Tuesday, July 26, 2011
New Blog
Saturday, May 28, 2011
Quick thoughts...
Monday, December 13, 2010
bumperstickers
Tuesday, March 31, 2009
Things that Make me Angry Vol. 1 - Family Guy
Wednesday, October 15, 2008
Economic Wisdom from the Sports Page
Gasoline Plentiful, Perspective Scarce: "Financial chaos is sweeping the world," a New York Times lead story said last week. I didn't notice any chaos in my part of the world -- every business was open, ATMs were working, goods and services were plentiful. There are economic problems to be sure. But chaos? Collapse? Next Depression? Please, media and political worlds, let's stop hyperventilating and show some perspective.
What is going on is a financial panic, not an economic collapse. Financial panics are no fun, especially for anyone who needs to cash out an asset right now for retirement, college and so on. But financial panics occur cyclically and are not necessarily devastating. The most recent financial panic was 1987, when the stock market fell 23 percent in a single day. Pundits and politicians instantly began talking about another Depression, about the "end of Wall Street." The 1987 panic had zero lasting economic consequences -- no recession began, and in less than two years, stocks had recouped all losses. (See John Gordon's excellent 2004 book on the history of financial panics, "An Empire of Wealth.") Perhaps a recession will be triggered by the current financial panic, but it may not necessarily be severe.
Politicians and pundits are competing to see who can act most panicked and use the most exaggerated claims about economic crisis -- yet the fundamentals of the U.S. economy are, in fact, strong. Productivity is high; innovation is high; the workforce is robust and well-educated; unemployment is troubling at 6.1 percent, but nothing compared to the recent past, such as 11.8 percent unemployment in 1992; there are no shortages of resources, energy or goods. Here, University of Chicago economist Casey Mulligan shows that return on capital is historically high; high returns on capital are associated with strong economies. Some Americans have significant problems with mortgages, and credit availability for business could become an issue if the multiple bank-stabilizing plans in progress don't work. But the likelihood is they will work. When the 1987 panic hit, people were afraid the economy would collapse; it didn't. This panic is global, enlarging the risks. But there's a good chance things will turn out fine.
Why has a credit-market problem expanded into a panic? One reason is the media and political systems are now programmed for panic mode. Everything's a crisis! Crises, after all, keep people's eyes glued to cable news shows, so the media have an interest in proclaiming crises. Crises make Washington seem more important, and can be used to justify giveaways to favored constituent groups, so Washington influence-peddlers have an interest in proclaiming crises.
An example of the exaggerated crisis claim is the assertion that Americans "lost" $2 trillion from their pension savings in the past month, while equities "lost" $8 trillion in value. "Investors Lose $8.4 Trillion of Wealth" read a Wall Street Journal headline last week. This confuses a loss with a decline. Unless you cashed out stocks or a 401(k) in the past month, you haven't "lost" anything. Nor have most investors "lost" money, let alone $8.4 trillion -- crisis-mongering is now so deeply ingrained in the media that even Wall Street Journal headline writers have forgotten basic economics. People who because of financial need have no choice but to cash out stocks right now are really harmed. Anyone who simply holds his or her ground with stocks takes no loss and is likely, although of course not certain, to come out ahead in the end. During the housing price bubble of 2003 to 2006, many Americans became much better off on paper, but never actually sold their homes, so it was all paper gains. Right now many Americans holdings stocks or retirement plans are much worse off on paper, but will be fine so long as they don't panic and sell. One of the distressing things about last week's media cries of doomsday is that they surely caused some average people to sell stocks or 401(k)'s in panic, taking losses they might have avoided by simply doing nothing. The financial shout-shows on cable tend to advise people to buy when the market is rising, sell when the market is falling -- the worst possible advice, and last week it was amplified by panic.
We've also fallen into panic because we pay way too much attention to stock prices. Ronald Reagan said, "Never confuse the stock market with the economy." Almost everyone is now making exactly that mistake. The stock market is not a barometer of the economy; it is a barometer of what people think stocks are worth. These are entirely separate things. What people think stocks are worth now depends on their guess about what stocks will be worth in the future, which is unknowable. You can only guess, and thus optimism feeds optimism while pessimism feeds pessimism.
There is no way the American economy became 8 percent less valuable between breakfast and morning coffee break Friday, then became 3 percent more valuable at lunchtime (that is, improved by 11 percent), then became 3 percent less valuable by afternoon teatime (that is, declined by 6 percent) -- to cite the actual Dow Jones Industrials swings from Friday. And the economy sure did not become 11 percent more valuable Monday. Such swings reflect panic or herd psychology, not the underlying economy, which changes over months and years, not single days. For the past few weeks pundits and Washington and London policy-makers have been staring at stock tickers as if they provided minute-by-minute readouts of economic health, which they do not. It's embarrassing to see White House and administration officials seemingly so poorly schooled in economic theory they are obsessing over stock-price movements, which they cannot control and in the short term should not even care about.
Consider this. On Black Monday in 1987, the market fell 23 percent. If you had invested $100 in a Dow Jones Index fund the following day, it would be $460 now, a 275 percent increase adjusting for inflation. That's after the big slide of the past month, and still excellent. So don't panic, just hold your stocks. And if you'd invested $100 in real estate in 1987, it would be $240 today, a 30 percent increase adjusting for inflation. That's after the housing price bubble burst. A 30 percent real gain in 20 years isn't a great investment -- until you consider that you lived in the house or condo during this time. To purchase and live in a dwelling, then come out ahead when you sell, is everyone's dream. Not only do stocks remain a good buy, America on average is still coming out ahead on the housing dream. (This example uses the Case Shiller Index for the whole country; because housing markets are local, some homeowners have lost substantial ground while others enjoyed significant appreciation.)
Economic problems are likely to be with us for awhile, but also likely to be resolved -- the 1987 panic and the 1997 Asian currency collapse both were repaired more quickly than predicted, with much less harm than forecast. Want to worry? Worry about the fact that the United States is borrowing, mainly from foreign investors and China, the money being used to fix our banks. The worse the national debt becomes -- $11 trillion now, and increasing owing to Washington giveaways -- the more the economy will soften over the long term. It's long-term borrowing, not short-term Wall Street mood swings, that ought to worry us, because the point may be reached where we can no longer solve problems by borrowing our way out. TMQ's former Brookings Institution colleague Peter Orszag, now director of the Congressional Budget Office, was on "Newshour" last week talking about the panic. Orszag is a wicked-smart economist -- for instance, he is careful to say pension holdings have declined, not been lost like most pundits are saying, as if there were no difference between decline and loss! The below exchange occurred with host Jeffrey Brown. Remember these words:
PETER ORSZAG: One thing we need to remember is we're lucky that we have the maneuvering room now to issue lots of additional Treasury securities and intervene aggressively to address this crisis.
JEFFREY BROWN: Wait a minute. Explain that. Lucky in what sense?
PETER ORSZAG: That people are still willing to lend to us. If in 20 or 30 years we continue on the same path, with rising health-care costs and rising budget deficits, we would reach a point where we wouldn't have that ability.
I'll admit that I know almost nothing about the economy. Not exactly a math person. However, I've been waiting for someone to say this for weeks. While real life factors clearly affect the market, it is based entirely on perception and it doesn't help anything when new organizations and politicians are constantly using the word "recession" and talking like it's the end of the world. Is our economy in the best shape it's ever been in? No. Is there a good chance it will recover? I think so. McCain said that the economy was "fundamentally strong" a few weeks ago and got hammered for it. It's like no one is allowed to say that things aren't really that bad without being called insensitive or naĆve. I honestly don't know if the bail-out was the right move or not. But I'm pretty sure that over-reacting isn't helping anyone.
Saturday, August 30, 2008
the difference between men & women
One of my least favorite things in movies and TV shows is when a couple gets together and they're obviously right for each other, but in order to stretch things out and create conflict, the writers send some ridiculous, unrealistic circumstance or misunderstanding their way to break them up. It's that kind of thinking that ruined "Friends." During the early years, I considered it one of my favorite shows, but then, after the audience had waited years for Ross and Rachel to get together, the stupid writers broke them up. I didn't have such a strong attachment to the characters that their split upset me, but it didn't make sense and it sent the show into a whole new direction. What had once been a show about quirky 20-somethings and their misadventures became basically a soap opera with the friends taking turns hooking up with each other and whatever celebrity they could talk into making a cameo. A few years after the break-up, the writers gave Ross and Rachel a baby, but defiantly refused to let them get back together. They finally reunited in the pilot with what I believe was one of those cliche airport scenes and I guess that was the idea all along. By that point, however, it was anti-climatic and the damage had been done. The ratings stayed high, of course, but what was once a show with across-the-board appeal became a show that guys refused to watch. "
It got me thinking about men and women. Maybe women just like for things to be complicated. I think every guy has been asked a question that seems like a trap. Every guy has seen a woman freak out and start a fight over something that seems insignificant. That's not to see that men don't do a myriad of things to ruin relationships as well. We're just as stupid if not more so. But I still wish that women could learn to be happy when things are good.
I've picked up another key gender difference during my time at Toys [backwards]R Us. Women have children as an outlet for nurturing and a source of unconditional love. Men have children to give themselves an excuse to play with toys.
On a completely unrelated note. Do we know for sure that Pac-Man and Ms Pac-Man were husband and wife? She used the ubiquitous-in-the-80's "Ms" that's specifically designed to be unspecific. She may have been his sister for all we know. I do remember a Pac-Man Jr at one point, but they certainly wouldn't be the first couple to have a child out of wedlock and it's perfectly possible that, 80's supercelebrity that he was, Pac-Man knocked up Samus from Metroid or the blonde girl in the ferrari from Out Run. Maybe the fact that her name was Ms Pac-Man and not Pac-Woman means they were probably married, but either way I'm pretty sure she was sleeping with Q*bert.