanding is that insurance companies spend months preparing the pricing and features of their products for the next year.  The have done no preparation to offer these plans in 2014, because, you know, they were (and still are, whatever the President says in a news conference) illegal.   Its like your wife telling you to take the next exit when you are in the left lane driving 75 miles an hour in heavy traffic and the exit is about 100 yards away.  With 31 business days between now and the new year, how are they supposed to do this?  Or are they even expected to be able to do so?  Is this the President's way to blame shift to insurance companies?

Update:

Insurance source: WH fix places "onus on us even tho they know we can't" effectively extend cancelled policies given rates/logistics probs

— John Harwood (@JohnJHarwood) November 14, 2013

More from insurance industry source on WH O-care fix: "This is a joke - doesn't change anything but allow WH to blame insurance companies"

— John Harwood (@JohnJHarwood) November 14, 2013

I don't really have a horse in this race, but I found it interesting to look at the deal Blackberry has made to sell itself to a Canadian insurance company.  The part of the business we all know and used to love -- the famous Blackberry handset business -- apparently is worth zero.

In a WSJ article, they cite the following valuations:

• Cash on hand:  $2.6 billion
• Patent portfolio:  $1 billion +
• Blackberry secure phone network:  $1 billion

Given that the price for the transaction is $4.7 billion, that implies the handset / smartphone business is worth zero.  Which comes as no surprise, given Blackberry's eroding position over the last 5 years or so.

The last item on the list above seems to cause a lot of debate.  I don't know enough to participate in that debate, but it appears to me that Blackberry's one last market bastion is the enterprise market where their enterprise servers and more proprietary network gave enterprises more control over their employees devices and how they used them.  Which made their decision in 2012 to apparently obsolete their installed base of enterprise servers with Blackberry 10 all the more bewildering.

I have wondered why Microsoft didn't try to use the enterprise market as a way to get into the tablet and handset market.  It would seem to play to its strengths and neither Android nor iOS are particularly enterprise-friendly.

This story has pretty much shifted from "I predict" to "I told you so" to "duh."  But everyone from Karl Rove to the Teamsters now recognize that Obamacare is on a path to destroying full-time employment in the retail service sector.  Via the WSJ, in an editorial by Rove:

These union heads charged that unless Mr. Obama enacts "an equitable fix," the Affordable Care Act "will shatter not only our hard-earned health benefits, but destroy the foundation of the 40-hour work week."...

Union leaders are correct that ObamaCare "creates an incentive to keep employees' work hours below 30 hours a week." After all, employers can avoid a $2,000-per-worker fine if they don't provide insurance as long as employees work fewer than 30 hours a week. Union leaders have realized—too late—that ObamaCare will affect the livelihood of millions of workers who wait tables, wash dishes, clean hotels, man registers, stock shelves and perform other tasks that can be limited to shifts of less than 30 hours a week. The White House take on this concern? Press Secretary Jay Carney said it "is belied by the facts."

But the data from the Bureau of Labor Statistics show that, in 2010, the year ObamaCare passed, full-time employment grew at an average monthly rate of 114,000 while part-time employment dropped an average of 6,000 a month. So far this year, as ObamaCare is being implemented, full-time employment has grown at an average monthly rate of 21,700 while part-time employment has increased an average of 93,000 a month.

No, we are not talking today about Elon Musk (though the name fits) but about this electric car buyer profiled in the WSJ:

Bronson Beisel, 46, says he was looking last fall for an alternative to driving his gas-guzzling Ford Expedition sport utility around suburban Atlanta, when he saw a discounted lease offer for an all-electric Nissan Leaf. With $1,000 down, Mr. Beisel says he got a two-year lease for total out-of-pocket payments of $7,009, a deal that reflects a $7,500 federal tax credit.

As a resident of Georgia, Mr. Beisel is also eligible for a $5,000 subsidy from the state government. Now, he says, his out-of-pocket costs for 24 months in the Leaf are just over $2,000. Factor in the $200 a month he reckons he isn't paying for gasoline to fill up his hulking SUV, and Mr. Beisel says "suddenly the car puts $2,000 in my pocket."

Yes, he pays for electricity to charge the Leaf's 24-kilowatt-hour battery—but not much. "In March, I spent $14.94 to charge the car" and a bit less than that in April, he says. He also got an electric car-charging station installed at his house for no upfront cost.

"It's like a two-year test drive, free," he says.

I hope you all enjoy Mr. Beisel's smug pride a driving a car using your money.

In my next post, I am going to dive deeper in the operating cost numbers here.  By the article, Mr. Beisel has cut his monthly fuel costs from $200 to $14.94, a savings of over 90%.  If these numbers are real, why the hell do we have to subsidize these cars?  Well, while it turns out that while the Leaf is a nice efficient vehicle, these numbers are way off.  Stay tuned.

I am not sure the WSJ has the law right (I don't really trust the media any more to get basic facts correct), but assuming for a moment they know what they are talking about, this caught my attention vis a vis the IRS scandal:

Officials explained that the unit had made the change [to their targeting criteria] because it was receiving many applications for groups that focused on lobbying, which is a permitted activity, and that weren't involved in political activity, which is restricted.

So its OK to kiss a Senator's ass but not OK to advocate for his defeat in the next election?  They may screw everything else up, but Congress is really good at making sure it takes care of itself.

Via the WSJ today:

Can a drug company be held liable for damages caused by generic drugs it didn't produce? That's the expansive new theory of "innovator liability" on parade in Alabama, where a recent ruling by the state Supreme Court could do damage throughout the U.S. economy.

In Wyeth Inc. et al., v. Danny Weeks et al., Mr. Weeks says he suffered from side effects from taking the generic version of an acid-reflux drug called Reglan. He sued Wyeth for fraud and misrepresentation, though the company didn't make the drug he took and had exited the Reglan market in 2002, five years before he took it. The court ruled 8-1 that Wyeth could be held liable for injuries because the generic manufacturer couldn't change the warnings on the product it copied.

First, this is nuts -- being held liable for problems with a product you did not make, simply because you invented it years before.   Are we going to start suing the estate of Thomas Edison every time someone buys a bad lightbulb?

But second, note how helpless Wyeth is now.  Drug makers are used to insane law suits that drain all the profit from helping millions of people to pay off a few folks who had adverse side effects (this same process literally destroyed the vaccination business until the government gave them special liability protection).

But let's accept the court victory - perhaps the drug really has a problem that has been discovered.  If the maker was being sued, he could just pull the drug from the market (as has happened any number of times after adverse suits) either forever or until the FDA will approve new warning language.

But in this case, Wyeth can't do this.  The generic drug makers will keep on selling the product - after all, they are not getting sued, and Wyeth will keep paying.  Wyeth does not even have standing to try to get the FDA to change the warnings on the drug.  If Wyeth tries to buy out the generic maker and shut it down, and new seller will simply takes its place.    If this case stands, Wyeth can be steadily bled to death and there is nothing they can do to stop it.

Finally, I don't want to get away without a mention of just how broken the FDA drug regulation regime is.  The original Supreme Court decision that led to the generic maker being immune to suits really turned on the impossibility of getting the FDA to change even one word on a drug's warning label.

Companies and assets don't go *poof* in a bankruptcy.   In fact, if any of you are even somewhat of a frequent airline flyer, over the last 10 years you likely flew an airline in bankruptcy.  Companies operate all the time, sometimes for years, out of Chapter 11.  In fact, that is what chapter 11 is all about -- helping creditors get more value from a company by keeping it in operation  (only in truly hopeless cases, like Solyndra, is liquidation a higher value outcome for creditors than continued operation).

As such, then, the Obama Administration did not "save" GM and Chrysler, it simply managed their bankruptcy to political ends, shifting the proceeds from those guaranteed them by the rule of law to cronies and political allies.  In the process, they kept these companies on essentially the same path that led them to bankruptcy in the first place, only with a pile of taxpayer money to blow so they could hang around for a while.

To this end, the WSJ has a great editorial on the whole mess

In a true bankruptcy guided by the law rather than by a sympathetic, rule-bending political task force, GM and Chrysler would have more fully faced their competitive challenges, enjoyed more leverage to secure union concessions, and had the chance to divest money-losing operations like GM's moribund Opel unit. True bankruptcy would have lessened the chance that GM and Chrysler will stumble again, a very real possibility in the brutally competitive auto industry.

Certainly President Obama threw enough money at GM and Chrysler to create a short-term turnaround, but if the auto makers find themselves on hard times and return to Washington with hats in hand, his policy will have been no rescue at all.

I will refer the reader back to my editorial way back in 2005 why it was OK to let GM die