Wednesday, April 8, 2015

Time Horizons: Messiah Complex

FLG was watching Russell Brand's Messiah Complex and was struck by several references to time horizons.   At one point, for example, Brand said he likes the idea that reality isn't permanent.   Later, he quoted Wittgenstein:
If we take eternity to mean not infinite temporal duration but timelessness, then eternal life belongs to those who live in the present.
FLG is on the other side of both those points of view, which probably explains why his politics differ so much from Brand, but very interesting nonetheless. 

Monday, April 6, 2015

In Case You Didn't Know: Seersucker Season

Put This On:
Depending on who you ask, seersucker season starts either on Memorial Day or Easter (most say Memorial Day, while some will insist on Easter).

FLG is staunchly in the Easter camp.   Over the last few years, he has been in knockdown drag out arguments on the first Friday (FLG wears his Seersucker on Fridays) following Easter with people wearing ill-fitting gray suits and cheap black shoes telling him he can't wear seersucker until Memorial Day.

Here's the thing, folks.  FLG can't remember a time that Derby Day, prime seersucker wearing day, has fallen after Memorial Day.   Therefore, Easter has to begin the season.  QED.  

Quote of the Day II

John McWhorter:
A key theme in the development of the West is the increasing value placed on 1) the individual, and 2) the factual. As such, the idea that the narrative is “what we really need to be talking about” sounds insightful, but is actually a veiled argument that moral advancement means fighting the Enlightenment.

Just clarify for those who won't click through.  In this context, "the narrative" is a story or point of view, for example that their is a rape crisis on college campuses, that is more important than facts in any particular case. 

Quote of the Day I

Larry Summers:
The legitimacy of US leadership depends on our resisting the temptation to abuse it in pursuit of parochial interest, even when that interest appears compelling. We cannot expect to maintain the dollar’s primary role in the international system if we are too aggressive about limiting its use in pursuit of particular security objectives.

Saturday, April 4, 2015

Quote of the Day

Matt Levine:
I guess the framers of the Constitution didn't really think about collateralized loan obligations.

Wednesday, April 1, 2015

Liberal Arts Versus STEM

A long running theme on this blog is that Liberal Arts and Humanities are more important than STEM education.  Consequently, FLG was happy to read this by Fareed Zakaria:
Innovation is not simply a technical matter but rather one of understanding how people and societies work, what they need and want. America will not dominate the 21st century by making cheaper computer chips but instead by constantly reimagining how computers and other new technologies interact with human beings.

Sunday, March 29, 2015

Quote of the day

Asness and Brown:
You can believe the models if you like, or you can look at the data and assume the most likely future is an extrapolation of the past. What you cannot do is both.

Friday, March 27, 2015

Washed Too Many Times?

When FLG saw this jacket, he thought, hey, pretty nice.  Linen and cotton.   Unlined.  Looks pretty unstructured.   Nice neutral color.   Not too pricey for a nice tailored jacket.   Then he saw the pictures of it on the model.

It looks all shrunken and doesn't come close to covering his ass.   Look, who the fuck does FLG have to draft a memo to get this taken care of permanently?  (Probably Thom Browne.) A men's tailored jacket needs to cover the ass.   This isn't negotiable.  The rule isn't some irrational, arbitrary thing perpetrated by pedantic old fogies.   It's the product of many years of figuring out what looks best, and a shrunken jacket that doesn't cover the ass is not it.   People wearing them look infantile.

Fuckitty-fuck fuck.

Thursday, March 26, 2015

Quote of the day

Every time Facebook spend a billion dollars on some startup with three employees, or whenever a venture capitalist makes an investment that values some company you never heard of at tens of billions of dollars, it would be great if people simply would say:
“I don’t understand that!”

Hallelujah and Amen! 

Monday, March 23, 2015

FLG Learned Something About Statistics In College

A few days ago, Frank Bruni wrote a piece, to hype his book, arguing that where you go to college doesn't matter.  FLG is somewhat sympathetic.  If a smart kid, who could otherwise gain entrance to an elite school, decides, for financial reasons, to attend their flagship state school, they'll be fine.  In fact, if they then go on to an elite graduate school, they probably saved a bunch of money and end up in the same spot.

Regardless, FLG saw a major flaw with some of the data Bruni used to support his position:
among the American-born chief executives of the top 100 companies in the Fortune 500, just about 30 went to an Ivy League school or equally selective college.

Okay, so only around 30% of the Fortune 100 CEOs went to a selective school, but here's the issue:
elite college and universities, however, they enroll fewer than 6 percent of U.S. college students 
So, elite school graduates are roughly 5x over-represented from what one would expect from a random draw, which sorta makes it harder to argue that there isn't that much value in attending those schools.   FLG made a note to look at more of the data, but he knew he'd never get around to it.

Luckily, somebody else did.  

Sunday, March 22, 2015

FLG Doesn't Get It

Every once and while, FLG feels compelled to write another post about some of the products Mr. Porter sells, the ones he doesn't get.  To be clear, this isn't to rail against the bourgeois capitalist conspicuous consumer.  As regular readers know, FLG loves himself some Charvet ties.  (He recently got this one and loves it.) It's more a question of taste.

$1,400 for these sneakers?  You couldn't pay FLG $725 to wear these.  What's wrong with a $50 pair of Chucks?  Oh, that's right.  Nothing.

FLG thinks the Loro Piana stuff is almost always way pricier than he'd be willing to pay, but at least he gets the appeal.  For example, these sneakers are pretty cool.    Not $825 cool, more like $100 cool, but still cool.  FLG gets it.  In fact, FLG would buy most everything Mr Porter has from Loro Piana, if he won the lottery, but he would never pay $1,400 for sweatpants.

He does find himself torn on driving shoes.   Driving shoes, since they can't be repaired and the little rubber nubs rub down so fast, seem like a massive waste of money.  However, he really wants to get a pair of blue suede ones.  Not these $450 ones, mind you.  Maybe these Allen-Edmonds ones, which are on clearance.   Or maybe these for $95.  (Although, these purple ones for 295 euros FLG thought about for maybe 5 seconds.)

Wednesday, March 18, 2015


FLG found this post about Robo-Advisers interesting.  He did have an issue with this part:

[Robo-advisers] basically combine simple asset allocation formulas with slick user interfaces on the Web to encourage people to put in their money and leave it there. The algorithms are mostly so simple that a finance doctoral student could implement one in less than a day of coding. That, after all, is the key to passive management. 
 FLG, who is not a finance doctoral student, could probably implement a Robo-Adviser in less than a day.   Well, maybe two days.  He hasn't coded in a while.

FLG does agree with this though:
The real value proposition of robo-advisers is behavioral. Investors are subject to an array of biases, including the temptation to chase returns and to try to time the market. Robo-advisers, with their fancy user interfaces and user experiences, hope to be able to cancel out these biases.
If you think about it, this must be the value-add of robo-advisers. After all, just buying a few ETFs and index funds on ScottTrade, and then forgetting about them for 20 years, will generally give you just as good a return as what the robo-advisers are offering, for slightly lower fees. Index funds basically are robo-advisers without the front-end. Robo-advisers add value if -- and only if -- investors find it much easier to give their money to a robo-adviser than to do the procedure I just described. That’s why robo-advisers are, fundamentally, applied behavioral finance technologies. 
FLG used to be very interested in optimizing his portfolio.  Or perhaps not optimizing, but rather understanding how to optimize it for when he started really looking into his portfolio.    Then one day he realized there are rapidly diminishing returns to getting to optimal.   So, now his portfolio consists of a Total Market Fund, an Ex-US Total Market Fund, and a US bond fund with super low expense ratios.

(He wishes he could find a good Ex-US bond fund, but the fees are always too high.  FLG always assumed the high fees were related to tax treatment of interest income, but has no idea why.)

(Oh, and FLG has a little bit of money in the TSP G-Fund, which he treats as if it were the risk free asset.   His finance professor argued for treating TIPS held to maturity as if they were the risk free asset, which makes sense, but the convenience of treating the G-fund as the risk free asset instead of dealing with actual individual TIPS is too appealing.)

Sunday, March 15, 2015

Speaking Of...

Julius Caesar.  FLG just realized it is the Ides of March.  Beware.

That is all.  

Friday, March 13, 2015

Does Nobody Know Shakespeare Anymore?

The other day, in response to a situation too complicated and too specific to detail here, FLG said, "Ambition should be made of sterner stuff."   Nobody, not one person, got the reference.   And we are talking about a half a dozen people most of whom have multiple degrees from Ivy League schools.

It's not like FLG was pulling quotes from Timon of Athens (not that he could).  It's one of the most famous soliloquies (well, technically FLG guesses it's a monologue, since Antony is addressing a crowd not talking to himself but still) not just in Shakespeare, but the entire English language, and arguably in any language.   It's not far behind Juliet's or Hamlet's.  The world is going to fucking shit.

Thursday, March 12, 2015

FLG Is Disappointed With Himself

He only got 15 out of 18 right!

Wednesday, March 4, 2015

Hillary & Email

FLG had the same reaction as Megan McArdle to the news that Hillary never had a State Department email, but instead used a private email account -- What can [she] have been thinking?

He hasn't been able to get up the energy to write about it because, well, people's views on Hillary are pretty much set.    People who think she is dirty --- think she is dirty.   People who think she is a victim of some massive right-wing conspiracy or, frankly, don't care if she is dirty as long as she is championing the causes they care about -- don't care.   In fact, you could probably release information tomorrow that she was eating Ibocaine at a Berlusconi Bunga Bunga party hosted at a house she rented out with funds from the Iranians using the Clinton Foundation as a pass-thru and her poll numbers wouldn't budge.

Monday, March 2, 2015

Party like it's 1696

It's pretty cool that the Bank of England released a spreadsheet with its balance sheet going back to 1696.

Thursday, February 26, 2015

Retirement Funds

Matt Levine writes of the White House proposal to rein in fees in retirement accounts:
The world view underlying this report seems to be that a lot of what the financial industry does is extract unproductive fees for itself from ignorant consumers, and that you can crack down on the fees -- and save consumers money -- without reducing the incentives for any socially productive activity. This, it goes without saying, is a hugely popular theory. I feel like it is generically wrong, but there may be many, many places where it is specifically correct.

It's the same world view FLG has been concerned with since at least 2009:
For most banks the real profits now come from late fees, balloon payments, default interest rates, and a host of other tricks and traps. In other words, making a profit has become an exercise in misdirection and misinformation. Sneaky has become the norm. 

Should most people just invest in low cost, passively managed index funds?  Absolutely.   Are there perverse incentives in financial advising?   Absolutely.   Do we need to make brokers and financial planners fiduciaries?   Absolutely not. 

A Little Bit Of Haberdashing

FLG is really torn on whether to buy this blazer.  While solid navy in color, it's got a fascinating texture to the weave.  Reminds him of the navy grenadine tie he loves.  Obviously, he wouldn't wear them at the same time.

Wednesday, February 25, 2015

Volcker Rule

FLG has long argued that the Volcker Rule sounds good in theory, don't let the banks take on risk subsidized by the tax payer by limiting their ability to trade on their own accounts, but that it would be difficult if not impossible to actually implement such a rule because in any particular trade it is near impossible to be certain whether the bank is taking on or laying off risk.  For example, let's say a bank engages in an interest rate swap to transform some of their fixed rate assets into variable rate assets.  Does that mean they are taking on risk?   They are going from certain cash flow to uncertain cash flow, so you could say, yes, more risk.  What if the bank had 90% fixed rate assets and the bank was concerned interest rates were going to rise?    Then the swap seems like a prudent move to hedge risk.  Anyway, after years, the regulators are actually trying to implement it.

From the FT:
Five years later it is crunch time. The regulators have to start implementing the rule. But it might not be enforceable.

Matt Levine at Bloomberg put together this handy chart that illustrates the silliness:
That chart is nonsense, which is partly my fault -- don't go trade on it or anything -- but mostly the fault of the Volcker Rule.

The whole endeavor was silly from the beginning.   FLG was always in favor of increasing capital requirements and decreasing leverage, but leaving the what they were levering up on and what risks they were taking to the banks.    FLG is even okay with putting a cap on bank size.  Heck, he's even in favor of limiting interstate banking as a way to contain banks.  (Although, he is still extremely skeptical about attempts to reimpose Glass-Steagall.)    Dodd-Frank is such a mess.

Sunday, February 22, 2015

A Couple of Things

First, on the Blacklist, Red Reddington used the phrase "wealth of Croesus."    FLG was unfamiliar with the name and thought, perhaps, it was a mispronunciation of Crassus, who was asstonishingly rich.   But alas, no, it was Croesus.  In fact, on the Wikipedia page of wealthiest historical figures, in the ancient section, Croesus directly above Crassus.

Second, FLG doesn't think this is entirely fair to Chris Hayes, but he laughed nonetheless:
Give Holden Caulfield a television show and you’ve got Chris Hayes.

Tuesday, February 17, 2015

Understanding The Mind Of The Enemy

FLG read this article about ISIS with much interest.   He was particularly struck by this passage:

There is a temptation to rehearse this observation—that jihadists are modern secular people, with modern political concerns, wearing medieval religious disguise—and make it fit the Islamic State. In fact, much of what the group does looks nonsensical except in light of a sincere, carefully considered commitment to returning civilization to a seventh-century legal environment, and ultimately to bringing about the apocalypse.

One of the best courses FLG took at Georgetown focused on understanding politics through the eyes of Muslim believers.   Too often individuals, peoples, and countries, assume that others, at their core, are like them.  Or maybe it's that they want to believe others are ultimately like them.   It's comforting to think that maybe the conflict is over some economic or political dispute that can be negotiated away.

Theological and ideological disagreements are different.   We must understand the self-conception of ISIS is we are to defeat them.  For FLG, this means that " well-intentioned but dishonest campaign to deny the Islamic State’s medieval religious nature" by the Left is deeply troubling.   Similarly, the rush to simply call ISIS evil on the Right is also problematic.  FLG thinks they are evil.   It's the idea that evil is somehow undifferentiated in its forms and that all evil must simply be destroyed.   Understanding the the exact nature of this particular form of evil will allow us to defeat it more successfully.   That understanding will allow us to predict their actions and responses to our actions, but more importantly allow us to find a way to destroy, over time, the ideas they are putting forth.

Friday, February 13, 2015

Continental Illinois National Bank and Trust

FLG first learned of Continental Illinois National Bank and Trust from The Ancient years ago.  FLG enjoyed this recent post at Motley Fool about "Too Big To Fail" lessons from Continental Illinois:
1. Today's darlings are tomorrow's pariahs
2. Rapid growth is a red flag
3. High profits often precede a fall
4. The perils of relying on "hot money"
5. Rumors alone can bring down even the biggest of banks

It's funny because FLG came away with most of these same lessons from the Northern Rock failure over two decades later.   Guess it's one of those cases of being doomed to repeat history.

Thursday, February 5, 2015

Time Horizons

Victor Davis Hanson:
stronger democratic nations feel that they can continue to enjoy short-term calm and peace of mind -- and let others worry about any long-term likelihood of aggression. 

Still all about time horizons for FLG. 

Tuesday, February 3, 2015

Time Horizons

Sure, FLG doesn't blog much anymore, but he would be so remiss if he didn't post this link he might as well just shut the blog down.

Maybe Washington is starting to get over its narrow-minded, irresponsible obsession with long-run problems and will finally take on the hard issue of short-run gratification instead.

Sunday, February 1, 2015

Quote of the day

George Will:
Take the day off, better angels of our nature, because nothing says America like football played indoors in air conditioning on grass in the desert.

Friday, January 30, 2015

Not Another Degree

Every once and while, when FLG gets a bit bored, he starts pondering another degree.   For whatever reason, he thinks he doesn't know enough about international economics and finance.

There are two programs that FLG was looking at yesterday.  First, an MSc in Quantitative Finance from the University of London's external program.   Then, he started looking at the Master's in International Economics and Finance at SAIS.  And he realized something.  Something he has probably realized before, but he keeps forgetting --- with the exception of some of the more advanced technical statistical analysis courses, which he is mildly interested in, he's pretty much taken all of the available courses.

Here's the SAIS curriculum for example:
Macroeconomics - Done
Microeconomics - Done
Quantitative Methods I - Done
International Finance - Done
International Trade - Done
Quantitative Methods II - Probably done
Monte Carlo Simulation - No, would be mildly interesting
Quantitative Methods III: - Cross-Sectional Econometrics or Time Series Econometrics - No, would be mildly interesting

And there are the electives:
Advanced Topics in Trade Theory - Probably done some of this
Case Studies in International Finance - Done
Cost-Benefit Analysis  - Done
Credit Markets and Credit Risk - No, would be mildly interesting
Economic Development - Done
Financial Decision-Making - FLG thinks his MBA covered this.
Financial Derivatives - Done
Financial Regulation - Done
Game Theory - Done
Global Investment Management - Done, more or less
Global Macro Modeling - Nope, could be very interesting
Industrial Organization - Done
International Money and Banking - Done
Multinational Corporate Finance - Done
Regulation of International Financial Markets - Done
Topics in Growth and Development - Done

Anyway, so FLG was looking through this and thought to himself, "why do you keep thinking you need to learn more?   Maybe a PhD on the topic would allow you to dig deeper into this stuff, but would you even want to dig that deep?  You wanted to be an expert in international economics and finance.  Just admit you're there.  You've pretty much got expert level knowledge in this domain.  Accept it.   Why are you insecure about this?  Do you need another credential?   None of this makes any sense and it's not normal."

Saturday, January 24, 2015


Telling point about FLG.   Obviously, he pays attention to the currency markets and he knew the ECB was expected to announce quantitative easing.    He also knew that this would drive the euro down against the dollar.   FLG's first thought?  Time to order shoes.  160 euros minus VAT is 132 euros.   132 euros is less than a $150.  Full grain leather, goodyear welted shoes for less than $150?   Yeah, gonna take advantage of that.

If the exchange rate stays this low for a bit, FLG might even buy these.

Tuesday, January 20, 2015


Saw David Muir in front of the White House.  FLG is about 75% sure he saw Chris Matthews as well.

Friday, January 16, 2015


FLG saw John Ashcroft this morning and Nouriel Roubini while walking back from lunch.

Thursday, January 15, 2015


Reread Euthyphro last night.

Not FLG's favorite dialogue.  Phaedrus probably is.  Followed closely by Meno, Apology, and Crito. But it reminded FLG why philosophy professors so often assign Euthyphro.  It demonstrates the Socratic Method; it raises a key theological dilemma; and, probably most important for Phil 101 professors, it's short.

Monday, January 5, 2015

Quotes About Finance

FLG ran across this Motley Fool article with 122 Things Everyone Should Know About Investing and the Economy.

Really liked this one regarding investing:
"In expert tennis, 80% of the points are won, while in amateur tennis, 80% are lost. The same is true for wrestling, chess, and investing: Beginners should focus on avoiding mistakes, experts on making great moves."
FLG also liked this one, which applies to finance and economics:
"We're all just guessing, but some of us have fancier math," writes Josh Brown. 

But of all the quotes, FLG like this the best because it applies pretty much to any field of human endeavor:
John Reed once wrote, "When you first start to study a field, it seems like you have to memorize a zillion things. You don't. What you need is to identify the core principles -- generally three to twelve of them -- that govern the field. The million things you thought you had to memorize are simply various combinations of the core principles." Keep that in mind when getting frustrated over complicated financial formulas.  

Sunday, January 4, 2015

Time Horizons: NOW!

FLG read this article with interest because of the obvious overlap with his time horizons theory.

Saturday, January 3, 2015

State Robustness

Nassim Taleb co-authored a piece in Foreign Affairs that articulates a concept that FLG has been thinking about for a long time -- states that appear stable are actually less stable.   Italy, for example, is more adept at absorbing shocks and change than Saudi Arabia.

According to the article, these are the signs of a fragile state:
Centralized power
Economic specialization (ex. tourism or oil)
Being highly indebted and highly leveraged
Lack of moderate levels of political change
Lack of a record of surviving big shock

These five markers function best as warning signals. They cannot indicate with high confidence whether a given country is stable—no methodology can—but they certainly can reveal if a given country should cause worry.

FLG is completely fascinated by the idea of entropy in both economic and political systems.  One could use either of two definitions:
A measure of the disorder or randomness in a closed system.
Inevitable and steady deterioration of a system or society.

The following passage from the article expresses FLG's thoughts on the matter far more concisely than he could on his own:
Although centralization reduces deviations from the norm, making things appear to run more smoothly, it magnifies the consequences of those deviations that do occur. It concentrates turmoil in fewer but more severe episodes, which are disproportionately more harmful than cumulative small variations.
FLG has previously used the idea of pressure in a system to articulate this.  The entropy in any system creates pressure.  Trying to contain the pressure is only a temporary solution.  There needs to be some sort of release valve or the entire system will be destroyed.

This means that a political system, including say central banks trying to manage the economy, that tries to tweak the system over time to preserve or optimize the status quo is deluding itself, as this continual optimization results in a sub-optimal long-term outcome.  The best rebuttal FLG has seen, not surprisingly for long-time readers a time horizons-based one based on Thomas Jefferson -- maybe a series of stable regimes that last for several decades, only to be violently replaced, is actually the best solution.  FLG doesn't agree, but it is a compelling argument.

Thursday, January 1, 2015


FLG enjoyed this review of Leo Strauss: Man of Peace because it reminded him of many of the things he so enjoys about the study of political philosophy.

It also reminded FLG of the part of Phaedrus where writing itself is called into question.  This most often used as the jumping off point for the concept of esoteric philosophical writing.  For FLG it is that, but also a warning about the limits and consequences of technology.  Every once and a while, it's healthy to step back and consider the effects of technology, not just computers, Internet, and smart phones, but to think about one of the most fundamental -- the written word.

I cannot help feeling, Phaedrus, that writing is unfortunately like painting; for the creations of the painter have the attitude of life, and yet if you ask them a question they preserve a solemn silence. And the same may be said of speeches. You would imagine that they had intelligence, but if you want to know anything and put a question to one of them, the speaker always gives one unvarying answer. And when they have been once written down they are tumbled about anywhere among those who may or may not understand them, and know not to whom they should reply, to whom not: and, if they are maltreated or abused, they have no parent to protect them; and they cannot protect or defend themselves. 
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