Quote of the Week

For this week's Quote of the Week, I was tempted to pull something from a terrific guest post on Barry Ritholtz's Big Picture blog on the myth of "liquidity" in capital markets, especially as it pertains to high-frequency trading. It's a must-read if you have any interest in financial markets (these days, it's frankly irresponsible not to), and I suggest you take a minute to peruse it--it's short.

But I'm going to turn my attention elsewhere, namely Washington, where the drumbeat of election season is getting louder by the day (which generally means truth is in short supply). You may have noticed that oil and gas prices are on the rise lately (I wonder why?), which of course is threatening to become a pretty big campaign issue. Enter Nancy Pelosi, that brilliant financial mind, with your Quote of the Week.

This week's QUOTE OF THE WEEK

"Wall Street profiteering, not oil shortages, is the cause of the price spike... Unfortunately, Republicans have chosen to protect the interests of Wall Street speculators and oil companies instead of the interests of working Americans by obstructing the agencies with the responsibility of enforcing consumer protection laws."
                          - House Minority Leader Nancy Pelosi

Sigh... here we are again, blaming those faceless "speculators" for ruining the economy. You see, the problem with this whole line of reasoning is that we only vilify so-called "speculators" (they're usually hedge funds, but since the biggest funds are trading with primarily pension fund money, it's really your pension fund doing the speculating... but that's a discussion for another day) when they cause markets to move in ways that we find inconvenient.

Nobody's blaming "speculators" for doubling the price of the S&P 500 in two years, because we generally like that outcome. But when those same investors (I refuse to actually call them "speculators", because it's just so intellectually dishonest) put their money into commodities like oil, corn, sugar, and wheat, it's suddenly a huge economic problem that requires swift action.

The problem is, it's Fed policies that caused all of this--pension funds need to consistently meet overly rosy annual return assumptions in order to remain solvent, and when you drive interest rates low enough, they therefore need to pile into any and every other asset class in order to attempt to meet those assumptions. Sometimes they pile into equities, which our economic central planners love. Other times, they pile into commodities, which those same planners vilify. BUT THEY'RE THE SAME PEOPLE.

When you choose to inflate the money supply as a way to "stimulate the economy" (read: bail out reckless fiscal policy), you will inflate all asset prices. Ultimately, you can't pick and choose which assets appreciate and which don't, and it becomes a bit of a zero-sum game economically speaking. This is why I've spent so many words here railing against Fed policy, but government hacks like Pelosi still don't get it and choose instead to fall back on stale campaign rhetoric. This is gonna be a long and frustrating year for me, isn't it?

[The Hill]

The blight of interest rate swaps

It's no secret that state budgets (not to mention their public pension funds) have been under intense pressure lately, a problem made significantly worse by perpetually accommodative Fed policy. Much like our federal budget, these state funding crises have stemmed from both the revenue side and the spending side, caused by decades of politicians who habitually promised the world to their constituents without bothering to do any contingency planning at all.

But a recent report from SEIU sheds light on yet another drag on state and municipal budgets at a time when they can least afford it, once again aided and abetted by Fed policy--and, of course, benefiting banks everywhere at the expense of taxpayers. To summarize...

Big banks are profiting at state and local governments’ expense using the same toxic financial instruments that helped crash the economy.  These derivatives known as interest rate swaps, were sold to governments with a promise that they would lower their borrowing costs but have now become a huge liability. The banks have already taken as much as $28 billion from state and local governments.  Now, during the worst public budget crisis in memory, the big banks seek to collect billions more from toxic deals that local and state governments are trapped into and are forcing layoffs and cuts to services to cover payments to banks.

I do take issue with the assertion that these are "the same toxic financial instruments that helped crash the economy", but that disagreement is immaterial to this discussion. The quick and dirty of it is that banks enticed state and local governments everywhere to "lock in" their interest rate costs--both pre-existing and projected--at what were at the time multi-decade lows. Those governments were effectively borrowing money in advance, often paying interest to the banks on loans never made (for projects not yet approved or begun). When the economy tanked and interest rates went even lower, the governments were still on the hook for the higher interest rate expense.

Adding insult to injury, the weakened economy meant that those not-yet-approved projects would in fact never begin (as spending measures were reined in), meaning that the governments had "locked in" interest rates on non-existent borrowing needs--without a project to fund, the swaps became naked bets on interest rate movement, bets that the governments had no way of winning in the face of loosening Fed policy.

The governments therefore were (and still are) left paying an insane tab to the banks for no reason whatsoever. If this whole scenario sounds familiar, that's because it is--I wrote several months ago about a similar scenario involving Bobby Bonilla and the Mets, in which case Bonilla was effectively playing the role of the bank. These interest rate swaps also cost the Port Authority of New York/New Jersey vast sums of money, sums that they are now trying to recoup via increased tolls and fees (as though they weren't high enough to begin with).

While the states should have known better than to get into these arrangements to begin with, the fact that these local budgets are now suffering so badly as a result shows yet another side effect--an unintended consequence--of the Fed policy that I have spent so many words on this blog deriding. The only way to solve the problems that these governments--state and otherwise--now face is, of course, through more monetary stimulus!! And round and round and round we go... aren't centrally planned economies fun?

[SEIU]

Song of the Week(end)

This week's Song of the Week(end) actually follows loosely in the theme of my last post, about baseball's forgotten (or underappreciated) former stars.

You see, one of my favorite things to do in my spare time is to watch old movies--not necessarily great old movies, or old favorites, but solid-if-not-spectacular movies from my childhood that I'd completely forgotten about. It's interesting to see how well some of these movies hold up over time (many of them, not well), and sometimes even more fascinating to watch actors I'd long since forgotten about or their excellent alternative, eventual stars in early-career roles that you'd forgotten existed (think Brad Pitt in Thelma & Louise).

Then, there are the soundtracks--I swear I've watched So I Married an Axe Murderer a thousand times, in large part because the soundtrack cracks me up every time. Which, finally, leads me to the point of this post. This weekend, I sifted through the old DVD rack and settled on The Saint, a semi-entertaining action flick with Val Kilmer and Elisabeth Shue. I got a kick out of re-watching it (hey, I know that guy, he was in EuroTrip!), and the soundtrack had a couple of treats as well.

Treats like this song, which I'd completely forgotten about, but is now your Song of the Week(end). Take it away, Sneaker Pimps.

The Hall of Very Good

Thanks to a tip from Deadspin, this morning I learned about a very cool e-book project called "The Hall of Very Good". According to the project's creators, HoVG:

"is an ebook meant to celebrate the careers of those who are not celebrated. It's not a book meant to reopen arguments about who does and does not deserve Hall of Fame enshrinement; rather, it's meant to remember those who, failing entrance into Cooperstown, will unfairly be lost to history. It's for the players we grew up rooting for, the ones whose best years led to flags and memories that will fly together forever. Players like Bret Saberhagen, Will Clark, Dwight Evans, Tim Salmon, Wilbur Wood, Orel Hershiser, and literally hundreds of others."

The roster of contributing writers that are on deck to create this project is seriously impressive, and I'm excited to read it (I've already contributed to the project, which is now beyond fully funded).

As a lifelong baseball fan, I think this project hits on a dynamic that is central to the life of a sports fan. The brilliance of HoVG is that it recognizes that most sports fans draw emotional connections not necessarily with the stars, but with the very capable role players (and fringe stars). They're more accessible somehow, seem more like "one of us", and we can therefore find it much easier to cheer for them. My three favorite Red Sox of the last 20 years--Tim Wakefield, Trot Nixon, and Bill Mueller--combined for one All-Star Game appearance, a late-career "lifetime achievement" nod to Wakefield in 2009.

The stars are just so obvious to root for--any guy (or, you know, girl) who picks up a sports page knows who Barry Bonds is, or Pedro Martinez. But the REAL fan can tell you all about the time Bill Mueller hit grand slams from both sides of the plate in a game, or argue over which Martinez was the better all-around hitter--Edgar or Tino. The REAL fan doesn't buy a Jeter jersey or an A-Rod jersey--he buys a Brett Gardner jersey, and then he talks your ear off all night about the little things Gardner does that help the team win. It takes stars to win a championship, yes, but it also takes a lot of almost-stars.

Of course, the secondary brilliance of this book is that it points out just how many truly terrific players never got into the Hall of Fame. I'm not talking about your one-time All-Stars whom history easily forgets (your John Hudeks, your Mike Sharpersons, your Neal Heatons). And I'm not even talking about your guys who have started multiple All-Star Games and still not gotten into the Hall (like Lance Parrish, David Justice, and Benito Santiago).

I'm talking about guys who have won MVP awards--multiple MVP awards, in some cases--and still not been deemed worthy of baseball's highest honor. Should history forget these men? It's an impressive list, one so impressive that I couldn't possibly list them all here. Kevin Mitchell was an MVP. So were George Bell, Terry Pendleton, Ken Caminiti (R.I.P.), Mo Vaughn, Don Mattingly, Kirk Gibson, Willie McGee, Keith Hernandez, Willie Hernandez, Don Baylor, and Dave Parker.

Dale Murphy won two MVP awards in 1982 and 1983, but he still can't get any Cooperstown love (he shares that dubious distinction with Roger Maris). There are also some more recent MVPs who probably won't get into the Hall of Fame because of steroid questions (Roger Clemens, Jose Canseco, Sammy Sosa, etc.), but that's not the point of this discussion.

I hadn't realized just how high the bar really was for Hall of Fame enshrinement until I noticed that just collecting MVP awards wasn't sufficient. That's not exactly fair--among other gripes, it's always bothered me that Hall voters seem to prioritize consistent above-averageness over sporadic brilliance--and that's why this project exists. I'm looking forward to seeing what kinds of stories get churned out here. The forgotten stars are, for me, a big part of why sports are so enjoyable.

Clip of the Week

Just like last Friday, I'm going to send you all into the weekend with a quick flurry of posts. First it's Clip of the Week, then it's a random sports-related post, then we'll cap things off with your Song of the Week(end).

So first, it's Clip of the Week. Some decent stuff this week, most notably this ridiculous college hoops buzzer-beater and the dumbest play in NBA history. There was also a really cool video of a bridge implosion on the West Virginia/Ohio border, which I could honestly watch all day for some reason (if you play that one, turn down your volume... apparently blowing up bridges is loud).

But you know what this week needs? Monkeys. Lots of monkeys. What week doesn't, right?

Is disability the new unemployment?

Did you hear the good news? New jobless claims are falling, and they're now hovering at a four-year low! That's excellent news for the economy, right? Maybe... maybe not. As has been reported in several places recently, the drop in people filing for unemployment has been accompanied by a sharp rise in those filing for (and receiving) disability.

More than 8.5 million workers are now collecting disability insurance, in other words almost 6% of the labor force is officially disabled. Perhaps not surprisingly, disability applications shot up just as unemployment benefits started to exhaust... 

Since 1995 the number of disabled workers has doubled and expenditures have increased even faster than disabled workers, tripling since 1995. The increase in workers receiving disability insurance has come at the same time as the US working age population has become healthier. A large fraction of the increase in disability has come from increases in hard-to-verify back pain and mental problems... 

After the 2001 recession, disability applications also shot up and they never fell back to their old levels. We may be reaching a new, permanently higher, plateau. 

Disabled workers do not count as unemployed, they have been bought out of the labor force.

Ugh. This is a terrible development--as Karl Denninger described it, this is in many situations a case of "I lost my job, now I'm crazy!"

I've said here before that the national unemployment rate (as currently calculated) is an incredibly noisy and easily-gamed statistic, as are jobless claims. When considering the overall health of our economy--especially in the face of a rapidly aging population with monstrous entitlement benefits--the most important statistic to track is the employment rate of the population, which of course continues to plummet even amid an "improving" economy.

Having more people on permanent or semi-permanent disability only adds weakness to the overall fiscal condition of our country, as people who should be wage-earners (and taxpayers) are instead transformed into tax recipients. With our country already gaining tax recipients by the day as the Baby Boomers retire in droves, who is going to be left to pay all of these bills? Warren Buffett? Good luck with that.

The massive impending liabilities of Medicare and Social Security require that our overall labor force be growing, not stagnating or shrinking. That absolutely is not happening, regardless of underlying improvement in the official unemployment rate. We can't hide these people on the disability rolls forever--sooner or later, we need to find ways for them to contribute, rather than add to our already bloated federal dole. Any ideas?

[Marginal Revolution]
[Market Ticker]

Quote of the Week

Six months ago, Warren Buffett penned an op-ed in the New York Times talking about his apparently unquenchable desire to pay more in taxes--as long as everyone else in his income category was legally bound to do the same, of course. I was skeptical of Buffett's supposed altruism at the time, and I still am. I wrote then:

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.

Now, New Jersey Governor Chris Christie has jumped on the Buffett-bashing bandwagon (it's fun, isn't it, Chris?), saying largely the same thing that I said then. For his comments, Gov. Christie has earned this week's Quote of the Week honors.

This week's QUOTE OF THE WEEK

"[Buffett] should just write a check and shut up. I'm tired of hearing about it. If he wants to give the government more money, he's got the ability to write a check -- go ahead and write it."
                          - New Jersey Governor Chris Christie
               
Ultimately, people everywhere in this country are extremely good at spending other people's money--or at least lobbying to spend other people's money. I've been a bit amused this week with the local goings-on at UVA, where a group of students is staging a hunger strike as a way of demanding a "living wage" for all university employees.

That's fine and all, and it's in many ways a noble goal, but the reality is that a living wage for all employees will of course require an increase in tuition and fees (for all students, undergraduate or otherwise) or a decrease in salaries and wages for higher-paid faculty members. So if the students really want the employees to have a living wage, they could (and should) start by footing part of the bill themselves. Their next step could be to actually physically raise the money by asking other students to do the same, and asking faculty members to similarly contribute--a true, grassroots movement that requires (and receives) the input and buy-in of an entire community.

But instead, the students would prefer to simply lobby the university's gatekeepers, and hope that those gatekeepers will agree to then impose an increased cost on all community members, regardless of their position on the subject. That's of course a microcosm of what happens in Washington D.C. every day, and it's this type of culture that has led us to have such a wickedly indebted society.

If you want to pay more in taxes, go ahead, pay more in taxes. If you want university employees to make more money, raise some money and pay them. Either way, if you're going to ask other people to foot the bill for your latest pet project, ask them directly, not via some third party intermediary. Then maybe you'll have a better understanding of what your project actually costs, and how much you're asking your friends and colleagues to contribute. Separating the beneficiaries of a policy from those who will feel that policy's cost almost always leads to bad overall decision-making. Raise the money first, then spend it--not the other way around.

[CNN Money]

Song of the Week(end)... a Tim Wakefield tribute

Today was a sad day for Red Sox fans (no, not sadder than September 28th... or October 12th... or November 30th... but sad nonetheless), with the announcement by the team that veteran knuckleballer Tim Wakefield is hanging up his spikes.

I've been a huge fan of Wakefield's since before he was even in Boston (for reasons unknown to me, I was a big Pirates fan back in 1992, when he burst on the scene as a rookie and pitched the team to two complete-game victories over the Braves in the NLCS--a series the Pirates would ultimately lose), and he remains one of my all-time favorites, alongside Trot Nixon and Jason Varitek. After enjoying a career renaissance in Boston with an out-of-nowhere 14-1 start to the 1995 season, Wake deservedly became a Red Sox fan favorite for the better part of the next two decades. For reasons I'll never fully understand, just about every Sox game I attended for 10 years was pitched by Wake, and I was never disappointed to see his number come up (even though Pedro games were an experience like no other).

Wake was occasionally spectacular, always reliable, and a consummate team player in an age where such a thing has become increasingly rare. My heart broke for him when he allowed the gut-punch home run to Aaron Boone to end the 2003 ALCS (it never should have come to that in the first place), and I was then incredibly happy for him when he earned the start in Game 1 of the next year's World Series. The Sox will be a little less fun without Wake's goofy knuckleball around, and I salute the man for a highly enjoyable career.

So, in honor of Wake, this week's Song of the Week(end) is Tim McGraw's "How Bad Do You Want It?", Wake's entrance music from last year. This may be the only time you'll see a country song here on the blog, but this one's for a good cause. I'll miss you, Wake. Enjoy retirement.

Communism has been proposed

Sigh... alright, I gave a teaser this morning about a potential rant, and I don't want to disappoint. I won't go on for too long about this, in part because I really hope some of my rant is self-explanatory (and redundant with previous rants on other topics), and also because the bill in question doesn't have a prayer of actually passing. But here goes:

Six House Democrats, led by Rep. Dennis Kucinich (D-Ohio), want to set up a “Reasonable Profits Board” to control gas profits. 

The Democrats, worried about higher gas prices, want to set up a board that would apply a “windfall profit tax” as high as 100 percent on the sale of oil and gas, according to their legislation. 

…The Gas Price Spike Act, H.R. 3784, would apply a windfall tax on the sale of oil and gas that ranges from 50 percent to 100 percent on all surplus earnings exceeding “a reasonable profit.” It would set up a Reasonable Profits Board made up of three presidential nominees that will serve three-year terms.

Reasonable profits? Excessive compensation? Mandatory free bag checking? What the hell is going on? When did our federal government, the most fiscally irresponsible group of politicians ever to have graced this fine nation, suddenly become the arbiters of all that is right and proper in the world of business?

There is nothing more ridiculous or counter-productive than these pseudo-communist government policies whose sole purpose seems to be to mitigate the negative impact of other government policies (believe me, oil and gas companies wouldn't have these kinds of profits--nor would banks and health care companies, for that matter--if it wasn't for persistently inflationary Fed policy that drives up the prices of the things we use the most).

But what bothers me the most is that these policies wouldn't even be effective in the first place. American companies and their executives are incredibly creative and resourceful (normally, this is considered to be a good thing), and it's not exactly difficult for them to show a nominal profit of zero in order to avoid paying a usurious tax. As a matter of fact, they're already doing it in large numbers, and it's costing our government a boatload of money.

Pretending that our gas companies couldn't find a way to avoid paying this tax (say, by paying their top executives ridiculously high salaries) is just indicative of how little our politicians actually understand about business and incentives. Sigh. Whatever. Good work, Rep. Kucinich. You're a true American hero.

[Marginal Revolution]

Clip of the Week

Man, I am just a day late on everything recently... story of my life. So today, you'll be getting a Clip of the Week, a Song of the Week(end), and maybe even a bonus blog rant if I get around to it (hint: it involves communism).

So first, your Clip of the Week. I really wanted to go the animal route with this one, by posting this video of a dolphin doing bad things. I also could've gone the sports route with this impressive goal from Cristiano Ronaldo (whom I really dislike).

But Linsanity is one of the most amazing and unexpected things to ever happen to Harvard athletics, and as a lifelong Harvard sports fan (and former Crimson athlete myself), I have to cash in on this frenzy before it pisses everyone off like Tebowmania. (Ah, crap, too late, Sarah Palin ruined it for everyone already. Thanks, Sarah. You're the best.) 

Whatever. Here's Jeremy Lin, in the days before Linsanity, teaching all you folks at home how to get into Harvard. Take notes, people, this is invaluable information.

Quote of the Week

For this week's Quote of the Week, I was incredibly tempted to give the honors to Metta World Peace (some of you may still know him as Ron Artest, but he's way more insane now), who summed up the Jeremy Lin mania (which I'm enjoying immensely) in a way that only a certifiably crazy person could--by ranting about leather pants, cigars, and Allen Iverson jerseys. Sure.

But I decided I'd go with a more "serious" Quote of the Week (I put "serious" in quotations because I honestly hope the speaker was joking when he said it), courtesy of Republican Presidential candidate Mitt (aka "Mittens") Romney. Mitt was formerly the Governor of my home state of Massachusetts, and I voted for him when he ran (way back in 2002). I'm pretty sure I won't be doing so this time around, and this little tidbit is part of the reason why.

This week's QUOTE OF THE WEEK

“This week, President Obama will release a budget that won’t take any meaningful steps toward solving our entitlement crisis. The president has failed to offer a single serious idea to save Social Security and is the only president in modern history to cut Medicare benefits for seniors.”
                                - Mitt Romney

Yeah. That doesn't make a lick of sense. It's quite possibly the most contradictory statement made to date by a man who has seemingly made a living off of contradicting himself. His platform makes absolutely no sense--the only consistent thing about it is that he will clearly say or do anything to get elected, sort of like John McCain four years ago.

I'm not sure what Mitt would consider a "meaningful step" toward solving our entitlement crisis if "cutting Medicare benefits for seniors" doesn't qualify, but then, I'm not sure what Mittens thinks at all anymore.

[Marginal Revolution]

Dilbert kills it again

(h/t Barry Ritholtz)

On taxation and black economies

A few months back I tried to shed some light on the problems in Greece by citing a statistic that there are more Porsche Cayennes registered in the country than taxpayers declaring an income of 50,000 euros or more. That statistic, when combined with other anecdotal evidence, shows that one of the root causes of Greece's ongoing economic problems is its government's inability to collect taxes on the economic activity that is actually occurring in the state.

An article last week regarding Italy showed that Greece is not alone in that regard.

Police fanned out across Milan in late January halting more than 350 vehicles, mostly luxury SUVs and Porsches. 

At checkpoints, including one adjacent to the fashionable Corso Como, the police got the driver’s license and registration, which they passed on to the national tax agency. The tax authorities will use the data to check if the cars’ owners had declared enough income -- and of course paid the right amount of income taxes -- to justify their lifestyles. 

It was at least the fifth raid targeting wealthy Italians since a Dec. 30 sweep at the posh Cortina d’Ampezzo ski resort, where 251 high-end cars were stopped, including Ferrari and Lamborghini supercars, Bloomberg Businessweek reports in its Feb. 13 issue. Rome, Portofino on the Italian Riviera and Florence have also been targeted.

Italy is getting aggressive with its tax evasion crackdown, and it's a necessary step--depending on the estimate, the underground "Black Economy" (or, "System D") accounts for 20 to 30% of all economic activity in the country. However, it's unclear whether Italy's efforts will be sufficient in the long run to solve its significant debt problems.

Ultimately, the strength of a state depends entirely on its ability to collect taxes from its citizens. One could argue that the United States is relatively strong in this regard (its "Black Economy" is nowhere near the levels of Italy and Greece), but it still does not collect nearly enough tax to pay its annual bills. If it in fact tried to raise its tax rates in order to close that gap--as Italy is now trying to do, in effect--it might find that the "Black Economy" would grow significantly as a result.

Those who argue that raising tax rates would harm economic growth are therefore certainly correct, although perhaps not in the way they might imagine. Instead of actually decreasing the overall amount of economic activity, a higher tax rate might just lead to a decrease in the amount of "official" economic activity, as more and more transactions went off the record. It's quite possible (if not probable) that's what happened in Italy over the last decade, which would help explain the nation's pitiful "official" economic statistics.

If citizens (of any nation) begin to feel that their tax burden is too high--or that their government is misusing their tax dollars--they will always find ways to avoid paying their tax bill. Sometimes this will be through outright misrepresentation and fraud, but often it will be much more subtle and therefore much harder to prove. If a mechanic fixes a friend's car for free, with the understanding that his doctor friend will return the favor in the future by dispensing free medical care, the level of "economic activity" (in terms of favors exchanged) is the same whether or not cash actually changes hands. But in one case, the government can collect taxes on the transactions, and in the other case, the government cannot (at least not easily).

The choice to do these transactions "on the record" or "off the record" depends entirely on the mechanic and the doctor's respective faith in their government, and whether they feel that their leaders are operating in good faith with respect to taxation. Unfortunately, once that good faith bond has been broken, it can be incredibly difficult to restore, as Italy and Greece are now learning. As the U.S. tries to solve its own deficit and debt problems, it too will end up facing a similar dilemma--how can it extract more money from its citizens without pushing more economic activity down into the underground, beyond its reach?

The strength of the state, ultimately, is only as good as the citizens' belief in that state and its leaders. Break that bond, and the state can suffer even as many of its citizens continue to thrive--at least in the short run. But in the long run, both the state and its citizens suffer together, and that's where Italy and Greece now find themselves.

[Bloomberg]

Clip of the Week

I had meant to post the Clip of the Week yesterday before calling it a night, but baby (and dinner) duty called, and this post sat idle on my computer for over a day. Whoops.

At any rate, if you think I'm posting anything at all from the Super Bowl, you're out of your mind. I'm still gonna pretend it didn't happen, because that's been working out pretty well for me so far.

So, for this week anyway, there'll be no sports here (even though Landry Fields and Jeremy Lin made a strong bid with the world's nerdiest handshake--this is why they don't let smart people play basketball).

With apologies to this disturbing and creepy video and this awesome and awe-inspiring video, this week's Clip of the Week goes to this guy, who almost sent himself over the edge of a cliff on his snowmobile, but ended up with a video of a really great view instead. I haven't seen any snow at all down here this winter, so this is the closest I've come to seeing a winter wonderland. Side note, I'm ready for spring.

Oh, come on, LA...

Yesterday's Quote of the Week highlighted what I considered to be a particularly egregious example of the federal government overstepping its bounds and needlessly meddling in the flow of private commerce. Today, I read an article that got me even more upset, and proved that local governments are similarly afflicted with what appears to be legislative Tourette's.

When you head down to the beach for a little fun this summer, county officials want you to leave the pigskin at home. 

The Board of Supervisors this week agreed to raise fines to up to $1,000 for anyone who throws a football or a Frisbee on any beach in Los Angeles County. 

In passing the 37-page ordinance on Tuesday, officials sought to outline responsibilities for law enforcement and other public agencies while also providing clarification on beach-goer activities that could potentially disrupt or even injure the public.

The updated rules now prohibit “any person to cast, toss, throw, kick or roll” any object other than a beach ball or volleyball “upon or over any beach” between Memorial Day and Labor Day. 

Exceptions allow for ball-throwing in predesignated areas, when a person obtains a permit, or playing water polo “in or over the Pacific Ocean”.

What the hell? Look, throwing footballs and frisbees is simply not the sort of thing that any government should need to concern itself with, least of all with a 37-page (side note: WTF?!? I've read dissertations that were shorter than that...) ordinance.

If somebody's throwing a football too close to me on the beach, I politely ask them to take it down closer to the water. If they refuse, the next time the ball comes near me, it's mine. Or I throw it in the ocean. I don't go crying to the county office building begging for them to pass a freaking law banning all football-throwing, and if I did, I'd expect them to laugh me out of the place.

BUT WAIT, there's more!!

Your kids could also end up costing you big bucks: the ordinance also prohibits digging any hole deeper than 18 inches into the sand except where permission is granted for film and TV production services only.

Oh, do come on... when I was a kid, practically the only reason I ever had any fun at the beach (besides body surfing, which always rules) was that I could dig a four foot deep hole (or as deep as I could go before I hit the water level) and then climb in it and screw around. Now, that's illegal. Of course it is.

I'm sick and tired of the environment in this country (some have called it the "nanny state") that seeks to ban any behavior that could potentially be performed in an irresponsible manner. It's a quick and dirty way for government officials to look like they're "doing something" (a dynamic I railed against in this post and this post regarding Yale athletics), but generally speaking we as citizens are simply sacrificing personal freedoms for a minimal social benefit (or, worse, a counter-productive policy).

Of course, in the case of L.A. County, this is probably just an example of a clearly-strapped local government trying to come up with ever more "creative" ways to raise revenue in a recession (hey, somebody's gotta pay for those wastefully extravagant schools). The fines that are being imposed here are basically just another form of taxation, albeit a much more "popular" form of taxation. Tax only the rule-breakers, not the responsible people, right? The same basic concept is used to justify high taxes on cigarettes, and now it's being extended to digging holes on beaches (an irresponsible behavior if ever there was one).

Whatever. Nice stealth tax hike, L.A. Well played.

[CBS L.A.]

On plant communication

I've written briefly about animal communication here before, but this week I came across a new one. This time, it's plants, and this is actually pretty cool stuff.

In news to gladden the heart of Prince Charles, who was once much mocked for having conversations with cabbages and the like, it appears science has caught up with what many gardeners have long held true – plants can communicate. 

Researchers revealed how plants talk by modifying a cabbage gene which triggers the production of a gas emitted when a plant’s surface is cut or pierced. 

By adding the protein luciferase – which makes fireflies glow in the dark – to the DNA the plants’ emissions could be monitored on camera. 

One cabbage plant had a leaf cut off with scissors and started emitting a gas – methyl jasmonate – thereby ‘telling’ its neighbours there may be trouble ahead. 

Two nearby cabbage plants, which had not been touched, received the message they should protect themselves. They did this by producing toxic chemicals on the leaves to fend off predators such as caterpillars. 

It is the first time such a process has been caught on camera. Scientists say it raises the possibility that plants are all communicating with each other in a complex ‘invisible language’ which we know nothing about.

It's pretty amazing how resourceful all living things--whether humans, other animals, or even plants--can be when their livelihood is being threatened. I think that plants are "smarter" than we give them credit for, if only from a pure survival point of view. It's a different type of intelligence, of course, but I think it's fascinating.

[Daily Mail]

Quote of the Week

Every once in a while, I read something that might as well have been written by me (but wasn't). It feels pretty good, to be honest, in that it somewhat validates my view of the world--a view that I occasionally wonder if anybody shares. That happened this weekend when I stumbled upon this item at Kid Dynamite's Blog (a recent addition to my blog roll, but one that I've been enjoying so far).

Referring to a New York Times article which discussed a bill in Congress that would mandate that airlines allow passengers' first bags to be checked free of charge, Kid Dynamite went off, in a way that made me well up with pride.

This week's QUOTE OF THE WEEK

"Free checked bags are not a basic human right that we need Congress to regulate and protect. Enough already. If you don’t want to pay the fee, fly a different airline. Get a different credit card that helps you with free bags. Don’t check bags. Consumers have choices. Vote with your wallet."

Absolutely dead on. Congress' job is to protect our fundamental rights, and to make sure that the entire country is playing on a level playing field. Beyond that, it's OUR RESPONSIBILITY to hold companies, people, and governments accountable for smaller actions that we feel are unjust. It is only when these people or groups of people infringe on our basic rights that we should ask government to get involved.

As a country, I think that we've completely lost our ability to solve our own problems as citizens. When something that we don't like pops up, we don't "vote with our wallet", hardly ever (if we did, FoxConn wouldn't exist, and neither would any of the big banks who've screwed us over time and time again over the last couple of decades). We just ask our politicians to make rules saving us from ourselves, because we can't possibly be expected to make the right choices based on our moral frameworks.

I think that America becomes weaker every time we do this, and it consistently makes me upset. America, when somebody slaps you in the face, don't just run and tell the teacher and have them sent to the principal's office--slap them the hell back, and then maybe they'll stop doing it.

[Kid Dynamite's Blog]

My (completely non-standard) Super Bowl prediction

With all eyes on Indianapolis for Super Bowl XLVI--and my Patriots involved in the big game again--I feel the need to join the parade and weigh in with my prediction for how things will go.

Before I begin, I have to say that I've been overwhelmed by the massive amount of Giants love so far from the "experts". Yes, they've played well lately (otherwise they wouldn't be here), and yes, they present matchup problems for the Patriots in multiple regards--hence the win in the regular season (and no, Super Bowl XLII doesn't mean a thing from a matchup/prediction standpoint).

But they don't build those big buildings in Vegas by accident, and the oddsmakers still give the Pats the edge, even given the murky health of tight end Rob Gronkowski. That might have something to do with the fact that the Patriots were 13-3 in the regular season, while the Giants were 9-7 and actually got outscored by their opponents--but I digress. The point is, these teams are pretty dead even as far as matchups go, and I'm surprised to see any consensus at all among the assorted media.

Now, as you'll know if you've read me often, I have significant philosophical problems with the typical reward system surrounding punditry. Experts are rewarded for making big, bold statements at every turn, knowing that they will get tons of attention for their correct picks, but face little accountability when they are wrong. Predictions (and predictors), therefore, tend to be overly bold, overly confident, and needlessly specific and certain.

All of these dynamics are at play with the standard practice of picking not just the winner of the Super Bowl, but the exact score. I won't be doing that here. Instead, I'm going to be the stat-geekiest stat geek around, giving you a range of possible outcomes, with accompanying probabilities. Hooray! Math fun for everyone! And because I'm not actually making a real pick, I can't possibly be wrong! Alright, fine, I'll make a standard pick at the end, just for kicks, because I know you want it. But I'm not happy about it.

Now... let's get to it. I'm presenting you with three potential game scenarios: The Shootout, The Slugfest, and The Blowout. For each scenario, I'll give you both the probability of that type of game happening, and the conditional probability of each team winning if that scenario develops. Make sense? Alright, cool.

Game Scenario #1: The Shootout (Probability: 55%)  

Recent Super Bowl examples: Super Bowl XLV, Super Bowl XXXVIII, Super Bowl XXXII

Neither of these teams has a particularly great defense. The Giants and Patriots allowed the 27th-most and 31st-most yards of any team in the league this year, respectively, and neither was in the top half of the league in terms of points allowed (the Giants were actually statistically worse than the Patriots, allowing 25 points per game vs. New England's 21.4). Furthermore, both offenses were quite explosive, with Tom Brady and Eli Manning both finishing in the top 5 in the NFL in passing yards.

Therefore, "The Shootout" is far and away the most likely game scenario to develop in Super Bowl XLVI. Picture both teams scoring over 24 points, with the winner posting at least 30. Who has the edge in this scenario? The statistics say the Patriots, despite their shaky secondary. That's mostly because of Brady, who has a higher completion percentage, more touchdown passes, and fewer interceptions this year (and for his career) than Manning.

In games this year where both teams scored at least 24 points, the Patriots were 4-1, while the Giants were just 3-3. Simply put, this year's Patriots are designed to win this type of game. Their edge isn't overwhelming here, but it's significant. In a shootout, the better quarterback usually wins, and Eli is still no Tom Brady.

Edge: Patriots (60% to 40%)

Game Scenario #2: The Slugfest (Probability: 30%)

Recent Super Bowl examples: Super Bowl XLII, Super Bowl XL, Super Bowl XXXVI

This scenario is essentially the opposite of The Shootout, and it would be a repeat of the last time these two teams met in the Super Bowl--a 17-14 Giants victory. Picture both teams scoring fewer than 20 points, and a few big plays (think: helmet catch) making the difference.

Despite the limitations of both defenses, this scenario isn't terribly unlikely. Both defenses have their strengths--generally speaking, it's the Giants' pass rush and the Patriots' ability to force turnovers--and those strengths have shown themselves at various times in the playoffs. Neither defense has allowed more than 20 points in a game so far this postseason (the Giants have allowed an average of 13 per game, the Patriots have allowed 15), and the defenses have combined for 17 sacks and 8 turnovers in the playoffs.

Ultimately, though, this kind of game has to favor the Giants. The Patriots are at their best when they're playing a wide-open game, and they certainly don't want to have to rely on their defense to make stops if they can avoid it. That worked against the Ravens, but barely. It's unlikely to happen again, and the Patriots will need to avoid the turnovers that plagued them in the AFC Championship.

Edge: Giants (70% to 30%)

Game Scenario #3: The Blowout (Probability: 15%) 

Recent Super Bowl examples: Super Bowl XXXVII, Super Bowl XXXV, Super Bowl XXIX

Ah, yes. The Super Bowl blowout. It's been so long since we've had one of these that we've almost forgotten that they were a mainstay of our childhood (assuming that we grew up in the '80s and '90s). Beginning with Super Bowl XV in 1981, 12 of the next 19 Super Bowls were decided by two touchdowns or more, and several of those were severely lopsided affairs (seven were 20+ point blowouts, of which four were 30+ point routs).

Those games have gladly become a thing of the past--seven of the last twelve Super Bowls have been decided by a touchdown or less, and there hasn't been a true "blowout" since the Buccaneers' Super Bowl XXXVII rout nine years ago. But there's still a chance of the blowout returning, even if it's the least likely of the three game scenarios.

But if the blowout does rear its ugly head again, chances favor the Patriots--by a wide margin. Since Tom Brady took over as Patriots quarterback in 2001, no team has won more games or lost fewer games by two touchdowns or more. The Patriots are 61-14 in those types of games (in the regular season; they're an additional 5-2 in the postseason), good for a staggering 81% winning percentage. No other team in the league comes close, and this disparity is a big part of the reason that the Patriots have been so dominant for the last decade--the Patriots rarely get run off the field, so they've pretty much always got a chance.

The Giants, for their part, are an even 33-33 in blowout games over the same span (plus 2-1 in the postseason), and they're only 10-10 over the last three seasons, during which the Patriots have gone a staggering 19-3. The only good news for the Giants is that their two postseason blowout wins have both come in the last month, over the Falcons and the Packers. But history indicates that a third such win is highly unlikely. If the Super Bowl rout returns, chances are it'll be Brady & Belichick who bring it back.

Edge: Patriots (80% to 20%)

So what do you get when you put it all together? Well, an awesome little stat geek matrix, that's what! 

For the record, then, the most likely outcome (of the 6 possible) is a Patriots win in a Shootout, with the Patriots also holding the overall edge. Interestingly, though, the 2nd and 3rd most likely scenarios are both Giants victories--in a Shootout and in a Slugfest, respectively. The take-home lesson is that if the Patriots can avoid a Slugfest--something they were unable to do in Super Bowl XLII--they've got a great chance at winning this game.

Okay, since you made me do it, here's my "standard" pick. My matrix, which is mathematically proven to never be wrong, tells me that a Patriots Shootout win is the most likely, so that's what I'm going with. I have 33% certainty that my pick is correct.

The Crimson Cavalier's needlessly precise, certain-to-be-wrong Super Bowl prediction

Patriots 34, Giants 24

With Gronkowski playing but limited, Brady is forced to use his secondary targets more frequently. He does so very effectively, as both Chad Ochocinco and Kevin Faulk haul in touchdown passes. Wes Welker and BenJarvus Green-Ellis contribute the other touchdowns for the Pats, as New England's offensive line does an admirable job of controlling the Giants' pass rush.

Meanwhile, with the Patriots employing bracket coverage on Victor Cruz for much of the game, Manning must also look to his secondary options for production. He is similarly effective, with Jake Ballard and Ahmad Bradshaw making big contributions in the passing game. A slick receiving touchdown from Bradshaw keeps the Giants close, and they have a chance to tie the game in the late stages. 

Trailing 31-24 with under four minutes to play and the ball in Patriots territory, Manning chooses a bad time to throw his first interception of the day--he tries to force a ball to Cruz in the slot, and Julian Edelman comes up with the crucial pick. A screen pass to Aaron Hernandez brings the ball into Giants territory, where a Stephen Gostkowski field goal gives the Patriots the clinching points.

There. Now that you know what won't happen, you can go ahead and enjoy the game. Do I get to be on ESPN now?

Song of the Week(end)

Ten years ago today, the Patriots stunned the sports world with an incredibly unexpected Super Bowl win over the heavily-favored St. Louis Rams. Their win of course sparked a decade of unprecedented success for Boston-area sports teams, and I'll always remember that day fondly.

My brother was in the building (the Superdome) for that win, and I'll always remember him calling me at halftime, with the U2 halftime show blaring in the background. With the Pats gearing up for another Super Bowl appearance this weekend, there's no more appropriate time to throw it back to '02, and that U2 performance. It still gives me chills.

Paul Ryan gets it?

I've had my disagreements with Paul Ryan's decisions in the past (namely, voting for TARP and voting for Medicare Part D), but today he issued some incredibly sensible analysis in his questioning of Fed Chairman Ben Bernanke.



The highlight, as I see it: "The Federal Reserve, whose primary goal is to manage our money, is involving itself in fiscal policy--is sort of bailing out fiscal policy, because the branch of government in charge of fiscal policy, this branch, is not doing its job. I mean, a budget hasn't passed Congress in two years."

That is correct. I vehemently disagree with Bernanke and his inflationary policies, as I've made clear here on several occasions. But as I pointed out in my post earlier this week, Bernanke is merely raising taxes (effectively, at least) where Congress has refused to do so. His constant purchases of U.S. debt have kept the federal government solvent where it otherwise would not be (by artificially depressing borrowing costs), and it is therefore disingenuous at best to see elected officials hurling barbs at Bernanke without also acknowledging their own shortcomings.

With his analysis today, Rep. Ryan showed that he at least seems to understand the dynamics at play--Bernanke may be the devil, but he's a devil of Congress' own creation. One cannot exist without the other.


(h/t The Mess That Greenspan Made)

Clip of the Week

We've got some good stuff this week, and we'll start it off with this cool clip of "people flying in NYC"--it's people-shaped cutouts attached to toy planes, but whatever, it's still cool to watch.

But this was a huge week for sports, so that's where we'll be finding our Clip of the Week. So with apologies to Shaun White's perfect run at the X-Games and the amazing Nadal-Djokovic match at the Australian Open (where both players nearly collapsed during an absurdly long awards ceremony speech), there's just no way to overlook Blake Griffin, who owned the week and year with this dunk that will go down in the record books as one of the best (and angriest) dunks ever.



I mean... wow. Sorry, Kendrick. Get 'em next time, buddy.

Quote of the Week

This week's Quote comes courtesy of Karl Denninger, who has inspired more than a couple of my rants here in the past. It stems from the Congressional Budget Office's projections released yesterday, which are absolutely chock full of ugly numbers and statistics (ignore them at your own peril). Let's get right to it:

This week's QUOTE OF THE WEEK

"Government spending for Medicare, Medicaid and other healthcare programs will more than double over the next decade to $1.8 trillion, or 7.3 percent of the country's total economic output, congressional researchers said on Tuesday.


In its annual budget and economic outlook, the non-partisan Congressional Budget Office said that even under its most conservative projections, healthcare spending would rise by 8 percent a year from 2012 to 2022, mainly as a result of an aging U.S. population and rising treatment costs. It will continue to be a key driver of the U.S. budget deficit."
                                           - David Morgan, Reuters

Look at that first paragraph: that's 7.3 percent OF THE COUNTRY'S TOTAL ECONOMIC OUTPUT! Not of tax revenues, not of total government spending, of the ENTIRE ECONOMIC OUTPUT. In case you were wondering, total federal tax receipts in 2011 were approximately $2.3 trillion, on total economic output (GDP) of $14.6 trillion--about 15.8% of total economic output. That means that our expected expenditure on health care programs would be a full HALF of everything that we currently bring in from tax revenues.

That is, in a word, untenable. There's absolutely no way to make these programs solvent, and we need to stop pretending that there is. We can't grow our way out of this problem, we can't inflate our way out of this problem (hi, Ben), and we certainly can't default our way out of it (although that's where we're heading).

Oh yeah, and just repealing Obamacare doesn't do anything to help matters either, in case any of you Republican-lovers were wondering.

This country is bumping up against fundamental problems with respect to how it cares for its elderly, and it's clear that we've made promises that we mathematically cannot keep. A millionaire tax or a wealth tax or an inflation tax or whatever other tax can't compensate for the fact that there's just simply not enough money to go around. We need to admit that we've made promises that we can't keep, and begin the ugly and unpleasant process of reneging on those promises. The longer we wait, the worse the problem will get--procrastination is an expensive vice that we simply cannot afford.

[Reuters]
(h/t Karl Denninger)