akota

baseball really is life

In last Friday's New York Times, an unlikely trio authored an op-ed on health policy: Senator John Kerry, former Speaker of the House Next Gingrich, and General Manager of the Oakland A's Billy Beane. Some excerpts:

In the past decade, baseball has experienced a data-driven information revolution. Numbers-crunchers now routinely use statistics to put better teams on the field for less money. Our overpriced, underperforming health care system needs a similar revolution.
. . .
Look at what’s happened in baseball. For decades, executives, managers and scouts built their teams and managed games based on their personal experiences and a handful of dubious statistics. This romantic approach has been replaced with a statistics-based creed called sabermetrics.
. . .
Similarly, a health care system that is driven by robust comparative clinical evidence will save lives and money. . . . Evidence-based health care would not strip doctors of their decision-making authority nor replace their expertise. Instead, data and evidence should complement a lifetime of experience, so that doctors can deliver the best quality care at the lowest possible cost.

universal suffrage

From The National Review here is Lisa Schiffen:

Letting the Homeless Vote

Try as I might, I cannot really understand how even a minimum standard of voting security can be maintained when, as an Ohio judge did yesterday, you decide to let the homeless vote. If there is no address — how do you check whether  someone has voted before or whether they are using a real name? I get that the judge is attempting to enable fraud on behalf of his campaign — but how does this pass even a minimum test of reasonableness?

I feel sick.  Citizens have the right to vote, homeless or not.  You don't decide whether or not they vote.  If you are seriously concerned about voting security here are some problems to actually worry about:

• The Vote Grab: Voting Machines Are Unreliable And Inaccurate
• Ohio Voting Machines Contained Programming Error That Dropped Vote
• Some solutions here: CalTech/MIT Voting Technology Project

the long haul

How is the Dow Jones Industrial Average doing? The average annual return over the last 50 years is 7.8%. The return over the last twenty years has been 7.5% (investing in Nov. 1988 and selling today).  Even if you take the worst case, investing before the crash of 1987 (buying high) and selling everything at the bottom of the current financial crisis (selling low), your average annual return would have been 5.1%. So, the long haul tends to work out.  Not great when you factor in inflation, but maybe not the tragic situation portrayed on the news.

On the other hand, the 1, 5, and 10 year returns are terrible: -35%, -1.6%, and 0.5%. FYI, if you had bought right after the crash of 1987 and sold at the peak of the market last October, your average annual return would have been 11.5%.

coupon clipper

You learn something new everyday. Nowadays you hear "coupon clipper" and you think of the frugal and the diligent who actually make use of the mass of free money stuffed into the Sunday paper.  It turns out that "coupon clipper" used to refer to a completely different kind of person.  More than a hundred years ago, coupon clipper meant a wealthy bond holder.

Corporate and government bonds used to be issued with coupons that represented interest payments.  As each interest payment came due, you would get your interest by tearing off the coupon and turning it in to collect your money.  So, coupon clippers were rich, people with a guaranteed income stream.  Following similar logic, a zero-coupon bond is one which doesn't get you periodic interest payments.

I would have thought that clipping coupons was a pretty safe way to make money, but it doesn't always turn out that way.

What Colin Powell Is Really Thinking

Here is the transcript of Colin Powell's endorsement of Sen. Obama that hasn't gotten the same media attention:

GEN. POWELL: I feel strongly about this particular point because of a picture I saw in a magazine.  It was a photo essay about troops who are serving in Iraq and Afghanistan.  And one picture at the tail end of this photo essay was of a mother in Arlington Cemetery, . . . [A]s the picture focused in, you could see the writing on the headstone.  And it gave his awards--Purple Heart, Bronze Star--showed that he died in Iraq, gave his date of birth, date of death.  He was 20 years old. And then, at the very top of the headstone . . . it had crescent and a star of the Islamic faith.  And his name was Kareem Rashad Sultan Khan, and he was an American. He was born in New Jersey.  . . . [A]nd he gave his life.  Now, we have got to stop polarizing ourself . . . .  And John McCain is as nondiscriminatory as anyone I know.  But I'm troubled about the fact that, within the party, we have these kinds of expressions.

He sounded presidential.  I bet he regrets not running for president in 2000. Here's more:

beatdown on Wall Street

The Telegraph reports on retribution for the CEO of Lehman:

Richard Fuld,CEO of Lehman  "went to the gym after ... Lehman was announced as going under." "He was on a treadmill with a heart monitor on. Someone was in the corner, pumping iron and he walked over and he knocked him out cold.

And no one saw a thing.

the best tom friedman takedown ever

Chris Floyd, in response to Friedman's column in late 2006 calling for more troops in Iraq:

Ah, but wise old Tom has a proposal to settle this problem . . . that we "re-invade" Iraq with 150,000 more troops...and this time really do a number on those recalcitrant tribes . . . , do whatever "is necessary to crush the dark forces in Iraq" and pound some sense into them, or at least some obedience, with our big "iron fist." Nowadays, of course, we hollow men, headpieces filled with straw, obviously lack the will to power. . . . In fact, who can forget Tom's giddy cheerleading for the Clinton-Blair air war against the civilian population of Serbia? Who can forget when he wrote: "Let's at least have a real war. It should be lights out in Belgrade: every power grid, water pipe, bridge, road and war-related factory has to be targeted. . . ." In a column the year before, as Friedman called for "bombing Iraq, over and over and over again." This, ladies and gentleman, is what passes for Establishment thought on the most respected newspaper in the land.

And the punchline:

This complete and utter moral perversion -- like unto an act of sexual congress with the beasts of the field -- is now the conventional wisdom of the chattering classes, the "public intellectuals," and the powerful elites whom they so cravenly serve. This blood-flecked drivel -- a precise echo of the genocidal fury being voiced on what once was once considered the lunatic fringes of the far right -- is now at the heart of American political life.

the magic wall

CNN's magic wall has been around for a while, but I saw it again last week and wondered who it made it. Here is a clip:

It looks a lot like Microsoft's Surface, but it is actually from Perceptive Pixel, a spinoff from NYU. Here is an article about the technology: Broadcast Engineering.

Understanding the Securitization of Subprime Mortgage Credit

Understanding the Securitization of Subprime Mortgage Credit by Adam Ashcraft and Til Schuerrmann explains it all. They conclude that 7 frictions in the flow of information caused our problems. Here is a quick summary of those information flow problems:

1. Predatory lending: mortgage brokers hide/obscure bad terms to sell the mortgage and make more money
2. Predatory borrowing: borrowers misrepresent themselves (credit rating, income, employment, etc.) to get bigger loans and flip bigger houses
3. Adverse selection (of mortgages for securitization): the worst mortgages make it into the pools of mortgages that are resold to investors
4. Moral hazard (for the homeowner): the might slack on maintenance and insurance since he doesn't own the house, it is expensive for the lender-side to monitor
5. Moral hazard (for the servicer ): the servicer (company that collects mortgage payments for the lender side) knows the most about when foreclosure is a good idea, but delays foreclosing to keep collecting fees
6. Principal-agent problem (between investors and money manager): money managers choose overly risky mortgage-backed securities for their clients' portfolios
7. Conflict of interest: credit rating agencies underreport the riskiness of the mortgage-backed securities because they are paid by the seller of the security

the tax man in the shadows

Included in the bailout bill (Section 401 of H.R. 1424):

SEC. 401. PERMANENT AUTHORITY FOR UNDERCOVER OPERATIONS.

Awesome. The IRS will now have permanent authority to conduct undercover operations "necessary for the detection and prosecution of offenses under the internal revenue laws."  This program was originally experimental and authority for it expired in January.  See Secction 7608(c) of the Internal Revenue Code. The IRS now has the authority "to establish or to acquire proprietary corporations or business entities as part of the undercover operation, and to operate such corporations or business entities on a commercial basis."  You never know, your friendly tax adviser might be a Fed.