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. 

Monday, December 15, 2014

DC Celebrity Sighting

Saw Paul Begala in front of the Loews Madison Hotel.

Updating the list.

Friday, December 12, 2014

Celebrity Sighting

Saw Michele Bachmann at Pennsylvania Ave and 15th.

Updating the list.

Thursday, November 27, 2014

Quote of the day

The division of labor is the essence of civilization, the underlying source of practically every good thing about the material conditions of the modern world. It is why civilized countries do not have famine any more, why we are surrounded by technological wonders, why things like air travel and mobile phones go from being restricted to millionaires to being ho-hum over a short course of years. Most of the technological ingredients for the Industrial Revolution had been in place not only in Britain but in Spain, France, Italy, etc., for years. But British subjects and American colonists had the opportunity and the inclination to begin a finer and more robust division of labor than did their European counterparts. They were just a little bit more free — and a little bit more determined to be free — and that little bit made an incalculable difference, not only to them, but to the world.

Saturday, November 22, 2014

I Don't Think That Word Means What You Think It Means

GQ's Douchiest College list.

Harvard at 4?  OK.
Princeton 3?  Gotcha.
Duke number 2?   Fine.
Brown topping the list?  Of course.  (Sorry, JTL)

But University of Colorado cracking the top 10?  Bob Jones?   University of Chicago?  University of Phoenix?!   Each have their issues, but douchy?  FLG doesn't think so.

Saturday, November 15, 2014

Politics and the English Language

Peggy Noonan inspired FLG to read "Politics and the English Language" with this passage:
I mentioned last week that the president has taken to filibustering, to long, rambling answers in planned sit-down settings—no questions on the fly walking from here to there, as other presidents have always faced. The press generally allows him to ramble on, rarely fighting back as they did with Nixon. But I have noticed Mr. Obama uses a lot of words as padding. He always has, but now he does it more. There’s a sense of indirection and obfuscation. You can say, “I love you,” or you can say, “You know, feelings will develop, that happens among humans and it’s good it happens, and I have always said, and I said it again just last week, that you are a good friend, I care about you, and it’s fair to say in terms of emotional responses that mine has escalated or increased somewhat, and ‘love’ would not be a wholly inappropriate word to use to describe where I’m coming from.”
When politicians do this they’re trying to mush words up so nothing breaks through. They’re leaving you dazed and trying to make it harder for you to understand what’s truly being said.

Thursday, November 13, 2014

Foreign Service Officer Test

FLG just learned that the State Department offers an online practice version of the Foreign Service Officer Test.   Apparently, the Georgetown School of Foreign Service really does prepare its graduates well (at least for the test):

Wednesday, November 12, 2014

FLG Hadn't Seen This

FLG was reading this piece by George Will about Hillary in 2016 when he came across this:

In October, Clinton was campaigning, with characteristic futility, for Martha Coakley, the losing candidate for Massachusetts governor, when she said:
"Don't let anybody tell you that it's corporations and businesses that create jobs."
Watch her on YouTube. When saying this, she glances down, not at a text but at notes, and proceeds with the hesitancy of someone gathering her thoughts. She is not reading a speechwriter's blunder. When she said those 13 words she actually was thinking.

FLG found the clip.  She clearly read the line and then started second guessing it in real-time.   It reinforces FLG's opinion that Hillary will basically say anything to get elected (although he's not sure this statement is particularly helpful), but also smart and resilient enough to carry on.

Saturday, November 1, 2014

Robot Sex

What robot sex enthusiasts forget is that there's far more to sex than the mechanical act

Regular readers will remember that he welcomes the development of sex robots, as he thinks it will dramatically reduce sex slavery and other horrible sex-related crimes.

Wednesday, October 29, 2014

A Conversation

FLG:  Hey FLG, isn't that David Boies over there in front of the U. S. Court of Federal Claims?

FLG:  Why, yes, FLG, I do believe it is.  You should add him to the celebrity sightings list.

FLG:  Is he widely known enough to be called a celebrity?

FLG:  Have you looked at the list lately?  He is more famous than a lot of other people who made your list?

FLG:  Okay, I'll do it.

FLG:  Can I ask why are you talking to yourself?

FLG:  I was about to ask you the same question.

Could've Been Appeared in a London Paper in the 1770s

FLG read this David Ignatius column and thought to himself, if you change a few names around, this could've appeared in a London paper in the 1770s.   To be clear, FLG is NOT drawing a moral equivalency between ISIS and American Revolutionaries.  Far from it.  But from a military perspective, sentences like this:

When the jihadists stand and fight, as they have done in the northern Syrian town of Kobane, they get pounded. U.S. officials estimate the jihadists have lost 400 fighters in that battle.

Could just as easily have been:
 When the American rebels stand and fight, as they have done in the Battle of Long Island, they get pounded. Crown officials estimate the rebels have lost 3,000 fighters in that battle.

Sunday, October 26, 2014


FLG wants one.   But he'll probably just end up buying a Jeep Wrangler, which he knows from previous ownership, is as good an off-road vehicle as he'll ever need because, well, he doesn't go off-roading all that much and Wranglers can go pretty much anywhere anyway.

Saturday, October 25, 2014

Ya Don't Say?

FLG watched this video, which reveals the closely held secret that when you deposit money in the bank it isn't placed in some super-secure vault and left there.  No, the bank...wait for it...lends the money out.   At, you'll never believe this, a higher rate of interest than they are paying you on your deposit.  This all leads to some sort of financial voodoo by way of fractional reserve banking and the money multiplier.

Thanks.  FLG had no idea.  Oh, neither did fucking Aristotle back in 300 something BC.

Also, while in theory this is maybe slightly interesting, there's this thing called the Federal Deposit Insurance Corporation that backstops all this.  So, for retail investors, you know, depositing bank notes as described in the video, this is all more or less irrelevant.

If, however, he wanted to do an educational video on the repurchase agreement or Eurodollar markets and how these both affected and were affected by the financial crisis in 2008, well, that might actually be relevant.

FLG Is Intrigued

Thursday, October 23, 2014

FLG's Prediction

Jeff Bezos will be recognized as one of the most influential business people of all time.  Up in the pantheon with the likes of John Pierpont Morgan, Henry Ford, and Sam Walton.  Steve Jobs will probably end up close behind, but despite what most people currently think, FLG is convinced Bill Gates will be light-years down the list.
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