• Regulators and Redskins
    Posted by on April 15th, 2009 at 8:39 pm

    Rational expectations:

    We examine the correlation between federal government activity and the performance of the D.C. area’s National Football League team, the Washington Redskins. We find a significantly positive, non-spurious, and robust correlation between the Redskins’ winning percentage and the amount of federal government bureaucratic activity as measured by the number of pages in the Federal Register. Because the Redskins’ performance is prototypically exogenous, we give this surprising result a causal interpretation. Drawing upon public choice theory and behavioral economics, we provide a plausible explanation for the causal mechanism: bureaucrats must make “logrolling” deals in order to expand their regulatory power, and a winning football team acts as a commonly shared source of joyous optimism to lubricate such negotiations. We do not find the same correlation when examining Congressional activity, which we attribute to legislator loyalty to their home state’s team(s).

    (HT: Ribstein.)

  • I’m Sorry But I Just Don’t Get Seasteading
    Posted by on April 15th, 2009 at 4:52 pm

    Here’s another Tax Day post.
    As person who enjoys highly theoretical or just plan off-the-wall propositions, it pains me to say that I just don’t get seasteading.
    If you’re not familiar with it, this is a radical libertarian venture that aims to build libertarian city-states…are you ready…floating on the high seas. Think of John Galt, but on a raft.
    I don’t want to be too dismissive of seasteading. Here’s Patri Friedman making the case.
    For myself, count me out. First, I do in fact love my country and feel loyalty to it no matter how batty its laws are. Secondly, I share Arnold Kling’s thought that a lot problems we have on land will follow them at sea.
    Still, I think dry land is the way to go. I would try to hunt for some speck in the Pacific Ocean. There are about a billion islands out there just waiting to be made into a libertarian paradise. Come to think of it, I never saw much government on Gilligan’s Island or Lost.
    The U.S. has a bunch of possessions out there. So do France and Britain. Why not try to buy one? The Northern Mariana Islands have a couple of uninhabited islands (see Pagan Island).
    Even if you don’t want to buy one, just go there and set up your own community. When someone official starts to bother you, do what everyone else does—secede. Sure, that will involve some government, but probably less than running a big boat.

  • The Libertarian Way to Fight Pirates
    Posted by on April 15th, 2009 at 1:21 pm

    In Article I, Section 8 of the Constitution, Congress has the power to issue Letters of Marque. As I understand it, this is an authorization from a government to individuals to let them seize assets from a foreign ship. “Here (scribble), go nuts.”
    I always thought this was some curio still left in the Constitution. I even joked with a friend recently that this would be the best way to fight the pirates.
    I joked too soon. I give you, Ron Paul:

    Rep. Ron Paul (R-Texas) has called for the use of congressional letters of marque to allow private security forces to patrol international waters and assume liability for such operations.
    “The whole mess over there is a reflection of our foreign policy as well because we’ve been involved in Somalia for a long time,” Paul said on Fox News on Wednesday.

    I wonder if it would apply to blimps. Shouldn’t they be Emails of Marque? So many questions. Anyway, Happy Tax Day.

  • Taleb Idiocy Watch
    Posted by on April 15th, 2009 at 11:05 am

    I hope to be credited as the person who starts this. Mark my words: More people are going to realize that Mr. Black Swan/Napoleon Dynamite has no idea what he’s talking about.

    Private-equity firms and the stock market share characteristics of Ponzi schemes, “Black Swan” author Nassim Nicholas Taleb said.
    Leveraged buyouts, the principal tool of private-equity investing, and buying stocks on margin should be restricted for the protection of small investors and the economy, Taleb said in a Bloomberg Television interview.
    “We want economic life to be organized to be as distant from that Madoff model as we can,” Taleb said, referring to Bernard Madoff, who pleaded guilty last month to directing the largest Ponzi scheme, bilking investors of about $65 billion.
    LBOs are “too close to Madoff” because “you rely on new investors to pay off the other ones,” Taleb said. “The stock market has some mild Ponzi characteristics. We have to make sure that innocent people are not harmed by this Ponzi-attribute.”
    The financial system needs to be simple because regulators can’t protect investors from complex financial products, Taleb said.
    “Regulators are fundamentally dumb,” he said. “Traders will go around them. I want the system where regulators can be stupid without you and I being harmed by it.”

    (EP and Joe W have more).

  • Audi Vs. BMW
    Posted by on April 15th, 2009 at 9:50 am

    car-wars.jpg

  • The Last Five Years In One Chart
    Posted by on April 14th, 2009 at 10:51 pm

    Here are the daily changes of the S&P Banking Index:
    image790.png

  • Bernanke at Morehouse
    Posted by on April 14th, 2009 at 1:39 pm

    Here’s the text of Ben Bernanke’s speech at Morehouse College. I’ll warn you, it’s long but he explains the financial crisis in easy-to-understand terms.

  • Why Isn’t JPMorgan Chase Too Big to Fail?
    Posted by on April 14th, 2009 at 12:22 pm

    On Thursday, JPMorgan Chase (JPM) will report its Q1 earnings. The results will probably be “not horrible.” Which isn’t bad, not to mention horrible.
    The reason I mention JPM is that the bank hasn’t reported a single money-losing quarter since the crisis broke. That puts them in small company. In fact, the bank has beaten estimates fairly consistently. They were also very fortunate to gain both Bear Stearns and WaMu at very good prices.
    As you might expect, the shares have responded very favorably. JPM has more than doubled from its March low. So I have to wonder, is JPMorgan Chase now too big to fail?
    The bank’s market cap is well over $120 billion. Their assets are over $2.1 trillion. The bank has been smart and lucky so now it’s gotten very big. All of the same arguments about the size Citigroup apply to JPM, so where’s the outcry?
    Just asking….

  • Here’s an Idea: The Government Is Auctioning Off Money on Ebay
    Posted by on April 14th, 2009 at 2:25 am

    No, not that money. This kind.
    Funny, once upon a time this too was a toxic asset.

  • Great Stock Theory
    Posted by on April 14th, 2009 at 2:14 am

    Mebane Faber’s new book, The Ivy Portfolio, has two great graphs showing the distribution of stock returns. (Nick Gogerty has posted them here.)
    We often talk about the market as a whole, but in reality, the large majority of stocks don’t do much at all. The real gains come from a very modest slice of the market. According to the chart, one-quarter of the market accounted for all the gains.
    In short, stock returns have a fat tail. This is why I place so much emphasis on consistency of performance because it’s those “great stocks” that make the difference. The other lesson is that too much diversification really isn’t that helpful.