Friday, August 31, 2012

Song of the Week(end)

It's Labor Day weekend, the 'Hoos are kicking things off tomorrow against Richmond, and I'm ready for football season. Sorta. I'm still wondering what happened to my summer. Who knows... let's do this.

So with a nod to the College Gameday boys, here's Big & Rich with "Comin' to your City". Happy long weekend, people. Maybe next week I'll get cracking on some of those 30-something blog post drafts I've got in my queue...

Clip of the Week

A lot of good stuff this week, but one clip stands out above the rest.

I loved this catch by the Blue Jays' Rajai Davis, and this tag-team catch by a couple of San Francisco Giants was entertaining as well. I'm also interested to watch this documentary about the knuckleball, given my well-known love of Tim Wakefield. Elsewhere in the sports world, we had this spectacular goal from Lionel Messi, which you really have to watch in slo-mo to fully appreciate.

In other random news, I was wildly entertained by this video showing that monkeys reject unequal/unfair pay structures (I love monkeys), and I thought this time-lapse of Los Angeles at nightfall was incredibly well done. 

Finally, in the political realm, I may not totally agree with Senator Rand Paul's political views (I like his dad a great deal, but I happen to think Rand is a nutjob), but I just can't disagree with his rant against Congress and its ridiculous ways of doing business. He's right to complain, and I salute his efforts to bring transparency (and fairness) to our political process, even if it they are ultimately all for naught.

But hey, speaking of nutjobs, this dude made a bicycle entirely out of cardboard. That's insane! It's also awesome. It's also your Clip of the Week, because yeah.

Izhar cardboard bike project from Giora Kariv on Vimeo.

Thursday, August 30, 2012

On review factories and web-based deception

I've written about the dangers of relying on internet reviews here once before—I also wrote a blog post discussing the practice known as "astroturfing"—but the concept of "review factories" was a new one to me. Of course, I can't say that I'm in the least bit surprised...
In the fall of 2010, [Todd] Rutherford started a Web site, At first, he advertised that he would review a book for $99. But some clients wanted a chorus proclaiming their excellence. So, for $499, Mr. Rutherford would do 20 online reviews. A few people needed a whole orchestra. For $999, he would do 50.
There were immediate complaints in online forums that the service was violating the sacred arm’s-length relationship between reviewer and author. But there were also orders, a lot of them. Before he knew it, he was taking in $28,000 a month...
Reviews by ordinary people have become an essential mechanism for selling almost anything online; they are used for resorts, dermatologists, neighborhood restaurants, high-fashion boutiques, churches, parks, astrologers and healers — not to mention products like garbage pails, tweezers, spa slippers and cases for tablet computers. In many situations, these reviews are supplanting the marketing department, the press agent, advertisements, word of mouth and the professional critique...
“The wheels of online commerce run on positive reviews,” said Bing Liu, a data-mining expert at the University of Illinois, Chicago, whose 2008 research showed that 60 percent of the millions of product reviews on Amazon are five stars and an additional 20 percent are four stars. “But almost no one wants to write five-star reviews, so many of them have to be created.”
"Created," in this case, of course means "bought". In this case, you pay Todd Rutherford a few hundred bucks, he goes onto Craiglist and finds a bunch of people to write reviews for 15 bucks apiece, and then he pockets the remainder. Nice business. Unfortunately for Todd, it didn't take long for his business to be exposed as a scam, and is no longer operational. But many of its competitors no doubt still exist, and it's nearly impossible to know how many there are and which products they're reviewing.

I hadn't seen the research saying that 80% of Amazon reviews were 4 or 5 star reviews, but it's definitely an eye-opening statistic. The take-home lesson here is pretty simple—if you want to know whether the product you're buying on the internet is any good, do your own research. If you outsource your research to "anonymous" internet reviewers, and trust in their opinion without verification, then you'll get what you pay for (actually, you'll get what the company paid for, but I digress).

But if you do insist on trying to discern which internet reviews are legitimate and which are fake, then Barry Ritholtz has passed along a helpful little guide of what to look out for. I'm sure a lot of these tricks will be familiar to many of you already...

Of course, what I would suggest instead is that you do what I already do—ignore the 4 and 5 star reviews entirely, and just read all of the 1 and 2 star reviews, almost all of which are legitimate. Sure, an enterprising company could be paying people to write negative reviews about its competition, but it's much less likely. So if you're looking for advice from internet reviews, that's the place to go. But of course, there are always better places to go...

[Yahoo Finance]
(h/t Falkenblog and Barry Ritholtz)

Quote of the Week (Brockton edition)

Whoa, it's Thursday already? And I haven't written a single blog post yet this week? And there's seriously football on tonight? Like, real actual football? Man, what happened to my summer? And why do I have 38 unfinished blog drafts sitting in my queue? I mean seriously, 38?

Alright, it's time to get back to work around here, starting with your belated Quote of the Week. This one comes from an article that I came across while I was on vacation, and it follows in a theme that I first teed up in this blog post, and then briefly followed up on at the end of this blog post. On multiple occasions I've called for people to boycott the big banks because of their continued criminal behavior, because the banks won't get the message until we hit them in the pocket with it.

There have been a few consumer-led move-your-money campaigns over the past few years, but the simple fact is that large institutions (governments and corporations) can single-handedly keep these banks in business even if the consumer depositors don't. Not only can they do so, but they're almost guaranteed to do so, in large part because they need the banks in order to remain solvent (who else is going to finance their ever-increasing debts?).

But sooner or later, even those governments and corporations are going to say "enough is enough" (whether as a result of taxpayer pressure or their own decision-making process), and we may be nearing that tipping point. The LIBOR-fixing scandal and the bid-rigging scandal were both instances where banks boldly conspired to effectively (or directly) steal money from local governments, indicating a brash assumption on their parts that they are completely above the law and have governments in the palms of their hands (not a bad assumption, frankly, but almost certainly taken too far).

This is a severe miscalculation on the banks' part, a banking equivalent to biting the hand that feeds them. City and local governments are seriously pissed, and they're starting to fight back. How appropriate, then, that one of the first cities to come out swinging was Brockton, Massachusetts, the so-called "City of Champions", home to Rocky Marciano and Marvin Hagler. From The Boston Globe, via Naked Capitalism's Yves Smith:


"Brockton will move its $170 million payroll account out of Bank of America, a move the city says makes good business sense but which advocates for residents facing foreclosure see as a just response to the national lender’s role in the subprime mortgage crisis."
                                        - The Boston Globe

For what it's worth, Brockton's City Treasurer went out of his way to stress that this was a strictly business decision, motivated by a better offer from local bank Eastern Bank. But he also admitted that he was sending a message to Bank of America with this move, and that he is revisiting the city's other working relationships with the bank (including school lunch accounts and health care trust funds) to see if they might be better served elsewhere.

Politicians and governments are funny beasts, and they have a tendency to change their tunes very quickly when public opinion shifts. Banks have been able to count on the support of government policies for many decades now, but it's clear that they've taken advantage of that support and in many cases betrayed the governments' trust. If at any point in the future any city government believes that there is more to be gained politically from leaving a bank than from continuing to support it, you can bet that those governments will make the politically popular move, banks' bottom lines be damned.

Might this Brockton decision be just an isolated incident in an otherwise unchanged environment? Quite possibly. But I'm wondering if this might be a warning shot, and if a tipping point might be nearer than many people (and banks) think. We'll see.

[Boston Globe]
(h/t Naked Capitalism)

Friday, August 24, 2012

Song of the Week(end)

Right on the heels of Clip of the Week, here's your Song of the Week(end), coming from a band I hadn't heard of until about 3 hours ago.

I got an e-mail in my inbox today promoting a Halloween night show here in Charlottesville featuring SOJA and Matisyahu. I've been a fan of Matisyahu's music for a while (particularly this song and this song), but I'd never heard of SOJA before (turns out they're a local act). If you're interested, here's their Wikipedia entry.

To summarize: SOJA is all about cool reggae, good beats, and awesome weekend listening. So let's enjoy summer while we still can, and cool out with some good BBQ-ing music—"I Don't Wanna Wait", by SOJA. Happy weekend, people.

Clip of the Week

One of the good things about going on vacation is that I now have two weeks worth of material for Clip of the Week, some of which I'm choosing to hold back until next week, because I can.

So while I could choose to make fun of NBC's coverage of the Olympics by posting this unfortunately timed promo for an NBC show, NBC's way too easy a target, and we've all moved on by now anyway (which means that this volleyball play, cool as it may have been, is also out of the running, as is this interactive graphic about the 100-meter dash).

I'm also going to pass on the baseball highlights (and lowlights) for now, because I'm sure we'll have plenty of them to choose from over the coming weeks as the pennant races heat up. So, sorry, Roger Bernadina... but keep up the good work.

I gave serious consideration to Jimmy Fallon's Jim Morrison impression, as he does a Doors version of the Reading Rainbow theme—I find Fallon to be extremely annoying, but he's at his absolute best when he's doing this kind of stuff—but I chose instead to give this week's clip to the world's fastest birds.

This clip is mesmerizing, and it involves animals, two things that I'm always a sucker for in Clip of the Week. So blow this up full screen and enjoy. It's pretty awesome.

Thursday, August 23, 2012

On Bartolo Colon, cheating, and the human response

Yesterday, in the most unsurprising news of the sports decade, Oakland A's pitcher Bartolo Colon was suspended 50 games after testing positive for performance-enhancing drugs. This news followed on the heels of the similar suspension of San Francisco Giants' All-Star outfielder Melky Cabrera (wait... steroids... in the Bay Area?? Well, I never!), who went to some pretty extraordinary lengths to avoid punishment for his misdeeds.

For those of you not up to speed on the matter, Bartolo Colon was once a terrific pitcher, making multiple All-Star teams and even winning the AL Cy Young award in 2005 with the California/Anaheim/Los Angeles Angels. Then he got fat, injured, and generally useless, winning only 14 games (in 48 total starts) over the next four seasons with three different teams. He never threw more than 100 innings in any of those seasons, and he managed fewer than 60 in two of them.

After his ineffective 2009 season, the 36-year old Colon disappeared entirely for a year, presumed by many to be finished. But then, miraculously, amid reports of a mysterious and controversial stem cell procedure, Colon burst back onto the scene with the Yankees in 2011, making 26 effective starts (and tossing 164 innings, more than he had thrown since his Cy Young season in 2005) while helping the Yankees win their division. He continued that success this year in Oakland, where he made 24 starts (and may have made more than 30, without the suspension) while winning a team-best 10 games and posting a solid 3.43 ERA.

Great success! A modern medical miracle! All hail the mysterious and controversial stem cell procedure! Or... you know... plain old steroids. Whatever, what am I, a doctor?

Of course, by now, we shouldn't be surprised to hear about steroids in baseball, particularly among athletes from the Dominican Republic, where there's been a long line of violators at both the major league and minor league level, including stars like Manny Ramirez and Alex Rodriguez. The only thing that's surprising is that we all continue to pay any attention (or feign outrage) when news like this breaks.

At the end of the day, in any world where there are great rewards to be had, there will always be those who are willing to cut corners to get to the top. It's a dynamic that I discussed at length in this post, in which I compared Roger Clemens (oh, and screw him, but that's a story for another day) to Bernie Madoff for their willingness to break the rules. It's even less far-fetched to assume that in a place like the Dominican Republic—where economic opportunities are few and far between—we might find even more people who are willing to fudge a few things in order to find success. On a similar note, think none of the Jamaican sprinters are into some similar stuff? Yeah, think again.

And of course, the teams that employed these players knew all of this as well, and assumed that the risks of signing a guy with steroid question marks were worth the financial rewards. Every GM in baseball is in possession of a chart that predicts rates of decline in production as players age—the charts are far from perfect, but they're in wide use, and especially smart teams like the Yankees and A's are well aware that a fat and fading guy like Colon is unlikely to make a dramatic comeback without a little "chemical assistance". So they knew, we knew, and yet we as spectators did nothing to prevent Colon from taking the field, demanding nothing of MLB until this inevitable day that he tested positive for PEDs. 

So ultimately, we as spectators get the product we deserve, the product we demand. We vote with our wallets and tell MLB that everything is a-okay with us, that we don't care if half the players out there are doped up beyond all recognition. And honestly, that's fine. I see no problem with that process in principle—it's free-market economics at its best. But when we vote with our wallets, with full knowledge of what's going on out there, we lose our right to feign outrage when the curtain is pulled back.

The same is true for us as consumers, as voters, as employees/pensioners, or even as family members. When something sounds or seems too good to be true, it very often is. And if we fail to hold people accountable when they've taken advantage of us, then frankly, we deserve what we get.

The fact is, for all the ranting that I do here on my blog about the banks, and the NCAA, and our broken political system, I continue to hold multiple bank accounts at a large bank (Wells Fargo), I'm a season ticket holder for multiple collegiate sports (at UVA), and I have never in my life voted for a third-party candidate (though that is likely to change, soon). So until I am willing to put my money where my mouth is, I too am part of the problem. The first step is recognizing it and admitting it. The next step is taking action. If we want a different world, we have to start by demanding a different world. Otherwise, we should all probably stop whining, myself included.

So until that day comes, this is America, where if you ain't cheatin', you ain't tryin'. Nice, huh?

Wednesday, August 22, 2012

Quote of the Week

It's the dog days of summer (well, for most of us, anyway—I just saw the neighborhood kids waiting for the bus for their first day of school this morning, so that about does that), which means that there isn't much in the way of news to sink our teeth into. I picked a good time to take a break from the blog, I guess.

So when I went in search of a Quote of the Week with which to announce my return from vacation, I realized that nothing much I'd come across was fresh and new. Sure, this blog post about Obama's quasi-religious pleas for Americans to "believe" in America would've been good fodder for a rant on what America and her political system have become... but the Obama quote in question is four years old, and honestly nothing all that special.

There was also this long blog post on the dangers of cynicism and apathy, which I found to be pretty strongly inspirational but also something that sort of spoke for itself—nothing much for me to add to the conversation.

So since we're resigned to going with something old and somewhat stale, and since I'd prefer to come back from vacation on a lighter note (as opposed to my usual ranting diatribes), I decided to go with an excerpt from this excellent oral history of "White Men Can't Jump" over at Grantland.

"White Men Can't Jump" is an all-time favorite of mine, and I honestly can't believe it's now 20 years old. I always love to read about some of the behind-the-scenes stuff that happens on these movie sets, as well as the original casting ideas (Laurence Fishburne as Sidney Deane? Really??). This one happens to be particularly entertaining, and I laughed out loud reading some of these guys' takes on the whole experience.

So this week's Quote of the Week comes from actor Cylk Cozart (Who? Ohhhhh, THAT guy...), who was originally being considered for the lead role of Sidney Deane before being passed over in favor of Wesley Snipes. In discussing some of the early contenders for Woody Harrelson's Billy Hoyle character, Cozart passed along an interesting experience with a young Keanu Reeves.


"Keanu almost broke my neck going up for a layup. He was so wild. He was throwing the ball hard and throwing elbows. He didn't know what he was doing. [Writer/Director] Ron [Shelton] stopped it, like, 'OK, I've seen enough.' I thought, 'Wow, what was he doing growing up? He didn't play ball?'"
                                - Actor Cylk Cozart

Maybe I shouldn't be, but I'm always surprised to find out how unathletic some of the best actors—especially those who come across as "jocks"—can be in real life (see: Vince Vaughn, Gary Sinise).

Maybe that speaks to the magic of the camera, or maybe the ballplayer in me just unrealistically expects everyone to be able to throw a ball without looking like a complete spaz, I don't really know. But it's funny to think that if Keanu was simply a little less of a complete space case on the court, "White Men Can't Jump" could've become an entirely different—and in my opinion, worse—movie. So here's to life's lucky little accidents, for giving us Woody Harrelson and a very memorable movie character. Happy 20th Birthday to one of the greatest sports movies of my lifetime.


Tuesday, August 21, 2012

Back in the Saddle

I'm back home after a brief New England vacation, reconnecting with family and realizing that I definitely need to do that more often. I'll be catching up on things around here slowly but surely, and I'll be announcing my presence with authority with your Quote of the Week this afternoon. After that, all bets are off.

For now, I'm sharing with you this cartoon that somehow seems pretty apt in the wake of my recent vacation. Hope you all didn't miss me too much. And would it kill you to call your mother?

Wednesday, August 8, 2012

JCPenney's big gamble

There was some interesting news a couple of weeks ago in the (shrinking) world of retail, where department store JCPenney announced what amounts to a "bet the company" proposal.
Struggling retailer JCPenney is making some big changes that will affect customers and its clerks. The store is getting rid of its check-out counters. 
CEO Ron Johnson said it will remove check-out counters in stores and replace them with a system that won't require clerks. It's all part of an effort to return the department store chain to profitability. 
Shoppers will be able to use self check-out machines, similar to those found in grocery stores. 
JCPenney is also planning to replace traditional bar codes on price tags with high-tech radio frequency identification, or "RFID" chips to make purchases faster. 
Johnson told "Fortune" magazine he hopes to phase out check-out counters by 2014.
This is a gutsy move, and one that only a desperate company could realistically get away with attempting. JCPenney is on the fast track to bankruptcy, so risky proposals are more acceptable to shareholders than they would be in other situations.

Will it work? Maybe, maybe not. But if necessity is the mother of invention, then desperation is at least a step-father or a surrogate. In fact, I see this dynamic as the great silver lining to our current economic malaise—in fact, I think it's the exact reason that we need a good recession every now and again, so that we can innovate our way out of it.

When things are going well, there's rarely any obvious reason to take big risks or try anything new, even though there should be (call it the curse of mediocrity). But when the sh*t is hitting the fan, people are willing to try just about anything, and this desperation very often breeds incredible technological and strategic breakthroughs. Does it also introduce extreme downside? Of course, but when you're going bankrupt anyway, who cares when it happens? Let's take a shot, right?

I generally welcome and embrace economic recessions, because they force people to be creative and thoughtful about their lives, careers, and relationships with other people in their communities. Creative destruction is at the root of capitalism and free markets, and without it there can be no lasting economic growth. I'm rooting for JCPenney here, if only because I like to see a gutsy move rewarded. Time will tell.

[ABC News]

Ponzi financing in California

I don't have a lot to add to Mish Shedlock's take on this situationthis post of mine basically covered the issues at hand—but suffice it to say that by now, just about every government in California is bankrupt and desperate. Given my previous post, though, I thought I had to pass this item along. From Mish (italics are quotes from this article, bolding is mine):
Poway California, population 47,811 as of 2010, has placed an enormous bet on rising home prices and tax revenues. Poway borrowed $105 million but will not start to pay that amount back until 2033 at which time they will owe $877 million in interest. 
Clearly this would be fiscal insanity anywhere, but it is especially true in California given Proposition 13 that caps property taxes... 
Last year the Poway Unified School District made a deal: It borrowed $105 million from investors to fund a final push in its decade-long effort to revamp aging schools. 
Without increasing taxes, the district couldn’t afford to borrow money in the conventional way. So, instead of borrowing from investors over 20 or 30 years and paying the debt down each year, like a mortgage, the district got creative. 
With advice from an Orange County financial consultant, the district borrowed the money over 40 years in a controversial loan called a capital appreciation bond. The key point for the district: It won’t make any payments on the debt for 20 years. 
And that means the district’s debt will keep getting bigger and bigger as interest on the loan piles up... 
As well as being expensive, capital appreciation bonds work by tapping future growth in property values to pay today’s debts, a concept considered by many in the school bond business to be both risky and inequitable. In 1994, the state of Michigan banned school districts from issuing bonds like this, deeming them too toxic to taxpayers. 
Nevertheless, California’s ever-strapped districts have increasingly looked to capital appreciation bonds to raise money for improvements without increasing taxes on current residents. Across the state, districts have borrowed billions this way, using exotic financing to shift the burden for paying for today’s school construction to future generations of Californians. 
"This is way worse than loan sharking," said Michael Turnipseed, executive director of the Kern County Taxpayers Association in central California, which has lobbied the state Legislature to tighten laws on school district borrowing. "And Poway is the poster child. What they have done is absolutely insane." 
Think growth will bail out Poway? Think again. 
From Poway City Data the population of Poway shrank by .5% between 2000 and 2010. 
The current upfront cost of this $1 billion proposal would be $2196 per every man, woman, and child. 
By the time Poway starts paying the bill, the cost will be $20,916 per every man, woman, and child. 
Given the average household size is 2.9, the cost per household when the debt is due will be $60,656... 
This scheme is not insane, it's well beyond insane. Unfortunately, I cannot come up with a stronger word to describe it. 
Bear in mind that 20 years from now it is highly likely the school district will need still more money for school maintenance.  What then? Will property taxes rise 10-fold to pay back this loan?
Mish's last point is right on. The problem with taking on massive amounts of debt—thus shifting the burden of current expenditures onto future generations, with interest—is that future generations will still have to find a way to finance the expenses that come up in their time, in addition to paying off the previous generations' bills.

For an analogy, imagine trying to pay down a mortgage on your own house while also still paying down your parents' mortgage on a house that you no longer live in but that has been accumulating interest for decades without a single principal payment—yeah, doesn't sound too feasible, does it?

Sooner or later, the debt writedowns (defaults) will come, because they must. If you can't find the money now, you can't just wave your hands and assume that your kids will have it in 20 years' time. They won't. They'll be too busy paying down their own student loans, not to mention fixing the crumbling infrastructure that you left for them.

But hey, that's not your problem, right? Hey, somebody give J.G. Wentworth a call... we've got some bridges that need some fixing.

[Mish Shedlock]

Tuesday, August 7, 2012

Quote of the Week (NFL Edition)

Shortly after former NFL linebacker Junior Seau's tragic suicide in May, I published a post here regarding concussions and the NFL. In that post, I argued that most NFL players are well aware of the risks of football (not just concussions, but of injuries of all types), but that they choose to play anyway because the rewards are so large.

My argument was lent serious credence over the weekend by former running back (and one-time Patriot) Curtis Martin, who may have said more than he realized during his Hall of Fame induction speech in Canton (which, incidentally, was incredible in its candor and is definitely worth watching in its entirety). In discussing his mentor, Bill Parcells, Martin cited this line from the legendary coach:


"I've always believed one thing... You should never come out of the huddle, because you never know who's going in the huddle."
                                      - Hall of Fame football coach Bill Parcells, via Curtis Martin

Martin went on to describe his takeaway from Parcells' message—in the NFL, you're always replaceable. There's always some rookie somewhere who's right on your heels, itching for the opportunity to take your job (Drew Bledsoe, meet Tom Brady). Martin later admitted that nearly every year in training camp there was someone on the Jets roster who had more ability than him, but that he kept his job simply by "out-working everyone".

With all due respect to Martin's legendary work ethic, it's probably not the only reason he kept his job—a consistent willingness to shake off injuries and even concussions couldn't have hurt his case. Indeed, Martin would follow up his Parcells story by recounting a tale of having been knocked silly during one game, leaving him so dazed that he ended up inadvertently wandering into the Oakland Raiders' defensive huddle.

I wouldn't be surprised if Martin was back on the field later in that same game against the Raiders, not to mention the next week and the week after that. In fact, given his incredible durability in his career (he missed only 8 regular season games in his 11-year career, 4 of which were in his final season), I'd be almost certain that was the case.

The uncomfortable truth is that if he hadn't found a way to get back on the field, somebody else would have, and the fear of being replaced is never far from a professional athlete's mind. It's never easy to make the decision to step aside and take a few plays off, especially when in the heat of the battle. And yet, despite all of this, and knowing all of the risks inherent in football, Martin still says that he would let his own children play football, because he believes that the risks are worth the potential rewards (be they tangible or intangible).

Honestly, I find Martin's honesty in this regard to be refreshing. We all engage in behavior in our lives that is "risky", but we do it because we happen to assess the situation as "worth it", whatever the potential rewards from the situation may be. So we smoke, we drink, we eat red meat, we play the lottery, we invest in the stock market, we buy houses in Las Vegas in 2005 with interest-only mortgages, whatever. The point is, we're all adults here, and as such we're entitled to make our own decisions about which risks are and are not acceptable in our lives.

I'm fine with all of this, right up until the time that those same people try to blame others when the risks inherent in their actions blow up in their faces. Sure, the bank ripped you off, but it's your fault for not reading and understanding your mortgage documents. Yes, you have a serious brain injury, but it's your fault for rushing back onto the field when you couldn't actually see straight.

I sympathize with those players who played back before there was a full appreciation of the seriousness of brain injuries (concussions), and I certainly don't mean to be callous with respect to players like Seau and Dave Duerson, whose deaths were tragic by any definition. But we're seeing more and more athletes admitting that they know (and knew) the risks of playing through injuries, and decided that the risk of not playing was in fact greater than the risk of continuing to play. That's life in the NFL, and we fans know it just as well as the players do. As long as there's another rookie willing to step out on that field, we'll keep seeing veterans who are willing to sacrifice their health in order to keep their jobs. That's just football.


Monday, August 6, 2012

"Criminality" in Oregon

What is this, L.A.?
Gary Harrington, an Oregon man, will be spending a month in jail, after being convicted on nine misdemeanor charges. His crime? "Illegally" collecting rain water on his own property.
Harrington, who lives in Eagle Point, Oregon, has been fighting for the right to collect rain water since 2002.
Now a decade later, he has been sentenced to 30 days in jail and fined over $1,500 for the man-made ponds he has built on his 170 acres of land. For filling “three illegal reservoirs” on his property with runoff water, Harrington has been convicted on nine misdemeanor charges in Circuit Court.
According to authorities, Harrington broke the law by collecting natural rain water and snow runoff, that landed on his property. Harrington said he stores the water mainly for fire protection.
According to officials with the Medford Water Commission, the water on Harrington's property, whether it came from the sky or not, is considered a tributary of the nearby Crowfoot Creek. Thus it is subject to a 1925 law, giving Medford Water Commission full ownership and rights to the water.
Due to this, prosecutors were able to argue in court that the three man-made boating and fishing ponds on Harrington's property have violated the law.
For what it's worth, in this case (unlike this case) I can at least begin to understand what the original purpose of the law in question was (or may have been). But this isn't 1925 anymore, this guy obviously doesn't have any ill intentions, and this whole thing just doesn't make any sense.

Then again, this is 21st century America, where one class of people can rip everyone off (and even admit to violating federal law) all they want and just pay a small fine, but another class gets thrown in jail for collecting rainwater. Sounds fair. Does anybody care?

[Digital Journal]

How Facebook could (help) bankrupt California

I wrote briefly last week about the troubles over in Facebookland (I shed no tears for Mr. Zuckerberg) and the company's incredibly shrinking stock price. Unfortunately for some of us—especially the California schoolteachers among us—there's some collateral damage here (isn't there always?). Per Bloomberg:
Facebook Inc. (FB)’s declining price may cost California “hundreds of millions of dollars” in revenue expected from taxes on capital gains, the state’s fiscal analyst said.
The owner of the world’s largest online social network, touched $19.82 today, the lowest price since the Menlo Park, California-based company first offered shares to the public at $38 on May 17.
The most populous U.S. state’s $91.3 billion budget, signed by Governor Jerry Brown in June, counted on $1.9 billion in income-tax revenue from company insiders such as Chief Executive Officer Mark Zuckerberg exercising options or sell shares, assuming an average price of $35. Facebook, which touched $45 May 18, has averaged $29.49 on the Nasdaq stock market.
“Facebook share prices have fallen far below levels assumed in the state’s revenue projections,” the nonpartisan Legislative Analyst’s Office said yesterday in a report. If “the lower share prices persist through November and December, hundreds of millions of dollars of income-tax revenue assumed in the state budget plan are at risk.”
Perfect. Let me put this as simply as possible—if your budget is only "balanced" based upon assumptions of one-time revenue streams from viciously overvalued assets (whether those assets are internet stocks or McMansions or marijuana farms or whatever else), then your budget isn't actually balanced and you need to go back to the drawing board. That's true whether you're an individual, a corporation, a credit union, a babysitting co-op, or the world's largest local government. Math doesn't care who you are, and it can't be fooled (or manipulated) for very long.

The simple and uncomfortable truth is that this is why our nation has developed the unprecedented culture of bailouts and financial market manipulation that we now have, a culture that's robbing us all of our prosperity by warping and manipulating the underlying infrastructure of our economy. We've all been led to believe by any number of politicians and economists that deflation is our enemy, and that we need inflation (and $5/gallon gas) in order to prosper. This is, of course, obvious bullshit, but the party line actually makes a lot of sense when you dig a little deeper.

Simply put, almost every government in our country—whether local, state, or federal—depends upon high asset valuations in order to maintain anything in the ballpark of a balanced budget. Property taxes, capital gains taxes, sales taxes, even excise taxes, all of these are significantly higher when asset prices are inflated. When the housing bubble burst in 2007-08, it blew a gargantuan hole in state and local budgets nationwide, a hole that still hasn't been adequately plugged. Politicians will be damned if they're going to let this happen again, even if their actions guarantee that the next bubble will be bigger and uglier than the one that preceded it.

For more than a decade, governments made overly rosy assumptions about current and future tax revenues—and therefore made overly aggressive financial commitments—entirely because they believed that house prices could never decline. Then they did, significantly, and tax revenues dried up, but the financial commitments remained. Oops. And despite all of our government's best efforts, we haven't been able to reflate that housing bubble, so here we remain, in a position of constant stagnation.

When a state like California has its budget riding on Facebook's stock price, is it at all far-fetched to assume that California politicians will do whatever is necessary to prop up that stock, unintended consequences be damned? Of course not, and that's why we've got the system we've got. It sucks, but thousand of California pensioners now "need" Facebook's stock to rally. So won't you be a good neighbor and buy a few thousand shares?


P.S.- For another cute example of how individual taxpayers end up on the hook to effectively (or directly) subsidize the corporations in their communities, check out these two recent posts from Deadspin, showing how the Kansas City Chiefs and Royals have been oh-so-cleverly using taxpayer dollars to pay ordinary operating expenses. This is yet another reason why we should never have conceded to the concept of taxpayer-funded stadiums and arenas. We pay for the company's expenses (as taxpayers), and then we pay for the company's product (as fans). Sweet business, huh? Beats stealing cardboard.

Friday, August 3, 2012

Gone Fishin'

I'm heading up to the old stomping grounds in New England for a couple of weeks (a long-awaited summer vacation), so my posting here may be a little sparse. I'll be enjoying some lobster and chowder and all the other good stuff, and I figured I'd post this up in honor of my upcoming trip. Be good, people.

Thursday, August 2, 2012

Clip of the Week (Olympics Week 1)

As promised, this week's Clip of the Week is coming from jolly old London, where the first week of the Olympics hasn't disappointed.

So with apologies to this trick shot from John Daly (not Olympics-related), and this crazy buzzer-beater in women's basketball, and this rant from former TARP Inspector General Neal Barofsky (also not Olympics-related, but read his book if you liked it), and this world record from Dana Vollmer, and this amazing vault from McKayla Maroney in the women's gymnastics team final... this week's Clip of the Week is going to Nathan Adrian, who won the 100 freestyle in what may have been the race of the Olympics so far.

Unfortunately, I can't figure out how to embed NBC's videos on my page (I'm pretty sure they made it impossible, and I'll save my long list of gripes about NBC's coverage for another time), so you'll have to go to their site to watch the clip (click here). Congrats to Nathan and the rest of the American gold medalists; it's been a fun week.


My next business venture... who's in?

Things are getting a little tough in the markets these days, and I'm thinking of switching vocations. Anybody got any good ideas for me?
For most people navigating the sidewalks of New York, the corrugated-cardboard bundles that stores put out for recycling are either an obstacle or nothing at all – invisible stitches in the city's zippy visual drapery. 
But for a subset of underground scavengers, they represent a drool-inducing resource, something to be urgently carried away to a recycling plant in exchange for cash money. 
"Cardboard poaching," as it's become known, is a multimillion-dollar cancer growing in the diseased corpus of recycling crime. Though the media have lately zeroed in on scrap-metals theft and restaurant-grease rustling, the stealing of cardboard still hovers below most people's awareness level. That might change soon as the bandits become even more brazen and as recyclers bear down on the papery perps who propagate this unusual black market.
Excellent! Of course, this is all technically illegal (all part of the "diseased corpus of recycling crime", apparently) because there are already companies who have been licensed by the city to do this hauling, so this cardboard is officially stolen goods... but hey who's counting? The only thing I'm gonna be counting is dollar bills, just like Homer and Bart.
The way it's supposed to work is that approximately 150,000 commercial establishments in New York contract with waste-removal companies who are licensed with the Business Integrity Commission, which among other duties is responsible for helping fight corruption in the city's garbage-management trade after the Mafia's intrusion in the 1990s. These authorized haulers schedule pick-up times with the businesses and whisk the waste away in professional-looking trucks. 
The thieves, on the other hand, drive in trucks rented from U-Haul and Penske or even unmarked Econolines. They cruise slowly down the street manhandling bales of cardboard into the vehicles. Or they'll dodge behind a large store like Costco to retrieve spoils left outside by the Dumpsters.
Oh, right. That's why it sounds like such a great racket... it's Mafia business. Makes sense. Still... who's coming with me, huh?
... the city's recyclers estimate that they're losing anywhere from $8 to $10 million a year. They argue that this loss hurts consumers as well, because haulers who can't make as much profit are less likely to grant discounts to business owners. Those businesses might then resort to raising their prices on consumers, and so on.
Sounds like a load of crap to me, honestly. But hey, $8 to $10 million? Sign me up. Beats investing in government bonds, amirite?

[The Atlantic]

Wednesday, August 1, 2012

Quote of the Week (Facebook edition)

This week's Quote of the Week comes from the world of Facebook, that ever-shrinking titan of social media. Things haven't been going so well for the company ever since they went public, as the increased scrutiny seems to have uncovered a number of pretty serious warts, none more serious than these most recent allegations as reported by PCMag.
A New York-based startup is ditching Facebook after it discovered some questionable activity on the social network's ad platform. 
Limited Run, which develops e-commerce platforms for musicians and labels, claims that 80 percent of the clicks for which Facebook was charging came from bots, not real Facebook users. 
The company said it discovered the problem several months ago in preparation for the launch of the new Limited Run. "We noticed some very strange things. Facebook was charging us for clicks, yet we could only verify about 20 percent of them actually showing up on our site," Limited Run said in a blog post.
I'd recommend reading the whole blog post for the gory details, but the long and short of it is that there are some potentially serious issues with the way that Facebook is reporting and charging for its ad clicks. There may be no ill will intended there—Limited Run, for their part, doesn't think there is—but the issue may be indicative of a serious lack of internal controls at Facebook, and that's a huge problem for a company that relies on advertising revenue to succeed.

But it is a secondary allegation by Limited Run that is the source of this week's Quote. The company claims that Facebook refused to let them change the name on their page (from "Limited Pressing" to "Limited Run") unless the company agreed to dramatically increase their advertising expenditures—not surprisingly, that didn't go over too well with the folks at Limited Run.


"Damn we were so pissed. We still are. This is why we need to delete this page and move away from Facebook. They’re scumbags and we just don’t have the patience for scumbags."
                                  - Limited Run

In the wake of Limited Run's allegations, Facebook scrambled to clarify that it is not company policy to charge to change names, and that they would address the situation. While that's the correct move, this is yet another indication of a general lack of internal controls at the company.

Simply put, Facebook's executive team doesn't seem to be ready for prime time, and they are going to seriously need to get their act together if they are going to remain a public company. This kind of scrutiny is only going to get worse for them, and each "unfortunate" incident like this will continue to have a negative impact on Facebook's stock price.

The spotlight is shining, and so far Facebook has wilted. For a guy like Zuckerberg who hasn't made too many friends along the way, they can't afford too many of these hickups before the whole world simply revolts. The world is watching, and the clock is ticking.