Wednesday, January 30, 2008

Virtual Reality Could Reduce Academic Elitism

I see a BusinessWeek article about virtual workplaces in the classroom. The concept is that business school students are now able to try their hand at solving real-world business problems in a virtual reality context. Eventually, someone may decide to permit students from multiple business schools to address the same problems at the same time. Suddenly, it would not matter whether you were attending business school at Harvard or at some lowly state university: you would have equal access and equal opportunity to demonstrate your capabilities. What can be done at business school can be done elsewhere. It should be possible for political science students to address real-world political problems. And what can be done in a virtual context can also be done in a real context. Those business problems and political problems need not be something that a professor dreams up. They can be posted by real people, growing rice in Southeast Asia or handling a civil war in Africa. It is not that students at Harvard or other elite universities would not continue to shine. I'm sure they would. Some of them, anyway. Some surely would not. The real point is that those who never made it to Harvard -- who, ultimately, may not be enrolled in any university at all -- may have an opportunity not merely to earn brownie points, but actually to build their resumes by racking up a string of suggested solutions, some of which might be implemented, achieve success, and receive kudos from the grateful poser of the original problem.

Monday, January 28, 2008

Ceding Sovereignty

It is conceivable that the debts of the United States government will exceed its ability to repay. What then? The news is filled with microworlds in which the U.S. government is expected to come up with billions, sometimes hundreds of billions, and even trillions, of dollars. The Iraq war, the health care system, Baby Boomers' retirements, a one-time tax rebate to get the economy rolling, and, most recently, the prospect of having to bail out a major failing bank -- these are the levels of financial challenges now confronting the U.S. Treasury. Federal insolvency is not at all a foregone conclusion. This is merely a speculative, what-if? piece. Sovereign wealth funds have jumped in to infuse cash into needy banks. They may continue to buy up failing enterprises in the U.S., reducing somewhat the burden on the Treasury. In that event, the answer to the question is that the debts of the U.S. government did not exceed its ability to repay because other nations took advantage of the opportunity to gain control of important parts of the U.S. economy at a great price, buying when we were desperate for buyers. If federal insolvency does occur, it may be because the pieces that were left over, that no foreign buyers wanted to bid on, were things that offered no chance of profit. Health care and eldercare would be possible examples. In the worst case, with no supply of funds, the payments would simply stop, and people would die, as they do in other countries whose economies function on the level toward which ours sometimes seems to be heading. The trick for the next president, or possibly for this one if things develop swiftly, may be to sell troubled assets as quickly as possible to foreign bidders, so that the U.S. Treasury itself does not have to spend any more than necessary on such things -- so that it can instead continue to make payments on the things that nobody else will pay.

Saturday, January 26, 2008

Early Bet: It's Obama

South Carolina's Democrats vote today. Both Hillary and Barack are playing politics as usual. But I think Hillary has more to lose. It is not in her interest to have Bill so prominent, nor to be so divisive and negative. On both counts, she reminds voters of the 1990s. That is probably intentional. Many Democrats, myself included, think Bill Clinton was a very competent president. But the prospect of taking the nation back in the direction of old-school politics is not appealing. I wish Barack had Hillary's experience and poise. But even as he is, he stands more clearly for change, and that's going to resonate, in South Carolina and beyond. My early bet is that the Clintons' behavior, in New Hampshire and South Carolina, will ultimately be a weight upon them, and that Barack will come out the Democratic party nominee. I think the nation might be better off with a choice between two heavyweights -- Hillary and John McCain -- in November. But I fear it may well be an entirely different and, in some ways, less promising choice between Obama and Romney.

Friday, January 25, 2008

China: Reduce Inflation by Dumping Dollars?

The Chinese government is worried about inflation in its overheated economy. I noticed someone's remark, the other day, that China would welcome a slowdown in the U.S., because that would reduce American demand for Chinese goods, giving the Chinese authorities a better chance to stabilize their economy. China is a heavy subsidizer of the U.S. government's budget deficits. If China invested less in American government bonds, the U.S. government would have to offer higher rates of interest in order to attract lenders who would continue to subsidize its deficits. It seems like those higher interest rates would compete with other would-be borrowers (e.g., American corporations). Also, higher borrowing costs would increase pressure on the U.S. government to lower its spending. In both of those ways, a Chinese departure from the dollar would seemingly facilitate the sort of U.S. economic slowdown that China is said to prefer at this point. I don't know if I have all those things right, and I also don't know if those steps will actually occur. A separate point is simply that it is now conceivable that, as one would expect, a big lender (e.g., China) eventually becomes able to manipulate the options and circumstances of its borrower (e.g., the U.S.). Such things have happened in the past -- with e.g., the Arab oil embargo of 1973-74. But the ability to influence the rate of interest that the U.S. government must pay nonetheless does seem to be a different kind of event.

Tuesday, January 22, 2008

Recession: Acceleration at the Top

On the subject of recession, envision two models of shifting views. In the first model, belief that a recession may occur grows linearly. Last week, 40% of economists (or whoever) believed that we would have a recession. This week, it's 50%. Next week, it will be 60%. That, I think, is an unlikely model. The alternative, I suggest, is a logarithmic or accelerating model. The acceleration occurs because recession means fear and pain. One might expect a similar acceleration in predictions about any undesirable but increasingly probable development. In this acceleration model, people initially resist believing in the negative outcome. The positive was good for them, and they want it to continue. So instead of ratcheting up by 10% per week, as perhaps it should, the opinions of economists (or whoever) initially increase by only 5%. Last week, 40% of economists publicly admitted that we were approaching a recession; this week, 45% of economists did so (even though the facts were such as to support that finding by a full 50%). It is like a rollercoaster. You do not just go directly into a 45-degree drop. First, once everyone is on the train, you roll out of the station. You screw around for a while -- up, down, up, down. Nothing major. Finally, you come to the big drop-off. But it does not happen all at once. There is a gradually steepening curve. You know what comes next. It is really scary, and there is no way on Earth to stop it. But you are not yet prepared to embrace it; and for a few seconds, the rollercoaster does not actually force you to embrace it. You are going down -- soon, but not for another fraction of a second. There is still time to hope, and to fear. That's Part I. Next, you do go over the cliff. You are indeed plunging downwards at a 45-degree angle. But it feels like 75 degrees. You're moving like a bat out of hell. You feel like you are going straight down. So now the economists are fully focused. We are into a recession: it will be a bad one, we don't know when it will end, etc. Now, instead of an increase from 50% of economists this week to a tally of 60% next week, the pace picks up. Now everybody is a believer. You go from 50% in one week to 75% in the next week. This is what panics are all about. People sell when they actually might not need to sell. The bottom might come soon. Or it might not; we really have no idea. The point here is simply that opinions change at an accelerating pace, not a linear one.

Monday, January 21, 2008

China and Australia: Two Scenarios

You have a large, largely empty, resource-rich, predominantly Anglo land down under. And you have two interested parties who would like to get their hands on it. In one corner, we have the defending champion, the U.S., whose primary claim may be cultural or racial. In the other corner, we have the challenger, China, whose primary claims may be that it wants and needs the resources and the space, it is willing to pay for them, it is a next-door neighbor (relatively speaking), and (in the future) that it is militarily better positioned to take it. In one scenario, China flexes its muscles in ways that worry people. Last year's bit about knocking down a satellite -- a direct threat to the U.S. -- is an example. Enough examples like that, and it won't just be an Anglo-Aussie coalition; it'll be Russo-Anglo-Aussie. (And let's not forget the anglophone Indians.) Then China really will have to fight for Australia, and it may be hard-pressed to succeed. In another scenario, China proceeds gently. Continue putting highly educated Chinese people in various places throughout the anglophone world; continue making appreciated purchases of resources (and also of companies) in the U.S. and Australia; continue letting Chinese people be welcomed as friends in Australia. And meanwhile, continue bringing China into the modern world, with enhanced rights for its people, growing awareness of rights violations, and other quietly woven threads of restraint around its oligarchs. Then Australia is not alarmed, the U.S. is not shocked into confrontation, and the ties between the lands of the koala and the panda grow naturally. In a generation, it will seem odd that the Australians would ever have contemplated an essentially anti-China economic (never mind military) coalition with the U.S. Can the second scenario be the primary one? I'd put the odds at somewhat less than 50%.

Friday, January 18, 2008

How to Know When a Bear Market Is Ending

The most prescient time to think bearishly of the stock market was when everything was perfect and it seemed the sky was the limit. The sky is almost never the limit. If stocks are priced on a bedrock-to-sky scale, they will be overpriced when Heaven predictably fails to embrace Earth. Another good time to go bearish was last week, when some commentators were observing that things seemed to be leveling off, and that the stock market was expected to go up in the second half of the year. Predicting the stock market six to twelve months ahead is like predicting your income from a job that you haven't even thought of applying for yet. That was a good time to go bearish because of the logic. Things are leveling off now; things will improve six months from now. What happens between now and then? Are we just going to sit it out and then start up again in July? That was the voice of hope. For a moment, I listened to it. Then I recognized the tone of plaintive hope. "It looks like we're going to die now; but if we can just not die, then we will live, and things will be much better for us." Agreed. If! The curve of pessimism now begins to verge over the rollercoaster cliff. We are looking more sharply downward at this moment. Some experts begin to note that, actually, we do not know where the bottom might be, but we do seem to be picking up speed. There is hope that Congress and the White House will think of something. They might. But what I hear from that quarter is an uncertain trumpet. Act fast (as if they would be likely to) and do the right thing (even though there is significant disagreement on what that might be) and things will not be as bad as they might be otherwise. Or perhaps they will be just as bad or worse, but not as quickly. According to Wikipedia, "Causes of the Great Depression are still a matter of active debate among economists." If all these brilliant people, analyzing a single topic for the better part of a century, are still not sure what went wrong, then it does seem a bit optimistic to assume that economists now have a pretty clear idea of what needs to happen, much less that politicians will get it and will act effectively on it. If we avoid a Great Depression this time, it will probably be because the economy still retains a fundamental soundness that cannot be suppressed by a deluge of bad news. And if we go into another Great Depression, my own guess is that it will be because too many key elements of our economy, and of its governance, were corrupted or impaired by laziness, greed, misunderstanding, and all the other elements that typically combine to create catastrophes. Most likely, the die is already cast. Our policymakers are tinkering (or at least talking about tinkering) with various aspects of the situation. Their choices will have real impacts. But there is some chance that they cannot and/or will not make the right adjustments, and that we will spend a period of years going to the basement and painfully reconstructing the foundations of a working economy. Great things can be built during depressions. The Empire State Building is an example. Shared hardship can forge bonds. It can lay the groundwork for a determined generation, as it may have done for the cohort of my parents, Tom Brokaw's "Greatest Generation." But people will get sick and die, things that cannot be maintained will fall apart, and bad guys who were kept in check during rich times may discover openings that did not exist previously. Hitler, for example, employed Germans' poverty to be elected to national leadership in 1933. World War II is commonly understood to have been the cure for the Great Depression. The productive efforts of millions of people, combined to make a great war machine, got the American economy going as all of FDR's plans and schemes could not. But it is unlikely that we will soon face another opportunity to build millions of guns, tanks, and other weapons and the accompanying mountains of supplies. America is not in the mood for more war right now. Depressions do not always end. Sometimes empires fade. It happened with Rome and Persia. It can happen to us. We are on the right track for that. We have one proposal after another that speaks of obligations in the hundreds of billions (and in some cases trillions) of dollars: Iraq, New Orleans, national infrastructure, massive housing foreclosures, and so forth. That is not sustainable financing. Possibly the way out of a Great Depression would be for the population to experience, once again, the shared hardship of deprivation, over a period of years, followed by a shock to the national consciousness. Such events could forge another cohort like that in which my parents came of age, combining in Tom Brokaw's so-called "Greatest Generation." Shrewd leaders abroad, contemplating such a prospect, may consider it wise to let the U.S. retain its belief in its specialness: do nothing that would radically motivate this or future generations of Americans; encourage their preoccupation with unrealistic impressions of themselves; and let them slip quietly, over the decades, into a background role befitting their foolish expenditures and weak educations. (Such thinking may not appeal to Islamic fundamentalist leaders, for whom America is best prodded and poked until it retaliates in such a way as to encourage recruitment for the cause. But that is another issue.) This seems to be the present situation. Those jobs have been going abroad -- first to Mexico, and then to Asia -- for a long time now; and as Bruce Springsteen observed in the 1980s, they ain't coming back. This has not shown any signs of being a temporary adjustment. With exceptions, it appears to be a relatively permanent change. Within the space of one U.S. president's time in office, we have gone from being the world's sole superpower to its problem child. So it may not be a question of when the bear market is ending, exactly. The better question may be when the decline of the stock market slows down to a point such that one could consider investing in it again. One good idea would be to wait until it stops collapsing. Some will tell you that you cannot time the market. That is nonsense. It is just a market, and markets do go through periods of extraordinary difficulty. You may not be able to time it by the day, but you certainly can time it enough to wait until the bad news is no longer an overwhelming flood. Likewise, it may be wise to wait until people are not quite so eager to say bad things about it. Right now, everyone is looking down that slope, in fear and anticipation of just how steep the rollercoaster's drop will be. After a while, they will lose their preoccupation with that. We may then have then settled into a long, grinding slump; or we may start to see signs of renewed perkiness. I'm not betting on the latter, but it is possible. It is true that you risk losing out on a winning proposition if you aren't already in the market when it starts to turn around. It's a good idea to keep up with what's going on. But it is also true that it took decades for the stock market to recover its valuation following the crash of 1929. If memory serves, the market did not reach 1929's level again until 1954. That's a long time to be invested in the market, waiting for good news.

Thursday, January 17, 2008

Hillary and Mitt: Studies in Political Sincerity

I met Mitt Romney in 1983 or 1984. I was working at a law firm on Wall Street, and he was looking to set up a venture capital limited partnership. I was a junior attorney, specializing in writing the agreements that the members of such partnerships would sign. Our firm helped him set up Bain & Co., which has helped him to become a richer man; I contributed to writing the agreement that created that firm. He didn't make much of an impression, one way or the other. He was your usual Wall Street Gentile -- tall, handsome, rich. I guess he made an impression, in that I do have a vague recollection of him, which is more than I can say for most of the people I met in 1984. I guess at this point he falls into the same category, in my mind, as Gary Hart, the ultimately scandal-plagued Democrat who was running for president around the same time, whose hand I shook at the Hoboken train station one day. Is Mitt Romney an honest man? A rationally (not necessarily politically) conservative judgment would be that we cannot know for sure, for lack of solid evidence; a rationally liberal judgment would be that he is not. On the rationally liberal side, we have some evidence. During the current presidential primary contest, Mitt has made a series of statements that make him sound like a liar, and a poor one at that. There is also the evidence from wealth -- the sentiment that, behind every great fortune there is a great crime. Also, whatever the media say about Mormons, in my own experience Mormons (including particularly those who live on the East Coast) are not more honest (in the simplistic sense of the term) than other people of conservative lifestyle, though they may be somewhat more inclined to pat themselves on the back for it. If anything, the implausibility of the Mormon scriptures would incline me to think that Mormons may be somewhat *less* preoccupied with truth than the average person. But I recognize that there are different kinds of Mormons, and that not all of them have a fundamentalist's orientation toward, or familiarity with, those Scriptures. What I would conclude, about Mitt, is that a rationally liberal argument for his insincerity might draw support, but not convincing support, from the fact of his Mormon roots. The rationally conservative argument would be that it may be possible to prove that he is dishonest, but doing so would require more than the occasional screwup in the heat of a political campaign. I noticed an article, in the New York Times the other day, by a guy who used to drive Mitt around. This guy was convinced of Mitt's honesty. His article called to mind that cynical saying, "Sincerity is the main thing: if you can fake that, you've got it made." A great many people are honest when they think God or someone else is watching them. The question is whether they would behave the same way, over a period of time sufficiently long to forget about God et al., if they came to believe that nobody at all was watching them, and that their handling of a certain opportunity was not even a moral test. That may never happen, if they are religious or if they spend their lives under a political spotlight. Indeed, they, themselves may not even know whether they are honest, though surely they will have an opinion on the question. So what should we conclude? In this primary election contest, this week, in Michigan, John McCain stood up and, in a painful exercise by his so-called "Straight Talk Express," told the voters of Michigan that their jobs were gone and would not be returning. This was not consistent with the dream, and McCain surely knew it. Regardless of whether he "is" an honest or straightforward person, he seems to have decided -- in this campaign, and evidently long before it -- that what works for him, personally and/or professionally, is to work toward providing people with a relatively close approximation to his actual understanding of things, in that small minority of human experiences when it behooves him to express his thoughts. John McCain probably will not, and possibly should not, be sharing his innermost "truths" with us. But on the relative and limited scale just described -- up here on the tip of the iceberg, as it were -- he seems to have understood that his Straight Talk Express would be derailed if he fibbed to the people of Michigan, and so he did not. Therefore, he lost Michigan. We have yet to see whether his gamble pays off in a backlash, in other states, against the politics-as-usual that prompted Romney to declare, in Michigan, that he would not accept the defeat of any American industry. Romney, not being a stupid man, surely realized that it's not his call -- that the defeat of American industries will be determined by factors beyond his control. But that is not what he said. And it is this instance that raises, in my mind, a question of sincerity sufficient to prompt the writing of this posting about him and Hillary. The Hillary connection has to do with the Show of Emotion. In New Hampshire, just before the primary election, Hillary -- for the first time of which I am aware -- showed, in public, a sign of what is stereotypically treated as a trait of women: she got emotional. Not very emotional. There did not appear to be any actual tears. But her face and voice were those of a woman who is getting a bit choked up. It seems that female voters loved this, and in my opinion they should; I've seen Bill get misty-eyed often enough, by now, to have a legitimate curiosity as to what Hillary would look like in that condition. It doesn't seem fair that political contests and power are such that she dare not -- not, anyway, until she or someone manages to make it seem normal for female politicians to express emotions that their male counterparts can safely express. I'm not sure how far we want to go down that road -- do we want male politicians, breaking current taboos, to feel comparably free to express violent rage? But we aren't there yet; and for present purposes, Hillary did tread onto some new ground there, and good for her. The question remains, however, whether that was a cynical move. Did Hillary, becoming desperate about pundits' predictions that she would lose New Hampshire by double digits, decide to undertake a bold experiment? She has shown such steely self-discipline, for so long, under such pressures and national spotlights, as to suggest that she probably did not show that bit of emotional upset by accident. A possible difference between her case and Romney's is that, if he is speaking cynically, he is doing so to convey a belief about something that ain't so, whereas Hillary's emotional moment, if somehow artificially contrived, seems likely to have taken us a bit closer to something that *is* so. Hillary Clinton has had grounds to cry, and to receive the nation's sympathy in the process. And not just in the receding past, when Bill was being himself. Crying about losing in New Hampshire, had she done so, would have been reasonable, and would have brought out sympathy in some who might not previously have considered themselves capable of being sympathetic to Hillary Clinton. Of course, it would have prompted disgust in others, and rightly so. Hillary Clinton is a woman who could lead the nation in a nuclear war. Let's keep it that way, at least until she ceases to be responsible for the fates of constituents. I don't know that a question about her hairdresser was the best moment to let her hair down, if you will. But it may have been sufficient for the purpose. My guess is that Hillary, alone or in consultation with Bill or other political advisors, have surely recognized that this Iron Lady routine is not always playing well. Certainly there has been a great deal of discussion, among the leading strategists within her campaign, on the question of whether and how she might reveal that she is actually a human being, to the extent that she is. (Disclosure: I will probably vote Democrat, but am presently undecided as to the specific candidate.) My speculation is that the discussion, in Hillary's head and/or among her advisors, came to the conclusion that all she really needed to do was, at some point, to take a deep breath and confront the unknown. She just had to let herself think of a certain thing -- possibly, but not necessarily, the question that was put to her -- and doing so would choke her up. It would be a gamble, and she would have to take it, and see what happened. It seems fair for Hillary to have decided to let us know that she is (probably) a human being, and that she gets upset too. It seems fair even if she decided to do it when the cameras were rolling, under conditions that she considered favorable for purposes of helping her to win the New Hampshire primary. I do not know of any candidate in this election who has forsworn the use of emotion, if emotion will help him/her win. It is also OK with me if she uses her gender -- the power of a lady's tears, as someone put it -- to counteract the gender disadvantage of being a woman in what has been a man's world (speaking, specifically, of the presidency). It does not seem likely, at present, that she will overdo it. Mitt Romney and Hillary Clinton are politicians. As such, they will lie, they will fake sincerity, and they will otherwise mislead people. It is a requirement of their job. They must be able to please everyone, which is the ridiculous expectation we place upon our political leaders. They must also be able to play poker with the bad guys. We may not think it would be appropriate for your minister to tell you that you're a pig-headed idiot, even if that is what s/he is thinking, and in this sense we permit your minister to mislead you. When your wife asks if a certain dress makes her look fat, we know the proper answer. It's a question of honesty, of course, but it's also a question of priorities, and of being able to lie well when circumstances require. Sometimes the truth hurts, and sometimes hurting someone is just not within the realm of reasonable reactions. That said, John McCain's approach is more palatable to me, partly because I want to believe that some members of the political class are actually reliable, and partly because his approach seems more workable as a practical matter. If Mitt Romney cannot lovably deceive the people of America, I honestly don't know if he will have what it takes to bargain with the Chinese. Michigan bought his line; but despite his expenditures, Iowa and New Hampshire didn't, and I think a lot of others won't. By similar values, at present, Hillary is the Democratic candidate I would consider most likely to perform well in an extremely difficult role. Her claim of experience resonates with me. I won't vote against her just because she probably manipulated people with a show of emotion. It didn't look fake -- which is to say, she was doing a good job of being a politician and, at the same time, was bringing us closer to the truth (i.e., that she has feelings), rather than further away from it. McCain, in his own very different way, seems to be making the same calculation: that he has to be the straight-shooter, even if it hurts him in some states, because that's what will help him win; and in making that judgment, he, too, may help voters to become more acquainted with the realities.

Wednesday, January 16, 2008

One Factor Auguring a Depression

It seems fairly clear, by now, that Ben Bernanke is very concerned -- almost preoccupied -- with the performance of the stock market. Since last August, his interest rate cuts have repeatedly proceeded for the purpose of saving the market, and despite warnings of potential inflation. The dollar is now at an all-time low against gold and is also very low and headed further downward against key currencies, including not only the euro but also the Chinese yuan, which is moving at a gradual but increasing pace toward becoming a freely traded currency. The low value of the dollar means that dollar-denominated investments perform poorly for international investors. As has been often noted, a foreign investor who entered the U.S. stock market five or six years ago, at the start of its recent and remarkable rise, would have *lost* money because of the contemporaneous decline in the dollar's value. Actual and potential foreign investors are not ignorant of this. They have funded the deficits of the Bush years, buying U.S. government securities because they have believed in the safety and profitability of investments in America. During the past year, however, such investors have become more audibly concerned about the sense of such investments. Steps are being taken -- gradual steps, but significant ones -- toward diversifying away from the U.S. economy. U.S. consumer purchases and government expenditures are founded, alike, on cheap credit. If money becomes less available and/or more expensive, consumers will borrow and spend less, and the government will be less able to afford to hire people, build and buy things, and otherwise stimulate the economy. Money will become less available if foreign investors supply less of it. Rationally, they should be doing so; and over time, by present trends, they will do so. It is not yet clear whether we are now in the opening phase of a massive readjustment to a more realistic world, one in which money is supplied to us based upon our present productivity and competitiveness, as distinct from faith in our future promise. But there is a good chance that that day has arrived. We face unprecedented competition on both counts, as rising economies (especially in Asia) offer seemingly endless supplies of people willing to work hard and live cheap. The market is confident that Bernanke's Federal Reserve Bank will again cut rates, two weeks from now, perhaps by as much as a half-point. (Some are betting on an even greater cut.) Foreign investors are undeniably paying attention. The standard wisdom continues to be that Asia cannot fully decouple its prospects from America's -- that, in other words, if the U.S. sneezes, Asia will catch a cold. But foreign investors cannot be expected to continue to invest where they will realize a negative rate of return. There remain an unacceptably high number of unknowns and negatives in today's stock market. Stocks may not be overvalued in historical terms. But there is a good chance that they are overvalued within a context of troubled times. It is not obviously a good time to cast a vote of confidence in the S&P 500 -- a vote that, essentially, things will return to where they were a year ago. That sort of renaissance seems unlikely in the near term. In short, the market and Fed policy seem to be based upon a worldview that says we have been coping with some difficulties, but that they will ultimately resolve themselves and good times will return. This is bull market thinking: it is the mentality in which everything finally turns out OK. Yesterday's market rout suggested that doubts are now emerging in the bull market mindset. Descriptions of that rout included the key word "panic." Panic is a bear market concept. It is the recognition that companies whose stock you own can go bankrupt, that you can lose your shirt, that the elevator to the penthouse also goes all the way to the basement. The stock market has been extraordinarily resilient despite repeated and growing pressures on multiple fronts. Some unknown portion of that resilience derives from the inexperience of a generation that has known largely good times. Even the recession of 2001 was mild, in contrast to the successively greater hardships known by previous generations, as one goes back in time to 1991, 1980, and, of course, 1933. If the American century were not over, one might expect a continuation of that pattern of successively milder national economic hardships. But this generation, unprecedentedly fortunate in its exposure to hardship, may yet encounter the novel thought that what goes up can go down. Panic remains possible for today's investor. People can reinterpret recent bad news through the bear's eyes. In that event, that grey expanse above us, presently perceived as a set of storm clouds over the economy's forward march, may instead come to be seen as the surface of the ocean, far, far above one's head. In such an event, thoughts go to survival, and standard valuations become rapidly recalculated. The U.S. government, including the Fed, does not presently understand the nation's capital markets, nor does it have the power to fix them. Nobody understands them fully; nobody has that power. Bernanke's consensus leadership style is, moreover, the wrong style for uncertain times. He is a brilliant man -- he is as competent as they come -- but the impression is growing that the Fed does not have the power and wisdom that investors were previously willing to credit to Greenspan's Fed. The impression grows that the Fed is becoming desperate, and that its desperation arises from its impotence. The Fed is behind the curve, and my hunch is that it will not (and could not) get ahead. What it can and apparently will do -- much to the lifelong regret of Bernanke, student of the Great Depression -- will be to alienate the foreign investors whose deposits in our economy have made the bull market possible. It does seem that there will be a wrenching readjustment, and that bear market thinking will come to seem more realistic.

Friday, January 11, 2008

Market Peaks and Troughs; How It Seems to Work

It doesn't seem to just go down, down, down, and then up. Nor up, up, up, and then down. What seems to happen, rather, is that you have these moments of congealing hope or fear, and they form a plateau or a small reversal. It was going down, but then it went down to the point where a critical mass of people said, "This is overdone," and they bought -- stock, real estate, or some other asset. Or it was going up, and then a sufficiently large number of people said, "This is a bubble," and they sold. To get a truly stunning downturn or upturn, it seems you must first iron out the kinks. You must persuade that temporary minority, optimistic in the face of danger or pessimistic despite hope, that they are wrong -- that things are really as good or bad as that group did not want to believe. You have to let that temporary minority make their investments, indulge their beliefs, and lose their shirts. Then they drop out or become converted. After you have hammered the dissenters several times, it's smoother sailing. Your market is better positioned to soar or plummet. Next time around, people will be more cautious about opposing the apparent trend. You will see more of a rise or fall than previously, before you reach that critical mass of people who once again say it's overdone or it's a bubble. This doesn't last forever, and it doesn't happen every time. You actually have to get quite a few ducks in a row before you can expect, with any confidence, that the dissenters will be hammered into submission. I'm not sure how it works with upturns, but what seems to be required at the start of downturns is that everything is just about as good as it could possibly be. If all sectors seem to be cruising and the world is looking fine, then possibly all you need to do is to inquire more carefully into whether the market seems to be irrationally disregarding bad news or good news. And yes, all those economists really can be wrong.

Wednesday, January 2, 2008

How to Print a Long Webpage or Image File

I took this question to the Adobe Acrobat Windows forum. It drew a couple of responses, but no real answer. Here was the problem. Acrobat gives you the option of printing a webpage to PDF. Usually, it works just fine: you print the webpage, Acrobat breaks it up into a bunch of 8.5 x 11 sheets (if it's a long webpage), and you have a PDF document containing a reasonably good representation of the webpage. Sometimes, unfortunately, it does not work that way. Instead of printing the entire webpage to PDF, Acrobat prints just the first and last pages, or maybe just the first page. I think the reason must have to do with the HTML coding of the webpage. Whatever: point is, you can't PDF the webpage. This happens for some long image files too. For instance, I thought of using the ScreenGrab extension in Firefox to save the irritating long webpage to JPG or PNG format, and then using an image editor (e.g., the highly recommended freeware IrfanView) to print the PNG to PDF. But this didn't work either: I still got the same outcome. Likewise if I first saved the webpage to different forms of HTML files on my local drive. Eventually, though, I came to a simple solution. Instead of trying to print to 8.5 x 11-inch paper, save the long webpage to a PNG, and then set Acrobat to print to a sheet that is 92 x 92 inches. There are many webpages that are still too long for that, but it's not a bad size. If you need to convert that outcome to 8.5 x 11, then maybe you can print the 92" PDF to an 8.5 x 11 PDF size. In my experiments so far, this approach gives me fonts that look pretty much normal, viewed at a page width display setting. They are good enough to OCR in Acrobat.

Tuesday, January 1, 2008

Catching Up: Best of 2004: May

Late-Night Political News from ______________________________ "New Gallup poll of Iraqi citizens came out yesterday — says two- thirds of them want us out of Iraq. Let me explain something to you people. We *invaded* you. We're not your in-laws freeloading during spring break. I imagine the Germans wanted us out of their country too after WW II. We'll let you know when we're ready to get out of there, OK? ... By the way, when are we getting out of there already?" —Jimmy Kimmel "Over the weekend British Prime Minister Tony Blair apologized for the mistreatment of Iraqi prisoners. Apparently some of the prisoners were accidentally given British food." —Conan O'Brien "It's a good thing there are no gay people in the military because otherwise weird sex stuff might happen." —Tina Fey, Saturday Night Live's "Weekend Update" [referring to the photos from the Abu Ghraib prison] "Gas prices are up, the stock market is down, Iraq is a mess and John Kerry is saying, 'How am I gonna beat this guy?" —David Letterman "The White House is now saying that they still do not have a timetable for when the U.S. will be out of Iraq. Although they hinted that it would be early in the Kerry administration." —David Letterman "Earlier today, John Kerry had a meeting with independent candidate Ralph Nader. Afterwards, Kerry said 'The meeting didn't go as well as I had hoped, because my gun jammed.'" —Conan O'Brien "There are now videos from Iraq showing American soldiers having group sex. Well, who said men and women couldn't serve in the armed forces together?" —Jay Leno "Congress now says they are reviewing the sex videos, so at least we have the comfort of knowing they're being reviewed by experts in this area." —Jay Leno "India's stock market crashed. My question is, is President Bush out- sourcing our economy too?" —Craig Kilborn "They asked President Bush why we didn't observe the Geneva convention and Bush said, 'That's easy, we weren't in Geneva. We're in Iraq.'" —Jay Leno "President Bush delivered a commencement speech at a university in Wisconsin. A very inspirational speech. Apparently Bush told the students, 'You can do anything in life if your parents work hard enough.'" —Conan O'Brien Legalization ________ Starting in the fall, pharmacies in British Columbia will sell marijuana for medicinal purposes .... Under [U.S.] law it is illegal to possess any amount of marijuana anywhere in the United States. Penalties for a first marijuana offense range from probation to life without parole. ... [T]he Partnership for a Drug-Free America originally received much of its financing from cigarette, alcohol and pharmaceutical companies like Hoffmann-La Roche, Philip Morris, R. J. Reynolds and Anheuser-Busch [which would have much to lose if marijuana became illegal]. ... [Marijuana] is a powerful, mind-altering drug. ... But it is remarkably nontoxic. In more than 5,000 years of recorded use, there is no verified case of anybody dying of an overdose. Indeed, no fatal dose has ever been established. Over the past two decades billions of dollars have been spent fighting the war on marijuana, millions of Americans have been arrested and tens of thousands have been imprisoned. Has it been worth it? According to the government's National Household Survey on Drug Abuse, in 1982 [when Ronald Reagan began the War on Drugs,] about 54 percent of Americans between the ages of 18 and 25 had smoked marijuana. In 2002 the proportion was ... about 54 percent. ... In 1972 a commission appointed by President Richard Nixon concluded that marijuana should be decriminalized in the United States. ... * * * * * Clippings ______ ORLANDO, Florida (AP) -- A federal drug agent shot himself in the leg during a gun safety presentation to children in what police describe as an accident. His bosses, however, are still investigating the incident. Clearest sign of a doomed candidacy: During an appearance on "The Tonight Show,'' Gephardt admitted that while he was in the airport in his hometown of St. Louis, he was asked to settle a bet between two women wondering if he was a CNN weatherman or Dan Quayle. Just because your voice reaches halfway around the world doesn't mean you are wiser than when it reached only to the end of the bar. -- Edward R. Murrow * * * * * Yogi Berra Quotes _____________ "He must have made that before he died." -- Referring to a Steve McQueen movie. "I'd find the fellow who lost it, and, if he was poor, I'd return it." -- When asked what he would do if he found a million dollars. "I knew I was going to take the wrong train, so I left early." "You better cut the pizza in four pieces because I'm not hungry enough to eat six." "It was impossible to get a conversation going; everybody was talking too much." "A nickel isn't worth a dime today." "Nobody goes there anymore; it's too crowded." "It gets late early out there." -- Referring to the bad sun conditions in left field at the stadium. "Do you mean now?" -- When asked for the time. "I take a two hour nap, from one o'clock to four." "If you come to a fork in the road, take it." "You give 100 percent in the first half of the game, and if that isn't enough in the second half you give what's left." "90% of the putts that are short don't go in." "Thanks, you don't look so hot yourself." -- After being told he looked cool. "I always thought that record would stand until it was broken." "If the fans don't come out to the ball park, you can't stop them." "It's never happened in the World Series competition, and it still hasn't." "How long have you known me, Jack? And you still don't know how to spell my name." -- Upon receiving a check from Jack Buck made out to "bearer." "I'd say he's done more than that." -- When asked if first baseman Don Mattingly had exceeded expectations for the current season. "The other teams could make trouble for us if they win." "It ain't the heat; it's the humility." "You should always go to other people's funerals; otherwise, they won't come to yours." * * * * * A few months ago, I was having a conversation with one of our Christian fundamentalist friends. She was (and may still be) convinced that God put George Bush into the presidency. The problem with her viewpoint, I tried to explain, was that this makes God responsible when things do not turn out well. It is, essentially, blasphemy; it is the worst way to use God's name in vain. * * * * * Water ____ One glass of water shuts down midnight hunger pangs for almost 100% of the dieters studied in a University study. Lack of water is the #1 trigger of daytime fatigue. Preliminary research indicates that 8-10 glasses of water a day could significantly ease back and joint pain for up to 80% of sufferers. A mere 2% drop in body water can trigger fuzzy short-term memory, trouble with basic math, and difficulty focusing on the computer screen. Drinking 5 glasses of water daily decreases the risk of colon cancer by 45%, plus it can slash the risk of breast cancer by 79%, and one is 50% less likely to develop bladder cancer. * * * * * Having Children A note from a friend ____________ I think there are just too many freakin people on the face of the Earth. ... I expect the USA to look like India before the end of this century. Too many people, hungry, no decent shelter, no land left for grazing or even grain production. Polluted water, polluted air. Raw sewage in the streets. ... I paid my very first property taxes this year. I was stunned to see how much I am paying to help pay for other people's kids. The school taxes are killing me, especially since I could not afford to have kids of my own. I specifically chose not to have kids because I could not afford to give them a decent upbringing, yet I have to pay for everyone else's kids? ... I don't think a person who is childless should pay for other people's kids. And if I do, how come I can't discipline the unruly brats in public? ... I am happy to not have contributed to the exponentially increasing, out of control, population explosion. Besides, who would possibly want me for their Mother? Unborn children everywhere thank me. * * * * * Deficits _____ [In 1992, after the Reagan and Bush administrations], the federal deficit was more than $300 billion — about 5 percent of the economy. President Bill Clinton and Congressional Democrats reversed this profligate trend by slashing spending and raising taxes. The strategy was hard to swallow, and not at all popular — not a single Republican member of Congress voted for Mr. Clinton's 1993 budget. Some of us in the president's cabinet thought he had gone further than he needed to; there was too little money left for education, job training and health care. But there is no disputing that the plan had the intended effect. Deficits that had ballooned under Ronald Reagan and George H. W. Bush were brought firmly under control. Bond traders breathed great sighs of relief. Wall Street beamed. * * * * * The PayPhone Project It started as an art project. Blue spiral notebook in hand, Mark Thomas spent afternoons walking the streets of Manhattan, compiling the numbers and locations of public pay phones. He posted them on his Web site in the hope that people would call them. "There is real beauty in whimsical acts of contact between strangers," he explained. Soon his list expanded to include public phones at the top of the Eiffel Tower, in the basement of the Vatican, in the middle of the Mojave Desert, and at about 450,000 other places around the world. Word of his project spread, and Cindy in Hawaii reported having had the strangest conversation about beaches with a man answering a pay phone in Brazil. Kim from Sydney, Australia, said she called a phone on the corner of 57th and Broadway in Manhattan, where a guy answered, "Wassup" and said he had never heard of Australia. Most surreal of all was the conversation Mr. Thomas had when he picked up a pay phone in Queens, at the 36th Avenue stop of the N line, and the person on the other end explained that he had found the number on Mr. Thomas's Web site. * * * * * Jon Stewart's Commencement Address at William & Mary _________________________________________ Thank you Mr. President, I had forgotten how crushingly dull these ceremonies are. Thank you. My best to the choir. I have to say, that song never grows old for me. Whenever I hear that song, it reminds me of nothing. ... I know there were some parents that were concerned about my speech here tonight, and I want to assure you that you will not hear any language that is not common at, say, a dock workers union meeting, or Tourrett's convention, or profanity seminar. Rest assured. I am honored to be here and to receive this honorary doctorate. When I think back to the people that have been in this position before me from Benjamin Franklin to Queen Noor of Jordan, I can't help but wonder what has happened to this place. Seriously, it saddens me. As a person, I am honored to get it; as an alumnus, I have to say I believe we can do better. And I believe we should. But it has always been a dream of mine to receive a doctorate and to know that today, without putting in any effort, I will. It's incredibly gratifying. Thank you. That's very nice of you, I appreciate it. ... But today isn't about how my presence here devalues this fine institution. It is about you, the graduates. I'm honored to be here to congratulate you today. Today is the day you enter into the real world, and I should give you a few pointers on what it is. It's actually not that different from the environment here. The biggest difference is you will now be paying for things, and the real world is not surrounded by three-foot brick wall. And the real world is not a restoration. If you see people in the real world making bricks out of straw and water, those people are not colonial re-enactors—they are poor. Help them. And in the real world, there is not as much candle lighting. I don't really know what it is about this campus and candle lighting, but I wish it would stop. We only have so much wax, people. Let's talk about the real world for a moment. We had been discussing it earlier, and I ... I wanted to bring this up to you earlier about the real world, and this is I guess as good a time as any. I don't really know to put this, so I'll be blunt. We broke it. ... I don't know if you've been following the news lately, but it just kinda got away from us. Somewhere between the gold rush of easy internet profits and an arrogant sense of endless empire, we heard kind of a pinging noise, and uh, then the damn thing just died on us. So I apologize. ... But obviously that's the world. What about your lives? What piece of wisdom can I impart to you about my journey that will somehow ease your transition from college back to your parents' basement? I know some of you are nostalgic today and filled with excitement and perhaps uncertainty at what the future holds. I know six of you are trying to figure out how to make a bong out of your caps. I believe you are members of Psi U. Hey that did work, thank you for the reference. ... So how do you know what is the right path to choose to get the result that you desire? And the honest answer is this. You won't. And accepting that greatly eases the anxiety of your life experience. ...