Saturday, September 20, 2008


I don't think this can be seen as anything but good news for Africa: Mbeki resigns (Bloomberg via Instapundit). PSA: Poverty and hunger are caused by government policies - not the lack of resources.

Wednesday, September 17, 2008

Poof! $4 Trillion Dollars.

All told when you look at the surviving financial giants on Wall Street, there's been an incredible level of value destruction. Consider that in the last year, Citigroup's market cap has dropped from $236.7 b to $97.8 b and Bank of America from $236.5 b to 150.2 b, the numbers are staggering - totaling $4 trillion dollars (TechCrunch)- and that doesn't even include what US taxpayers will ultimately be on the hook for!

We've felt some of the effects ourselves with our primary credit financing firm closing its service in China given that most of this venture was funded by hedge funds (which is a big part of all the headaches we've had to deal with in recent months in order to meet the requirements of our US/Canadian clients). As a side note, it seems bizarre to me that we aren't able to find a service that will take "risk" of receivables that are fully insured against bad credit, for a price that we (or more accurately our clients) willing to pay of close to 36% per annum!

With the US government taking on full responsibility for AIG despite the fact that 70% of AIG's business was foreign, I tend to agree with Paul Kedrosky who asks where the President and Congress are in all of this? With the level of risk and potential costs that may ultimately exceed even the Iraq War, don't they have a responsibility to "get out in front of growing voter anger and confusion before it's too late"?

PS For those who are interested, here's a fairly accurate sounding prediction of how investment banks will ultimately look like after this debacle (Information Arbitrage). The one thing I probably disagree with is the question of whether or not Bank of America and Merrill will make a good fit. I suspect that this had as much to do with their wide reaching brokerage services as it did their investment bank / trading groups.

Update: Funny and sad - particularly in light of the US Treasury's intervention - "The strength to be there" (via Paul Kedrosky):

China + Baby Milk = Ethical Crisis?

A recent article makes the claim that the root cause over the contaminated milk is "an ethical gap in China's business" (Christian Science Monitor).

There are a few parts to this scandal - from quality control to the likely cover up with the Chinese partners in the venture resisting an effort to recall the faulty product. I'd disagree that it's a question of ethics in China business - but rather, the lack of a free media. Thankfully the article notes that regulation isn't the only answer (though in any other society, what was done is criminally negligent - so I'm not even sure more regulation is the answer). It should be clear to anyone with half a brain that in a broader context, adding a chemical that would cause kidney stones in babies would be a net loser - I mean seriously, after this, how many people are going to buy Sanlu milk?

So what's the answer? Companies must be held responsible for testing the products that they sell. Laws should be enforced, consumers should have the opportunity to seek compensation and penalties that are significantly greater than any possible savings that could have been achieved by using the chemical substitute, and the government should open the markets to greater foreign competition to allow for greater choice and force a rush towards improving standards.

Update: More on the growing scandal (Imagethief). Yet another reason why I don't partake in dairy products in China.

Monday, September 15, 2008

A Bit of Perspective on the Financial Markets

From Gary Bland, a Lehman limited partner, the State Investment Officer of New Mexico (via peHUB) - which is perhaps, only somewhat reassuring:

Q: So you’re saying this is a good thing.

A: From here on out the wizards of Wall Street that still use Clearasil have learned some valuable lessons. Magic is magic. It’s not real.

Q: It’s good that you can look on the bright side of all this.

A: You have to. If the world ends, who cares?

It wasn't just the Rich that got Richer

Good news, from the WSJ: "In 2007, overall real median family income increased to $50,233, up $600 from 2006. The real median income for intact families -- mother and father in the home -- rose to $78,000, an all-time high."

Of course it's probably not something you'll be hearing about particularly with the meltdown today in the financial markets. On that note, it's sort of sad to see two storied financial institutions disappear, but I think the US government finally did the right thing. In recent years the media has been spinning a tale of woe that the economy hasn't been "fair" rewarding the rich over the poor but as the editorial notes, there has been a 25% improvement since 1983 in the living standards of the bottom quintile of Americans. This in itself should be remarkable and celebrated - just don't expect to see those headlines in your paper any time soon (unless you subscribe to the WSJ).

Quote of the Day

Arthur Laffer & Stephen Moore (WSJ):

When you put "tax fairness" ahead of economic progress, you produce neither.

Sunday, September 14, 2008

"You Can Shine"

I found this commercial remarkable for a few reasons. First, you can definitely tell at the end that it's for a hair product - and in that, it's quite effective (and sort of funny as well). Second, it's an inspirational message for the disabled (and any underdog really) in an Asian society where the attitudes towards the handicapped leave something to be desired. Another thing you also notice is that while it's probably not as polished as it could be, it's way longer than any commercial you see here but it does communicate a message and I think it does it well. Youtube via Trendhunter:

Side note: As a former violinist (I still have a violin though I can't say that I've played it much in the last 10 years), the song that's played - Pachabel's Canon in D, while popular, does get on the nerves of a lot of strings players just because it is played so much but it's also a crowd pleaser.

It's easy to be charitable...

...when it's not your money (Greg Mankiw). Shouldn't those who suggest governments should do more to help cause xyz (UN Dispatch) be the first to lead by example?

Unlike Mankiw, who presumes forethought and planning, I can't say I'm surprised. Using the heavy hand of taxes and government is coercive at best and corrupt at worst (Accuracy in Media) working best when you have the freedom to spend on behalf of others - especially when you think you're better than everyone else (Pajamahadin / Never Yet Melted).

Saturday, September 13, 2008

Quote of the Day

PJ O'Rourke (via Instapundit):

When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.

Freeing Markets

Finally, some good news. There are a large number of developing countries who are making significant attempts at large-scale regulatory changes to unleash markets (WSJ). This will do more to eradicate poverty than any of the often self serving commentary by the liberal elite (Times UK). It is ironic that in recent years the countries that have made the greatest strides in championing markets and capitalism are those like China. As the IFC notes:

Countries with liberalized business regulations frequently grow faster than their peers and are more resilient when tough times hit.

Higher gas prices or none at all?

The choice is binary (Instapundit). It is remarkable that both the media and politicians don't get it time and time again.

Thursday, September 11, 2008

China Moment

Was just filling up at a gas station in Canada with quite the line up. Apparently gas prices are going up 13 cents a litre tomorrow (which works out to being just over 10% with gas prices at 1.205/litre) which just goes to show how inefficient gas markets are... not that I'm complaining - particularly if gas prices do actually rise that much tomorrow (of course, not sure saving myself 2 bucks was actually worth it though it was something I had to do anyway).

While the news article complains about speculators, I suppose that's what you get when you don't allow new refineries to be built and most of the old ones are all in hurricane friendly regions.

Remembering 9/11/01

Not that any of us will forget anytime soon and while there will be time to consider the ramifications of what happen and will still happen, today's a day for remembering. There's a good series of photos from the Boston Globe:

Wednesday, September 10, 2008

Yay to Tax Havens!

Not that I would ever use one, unless it were legal to do so, of course (via ASI) - though I must say Cato makes a strong moral case for them (admittedly preaching to the choir) so maybe I should, or perhaps we all should:

Tuesday, September 09, 2008

Best Predictor of Startup Success?

According to Peter Thiel, it's low CEO pay (Tech Crunch):

The lower the CEO salary, the more likely it is to succeed.

The CEO’s salary sets a cap for everyone else. If it is set at a high level, you end up burning a whole lot more money. It aligns his interest with the equity holders. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks.

In practice we have found that if you only ask one question, ask that.
Sounds about right. The tone is set from the top. Everything leaders do (let alone business leaders) sends signals to those below.

Monday, September 08, 2008

Man attempts to Paddle to the North Pole to Highlight Threats of Global Warming

Hilarity ensues (Mr. Euginedes). In explaining why his quest was important:

Global warming is, I believe, a significantly greater threat to us, to our economies and to our way of life than any or all of recent issues that have headed national agendas: the credit crunch, global terrorism, the price of oil, healthcare, ageing populations etc. World leaders need to attack this threat head-on. This response will need to be as aggressive, and as global, as the world’s response to fascism and Nazism in the mid-twentieth century. And I think the best way to approach this problem is as though a war is being fought, a war whose outcome will determine the fate of all of us.

Our response so far, such as it is, has been predicated on a ‘best case’ scenario - but any war that has a chance of being won is planned on a ‘worst case’ and it is the ‘worst case’ that I believe can be witnessed here in the Arctic. From what I have seen over the past week it is not a question of ‘whether’ but simply ‘when’ the Arctic will be free of summer sea ice. Those leaders who ignore the warming signs and fail to act with the vision, tenacity and determination that I believe is necessary imperil not only future generations, but the current one as well.
Click the link above for why he failed.

Update: A link of a Canadian researcher who believes we should be preparing for global cooling (National Post) subscribing to the sun spot hypothesis.

The Problem with Prohibitions and Why Legalized Prostitution Should be Supported

I'm a libertarian - on the most fundamental level, so long as they aren't harming others, they should have the ability to do as they choose no matter how much I disagree with what they do based on my personal beliefs/moral code. Economics helpfully reinforces this view and history is replete with examples and results of arbitrary prohibitions like the war on drugs and booze. Oddly, appearing in the Guardian is the economic case (and moral case) for avoiding a ban on prostitution:

Before the government implements a ban, they should consider carefully that whatever laws they pass, women who have made a choice to sell sex to earn a living rather than to support a drug habit, or because they have been coerced into it, are likely to continue to do so. If men are criminalised for buying sex, the women selling it will be driven underground, making them more vulnerable to violence, with less control over what they do. For a government that has pledged to protect women in prostitution from exploitation, this could be a spectacular own goal.

The Fall of Fannie Mae & Freddie Mac

Of course from its inception, some would argue that they were doomed to failure given the moral hazard at play. The government's implicit backing opened the possibility, and now certainty, of the two firms being taken over by the government this weekend. Jim Rogers (a pessimist in recent years of US markets) suggested that the US had become more communist than China (via Club for Growth):

More from Paul Kedrosky:
Why didn't the Freddie/Fannie bailout deal wipe out the common shares? That's one question most people have, myself included, as we look at the structure of the deal. Leaving common shareholders with 20% of the equity of the firms seems unnecessarily generous
I tend to agree with Greg Mankiw's third reaction in that it's a sad day with the problems for the markets far from over:
The problem is far from over, as the future of these institutions and a large segment of the financial system is still to be determined. The worrisome part is that this future will be determined by a political system that both created the GSEs and failed to provide sufficient oversight, even when many economists suggested reform was needed. To believe that the Congress will do a good job of it would be the triumph of hope over experience.
But the bottomline impact for most of us? Nothing (Paul Kedrosky). The impact will come later. Fun times. If there's one small teeny tiny silver lining it's that both Freddie Mac and Fannie Mae as terms of the takeover must cease all government lobbying immediately. More details here (Paul Kedrosky).

Sunday, September 07, 2008

Er... er... hmmm...

When I first saw this I thought it was too ridiculous to be true. But no, apparently these nutters do in fact exist. They're environmentalists who have been filmed mourning the loss of trees:

via David Thompson who links to their website and says: "Hand me the gun. No, the bigger one." Me? Personally, I'm happy with laughing at them and marginalizing them accordingly.

Linking Miscellany

A number of interesting links that I've been accumulating over the past week:

Surprise: Fair Trade Plays Favorites and Makes Poor Farmers Poorer

The unfortunate consequences of "fair trade", as quoted at ASI:

This is not just a matter of one lot of farmers receiving a little more and another lot a little less. It means subsidizing 1.5m coffee workers while paying 25m farm families - the coffee growers who are not part of Fairtrade – a lot less. Most of these are subsistence producers, whose income from coffee is tiny. Any fall in income will mean children dying from malnutrition or malaria.

Quote of the Day

From ASI, Albert Einstein:

The hardest thing in the world to understand is the income tax.

Thursday, September 04, 2008

People Respond to Incentives...

So when your business is the poor... isn't it also in your best interest to make more of them (Acumen Blog)? Cue the World Bank.

Riddles at Job Interviews

Show how adept people are at solving riddles? I dunno, I'm indifferent mostly because my Chinese isn't proficient enough to actually ask any at job interviews (which is probably a good thing). Anyway here's an interesting take (Classic WTF), plus a hilarious anecdote:

During a screening interview, I was asked how I would design a bike fit for someone visually impaired. I responded something to the effect of, "What, like, for blind people?", and she answered yes.

I thought for a moment and then I responded, "Well.. a blind person riding a bike doesn't sound like a very safe idea, so I would make the bike stationary, maybe with a fan blowing in the person's face. He probably wouldn't even know the difference."

She was speechless.
The funny thing is that depending on my mood, I might have hired the guy.

"Damn it Feels Good to Be a Banker"

Funny. Particularly if you've done either i-banking or consulting:

Things that go bump in the night...

Are sometimes actually monsters. So apparently people have been murdered in China so that relatives of other dead people can use their corpses (I say apparently, since this too incredible to be true). From Time's China Blog:

Puning government and police spokesmen said yesterday wealthy people who did not want their dead relatives cremated had bought the corpses of the murder victims to replace their relatives' bodies, which were later interred according to traditional customs. [...] The report said suspects would trail victims, usually mentally disabled or elderly, drag them into vehicles in remote areas and either strangle or poison them.
Of course, a few years ago I also heard it claimed that it was rather easy to get someone assassinated/maimed in China at bargain basement prices.

Idiocy at the World Health Organisation

They want to cure disease by making the poor more reliant on governments and taxing the most productive members of society (ASI).

Monday, September 01, 2008

Forget Global Warming. Should you be prepared for a Deep Freeze?

Apparently we have just gone through the first month without solar sunspots in a century (Dailytech). A competing theory to recent global warming has been that solar sunspots indicating activity on the surface of the sun have been on the rise for the last 60 years (BBC). That is, until this past year.

What's also somewhat disconcerting is that some of the research was initially rejected for being "too controversial": "In 2005, a pair of astronomers from the National Solar Observatory (NSO) in Tucson attempted to publish a paper in the journal Science. The pair looked at minute spectroscopic and magnetic changes in the sun. By extrapolating forward, they reached the startling result that, within 10 years, sunspots would vanish entirely. At the time, the sun was very active. Most of their peers laughed at what they considered an unsubstantiated conclusion."

The potential implications now that their earlier predictions have come to pass?

In the past 1000 years, three previous such events -- the Dalton, Maunder, and Spörer Minimums, have all led to rapid cooling. On [sic] was large enough to be called a "mini ice age". For a society dependent on agriculture, cold is more damaging than heat. The growing season shortens, yields drop, and the occurrence of crop-destroying frosts increases.
So what does it really mean? Broad socio-economic impact. It's at least something to keep an eye on but look for even higher food prices (though productivity yields are getting higher because of current food prices), energy prices to rise. I suspect the west will be far better suited to this change in conditions given our reliance more on natural gas for heating whereas places in Asia tend to use more electrical radiators because of a lower need for heaters. It's not like Asia will stop developing and so the need for resources will continue to be needed but the energy costs to do so will likely rise.

Update (Sept 4): A rebuttal (though not related to recent sunspot activity) that discounts the effect that sun spots have on world climate. Personally, I think that there's still so much we don't know, and rather than plan for an outcome that may or may not happen spending trillions of dollars, we should be trying to ensure we have the wealth and ideas to cope with climate change.