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Wednesday, October 29, 2008

Where Did I Put That Book?

I had some technical algorithm work to do at home, so I took my copy of "Numerical Recipes in C" home with me. When the time came to use it, I couldn't find it anywhere. It wasn't in the car, wasn't anywhere in the house that I could see, it wasn't at work (I thought that maybe I'd forgotten to bring it home). It seemed to have disappeared from the face of the earth.

I asked my wife about it:
Me: Have you seen a big, red reference book anywhere?

Her: No. What's the name of it?

Me: Numerical Recipes in C.

Her: Have you looked in the cupboard where we keep the cookbooks?
Sure enough, there it was. It turns out that the student who watches our kids after school had been tidying up and "recipes" was the only word she recognized in the title so she put it with the cookbooks.

What impressed me most, though, was the fact that my wife immediately knew where it was when I told her the title.

Aspects of markets and a free market system

In discussions over various ideas about political economy people bring a variety of notions and observations to the table. I try to look at history, data, and theory as they relate to events and the actions of individuals and groups. One of the mental models that I keep in mind in light of this is based upon the concept of complexity. A comment on this post made me think about it again:
Unsupervised markets always crash.
That is not a particularly shocking observation to my mind. The implication might be that supervised markets don't crash. My thought is that they just take longer to get to a point of criticality. Complex systems tend to exhibit a behavior called self-organized criticality.

Ming the Mechanic offers this:
We might over-simplify things for our purposes and say that there are three kinds of states of a system:

- equilibrium
- criticality
- chaos

If you poke at a system that is in equilibrium, nothing much happens. Or, if something happens to it, it would tend to go back to the same state as before.

If you poke at a system that is in chaos, something random will happen. If you poke at a system that's bordering on chaos, obviously something very random and chaotic might happen.

If you poke at a system that is complex, in particular one that is self-organized criticality, something is likely to happen. Probably something small, but maybe something big.

Despite that we've talked about avalanches and earthquakes, it should be stressed that the critical state is not chaos. It is not just some random catastrophe. It is ordered, although not in a way that's very transparent to us humans.

The critical state is also robust. It is always on the edge, but the edge is stable, although changing.

That might be hard to wrap one's mind around. Think about a wave in the ocean. It is neither in equilibrium nor is it chaotic. It is critical. It is the edge. There are small waves and big waves. They're all connected. If you watch a particular wave, it is moving, but it remains coherent as a wave, at least until it eventually crashes on the beach. If you're a surfer, you can catch a good wave and ride on it. When you're done with it, you can catch another. Waves are not random, they don't just come out of nowhere. You might not understand exactly how a wave came about, but you can learn to have a sense of whether one is coming, and you can catch it.

Social networks seem to self-organize towards criticality. They follow power laws. There are many small events and few big events. All sorts of frequencies are mixed together. There's a relatively pleasing pink noise. The network dynamically self-organizes itself into the most efficient state it could, without anybody being in charge. Many relationships have formed. The many actions of many individuals have woven a web of complexity. The network has over time become wound up in many ways.

So, in a complex social network, if you do something, something might happen. Something is more likely to happen than if all connections were random, or if it was neatly ordered in some very balanced way. Mostly small things happen, but there's an opportunity for big things to happen. You drop a message to somebody else, and if it is the right kind of message at the right time, the network is ready to allow a chain reaction to happen. Millions of people might be talking about it tomorrow. No guarantees, but the network is ready for you.

We ought to understand all of this better, of course. It seems to be a human tendency to try to fight against it. Central banks try to keep the economy in a perpetual equilibrium. Industrialized farming tries to grow just the crops we think we want, and nothing else. We try to organize things so that nothing bad ever happens. But we might at the same time be sabotaging the mechanisms that allow great things to happen.

We might need to learn to surf on the edge of the wave of complex change, rather than seek in vain the safety between the waves.
Technically, the region between equilibrium(very simple order) and chaos is called complexity and a point just before a major change is called critical, otherwise not a bad take.

Per Bak gives us this

There are reasons to suggest that socio-economic systems might organise themselves into a critical state with avalanches of change at all sizes via which dissipation mostly works itself out. This is a proposition to be tested but already statistical data like that found by Mandelbrot, Moss and Lux suggest that some variables change via avalanches of all sizes and that the power law distribution describes behaviour for some of these variables. Avalanches may serve, for instance, as a means of dissipation for the internal forces in markets.

A socio-economic system might become catastrophically unstable if the system were manipulated and forced to attain a certain optimal state interfering with its natural dissipation process. This has been observed in centrally controlled economies like that in Russia. However, it does not mean that any external control or influence generates this kind of 'negative' consequence. If an economy were a critically self-organised system, it might be controlled in such a way as to take advantages of its SOC properties. For example, it might be the case that in a weak economy (highly dependent on foreign markets), such as those in developing countries, some controls to protect the country from variations in the markets would help in changing towards or remaining on a 'good' development path. Better understanding of the dynamics of self-organised systems might allow to enhance those factors that minimise the number of large avalanches by channelling system dissipation through more frequent avalanches of small size.

FYI, Mandelbrot on finance , more and a good interview plus John Tierney gives mention.

We are quite likely dealing with an evolved system of fractal dimension in financial markets, the economy and the broader society. If so, rules, regulations and institutions oriented towards resilience and adaptation might serve better than those focused so intently just upon stability and they will need changes to keep up with an evolving world.

Tuesday, October 28, 2008

That's Worrisome

Art Laffer, known for the Laffer Curve, predicts The End of Prosperity:

About a year ago Stephen Moore, Peter Tanous and I set about writing a book about our vision for the future entitled "The End of Prosperity." Little did we know then how appropriate its release would be earlier this month.

Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness."

When markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses. [...]

Now enter the government and the prospects of a kinder and gentler economy. To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy. And the government doesn't create anything; it just redistributes. Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.

If you don't believe me, just watch how Congress and Barney Frank run the banks. If you thought they did a bad job running the post office, Amtrak, Fannie Mae, Freddie Mac and the military, just wait till you see what they'll do with Wall Street. [...]

Giving more money to people when they fail and taking more money away from people when they work doesn't increase work. And the stock market knows it.

The stock market is forward looking, reflecting the current value of future expected after-tax profits. An improving economy carries with it the prospects of enhanced profitability as well as higher employment, higher wages, more productivity and more output. Just look at the era beginning with President Reagan's tax cuts, Paul Volcker's sound money, and all the other pro-growth, supply-side policies. [...]

The stock market is obviously no fan of second-term George W. Bush, Nancy Pelosi, Harry Reid, Ben Bernanke, Barack Obama or John McCain, and again for good reasons.

These issues aren't Republican or Democrat, left or right, liberal or conservative. They are simply economics, and wish as you might, bad economics will sink any economy no matter how much they believe this time things are different. They aren't. [...]

There are many more examples [of disastrous government interventions], but none hold a candle to what's happening right now. Twenty-five years down the line, what this administration and Congress have done will be viewed in much the same light as what Herbert Hoover did in the years 1929 through 1932. Whenever people make decisions when they are panicked, the consequences are rarely pretty. We are now witnessing the end of prosperity.

Laffer is certainly partisan, presents oversimplified concepts, and has been ridiculed extensively. However, his actual predictions over his long career haven't always been all that far off. I hope this is one of his bad predictions, but I do agree that the government has made a big mistake meddling here, so I'm worried.

Thursday, October 23, 2008

Fooling Themselves

Arnold Kling on the financial Crisis:
Economists ought to admit that we do not know much about what is going on today. Neither do the Fed Chairman and the Treasury Secretary. Of course, the market demand is for "strong" leaders and for "strong" economists, who can fool the public into believing that they have great knowledge. The ones who do this best are those who have fooled themselves.
My guess is still that if the bailout "works" it probably wasn't needed. If it doesn't work - well, then it was a total waste of effort. But we'll never know and we have our "strong" leaders instead. Oh joy!

Plain old fun




bottom to top:

The right tools

Wealth Spread, "Made with 100% taxpayer sweat."

Obama Says Tire Pressure Is the Key to Energy Independence

3 little dandies!

Tuesday, October 21, 2008

Sometimes the mask slips

No thanks to the mainstream media, we are finally getting a sense of who Barack Obama is:
Strip away Obama's deep-timbred voice and his puffball platitudes, and what remains is nothing more than an academic radical using Chicago machine politics to grab a power base and using smoke-and-mirrors to project a pleasing image. The way to break through this "Obama Effect" is to focus on substance, and let the people decide.
The candidates response to Joe the plumber along with the sliming that followed were very revealing and are a slipping of the mask. Bret has made his attitude known.

Neoneocon calls Obama a soft socialist: see here

Bookworm has a piece at American Thinker in which she makes the point that it might be more instructive to divide ourselves on a continuum of Statists vs. Individualists rather than Liberals vs. Conservatives.

Obama, of course, would be a statist, of the “soft socialism” type. Look to Europe for the template. And look to the British or Canadian health care systems for a preview of just how well it works (hint: anyone with any money goes outside the system for treatment because of the unconscionable waits and the substandard care).

I think it’s even worse than that, however: I’ve noticed Obama showing signs of being at least somewhat simpatico with hard socialism, of the Hugo Chavez type. We don’t know for sure (and I sincerely hope I am incorrect!), because we don’t really know what Obama is made of inside. His record is sparse, but what we see of it is far more to the hard Left than his current rhetoric would indicate. His worrisome propensity for blocking speech that is critical of him is troubling. And of course there are his myriad associations with those whom Steve Diamond has termed the authoritarian Left.


Sol Stern delves into Ayers here
Calling Bill Ayers a school reformer is a bit like calling Joseph Stalin an agricultural reformer. (If you find the metaphor strained, consider that Walter Duranty, the infamous New York Times reporter covering the Soviet Union in the 1930s, did, in fact, depict Stalin as a great land reformer who created happy, productive collective farms.) For instance, at a November 2006 education forum in Caracas, Venezuela, with President Hugo Chávez at his side, Ayers proclaimed his support for “the profound educational reforms under way here in Venezuela under the leadership of President Chávez. We share the belief that education is the motor-force of revolution. . . . I look forward to seeing how you continue to overcome the failings of capitalist education as you seek to create something truly new and deeply humane.” Ayers concluded his speech by declaring that “Venezuela is poised to offer the world a new model of education—a humanizing and revolutionary model whose twin missions are enlightenment and liberation,” and then, as in days of old, raised his fist and chanted: “Viva Presidente Chávez! Viva la Revolucion Bolivariana! Hasta la Victoria Siempre!”

Melanie Phillips enlightens us further with this
The contrast between, on the one hand, the huge amount of material about Obama’s radical associations that has been published in on-line journals and in a few brave newspapers, and on the other the refusal by big media to address it and to vilify those who do, becomes more astounding by the day. The Obamaniacs are spinning the relationship between Obama and William Ayers, former of Weather Undergound Terrorism Inc, as of no consequence because this was supposedly a chance acquaintance and because the educational project they worked on, the Annenberg Challenge, was a worthy one.

Stanley Kurtz now nails that canard by showing how, through the Annenberg Challenge, Obama and Ayers channelled funds to extremist anti-American Afrocentric ‘educational’ programmes which were a carbon-copy of the world view of Pastor Jeremiah Wright, Obama’s black racist mentor who, under pressure, Obama was forced to repudiate. These programmes promoted, amongst other radical ideas, the ‘rites of passage’ philosophy which attempted to create a ‘virtually separate and intensely anti-American black social world’ in order to ‘counter the potentially detrimental effects of a Eurocentrically oriented society.’

As Kurtz wrote:

So it would appear that Obama’s own writings solve the mystery of why he stayed at Trinity for 20 years. Obama’s long-held and decidedly audacious hope has been to spread Wright’s radical spirit by linking it to a viable, left-leaning political program, with Obama himself at the center. The revolutionizing power of a politically awakened black church is not some side issue, or merely a personal matter, but has been the signature theme of Obama’s grand political strategy.


You have to pinch yourself – a Marxisant radical who all his life has been mentored by, sat at the feet of, worshipped with, befriended, endorsed the philosophy of, funded and been in turn funded, politically promoted and supported by a nexus comprising black power anti-white racists, Jew-haters, revolutionary Marxists, unrepentant former terrorists and Chicago mobsters, is on the verge of becoming President of the United States. And apparently it’s considered impolite to say so.

Obama is perhaps less embittered than the typical radical academic leftist. He certainly understands that a moderate front must be presented to the public to get elected to high office in America.

As comedian Yakov Smirnoff says, "what a country."

Fighting Against the Current

Economics is pretty complicated, but there are a few fundamental rules that are nearly universally true. One of those is that if you want less of something, tax it (or increase the taxes on it).

Therefore, if you increase the taxes on working, you will get less work (i.e., people will work fewer hours). If people work fewer hours, fewer goods and services will be produced. If fewer goods and services are produced, our country will be less wealthy overall.

Can a poorer country make the poor better off? It's at best tricky because you have to give the poor an even larger slice of the smaller pie to do that. It's like swimming upstream and fighting against the current. It may be possible to funnel enough of the limited extra taxes efficiently enough to the poor to make them better off, but it's a bad bet in my opinion.

A Three Letter Word

According to an article in the Boston Herald, "Sen. Biden ... recently told supporters that Obama’s highest priority “is a three-letter word: Jobs! J-O-B-S.”

Unfortunately, Biden may have the math right. If Obama gets elected, his policies might mean that the number of new jobs created may well be singular. There might only be one job created during his whole term: "Job! J-O-B," a three letter word, just like he said.

Sunday, October 19, 2008

Joe the Plumber

Nothing in politics has ever made me angrier than the MSM's treatment of Joe the Plumber after his recent conversation with Obama. In the past, I was taken aback by the attacks on Palin, but she, at least, is a public figure. I was even more taken aback by the massive attacks (many of which are untrue) on Palin's family, and I considered that to be beyond the pale since they aren't really public figures. But the attacks on Joe the Plumber represent a whole new level of Media malfeasance. They are a massive and unwarranted intrusion into the life of a private citizen that has dredged up a few minor skeletons in his closet that have the potential of to cause severe negative consequences for him.

It turns out that Joe doesn't have a plumber's license. I don't have a plumber's license either. I've done plumbing in my house and in friends' and neighbors' houses. I'm not sure whether or not my plumbing without a license was illegal, but it certainly shouldn't be. As of this writing, it's not clear whether or not Joe's plumbing without a license was illegal (since he was working for a licensed plumber), but it certainly shouldn't be.

The MSM managed to dredge up some other problems, and I can relate to all of them. He's had driver's license problems, I've had driver's problems (due to petty out-of-state bureaucrats jerking me around). He has a tax problem, I've been audited four times by the IRS (though I only ended up owing money once and that was for only a few hundred dollars). He may have overestimated the revenue of the plumbing company that he works for, I've been known to overestimate some revenue projections for my companies (as my investors are sometimes quick to note). What it comes down to is that I could not possibly withstand the severe media scrutiny that Joe has had to endure and my bet is that very few people could.

That's the first part of what makes me so angry: the MSM can ruin anybody's life if it wants to, and apparently it will if it suits its purpose. And it gets to decide if and when ruining lives suits its purpose.

The second part of what makes me angry is that Joe's background has no bearing on his conversation with Obama. That's because it's immaterial who asked Obama the questions. It doesn't matter if the private citizen who asked the questions has a plumbing license or has overestimated the revenue of the company he's currently working for during an impromptu conversation. The only news of importance is Obama's responses to those questions and his responses are his responses regardless of who asked the questions.

And what was wrong with Obama's responses? Is it really any surprise that Obama wants to "spread the wealth around?" That he wants to "make sure that everybody who is behind [Joe], that they've got a chance at success, too?" Indeed, wouldn't Obama's supporters, including the MSM, be unhappy if Obama didn't want to do those things? Doesn't it even seem like a rather nice exchange highlighting Obama's compassion for the little guy?

So why destroy Joe? I've seen few theories that make any sense to me. The only one that makes some sense to me and fits some of the facts is the scariest: the MSM was hoping to hide Obama's true beliefs until after the election, making him a blank slate upon which each individual voter would project his or her own beliefs such that they would trust and then vote for Obama; Joe, because of his innocent questions, elicited one of the few defining responses ever from Obama; As a result, at least some potential swing voters might vote against Obama because there is now something written on the previously blank slate that they don't like; So the MSM, instead of trying to inform the public, has instead tried to keep information from the public and are livid that Joe the Plumber has ruined their plans by writing on Obama's blank slate and are taking revenge.

I hope that's not it, but whatever the reason, the fear of being raked over the coals like Joe the Plumber is not going to help public discourse in this democracy of ours.

Thursday, October 16, 2008

Bernanke's an Idiot

Deflation in August, no inflation in September.

He's not injecting liquidity nearly fast enough.

Wednesday, October 15, 2008

John Galt

Dr. Helen (who's Instapundit's wife) asks:

Do you ever wonder after dealing with all that is going on with the economy and the upcoming election if it’s getting to be time to “go John Galt”? For those of you who have never read Ayn Rand’s Atlas Shrugged, the basic theme is that John Galt and his allies take actions that include withdrawing their talents, “stopping the motor of the world,” and leading the “strikers” (those who refuse to be exploited) against the “looters” (the exploiters, backed by the government).
I don't think that there's any need for a "John Galt" to lead the productive to "strike". Individuals will review their situations and make decisions to cut back or stop working altogether depending on Obama's new tax and regulatory regimes and their own personal preferences and needs. The result may look like a John Galt organized them, but it will instead be a great example of Adam Smith's "Invisible Finger"1 (the middle one, of course) causing such people to self organize into a group that decides that it's no longer worth their while to work as much any more.

Also, even though I am personally fairly likely to close down my business and stop working if and when Obama's new taxes take effect, I don't see any benefit whatsoever to trying to convince others to do so. The more productive others are, the better off I am. If they want to continue to work hard and don't mind the high taxes so much, why would I possibly want to discourage them? Indeed, after I close my business, I'll be pretty poor and will greatly enjoy the goods and services and handouts that they make possible.

Notes:
1 My co-blogger Howard alerted me to the phrase "Invisible Middle Finger".

Sunday, October 12, 2008

My Confidence is Shaken

In a post last month, I wrote, "I'm confident that the country will survive just fine regardless of who's elected."

However, after doing a little bit of research1, I'm not so confident about that anymore. There are a number of things that I find disconcerting about Obama's background. There are also gaps in the record, or blank areas (and I also find that disconcerting).

The bottom line is that many of Obama's past supporters were radical socialists and/or anti-American activists and seemed to think that Obama was one of them. While there is no proof (as far as I can tell) that Obama was (or is) in fact a radical socialist and/or anti-American activist, there is also no proof that he was not, and I think that's a problem.

Usually, I would give the benefit of the doubt to a candidate. After all, it's quite difficult to get anywhere in politics without being exposed to some unsavory characters. Corruption and greed run rampant in all political systems. Corruption and greed I can handle. Hypocrisy? No big deal, especially when it's clearly just to win an election.

Radical ideologies and anti-Americanism? Those worry me. In the wrong hands, those characteristics have the potential to inflict a tremendous amount of damage. The president of the United States certainly qualifies as having the wrong hands to be trusted with such characteristics.

There are three associations in particular that I find disconcerting. None of the three is enough in itself, in my opinion, to reject Obama. But taken together, I'm worried.

First is the Rev. Jeremiah Wright. The following is an excerpt from ABC News in March, 2008 regarding Wright and Obama:

Sen. Barack Obama's pastor says blacks should not sing "God Bless America" but "God damn America."

The Rev. Jeremiah Wright, Obama's pastor for the last 20 years at the Trinity United Church of Christ on Chicago's south side, has a long history of what even Obama's campaign aides concede is "inflammatory rhetoric," including the assertion that the United States brought on the 9/11 attacks with its own "terrorism."

In a campaign appearance earlier this month, Sen. Obama said, "I don't think my church is actually particularly controversial." [...]

Rev. Wright married Obama and his wife Michelle, baptized their two daughters and is credited by Obama for the title of his book, "The Audacity of Hope."

Obama belonged to Wright's church for many years and was impressed enough with Wright that he used material from Wright's sermons as the title for one of his books. In addition, Obama doesn't think that the church was "particularly controversial."

Many of the articles written about Wright seem to dismiss him as a bit of a kook. In other words, they admit he has said some "controversial" things, but that's only because he's a little bit nutty.

But that explanation, I believe, is clearly wrong. Wright's church preaches Black Liberation Theology which is completely compatible with what Wright has preached according to numerous criticisms:
Theologians such as theology scholar Dr. Robert A. Morley take a dim view of black theology. Morley's paper "The Goals Of Black Liberal Theology" is one widely quoted paper citing specific criticisms of black theology. He states that black theology turns religion into sociology, and Jesus into a black Marxist rebel. [...]

Anthony Bradley of the Christian Post interprets that the language of "economic parity" and references to "mal-distribution" as nothing more than channeling the views of Karl Marx.

He believes James Cone and Cornel West have worked to incorporate Marxist thought into the black church, forming an ethical framework predicated on a system of oppressor class versus a victim much like Marxism.[23]

Stanley Kurtz of the National Review criticizes black liberation theology, saying, "A scarcely concealed, Marxist-inspired indictment of American capitalism pervades contemporary 'black-liberation theology'...The black intellectual's goal, says Cone, is to "aid in the destruction of America as he knows it." Such destruction requires both black anger and white guilt. The black-power theologian's goal is to tell the story of American oppression so powerfully and precisely that white men will "tremble, curse, and go mad, because they will be drenched with the filth of their evil."
In other words, Obama belonged to a church for many years that was essentially Marxist and which Obama did not find controversial.

The New Party, an offshoot of the Democratic Socialists of America, claimed Obama as one of their candidates in 1996, only 12 years ago, and worked actively to help him get elected. The following is an excerpt from a 1996 New Party Internet Newsletter2:
Illinois: Three NP-members won Democratic primaries last Spring and face off against Republican opponents on election day: Danny Davis (U.S. House), Barack Obama (State Senate) and Patricia Martin (Cook County Judiciary).
Here is an excerpt from a Democratic Socialists of America newsletter from the same year:
Barack Obama, victor in the 13th State Senate District, encouraged NPers to join in his task forces on Voter Education and Voter Registration.
Obama may not have considered himself a member of either the Democratic Socialists of America or of its offshoot, the New Party, but they sure considered that he was one of them and were quite happy that he won the election. In other words, they thought he was a socialist, and Obama has not repudiated those alliances. Once again, in and of itself, it's no big deal. As part of pattern, I think it should be taken more seriously.

Then there Obama's relationship with Bill Ayers and his wife Bernardine Dohrn, leaders of the violent, far left, anti-American group, The Weather Underground. This group is so well known, and so visciously evil, that I find it well beyond the pale for anyone to have even a casual relationship with leaders of such a group. If political expediency absolutely requires it, then you need to thoroughly condemn the actions and beliefs of such people whenever the subject comes up. Obama has not done that.

Just a few statements and actions by these people that I think are the most appalling:
"Dig it! First they killed those pigs and then they put a fork in their bellies. Wild!" Bernardine Dohrn regarding the Charles Manson led Tate-LaBianca murders in 1969.
"Kill all the rich people. Break up their cars and apartments. Bring the revolution home, kill your parents — that's where it's really at." Bill Ayers describing the Weather Underground's philosophy in 1969.
"Guilty as hell, free as a bird—America is a great country." Bill Ayers after government misconduct caused the case against him to be dismissed in 1980.
The last statement is indicative of how little responsibility he felt for his actions and his complete lack of contrition and regret. He and his group waged war against the United States and are proud of it. Obama's response to all this? None, other than Ayers was just a guy in the neighborhood.

The extent of Obama's relationship with Ayers and Dohrn is unclear, but at a minimum (according to the NY Times):
Their paths have crossed sporadically since then, at a coffee Mr. Ayers hosted for Mr. Obama’s first run for office, on the schools project and a charitable board, and in casual encounters as Hyde Park neighbors.
While the crossing of their paths may have been sporadic, I believe their paths crossed numerous times. According to Victor David Hanson:

He [Obama] did not just know a Wright or Rezko, but knew them quite well for quite a long time. And in the case of Ayers, Obama has sorely misled: he apparently still emailed and communicated with him after 9/11, when Ayers, on his Fugitive Justice book tour, grandly announced that he regretted only that he had not bombed enough. At that point any further communication was indefensible, since the New York Times had widely circulated Ayers’ views. Yet Obama was emailing him at least until 2005!

The problem with these associations is not necessarily the associations themselves. It's a combination of the pattern and pervasiveness of the associations coupled with the fact that Obama has not made it clear that he doesn't agree with those associates. Any repudiation of his associates' viewpoints has come late and under severe pressure for him to do so and has been quite mild.

While I have not taken strong sides in past elections, I believe that Obama is by far the most radical left-wing socialist candidate for President (from a serious political party) that this country has ever seen and with the support of one of the more left-wing Congresses that we've had in quite some time, could actually spell disaster for this country.

I sure hope I'm wrong. Looks like we'll find out.

Notes:
1 Unlike the MSM, I haven't done a great deal of fact checking so any of the claims in the post could be completely wrong - do your own damn fact checking!
2 The page isn't still available on the New Party website but has been archived by archive.org.

Saturday, October 11, 2008

Wait and See

The likelihood of Obama becoming president is inversely correlated with the price of the S&P 500 stock market index. The correlation coefficient is only about -0.4, which isn't a particularly strong correlation, and correlation certainly doesn't prove causation. However, I believe that the correlation is valid and I believe there is a mechanism for causation. In other words, I believe that the increasing likelihood of Obama becoming president is a cause for the cratering of the stock market that we are currently experiencing.

It seems clear that the drop in the stock market has been at least partially caused by the credit contraction, which has been at least partially caused by the mortgage securities problem, which has been at least partially caused by falling house prices. This is a train wreck that's been waiting to happen for more than a decade. The questions are why now, and why so severe?

My answers to those questions are based on my observations and my observations are based on my perspective. My perspective is that of an entrepreneur/businessman/technologist who has co-founded companies that have created jobs for and employed 100+ people over the last 25+ years.

Starting and running businesses is risky. Indeed, I would personally have been far, far better off if I had just taken a job that someone else created rather than building these companies.

The potential for change increases risk. The riskiest point in the political cycle is when there will be a change in administration and the new administration's political affiliation is likely to align with the party that controls Congress. This is further exacerbated (from my point of view) when the incoming Administration's mantra is "Change" and that change is promised to be higher taxes and more regulation, both of which increase the risk to businesses.

As a result, I personally have stopped investing in my company for several months now. I have stopped trying to grow the business. I have stopped trying to hire people. I'm now in a "wait and see" mode. The pain of growing and hiring new people only to have to retrench and lay them off is very, very painful and not something I'm willing to do except as a very last resort.

I hang out with other entrepreneurs1 and they tell me they're in the same boat. Let's wait and see, let's just wait and see.

Well, you don't really need all that many employers waiting and seeing before it has an adverse effect on at least parts of the economy. I think the housing markets softness was exacerbated by the softer job market which was exacerbated by waiting and seeing. The credit crunch and stock market drops are also exacerbated by waiting and seeing.

So I do think that Obama's successful candidacy has contributed to the precipitation and depth of the stock market plunge. Once elected, things will likely stabilize, since the waiting and seeing part will be over and I, and others, will reformulate our strategies based on the new rules of the game. Obama will then, of course, get credit for stabilizing the economy, in what I will consider to be the greatest irony of all.

Notes:
1 Though I'm not actually a CEO, just a business owner who hired a CEO to take care of all the administrative BS that I don't like to do anyway, it looks like a solid majority of CEOs feel the way I and the other entrepreneurs that I know do about the election

Friday, October 10, 2008

A Competent Response

There's been a lot of discussion lately about FDR and whether or not his policies prolonged the depression.

But whether or not his policies helped or hurt, my opinion is that his response was very, very competent. There is no doubt that his policies achieved the following:
1. He made himself far more powerful;
2. He made his party far more powerful (they controlled the country for generations); and
3. He made government far more powerful.

These are signs of a very, very competent politician.

Prolonging the economic misery of tens of millions of Americans, laying part of the groundwork that precipitated a world war that killed tens of millions and laid two continents to waste, and stifling the economic development of the United States for generations seems a small price to pay for the political accomplishments listed above.

To those who are wishing that the next Administration responds "competently" to the economic situation, I say, "Be very careful what you wish for!"

Tuesday, October 07, 2008

Not that far from the Truth

Paulson to Congress: You’re Mine Now, Suckas

It's funny because it's frighteningly close to reality. Do not drink hot liquids while reading it.

Fuel to the Fire

The intrade.com odds of Obama becoming President is inversely correlated (-.4) with the stock market. In other words, as it has becoming more likely that Obama will be President, the stock market has done worse and worse.

The common narrative on the stock market is that plummeting housing prices triggered a financial crisis which has pummeled the stock markets. Therefore, plummeting housing prices are the root cause.

But I think that the root cause is deeper.

As a businessman/entrepreneur who is running a small robotics technology company, I can tell you that for the last two years, with Pelosi and Reid running congress, and the increasing likelihood of a far left President, I've been very hesitant at pursuing any expansion plans given the additional taxes and regulations that are going to be imposed on businesses during the coming administration(s). I know that many of my associates who run other businesses feel the same way.

The result is reduced investment, reduced expansion, reduced hiring, reduced employment, and reduced wealth creation. Reduced wealth means that most assets like houses are going to have lower prices. That is the root cause of the plummeting housing prices which has caused the financial turmoil.

The great irony is that once Obama finally takes office, the damage will already be complete. The anticipated taxes and regulations will be put in place and the economy will resume growth (though at a slower rate and from a lower level) and Obama will be given credit for "fixing" the economy and Bush will continue to be vilified for having mismanaged it and most of us will learn the wrong lessons and make the same bad decisions in the future.

Thursday, October 02, 2008

Oroborous Wins!

Oroborous and I made a bet in September, 2007. I bet that the SP500 wouldn't close below 1131 between then and the end of September, 2008. That price was picked as the level that would demarcate random market fluctuations (my side of the bet) from the prediction that the market price in September, 2007 was predictably overpriced because of falling housing prices and mortgage problems (the side of the bet Oroborous signed up to).

Well, the price did close below 1131 on September 29, 2008, with less than 30 hours left in the bet. While that was a close call, I'll certainly admit that much of the price action is due to housing and mortgage related issues, so Oroborous won both the spirit and letter of the bet.

I now owe Oroborous up to $100 of books, CDs, or DVDs.

Oroborous, please leave your email in the comments so we can make arrangements.