Thursday, May 31, 2012

Tuesday, May 29, 2012

FLG's Time Horizons Theory

Perpetually relevant...

In the long run we are not dead, we will still be recovering from the Great Recession. We should therefore weigh stimulus policies not just on their immediate effect but on their consequences over time. Sensible Keynesians recognise this. They bet that reviving growth through government spending today outweighs the future loss of growth as the debt taken on to fund current spending is paid back.

Friday, May 25, 2012

Things FLG Is A Fan Of

Trouser Side Adjusters.

FLG has them on two suits and loves them.  Unfortunately, one usually has to get their suits made to have them, but FLG has pretty much decided that he is only going to go bespoke with suits from now on anyway.

Wednesday, May 23, 2012

It's Political, Not Economic

It saddens FLG that news programs keep asking economists to comment on the European financial situation.  The euro was and is a political, not an economic creation.  The issues involved aren't economic at all, they're political.

Think about it.  Greece would've already defaulted if it weren't for political intervention by Germany and the rest.  The present uncertainty in Greece isn't about the economics or finances. They're catastrophic. It's about whether Greece or Germany will cave to the other politically. Likewise, the contagion effects beyond a Grexit will be determined by politics as well.  Specifically, how much money printing the Germans will allow the ECB to do to backstop Spanish banks.

The primary variables at play are exogenous international politics, not endogenous economic issues.  Asking economists about these things is silly.  Sure, you can ask them what they think would happen given some hypothetical political scenario, but that's not very helpful.  FLG can come up with that himself.

What would be helpful would be to get some informed opinions on what the likelihood of various political outcomes are.  Economists aren't the people to ask about those.  What FLG would like more of are interviews with people who have insight into how the respective governments are thinking about these issues.  Sure, nobody knows for sure how these things will turn out, but economists are definitely the wrong people to ask.  They assume rational actors who will maximize benefits and minimize costs, which doesn't always happen in international politics.

So, please, news programs, stop asking economists to comment on what is entirely a political issue.  Also, economists, please stop commenting on what is a political, not an economic issue.  Your economics PhD doesn't give you carte blanche know-it-all status. 

Tuesday, May 22, 2012

It's Still About Leverage

This post by Dr. Manhattan arguing that Mortgage-backed Securities should be abolished caught FLG's eye.

FLG has long been on record that real estate is a uniquely problematic asset with regards to financial crises because it both simultaneously highly leveraged and illiquid.

Here's part of a passage that Dr. Manhattan quoted:
As a groundbreaking modeler in the mortgage departments at First Boston and Drexel, he had come to see that all of mortgage trading was just a way to make money until the next unanticipated blow up. Time after time, the same thing happened: rates changed and entire trading desks, whole fixed income divisions were blown out of the water because of one or two mortgage trading positions. Savage had a litany of reasons why: hedges -- if they were even available -- always underperformed because the securities were too leveraged to interest rates. In turn, brokers and hedge funds, trying to squeeze every last dime of profit out of a trade, used too much leverage in positioning the bonds, so when the market reversed, they were always forced to sell in a panic.
FLG isn't sure that this proves that MBS's ought to be abolished.  The issue is the amount of leverage, not MBS's.   FLG might be able to get behind the idea that MBS's present leverage that is inherently unregulatable, but he's not there yet.

As FLG has said before, much of the financial crisis response has been more about hobby horses than effective proposals to mitigate and regulate systematic risk. 

Look, almost everybody who calls for Glass-Steagall to be brought back (and FLG would argue most people who support the Volcker Rule) predicates that recommendation on the moral stance that financial markets are no more than gambling.  The trouble is that the lines between investment and commercial banking have blurred for a variety of financial and technological reasons and it isn't desirable or probably even possible to truly put that genie back in the bottle, regardless of how much people would like it to be so.  And don't get FLG started on how the Consumer Financial Protection Bureau has fuck all to do with systematic risk and is all about therapeutic moralism.  

FLG isn't arguing that financial markets aren't risky.  Nor is he arguing that prop trading is super-socially useful.  This isn't the issue when it comes to systematic risk; the issue was, is, and will be leverage.

A bank wants to bet a bunch on the Kentucky Derby trifecta?  Great.  FLG doesn't care.  He only cares about how big the bet is relative to the bank's balance sheet.  Well, that's not quite true.  It's pretty damn stupid thing for a bank to do.  But the point is that what he does care about is whether the amount of money they are putting towards that wager represents a risk to the soundness of the bank.

That's pretty much how FLG views JP Morgan's $2 billion loss.  Sure, $2 billion is a lot of money.  But in comparison to $90 billion in revenue, $20 billion in net income, and more than $180 billion in equity, who gives a shit?    Mistakes were made.  People lost their jobs.  $2 billion ain't chump change, but it's not like JP Morgan was or is anywhere near going under because of a $2 billion loss.  It sure doesn't represent anything like a systematic risk to the banking system.

As far as FLG can tell, the hoopla is motivated by a combination of schadenfreude at Jamie Dimon's predicament (understandable), fears that if $2 billion was lost then who is to say they couldn't have lost $200 billion and sunk the bank and the entire financial system (unreasonable), and finally the same moral stance as above (unhelpful).

UPDATE:  Not two minutes after FLG published this post, he read that the loss could be as much as $7 billion.

A Pet Peeve Of FLG

Has FLG ever mentioned his pet peeve about Schrödinger’s cat?

Look, the cat is either dead or alive.  Just because it hasn't been observed doesn't mean that the cat is in some limbo between the two.

FLG also has a problem with the whole tree falling in a forest with nobody around to hear it question.  Look, the tree fell.  Ergo, it caused sound waves.  Therefore, it made a sound regardless of whether somebody was around.

FLG finds the idea that for something to have occurred it must be observed by a human, which is what both are getting at in the normal interpretations, to be completely asinine, and hubristic about the importance of human beings generally.

Saturday, May 19, 2012

Friday, May 18, 2012

Speaking Of The Frustrations Of Job Hunting

WSJ:
When the labor market is weak and job-seekers are desperate for work, overwhelmed recruiters sometimes default to treating applicants like cattle – an undifferentiated mass of mostly unqualified individuals firing off resumes wherever they can.

But an unhappy job applicant is unlikely to become a happy customer of your company’s goods or services...

Correspondence

This spring, like most springs, FLG got a few emails from prospective Georgetown students.  He figured he'd write one comprehensive post responding to the most common questions to save everybody time.  Listed in rough order of frequency FLG gets asked.

I was accepted to Georgetown and (insert Ivy League School here), which should I choose?  I like Georgetown, but it's not Ivy (or not as highly rated as other school I am considering.)

Don't get hung up on the Ivy or ranking thing.  If you want to study international affairs, government, politics, etc, then Georgetown versus Ivy is meaningless.  Georgetown's reputation is perfectly fine in those fields.  Moreover, GU's location offers the opportunity for tons of internships that will nullify any issues when finding a job.

If you aren't sure what you want to study or you want to study something other than those topics (but not science related), then FLG'd say pick which one you think fits better for you. And if it's a toss up, then go to the most prestigious one.  If you want to study something science related, then FLG thinks you are better off at another school.  Not that you can't get a good science education at Georgetown, you can, it's just that it's hasn't really been the focus at Georgetown.  Sure, they're building a new science building and trying to change that, but FLG'd tell his kid, if they were interested in science and choosing right now, to go someplace else for now.

Is Georgetown SFS worth the cost?  He's already answered that here with respect to undergrad.

Is Georgetown MSFS, the grad program, worth the cost?

FLG doesn't hold an MSFS, but from his interactions with the MSFS students he'd say yes. 

Should I choose Georgetown MSFS over (insert other international affairs grad school here)?

He doesn't know.  He only knows from reputation.  Generally speaking, the top two IR grad schools by reputation seem to be SFS and SAIS.  There's also SIPA at Columbia, the Kennedy School at Harvard, Woody Woo up at Princeton, Fletcher at Tufts. And don't forget GW and American.

Between SFS and SAIS, SFS is smaller and seems to have a more flexible curriculum.   However, FLG thinks that comes at a cost.  Having the larger, more functionally specialized student body allows SAIS to offer some more specific classes in certain areas.  For example, if a student was interested in the nitty gritty details of international economics or international finance, then FLG would suggest that student consider SAIS.  If, for example, the student were more interested in the nexus between the public and private sectors, then Georgetown is probably a good place to attend.  If the student is just interested in IR generally, then either would be a great place.  Just realize SAIS has more econ requirements.

Of the others, FLG has heard from SIPA grads that, like SAIS, it's pretty big and therefore offers the ability to explore specific topics in-depth.  Fletcher has a great reputation and is probably has the most flexible curriculum of all.  Woody Woo and Kennedy offer IR coursework, but in comparison to the other schools it seems less emphasized.  IR is just one concentration among several others within public policy.  Although, Princeton and Harvard will open up a lot of doors.

Should I apply to MSFS or the Masters of Public Policy program at Georgetown?

If you are interested in international affairs, then MSFS.  If you want to focus on domestic policy and do policy analysis, then MPP.



Wednesday, May 16, 2012

Tuesday, May 15, 2012

Random Update

FLG hasn't been posting much because, as he has mentioned before, he's spending time he'd spent blogging either 1) doing Insanity or 2) searching for jobs.

On the job front, he's scoring a big goose egg on interviews, including when he's been referred by current employees.  It's pretty frustrating considering he spent the last two years getting a Georgetown MBA.  Shit, it's not a Harvard MBA, but he felt the name brand would at least be good enough to get some interviews.

To add injury to insult, FLG got rear ended dropping Miss FLG Maior and Minor off at day care.   Thank God, nobody was hurt.  Just a lost fender and hood.

While FLG knows deep down somewhere that he one of the most fortunate people on the planet, or for that matter, one of the most fortunate that has ever lived on the planet - great family, healthy and getting healthier, good education, earning a decent living etc, -- it's hard not to get down.  But he should know better.

Anyway, updates will continue to be sporadic. 

Monday, May 14, 2012

Insanity Update

FLG finished the 60 days of Insanity (with a break while he was in Istanbul).  He weighed in at 205, which is a 15 pound drop in a little over two months.   Considering he has been eating ice cream and cupcakes lately, this is pretty damn good. 

Starting a second round tomorrow...

Friday, May 11, 2012

Georgetown

FLG has been busy and didn't notice until The Ancient pointed it out, that Mrs. P called Georgetown overrated and then posted about Prof. Deneen's quest to get Georgetown to rescind the invitation to Kathleen Sebelius to speak on commencement day.

A few things:
First, Prof. Deneen is a fantastic professor.  FLG and countless other students will miss him and feel that university is far worse off for his loss.  The Tocqueville Forum, which Prof. Deneen founded, livened the academic and intellectual life of the university, and FLG is deeply and personally grateful to him for this.

Second, while FLG is sadden about Deneen leaving and thinks the university community is to blame, he also doesn't think there should be a litmus test for who speaks at Georgetown.  Should it only be Catholics?  Only people who adhere steadfastly to the Church's teachings?  Because we are all sinners and the list will get very short very quickly.  FLG doesn't think even a university as prestigious as Georgetown can get Jesus or one of the saints to deliver a commencement address every year.

Third, all of this discussion reminded FLG of these passages:
Georgetown has, for years, had a golden opportunity...to make a great contribution to American education...

Georgetown has had this opportunity for one simply stated but complexly true reason: because it was Catholic. But, instead of being Catholic, or even Jesuit, Georgetown has rudely turned its back on its one chance of making any contribution to American education and has instead almost totally destroyed its opportunity for becoming an excellent Catholic university and a good American university, in its frantic drive to become a fifth-rate Harvard...

The rulers of Georgetown University have never stopped to ask themselves: What is real education? What should we be trying to do? What can we do best, or better than anyone else around? What can our own traditions contribute to the improvement of American education? From the answers to these questions Georgetown could achieve the best undergraduate education in America and do it with less money than is now being wasted on the misguided, mis-emphasized, present drive to follow the so-called "great universities" down the slope after Harvard, Princeton, and Berkeley.
By aping the un-Christianized, de-Westernized world of American life and American education outside the old Catholic ghetto, the Jesuits have betrayed Christianity, and the West, to a degree even greater than has occurred at Harvard or at Princeton. And now young people all over the country are trying desperately to get back to some kind of real, if primitive, Christianity, with little real guidance from their so-called teachers and clergy. What is even more ironical is that they, and the more progressive of their teachers, in their efforts to get back to the mainstream of Western Christian growth are trying to work out, by painful application, all those things (like multi-valued logic, or the role of daily good-works in Christian life) which were worked out within the Christian West long ago, but are now forgotten, and now have to be re-discovered as something new.

Funny thing, that's from 1967. 

Celebrity Sightings

A couple of weeks ago, the FLGs were at the Whole Foods in Old Town Alexandria.  FLG saw somebody he recognized, somebody who is on TV a lot, but could quite place who they were.   The reaction of the person when he recognized the recognition on FLG's face confirmed FLG's suspicion.

Mrs. FLG walked up.

Mrs. FLG: What is it?

FLG:  Nothing, I just saw somebody I recognized and it bothers me that I can't place who he is -- either a congressman or a public policy commentator or something.  For some reason, I want to say Pete Domenici, but it wasn't him.

Mrs. FLG:  This is going to bother you all day, isn't it?

FLG:  Absolutely.

In fact, it has been bothering FLG for weeks.  But today, finally, FLG saw a Kyocera commercial and  the mystery was solved -- it was Peter Morici.

Thursday, May 10, 2012

How Awesome Is

this?

That's right, pretty awesome.

Wednesday, May 9, 2012

Quote of the day


Once one has a force that can beat anyone in a fair fight, no one will want to fight fair. Even if the Empire eventually built a [Death Star] without a design flaw, its enemies would find some way to fight it indirectly. For example, when its not destroying planets, the DS also likes to grab passing ships in its tractor beam, drag them inside, and then scan them for bad guys. It would be simple to rig a decoy ship as a massive bomb, piloted by a robot with orders to detonate the ship once it’s inside the DS.

Tuesday, May 8, 2012

Quote of the day

Gabriel Rossman:
for the sake of argument let's accept that Caesar rather brashly gave away too much information [to the pirates] in the game of price discovery

Monday, May 7, 2012

Quote of the day

Jagdish Bhagwati:
if President Barack Obama had nominated a lamp-post, the US's ‘newspaper of record' would have found it to be possessed of excellent credentials.
 
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