An entertaining history of how the right has been crippling our government in order to gain power and enrich itself and its corporate clients from the...moreAn entertaining history of how the right has been crippling our government in order to gain power and enrich itself and its corporate clients from the time of Richard Nixon, through their most productive years under Reagan and a pair of Bushes and no slack for Clinton. We are now reaping some more of the some the "benefits" of over thirty years of turning capable people out of government service and putting in appointed hacks who see business not the people as their client to enable the grand rip-offs of "privatization" and "deregulation". ($700B and counting in the financial sector.)
Civil service was implemented to create a stable base of government function insulated from patronage and control by monied interests. The "privatization" extolled by the right and vigorously implemented since 1980 is little more than the reimplementation of the spoils system that civil service replaced.
The key features are: 1. Preaching a religion that states that all good things come from a unrestrained free-market and that government is an evil obstacle in the road to utopia. (Not withstanding that the institutions in question were created in response to the massive and egregious abuses to fair commerce and labor of that market in the past and castastrophe of the great depression, the last time the financiers could make the rules as they wished.)
2. Making a career in public service as undesirable as possible by ever lowering pay, and disempowering those whose responsiblities might inconvenience businesses or interfere in the distribution of government contracts to those who contribute to the right. There is a term for this last feature, the term is "kick-back".
3. Placing appointees in charge of agencies who are known opponents of that agency's purpose (e.g. Bolton at the U.N. Gorsuch at EPA, Watt at Interior) who disable the enforcement functions, reduce staff, and implement policies reflecting that business not the public good is the client for the agency's services. [In that case, let us tear down the FTC, FDA etc, fire everyone, keep the money, and put up a plaque in their places reflecting the true policy, for the FTC, FDA: "Caveat Emptor", and for the Dept of Labor: "I upped my income, up yours!")
In short, wrecking the government, insuring poor government, perverting what government there is to the service of business, placing the supervision of business in the hands of business itself. Then claiming that this poor result proves the need for more privatization.
I appreciated most that he distilled a character based rather than method based idea. There are far too many business oriented self promotion books an...moreI appreciated most that he distilled a character based rather than method based idea. There are far too many business oriented self promotion books and programs that advocate better ways to puff one's self up and screw others over to get ahead and not feel a shred of remorse, however, that ugly message is gussied up in trendy jargon.
However, most of what makes my life enjoyable as opposed to "worthwhile" seems to land in his quadrant 4 (non urgent, non important). A perfect Covey person either must really enjoy a life devoted to the service of a corporation, a community and a family (in some order) or will be wake up one day to realize that it was all work, because the fun got pushed off into quadrant four and into the mists of eternity.(less)
As a student of the efficient market idea I has always wondered what these guys were up to in more detail even after seeing the Nova program about the...moreAs a student of the efficient market idea I has always wondered what these guys were up to in more detail even after seeing the Nova program about the meltdown of Long Term Capital Management in 1998. This is an excellent book that explains as well as can be in a general work of literature less than 300 pages.
There are several lessons here, that apparently will not be learned.
Mathematical models are based on very good math with very many assumptions required to make the computations workable. The real world is under no obligation to stay within either the quantitative nor temporal boundaries required to survive an investment program based on these models in the applicable markets. The quote from Keynes applies "Markets can remain irrational longer than you can remain solvent". The technique employed by hedge fund such as Long Term only works by means of very large bets with very big leverage. Without these elements there is insufficient return compared to the costs and risk. Unfortunately leverage is a two edged sword, if leveraged 10 to 1, a 10% loss in the asset wipes out the investor. As things go wrong leverage increases as base equity declines. In the example, a 5% loss in the asset means a 50% loss to the investor. LTCM was leveraged 20-30 to 1 routinely, and of course much higher, eventually more than 100 to 1 as relentless losses hammered their capital.
Many events that affect investments are truly unpredictable both as to their source and their impact when they occur. For example, a little nation defaults or devalues. Maybe no big deal. If the little country defaults in the midst of a larger default by a larger nation (e.g. Russia) there might be a disproportionate effect larger than simple sum of the two together, especially if the world's largest players are margined up to the eyeballs on a different outcome when it happens. (or are tied together by a poorly understood network of derivative contracts that ostensibly hedge the risk, but in practice become linked together to become the rock that sinks the world.)
Crisis scenarios are poorly represented in such models which always are based on predicting the future based on the past. In a crisis, linkages occur that are not normally apparent, as the book says correlations converge to one. As it happens it was a self-delusion on the part of LTCM partners that there was any true diversity in their bets. While most were hedged, all were essentially the same bet made on similar goods in many locations. They were counting on diversity over thousands of positions to prevent my simple leverage example above from simply taking them out in short run of adverse market conditions. But as conditions deteriorated all of their trades suffered in unison and LTCM took the full force of leverage against its equity. Another non-mathematical fact is that their markets are a small place full of people not automatons. Once their distress started to become evident, trading behavior compounded their troubles. Although LTCM's secretiveness, arrogance and its deal making practices that skinned safety and profit to the bone for those who helped them finance their trades (e.g. Sholes' "warrant") would account for malicious trading designed to hit them when they were down that is not the main story. The main story is that their success spawned imitators, who had a two fold effect. One, it reduced the quantity and quality of the opportunities for which their models work as others sought out and bought the same opportunities. Two, when things started to go wrong the arbitrage departments of their lenders were trying to unload positions virtually identical to those held by LTCM flooding an inherently thin market leaving them no good way to liquidate their enormous holdings.
On top of that, they did not know when to quit. After a few years of great success when their choice market was decaying, partly due to their size and success in it. They looked for ways to apply the model to other investments that were a much poorer fit, and eventually started to make "directional" trades, a fancy term for ordinary speculation without any hedge at all, and still leveraged. You may know that buying stock in the US is limited to 2 to 1 leverage. LTCM got around this by use of complex derivatives that served as proxies for the actual stock that are not governed by that rule.
Summing up we have: 1. Sheer hubris. 2. Greed. 3. Plain foolishness (dealing in trades that do not fit the model, where LTCM has no expertise and no real edge, even in principle. 4. Reliance on defective technology.
When it all came apart, LTCM was bought out by a consortium of banks coordinated by the Federal Reserve with no public funds involved. The banks had to be persuaded to do this with great difficulty, since they had losing arbitrage units of their own and most figured they had less to lose by LTCM's immediate failure than the sum required for the buyout and a later failure. The fearful unknown that brought them around was what the effects of an LTCM failure would have on markets where their own stock had already lost 40-50%, and the very markets where they would have to unload their own LTCM wannabe positions in the near future in the midst of the massive liquidation of LTCM.
At the time this move was decried by many as something government should not do, or setting a bad example of a soft landing for the excesses of private enterprise in a free market. But note, that no public funds were used, it was only the prestige of the Fed that was used to create a private sector solution to a private sector problem.
Compare that to today when upwards of a trillion dollars of public money will be used to bail-out the damage caused by financial institutions, many the same banks that knowingly bet on LTCM despite the risk, as they went on to even larger and imprudent excesses in pursuit of profit without a sound basis for making it. The LTCM fiasco was a small dress rehearsal for the potential and realized consequences of massive, complex and poorly understood instruments and unsupervised, unregulated hedge funds, and reckless risk taking on the part of the financial community. The modern financial world is a 747 with one engine, no backup systems, and crew more than a bit unclear on how it works. Everything must work right all the time or there is a crash with little in between. It is an inherent problem. LTCM committed no crimes, no one went to jail, it cannot be dismissed as an isolated event due to a rogue operator (as when Russian oligarchs steal the IMF bailout money). This all happened with the best and brightest (and the most arrogant) following the latest principles completely within the law, with the blessing of the great Greenspan, and a maximal embodiment of the spirit of the "free market". It's cleaner than Enron (a rogue) but it still does not work.(less)
One of Dahl's most remarkable books, if not the most remarkable. I have not read them all but this is one packs the most weight by far of those I have...moreOne of Dahl's most remarkable books, if not the most remarkable. I have not read them all but this is one packs the most weight by far of those I have. After an extended exposition to familiarize the reader with the main characters, a boy and his grandmother living in Denmark and the basics concerning witches the story moves to England and turns into a ripping adventure for the boy. The main action is a story of the boy bravely facing danger and taking damage to prevail for a good cause larger than himself. After the central emergency is resolved this book concludes in a way that is unusual and deep. There are real and serious consequences that do not go away magically. The boy, not the Twits, or the evil aunts, or the greedy children takes the punishment and comes out intact in spirit if not body. The final section where the boy takes stock of what has happened and what it means for his future is some of the deepest and unflinching writing I have ever seen in a so-called children's book. As a fantasy lacking a conventional happy ending or the embracing of traditional religious values for its ending, it may not be for everyone. But I thought it was a brilliant book.(less)
Quasi-required high school reading. Recommended to me by a good English teacher for the elective book report that term. Found it dull going overall at...moreQuasi-required high school reading. Recommended to me by a good English teacher for the elective book report that term. Found it dull going overall at the time, in fact, I did not quite finish it. Managed to get the sporting result (a good grade) required but did not come away feeling improved by the experience. I understand that Dreiser is not universally admired even among the professionals, in his day or later on, so perhaps I can be excused. Give him credit due for getting it done, getting it out, and not being forgotten.
If you have been reading some of the other "reviews" for my old required reading that review my limitations, at least in high school, more than the works in question, you may think I might be as dull as now, gratefully, former President G.W. Bush (he of the Hungry Hungry Caterpillar), the highest profile specimen of aggressive ignorance I can recall (having to managed two dips in the ivy league without letting it go to his head). I am grateful for much of what was sent my way that I might not have read otherwise: the three for four Steinbeck novels, all the Twain, Gulliver's Travels was a real high point. We also did a quite a bit of reading of plays and regretted nothing (except perhaps both parts of Henry IV saved only by Falstaff and his crew, and I have some issues with Macbeth. To my mind it fails to meet the given criteria for tragedy in that the "hero" is such a turd from end(weak but murderous if cajoled) to end(simply criminal,e.g. murdering MacDuff's family etc) that I wonder at what point I was expected to bond with him on the way to catharsis. Too much flaw, too little hero for my thinking. Hamlet, on the other hand, is the real deal. Macbeth's main recommendations are some very attractive speeches and the chutzpah it might have taken to be that upfront with regicide so close to contemporary history as opposed to depicting it ancient Rome.) among entries that included Shaw, a large helping of Barrie (who seems to have dropped off the edge since, Dear Brutus would still make my top ten), three from Wilde (minus Salome and Ideal Husband) and several Shakespeare plays.
While no reading machine, most of the items on my list were not compulsory. (less)