Links 4/2/09

Baby chicks do basic arithmetic BBC

Yeast-powered fuel cell feeds on human blood New Scientist

People in Need Are Filling and Taxing Libraries New York Times

AIG Debacle Not My Fault, Says Greenberg; Testifies Today Wall Street Journal. Please. Greenberg signed on to a firm within a firm arrangement with AIGFP, broke it, then reinstated it, and when Howard Sosin (who did know a thing or two about risk) left, he promoted Cassano, who did not.

Geithner’s Plan: Loopholes Galore Business Week. It’s as bad as you feared.

Measuring the value-added of hedge funds Richard Bookstaber

U.S. auto sales plunge but bottom seen near Reuters. GM’s sales were down 45%, and they were having some pretty aggressive promotions. Can we be certain the bankruptcy talk isn’t a factor?

Born again – and again Julian Delasantellis Asia Times (hat tip reader Bill)

Hedge funds with $1bn-plus plummet 40% Financial Times

National Trade Barriers Report on Barriers to Trade – China Office of the US Trade Representative (hat tip reader Paul). 56 pages of not very pretty conduct.

On the Urgency of Restructuring Bank and Mortgage Debt, and of Abandoning Toxic Asset Purchases John Hussman. This is from a few days ago, but still highly relevant, and also has one of the best “what to do about the crisis” ideas.

Antidote du jour:

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  1. MyLessThanPrimeBeef

    Let me say something about this story of chicks doing arithmetics.

    While the West had to wait a long time for the Arabs to introduce to them the concept of zero invented somewhere in India, my cat was born with that concept. He knew there was no food in the bowl (zero) vs when there was food in the bowl (not zero), instinctvely.

    Again, we don’t learn anything new from the media.

    Next, they will tell you animals can tell time – that they wake up at the same time everyday and that they can tell day from night.

  2. Independent Accountant

    I read Bookstaber’s comments. There is empirical research on mutual funds showing mutual fund investors do not do as well as the funds. This is because of the phenomenon Bookstaber writes about, i.e., people invest in funds after they have established a good track record. The result: the good track record occured while the fund managed a small amount of money. The bad track record while it managed a large amount of money. I have long suspected this was true of hedge and private equity funds too.

  3. vlade

    I think it’s well established that increasing fund under managements raises profits only for the fund manager.
    The more funds you have, the harded it is to deploy them constructively (and, at the same time, not to suffer from me-too, or from liquidity problem, or plethora of others).

    Another problem is, that because most humans don’t really understand exponential function, they still want relative, not absolute returns – even though absolute returns are sufficient at one point to stop caring about relative. In fact, past something relative won’t work because the returns would have to be so large as to eat everything else.

    I think I’d actually support 100% tax on wealth over say 1bn. What’s the point there, except for keeping score (and I think we can find more productive ways of keeping score)?
    Assuming you’d have 40 years to spend it, and not receive any interest on it, you’d still have just over 2 mil month to spend.

    I have yet to see any evidence that a student would be discouraged from doing something new because the max personal wealth he could ever achieve was topped at 1bn.

  4. Anonymous

    I see a headline this morning that Geithner may fire some finance CEOs.

    It remains beyond comprehension and increasingly unacceptable like a stick in your eye that this man, trained under Robert Rubin, close colleague of Paulson, head of the New York Fed while all this lawlessness and dismantling of the finance legal system of the US has been given this power.

    We are at a crises of trust where you can be sure his criteria for ‘firing’ would have less to do with business judgment for the good of the country and people all over the world effected my American decadence than it would with cronyism and worse.

    Just when we thought we had gotten rid of the Bush goons we have more vacuous and slippery goons in charge.


  5. Anonymous

    Just another plan for the disingenuous man — ho hum …

    Regarding the Hussman article; “On the Urgency of Restructuring Bank and Mortgage Debt, and of Abandoning Toxic Asset Purchases”

    One wonders what his Ph.D. is in? Gullibility? This is just another fantasy remedial plan that will never see the light of day because Hussman is too stupid to see that directing his efforts towards the same sold out gangster politicians that created this mess in the first place is a counterproductive waste of time. Worse, it only serves to validate the hijacked authority of the wealthy ruling elite’s gangster puppets! Along with strutting his stupidity, and voluntarily giving up his power, he even arrogantly asks others to join him in contacting the wealthy elite’s stooges.

    One wonders, where is the crossover point when the ‘want to believe so badly’ folks like Hussman finally wake up? What part of totally non responsive gangster government owned and controlled by the wealthy ruling elite does he not understand?

    He needs to realize that in the new two tier ruler and ruled world of rich and poor — where all of the middle rungs of the crumbunist ladder are removed — he will be at the bottom.

    This is not a financial crisis, it is a systemic hijacking of the ‘rule of law’ crisis.

    How about a really worthwhile “Steps to Stability” plan for a truly responsive to the people democratic government.

    Deception is the strongest political force on the planet.

    i on the ball patriot

  6. Richard Kline

    Two belated comments:

    I greatly appreciate Simon Johnson’s detailed review of the Quiet Coup by the Lords of Finance in the US. That was my term from last mid-summer (though scarcely mine alone). Were I of the commentator persuasion, his piece is exactly what I would like to have written, giving details, names, and a reasoned presentation. The Atlantic is a good forum for that, too. Nothing in his article is news to readers here at NC, but there is a a large portion of the educated public in the US that is not up to speed on this—but they read. News of the dire state of our state is slowly rippling outwards in society: good. As I’ve said before, these things move slowly, but they do move massively in due course.

    And Swedish Lex: I am in complete agreement with your thesis that the government is deliberately propping up the massive financials because they are a direct instrument of American realpolitical power. I have thought that for long, and it is the only really cogent explanation I can think of for the present policy at the top level of the current Administration. It is a certainty that American power will take a huge hit if the major financials go bust, are broken up or both. —And US ‘power/greed/insanity/antisociality _should_ take such a hit. If you can find the time, and I know that this can be difficult, write that post and run it by Yves. This is an issue which needs open discussion. We are not ‘saving the banks’ simply to save our banking system or even our wealth class; the American power elite is spending everything they can soak the populace for to protect their own financial force superiority. It’s madness, and moreover they are doomed to fail, but they will damage or destroy much that could be save in the assault—on the World. I know, I sound like a ranter, but to me it’s plain truth.

  7. Don

    “Geithner’s Plan: Loopholes Galore Business Week. It’s as bad as you feared.”

    Although it’s fine to point out possible problems,and is indeed very useful, the plan hasn’t been finalized, nor has a deal even been made.

    You can’t have a smoking gun on a gun that hasn’t even been loaded. Sometimes, you simply have wait and see if it’s as bad as you feared.

    Don the libertarian Democrat

  8. jh

    To Richard Kline – not for a moment
    would I consider you a ranter.
    Rather one of the more reasoned
    and well spoken voices I’ve encountered in these legions of

    And though I’ve no intention of
    tilting at windmills, it may well
    be that our current storm will
    in part restore some measure of
    sanity and structure. Or not.

  9. joe c

    Hey Ho!
    Financial Times:

    US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.

    The plans proved controversial, with critics charging that the government’s public-private partnership – which provide generous loans to investors – are intended to help banks sell, rather than acquire, troubled securities and loans.

    Spencer Bachus, the top Republican on the House financial services committee, vowed after being told of the plans by the FT to introduce legislation to stop financial institutions ”gaming the system to reap taxpayer-subsidised windfalls”.

    Mr Bachus added it would mark ”a new level of absurdity” if financial institutions were ”colluding to swap assets at inflated prices using taxpayers’ dollars.”

  10. Anonymous

    Just to get this on the board.

    From Ambrose Evans-Pritchard today

    Barack Obama gave her a clear enough warning yesterday that America will not continue to keep the spirit of free trade alive in Washington if its own precious stimulus keeps leaking out to free riders that refuse to reciprocate. The US will have to tighten its belt gradually and bring its own trade and current account deficits back into balance.

    “If there is going to be new growth it can’t just be the United States as the engine. Everybody is going to have to pick up the pace,” he said.

    “The US will do its share but in some ways the world has become accustomed to the United States being a voracious consumer market, the engine that drives a lot of economic growth worldwide,” he said.

    Then the sting: “To the extent that all countries are participating, that strengthens arguments we make in our respective countries about the importance of world trade, the sense that this isn’t a situation where each country is only exporting and never importing, but rather that there’s a balance,” he said.

    The core economic issue of our time — which this G20 is dodging — is whether or not the surplus states will at long last accept that they can no longer feast on Anglo-Saxon demand and instead take steps to change the structure of their economies.

    If they don’t come up with some way of doing this gently, then it will be done to them brutally.

    Brutal Method One is to stuff them on the exchange rate. This has already occurred with sterling. Hence the European crowds in London – and mostly welcome they are too — creating a tourist miniboom that has kept London afloat. Hence, too, Britain’s fast narrowing current account deficit, now just 2pc of GDP.

    It is occurring with the dollar too to some degree. The high euro is hollowing out Europe’s core industries. With a lag, this will be reflected in a slow rebuilding of America’s industrial base. Note how EADS-Airbus is building plants in America.
    Brutal Method Two is the more radical option of a closed trade bloc that shuts out exports from mercantilists. That would be truly ugly.

    It is this last which has made it into thoughtful print. Ideas, someone smart said, acquire a life of their own.

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