Hu Jintao and Tim Geithner

If the Chairman and CEO of General Motors serves at the pleasure of the American President because GM is so indebted to the US Government, does this mean that the US Treasury Secretary, Timothy Geithner, serves at the pleasure of Hu Jintao because the Chinese are the largest foreign holder of US Treasuries?

Rick Wagoner sacked by Obama

OpenSecrets indicates that Rick Wagoner, recently departed CEO of GM, only gave $1,000 to the Democratic Congressional Campaign Committee. Clearly, one must be more "generous" if one wants to keep their job in the new order. Since Wagoner resigned at Obama's request, I think he's ineligible for unemployment benefits.

Compact Fluorescent Bulbs

The light fixture above the mirror in our bathroom has eight 40W globe bulbs. I need a step ladder to change them and you never need 320W of light in such a small space—especially, first thing in the morning. My goal is to keep between four and six of them lit, but that changed recently...

Last summer I noticed Costco was selling a compact fluorescent version of the 40W globes. They come four to a pack. I bought some and put four in the fixture. A week or two ago, I noticed we were at the dreaded three bulb, time-to-get-the-step ladder, point. I also noticed it was 2 incandescents to 1 compact fluorescent.

The race is on!

And it's tightened! One of the incandescents went dark the other day.

That light fixture is not my only source of disillusionment with compact fluorescent bulbs. I've had my doubts about the ones I've installed elsewhere. None of them seem to be lasting as long as promised, so I've decided to write the installation date with a Sharpie on each one before putting it in a fixture. When it dies, I'll write that date on it too. The bulbs have a limited warranty which probably wont help; however, I'm sure Costco will communicate both my dissatisfaction to the manufacturer, Feit. After all, I'm not the only one having problems with compact fluorescents purchased from Costco (via Instapundit).

Here's my first 60W equivalent with an installation date:


The Instapundit has also noticed reliability problems with compact fluorescents. To answer his question ("If you made a shift, what’s your experience been?"): We've made the shift gradually. That combined with the relatively small impact each bulb makes on our bottom line, means that we haven't noticed any savings.

If have experience with LED bulbs, please tell me about them in the comments!

Mike Rowe at TED

The Anchoress linked to the Dirty Jobs' Mike Rowe at TED. It's quite good (if a little disturbing). His comments about work toward the end of this 20-minute video are very interesting.

Forever Stamps

If you're a survivalist or just worried about inflation, you'll want a shoebox full of Forever Stamps next to your toilet paper, canned goods, shotgun shells, and gold coins. From the link:

As the name suggests, Forever Stamps can be used to mail a one-ounce letter regardless of when the stamps are purchased or used and no matter how prices may change in the future.

So the Forever Stamps that you buy today for $0.42 each can be used to mail a 1oz letter after Obama leaves office despite the first-class rate having risen to $4.20 then. Yeah, the last inflation resistant government fiat currency is being printed by the USPS!

BTW, the price is going up on May 11th. Plan accordingly.

Update: Since there are no carbon taxes today and likely will be in the future, Forever Stamps are a hedge against those.

Robert Stacy McCain has a post about the dangers of the Fed buying treasuries. The currency numbers out of the Fed have been signaling problems since last fall. Perhaps he'll establish a position in Forever Stamps to mitigate his inflation exposure!

FWIW, if you're taking my investment advice to go long Forever Stamps, then you've obviously got serious issues that go beyond poor judgment.

Obama Wants More John Galts

The New York Times is reporting that Obama will call for increased oversight of "executive pay at all banks, Wall Street firms and possibly other companies." Similarly, Reuters is reporting that Barney Frank wants to "rescind the retention bonus programs" at Fannie Mae and Freddie Mac. To the extent that their efforts are successful, tax revenue will fall.

We are in the very best of hands.

See also: Lax Regulation Identified!, Frank, Obama Galt AIG

BREAKING: Lax Regulation Identified!

According to The Drudge Report, the missing regulation that caused the world wide economic meltdown has been identified by President Obama. Earlier this month the President identified "lax regulation and extravagant risk taking" as the root causes of the financial tsunami. Now, he will put in place the regulation that would have forestalled the economic implosion: increased oversight of executive pay. The President has not commented on whether or not increased scrutiny of congressional pay, particularly members of the House and Senate committees charged with banking oversight, would shore up the foundation of our economy.

We are in the very best of hands.

See also: Unsupervised!?!

Shamed Dogan Hits the Big-time!

I met Shamed Dogan at the St Louis Tea Party. He's a great guy and he's gonna get a few more hits now that a video he (briefly) appears in is headlined on Drudge:

Frank, Obama "Galt" AIG UPDATED

Barney Frank (D-MA) and Barack Obama have condemned AIG's plans for $165 million in bonuses. Assuming those bonuses are going to "over paid" executives making $250k or more, that $165 million would've netted the IRS a tidy $57 million in income tax.

Unemployment seems to be up. Let's hire $165 million worth of $30k/yr employees and see how the tax revenue works out! Here are the numbers:

• $30,000 annual salary
• $2,295 employee FICA contribution
• $2,295 employer FICA contribution
• $500/mo health plan ($6000/yr)
• $5,450 standard deduction
• $3,282 income tax
• $38,295 per employee cost
• $7,872 per employee federal tax

The per employee cost implies that we can hire about 4,300 people. This cohort will garner the government about $34 million in revenue. The loss in government revenue may only be $23 million, but it's much worse than that. Since about %60 of the $34 million is to FICA, our cohort has created a significant future obligation for the US government.

Perhaps that $165 million will be spent in a way that will garner more taxes, but that does not seem likely. In effect, Barney Frank and Barack Obama have "galted" the AIG bonuses by reducing the government revenue on that money. Who knew we would have friends in such high places!?!

Personally, I have mixed feelings about the AIG bonuses. Megan McArdle captures my sentiments well: "...the AIG retention bonuses raise a question the government is going to have to ask again and again before all this is over: do we want to make a point, or do we want to make money?"

I think the economic crisis and ensuing turmoil will reveal that our "progressive" tax system is quite brittle. Tax revenues are going down and our politicians will continue to raise taxes on the top quintile. That will cause some employees to increase their compensation by asking for more vacation time or a four day work week while maintaining or decreasing their salary. Given the high unemployment, many people will choose to be underemployed. This will also reduce government tax revenues.

Note: In my example, I'm ignoring the earned income tax credit. I assume all employees are single. If we hire married people, both the health plan and the standard deduction go up, reducing the per employee tax burden.

Update 4/2/2009: I didn't realize this because it has not been widely reported, but many (most?) of the AIG employees receiving these bonuses, have opted to take a 1$/yr salary (Don Surber noticed). I heard this from a banking friend. Bill Whittle alludes to it in his Tone Deaf 2 post. Obviously, that changes all the math above.

Will the People Leave?

I recently added Clay Shirky's blog to my blogroll (for his essays, go here). I've always found his writing thought provoking. His recent post left me with a couple of questions, so here's what I just emailed him (with a few edits):

I love your work, just love it. About your newspaper blog post… here are some follow-on questions to think about:

1. When will the problems with newspapers trickle-up to broadcasting? (Broadcast doesn’t have the craigslist problem, but I still think they’re vulnerable.)
2. Why do we still have libraries? When will they mostly disappear? When will they be replaced with a server hosting a copy of the Gutenberg project and/or Wikipedia?
3. If small classes sizes are so great, why not require homeschooling?
4. When will it be possible to get a masters degree by attending iTunes University? A PhD? Why pay for the sheepskin?

Here’s a much deeper question… In “Ontology is Overrated” you said: “…East Germany actually turned out to be an unstable category. Cities are real. They are real, physical facts. Countries are social fictions.” It’s been years since I read that article—I still recommend it to friends, though. Anyway, I’ve been wondering if cities might become “less real” during/after the tumult you discussed in your newspaper blog post. 5. What is the value proposition of "the city"? I live in St Louis, MO. I get to pay 1% annual income tax to the city. The schools are unaccredited. Crime is high.

To be a little dark… What happens if a city somewhere in the world is nuked? City property values the world over will go down while non-city property values will go up. What about a second nuke and so on? I certainly hope none of that happens. Nonetheless, I think humanity’s future will more closely resemble peer-to-peer networks than the current client-server architecture sustaining our cities.

Leave your thoughts in the comments!

Update: Will more cities look like Detroit?

Washington Should Continue to Favor Long-Buyers

Instapundit links to Rich Karlgaard's Washington Should Stop Favoring Short-Sellers. (Before we get started, do not take my investment advice. While misery may love company, you certainly do not want to be that miserable ;-) Rich omits several details about shorting equities, so I'm mostly faulting him for errors of omission. Perhaps he just didn't know—it's been known to happen (see below). Rich writes:

For investors, the question is: Does it still work to bet against the popular mood? I think so, but the worm in this apple is bad public policy. Specifically, the cockeyed policy that has, since late 2007, tilted the investing playing field toward short selling. Good public policy should not side with either longs or shorts. Policy should be neutral.

I do not feel that the playing field is tilted toward short selling. Nor do I see how anyone could honestly claim that it was. More importantly, the current regulatory scheme favoring long positions is better than a neutral policy.

There are several policies tilting the market long. First, you cannot establish a short position in an IRA account. Second, you cannot short mutual funds. It's possible that part of the assets of a mutual fund could be used for short positions. However, the regulatory requirements make this unlikely. The regulations described here explain why:

The Investment Company Act severely restricts a mutual fund's ability to leverage or borrow against the value of securities in its portfolio. The SEC requires that funds engaging in certain investment techniques, including the use of options, futures, forward contracts and short selling, "cover" their positions. The effect of these constraints has been to strictly limit leveraging by mutual fund portfolio managers.

In other words, the people least leveraged in the recent economic implosion (elderly folks with IRAs bulging with mutual funds) were some of the hardest hit. Did I mention that mutual funds only trade at the end of the day? The price of a mutual fund is set when the market closes. This means that on days where the market loses 5% of its value, you cannot cash-out your mutual fund to avoid further loses. You certainly can't flip a mutual fund in your IRA to a short position in the hopes of recouping some of what you losed. For these reasons, I prefer ETFs to mutual funds.

Back to the long tilt of market policy... Third, short sales can only be "day" orders. This rule was imposed in the wake of last year's meltdown. When placing a buy or sell limit order, you have to specify the duration of the order. The duration may be just for today (a day order) or good-til-cancel (GTC) which can be several months out. (Ok, there are a few others, but that would expose minutea that even I do not care about.) If you want to establish a short position in QQQQ (full disclosure: I'm currently short QQQQ) you have to place the order after the previous day's market close. You cannot simply enter that order on Sunday and review it the next weekend. This means that there's slightly more work involved in shorting (you have to enter your shorts daily).

Fourth, short interest is reported monthly and, if it's too high, there could be a short sqeeze. The short interest for QQQQ (153,801,007) is near the daily trading volume (173,147,912). That means that the days to cover is about 1. Combined with the good liquidity (high trading volumes), I believe the risk of a short squeeze is pretty low. Nonetheless, a squeeze would acrue to the benefit of the longs.

Lastly, if an equity you shorted pays a dividend, then you pay that dividend. If more companies paid regular dividends, there would be less short interest.

Karlgaard has three recommendations:

1. Suspend mark-to-market accounting
2. Make the SEC enforce its own ban against naked shorting.
3. Reinstate the short-uptick rule.

I don't think #1 is relevant to his argument. It would cause the firesale of a few banking concerns as companies would have to realize their paper loses. And, "suspending" it is a really bad idea. This market needs certainty and "suspend" is a word littered with temporal ambiguity. I'm not even convinced that mark-to-market is a bad thing.

Rich is spot on with #2. I don't know how the SEC can do this, but I agree.

I also agree with #3. In fact, I didn't know that rule had been remove—it's been known to happen ;-)

I will pick one last nit: Rich, if you want a "neutral policy" and the "short-uptick rule", would you also advocate a long-downtick rule? I would say no, because the market is not a zero-sum game. The policy should be appropriately biased towards longs.

wow... That's A LOT of John Galts

Via Instapundit, we learn that self-employment is the main source of job creation in NYC. Glenn links to a Newsalert article that says in part:

...of the 773,000 jobs that Gotham added from 1981 to 2006, a stunning 491,000 were people working for themselves, making self-employment the biggest source of job creation in the city.

Has DC awakened a slumbering giant?

A Walk with the Girls

Last Friday I took the girls out for a walk in the neighborhood. The weather was great—more summer than spring. The four year old was riding her big-wheel while I carried her little sister.

As we passed one house an older gentleman called out to us. He was excited to see the little ones and proud to list off his children, grand-children, and great-grand-children. He told me about his time in WWII. At 84 he's seen a lot, including Europe from the vantage point of a ball turret on a B-24. His first mission was on June 6, 1944, D-Day.

The four year old had peddled off and was nearly at the next corner, so I had to excuse myself. I told him we would be walking around the neighborhood a lot in the coming months. There would be other times to stop and chat.

On Saturday, I saw another story about a B-24 ball turret gunner: Sippican Cottage: My Father Asks For Nothing. I've printed out a copy to deliver to the one I know.

Walk on the Fed?

Alex Tabarrok of MarginalRevolution notes that safe's are a counter-cyclical asset. Last week I heard a radio advertisement that, in part, went: "whether you need a gun safe for your home or a vault for your business..." Alex includes a graph of the currency component of the money supply. I've included the same here using a slightly different dataset. FWIW, currency has gone from $760B at the beginning of the recession to about $840B. That's about a 10.5% increase in currency, so I think it's more a bank "walk" than a bank run.

How did this happen? I suspect there are a lot of people who have decided to get another $10 back at the grocery store when they pay with a debit card. Others are getting another $20 each time they visit an ATM.

Our Leader

I just saw that picture headlined on Drudge. It's nice to see a picture of our leader, XD-235, but I don't understand why the focus is on XD's voice talent. You'd think the leader of the free world would get more respect!

Unsupervised!?!

Don Boudreaux quotes a letter by Daniel Gallington. In part Daniel says: "...the economic power of the private sector, especially if unsupervised..."

Unsupervised!?! Are you kidding me? Here's a list of "supervisors" that failed to prevent various and sundry aspects of the financial meltdown:

1. Congress (House and Senate, added 3/7/9)
   
2. US Treasury
3. Federal Deposit Insurance Corporation (FDIC)
4. Federal Reserve ("The Fed")
5. Office of the Comptroller of the Currency (OCC)
6. Security and Exchange Commission (SEC)
7. Bureau of the Public Debt (I bet they're busy these days!)
8. Community Development Financial Institution Fund (CDFI)
9. Financial Crimes Enforcement Network (FinCEN)
10. Federal Inspectors General
11. Office of Thrift Supervision (OTS)
12. National Credit Union Administration (NCUA)
13. Housing and Urban Development (HUD)
14. Office of Fair Housing and Equal Opportunity (FHEO)
15. Federal Housing Administration (FHA)
16. Fannie Mae
17. Freddie Mac
18. Ginnie Mae

Oh, yeah. Yeah. No one was watching the hen house, Danny! Truth is, none of them did a very good job and some of them had conflicts of interest—Freddie and Fannie both gave generously to Obama.

Let's review the second rule of bureaucracy. Rule 1, of course, is: Spend Your Budget. Rule 2 is: Fail. "Why fail," you may ask, because once you've failed you can ask for more money and more power. Failure is how you grow your bureaucratic fiefdom. With failure you get a larger budget next year. If you were to succeed, then someone might want to "improve your efficiency" by reducing your budget.

Update: Director Blue's Meltdown post reminded me of the most important supervisor: Congress. I've added them to the top of my list. Go back to those rules of bureaucracy and pay particular attention to Rule 3: Cover Your Ass.

Mankiw on Fiscal Multipliers

Greg Mankiw highlights the debate about whether fiscal stimulus multipliers are large or small.
He's explained elsewhere that marginal propensity to consume (MPC) increases (in contrast to average propensity to consume) during times of uncertainty. Therefore, he tends to agree with the Obama administration that fiscal multipliers will be "larger than normal as well".

I wonder if his MPC argument applies to dollars themselves. That is, during times of uncertainty, are consumers more likely to spend the spare change or drop it in a jar at home? In light of the Bloomberg report that the FDIC might run out of money this year, I wonder where consumers are putting their marginal dollars. Are they putting them in Bank of America or their mattress?

Update: Congress is considering a loan to the FDIC.

Such an Obvious Target for Civil Disobedience

Pranksters everywhere, take note: Barry needs his teleprompter. If you're looking to have a little fun, you might unplug it. Personally, I'd like to see a well-loved security blanket thrown over it. How about someone in hockey pads checking XD-235 into the boards?

The best part will be when XD gets his own Secret Service detachment. I look forward to seeing pictures of a teleprompter protected by a battalion of Men in Black!

Pursuing John Galt

Laura at Pursuing Holiness is going John Galt (via Instapundit). She says the following about her spiritual reasoning (emphasis in original):

Do I want Obama to fail? Aren’t I, as a Christian, required to pray for our president? I do pray for him. But I don’t pray for his success, where his success means implementing policies which harm the country’s security, kill babies, increase poverty, and decrease freedom.

I agree with her; however, my theological reasons for going John Galt are a little different. First, I feel that socialism violates the ten commandments. And, second, I believe socialism damages charity.

The socialist argument for redistribution requires a populace that actively violates the tenth commandment and a government that abets them by violating the eighth. Here's a refresher:

TEN: 'You shall not covet your neighbor's house; you shall not covet your neighbor's wife, nor his male servant, nor his female servant, nor his ox, nor his donkey, nor anything that is your neighbor's.'

EIGHT: 'You shall not steal.'

Leftist politicians promise to steal for their covetous constituents and call it charity. That is the pernicious evil of socialism.

The Christian tradition often references Christ's response to the question: which is the greatest commandment? His answer is found in Matthew 22:36-40 and it makes no reference to a government role for loving your neighbor:

36"Teacher, which is the greatest commandment in the Law?" 37Jesus replied: " 'Love the Lord your God with all your heart and with all your soul and with all your mind.'[a] 38This is the first and greatest commandment. 39And the second is like it: 'Love your neighbor as yourself.'[b] 40All the Law and the Prophets hang on these two commandments."

Your obligation to love your neighbor as yourself cannot be fulfilled if the government is doing it for you. In other words, socialism erodes our civic charity. Exhibit A is Joe Biden. Over the course of ten years he earned $2,450,042 and donated $3,690 to charity—about 0.15%. That's about one seventh of one percent.

Note: A valid Judeo-Christian criticism of going John Galt is contained in the fourth commandment (emphasis added):

8 "Remember the Sabbath day by keeping it holy. 9 Six days you shall labor and do all your work, 10 but the seventh day is a Sabbath to the LORD your God. On it you shall not do any work, neither you, nor your son or daughter, nor your manservant or maidservant, nor your animals, nor the alien within your gates. 11 For in six days the LORD made the heavens and the earth, the sea, and all that is in them, but he rested on the seventh day. Therefore the LORD blessed the Sabbath day and made it holy.

This doesn't bother me because I'm a stay-at-home dad so I've chosen to do work for which I will not be paid. Nonetheless, I think this could lead to an interesting theological discussion.

Update: Dr. Helen is looking for people going Galt to interview for PJTV.

Censorship is Damage

Dave Winer (via Instapundit) observes:

Why journalism is dead 3.0: The sources got blogs.

Perhaps, there are other reasons. Perhaps, the Net has interpreted newspapers as damage and is routing around them.

I am John Galt

Four years ago I decided to back-burner my independent consulting career and become a stay-at-home dad. I continue to do some consulting work, but it's only a handful of hours and it's at a reduced rate. At the time I was making north of $100k/yr doing Java/JEE work and traveling every week—in 2004 I was living in North Carolina and working in Arkansas. My wife works, so let's take a look at our tax situation.

First, assume (incorrectly) that my wife makes $65k/yr and I could bring home an additional $100k/yr. My wife's base salary puts us in the 25% bracket for married filing jointly, so every dollar I earn will be taxed at 25% or more. To keep things simple, let's pretend my income tax is only 25% or $25k. I'm self-employed, so I have to pay both sides of FICA which works out to about 15%. This would only apply to about $40k of my additional income (for 2008) or about $6k. My state income tax would add another $6k, so we're looking at taxes around $37k.

If I wasn't a stay-at-home dad, then we'd need to hire a nanny to take care of the girls. I think that would set us back about $25k/yr maybe more. That leaves us with $100k - $37k - $25k = $38k. Taking an active role raising your children... what's that worth? Obviously, it's worth more than $38k/yr to me. Yeah, the diapers suck, but seeing their first steps, hearing their first words, that stuff is priceless.

If you're Atlas and you'd like to shrug, have you ever wondered why it is that Europeans take so much vacation time? Part of the reason is that time-off is taxed at 0%. If you're negotiating your compensation then you should not only consider asking for more vacation time, but also a shorter work week—a four day work week is like a 20% raise. Of course, the workaholics are probably wondering what to do with three whole days off. Simple: protest, call your congresscritters, and lead us to a brighter future with lower taxes so you can get back to work!

See also: Instapundit, PJTV, and Dr. Helen.

PS: Watch for news stories about compensation packages having lower salaries with more generous vacation and/or flex time. Those companies have to "tighten their belts," but they'll want to "do right by their workers" and try to "maximize the number of employees they retain in these tough economic times." They're "switching to a four day work week to reduce their carbon footprint." That's what you'll read. Then take a gander at tax revenues. This will be an object lesson in the deficiencies of the progressive tax system. Trying to play catch-up by moving the goalposts from $250k to $150k to $50k will be fun to watch.

Update: I have a followup post Pursuing John Galt responding to Pursuing Holiness's post.

Advice for Citizen Journalists

The Washington Post has a great article about the role newspaper journalists have played in checking police abuse. As newspapers continue their downward spiral, citizen journalists need to step up. Here are some quotes:

In the halcyon days when American newspapers were feared rather than pitied, I had the pleasure of reporting on crime in the prodigiously criminal environs of Baltimore. The city was a wonderland of chaos, dirt and miscalculation, and loyal adversaries were many. Among them, I could count police commanders who felt it was their duty to demonstrate that crime never occurred in their precincts, desk sergeants who believed that they had a right to arrest and detain citizens without reporting it and, of course, homicide detectives and patrolmen who, when it suited them, argued convincingly that to provide the basic details of any incident might lead to the escape of some heinous felon. Everyone had very good reasons for why nearly every fact about a crime should go unreported.

In response to such flummery, I had in my wallet, next to my Baltimore Sun press pass, a business card for Chief Judge Robert F. Sweeney of the Maryland District Court, with his home phone number on the back. When confronted with a desk sergeant or police spokesman convinced that the public had no right to know who had shot whom in the 1400 block of North Bentalou Street, I would dial the judge.

And then I would stand, secretly delighted, as yet another police officer learned not only the fundamentals of Maryland's public information law, but the fact that as custodian of public records, he needed to kick out the face sheet of any incident report and open his arrest log to immediate inspection. There are civil penalties for refusing to do so, the judge would assure him. And as chief judge of the District Court, he would declare, I may well invoke said penalties if you go further down this path.

Delays of even 24 hours? Nope, not acceptable. Requiring written notification from the newspaper? No, the judge would explain. Even ordinary citizens have a right to those reports. And woe to any fool who tried to suggest to His Honor that he would need a 30-day state Public Information Act request for something as basic as a face sheet or an arrest log.

Read the whole thing.