Friday, October 28, 2011
The stock markets were euphoric yesterday about the latest EU bailout/rescue deal. Is the euro-crisis over? Will euphoria, or even mild euro-optimism, continue for very long? I wouldn't bet on it.
The trillion Euro rescue commitment turns out to be highly "leveraged", that is, illusory or at least highly risky. It was leverage that helped precipitate the 2008 Lehman and housing crises. The risk that Wednesday's euro-salvation might make things even worse, rather than better, is very real.
Leverage, of course, means putting down less money than you are committed to. If the market goes up, you make far more than you would otherwise, since you gain the full value of the rise in your commitment, without your having put down - typically, without your possessing - what you committed. But if the market goes down, you lose dramatically - often, you lose everything - since if you put down, say, 30% of your commitment, and the market goes down 30%, then you lose not 30% but 100% of your actual investment. (The European governments seem to have put down about 30% of their trillion Euro "commitment", although given the slipperiness of their government accounting practices, it's all too likely they're really putting down even less than that.)
Here is Ambrose Evans-Pritchard on the European "rescue":
Albert Edwards from Société Générale said the ECB will have to act, over a German veto if necessary. "The increasingly frenzied attempts of eurozone governments to persuade financial markets that they can draw a line under this crisis will ultimately fail."
"The impending threat of a euro break-up will force the ECB to begin printing money, very reluctantly joining the global QE party. The question is whether Germany will leave the eurozone in the face of such monetary debauchery," he said.
Evans-Pritchard is a quirky man, to put it gently. (He is intellectually idiosyncratic in a very English, upper class contrarian way. His father was Edward Evan Evans-Pritchard, perhaps the greatest English anthropologist of his generation, and a sharply contrarian character himself.) But Ambrose Evans-Pritchard's scepticism in this case seems justified; probably more than justified. Read the whole article.
My first introduction to the concept of leverage, by the way, came from John Kenneth Galbraith's wry book about 1929, "The Great Crash". Galbraith was a deeply complacent liberal and a believer in Keynes as the last word in economics, but he wrote clearly and he could be quite funny, as he was in The Great Crash. Galbraith's writing is irritating too, of course, because he was so relentlessly pleased with himself. But credit where it's due: The Great Crash explains leverage unforgettably and with an amusing helping of irony.
Thursday, October 27, 2011
But Japan is not like anywhere else.
Among Tokyo's sparkling towers and madly busy streets, you get a strong feeling of being in a different universe from ours, a feeling strengthened by the way British mobile phones are not advanced enough to work here, and your cashpoint card is rejected with an almost audible sneer by most Japanese bank machines.
As a Japanese friend said: 'We are on another planet here, the only place that has not globalised.'
In many ways this is a conservative paradise. Though Tokyo is not as severely conformist as when I first saw it almost 30 years ago, some things have not changed.
The Jobs idolatry is out of hand and this piece suggests why. (H/t instapundit) Here is what bothers me. The notion that you need somebody like Jobs to convince you that economic freedom and technology are good things, is pretty lame. Jobs made himself and a lot of other people rich, but he is hardly a model of anything to be admired, as far as his personal qualities go. It is just foolish and misinformed to lionize ruthlessness and dishonesty as somehow prime capitalist virtues. For one thing, it's not true.
Sure, there are creeps and liars who prosper in business, but most successful businesspeople will tell you nothing is more valuable in business than a reputation for honesty and for keeping one's word. It's impossible to enforce all deals through litigation or other third party means. If you get a reputation for breaking your deals, people won't deal with you. A reputation for keeping your word is of enormous importance in business. It's how many markets including trillion dollar trading markets work. A congenital liar like Jobs -- what can you say; it seems universally acknowledged that the truth was just not in the guy -- prospered because he had other huge talents. But most liars fail because nobody will trust them.
Similar story for being a personal flake. Some study I read years ago suggested successful CEOs tend to be far more successful in marriage than average. They are not mostly men and some women who throw spouses and children under the bus to achieve success. That may be Hollywood's view and may even be how the movie biz works, but for business generally, not so. CEOs tend to be devoted husbands and fathers, men who keep their promises, and women too. For every trophy wife collector you read about in the gossip pages there are many more who will celebrate golden anniversaries. Which makes perfect sense when you think about it. People who can be trusted with other people's money can generally be trusted with one's affections as well. I thought Ross Perot was right when he dismissed some annoying journalist's suggestion that his rules at EDS regarding marital fidelity were overly puritanical: Perot said "if his wife can't trust him, why should I?" A fair question.
That Jobs stole ideas, cheated his business partners and lied habitually seems to be generally accepted and documented in the new Isaacson biography. These are bad things not only morally but also for business. In my book this doesn't make a Jobs "complex"; it makes him a scoundrel, a person not be admired. Yes, I know, iPods are cool.
The upper echelons of business are full of admirable men and women. A fair number of shits too, of course, but on average fewer than you will find in the middle, let alone the dregs. It's unfair to business leaders to tar them with the tawdry but glamorous sheen of Jobs. I think most of them have enough self respect not to be caught dead in a five hundred dollar black turtleneck. Yes, certain fabulously talented but mostly amoral and psychologically troubled sorts like Jobs can be wildly successful, but his personality traits much more often lead to tragedy and failure. This is why I seem to be on a one man campaign against his being held up as a hero or role model for anybody.
The heros of capitalism are the honest, hard working and smart men and women who do what they do because they promised they would, who come up with brilliant ideas and give due or even more than due credit to their colleagues and who contribute to their communities out of a kind of love for their homes and country. They may not sell books or movies but they are what makes a free economy work.
It must be strange to be a woman. They have things like beauty blogs. Don't me wrong. I'm all in favor of female beauty. If they want to do mysterious things to be more beautiful, I'm all for it. But it's very different from me. I buzz my hair because I'm balding anyway and if it's really short I don't have to comb it. I stopped shaving years ago and buzz my beard because I don't have to trim it if it's short. My beauty routine consists of remembering to put on deoderant and not picking at any scabs. The idea of knowing a lot about lipstick or eyeliner is very alien to me. But vive la difference.
The researchers interviewed 52 convicted murderers, 14 of them ranked as psychopaths according to the Psychopathy Checklist-Revised, a 20-item assessment, and asked them to describe their crimes in detail. Using computer programs to analyze what the men said, the researchers found that those with psychopathic scores showed a lack of emotion, spoke in terms of cause-and-effect when describing their crimes, and focused their attention on basic needs, such as food, drink and money.
The study has already forced its authors to discard some of their assumptions about living with schizophrenia. “It’s just embarrassing,” said Dr. Stephen R. Marder, director of the psychosis section at U.C.L.A.’s Semel Institute for Neuroscience and Human Behavior, a psychiatrist with the V.A. Greater Los Angeles Healthcare System and one of the authors of the study. “For years, we as psychiatrists have been telling people with a diagnosis what to expect; we’ve been telling them who they are, how to change their lives — and it was bad information” for many people.
Wednesday, October 26, 2011
After years of fumbling while reading the written word, Christian Boer, a graphic designer from the Netherlands, has developed a way to help tackle his dyslexia. The 30-year-old created a font called Dyslexie that has proved to decrease the number of errors made by dyslexics while reading. The font works by tweaking the appearance of certain letters of the alphabet that dyslexics commonly misconstrue, such as "d" and "b," to make them more recognizable. This month Boer released the font in English for U.S. users to purchase online.