Thursday, January 30, 2014

Celebrity Sightings

FLG is pretty sure Al Hunt was on his DCA-LGA shuttle flight this afternoon.

FLG is completely positive that Mitt and Ann Romney walked into the Carnegie Deli while he was paying for his pastrami on rye.  They were very gracious and polite.

Monday, January 27, 2014

FLG Still Contends It's All About Leverage

The way to limit systemic risk in the financial system is to limit leverage.  Everything else is pretty much a distraction.  This isn't to say that other things, prosecuting insider trading, fraud, other ethical violation, etc, aren't important, but they just don't have much to to with systemic risk.

FLG has been calling for hard, fast rules limiting leverage because, well, he wants to limit leverage (see above).  He also thinks things like the Volcker Rule sound great in theory become horrible 2,400 pages of indecipherable mess that can and will be gamed when all is said and done.   Far better to just set up a rule that can be both explained and actually implemented in one sentence.  So, you can imagine FLG's joy when he read this the other day:
It's particularly tenet-shaking because of the blunt arbitrariness of the rules: Lending to companies with a debt-to-earnings (no, debt to our good friend Ebitda, earnings before interest, taxes, depreciation and amortization) ratio of greater than 6 times is basically right out, but a 5.9x ratio is fine. Give or take.You can buy a company and lever it more than 6 times, but not with (any) bank debt. You gotta go get bonds, and "Since bonds are typically more expensive than loans, the revised structure can make the deals more costly."

It's pure, simple, and easily understood leverage limiting.   Sure, this arbitrary rule will create some inefficiencies, but almost any regulation will create inefficiencies.   

Friday, January 24, 2014

Quote of the day

John C. Dvorak:
Someone at Microsoft—and I suspect it began with the miserable counter-productive "ribbon" interface on Microsoft Word—hates desktop computers.

Wednesday, January 8, 2014

Six Years

The world has now been subjected to FLG for six years.  Although, the annual post count keeps decreasing with radioactive half-life-esque speed.

Tuesday, January 7, 2014

Quote of the day

Kathleen Parker:
Obama is not, in fact, a god, as he now seems comfortable conceding

Well, in that case, he just broke Winston Zeddemore's number one rule.   

Friday, January 3, 2014

Minimum Wage

The other day, FLG read this NYTimes editorial and scratched his head at the same passage that Caroline Baum over at Bloomberg did:
In March, every Republican in the House voted against a measure to raise the minimum wage. “When you raise the price of employment, guess what happens? You get less of it,” said Speaker John Boehner in February, espousing a party-line theory that most economists agree has been discredited.
FLG actually read it twice to make sure he read it correctly.  Look, FLG isn't one to think that a moderate increase in the minimum wage is going to have disastrous effects on the labor market.  But he also knows that a price floor results in a surplus because the quantity of labor demanded would decrease and the quantity of labor supplied would increase.  This isn't some crazy party-line theory that has been discredited, but Econ 101 and all that is required to graph it are some straight lines.

So, thinking this, FLG had to click on the link asserting the discredit of basic price floor theory.  Lo and behold, it links to a CEPR report.   Now, for those of you who don't know, CEPR is the Center for Economics and Policy Research headed by Dean Baker.  (Although, he wasn't the author of the paper.)  FLG has said good things about Dean Baker in the past, but let's be clear, he's a man of the left.  The equivalent would be to dismiss Nancy Pelosi was a left-wing ideologue for suggesting that deficit spending can stimulate the economy, cite a Cato or Heritage paper, and claim most economists disagree.  It's fucking nuts.  (Although, FLG must, in the interest of fairness, state that he assumes the Wall Street Journal has probably done just that, but it's still fucking nuts.)

Time Horizons: Inauguration Speech Edition

FLG would like to point out that in Bill de Blasio's inauguration speech he mentions not waiting, starting today, and now more than a dozen times, which makes perfect sense given FLG's Time Horizons Theory.

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