A random sampling of the stupid.

Saturday, September 27, 2008

We're doling out that "bad economy" line because the economy is bad

Donald Luskin at WaPo is apparently in the Phil Gramm camp, saying that the country has a lot of nerve bitching about the economy, and that it's really not so bad. In general, I actually agree, but with that rather crucial caveat that things are likely to get a whole lot worse before they get better. How much worse, nobody knows, but that's why we worry. A paragraph of the article which sums up the gist:

Things today just aren't that bad. Sure, there are trouble spots in the economy, as the government takeover of mortgage giants Fannie Mae and Freddie Mac, and jitters about Wall Street firm Lehman Brothers, amply demonstrate. And unemployment figures are up a bit, too. None of this, however, is cause for depression -- or exaggerated Depression comparisons.
First, companies which own or guarantee $5 trillion dollars of mortgage debt are more than "trouble spots". Remember when Bernanke said that certain housing markets are "frothy"?
I'd like to focus on one particular statistic he cites:

Here's another one not to be too alarmed about: Obama is flat-out wrong when he frets on his campaign Web site that "the personal savings rate is now the lowest it's been since the Great Depression." The latest rate, for the second quarter of 2008, is 2.6 percent -- higher than the 1.9 percent rate that prevailed in the last quarter of Bill Clinton's presidency.

Here's a graph of the personal savings rate (from the St. Louis Fed):
Graph: Personal Saving Rate

Pretty fair guess that that spike is from the rebate checks. Anyway, Obama might get the exact statistic wrong but he gets the idea right. The personal savings rate has dropped steadily since 1980. People don't have money to save anymore.

People can use truthful statistics to lie, simply by selecting noise points. Luskin needs to get a more complete data set. Or he's a liar.

Error rating: 3


Friday, September 19, 2008

Short-sellers, speculators, and other bogey men

Assuming you spend lots of time on the intartubes (like I do), the SEC ban on short-selling financial stocks is old news:

The U.S. Securities and Exchange Commission took what it called "emergency action" Friday and temporarily banned investors from short-selling 799 financial companies.

The temporary ban, aimed at helping restore falling stock prices that have shattered confidence in the financial markets, takes effect immediately.

You may recall that they did this a few months ago. It bounced the stock market, in particular the financials, or maybe that was the FRE/FNM bailout. Who knows. Anyway, this particular market intervention appears to be having the same effect. The S&P 500 is up 98 points (8.5%) over the past two days. Again, that could also be the governments plan to take the losses themselves.

People always get this backwards. When a bubble inflates, it's seen as the economy growing, new wealth being created everybody winning. That's a lie. When it bursts, people complain that wealth is being destroyed. That's also a lie. It never existed in the first place. And they also blame short sellers and speculators, cause hey, everybody knows that profiting off the misfortune of others makes you evil. That's why everybody hates doctors.

Short sellers make markets more liquid, and more efficient. Naked shorting is a different story (and should be banned altogether), but there's nothing wrong with regular short selling. This is especially heinous because only financial stocks are being propped up, artificially inflating their values. It won't help them raise equity, because investors won't pay artificially inflated prices.

Error rating: 3. I know you mean well, but you're hurting in the long run. Plus, the people in charge of the economy are supposed to understand economics.


Sunday, September 14, 2008

There's a reason to date your articles

Apologies about the unusually long delay between postings

By now the story about United Airlines going into bankrupty is old news; both the fact that it happened 6 years ago, and the fact that through a series of unfortunate events, Bloomberg reported that it was happening again last week. Anytime something like this happens, the SEC usually stomps around a few times to find out what went wrong, and assure people that it will never happen again (lol). WaPo reports:

Now, the WSJ reports, the SEC has opened a preliminary investigation into how the story resurfaced. It may not turn into a full investigation but a lot of investors felt the impact Monday and those trades aren't being reversed.... The Tribune says the story made it into the current news flow because of one person visiting the article at 1 a.m. Sunday morning and that pushed the story into the business section's "most viewed" list, which is where Google News found it Sunday afternoon after someone else clicked on the link. In an interesting insight into Google News, the first inbound link came in three minutes later. But the major trouble began when Income Securities Advisors put it on Bloomberg News?and getting it there had nothing to do with bots.

There is an astonishingly simple way to solve this problem forever. Date your news articles. Print newspapers don't do this because the paper itself is dated, and dating every article would be redundant, but if you're going to post articles online, all you have to do is include a tag with the date. Ideally, the tag would be in format easily readable to both humans and computers (i.e., make 2, one in html unseen by humans and one at the top just below the headline) so that crawling newsbots could easily figure out what's new, and so could any human who read the article. In fact, most news articles you find online do this already, on account of not being idiots. It might be hard for a computer to easily figure out the date of the article, but that's where the html date stamping comes in.

Seriously, this is not a complicated problem. Error rating: 6. SERIOUSLY, THIS IS NOT A COMPLICATED PROBLEM. Nothing irritates me more than easily solved problems which have not been solved.