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Showing posts from October, 2014

1952 recalled

A Facebook friend of mine has recently quoted Senator Bernie Sanders thus:

She (my friend) then added her own comment:

There were a lot of things wrong with the 50's, but one parent working with another one staying home (which they owned) was doable when the onus of taxes wasn't on citizens.

There are so many different lines of thought that arise out of such claims., I almost replied thus:

One line of thought this suggests, (your comment, not Bernie's) is the size of the labor pool then and now. Were women staying home (after the riveting services of Rosie were no longer required for reasons of war) because their men could make enough money to support them comfortably? That's what you seem to be suggesting, though you prefer to state the fact in a gender-free manner that would have seemed off in 1952. Anyway: consider the other direction of causality. Perhaps the fact that women were expected to stay home helped keep the supply of labor for certain sorts of jobs low, a…

The Last of HedgeWorld

Thomson Reuters is putting an end to what until days ago remained of HedgeWorld. Excuse me while I shed an inward tear.

HedgeWorld, founded in 1999, was the first news operation to focus squarely, full time, upon the hedge fund industry. The founders lit this candle soon after the self-destruction of Long-Term Capital Management created a broad public desirous of information on this subject. Better to light that one candle, after all, than to curse the darkness.

I was the first hire of those founders -- they brought me on board in the spring of 2000.

HedgeWorld had a complicated corporate history, but in time it was captured by Reuters, and it was run as a semi-autonomous operation beneath that broad Reuteronian sky.

Then, alas, Reuters merged with Thomson, and the Bigs of the two operations put their pointy heads together and decided where they could make cuts. They closed down HW as a news gathering operation in th

Global Warming and Theology

I'm a member of a facebook group devoted to the discussion of global warming. It was probably a mistake to join, since the discussion is quite jejune.

Here is an example. A poster writes:  "Prove that God is not responsible for global warming."


Assume theism [of some fairly traditional peoples-of-the-book sort] for the sake of discussion here.

Now abstract a bit and consider ANY statement of the form "why is X happening?" where X  is some observable event in time and space. Either you believe that "God so decreed" is an adequate answer or you don't.

If you do believe that to be an adequate answer, then you have rejected empirical science altogether, because science is all about assigning observable causes to observable effects.

On the other hand, if you do not believe that to be an adequate answer, and you press on for a better one, then you have accepted the scientific enterprise, and the challenge of the form "Prove that God i…

The Judge

I saw "The Judge" recently. A decent movie, though it didn't blow me away.

Robert Downey Jr plays Hank Palmer, the sort of city-slicker defense lawyer Hollywood loves, because he is both glamorous and sleazy, so there's plenty of room for tragedy and personal growth.

Robert Duvall plays his father, a small town judge who gets into trouble soon after his wife passes away, and who desperately requires the service of a good, even if sleazy, defense lawyer. That's the set up.

The leading lady is Vera Farmiga, whose character, Samantha Powell, was the high school girlfriend of Hank Palmer. Of course they went their separate ways. Hank went to law school and a big city practice. Samantha stayed in the rural town they grew up in.

One of the subplots of the story involves whether Samantha's daughter is Hank's child. I'm trying to be good and avoid spoilers here, so I'll say no more.

As you may already have gathered, the plot is a bit formulaic, the …

A Follow-Up on those Gilbert Lyrics

Almost 40 years ago now M. Scott Peck, in THE ROAD LESS TRAVELED, contended that discipline is the key not only to normal adult human functioning but to spiritual growth as well.

Discipline in the relevant sense is the habit of constructively responding to problems rather than avoiding them, and there are four basic techniques involved: "delaying gratification, assumption of responsibility, dedication to the truth or reality, and balancing."

That list seems to represent, in Peck's mind, roughly a chronological order in human growth. Even young children can figure out that it makes sense to delay gratification, that is to forgo one bit of candy now in order to get two bits later. At the other end of that list, though, balancing, one decides which of  "conflicting needs, goals, duties, responsibilities, directions" to give up, and making such decisions, making them well, is a lifelong challenge.

There is a connection between Peck's serious point here and G…

Some words from W.S. Gilbert

When a felon's not engaged in his employment
Or maturing his felonious little plans,
His capacity for innocent enjoyment
Is just as great as any honest man's.
Our feelings we with difficulty smother
When constabulary duty's to be done.
Ah, take one consideration with another,
The policeman's lot is not a happy one.

Nobel Prize in Economics

The Nobel in Economics this year went to the dapper Frenchman pictured here, Jean Tirole, a member of the Toulouse School of Economics, and with the Institut d'Economie Industrielle (IDEI). In fact, he chairs the board of directors of IDEI.

Nonetheless, if you are an Anglophone, even if you are reasonably well informed about contemporary academic economics, the odds are good you've never heard of him.

Which is just as well. The selection of a more widely-known figure, Krugman, Kahneman, Mundell, to take recent examples, doesn't really teach us anything. The selection of Tirole naturally leads some of us to wonder why, and so to teach ourselves something. In that teaching-moment respect, the choice is akin to that of Elinor Ostrom a few years back.

Tyler Cowen got the goods, collecting a lot of material about Tirole quickly and effectively on his blog on the morning of the announcement.

About a third of third of the way down Cowen's blog piece, this caught my eye, &q…

Nobel Prize in Chemistry

Nobel week is a fascinating time of year. Each day brings an announcement of one of the prizes, in a way that starts with the hard sciences and seems to build toward the politically contentious pair -- Peace and Economics.

The news in the hard sciences is intriguing (and political in its own way surely, though I am happily abstracted from the sort of academic politics that would manifest itself in such matters). It is intriguing because the bestowal of an award on someone who certainly ISN'T a household name, like the chemists Eric Betzig, Stefan Hell, and William Moerner this year, forces various bright science journalists to explain their life work to the rest of us. And I always enjoy getting some easily digestible field about a subject to which I never otherwise give any thought at all.

Here is the prize committee's own explanation of the work of the three chemists who win this year.


I've put a photo of Eric Betzig at the top of this post -- due respect to…


Wikileaks is now saying that it is about to release more information about the Trans-Pacific Partnership (TPP). It'll be a 30,000 word document.

Okay, you're saying "be still my beating heart" wiseguys, aren't you?

But this could be significant. A year ago, Wikileaks released its first satchel [e-satchel?] of TPP documents, the Intellectual Property agreement.

The participating nations constitute about 40% of the gross net product of the planet. They include: the U.S., Canada, Japan, Brunei, Australia, New Zealand, Singapore, Peru and Mexico.

Critics of the TPP interpreted the materials disclosed in late 2013 as an effort to get higher prices for drugs, higher profits for Big Pharma.  

So: what has Wikileaks got in store this year?


The above photo shows the leaders of all the TPP member states as a 2010 summit.

Proposed Ending for Book

We have travelled a long way. A look back is a good way to end a journey.
We began with a discussion of some of the concepts essential to any discussion of contemporary finance. Why do stock prices move? Do they move randomly? We discussed the fact that modern finance theory has long used the bell curve as a randomness base line.
Related to this, we said that the efficiency of markets, built as it is upon their liquidity and transparency, as well as the fact that a lot of very smart people are looking for an edge in competition with one another, is an adequate explanation for random movements, but that inefficiencies of inefficiencies of markets, which show up as skewed or otherwise non-normal curves, require other explanations.
From there we moved to the questions: how stock options derive their value? And, what are the defining facts about bonds, either

Contra Wittgenstein

I hold to an understanding of the word "world" such that:

1) whether the world is everything that is the case is an open question;

2) but not a very interesting one.

All clear?

High-water marks

In yesterday's entry here, I made what may have seemed to some a quite cryptic observation about "high water marks."

To review, I said that the use of a 20%-of-gain element in the fee structure of hedge funds makes an issue out of the high-water mark, but that I would discuss this at another day.

The underlying idea is this. A hedge fund manager takes as his compensation 20% of the increase in fund value over the last recorded maximum.

Suppose a fund was worth $3 million at the end of year 1. Then it had a bad second year, and ended that annum worth only $2.5 million. No performance fee for them, of course (they have to content themselves with their share of the AUM.) In the third year, they do somewhat better, and get the value of the whole back to $3 million.

In their heart of hearts, the managers would surely like to say that they grew their fund by $500,000 in year 3, so they are entitled to 20% of that, or $100,000. But they can't. By standard contract terms…

Misalignment of Incentives

In the hedge fund world, the phrase "2 + 20" remains at least a critical point in discussion of fees, even though there has been a lot of erosion over the years, and it isn't clear how much of the industry still gets away with actually charging 2 + 20.

The idea is that the management takes 2% of the assets it has under management [AUM] regardless of performance, and separately takes 20% of the profit it makes for its investors. The 20% incentive fee never goes below zero. That is, managers don't have to make up for the fund's losses, they simply get a chunk of gains when there are gains/

The 20% is the big money (at least in good times), while the 2% management fee keeps the lights on and the staff busily employed even in bad times.

The 20% also means that, in the hedge fund world, there is a lot of talk about getting back to a "high water mark," but I'll ignore that today.

The structure has come under pressure for a number of reasons. As long ag…

Immanuel Kant and Original Sin

I've recently tried to read up on Kant's doctrine of "radical evil," his effort at reconciling his Enlightenment philosophy with the Christian conception of original sin.

I will spare you, dear reader, any twistings and turnings on this road just now. I'll simply link you to an article by Paul Formosa, a professor at Macquarie University.

Available through

Money quote (so far as I can tell).

Exclusive Forum Bylaws

Should corporations be allowed to create bylaws in which they limit where they can be sued, especially by their shareholders?

That is one way of looking at the issue in NORTH v. McNAMARA. It concerns specifically what are called "shareholder derivative actions" -- actions in which the litigating shareholder derives his standing from the corporate person itself.  These are the cases in which company managements have long been eager to keep their disputes with shareholders in the (to them friendly) confines of the Delaware Chancery Court where possible.

A court in Oregon recently (August 2014) refused to enforce a forum selection bylaw in litigation over TriQuint SemiConductor Inc. It found suspicious the bylaw in question because the board adopted this forum selection rule at the very same meeting where it approved entering into a particular merger, the merger to which some stockholders objected. The board seemed obviously not to be declaring a general rule about the best …

Two sorts of biology

The September issue of HARPER's included a review by David Quammen of three recent books on the subject of the Neanderthals.

What caught my attention, and made me want to commonplace a bit of this, was Quammen's digression onto the two different sorts of biology in general. There are biologists who look at their field as a batter of applied chemistry -- molecules interacting and compounding. There are also biologists who look at life on the level of the organism, or on the still broader level of the whole populations or ecosystems. Reductionists versus holists, if you will, although those words are judgment freighted. Quammen speaks of organismic versus molecular biology.

Here's a passage, without further comment.

You may have missed this argument, unless you work in the field or are somehow involved with the allocation of university budgets and buildings. It has been quiet and internecine but bitter, and traceable back to the late 1950s and early 60s, when Edward O. Wil…

A commonplace book

This blog has come of late to approximate what used to be known as a "commonplace book," in which (I paraphrase from the Wikipedia entry on the subject) a note taker stored quotations, observations, and definitions from his reading. In the 17th century "commonplacing" as a verb was used much as we would use "scrapbooking." Or blogging, for that matter.

I've been storing quotations here that I've come across in my disorganized reading, often without commentary to speak of, except the commentary implied in thinking a passage important enough to put into this blog.

Here's to the selective revival of traditions.