Black Swans

March 6, 2009

From Vanity Fair, a classic, textbook definition of  the “Narrative Fallacy” from the Black Swan by Nassim Taleb, and how it leads to people not recognizing the real reason behind an event.

Icelanders—or at any rate Icelandic men—had their own explanations for why, when they leapt into global finance, they broke world records: the natural superiority of Icelanders. Because they were small and isolated it had taken 1,100 years for them—and the world—to understand and exploit their natural gifts, but now that the world was flat and money flowed freely, unfair disadvantages had vanished. Iceland’s president, Olafur Ragnar Grimsson, gave speeches abroad in which he explained why Icelanders were banking prodigies. “Our heritage and training, our culture and home market, have provided a valuable advantage,” he said, then went on to list nine of these advantages, ending with how unthreatening to others Icelanders are. There were many, many expressions of this same sentiment, most of them in Icelandic. “There were research projects at the university to explain why the Icelandic business model was superior,” says Gylfi Zoega, chairman of the economics department. “It was all about our informal channels of communication and ability to make quick decisions and so forth.”

Truly classic.


The Dollar

March 5, 2009

Russia is not a big enough player for this to make a marked difference, but this is what happens when your financing become a foreign policy issue.

Russia banned investment of its $83.7 billion National Wealth Fund in bonds issued by foreign government agencies such as Fannie Mae and Freddie Mac, the Finance Ministry said on Thursday.

The ministry said earlier on Thursday it had also banned investment of its $136.3 billion Reserve Fund in foreign government agencies’ bonds.


March 5, 2009

A categorization of the Icelandic banking system,

You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets.

From Vanity Fair.

In other words, from Tony Shearer,

“They were very different,” he told the House of Commons committee. “They ran their business in a very strange way. Everyone there was incredibly young. They were all from the same community in Reykjavík. And they had no idea what they were doing.”


March 4, 2009

Was doing some research on average compensation last week and came across this interesting bit of information.  This information is from the Employer Costs for Employee Compensation Summary put out by the Bureau of Labor Statistics.

In September 2008, private industry employer compensation costs averaged $27.07 per hour worked.

In September 2008, employer costs in state and local governments averaged $39.18 per hour worked.

On the face of it, I never thought there would be a differential between the two, never mind that much of one.  Kinda yikes.

The Dollar

March 3, 2009

A bit old, but I have been busy.  Paths to Repudiation.

As readers of this blog and my newsletter are aware, I have laid out the case whereby the United States eventually repudiates its public debt. The means by which this happens is unclear. There are several paths to the same place however, and it’s not necessary to choose only one method of ultimate default. All the usual methods will do, and I am now confident we’ll witness most of them in the next five years.

A short read where he lists a couple of plausible scenarios.

New York City

March 3, 2009

Generally, the cost of doing business is so high in NYC, in order to be competitive with other places, you need some help from the government.  A Plea to Keep Cameras Rolling in New York.

At a news conference at Kaufman Astoria Studios in Queens, dozens of film and television workers gathered on Monday to ask politicians to expand the incentive program offered to their industry in the past few years, not scale it back as planned.

The program, which offers studios tax credits from the city and state for up to 35 percent of the production costs — 30 percent from the state and 5 percent from the city — has been so successful that the state has already paid out the $690 million that was to last through 2013.

Perhaps it would be best to find a way for New York (or New  York City) to become cost competitive with other areas.  Find out why you can not film here and work out those issues instead of taking money from those areas of the economy that are cost competitive and subsidizing those that are not.

And where else would you film a show shot in NYC you ask?

Beth Kushnick, the set decorator for the science fiction drama “Fringe,” which is relocating to Vancouver in May, said the show had 200 workers here, most of whom would lose their jobs.

The strangest part of the article, however, was the last paragraph,

And then there is the global effect. Maxine Kaplan, president of the Prop Company — Kaplan & Associates, said that two of the seven workers she employs are from Tibet and depend on their salaries to send money to relatives overseas.

Would not a Tibetian employee working in Vancouver still be able to send his proceeds to his native country, not even mentioning the issue of tax incentives in New York for money that is to then be sent overseas?

Friday Quote

February 27, 2009

The payoff of a human venture is, in general, inversely proportional to what it is expected to be.

– Nassim Taleb, The Black Swan