Resistance Begins at Ohm!

Wednesday, August 18, 2010

Climategate stories

This is a history of climate wars, with some deserved humor and a bit of tongue-in-cheek.
Climate wars... ending?

And this is a summary of all the various "gates" (falsehoods, exaggerations, unsupported speculation, propaganda) in the IPPC reports. Skeptical Swedish Scientists

Both are worth the read, IMNSHO
Certainly an impressive weight of evidence.

Tuesday, August 17, 2010

Picking losers

I think I have figured out why the whole mosque thing is bigger than maybe it warrants.

Clearly, our culture is still very raw about what Islam and a few dozen muslims carried out on 9/11. And what is wrong with that? You can't call people religious bigots because they are still emotional (angry, sad, offended, fearful) - that was a big deal. To the extent that muslims around the world are still celebrating the attack on the World Trade Center, we are still entitled to our emotions about it, are we not?

That is a point of discussion regarding my opinion about the proposed mosque. I have an opinion and so do a lot of people. There are no right or wrong feelings. There is, however, gracious and civilized behavior, which means you consider another person's feelings about a matter before you decide to do something that impacts them.

Here's what the prez said. America's feelings aside, they have a right to religious freedom (true) including building a mosque at ground zero minus 2 blocks (false, property rights are different than religious rights - dummass). And I am picking the winner here - it's the muslims. Everyone else, tough noogies. Then on Saturday, he said he didn't have an opinion about whether they should build the mosque, just that they had the right.

It's picking winners and losers again. We don't want one person at the head of the executive branch picking winners and losers. Furthermore, this isn't a debate that concerns the presidency, so why would he be picking in the first place? The rest of the message seems to be that if we don't agree with his choice, then there must be something wrong with us. We are too stupid to understand, or we are racists or bigots or trying to make it political. Wrong. We are offended that you are making this decision; that you are once again picking the losers and the losers are us.

Monday, August 16, 2010

How far, freedom of religion

This is not about Islam, it is about the extent that religious rights extend. Maybe I'm wrong, after all I am not a constitutional scholar (unlike Barry, after teaching a class, but not as a professor). My take on religious rights in this country is that we have the right to believe and worship whatever we wish, or nothing if we wish that. Where does this include real estate? Seems to me that a local government can decide whatever it wants regarding the use of property, and your religious rights or my religious rights don't have a thing to do with it. What does imminent domain mean? The government can claim property from private ownership for whatever purpose it deems worthy. I don't think religious rights trump that... So what the heck does religious freedom have to do with how this piece of property is used? Governments decide all the time that some activity is inappropriate for a particular place. Might be because of traffic, noise, inconsistent with other land use.... sorry it's not that you can't do that, you just can't do that there. Sorry.

I like this soundbite: The right to do something doesn't make it right to do. By the same token, the right to one thing (religious rights) don't have to extend to some other right (property). I think the whole argument is a strawman. I don't hear anyone discussing this piece, they are just all wrapped around the axle about how they feel. Meh.

Of course, New York doesn't have a monopoly on bad taste, distasteful policy and poor use of resources. Seems the State Dept. has decided that this Imam is just the person so send on a diplomatic mission to the mid-east. Yeah, he seems like just the person to hold a discussion about religious tolerance and respect. Right.

I really don't like stepping into this mess but since I haven't heard anyone discuss the difference between one right and another instead of subsuming one right to another, I had to toss the idea out there and see what comes of it.

Oh, my comment on constitutional law qualifications? Barry wasn't a constitutional law professor. He wasn't a professor at all. He was a part time lecturer, and while he was hired to discuss constitutional law, that isn't what he "taught" at all. Why do we keep perpetuating this resume embellishment? It isn't OK to embellish a military career. But how is it fair to skewer one person for that while another person parades around as an academic when they weren't even close?
NY Times
conservative blog take on it
second hand testimony

Friday, August 13, 2010

Market Compass Goes Awry When Governments Steal

Bloomberg Opinion by Mark Gilbert

In my not so humble opinion, there are three core issues which make investment risk unmanageable.
1) Governments decide who wins and who loses in the marketplace
2) Governments confiscate and redistribute core assets
3) As citizens, we allow government to keep doing it.

The first is as citizens of any developed country, our willingness to look aside as our corrupt governments choose the winners and losers in business, finance, asset owners and services - from borrowing/credit to insurance to investment markets to manufacturing to health care. The winners and losers are not determined by investments and market, they are determined by policy wonks in government. I can't even say that they are determined by your elected representatives since they don't seem to have a freakin clue what is written in the bills they pass. Only the policy wonks who wrote the bills are really making any of these decisions. Success is not determined by investor trust and understanding of risks, it is determined by whether the government will allow a business to function in a profitable manner. The government intervenes in numerous ways, but these are certainly significant:
  • extorting profits (taxes, fees, ceilings) that are redirected to non-market social programs. Maybe not the best example, but take the tax on cigarettes. The completely unrealistic tax based on product value drives an entire secondary public market of social programs. The people who manage those programs are completely unmotivated by and totally insulated from a non-government valuation of the programs. In other words, the government collects money and does things that people find little value in, yet there is nothing to stop those programs in perpetuity as long as the unrelated revenue is there. This is important because it is a big factor in problem number 2.
  • subsidizing certain industries at the expense of others - this is directly picking winners and losers. For example, lets take from durable medical goods in the form of more taxes and give to the pharmaceuticals in the form of prescription subsidies. Or lets take from coal and give to wind. Or take from farm and give to ranch or take from wheat and give to corn or take from insurance and give to mortgage lending... the list goes on an on and the methods are often difficult to discover, being well hidden in programs supposedly benefiting certain groups of citizens in one way or another.
  • benefiting certain groups over other groups. We sort of expect that the government will support poor people at the expense of rich ones, although often that seems to be the sole objective, not a genuine attempt to alter the ability of poor people to compete more fairly in the economy. Benefiting teachers at the expense of business owners, benefiting farmers at the expense of miners; in fact we don't even have to identify a particular group who are expended. The fact that the government chooses certain groups from among the various producers in the economy and favors them with benefits that other groups don't get is the point. Favoring homeowners, single people (yes, there is no marriage benefit, only a penalty), people with children, nurses, indebted college graduates does make a difference in decisions people make, however it also makes a big difference in the opinions of the people who aren't favored. Sure we all want to have our children taught by happy, competent teachers, and make sure there is a nurse available when we park our parents in the nursing home. But where does that leave the waitress, construction worker and taxi driver? Government has no place in making these value judgments. 
The people who buy the products, do the work, finance the risk and use the services should make these decisions in the marketplace. Otherwise government is owned by special interests, which is what we see happening now. This leads to class warfare and ultimately, when enough people feel the corrupt and capricious decisions of government have a greater risk of harm to them personally than benefit, it leads to revolution.

The second core problem is redirecting resources necessary to generate wealth. This comes in two forms, confiscation and redistribution of a country's assets such as land, timber, water, energy; fungible things such as money, oil, pseudo-products such as futures and carbon credits; and permissions to do certain things (everything from build a hospital to make a mess). When government redirects its income to do certain agreed-upon things like national defense, social programs such as medicare and retirement into other things like banking and automobile manufacturing, it is taking the risk of failure from the private market and putting it on the taxpayer directly. If you want to take a chance on GM or Citibank, you should do that through your own capital investments.

The government should not be creating a funds pool out of your tax dollars and then choosing which stupid business decisions your are going to pay for. This is particularly troublesome because as an individual, you can choose not to take the risk and keep your money for some other purpose you determine is more worthy. When government is allowed to do this, you have no decision about whether a particular risk is worthy of your earnings. Who says GM and Citibank are too big to fail? Moreover, when you decide to take a risk on GM or Citibank, you should feel reasonably certain that your investment will bear fruit based on the performance of the company and the agreed-upon rules of the market. You should not fear that the government is going to confiscate your personal ownership and turn it over to some favored class --- say retired union workers for example.

This is exactly what happened with GM. People who invested in stock, who put their money into divested retirement accounts, who relied on investment managers to return an averaged pools of assets had those chits and their associated GM obligations voided by a bankruptcy court. The assets were not distributed fairly to those who had standing in a divestiture decision. They were given - literally - to the government who in turn gave a portion to unions for the funding of retirement benefits including medical care. From the hands of private investors into the hands of special interests, courtesy of the government. Yes, GM has an obligation to its retirees, but not at your personal expense without your consent. You did not decide to invest your tax money in GM, or pay dues to the union. But you are paying none-the-less by having your investment assets stolen and by having your tax dollars used to shore up the now union owned auto companies (Chrysler is the other entity and the situation there is only worse - your tax dollars are shoring up Fiat, who has no skin in the game having received 20% ownership in Chrysler for exactly $0). Ditto Citibank, AIG, Fannie Mae, Freddie Mac and so-on. Goldman Sachs = winners; Lehman Brothers = losers. Except for the unions, Chrysler would have been a loser, too -- as they should be based on their performance.

Perhaps you feel that this is history and it's behind us now. Think again. When the government is deciding that using clean, efficient, reliable, available and predictable natural gas for electricity production is a bad thing and instead using environmentally damaging, inefficient, unreliable, only partially available and completely unpredictable wind shall be done instead, we are facing intended and unintended consequences far into the future. Why? Because we are making huge capital investments in very high-risk ventures that cannot be undone -- at the expense of low-risk ventures which then will not exist when high-risk fails. Wind and nuclear energy do not have private market investment support to speak of because no one is stupid enough to put their money there. So the government is putting your money there instead.

Because it is just way too costly to fund on the pubic dime, the government is expecting to pay for it through a non-existent asset called carbon credits. There is no such thing. It is another form of money and it is designed to work like a futures market, except there is no future product being traded. The money for these carbon chits come from the industries that the government has decided will be losers - coal, oil and natural gas. They are collected by the government and given to the losers - wind, solar and nuclear. This is how the government makes winners when the private markets won't have anything to do with it. And you, the taxpayer are not only shouldering the risk, but you are also entirely funding the cost through increases in your energy costs - in whatever form they take. Since it isn't tax revenue, the government will not hold itself accountable for those costs. Rather, it assumes you will shoulder this additional burden silently because you can't elect someone else to be your electric company and you don't have a choice. Here, the government has created an entire new market by taking money out of the economy as we understand it and putting it into a new economy that is managed by government without your market input, just your cash input. The same thing is happening with health care. Remember we have already passed that turkey; carbon credits isn't a federal program yet. It is a regional one. However, when you consider the level of debt the government has incurred, one can only expect that carbon credits under some other name (probably the energy preservation or electrical costs reduction - something opposite of the truth) will have to pass.

My conclusion therefore is that putting your money into precious metals and hiding it in your mattress is a much better risk posture than putting your money in equity markets. You may not be a winner, but at least you won't lose twice, only once as a taxpayer. Even if you did win in the market, the government is destined to confiscate 50% of your winnings, so really what is the point in taking the risk in the first place? Unfortunately, I cannot recommend you go build a carbon futures trading market infrastructure anticipating that skimming the transactions will make for a comfortable retirement. Why? Because Al Gore already has a (government subsidized) monopoly.

If we continue to allow government to keep changing the rules, taking from one to give to another, skimming the transactions and putting the cash in the control of congress, we will continue to reap what we deserve -- more debt, less credit and diminished wealth. Government never grows wealth or increases production.

Friday, August 6, 2010

The Federal Budget in Pictures

I think this is a very informative web site and recommend a visit...
Fed Budget Chart Book
Federal spending per household = $31,088

Debt as pct of GDP











I'm working on a chart that shows interest relative to other discretionary spending. No love for MS today.