Brilliant

Sometimes I come across things that are too cool not to share. This video is one of those things. Using the Case-Shiller home price index for data, a couple of creative and enterprising individuals put together a video that shows what a roller coaster ride would look like if home prices were a roller coaster (covering the period 1890-2010).

This particular video is an update to the original "Speculative Bubble" video, which only included data up to 2007--things haven't been pretty since the original left off. If you don't have the patience for the whole 4 minutes, skip ahead to the 2:24 mark (or click here) to see just the last 30 years, which is the real punchline to the story. Seeing the speculative bubble (and the pop) in this manner is pretty much jaw-dropping.



Props to Barry Ritholtz for the heads-up.

Quote of the Week (or: Eric Schneiderman, the lonely soldier)

This week's Quote of the Week is a bit late, but it's a real doozy. If you haven't been paying attention to the banking sector lately, you may be unaware that Bank of America has become quite the center of attention. With its stock down nearly 50% since January, the bank has found itself beset with questions regarding its solvency, similar to Lehman Brothers and Bear Stearns back in 2008.

But unlike with Bear and Lehman, the stakes are much higher now for Bank of America, and many more political players have much more to lose if it fails (think "too big to fail" is a thing of the past? Think again--the biggest banks have only gotten bigger). As a result, battlegrounds are shaping up everywhere, with almost everyone in the political and financial world (from Barack Obama to Warren Buffett) aligned to help save this floundering institution. Everyone, that is, except New York Attorney General Eric Schneiderman.

As Matt Taibbi notes in his blog post, the Obama administration is pushing the 50 state AGs to agree to a settlement with Bank of America over massive and widespread mortgage abuses, including foreclosure fraud. The settlement would largely indemnify BofA against future lawsuits from homeowners who were victimized, and essentially wrap up what Taibbi refers to as "the broadest and most destructive fraud scheme in American history, one that makes the S&L crisis look like a cheap liquor store holdup".

Unfortunately for Obama and BofA, Eric Schneiderman doesn't think this settlement quite covers it, and he's refusing to lie down. His refusal apparently led to his being kicked off of the leadership committee that is negotiating the settlement, and he's been villainized by bank-friendly politicians everywhere.

Politicians like New York Federal Reserve Bank board member Kathryn Wylde, who is the speaker of this week's head-smacking Quote of the Week. Speaking to Eric Schneiderman, she said:

This week's QUOTE OF THE WEEK

"It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible."
                       - New York Fed board member Kathryn Wylde

Wylde, like Schneiderman, ostensibly represents "the public" in her role with the New York Fed. But with this quote, she has made it clear that she has no intention of actually representing the best interests of the public. She seems to think that it is the job of public servants to make sure that legal issues are resolved expediently, with fairness and justice running a distant second.

I'd of course love to ask Ms. Wylde what she considers "indefensible", if the list of abuses enumerated in this article don't qualify (yes, that last link is about Chase and not Bank of America, but the very same things have been occurring on BofA's watch, if not worse... I suggest you read that article regardless). Schneiderman naturally concurs with my (and Taibbi's) opinion, and it's a good thing. He seems to be the only one around here who's actually looking out for the public and performing his civic duty.

For what it's worth, Schneiderman's view seems to have gained some traction since Taibbi's blog post was published. On Monday, the FDIC filed its objection to the proposed settlement, and this was followed up yesterday by a similar lawsuit filed by a group of homeowners supported by the National Consumer Law Center. No matter what the Obama administration would seemingly like to see happen here, a President cannot completely override our justice process, not even when big-bank apologists like Kathryn Wylde are trying their best to do so.

Contrary to what Ms. Wylde might like us to believe, this isn't an issue of "love" versus "hate"--it's an issue of right versus wrong, legal versus illegal, and true capitalism versus what is increasingly looking like a semi-socialist corporatocracy. Eric Schneiderman is one of the only friends that the general public has left, whether or not we all realize it. Do yourself a favor and write Schneiderman a note of encouragement--while you're at it, you could also demand Kathryn Wylde's resignation.

Changing living patterns in America: an update

Earlier this summer (side note: how is it almost September, what happened to my summer?), I ran a post discussing the rise in homes with dual master bedrooms in the U.S. The CNN article that inspired the post talked about dual masters being a solution to "mediocre marriages", but I took the rise to be indicative of a broader change in American living habits. I wrote then:

For one, the housing crash that precipitated the financial crisis of 2007-2008 has eroded a long-standing belief that housing is a stable investment and that home ownership is a laudable goal for all Americans. An increasing number of younger people (including well-regarded journalist and hedge fund manager James Altucher) have begun to question the wisdom of owning real estate at all, and have turned to renting instead. A dual master setup would seem to lend itself particularly well to a renting situation, where two people could share the rent on a house without having to share a bathroom or a primary living space.

Furthermore, economic realities affecting two important groups of people may force a trend toward co-habitation over the coming years. The first of these groups is the elderly--while they likely don't have to worry about suspensions of Social Security payments any time soon, it is clear that the Federal Reserve's low-interest rate policy has made life very difficult for "savers", those who rely on interest payments to generate income. Many of the elderly are of course in this category, and without a steady stream of income, they may be forced to move in with their children, as was commonplace in previous generations.

The second such group is on the other end of the spectrum, but no less impacted by the economic recession. With an ever-increasing number of college graduates unable to find adequate employment upon graduation--and many others accepting much lower-paying jobs out of necessity--young professionals may be forced to move back in with their parents on a semi-permanent basis as they try to whittle away at their mountains of student loan debt. This dynamic has of course already begun, and homebuilders may just be trying to get ahead of the curve.

Now, this article from Bloomberg seems to agree with me, and provides some statistics to lend my argument some weight--always a good thing.

The U.S. is experiencing a surge in the multigenerational households that were once a common feature of American life, and Hispanic and Asian families are driving the trend, according to U.S. Census Bureau data released this month. The number of such households, defined as those with three or more generations living under one roof, grew to almost 5.1 million in 2010, a 30 percent increase from 3.9 million in 2000, the data show.

They hit 2.9 million in 1950 and didn’t top that again until four decades later, according to the Washington-based Pew Research Center. At the 1980 low, multiple-generation homes represented just 2.9 percent of all U.S. households, down from 7.8 percent in 1900.

Although the term multigenerational invokes images of grandma churning butter on a pioneer farm or turn-of-the-century immigrants crammed into tenements, today’s extended families are more likely to live in suburbs. Among large cities, the one with the highest percentage of multigenerational households, at 16 percent, is Norwalk, California, a collection of largely single- family homes 15 miles (25 kilometers) south of Los Angeles.

“Many conservatives are locked into this 1950s paradigm of the nuclear family,” said Joel Kotkin, author of “The Next Hundred Million: America in 2050,” a book about demographics. “Boomers are aging in place. Immigrants move in with their cousins. The suburbs are changing.”

Job losses and the difficulty of purchasing a home make young people more likely to live with their parents, according to D’Vera Cohn, a senior writer with Pew who has studied the trend. Longer life spans and growth in the Hispanic and Asian populations keep older folks in the house.

So, in addition to the economic reasons I listed in my original post, you can now add a demographic argument to the list. If we continue to see the Mexican immigration and homebuying that we've seen in recent months, this shift could become even more pronounced.

Either way, the trend toward cohabitation and homes with dual master bedrooms is bad news for the overall housing market, especially new construction. But then, that's a market that's just about dead anyway, whether or not we'd like to admit it.

[Bloomberg]

The new immigration

I've discussed immigration (both legal and illegal) on here several times before, but this article in the Washington Post from the weekend puts a bit of a new angle on the issue.

For years, national security experts have warned that Mexico’s drug violence could send a wave of refugees fleeing to the United States. Now, the refugees are arriving — and they are driving BMWs and snapping up half-million-dollar homes.

Tens of thousands of well-off Mexicans have moved north of the border in a quiet exodus over the past few years, according to local officials, border experts and demographers. Unlike the much larger population of illegal immigrants, they are being warmly welcomed.

“It goes counter to the conventional wisdom about the Mexican presence in the United States,” San Antonio Mayor Julian Castro said. The influx “is positive, it is entrepreneurial . . . and one of the keys to a very successful growing city like San Antonio.”

Castro estimates that Mexicans own at least 50,000 of the approximately 500,000 homes and apartments in his city of 1.3 million, which has a vibrant Hispanic culture. Many are in gated communities that have sprung up in the city’s sun-baked northern hills. One neighborhood built around a country club has so many residents from the Mexican city of Monterrey that it has been dubbed “Sonterrey.”...

“All these businesses are Mexican,” said Alejandro Quiroz, a Mexican-born businessman, sitting outside a Starbucks in Sonterra and gesturing to a bank and gourmet Mexican take-out shop. Women in designer sunglasses and high-heeled shoes left the Starbucks, chatting in Spanish.

“Generally, people come with capital,” Quiroz said. “They buy houses, cars. And then they say, I want to invest in a business.”

Interestingly, as the article notes, illegal immigration from Mexico has been steadily declining in recent years ("due to the weak U.S. economy, border crime and more opportunities for young Mexicans at home", says the article), even while it has dominated the political conversation.

In its place has come this new influx of affluent Mexicans, a group that we Americans would do well not to discount. As San Antonio's mayor noted (and I first mentioned toward the end of this post), immigrants have a tendency to be among our most entrepreneurial workers, and often help to push our economy forward rather than let it stagnate.

I think that this is another interesting data point in the broader discussion on U.S. immigration policy, and no conversation about immigration (illegal or otherwise) is complete without recognizing this dynamic. But then, I bet you won't hear Rick Perry crediting Mexican immigrants for Texan job creation any time soon...

[Washington Post]

Media hysterics

With this week's earthquake now a distant memory as far as the media is concerned, we've turned our full attention to Hurricane Irene, which if I'm hearing the media correctly is going to turn Manhattan into an underwater wonderland, a la Waterworld (dry land is not a myth!).

Thanks to CNBC's Bob Pisani, I'm now comfortable with the knowledge that yes, the New York Stock Exchange will open as usual on Monday morning, with many of our treasured investment professionals prepared to sleep in hotel rooms in lower Manhattan over the weekend to facilitate its opening. What brave, hearty souls they are up in New York City, battling back against the expected havoc that will be wrought by Irene, which... might not even officially qualify as a hurricane by the time it gets there.

That's right, this beast of a hurricane that's bearing down on the east coast with all its might isn't a Category 5 storm like Katrina or Ivan, or even a Category 3 storm like Bob, the last major hurricane to strike the Northeast. As of this morning, Irene is a Category 2 storm, which hardly seems to jive with the media hysterics we're witnessing.

Now, don't get me wrong--I fully appreciate the damage that a Category 2 storm can do, having witnessed the aftermath of Hurricane Bob on Cape Cod, which was a weak Category 2 by the time it reached there. Because of that, I'd be particularly worried if I'm anywhere near the point of initial landfall--in North Carolina and Virginia. Some of the outer peninsulas and islands are particularly at risk, and I sincerely hope that they survive the initial force of this storm's landfall intact.

But I'm growing extremely tired of the breathless nature of the news coverage any time anything comes anywhere near the sacred island of Manhattan. Truth be told, "largest hurricane to hit Northeast in 25 years" is sort of a dubious distinction, similar to "largest earthquake to strike Virginia in a century", which provoked no small number of guffaws from our more seismically seasoned friends on the west coast. These incidents--while certainly rare and scary--are considered business-as-usual in other parts of the country, and most likely would barely raise an eyebrow. But put them in New York... and, well, that's a different story.



Perhaps I'm still just a little bitter at how this week's earthquake was covered (the Northeast earthquake? Really? Since when are Charlottesville and Richmond--the two cities closest to the epicenter--in the Northeast? I could've sworn I'd moved to the Mid-Atlantic, if not the South... but I digress), or maybe I'm just generally hard on the New York media ever since I've left the city... but it really does seem like the hysterics in this case have gone into overdrive.

For what is perhaps the first time in my life, I now fully understand what those in most of the country refer to as the "East Coast bias". While I appreciate the value of preparing for the worst and hoping for the best (and I, too, hope for the best, especially for my friends and family in New York and New England), it's also important not to lose perspective. Unfortunately, perspective seems to be something that's in short supply on that little island between Connecticut and New Jersey.

Clip of the Week

Last week, I passed up the opportunity to post a triple play turned by the Red Sox, in favor of a Jon Stewart clip. I'm glad I did, because this week brought some even better baseball highlights, including a significantly more entertaining triple play.

So, with apologies to this play by Ben Revere (this year's version of this great catch by Gary Matthews Jr., which led to an absolutely atrocious contract from the Angels), I present to you Logan Schafer of the Triple-A Nashville Sounds. Yes, it's minor league ball, but that doesn't make it any less impressive.



That is definitely the flukiest, awesomest triple play I've ever seen. Let's hope, for Logan's sake, that the Angels were watching.

Welcome, campaign season

Yes, I unofficially introduced the 2012 Presidential campaign to the blog with last week's Clip of the Week, but let's call this post the Crimson Cavalier's official welcome to the 2012 Presidential campaign, beginning with the race for the Republican party nomination.

As always, that means we should get ready to hear all kinds of ridiculous platitudes and brain-dead oversimplifications of the world and the economy over the next several months. One theme that's already beginning to drive me nuts is the portrayal of Texas Governor Rick Perry as some sort of free-market-touting, job-creating wunderkind.

Let me spoil the surprise for you--it's bullshit. Jonathan Turley does a fine job of tearing down the Perry myth (in short, he shows that most of the jobs created are minimum-wage jobs with no health insurance), but Barry Ritholtz's guest blogger friend "Invictus" is the real champion here. In this chart, he shows that if you want to give Perry credit for this job creation "miracle", you must also hold him accountable for all of the other social dynamics in Texas. (Note: According to Invictus, "I ranked the 50 states in a manner where “1″ is the best score achievable and “50″ the worst (e.g., the highest high school graduation rate would garner a “1,” the lowest incidence of STD’s would also garner a “1.”  In other words, if you’re a governor — a state’s CEO, as it were — you always want to be #1 and, conversely, nowhere near #50)".

In other words, giving credit to Perry for the jobs picture without also mentioning the other side of the coin is--you guessed it--more bad science. It's extremely disheartening to see how often this kind of dishonesty is bandied about in the political arena, most notably during campaign season.

While I do recognize that Texas' high levels of immigration are in part to blame for some of those summary statistics, I'd remind you that immigration is a national issue, not just a Texas issue. Perry has done little to address immigrant-related issues in his time as Governor, so there's little reason to expect that his record would be any better as President.

So, if that's the America that you want to live in, then by all means vote for Rick Perry. As for me, I plan on throwing my vote away for that other crazy Texan, Ron Paul.

[The Big Picture]

Celebrating a birthday in style

Well, folks, it's time to celebrate a very important birthday. No, not my birthday--that was last week, and so far I'm taking my 30s in stride. You see, today, we celebrate the first birthday of The Crimson Cavalier. Yes, one year ago we started this thing with one innocent post, and now look what we've created.

We've had nearly 500 posts here (468 to be exact), we've had about 16,000 total pageviews, and somehow we're all still standing. My most commonly viewed post (by far) is this one on the unintended consequences of globalization, a topic I've tackled often here. My most commonly considered topics (based on the tags I place on them)? Sports, politics, finance, humor, and debt, in that order. In other words, all over the place.

Hey, speaking of all over the place, let's do a word cloud, because why not?

I hope you've all enjoyed the first year of business here at the Crimson Cavalier. Here's hoping it's just the first of many.

Quote of the Week

Now that my house has stopped shaking and my nerves have (mostly) returned to normal, it's time for Quote of the Week. And what better topic for Quote of the Week than... the earthquake that just shook the crap out of my house. It's still a little crazy to look at a map of recent seismic activity and see a big marker right next to my hometown...

...but so be it. So, let's turn to Twitter for some of the best reactions to the quake, because if you can't have a sense of humor about this stuff, then it's just plain scary, and that's no fun.

Also, special recognition goes to the local news anchor who just asked a UVA geology professor to explain why we weren't at risk of a tsunami from this earthquake. He answered, with a puzzled look, "well, we're in the middle of the continent, not the middle of the ocean"... yep, it's gonna be a fun night of watching the local news here in central Virginia. I can't wait.

Save the Statistical Abstract

It's really not often that I agree with (or have anything nice to say about) Paul Krugman, but today is no ordinary day. As part of the ongoing idiocy in Washington that insists on slashing low-cost social programs (many of which--like NPR--have quite high incremental benefits to society) while leaving the high-cost items (defense, Medicare, Social Security) untouched, Krugman notes that the annual "Statistical Abstract of the United States" is set for the deficit-cutting chopping block after next year, a fact that he and many others bemoan. As Robert J. Samuelson wrote for the Washington Post,

If you want to know something about America, there are few better places to start than the “Statistical Abstract of the United States.” Published annually by the Census Bureau, the Stat Abstract assembles about 1,400 tables describing our national condition. What share of children are immunized against measles, mumps and rubella? Answer: 92 percent. What state has the highest disposable per capita income? Answer: Connecticut, 33 percent above the national average. How big is the nation’s network of oil pipelines? Answer: 147,000 miles, about triple the length of the Interstate Highway System (46,751 miles).

I am a devoted fan of the Stat Abstract. In four decades of reporting, I have grabbed it thousands of times to find a fact, tutor myself or answer a pressing question. Its figures are usually the start of a story, not the end. They suggest paths of inquiry, including the meaning and reliability of the statistics themselves (otherwise, they can mislead or tell false tales). The Stat Abstract has been a stalwart journalistic ally. With some interruptions, the government has published it since 1878.

No more. The Stat Abstract is headed for the chopping block. The 2012 edition, scheduled for publication later this year, will be the last, unless someone saves it.

In the next months and years, we will stumble across countless examples of good government coming to grief. Budget pressures will force cutbacks and cancellations. Many will be desirable and overdue: programs that don’t work, have outlived their usefulness or favor the undeserving. But some will represent valuable activities that were reluctantly or foolishly eliminated to meet budget targets. The Stat Abstract’s fate belongs in this category.

I am of course on record here as a staunch supporter of balanced budgets and sustainable fiscal policy (and, to a degree, a limited role of the federal government). But I am also on record as saying that it is absolutely foolish and self-defeating to try to balance a budget by slashing the small items and leaving the big ones untouched. You can't balance a household budget by decreasing your food intake but buying a bigger car, and yet that's exactly what we're trying to do here. Sooner or later, you'll starve, and your car won't help you solve that problem.

One of the few things that sets first-world economies apart from their second and third-world counterparts is the publication and wide availability of information and statistics. As Krugman points out, the elimination of the Statistical Abstract would go a long way toward creating a more ignorant populace, which is never a good thing for a country's long-term outlook.

For a Presidential administration that ran on a platform of transparency and availability of data, letting the Abstract die would be a particularly ironic and tragic event. It's not hard to imagine a future world where what was once public information has become the exclusive domain of a select few privileged people--and that may be exactly what those (Republican... corporate... rich...) people want. For a truly free society to exist, the democratization and freedom of information is of paramount importance--an ignorant country is a weak country.

Hey, Warren Buffett, maybe you should open up your checkbook and pony up a couple million bucks to save this one, huh? I won't hold my breath... 

 

[Washington Post]  

(h/t Paul Krugman)

 

 

A decade of stimulus

This doesn't qualify as breaking news, nor is it particularly earth-shattering (or even, frankly, surprising), but Mish Shedlock recently posted this list of fiscal and monetary "economic stimulus" programs to have been implemented over the past decade, and it's simply stunning to see them all compiled in one place.

1. We had 1% interest rates from Greenspan fueling housing.
2. We had wars from Bush and Obama fueling defense industry employment.
3. We had two rounds of Quantitative easing from the Fed.
4. We had cash-for-clunkers.
5. We had two housing tax credit packages.
6. We had an $800 billion stimulus package from Congress for "shovel-ready" projects.
7. We had stimulus kickbacks to states.
8. We had HAMP (Home Affordable Mortgage Program).
9. We had bank bailouts out the wazoo to stimulate lending.
10. We had Small Business lending programs.
11. We had central bank liquidity swaps.
12. We had Maiden Lane, Maiden Lane II, and Maiden Lane III
13. We had Single Tranche Repurchase agreements
14. We had the Citi Asset Guarantee
15. We had TALF, TARP, TAF, CPFF, TSLF, MMIFF, TLGP, AMLF, PPIP, and PDCF
16. We had so many programs the Fed must have run out of letters because they were not given an acronym.

That's certainly an impressive list, and it's not even an exhaustive one. Have the programs worked? Well, maybe (though as Mish points out, the statistics are underwhelming at best)... but if they have, then that just shows exactly how weak (and support-dependent) we've let our economy become, and how much work we've got ahead of us if we're ever going to enjoy sustainable prosperity again.

Anyone who continues to look to the government as the answer to their economic problems is looking to the wrong place. Even if we could afford to do more, it's far from clear whether or not it would do any real good.

[Mish Shedlock]

Clip of the Week

I was really tempted to just go ahead and post the beluga whale up here again, if only because the market's melting down again and he just looks so damned happy. But predictability's no fun, so I passed on that idea and then considered posting video of the Red Sox' turning of a triple play against the Rays earlier this week (because those don't come along very often), but the Sox ended up losing that game and that makes it less cool--at least from my perspective.

So, no beluga whales, no baseball clips, what have we got left? Well, in my Michele Bachmann rant earlier, I promised you all more Ron Paul, so here you have it. Despite nearly winning the Iowa straw poll last week, Paul can't seem to get any love from the mainstream media, despite the fact that he has consistently stood for the very libertarian principles that the Tea Party claims to care about (as opposed to what they actually vote for, which is a different story).

No, people would rather cover the ranting sound bites of Bachmann and Sarah Palin than talk about old Ron Paul, a dynamic that's covered at length over at the Big Picture blog (yes, I'm outsourcing that rant to somebody else--I've done enough here for one day). And Jon Stewart, for one, thinks it's a little silly. Have at it, Jon.

The Daily Show - Indecision 2012 - Corn Polled Edition - Ron Paul & the Top Tier
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Michele Bachmann is an idiot

To some of you, the headline of this post is obvious; to others, it's probably inflammatory. But it's not a statement of political ideology, it's a statement of fact. Because Michele Bachmann's latest political stunt is at best indicative of a poor understanding of global markets, at worst flagrantly and disarmingly misleading (which, incidentally, would probably make her a perfect President based on recent standards, but I digress). Either way, it's idiotic.

President Michele Bachmann has a promise: $2 gas.

"Under President Bachmann you will see gasoline come down below $2 a gallon again," Bachmann told a crowd Tuesday in South Carolina. "That will happen."...

It's certainly true that prices -- now about $3.50 a gallon on average -- have risen since President Obama took office.

"The day that the president became president gasoline was $1.79 a gallon," Bachmann said.

"Look what it is today."

Oh, for crying out loud...

The CNN article does go on to provide a counter-point to Bachmann, and it's a good thing--for those of you who have read me for a while, you'll know that this is ground that I've already covered once before. Have gas prices soared since President Obama took office in January 2009? Yes, they certainly have. But so too have stock prices, bond prices, corn prices, gold prices, and frankly prices of just about anything that happens to be denominated in dollars. But Bachmann doesn't want to tell you all of that--it would lessen the value of her sound bite.

The rising prices everywhere are indicative of loose monetary policy--something that the President has almost no control over--and an economic recovery (albeit a very weak one) that has brought prices of all goods back up from recessionary lows. You can't blame Obama for high gas prices unless you also credit him for rising stock prices (okay, not lately, but I digress), and I don't see folks lining up on the campaign trail to do that.

The fact is, Bachmann should be careful what she wishes for. Barring a sudden unforeseen shift in dollar policy, OPEC behavior, or consumer preferences for energy-efficient vehicles (all of which would be out of any President's direct control), the only thing that could bring us back to $2 gas is a dramatic collapse in global demand, say due to a(nother) economic recession. If gas gets back down to 2 bucks, it likely means that nobody can afford to buy gas any more at any price, and that they're selling their cars for scrap metal at the junkyard because they don't have jobs or money.

Michele Bachmann, you are a bold-faced liar. I'll never vote for you in a million years, and that's only in part because I think you're batshit nuts and that you probably hoard cats in your basement. I hope Ron Paul (more on him later) tears you a new one during campaign season--it shouldn't be hard.

[CNNMoney]
(h/t The Red Cowboy)

Another link dump

Yes, even though I generally hate link dumps, I'm once again staring at a pile of interesting-but-not-interesting-enough-for-a-full-post items, so you know what that means... as usual, I'll post the links, with a quick blurb summarizing my thoughts. Click through for the full articles if you're interested.

Is the SEC Covering Up Wall Street Crimes?
Matt Taibbi; Rolling Stone

I'm always posting Taibbi articles here, and the hits keep coming. This time, our favorite malcontent is taking on the Securities & Exchange Commission (a group I've mentioned briefly here, but probably not enough), levying some pretty serious charges at the SEC's leadership.

I've tended to be fairly understanding of the SEC's shortcoming in the past, since I recognize that given their (lack of) funding, they are essentially set up to fail in their fight against an industry that is politically well-connected and has extraordinarily deep pockets. But if Taibbi's accusations here are accurate, I may have to reconsider my position. To wit:

For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation's worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – "18,000 ... including Madoff," as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency's records – "including case files relating to preliminary investigations" – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term "Orwellian," devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation.

In at least one case, a senior SEC official allegedly prevented the pursuit of a case against a bank--thus ordering the files to be destroyed--only to turn around and accept a job with that very same bank. You know what, maybe this article deserves its own post, after all......

Wells Fargo's $3 Debit Card Charge: A Sign of More Bank Fees to Come?
Ron Dicker; Daily Finance

In response to legislation (put in motion by the Dodd-Frank Act) that has placed a cap on fees that banks charge to retail outlets for debit card purchases, it seems that the banks are trying to recoup this lost income by passing the charges directly onto its customers. Wells Fargo is leading the way by proposing a $3 monthly charge for customers to use their debit cards, and other banks like Chase are primed and ready to fall in line behind them. There's a laundry list of other proposals by the banks to recoup this lost income, none of them good for individual bank customers.

When the swipe-card fee cap was passed, it was hailed and presented as a boon to small businesses, many of whom felt overly burdened by onerous fees. But by passing the fees along to individual consumers, the banks have ensured that there won't be any overall macroeconomic impact from this fee cap--we've just changed who's making the payment, making a transfer from individuals' pockets into business (and bank) coffers.

Of course, with the consumer directly bearing the impact of the fees, retailers won't have to raise their prices any more to compensate for increased bank fees--therefore, inflation statistics as collected by the government will remain lower than they otherwise would (the rising Consumer Price Index doesn't take into account bank fees, only "retail price paid"), possibly fueling a misguided belief that inflation is under control... it's not. The consumer is once again worse off, regardless of what "official" inflation statistics might say--but I'm sure you already knew that.

Bank of America's back-door TARP
Abigail Field; CNNMoney

Yes, we've got a bit of a financial theme going on here in this link dump, but so be it. While you were all busy worrying about debt ceilings and official government spending statistics, your government was busy unofficially spending more taxpayer dollars to prop up a financial institution.

As you're no doubt aware, Fannie Mae and Freddie Mac (as well as AIG, to a different degree) have been in government-sponsored conservatorship since the financial crisis in 2008. Therefore, anything done by those organizations is essentially being done by the U.S. taxpayer, and must be watched very closely--if they lose money, we lose money. So keep your eye out for stuff like this:

Taxpayers may not realize it, but they just bailed out Bank of America again, this time to the tune of more than a half billion dollars.

The Charlotte, NC-based bank was one of the biggest recipients of bailout funds during the financial crisis. But Bank of America continues to face deep problems related to its troubled mortgage portfolio and investors have battered the stock, which has plunged over 40% so far this year. That's escalated concerns that the bank may need to raise more capital. Yves Smith at Naked Capitalism has even started a BofA death watch.

But apparently the federal government is determined to resurrect BofA: the Wall Street Journal reports the feds have just used Fannie Mae, which is controlled by the U.S. government, to infuse BofA with $500 million and ease one of the bank's biggest headaches...

According to the WSJ, Fannie Mae spent $500 million to buy the servicing rights to a big chunk of the "seven million loans still causing the most problems." Although the $500 million is a paper loss to BofA, in that the rights were "originally worth more," it looks like BofA is still getting a good deal because the portfolio's "value is expected to deteriorate further."

In fact, the deal is worth much more than $500 million to BofA, because getting rid of those servicing rights lifts a huge cost burden off BofA's shoulders. And if securitized loans are involved, which they most likely are, the sale also limits the BofA's potential liability to investors for its current servicing violations. Finally, the $500 million is surely more than the servicing rights are worth in an arms-length transaction. How do we know? Beyond the comment that the loans are expected to "deteriorate further," the goal of the intervention can only be to fix Bank of America's capital structure, which is easier for the government to do if it overpays for the rights.

In short, purchasing these servicing rights was another Troubled Asset Relief Program.

So there you have it. It's not "official" government spending--at least not until those losses are realized by Fannie Mae--but it's government spending nonetheless. And when you're throwing around $500 million like this without anyone noticing, it certainly makes that supposed $2 trillion in "savings" look a little less significant, doesn't it?

Southampton engineers fly the world's first 'printed' aircraft
News Release; University of Southampton (UK)

You may remember my Clip of the Week featuring a 3D printer that "printed" a usable wrench seemingly out of thin air. That same type of technology seems to be popping up everywhere now, including at the University of Southampton, where engineers have created (and flown) a small airplane using 3D printing technology.

From their News Release announcing the achievement:

The SULSA (Southampton University Laser Sintered Aircraft) plane is an unmanned air vehicle (UAV) whose entire structure has been printed, including wings, integral control surfaces and access hatches. It was printed on an EOS EOSINT P730 nylon laser sintering machine, which fabricates plastic or metal objects, building up the item layer by layer. 

No fasteners were used and all equipment was attached using ‘snap fit’ techniques so that the entire aircraft can be put together without tools in minutes... 

The electric-powered aircraft, with a 2-metres wingspan, has a top speed of nearly 100 miles per hour, but when in cruise mode is almost silent. The aircraft is also equipped with a miniature autopilot developed by Dr Matt Bennett, one of the members of the team. 

Laser sintering allows the designer to create shapes and structures that would normally involve costly traditional manufacturing techniques. This technology allows a highly-tailored aircraft to be developed from concept to first flight in days. Using conventional materials and manufacturing techniques, such as composites, this would normally take months. Furthermore, because no tooling is required for manufacture, radical changes to the shape and scale of the aircraft can be made with no extra cost.

Very cool. It'll be interesting to see how scalable this technology is, and how economical it may (or may not) be to put into wide usage. Either way, the concept fascinates me, and it's an example of the innovation I'm always saying we need more of.

Definitely more uplifting than bitching about banks all the time...

Quote of the Week

I once again neglected to post Quote of the Week yesterday on its designated day, so here it is a day later. It's too bad that I forgot to put it up, because this week's quote is a doozy.

While the Red Cowboy didn't steal my Quote of the Week material as he'd feared, he did have the topic right--the UK riots of last week. In one of the most brilliant cranky-old-man rants of all time, Max Hastings of the Daily Mail absolutely tears into England's youth, obliterating them with his keyboard.

This week's QUOTE OF THE WEEK

"The depressing truth is that at the bottom of our society is a layer of young people with no skills, education, values or aspirations. They do not have what most of us would call 'lives': they simply exist."
                           - Max Hastings, Daily Mail columnist

Wow, big guy. Tell us how you really feel.

Of course, for all its bitter vitriol and (at times) insightful analysis, Hastings' elitist rant against young hooligans who--apparently--don't respect society and just want to watch the world burn is also brutally one-sided. Among other things, it ignores the fact that for over a generation, the British working class (of which Hastings is of course a part) has systematically raped its younger generations by voting for unsustainable benefits backed by debt--debt that will be paid for, eventually, by the younger people. The "austerity measures" that are now sweeping across Europe are a direct result of those decisions, and the young people are pissed off.

Is it true that the people doing the looting are a specific subset of that disaffected youth, and that those individuals in question are almost certainly deserving of our scorn? Probably. But it ignores the over-arching issue at play here, which is that the currently aging "baby boom" generation has consistently and dramatically overstated its own contributions to global society, and that it has enjoyed the fruits of one of the greatest increases in indebtedness in world history. I can't say that I blame the younger generation (myself included) for being a little pissed off about the world (and the tax bill) that they've inherited.

That said, you should still read Hastings' column. It may be one of the best-crafted polemics I've ever read. Pure literary brilliance, even if it is at least in part a work of fiction.

[Daily Mail]

Dear Warren Buffett: Put up or shut up

To many in the world of finance, Warren Buffett has taken on a somewhat mythical status, held up as a godlike patron saint of value investing. While I recognize and appreciate the man's savant-ish ability to recite line items on corporate balance sheets, I don't buy into the Buffett worship, at least not any more.

At one point in time, Buffett was--deservedly--the undisputed king of the investing world, and he became a very rich man because of it. But somewhere along the line (realistically, during the financial crisis of 2008-2009), Buffett abandoned his independent maverick-like tendencies and morphed into a strange type of company man, shilling on behalf of big banks and the big government programs that supported them. Beginning with his assistance in structuring the original bank bailout packages, Buffett has begun to throw his political weight around, most recently with this op-ed in Sunday's New York Times.

Our leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

To be clear, Buffett is not the only high-profile executive to make this "raise my taxes" plea--he is joined by Netflix' Reed Hastings and Microsoft's Bill Gates, among others.

But to me, regardless of the logic behind his argument (I happen to think there are some logical flaws, but that's not my focus here) making this plea in such a public fashion rings hollow--as usual, actions speak much louder than words. Warren, you of all people should know that when you really believe in something, you should put your money where your mouth is. There's no law prohibiting you from opening your checkbook tomorrow, grabbing a pen, and writing a $1 billion check to the U.S. Treasury. If you really want to pay more in taxes, don't sit around waiting for the government to send you a bill--just send the damn check.

Otherwise, it seems like for all your seemingly well-intentioned rhetoric, what you really want is for others to share in your "sacrifice". Your pleas seem genuine and heartfelt, but at the end of the day you know that you could very easily cut a check tomorrow and not bother to tell anyone about it. But that's not what you want. You want all the publicity, and to make a political statement, but you don't want to actually step up and pay more in taxes unless and until every other billionaire in the country is legally obligated to do the same. That's not heroic--that's cowardly. And that's why I don't buy into your hype. The real Warren Buffett wouldn't wait around for others to show him the way forward.

[NY Times]

This is America

I don't know if I could possibly come up with a more ridiculously appropriate description of the last 10 to 20 years of American life than this article. It pretty much sums up everything good, bad, and weird about the country that we've both inherited and created.

If you've ever dreamed of turning the tables and taking Bernie Madoff to the cleaners, here's your chance. John Vaccaro, a New York entrepreneur, is selling iPad covers made from the disgraced financier's tailored clothes.

Madoff was sentenced to 150 years in prison in June, 2009 for swindling billions of dollars from clients in what has been called the largest Ponzi scheme in U.S. history.

Last November, his clothes and personal possessions were sold at auction sponsored by the U.S. Marshals Service with proceeds going to help those who lost money from his scheme.

One of the bidders at the auction was Vaccaro, 41, who had just launched a new company, frederickjames.com selling eco-friendly customized iPad covers made from cashmere and other fine fabrics. Vaccaro first conceived the idea for his unique covers after purchasing an iPad and searching for a cover that would prove to be both scratch-resistant and fashionable...

Vaccaro immediately sold five iPad covers made from Madoff's former cashmere sweaters to a Wall Street attorney who gave them out as Christmas gifts.

"For some people in the finance world, these covers, made from Madoff castoffs, represent bragging rights," said Vaccaro. "For others, it's a chance to own a piece of history."

Now Vaccaro is focusing on selling one-of-a-kind iPad covers made from Madoff's Banana Republic chinos and Murphy & Nye sailcloth pants for between $250 and $500, while providing buyers with a certificate of authenticity, and a receipt from the auction.

He estimates that he has enough fabric to sell a limited collection of 31 Madoff-themed covers. Once he breaks even with his auction purchase, he hopes to donate a portion of the proceeds to Madoff victims.

Whether you choose to view this article as interesting, disgusting, amusing, or irrelevant is of course entirely a matter of your own personal point of view, and to me that's what makes it so fascinating.

This article has everything going on--the Madoff issue, some kind of non-descript pandering to Madoff victims' "charity", the cult of celebrity, Apple fanboyism, corporate voyeurism in all its forms--and basically is an absolutely perfect addition to the American time capsule.

Ultimately, what's clear is that America's obsession with celebrity remains incredibly powerful, regardless of the source of the celebrity. For better or worse, Madoff is most assuredly a celebrity, and he captivates the imagination of the people in a way that few people can. 

[CNN Money]

Clip of the Week

I'm basically a day behind in all things blog-related, so I'm just now posting your belated Clip of the Week. While I really, really, really want to post this epic rant from Dylan Ratigan (especially pertinent given the events of the last couple of weeks, and the impact they've had on the markets that I make my living following), I just feel like it's not what this week needs.

No, what this week needs is something mindlessly happy... something that makes very little sense, but somehow makes us smile anyway as we recognize that life, for all the craziness and chaos that we get so worked up over on a daily basis, is ultimately just to be enjoyed. So with that in mind, I present to you... beluga whale dancing with mariachis.



That whale just looks awesomely happy. I want to be that whale. He has no idea that the world is drowning in debt, and he couldn't care less. Tonight, I think I'll grab a margarita and listen to some mariachi music and just try to be half as happy as that whale.

Michael Lewis on Germany

I'm still busy watching the markets go crazy, so obviously I haven't been posting much lately. But if you're looking for something to read, I highly recommend Michael Lewis' new piece in Vanity Fair about Germany and the European economy. Lewis is the author of Liar's Poker, Moneyball, The Blind Side, The Big Short, and more, and he's always fascinating to read (he's also a terrific researcher and a generally interesting guy).

Germany obviously found itself at the center of a significant amount of turmoil in the 20th century (we Americans love to refer to the 20th century as "the American century", but I'd argue that the Germans had a far more significant role in the global happenings of the past 100 years), and with the Eurozone economic crisis that is currently unfolding, Germany is once again playing a starring role. What the Germans choose to do in the coming months and years will have a lot to say about the long-term viability of a currency, an economic paradigm, and possibly an entire continent--again.

I'll print Lewis' lead paragraph, to set the stage for his piece. I haven't had a chance to read it in its entirety, but it definitely seems like a must-read. Enjoy.

By the time I arrived in Hamburg the fate of the financial universe seemed to turn on which way the German people jumped. Moody’s was set to downgrade the Portuguese government’s debt to junk-bond status, and Standard & Poor’s had hinted darkly that Italy might be next. Ireland was about to be downgraded to junk status, too, and there was a very real possibility that the newly elected Spanish government might seize the moment to announce that the old Spanish government had miscalculated, and owed foreigners a lot more money than they previously imagined. Then there was Greece. Of the 126 countries with rated debt, Greece now ranked 126th: the Greeks were officially regarded as the least likely people on the planet to repay their debts. As the Germans were not only the biggest creditor of the various deadbeat European nations but their only serious hope for future funding, it was left to Germans to act as moral arbiter, to decide which financial behaviors would be tolerated and which would not. As a senior official at the Bundesbank put it to me, “If we say ‘no,’ it’s ‘no.’ Nothing happens without Germany. This is where the losses come to live.” Just a year ago, when German public figures called Greeks cheaters, and German magazines ran headlines like why don't you sell your islands, you bankrupt greeks? , ordinary Greeks took it as an outrageous insult. In June of this year the Greek government started selling islands or at any rate created a fire-sale list of a thousand properties—golf courses, beaches, airports, farmlands, roads—that they hoped to sell, to help repay their debts. It was safe to say that the idea for doing this had not come from the Greeks.

[Vanity Fair]

Quote of the Week

We'll keep this one short and sweet. Stephen Colbert is absolutely on fire in this clip, in which he tackles the revelation that our new health care law will mandate that birth control be provided for women essentially free of charge.

I've certainly got my own issues with that concept, but I don't think it's anywhere near the list of top 50 most nauseating things to come out of Washington in the last 5 years. Of course, you wouldn't know that from the response in some corners of the media world, and that's what Colbert does such an expert job of taking down in his inimitable comedic style.

This week's QUOTE OF THE WEEK

"If we give your daughters and granddaughters access to birth control, they will instantly turn into wanton harlots with an insatiable appetite. Because you know women--they're always on the edge of nymphomaniacal orgiastic abandon."
                               - Stephen Colbert

The Colbert Report
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The best education money can buy

I'm going to pass on writing about the market action of the past few days (and on the politics surrounding S&P's downgrade of U.S. sovereign debt), in part because so much has already been written that I fear I can add little to the conversation beyond what I've already said regarding the unsustainable nature of our growing national debt.

The one thing I will choose to point out is the absolutely ignorant and arrogant fingers-in-their-ears response from the Senate Banking Committee, which has apparently taken the S&P's downgrade not as a wake-up call, but as an opportunity to prove just how out of touch they really are. Instead of taking their medicine and admitting that their debt ceiling deal was a farce, the Senate Banking Committee has elected to investigate the S&P (for exactly what, I have no idea), choosing once again to find a scapegoat for our country's problems rather than accepting personal blame and then actually trying to make amends.

But I digress (didn't I say I wasn't going to talk about those issues?)... what I actually have to talk about today is a bit of a follow-up on my post from last Friday, which tackled the issue of grade inflation at our nation's universities, and whether students who attend private colleges are literally buying their way to higher grades and better career opportunities (hint: they are). According to the New York Times, this dynamic of the-best-education-money-can-buy could be starting even earlier, in the college application process.

Josh Isackson, an 18-year-old graduate of Tenafly High School in New Jersey, spent the summer after his sophomore year studying Mandarin in Nanjing, China. The next year he was an intern at a market research firm in Shanghai. When it came time to write a personal statement for his college applications, those summers offered a lot of inspiration.

“When I was thinking about the essay, I realized that taking Chinese was a big part of me,” he said.

So Mr. Isackson wrote about exploring the ancient tombs of the Ming dynasty in the Purple Mountain region of Nanjing, “trading jokes with long-dead Ming Emperors, stringing my string hammock between two plum trees and calmly sipping fresh green tea while watching the sun set on the horizon.”...

Students preparing to apply to college are increasingly tailoring their summer plans with the goal of creating a standout personal statement — 250 words or more — for the Common Application in which to describe “a significant experience, achievement, risk you have taken or ethical dilemma you have faced and its impact on you.” Specialized, exotic and sometimes costly activities, they hope, will polish a skill, cultivate an interest and put them in the spotlight in a crowded field of straight-A students with strong test scores, community service hours and plenty of extracurricular activities.

A dizzying array of summer programs have cropped up to feed the growing anxiety that summer must be used constructively. Students can study health care in Rwanda, veterinary medicine in the Caribbean or cell cloning at Brown University, or learn about Sikkim, India’s only Buddhist state.

For those who lack the means to pay for an essay-inspiring trip, at least one scholarship program exists to help. Ten 11th-grade New York City public school students won the Palazzo Strozzi Renaissance Award, which entailed traveling around Italy for a month this summer to study the culture, philosophy and arts of the Renaissance. The students were required to keep diaries and write a final essay, which the foundation said would be used with their college applications.

It's not hard to see where I'm going with this. Isackson's ludicrous, vomit-inducing line about "trading jokes with long-dead Ming Emperors" aside (he's going to be a Yalie, naturally... they deserve each other), the class-divide issues are too obvious not to mention.

I don't know what you readers did during your high school summers (maybe you were taking private planes to summer camp, I don't know), but I know I sure as hell didn't spend them "sipping fresh green tea while watching the sun set on the horizon", at least not in Nanjing. Sure, I spent a month or so hammering down lagers from oversized mugs in beer gardens in Munich when I was 16 (part of a student exchange program--I also hosted a German student at my house who seemed to have a strange fixation with devil sticks and Bayern München, but he's not important here), but underage drinking in Europe isn't exactly the first thing that leaps to mind when I'm thinking about application essay topics.

So while I salute Mr. Isackson for his adventurousness and willingness to travel long distances to foreign lands at a young age, programs like the Palazzo Strozzi Renaissance Award aren't nearly sufficient to bridge what is a very obvious and important economic gap between students of varying backgrounds. There is a significant portion of college applicants for whom the concept of summering in China is simply out of the question from a financial perspective. Should we penalize lower-income students because the universe of options was simply smaller for them than for other applicants?

Hopefully, admissions officers recognize this disparity, and do not unduly punish those students who write well-crafted essays on more mundane topics (like, say, working through high school to support one's family). But I'm pragmatic and realistic enough to know better, to realize that whether they mean to be or not, admissions officers will always be impressed and biased toward the more exotic essay topics.

Maybe there's nothing we can do to overcome this economic disparity--even if we find some way to fix this particular problem, the richer kids (and their parents) are virtually guaranteed of finding some other way to use their financial resources to better craft their college-application resume. Whether it's expensive SAT test prep classes, crazy travel itineraries, private tutors, or some other to-be-determined means, money will always find a way to buy what it wants.

And maybe that's just America, and maybe that's just life. But it just sort of smells rotten, doesn't it? Or maybe that's just Mr. Isackson's ego I'm smelling. Or maybe I just really don't like Yalies.

[New York Times]

New Zealand is the world's shepherd

That headline is meant literally, according to this graphic from The Economist, which tracks the nations with the heaviest concentrations of livestock (focusing on the four most common animals--chickens, cattle, pigs, and sheep).

I think the most interesting thing to look at here is not the gross numbers (by that count, China leads almost every category based on its sheer size and population), but the relative numbers on the right side of the charts.

That is where we learn some interesting tidbits that I had no clue about. For instance, who knew that the Sudan and Ethiopia had so many cattle (4th and 5th-most per capita on the list, respectively), or that Iran had so many chickens? Why does Denmark absolutely lap the field in pigs per person? And why is the USA nowhere to be found on the list of sheep producers (should we blame "Mary Had a Little Lamb" and Lamb Chop for personifying sheep and making us not want to eat lamb)?

One thing, though, is for sure: New Zealand produces a whole lot of sheep. They are, apparently, the world's shepherd.

I'll be in and out again today (following these markets, it's clear that I'm not alone), so my apologies in advance if I don't post much. Be careful out there.

[Economist]

College grade inflation

I recently came across an interesting chart regarding grade inflation at our nation's universities--it looked, perhaps not surprisingly, strikingly familiar...

What's perhaps most notable is that grade inflation has been significantly more prevalent at private schools as opposed to public schools.

At first blush, the response is "so what"? Who cares if a bunch of Ivy League assholes (not me, of course, I earned my cum laude degree...) are getting higher grades than they used to? The problem is, college GPA is often a primary factor in both corporate hiring and graduate school admissions (many companies refuse to consider applicants whose GPA is below 3.0, regardless of the school they attended), indicating that private school students are, all else equal, more likely to be accepted to graduate school or hired into high-paying jobs.

This isn't necessarily a problem, if we concede that the students at the private schools are actually earning those grades. It's certainly plausible that private schools, with their typically more selective criteria, are in fact getting better students--it's no less plausible that over time, these top students have become better at responding to (and providing) what their professors reward, and that the curricula and grading standards have simply been slow to adjust. In that vein, schools like Harvard and Yale have been quick to point out that their mean SAT scores have increased over time, as their acceptance rates have continually plummeted.

But there is, of course, a possible darker explanation to this picture. It's difficult (if not impossible) for private schools to justify their ever-increasing tuition costs on a "return-on-investment" basis if their students aren't being accepted to graduate schools and hired by banks and consulting firms at a higher rate than their public school counterparts. They therefore have a vested interest in assuring that their students are best positioned for acceptance at the next stage, and a higher GPA is certainly part of that picture. Grade inflation, then, is simply good business for private schools--at least until the graduate schools and corporations change their methods, which they probably won't.

This is not to say that private schools in general are failing to deliver a solid education--though I'd argue that some most certainly are. But there is certainly a benefit to the institution of providing high grades to its students regardless of their performance, and when there is an incentive, there is typically a response.

That's the story that the above chart is really showing, and it's a tough story to swallow. In essence, private school students (well, their parents anyway) are buying their way to higher college GPAs, and therefore buying their way into better post-graduate opportunities. That's certainly not a story Harvard would like to tell about itself, but that doesn't necessarily make it any less true.

[FlowingData]

Clip of the Week

My apologies for the lack of posting today... things got a little busy at the office.

Skipping right past the usual banter, we all know it's Clip of the Week time, but the pickings were a little slim this week. I was a huge fan of this clip from the Jimmy Fallon show (special hat-tip to Brian Williams, who I didn't realize had a sense of humor), and it very nearly took home Clip of the Week honors for its sheer idiocy.

But when there's a clip that I can't stop watching (it usually happens in the world of sports), it's usually a fair bet that it's going to be my Clip of the Week. And while this video of Orlando Magic coach Stan Van Gundy showing off his basketball skills did fit that bill, it's not this week's winner.

Instead, our winner comes from an exhibition soccer game between Mexican club Chivas (de Guadalajara) and world power Barcelona. Chivas pulled off the stunning 4-1 upset, thanks in no small part to this amazing goal from Marco Fabian, which proved to be the game-winner. Impressive stuff.