Friday, April 30, 2010

Come one, come all

It is old news that last weekend Arizona passed a discriminatory immigration bill which makes not providing proper documentation to a government official a misdemeanor punishable by up to a $5,000 fine. Here is an article discussing the extreme fracture and fervor it has created in America in a little under a week. In discussing the bill's significance with my girlfriend, she was shocked to find my extremely liberal views towards immigration.

Surprising to her, I am pro-immigration along all the spectrums, but especially pro- high-income and technically skilled immigrants. I make the distinction "among all the spectrums" because I read many articles on repealing the skilled workers' quota (which includes sports athletes to the exclusion of doctors and engineers) but not as many that propose increasing America's overall cap. I view this as a subtle slight (at best) against potential Latin American emigrees - racism and xenophobia at worst.

The homeland security argument is a valid point, but I view the costs, both in human and financial terms, as far outweighing the benefits of detering a (in my opinion) low probability terrorist event.

I never knew that the inscription on the Statue of Liberty was so long. All I knew were the succinct verses towards the end (in bold) which really capture the warm and accepting message that I've appropriated as my own opinion towards immigration. I wish America would welcome all who seek her refuge today, for it was her who took on my ancestors when their dream was to come across the Atlantic in a boat to seek a better life.
The inscription in its entirety:

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
"Keep, ancient lands, your storied pomp!" cries she
' With silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!"

Wednesday, April 28, 2010

Haiku - Ode to Ben Nelson

Ode to Ben Nelson

Wall Street's in your debt.

Your no to regulation,

a stroke of genius.

It probably has nothing to do with the $500,000 to $1 million in Berkshire stock that Senator Nelson owns (Source: WSJ). Nope, it couldn't be self-interested greed. It must be for the burgeoning derivatives trading industry in Nebraska. He is simply defending his state's interests.


Goals update

This morning I officially passed one of my short term goals of 10 Twitter followers. I didn't cheat by posting my Twitter account on my other social media accounts, i.e. Facebook, LinkedIn, or this blog. I grew it organically: followers came and went, but it was a slow and steady climb. I hope they like my style - just thoughts. I don't engage in re-tweeting or in responding to conversations that my followers are not privy to. It took 16 weeks and 98 posts to attract 10 steady followers, now the goal is 100. Will it take 10x the amount of time? I doubt it, probably by the end of the year if I catch on with a group, more if I don't.

Tuesday, April 27, 2010

Haiku - Promotion

Do you deserve it?
The elusive promotion,
Work harder, next year.

Monday, April 26, 2010

Haiku - Dr. Copper

Rich Doctor Copper
metal with a doctorate
predicts future moves.

Thursday, April 22, 2010

Why DO they use bull and bear imagery?

I never knew. Well I guess I learned something today.

Tuesday, April 20, 2010

Limerick - Warren Buffett

Dubbed the Oracle of Omaha,
for the expected returns he foresaw,
with his partner Munger,
and a rich man's hunger,
his wealth grew and grew in awe.

Monday, April 19, 2010

The Speed of Life

Today I’m going to do something a little different. I usually don’t tackle personal, philosophical issues on my blog, but this is a topic that I’ve thought a lot about and it might help me to form a cohesive article about it.

I was born and raised in Ashland, a small town of around 30,000 and declining, in eastern Kentucky. If you have ever traveled on I-64 you can identify the town by the refinery that greets you as you descend from West Virginia. The town’s largest employers when I was growing up were Ashland Inc. and AK Steel which have subsequently either a.) merged and moved or b.) closed forever. It’s a sad fact of life that many towns who depended on industrial and manufacturing jobs now face.

Needless to say, the prospects for career advancement there are limited. This has contributed to what I would label a crisis of brain-drain, where the highest-caliber students leave the area for demanding academic programs. I’ve found that most people’s college connections lead them to jobs close to their alma mater so they stay within a limited radius of their college. The important point is that the highest performers don’t ever move back to eastern Kentucky, because there are no opportunities that bring them back.

Going off-track for a bit – Facebook offers me the opportunity to observe the lives of the people and friends that I’ve made over the years, from Kentucky and the liberal arts college I attended. It’s sort of a people-watching experience, only creepier because it’s online. The main observation that I can make with is that the people who stayed in Ashland are more likely to a.) be married and b.) have children than those that I went to college with (just for reference, I am 24 which is where I am speaking from). My dad says that we all need a ruler to measure against and his ruler was his parents – his point was that he got married at 23 and had his first child (me) at 29. Taking this further, perhaps what I’m observing is the juxtaposition of these two widely-different community rulers at work, where the parents and community members have previously exhibited this behavior and it’s a situation in which history is repeating itself.

But this explanation doesn’t fully convince me. Let me return to where we jumped off track: the people who remain in Ashland are left with limited opportunities in the service-oriented economy. They are left with the option of searching for a different raison d'ĂȘtre other than a rewarding career or resigning themselves to a life of drugs and alcohol, which unfortunately, strikes far too many people in the area. The pursuit of the former most commonly results in pregnancy, which has the side-benefit of (potentially) locking-down a male partner. In a region where people top out their potential incomes quickly, obesity is endemic, and life expectancies are lower than the national average, the potential of starting adulthood early cannot be overstated enough.

Compared with my current, urban location in DC, the difference in lifestyles of twenty-somethings couldn’t be more stark. Here, and observing my college friends who have since spread out, it is all about your career – getting a good first job, performing at a high level, and seeking promotions. Dating takes a backseat as a generation of children of divorce tries to avoid the sins of their fathers. Either that or they want to be secure before they settle down. Emerging from college in the midst of the most severe recession in decades has ingrained the notion that security must be attained or you risk putting not just yourself, but your entire, burgeoning family in jeopardy. I’ve heard it both ways. But mating isn’t even on these people’s radar screens – most people would describe it as a “long term goal”, something 5 or more years out (late 20s/early 30s).

As educated people delay family formation in order to pursue career goals while those in eastern Kentucky choose to begin their family lives earlier, income inequality between these two groups will rise and continue on into the next generation. The educated families will have more resources to invest in their children, providing a higher standard of living which has numerous positive benefits in terms of life development. The Ashland families will not have the same level of resources and so it will continue to propagate the cycle.

It’s a very sad situation, but I have many friends and family members who live in Ashland. I hope to return to Kentucky someday and the plan is to found a private equity firm to invest in local businesses. I was blessed enough to grow up in a safe, friendly town with a good public school. As a result I feel a JFK-like obligation to go back because “to those that much has been given, much is expected”. And make some money. And live closer to my family.

Friday, April 16, 2010

Haiku - Goldman Sachs makin' headlines

Man, I'm sorry to see the bad press today for the kings of the universe. The SEC launched a lawsuit against Goldman alleging that $GS omitted “key facts related to subprime securities” (i.e. their customer, John Paulson & Co. created and packaged, and then bet against, the subprime MBSs that $GS then sold to investors) eventually resulting in the investors in the CDO losing $1 billion. You can read about it here from the NYT or here from Breitbart.
So I wrote a haiku about it:

Sneaky maneuver,
why defraud your investors?
you'll lose customers.

*I was debating "you've lost people's trust" for the last line, because it's probably more true than the alternative, but settled for the customers bit.

Wednesday, April 14, 2010

Haiku - The Peacock

I'm not a fan of attention-seeking people. On the whole, they tend to be very shallow "look-at-me" types, whereas I gravitate towards people that I consider to have substance. In college it was easy to identify them with the monicker "theatre-types."
Rather, I enjoy people that are comfortable with themselves, that (to some extent) know who they are and what they want. The non-bull-artists don't try to impress you, they aren't one-uppers, they don't talk over you or too loudly trying to have people outside your conversation hear them; instead, they listen.
This haiku is for all those big talkers that I'll probably never be friends with, unless I need a marketer.
The Peacock
Hurricane-force winds
utter garbage streaming forth,
Just shut up, blowhard.

links of the day 04-14-10

Great opine from Arthur C. Brooks on how America actually feels about taxation (WSJ)
With rates at zero, investors must take a lot of risk to simply beat inflation (EconomPic)

An analysis of Sorkin vs. Krugman: a debate on the bailour (Village Voice)
Sorkin originally here (Dealbook)
Krugman's response here (NYT)

Why do colleges care so much about extracurricular activities (MR)

The WSJ makes fun of Syracuse students protesting Jamie Dimon as the commencement speaker next month. She gets her two cents in:

“He is a figurehead of an industry that has failed the American people in a lot of ways.’’ said Ashley Owen, a Syracuse senior in a phone call from campus. “I personally know students who have had to drop out of school because their parents have lost their jobs in the financial crisis. To have Dimon as our commencement speaker is really insensitive."

And THEN they pull the punch:

“The big banks that are still growing and growing, and I don’t think that the monopolization of any industry is a good thing,’’ she said.
After several minutes into the interview, Owen apologized for having to get off the phone. She had 20 more pages to finish of Karl Marx’s “Das Capital” for a class assignment.

Haiku - OTC Derivatives

I wasn't born yesterday.
Clearinghouse for me.

Tuesday, April 13, 2010

Haiku - Obama's courtesy

Obama's Courtesy
Bow to the Premier
America is humble
reverse Bush's course.

Haiku - VAT

Governments need it.
More revenue, from inputs,
--> Value-added tax.

Friday, April 9, 2010

Barbie gets a career change -- computer engineer

This morning's Wall Street Journal ran an article on the open vote to decide Barbie's new career path. I believe the article is way off base though because they report, numerous times, that:
Why grown women felt so strongly about having themselves represented by a doll—especially one that feminists have always loathed—speaks volumes both about the power of the iconic Barbie doll and the current state of women who work in computer and information sciences.
The anecdotes that ran in the article are also exclusively female. These statements give the impression that it was a girls-only vote for girls' favorite childhood toy.
That is simply not the case. I even voted in this election for computer engineer Barbie after I was sent the link from my MIT-educated programming friend. Beyond this narrow example, I'm aware of at least a few online communities (and am a passive viewer of one) that engage in "raids" designed to hijack campaigns, votes, and the like. I believe, if it were possible to analyze ex-post the demographics of the ballot-throwers, the members of these communities would account for a significant majority of the voting behind computer engineer Barbie.
Do you remember when the Spice Girls reunion tour placed a ballot on their website for the location of an open date for a concert? Baghdad won over Montreal by a wide margin. Do you remember those demonstrations by Guy Fawkes mask-wearing males protesting the Church of Scientology? I do, and Fires of Heaven and 4Chan forums were behind these.
The power of the internet and especially the internet's more active communities is strong and it shouldn't be underestimated.

Thursday, April 8, 2010

United and US Airways' merger is bad for the consumer

From today's WSJ:

Both companies' CEOs—US Airways' Doug Parker and UAL's Glenn Tilton—have loudly championed the need for consolidation tamong domestic carriers to cut capacity and allow fares to rise.
The older I get and the more experiences I have the more poignant and applicable Adam Smith's wisdom from The Wealth of Nations becomes. In it he warns, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
Why do the two airlines want to merge? So that they can cut "capacity" (routes) effectively sharply contracting the supply on some of the more sparsely traveled lines so that they can raise the prices. I'm no knee-jerk populist but if the two executives are already talking about conspiring against the consumer then it might be worthwhile for the regulators to take a closer look at this merger.

Wednesday, April 7, 2010

Tuesday, April 6, 2010

Haiku - iPad

You did it Steve Jobs!
Everyone thinks they need iPads
even though they don't.

* I read these to my girlfriend after work sometimes and she helps to double-check my syllable count. Apparently the middle line is 8, but who cares? I like this haiku.

Monday, April 5, 2010

The State of the Mutual fund industry

Got to play catch-up

assets robbed by index funds

fix: sliding fee scale.


I'm not a fan of actively-managed mutual funds. It's not because some managers aren't able to produce alpha, simply that most aren't able to. They either aren't equipped to or, more likely, they are much more comfortable mimicking their underlying index while making small changes around the sides. That way they place a small bet on "beating" their benchmark, while minimizing their downside. Do they deserve over a hundred basis points more per year for that kind of mediocrity? The overwhelming answer is no, and America has spoken by moving their money out of actively-managed mutual funds and into passive index funds.

I have an idea for a way to solve this problem plaguing the mutual fund industry to make it more competitive with the passive trend - sliding fee scale. I believe this idea will take out the egalitarianism in the industry and create a more performance-driven environment.
This idea, an example of which is outlined below, is characterized by two main properties: lower fees for underperformance in absolute returns and relative to the stated benchmark. As you can see the fees (which are a percentage of the assets under management) increase left-to-right and bottom-to top reflecting these properties. The plus-or-minus 2% band around the benchmark correlate with lower than average to average index fund fees, because what you are getting in actuality is the benchmark and that is all you should pay for.
The highest fees are for positively high absolute returns that significantly deviate from the benchmark index, which indicates a manager with superior portfolio skills and deserves the lion's share of rewards. The opposite is true for the least skilled, the mediocre, and the risk-takers, and multiple years of severe underperformance won't support their (often) large staffs resulting in their exit from the industry. This effect will "clean up" the industry, removing the complacent and ineffective fund managers while promoting those that have the skills necessary to be guardians of many Americans' nest eggs.

Friday, April 2, 2010

Haiku - Peter Lynch

Fund man Peter Lynch,

at the helm of Magellan,

never a down year.


Thursday, April 1, 2010

Chart of the Day - Labor

Click to enlarge, courtesy of The Big Picture.

Haiku - Congress

Do you know Congress?
I do, and he's not that fun.
Preachy, kind of rude.