tech punditry and investment advice

I am obviously not a daily reader of MG Siegler's ParisLemon as I am commenting on something that was posted last week, which in mobile years might as well be last century. Anyway, the particular post is nerdspasm worthy - if you just so happen to be into both tech and finance.

Conveniently, I am.

Siegler links to Chris Dixon posting Warren Buffett's annual shareholder letter as CEO of Berkshire Hathaway (more specifically, the parts that are purposefully released PR-style for public consumption; the full letter is more detailed). Siegler's commentary reads (mostly)

Ask anyone why gold is so valuable and they’ll immediately tell you that it’s a rare commodity. And that’s true. But beyond its decorative value, which is minimal at best, what value does it actually produce? Very little.

Well, very little beyond selling it to the next fool who will pay more for it.

I don't know whether Siegler is casually interested or follows this more closely, but Buffett's letters are always fun fodder for the investment world and in particular the 2011 letter is quite remarkable. Indeed, this letter is darn near infamous.

First, Buffett yet again exemplifies that being a billionaire does not cause stupidity; it really is possible to be rich and maintain some touch with reality. Specifically, he acknowledges in the letter that he was wrong on housing finding a bottom. Contrast that kind of directness with how Manhattan financial firms operate, like Goldman Sachs Chief Financial Officer David Viniar giving his incoherent explanation of 25 standard deviation moves. Actually, don't contrast them. It will just make you cry (whether over math or the failing of our institutions, is in your hands). It's not that Buffett is always right, but that he puts his thoughts out there.

Second, Buffett has thrown himself in the midst of what has to be one of the greatest not-really-that-important controversies in the history of the internet. Except that if it's not important, why mention it?

And therein lies the rub. Warren Buffett is in the business of profiting off of information asymmetries. He wants to buy undervalued shares and sell overvalued shares. Warren Buffett, in other words, practices the art of the greater fool theory. He believes that fools exist at both ends, in fact! People dumb enough to sell him shares at below real value and people dumb enough to buy shares at higher than real value.

Once you see that Buffett is talking his book, in fact specifically referencing holdings like Coke and See's, the particular commentary on gold becomes even more fascinating. He needs people to put their money in financial assets because that's where he has leverage - political access, business contacts, legal resources, etc. Precious metals are a huge threat to that power base, not because they realize a return, but because they're not in the business of generating returns. Investing is incredibly risky. Saving is an entirely different endeavor - the whole point is to transport today's capital in a form accepted tomorrow, not to generate additional capital tomorrow. There are basically three types of precious metals investors: 1) conspiracy theorists/doomsday preppers, 2) savers, and 3) speculators. Note that while we colloquially use the word investing to describe this, none of these three types of activities are actually investing in the financial sense of the word. What's really dangerous is when people end up investing when they think that they are saving*.

(I of course do not give official financial advice, legal advice, tax advice, marriage advice, cooking advice...but personally, I am a big believer in investing in stocks. That is in no way inconsistent in also believing in saving in much safer vehicles that have nothing to do with equities, nor is it inconsistent with also believing in the value of diversity over concentration.)

It's the relationship between value and price that determines whether 'something' is a good investment or not. The utility of that something for some other purpose is irrelevant*. After all, if Buffett was simply a buy and hold forever investor, how come he sold all that Exxon Mobil stock he's so interested in talking about? If he is so focused on productive assets, why does he invest in companies that are so unproductive that they require government bailouts just to stay afloat?

So Siegler, if you really think gold has minimal decorative value, why is it so valued in jewelry? It rivals diamonds in popularity and global ubiquity even though the gold market lacks the monopoly equivalent of De Beers backing it.

And I would love to know where I can get a list of the companies that are going to be productive over the next decade. If this was known, if there were no risk, it wouldn't be investing. But perhaps most plainly, the greater fools theory simply doesn't make sense. If you bought something, that means you're the fool. The natural conclusion of this advice is to steer clear of the entire (secondary) equities markets.

Michael Dell went into the investment advice business in such a famous way that he singlehandedly demonstrated the importance of knowing when people are talking their books. If someone had shorted Apple and gone long Dell a decade and a half ago, they'd be bankrupt today. In fact, they would have gone bankrupt years ago.

*Note, there are huge incentives to confuse people about this, and not just in stocks and precious metals. The housing bubble was encouraged in no small part by the National Association of Realtors and the Federal Reserve pushing people to think of housing - something of value due to its utility as shelter - as somehow synonymous with the returns of investing and the safety of saving.

shorter sotu 2012

War is Bipartisan. Yippeee! Look, I used an exclamation point, so it's optimistic!

I was looking at a USA Today questionnaire about the presidential race, and it does a great job of (unwittingly) capturing the impending irrelevance of the presidential election. My first-place match gave my answer in 3 out of 11 categories.

Oh, and my number 2 guy has already quit the race. I know virtually nothing about him. My number 3, well, she also is a quitter, and perhaps personally responsible for the great northern migration south. Obama didn't even rank in the top three.

This is like the opposite of 2000. It's shaping up to be the least important election of our time*. But the match game is fun, go check it out.


*Not that it's worth anything, but I remain unchanged in my opinion that this is still Obama's election to lose. Have you seen the GOP clowns? It's a bizarre world when Ron Paul can have so much fun annoying the establishments of both political parties. How is it that he, not the Democratic candidates, is the one inspiring productions like this?



By the way, check out the screen shot. OFA has money to buy airtime on obscure Ron Paul You Tube videos. That says about everything you need to know about our electoral system.



P.S. - Check out the You Tube video now. It's been taken down for copyright infringement!

one year later

Watch the full episode. See more FRONTLINE.

We're all flawed human beings. We have our individual problems/challenges/hubris/sins/whatever.

Transparency in our institutions is one of the best tools we have to allow us to function collectively in a civilized fashion.

comedy news network

CNN claims that, "Secretary of Defense Robert Gates is credited with trimming military spending and using a firm hand on tough decisions."

Ha!

midwesterners for manning

So I haven't been able to sleep through the storm this morning. Maybe I'm excited to go home for Easter.

For whatever reason, I've decided to put down my two cents on the government's move of Pfc. Bradley Manning from Quantico to Leavenworth. For most folks, that's like the middle of nowhere. But I happen to be from a few miles east of there! So I put together a Facebook page and attached this description. If I've done this right, you can even click the Facebook link right here to like it.



With the government’s surprise announcement in April of 2011 that Private First Class Bradley Manning would be transferred from Marine Corps Base Quantico to the Army’s Fort Leavenworth, you may be wondering, where the heck is Fort Leavenworth? For the 99% of the population that doesn’t live in the Kansas City metropolitan area, here’s a brief primer on the military assets in the nation’s midsection.

Scattered around the region are a couple of army ammunition plants, underground storage facilities courtesy of various limestone mines and caves, the old Richards-Gebaur Air Force Base, and Honeywell’s nuclear weapons plant. The major military bases are Whiteman Air Force Base and Fort Leavenworth. Whiteman, a little over an hour east of the KC area, is home to one of the world’s most unique military assets – the fleet of B-2 stealth bombers. On the Kansas side, Leavenworth (also the town’s name), in the northwest corner of the KC area, is the oldest Army post west of the Mississippi River. It serves as one of the Army’s most important training facilities.

But this page isn’t about these installations. This is about a particular human being, raising awareness of his circumstances.

You see, Leavenworth is also home to THE federal prison, the prison of prisons, the Place To Be. Sure, there are infamous prisons like Alcatraz, historic prisons like la Bastille Saint-Antoine, and the superduperultravaluemealmax security facilities that have sprouted all over the country. But if you have been a VIP of the United States Federal Government, you have paid a visit to Leavenworth. (Technical note: there are several separate correctional facilities in the Leavenworth area, so if you are ever writing to or visiting someone, make sure you know exactly where they are, but collectively, it’s easiest to simply refer to them all as ‘Leavenworth’).

Naturally, surprise announcements can cause worry and concern, but two key things about Leavenworth do not need to cause alarm. First, it’s true that this relocation moves Manning away from his attorney and the nation’s capital. But Leavenworth isn’t in the middle of nowhere isolated from the rest of the world. It’s actually closer to a major civilian airport than Quantico. Second, Leavenworth is a major destination for military and civilian prisoners. Places like Quantico and Fort Knox are for lesser sentences of military personnel, and on the civilian side, for much of the 20th century, there were few other United States Penitentiaries of note. (Another technical note: in 2005, the civilian federal prison system expanded and reorganized, building larger maximum security facilities and changing United States Penitentiary, Leavenworth to a medium security installation, ending the prison’s century long role as the largest maximum security prison run by the federal government. The United States Disciplinary Barracks remains the military’s sole maximum security facility.)

In other words, the military has taken now 23 year old Bradley Manning out of the purgatory of indefinite detention amongst run of the mill detainees to move him to the place of the federal government’s worst offenders.

Now, I don’t know whether Manning is ‘guilty’ or ‘innocent’ – I don’t even understand exactly what laws the government claims have been broken. As of the time of this transfer, the government hasn’t even started prosecuting him yet, even though he has been imprisoned since May of 2010. What I do know is that every American citizen, every human being, deserves a few basic rights:

1. Due process
2. A speedy trial
3. Humane treatment
4. Protection from cruel and unusual punishment
5. Access to visitors, including legal counsel, friends, and international observers
6. Equal protection under the law

I also know that information about the activities of our government belongs to We the People, not to our employees in Washington. After all, we don’t imprison Daniel Ellsberg, we celebrate him. The government acted so heinously in the Ellsberg case back in the 1970s that the federal judge hearing the trial dismissed all the charges against the man who leaked what we call the Pentagon Papers.

These principles form the bedrock of our justice system, of our way of life, and not just in DC. We Midwesterners happen to believe in them, too.

Thanks for sharing this page with your family, friends, neighbors, colleagues, and elected representatives.

(Note: This summary was compiled by a civilian (me) with no detailed knowledge of either the military or civilian correctional systems. If you have expertise in editing this to be more precise, please feel free to share!)

For more info about the ongoing treatment of Manning, see this website or this one.

pundit4sale

(P) Something that has fascinated me for several years now is how easily some Democratic pundits seem to shift their principles based upon how the wind blows from party leaders. In the short term, it does provide them significant cover in that it is difficult to discern whether they're bought off or honestly believe what they're blathering. But over time, the only value added Dems bring to the equation is inhabiting the reality-based world, in being interested in doing what works.

It's utter nonsense like this spewed by Matthew Yglesias last week - on a Think Progress blog, no less - that starts warranting comparisons to folks like Rush Limbaugh and Bill O'Reilly and Michelle Malkin. Yglesias is actively proposing that powerful people should be above the law. That's a direct assault on the Constitution, not to mention a market-based economy.

So here's the question. Is Yglesias bought and paid for, knowing that the rule of law is a good thing but being willing to shill for criminals nonetheless? Or does he honestly believe that poor people should go to prison for petty crimes while the rich and powerful should maintain their liberty no matter how heinous the consequences of their actions?

I'm obviously a little partial to the Heartland, but the one-two transpartisan punch of Bill Black at UMKC and Tom Hoenig at the KCFRB over the past couple years has been much more interesting than most of the 'liberal' commentary from Inside the Beltway about how we need to Protect the Financial Fraudsters for the Good of us All.

I eagerly anticipate wittiness from Yglesias in favor of the rule of law. Oh wait, just look to the Bush years.

Like this commentary on Attorney General Mukasey.
Or this one on Bush lawbreaking more generally.

Black's response is worth reading in full. And here is the underlying New York Times article from Gretchen Morgenson and Louise Story that set off Yglesias' defense of our rotten system. By the way, how's that for turnabout? The corporate media runs a big story highlighting a major problem, and the 'liberal' blogger Yglesias defends the status quo!

This is also a good place to tie in some commentary from Barry Ritholtz about another NYT article - yes, that's two positive references from me regarding the Times in the same post! Even as the overall US prison population has exploded, the Bush and Obama Justice Departments radically reduced annual referrals of white collar crimes for prosecution. You know, despite the mid-90s having no systemic domestic financial collapse, while a decade plus later, we confront Armageddon that Requires us to Give Rich People Money.

i can't believe i'm about to type this

but Ross Douthat just wrote a fairly insightful and stimulating piece. Douthat is the conservative picked up recently by the NY Times as clearly their other authors are just so gosh darn radical tree-hugging hippies.

I've particularly enjoyed Naked Capitalism's warning labels. For example, for the bizarre hit piece called The Agony of the Liberals, Yves Smith added the disclaimer:

The Agony of the Liberals Ross Douthat, New York Times. Read this only if you want to raise your blood pressure.

But this week, in The Roots of White Anxiety, he almost accidentally hits upon something important. You have to get past the obligatory conservative homage to a Pat Buchanan intro, and past some of the unhelpful generalizations, like the implicit barb that 'elite universities' are somehow unfriendly to conservatives or 'Red America', to see it.

But it's there. He lays out in black and white the challenge confronting our body politic. Our system of higher education represents the class divide rocking our society, morphing from institutions of equality and meritocracy to places designed to amplify and harden socioeconomic status across generations. Working class Americans of our rural and urban communities have at some points in our history worked together to achieve progress. Much of the unfolding of the past few decades has been efforts to break these two groups apart, to create as much tension and hostility as possible to prevent them from working together. That's essentially why the culture wars were fought: not just to get Republicans fired up to oppose those Godless commies, but also, to get Democrats to relate less to all the racists who live between NY and LA.

The culture wars themselves are largely irrelevant now (sorry boomers, but most young people really don't care much about petty things like skin color or abortion bans or the evils of homosexuality). But the remnants of the culture wars are all around us, in the increasingly separate worlds inhabited by various socioeconomic classes. Lack of familiarity breeds distrust and undermines cooperation. Not on purpose. But just because we're more comfortable with stuff we're around, from ideas to people. The outcome is class stratification, and looking at the demographics of admissions to top universities gives a great empirical insight into the larger trend.

a tale of two brits

(P) I found these two articles from British outlets deliciously contrasting in their presentation of the healthcare debate in America.

First, from the Economist, we have "Friend or Foe? It is not wise for Democrats to bash America's health insurers".

Then, from the Independent UK, we have "The brutal truth about America’s healthcare: An extraordinary report from Guy Adams in Los Angeles at the music arena that has been turned into a makeshift medical centre".

Can you guess from the title which one is the concern troll about bashing health insurance companies, and which one is the detailed reporting about the lack of access to quality medical care in the United States?

Let's play a little game. Guess which article the quotes come from.

1. "For one thing, the punters at these meetings often have poignant and unscripted personal tales that explain their distrust of proposed reforms. Also, numerous polls now confirm that scepticism among Americans at large—and independents in particular—is growing about health reform."

2. "They came in their thousands, queuing through the night to secure one of the coveted wristbands offering entry into a strange parallel universe where medical care is a free and basic right and not an expensive luxury. Some of these Americans had walked miles simply to have their blood pressure checked, some had slept in their cars in the hope of getting an eye-test or a mammogram, others had brought their children for immunizations that could end up saving their life."

3. "The more underhanded gambit is the decision to bash the insurance industry at every turn. Ms Pelosi now calls its bosses “villains”, while Mr Obama wags a disapproving finger. This will score some political points, as many Americans have a deep (and often well-founded) distrust of health insurers. But the tactic could ultimately hobble or even doom reform."

4. "Although the Americans spend more on medicine than any nation on earth, there are an estimated 50 million with no health insurance at all. Many of those who have jobs can't afford coverage, and even those with standard policies often find it doesn't cover commonplace procedures. California's unemployed - who rely on Medicaid - had their dental care axed last month."

5. "Though it has a shameful history, the insurance industry has done a U-turn of late. It now accepts the need for a radical overhaul of insurance markets through measures such as guaranteed issue of coverage and the creation of health insurance “exchanges”. But its leaders are increasingly unhappy about the shrill attacks. Can Mr Obama continue to bash the insurers one day and rely on them the next?"

6. "I've been very conservative in my outlook for the whole of my life. I've been described as being about 90,000 miles to the right of Attila the Hun. But I think one reaches the reality that something doesn't work... In this country something has to be done. And as a proud member of the US community but a loyal British subject to the core, I would say that if Britain could fix it in 1944, surely we could fix it here in America."

Hint: this test is designed to be easy. It goes E/I/E/I/E/I. Oh, but you probably figured that out already.

time to rant

(R) This has no in-depth analysis. Nothing's changed in college football in the last 24 hours.

I just saw something on ESPN that really encapsulates the absurdity of the season. Look at the articles written about the four BCS bowls played so far.


In the Orange Bowl, Virigina Tech, #1 in the computer ranking, is matched up against Kansas, a team with a better record than both USC and Georgia. That apparently warrants three articles, with headlines like, "Kansas Proved it Belonged". Meanwhile, the Fiesta Bowl had the most anticipated game, the only match-up between two conference champions. It is just as worthy of the national championship as Ohio State/LSU. That naturally is worth four articles.

However, the Sugar Bowl, where Georgia played a team whose best victory was against Boise State, somehow warranted seven articles. And the Rose Bowl, the most pathetic excuse of a BCS game in perhaps the history of the BCS, an embarrassment to any claim the Rose Bowl has to national implications, was somehow deserving of nine articles. The top one is titled, "USC looks like nation's best team". Wow, they beat a top 25 team in what was essentially a home game. That's, like, an automatic national title, isn't it? You'd think the coach of the year was at Georgia or USC with this kind of coverage. You'd certainly be forgiven for thinking Georgia and USC have the best records in college football, or that they've beaten the best teams this season, or that they haven't lost to any bad teams. Of course, you'd also be wrong. Georgia, like Kansas, didn't even win its division. USC lost to Stanford, an even worse loss than West Virginia's loss to Pitt.

Sports coverage is usually quite good, at least, in comparison to things like political coverage. But these guys should be embarrassed. Or they should just admit that they're not covering college football. Rather, they're partisans with a particular interest in certain schools. There's nothing wrong with that. In fact, fans are what make sports great. Just be honest about whether you're writing as a fan or an analyst. If writing as a fan, then give equal space for fans from other schools to make their case. If writing as an analyst, include all teams in your discussion. It's not like Missouri or Kansas or Oklahoma or West Virginia or Virginia Tech are clearly superior to USC and Georgia. Rather, it's that they're obviously equal to them, deserving mention in any objective analysis about the best teams this season or the best bowl games or anything else.

annoyed baseball fan

(R) When ranting about sports coverage, it's hard to not address the wider problems we have with corporate control of the media and lack of competition and whatnot, not to mention disparities in how baseball distributes TV revenue. But, honestly, this is a very targeted complaint. There are lots of other opportunities to complain.

You've got a freakin' $100 million dollar pitcher starting his first major league game, and you can't watch the game in the state it's being played on a cable package that costs hundreds of dollars a year, not to mention funding from commercial breaks. It's absolutely ridiculous. What's on ESPN, ESPN2, and FSN? Reruns. Lovely. Don't even ask about the 40 other channels showing crap at 2 in the afternoon on a Thursday.

Oh, but of course, you can watch the White Sox on WGN. Whoopdeedoo.

And who would have thought the Royals and Cards would have started the season 1-5? Bleh.