Welcome March Madness (from The Simpsons)

It's March (already?), and that of course means that March Madness officially kicks off this week with Championship Week--plenty of teams have already clinched their NCAA berths, the Big East tournament has been underway for about a week now, and the ACC just started theirs today. I couldn't be more excited.

In honor of the ACC tournament and my Cavaliers (who earned a first round bye and start tourney play tomorrow), I thought I'd share my personal take on the ACC, as viewed through the all-knowing lens of The Simpsons. Enjoy. (Click on the pic to blow it up full size, for the full effect).

Quote of the Week (bonus edition)

Okay, this week I couldn't make a choice, so you're getting two Quotes of the Week. They're not related in any way, I just thought they both deserved recognition, so here goes.

First of all, in advance of this Friday's highly-anticipated monthly jobs report, former Reagan economic adviser David Stockman decided to put things in perspective for those of us who are getting (maybe a little too) excited about our apparently improving economy. In a wide-ranging interview that is highly critical of Fed policy (attaboy, Stockman), we're reminded that while things may be getting somewhat better in the job market, they're still pretty ugly.

QUOTE OF THE WEEK #1

"Look at the data that really counts. The 131.7 million (jobs in November) was first achieved in February 2000. That number has gone nowhere for 12 years."
                                                 - David Stockman

This is a gentle reminder that without a SIGNIFICANT number of new jobs and a MUCH higher labor force participation rate among the younger generation, there is NO WAY that we can possibly afford to subsidize the Baby Boomers' retirement years via Social Security and Medicare without going completely bankrupt as a nation. While the debt and deficit numbers are already staggering, our biggest liabilities have barely even begun to show up, and our tax base is showing no signs of expanding. This is a big problem.

And hey, on that note, it's Super Tuesday!! The day on which we will (maybe) choose who will try to lead this country out of the problems that Stockman has so kindly pointed out for us in his interview. So we'll turn things over to Joe Nocera, who has some... interesting words about Rick Santorum (a candidate I've briefly discussed here). In a piece that is highly critical of what the modern Republican party has become, Nocera gives his best endorsement of Santorum:

QUOTE OF THE WEEK #2

"An alcoholic doesn’t stop drinking until he hits bottom. The Republican Party won’t change until it hits bottom. Only Santorum offers that possibility."
                                     - Joe Nocera, New York Times

Yeah, that's pretty much how I feel about him. I support neither party, but I've voted Democrat in three straight Presidential elections because the Republican alternative was so distasteful to me (I have few kind words for George W. Bush, and John McCain ruined any good feelings I had about him the day he picked Sarah Palin as his running mate). And yet, if I had to choose between Bush, McCain/Palin, and Santorum... Santorum would be the absolute last choice on my list. But enough of that.

Nocera makes some solid points (it's not all snark), and I think his take on the matter is worth a read. I will now go vote for Ron Paul. Go America.

[USA Today]
[New York Times]

Why listen to critics?

We love critics in our culture--whether they're pundits providing analysis, rating agencies giving advice, or pure criticism as in the newspaper, we're absolutely addicted to reading about and soliciting other people's opinions. If we weren't, then this blog frankly wouldn't have any reason to exist (yes, I'm a critic, but you already knew that). There's something comforting in knowing (or believing) that we're making informed decisions about the things that we do in this world, and there's always strength in numbers. Buying or watching or listening to something that somebody else knowledgeable has already signed off on gives us a huge (if intangible) sense of comfort.

But why do we assume that the critics whose opinions we solicit have similar tastes to ours? What if the people providing the ratings are in some way fundamentally different than the people who are following the advice they give? That's the main question behind this Bloomberg article, which focuses on wine critics.

The flavors described so effusively by top wine critics may not be shared by consumers who buy products based on their opinions, a researcher suggests. 

Winemakers and critics surveyed in Canada were found to be much better able to sense a test chemical as intensely bitter, compared with average consumers who weren’t bothered by the taste, according to a report in the American Journal of Enology and Viticulture. 

The chemical is an indicator of oral sensitivity, the researchers wrote. The data suggest people born with a talent for identifying tiny differences in wine may have naturally gravitated to an industry where their abilities give them an edge, said John Hayes, director of the Pennsylvania State University’s sensory evaluation center. 

“Wine experts are more likely to have a very exquisite, acute sense of taste that the rest of us can’t sense,” said Hayes, one of the authors of the report, in a telephone interview. “Some of that is biology.”

In this case, we have scientific evidence that wine experts and general wine consumers are indeed two completely different types of people. That could explain why, when I take a sip of a Pinot Noir, I have just a little bit of trouble identifying the "hints of earthy cinnamon and honeysuckle", or whatever the hell the tasting notes say I'm supposed to taste. Why, then, should the wine experts' opinions be worth anything at all to us? If we can't appreciate what they can appreciate, is their "wisdom" at all helpful? Or is it perhaps even counter-productive?

I wonder how pervasive this is in other areas of criticism--do movie critics hold their movies to higher standards than the general public (yes, almost certainly)? Or are they simply looking for things that average people don't really pay much attention to?

The more I think about this kind of stuff, the more important I think word-of-mouth marketing becomes. Since we don't ever really know anything about the nameless, faceless people who provide reviews of the products we buy, we have no choice but to take their opinions on faith. That can defeat the whole point of relying on an outside opinion in the first place, so we instead have a tendency to lean on those closest to us--our friends and family whom we know have similar tastes to ours.

That's a difficult dynamic to capitalize on for many businesses and prospective marketers. It would be much easier for them (if more risky) if they only had to convince one critic that their product was high-quality, as opposed to thousands of unique customers. In the internet age, it just may be that traditional critics like the wine experts discussed in this Bloomberg article could become an endangered species. In my opinion, that's probably a good thing. But then... why are you listening to me?

[Bloomberg]

Song of the Week(end)

Okay, let's finish off this three-post Friday (let's call it a hat trick) with a little weekend music. I was planning to honor the recently-deceased Davy Jones--former lead singer of the Monkees--in this post, but I've heard "Daydream Believer" so much this week that it's nearly driven me insane (much like "I Will Always Love You" a couple of weeks ago... I had no idea the Monkees were ever this popular... I don't think they were).

So instead, I'm going to go in a completely different direction and throw a little sports theme onto this weekend's tune (no, this isn't the first time I've done that). You see, 50 years ago today, Wilt Chamberlain scored 100 points in an NBA game. Along with Joe DiMaggio's 56-game hitting streak, it's in the Pantheon of sports' most unbreakable records, a record made even more impressive by the absence of the 3-point shot in Chamberlain's era.

In the last 20 years, only Kobe Bryant and David Robinson have come anywhere close to Wilt's mark, even with the 3-pointer at their disposal. So today, we honor The Stilt by playing the chart-topping song from 50 years ago, Gene Chandler's "Duke of Earl". Yes, I'm thrilled that the chart-topper was actually a song that I'd heard of and liked, never a guarantee when you're talking about the '60s--it made this post much easier on me. Happy weekend, people.

The lunacy of Dow 116k (or, why all our pension funds are screwed)

I'm going to try to make this one as quick as I can, because I could really rant about it for days. I've talked here before about how the only market analysts who get publicity are the ones making outrageous calls (Dow 3,000! Dow 25,000 by August!), and how this has everything to do with the severely skewed incentive structure surrounding punditry.

Now, with the market nearing multi-year highs, we're in prime territory for these kinds of silly calls, on both sides of the bear/bull debate. This one just happens to be the most absurd, and for those of you who follow me on Twitter, you may already have seen my teaser of this issue. From MarketWatch's Chuck Jaffe:

My favorite market forecast of all time came in the fall of 1995, when mutual fund pioneer Bill Berger came to Boston and predicted the Dow Jones Industrial Average would rise to 116,200.  

He didn’t think it would happen overnight. In fact, the 70-something founder of the Berger Funds figured the market would need until the year 2040 to reach it. (He wryly suggested that if he was proved wrong, people come find him to discuss it; sadly, he died a few years later.) 

Of course, Dow 116,200 would be a far more ridiculous thought than even, say, Dow 36,000, the title of a popular-but-wrong-headed book from the bubble days of the late 1990s, were it not for one thing: As the Dow touched 13,000 this week (and the Nasdaq Composite flirted with 3,000), it’s actually stunningly close to being on track toward making Berger’s prediction come true.

Stunningly close, eh? Let's unpack this one for a minute. Jaffe goes on to extrapolate the annual return over the last 17 years (a completely arbitrary time period that is only relevant based on the exact timing of the prediction he's attempting to analyze), assuming that it will persist at exactly this same rate (7.2% compounded--he actually uses 6.75% because he's starting in June and not March, whatever) over the next thirty years. Using that compounding, the Dow will be well above 100k and on its way to 200k by 2046.

The problem is, this compounded annual rate is absolutely an accident of the time period he's using. For the first five years following Berger's Dow 116k call, the market went on an unprecedented vertical run-up, fueled by an influx of Baby Boomer cash and the dot-com bubble frenzy. The compounded annual return between 1995 and 2000 was a staggering 21%, leading the stock market to more than double over those five years.

Unfortunately for Jaffe (and Berger), it's made basically zero headway since then. In the 12 years following that once-in-a-lifetime bull market, the market has simply lurched from one asset bubble to the next, treading water for a long enough time that just about any index with a continuous compounding assumption (like, um, a pension fund) now finds itself hopelessly behind the curve. The only reason that the Dow 116k call looks like anything resembling a reasonable prediction is the specific and arbitrary points that our author has selected for his analysis.

To show what I mean, let's use a couple of other equally arbitrary starting and ending points for our analysis, to see what kind of wildly different conclusions we can reach (we'll list the author's prediction first, for comparison's sake). You might want to click on the table to get a clearer view.

I'm a particular fan of the "Dow 26 Million" call that you could make if you extrapolated from the March 2009 bottom until today--that's a good one. And the "Dow Zero" call at the bottom of the table is a bit harsh--the Dow would actually hit an asymptotically small level of nine cents by 2046 under that projection, so you wouldn't be totally wiped out.

The point is, any time you try to extrapolate too far based on arbitrary data sets, you're completely a slave to your small sample. Yes, I recognize that the 1995 to 2012 time horizon is the widest range of the bunch, and therefore your biggest and hypothetically least-random sample. But is the 12 years since 2000, where the market has eked out only a 1.9% annual return, meant to be ignored simply because the 5 years prior were so good? If 12 years isn't a significant sample, then why is 17? And if those 5 years from 1995 to 2000 are so important, why aren't the 5 years from 2007 to 2012--with their meager 1.43% annual gain, even after this year's ramp job--equally important?

You get my point by now, so I'll back off. The problem is, every single pension fund in the country uses exactly this kind of infinite compounding analysis in order to claim its solvency. These funds generally assume a consistent return of 7% to 8% (sometimes more) into perpetuity, in order to have enough funds to pay out their accumulated liabilities.

In other words, if the Dow isn't at 116,200 by 2046, these funds are gonna have one hell of a problem on their hands. So, you can laugh at this prediction if you want... but in doing so, recognize that your pension (if you've got one) relies on just this kind of mathematical lunacy. Gooooooooo Dow!!

[MarketWatch]

When hypocrisy is good business: "The Lorax"

Alright, I may be coming at you today with another flurry of posts to send you into the weekend. As usual, I promise nothing, but I've got all sorts of good intentions.

The ostensible purpose of this particular post is to share with you what just might be the greatest movie review ever written. You may have heard about the movie version of "The Lorax" already, and you almost certainly have if you watch Fox News (which, if you're reading this blog... ehhhh, you probably don't, but I digress). You see, many on the far right have latched onto The Lorax as their most recent cause célèbre, vilifying the movie as Hollywood's latest attempt to "indoctrinate" our kids with a dangerous message of conservation.

I could seriously spend hours unpacking the idiocy behind that one, but I won't bother. Because, as New York Times movie reviewer A.O. Scott points out, ultimately the joke is on Fox News. In a piece that is honestly one of the greatest examples of journalistic criticism in recent memory, Scott unleashes the awesomest, meanest, most beautifully-crafted negative review I've ever read (well, at least since Homer Simpson's review of "The Legless Frog").

Having donned recyclable 3-D glasses and seen the thing for myself, I’m not sure whether to mock the enemies of “The Lorax” for their cluelessness, to offer them reassurance or to compliment them for being half-right. Thematically the movie... dutifully lectures its audience on the folly of overconsumption and the virtue of conservation. At times the imagery takes on a dark, almost apocalyptic cast as it surveys the smogged-up, denuded landscape where the trees used to be and the shiny, commercialized pseudo-utopia (called Thneedville) that an alienated humanity, having lost the memory of nature, now calls home. 

Don’t be fooled. Despite its soft environmentalist message “The Lorax” is an example of what it pretends to oppose. Its relationship to Dr. Seuss’s book is precisely that of the synthetic trees that line the streets of Thneedville to the organic Truffulas they have displaced. The movie is a noisy, useless piece of junk, reverse-engineered into something resembling popular art in accordance with the reigning imperatives of marketing and brand extension. 

This is not a matter of hypocrisy or corporate green-washing on the part of the filmmakers, nor of reflexive Loraxian dogmatism on my part. The corporate entertainment system has shown itself perfectly capable of injecting soul into what it sells, and at inflecting some of its products with a critical spirit. “Wall-E” is a transcendent example, brilliantly embracing its own contradictions, but there are plenty of other movies, animated and not, that manage to pay tribute to the beauty of the natural world even as they revel in giddy, merchandising-friendly artifice.

Wow, wow, wow. Seriously, every word of this thing is perfectly chosen, and I highly suggest that you read it in its entirety. I read it aloud to my wife last night and I could barely finish the thing without grinning like an idiot at the sheer brutality of it all.

But the thing is, Scott is dead on. I've already seen The Lorax shilling for Mazda SUVs and doing random promotional spots for TBS (two of apparently 70 "launch partners" for the film, many of whom have tenuous ties at best to any environmentalist movement), and I'm sure there's more on the way. All I know is, if I see the Lorax showing up courtside at Lakers games, I'm outta here.

As I said earlier, ultimately the joke is on Fox News here for assuming that The Lorax's "message" is in any way genuine. After all, the directors and producers are doing more damage to their own "message" with this hypocrisy than any conservative broadcaster could ever do. Actions always speak louder than words, and their actions here are extremely loud and in your face.

As a business entity, "The Lorax" is essentially doing what just about every corporate titan is doing these days--attempting to co-opt the "green" movement as a corporate slogan, spending more money publicizing its supposed good deeds than was ever spent actually pursuing those same deeds. It's brilliant P.R., but it's also in most cases incredibly dishonest and fraudulent.

Interestingly enough, Fox News could actually learn a little something from The Lorax here--these days, it's good business to pretend to be green, whether or not you actually are. Actually, I'm pretty sure the Republican Party of today is built on just this kind of hypocrisy... ironic, isn't it?

[New York Times]

Clip of the Week

Big week for video clips. If you're into soccer, I recommend Cristiano Ronaldo's goal (I don't like the guy, but damn he's good), the referees' blown call against AC Milan, and Clint Dempsey's goal that sealed the USMNT's first ever win over Italy, on their turf no less (congrats to all).

If you'd rather go the animal route this week instead, I present to you this adorable video of a baby fennec fox. I have no idea what a fennec fox is, but I now desperately want one in my house. I'm sure my cat would be thrilled, especially on the heels of the small human that we recently introduced into his environment.

Next, if you want to be reminded of your vast insignificance in the context of the universe, while also being reminded of how much stuff there is in the world that you've never heard of (and hey, who doesn't, right?), then this video is definitely for you. Or you could just appreciate the simple beauty of nature (and art) by allowing yourself to be mesmerized by this video for a few minutes.

But obviously, none of these are your Clip of the Week. This week, I'm presenting all you athletes out there with a reminder that no matter how athletic you think you are, once were, or some day could be, there's always somebody who's more athletic than you and can do things you'd never dreamed of (yes, even you, Dorn). So here's retired high jumper Stefan Holm, jumping over things that I'd be happy to do pull-ups on.

No, it's not anything new (it's from 6 years ago), but I just saw it for the first time today and then decided to quit sports forever. Because that's not fair.