Wednesday, October 31, 2007
See my post at Chicago Boyz.
Tuesday, October 30, 2007
From the hag and hungry goblin
That into rags would rend ye
And the spirits that stand
By the naked man
In the Book of Moons, defend ye!
That of your five sound sense
You never be forsaken
Nor wander from
Yourself with Tom
Abroad to beg your bacon
The moon's my constant mistress
And the lonely owl my marrow
The flaming drake
And the night-crow make
Me music to my sorrow
I know more than Apollo
For oft, when he lies sleeping
I see the stars
At mortal wars
And the rounded welkin weeping
With a host of furious fancies
Whereof I am commander
With a burning spear
And a horse of air
To the wilderness I wander
By a knight of ghosts and shadows
I summoned am to tourney
Ten leagues beyond
The wide world's end
Methinks it is no journey
(Not specifically a Halloween poem, but it certainly sets the mood, doesn't it? This is Tom O'Bedlam's Song, dating from sometime around 1600. There are lots more verses, and many different versions.)
Monday, October 29, 2007
The per-pupil cost of public school education, compared with the price per barrel of oil, over the last 78 years. At Carpe Diem.
Sunday, October 28, 2007
NOTEWORTHY, BUT NOT NOTED
Iraqi officers and soldiers contributed money for the wildfire victims in California.
These Iraqi troops have plenty of problems of their own, and most of them probably don't have all that much money--but still made an effort to help out American disaster victimes.
I have not been able to locate a single mention of this story in the old media.
Friday, October 26, 2007
National Review reports that the University of Delaware asked Asaf Romirowsky to step down from an academic panel--because Romirowsky is a former member of the Israel Defense Forces who has been stationed in the West Bank, and another panelist wasn't sure he would be "comfortable" appearing on a panel with someone having that background.
Via Seraphic Secret.
Wednesday, October 24, 2007
MANAGEMENT ADVICE FROM 1797
At Chicago Boyz. (Based on a Photon Courier post from a couple of years ago.)
Tuesday, October 23, 2007
For years, the Paso Robles (CA) post office has displayed photos of U.S. soldiers serving in Afghanistan and Iraq. But after someone complained, the pictures were taken down.
The good news is that the pictures are now back up following outrage from local citizens and the involvement of a Congressman. It's disturbing, though, that the regional postal center made the decision to take them down in the first place.
Monday, October 22, 2007
Curiosity as a Competitive Advantage
("Curiosity" link via the Lean Blog)
INTERESTING DATA POINT
A real-estate broker in Florida, in a letter to Barrons:
Our normal percentage of web traffic from Canadian browsers approximates 7.5%--but has been a whopping 40% since Oct 1.
As she says, it's too early to know how many of the browsers will turn into buyers. But declines in the dollar certainly do make U.S. real estate more attractive to citizens of other countries, and this phenomenon may help in putting an eventual floor under price declines--at least in those locations which are desirable for vacation and/or retirement.
Thursday, October 18, 2007
PLANNING AND ACTION
A thoughtful piece by Tom Peters. Excerpt:
Years ago, in my McKinsey days, one of my bosses was bemoaning the help we were getting from an "economic genius." He said, "Tom, consider a matrix. One axis boils down to 'simplifier' vs 'complexifier.' The other is 'smart' and 'dumb.' Thus we are dealing with a 2X2 matrix. The analyst-from-heaven is the 'smart simplifier.' The analyst-from hell is 'smart complexifier.' He is, in fact, worse that the 'dumb complexifier,' who you can simply ignore, and the 'dumb simplifier' who might actually be of help."
Inflation Central is maintained by the Cleveland Fed and has extensive data on inflation in the U.S. and throughout the world. One of the data sets is this analysis of expected inflation derived by comparing yields on standard Treasuries vs yields on Treasury inflation-protected securities.
Tuesday, October 16, 2007
THE LOST ART OF THE TURN SIGNAL
See my post at Chicago Boyz.
Friday, October 12, 2007
GREAT BLOGGING STORY
...at Seraphic Secret.
Thursday, October 11, 2007
PAGING WILLIAM OF OCKHAM
Some "anti-war" protestors have accused the U.S. government of using mechanical dragonflies to spy on them.
Didn't these people ever study Occam's Razor in college?
(via Tinkerty Tonk)
Sunday, October 07, 2007
Here's a story about an anthropologist who is working with U.S. forces in Afghanistan:
Tracy, who asked that her surname not be used for security reasons, is a member of the first Human Terrain Team, an experimental Pentagon program that assigns anthropologists and other social scientists to American combat units in Afghanistan and Iraq. Her team’s ability to understand subtle points of tribal relations — in one case spotting a land dispute that allowed the Taliban to bully parts of a major tribe — has won the praise of officers who say they are seeing concrete results.
The Pentagon's Human Terrain Team program is assigning sociologists and anthropologists to each of the 26 American combat brigades in Iraq and Afghanistan. American officers interviewed for the article seem to feel that the program is worthwhile.
And, of course, some academics disapprove of the whole thing. Indeed, some of them are attempting to create a boycott against the teams.
Read what Neptunus Lex has to say about the work of Tracy and her fellow tactical anthropologists--and about those academics who are trying to undercut that work.
Friday, October 05, 2007
COURIC ON AMERICA
Katie Couric says that she's not very comfortable with the idea of using the term "we" when referring to the United States. Jonah Goldberg responds.
I wonder if there is any grouping of people for whom Couric would feel it is appropriate to use the "we" word.
Related thoughts from Jules Crittenden.
UPDATE: See also this interesting post on patriotism at Winds of Change.
Thursday, October 04, 2007
THE PAST OF THE FUTURE
Paleo-Future is a website devoted to visions of the future, as these were portrayed in the media from the 1880s through the 1930s.
Here are some sets of prints reflecting the year 2000 as seen from France in 1910 and from Germany in 1900.
Wednesday, October 03, 2007
AHMADINEJAD AT COLUMBIA
Tim Rutten offers some thoughts and some history. Via Don Sensing.
And here is some unpleasant history about American universities who went out of their way to be nice to the Nazis in the mid and even the late 1930s.
Tuesday, October 02, 2007
INTERESTING THOUGHTS ON CDOs
A year ago, Collateralized Debt Obligations were widely viewed as brilliant "financial engineering." Now, they are considerably less in favor. Alan Greenspan recently declared that CDOs "will never get back to the levels and structures that they were, because now everybody knows that you cannot price them."
Writing in Financial Times (9/28), Jan Krahnen of Goethe University argues ("How to revitalise the credit market in one step") that CDOs still have an important role to play, but that some structural changes are needed in order to make risks more predictable and manageable.
The basic idea of credit securitisation is to transform a pool of loans into distinct asset mixtures, some with very low risk and others with high risk. Typically, low-risk senior notes are sold to pension funds and households, while high-risk junior notes are held by banks or hedge funds.
In the literature on asset-backed securities, it is pointed out that the most junior note, the so-called first loss piece, or equity tranche, should permanently be held by the originator. The reason is moral hazard, or the risk of irresponsible lending. This can be reduced if the bank that issued the security monitors its performance and provides other support activities. The lender must remain personally involved or, in financial terms, he must remain at risk by keeping a deductible. The retention of a first loss piece in a CDO transaction achieves exactly this.
In contrast, if the equity tranche of a CDO is sold to some other investor, for example, a mono-line insurer or a hedge fund, then the tie between the originating bank and its borrower is disconnected, and the monitoring and support incentives are weakened or completely dispelled. For the holder of a senior CDO note, the expected loss of his investment will thus rise once the originator sells the equity piece.
Subprime mortgages are a prime example of such a zero-deductible market. The tragedy, in retrospect, is that up to now, nobody seemed to care. The information on whether the equity note is held by the originator is not conveyed to investors. Neither the rating agencies nor the regulators have any clue where the equity pieces are in fact being held. One may object that this is probably a minor problem, given that equity pieces typically are fairly small, averaging only 3 per cent of the issue size. However, absolute size is misleading here because, thanks to the construction of a typical CDO transaction, the equity piece covers the lion's share of any expected loss. More precisely, if loans are defaulting, the resulting losses are covered by the holders of the equity piece, up to its nominal value, before more senior bondholders have to sustain any losses at all.
In a response to the Krahnen article, a pension portfolio manager from Finland argues that it would be better if the CDO originator holds a portion of the second-loss tranche, rather than the equity tranche, because of the differential behavior of risk and reward across the various tranches.
The overall point here is about the alignment of incentives. A CDO originator who will have a continuing financial interest in the pool is likely to behave differently than one whose financial interest ends when the securities are sold to others. When investing--whether you are a pension fund or an individual--it is important to consider the incentives that drive other parties involved in the investment.