Thanks to all readers of Naked Capitalism for your interest and support. Wishing you all happiness, health and prosperity in 2011!
New Year’s Eve Fireworks Sydney Morning Herald (hat tip Crocodile Chuck). Trust me, ringing in the new year is more fun down under, with some exceptions this year: 200,000 displaced in Australia floods Raw Story
Are we becoming more stupid? Human brain has been ‘shrinking for the last 20,000 years’ Daily Mail
EU wants power to block China’s technology purchasing power IT World
From the Pentagon to the private sector Boston Globe (hat tip reader Michael I)
Cuts, leaks and atom smashing Financial Times
Families £3,000 worse off Telegraph
Democracy’s failures, 2010 Guardian (hat tip reader May S)
Career Shift Often Means Drop in Living Standards New York Times. Duh. This is why otherwise smart and honorable people do stupid and sometimes dishonest stuff at the behest of their bosses: they suspect they’s to do similar stuff pretty much anywhere else in their field of work, and jumping to a new field entails a big step down.
Does Recovery Mean New Jobs at Lower Pay? Mark Thoma
Ron Paul Does Not Like Elizabeth Warren Or The New Consumer Protection Agency (VIDEO) Daily Bail (hat tip reader Natalie). His criticisms are of a caricature of Warren and the agency.
Borders Tumbles After Delaying Payments to Some Publishers Bloomberg
Strong Finish Gives Paulson Fund Winning Year New York Times. Dictation masquerading as news. The S&P 500 was up 13%, Paulson was up 14%. The normal target for a hedge fund is 20% or more to justify the fees. Paulson’s investors would have done better in a index fund at Vanguard.
Housing Pain Pits Neighbor Against Neighbor in Florida Wall Street Journal
Which of These Banks Was 2010’s Most Shameless Corporate Outlaw? Huffington Post (hat tip Lisa Epstein)
Academic Economists to Consider Ethics Code New York Times
How a Different America Responded to the Great Depression Pew Research (hat tip reader James S)
Antidote du jour:
Happy New Year, Yves and all.
Yves, thank you so much for your work on this blog.
Heartily seconded. Please don’t travel in any small planes Yves.
Heartily thirded or whatever. History will give you a place “Yves” which you richly deserve.
2011 is going to be better for me than 2010, unless I die, in which case I won’t care. Life sure is interesting.
Happy 2011 to all. Stay tuned……
Ditto, and amen on the small planes.
May ‘the force be with us’..I fear we will need it.
I hope all my fellow posters can find peace and fullfillment in 2011. Thank you all for your courtesty to me and your patience with my posting.
very kind thoughts, and best of the New Year to you and all the other posters, Yves included of course.
Thank you emc. The same to you personally. I hope we can always defend each others’, rights to be wrong..:)
I have been trying to respond to you on the other thread but for some reason cannot.
Happy New Years Everyone.
Wishing everyone a happy and healthy year,
especially Yves, our most generous host.
Happy Christmas and a Merry New Year. Let’s hope that 2011 will be the year that everyone stands up and says WTF? We’ve had enough!
And while I’m at it, congratulations of the perfect phrase “Dictation masquerading as news”.
My most heartfelt best wishes to you on this new year’s day, Yves. You have worked so long for all of us.
Thank you for your hard work on this blog, it’s one of the very best on the web. To show my appreciation, I purchased your book. It’ll be my vacation read in January.
happy new year to you and may you thrive and be well in 2011.
in appreciation of your work, i’ve made a donation–first time ever to a blog.
not only your own great writing but also the news service you provide are a godsend in my life. there is no one else whose work i trust so implicitly. it’s not just because of what you do but the quality of your character, which shines like a lighthouse. you have also inspired me to become more engaged and active in some small ways i’ve discovered i can. and there may be more. i suspect it’s impossible to read naked capitalism and remain on the sidelines for very long.
I wish you all a happy and prosperous new year !!!
I always find interesting links at Nude Capitalism; thanks!
This morning the NYT has an article about the dismal Pennsylvania state liquor store #5801 in Forest City, PA which — because it loses money — is open for only three business days (21 hours) a week. (Not a typo — see photo of the opening hours sign on the door.)
UFB! We’ve all heard about the IRS losing money running a whorehouse (the Mustang Ranch) in Nevada. And 2010 marked the demise of New York State’s decrepit horse race betting monopoly, OTB [Off Track Betting, ostensibly, though unofficially it meant ‘Old, Tired Bettors.’]
But it takes a special level of bureaucratic incompetence for Pennsylvania’s #5801 booze pushers to lose money on monopoly alcohol sales when their nearest competition is 11 miles away. Apparently the selection, the service, the convenience and the prices are so dismal that dismayed customers are willing to drive across the border to New York and New Jersey just to escape the dusty, depressing, dead-end blight of state enterprise and service with a snarl.
Boy, I can hardly wait for Obamacare! ;-)
To freedom in 2011, comrades! Abolish the Soviet Fed!
Amen bro! I have the same feelings toward my local auto dealer. I actually drive out of state to have my car seviced at a different dealer. I think these guys are trying to retire on a single car repair!
Glad to hear the socialist monopoly can compete with a capitalist monopoly in disservice and price! Too bad the car dealer is still open more hours than that liquor store!
Yes. It’s all true. From the failings of a remote branch of a business model left over fr/ the 1930’s, & the demise of a state gambling monopoly that made money until its client base dwindled along with racing betting all over the US, and problems running a bordello, we can all extrapolate that all government healthcare will be a failure. And that we should abolish the nation’s central bank. And (this I presume) that we should extend the ‘magic of markets’ to every corner of our political economy?
It’s always fun to see ideology trump everything that dare stand in its way.
For the record, 40 years ago when I had dealings w/ them, the State Store clerks were friendly & efficient. Were that the clerks of Forest City could sue you for libel.
Party On! All is Well! by Numerian. A depressing, but I fear accurate, read on the economy in the new year.
Best wishes for the new year, Yves! Your blog has been interesting, informative, and very educational for me. In addition, the blog draws comments from highly thoughtful readers which I also appreciate. Kudos to all!
Paulson’s investors would have done better in a index fund at Vanguard.
Yves, surprised that you would make such a statement. I’m certain you understand the difference between alpha and beta and that comparing returns without adjusting for risk is only looking at half the picture.
The beta in Paulson’s fund is certain to be higher than in an S&P 500 index, which is why I did not bother addressing that issue. Paulson takes concentrated bets and does no asset allocation. In fact, he’d be dinged for that by the fund management police; that’s supposed to be the duty of the fund consultants. So incorporating the beta v. alpha issue serves to strengthen the case against Paulson and for Vanguard.
In general, the idea that hedge funds actually produce alpha is way oversold. I was writing back in 2007 that hedge funds were even having to sell themselves as producing “synthetic beta”. You can produce synthetic beta a LOT more cheaply than for 2 and 20.
Moreover, as I discuss long form in ECONNED, the idea of beta itself is bogus. There is no way to define a “market” portfolio. Even Markowitz and Sharpe have abandoned it.
Taking a concentrated position, of say for example long Citigroup / short Bank of America in 2010 would have had an ex ante prediction of a beta much lower than the S&P (Citi’s predicted beta at the beginning of the year was higher than Bank of America’s) but with the benefit of hindsight would have produced fantastic returns. Long JP Morgan / short BAC would’ve produced something closer to Paulson’s returns and also would’ve done so with much lower predicted beta than the S&P.
Goetzmann, Ingersoll, & Ross have a working paper out that, if memory serves, suggested for alphas as low as 300 bps, clients should be indifferent between 2/20 and index funds.
Econned is on my 2011 reading list, but haven’t gotten to it yet.
>Ahem, I think this infighting story is still too kind to Obama.. Obama has shown repeatedly that he is more interested in being able to claim he got a deal/policy done rather than having said deal/policy make an iota of sense.
I think even THAT is being too kind; Obama’s plans make perfect sense-once you accept he is really an RWR Republican at heart.
This is my favorite financial blog.
The neighbors in the Florida condo complex should direct their anger at the true culprits that created the housing maelstrom. From Wamu to Countrywide to all the perps identified in the film “Inside Job.” Their neighbors being foreclosed on are just collateral damage.
In some ways, IMO, this story shows how little the average person understands about the origins of the housing crisis.
Happy New Year. And thank you for another year where you show a true Christan concern for all
My humble suggestion is to apply the Rockefeller drug law notion of mandatory jail time for white collar crimes. With increasing time depending on the “weight” of the dollar amount concerned.
HNY Ms. Yves, and my hearty thanks for acting our hostess with clarity and grace. May you run long and your words ring far.
When I was somewhere between age 21 to age 24, I read The Fountainhead and Atlas Shrugged by Ayn Rand. The first presented a philosophy new to me. The second was more of the same except more strident. Individualism was initially an attractive philosophy but closer inspection revealed fatal flaws especially when carried to the extreme. And if you don’t believe that Ms Rand carried it to the extreme then heaven help you.
Apparently Alan Greenspan was an ardent follower of Ayn Rand. He is now notoriously known as the Fed chairman who believed that regulation of banks and Wall Street was unnecessary and added costs. Greenspan and his helpmates beat Brooksley Born into submission in Congressional hearings after she tried to regulate Credit Default Swaps (CDSs). Shortly afterwards, she resigned as chairperson of the Commodity Futures Trading Commission (CFTC) and we were left with unregulated or at best under regulated markets. For the uninformed, CDSs’ were and probably still are a huge problem for the largest banks.
Now comes Ron Paul a Republican/libertarian who is highly critical of Elizabeth Warren and the new Consumer Financial Protection Bureau (CFPB). Ron Paul is not a fan of the big banks but he is so anti regulation that he criticizes the CFPB for a variety of reasons. Libertarians believe that in most cases government is the problem, that businesses should regulate themselves, and that “Let the buyer beware” is enough of a principle to protect consumers. Ayn Rand would love them.
Modern libertarians are pikers. They should have been trying to do business before anti trust regulation brought the real libertarians under some control. John D Rockefeller (1839-1937) would have ruined this bunch before breakfast and then ate their lunch and dinner!
If they want real deregulation then let us also deregulate assault and battery. When a business defrauds a customer, let the customer ambush the said businesses’ CEO and beat the funds out of him.
As a side note, the term piker originally referred to pikemen in medieval England. They were usually untrained peasants, wore little in the way of armor and their only weapons were long spears. The modern equivalent would be lightly armed infantry facing tanks before the widespread use of anti tank weapons. (See: cannon fodder)
There, now I feel better! Happy New Year.
What should a business do when its competitors (in other countries) convince their own governments to undo with regulations? Consider that in the ensuing few years, the foreign businesses will enjoy a competitive advantage, putting the local ones out of business. A decade or so later, the imprudent business themselves blow up, without the safety check of the regulations they lobbied to overturn. Their governments bail them out and local businesses are still left at a competitive advantage. A question for liberal and libertarians alike.
Lack of regulation is a subsidy by the government; society ends up taking on costs that arise in the course of doing business.
Regulations themselves aren’t necessarily antieconomic, since a lot of them are common sense and encourage behavior that saves the company money in the long run. Office politics aren’t geared to long run solutions. Regulation, while protecting workers, customers, and the larger community, usually protect the decision makers for being dragged into dumb decisions. And it gives them some group-approved team-building boss-pleasing whining time.
In any case, foreign businesses are directly subsidized into the US market. Partly this is a joy of having a reserve currency, partly the work of governments who run their economies for the benefit of their own population, and partly the inevitable result of allowing government officials who should protect the homeland to batten on bribes. While free market beliefs are plausible in the abstract they just don’t work in practical terms.
First, a belated “Happy Holidays” to our brilliant and exemplary humanist hostess, Yves/Susan! May this year bear better fruit for all of us. (Of course, I almost never refuse “bare fruit,” either!)
Jim, your comment is, from my perspective, spot-on and I couldn’t agree more. How little we’ve “learned” as a society/”country”! Except I was 33 or so when I was first introduced to Atlas Shrugged. It was after I did research and a speech (for a college course in ’88) on the “birth and evolution” of the computer. Do you know that W. Shockley and his 4 collaborators, who “invented/developed” the transistor, were awarded a bonus equivalent to a whole year’s salary. It was 1952 (or ’53, “old” memory) and those 5 bonuses “cost” AT&T Bell Labs a little over $100K at that time. The very next year, AT&T made more than $1,000,000 in profit from sales of the transistor alone? Whoever does not think that Shockley and company were royally screwed by their feudal overlords (AT&T), well, I’ve got a “job” for you! Ms. Rand’s words in “AS” were not the “light at the end of the tunnel” for me, they were the light that illuminated the tunnel showing that the tunnel has no end!! In either direction!!! Yet, as you observe, her “objectivist” philosophy, on closer inspection, leaves as much or more to be desired as any other political/economic “thought.” However, there was at least 1 “principle” she espoused which, in my not-so-humble-opinion, should be lauded and repeated far and wide. I recall that she advised one to “re-examine your premises.” I find that very useful when I find people whose actions are diametrically opposed to the words they’ve previously stated. Democracy is dead, long live hypocrisy… it, as we, are already on “borrowed time.”
Do you think that Shockley and the other inventors of the transistor could have created their invention if they hadn’t been able to stand on the shoulders of Bell and the capital of ATT? Grow up.
Very eloquent. All ideologues are inherently incoherent when invoking their ideology. Ron Paul included.
Yves, thanks for all you do and for all the wonderful commenters (who have kindly tolerated my own musings here this year).
With respect to today’s links, I really have to give kudos to the NYT on that link about novel concept of requiring economists to follow a Code of Ethics. Although I understand that I can only copy a snippet, just to encourage other readers here to go click on that NYT link, this just had me frothing after I read it:
If this man ever operationalized a variable, had to sweat out defining the parameters of subject groups, toiled over a Methods procedure, then I’ll eat two of my hats.
I was just frothing and gaping over this quote earlier, when my spouse drolly observed that perhaps the Nobel laureate in question took Mengele’s view of science: whatever ‘experiments’ we do on human subjects, we never feel the pain; that is all for the subjects to endure. I think The Spouse has sussed this out correctly.
I can’t think the unctious professor would be at all regarded by any of the **real** science geeks at CSIRO, or NIH, or WHO, or any number of spots where people engage in real, actual science.
If only for your explanation of how the ‘wannabe science of economics’ has claimed for itself a political influence and cache that are entirely unwarranted, my deepest thanks and admiration, Yves.
This Nobel laureate could not have offered up a more unwitting, clear example of the problems that you point to if he’d spent an entire year pondering what to tell that NYT reporter. (That is one well written article, FWIW.)
What a fitting way to start the New Year, I suppose — with the very illustrious Nobel laureate providing Exhibit A in how the field of economics was positioned to perform an Inside Job on society.
Here’s hoping the dawning realizations that spring from better financial blogs, documentaries, and journalism lead to some meaningful social, legal, and political endeavors in 2011.
readerOfTeaLeaves says: “…”
Sir, your comment is right on the mark.
This poor man should start reading this blog. On 12/23/2010 Yves gave a link to an article titled “The truth wears off” here:
The gist of that article is that some research studies can be initially replicated, but as time goes by, they are less and less replicable. Apparently this occurs in fields dealing with human behavior.
I envy him. In a field that has to include some human behavior, he can control for all variables and no variable is unseen! His work is and ever will be replicable.
The only research project that I was involved with was much messier than that.
Re code of ethics for economists. FYI:
It is not enforceable in the legal sense, but peer pressure within a professional society such as this works to make it so. That economists have fought against such a code in the past says a lot I think.
“Although I understand that I can only copy a snippet, just to encourage other readers here to go click on that NYT link, this just had me frothing after I read it:”
I read that, too, and I was laughing MAO. He actually said: “What disciplines economics, like any science, is whether your work can be replicated.” LOL! Replicated? Like most of that stuff has any relationship to empirical reality? LOL.
Be careful about linking to Daily Mail Yves, it’s a tabloid.
Yes, I know, but some of its lightweight stories are fun.
HAPPY NEW YEAR . . .
. . . to NC-ers and other free-thinkers “who are paying attention,” and fighting the good fight against “unenlightened self-interest”(*).
* From the title of Yves book, of course.
HNY to all at NC – and here’s hoping next year will be even a slight improvement on this one. I’ve rarely been so glad to see a year go by…..
WRT the article in the NYT on taking lower pay with job changes – Yves’ “duh” is spot on. When I was unemployed earlier this year, I considered going back to my original career path (public education.) I stopped considering this immediately upon learning that the pay scale in my local school district was exactly the same pay scale that I had been offered when I graduated from college. In 1996. Besides, I cannot pay my bills on $35K a year, which is what they were offering.
Have a good year, Yves. You’ve done good work this past year to keep us informed before it hits the wire.
What’s this in the Huff Post; http://www.huffingtonpost.com/l-randall-wray/why-mortgagebacked-securi_b_802600.html.
Summarizing all you ‘ve done without attribution?
Let’s go forward.
Thanks for noticing, but more useful if you point that out in comments at HuffPo and e-mail Wray :-)
Bonne Année, Yves !
Yves, thanks for the Fannie summer reruns.
Once the GSEs have taken on all of the dreck, the free marketeers will be salivating at the prospect of re-privatizing them, for pennies.
Thanks for this space of reality and sanity, continuing education and thoughtful discussion. I’ve learned so much from reading your blog posts and the comments.
Naked for another year…
Happy New Year to all!
A special salute to Yves, who gives us something meaningful to think about (and rant about too…:-D ) every day.
New Year’s Resolutions
Don’t usually do this – not one for making commitment. This year I’m inclined to make an exception.
1. To live a fuller life
a. To spend more money
b. To eat better, more pure, more locally produced ingredients, more home prepared meals and no more restaurant stuff unless carefully selected for the purity or dining experience.
c. Drink better wine
d. Other consistent with 1 above
2. Give more money to local charities. The regular “bums” know how to get by, but we’ve lost 8mm jobs recently and there are a whole new population of people who don’t know how to feed their families. Start by helping with that.
3. Endeavor to get the rest of my money off Wall Street and out of the bonus pool.
4. Seek out those caring for the terminally ill and do what I can to mentor them. I think I have something to offer.
5. Write better comments at NC.
Not necessarily in that order.
Happy New Year, Yves. I’m a new reader to your site and I love it. Thank you!
Happy New Year,
I’m stretched too thin these days, but love the work here!
Also see: Yves Smith’s Naked Capitalism is well respected, and with reason, for its views on banking-sector regulation.
Music for 2011: http://www.youtube.com/watch?v=ht64qlnOus8
Best wishes for continued success in 2011!
Happy New Year! Let’s do lunch ;)