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I’m in Washington, D.C. right now and, aside from noting the glorious wealth compared to Boston (the new cars, the new or rebuilt houses, the lack of vacant retail space), I am encountering a lot of government workers. One Labor Department official expects that the reelected Obama will add a raft of new regulations for employers. One example cited, that could be done without any new law being passed by Congress, was a quota system requiring companies that get revenue from the government, either as contractors or subcontractors, to hire 7 percent disabled workers (WSJ article). Given the large percentage of the economy taken up by government, this might end up embracing those companies where a majority of Americans work. Another new tangle of Labor Department regulations is related to Obamacare (article). The new requirements are so complex that the government workers who are to enforce them are requiring continuing education and training (from private contractors, of course!).

After all the dust settles from the new regulations, what was the most surprising thing for this Labor Department official? “I can’t believe that any private company is willing to hire a worker in America.”

[Where can employers find enough disabled workers to meet the Obamaquota? Here the government itself may provide the solution. In a lot of places, e.g., New York City, a majority of firefighters and police officers retire on a disability pension (example; note that this means that pension obligation calculations by local governments are even more wishful thinking (article)). As these folks may be under 50 years old at retirement they can supply the required 7 percent quota.]

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A lot has been made about Mitt Romney’s career in private equity, which started in 1984 at Bain Capital and ended in 1999 when he left to run the Salt Lake City Olympics. This calculator shows that the annualized return of the S&P 500 during this period was 18 percent (i.e., this was an exceptionally fortunate time for an investor in U.S. companies; the same calculation for the period 2000-2011 results in a 0.5 percent return).

Did Mitt Romney do even better than a passive investor in the S&P 500? Yes, as did most private equity shops during this period. Was that due to the fact that the folks who collected massive fees for managing private equity funds knew something about how to operate a business that had escaped the managers who’d spent their entire lives within a given industry? Not necessarily. Jeremy Grantham, one of the world’s most successful investors, is fond of pointing out that KKR has demonstrated very similar returns to what an investor would have achieved by buying the S&P 500 using the same amount of leverage that KKR used to buy companies. In other words, instead of paying a 20 percent fee to KKR, an investor could have simply bought the S&P 500 on margin and walked away, keeping 100 percent of the fruits of the investment rather than 80 percent. And KKR, instead of working hard to identify exactly the best companies to purchase and the best managers to hire, could simply have bought stocks at random to achieve the same result. (Indeed KKR might have done better with a more hands-off approach; the company offered a full partnership to Ken Lay, the Chairman of Enron, shortly before Enron’s accounting frauds were exposed (see this book excerpt).)

So while there may be other reasons to like Mitt Romney, his ability to outperform the S&P 500 is not necessarily one of them. Anyone who was able to borrow money at an interest rate lower than 18 percent could have beaten the S&P 500 during the period of time that Mitt Romney was involved in private equity.

[Has anyone seen this kind of analysis in a mainstream newspaper article or TV show? It seems odd to report that Mitt Romney was a big success as an investor without noting that so was almost everyone else during the same period of time.]

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People seem sort of shocked when countries such as Greece and Spain come crashing down to earth or when an unlikely success story such as Israel or Singapore emerges. I’m wondering if a simple study could predict a country’s economic future: Is a young person better off going to work for the government, or in a quasi-government job, or for private industry?

China stagnated for centuries and many historians have put forth as a explanation that the best and brightest young people wished to enter the civil service rather than become merchants or engineers. Israel has one of the world’s most successful economies, despite a huge range of challenges. A schoolteacher in Israel starts at about $18,000 per year (source; compare to about $51,000 in Chicago (source)), despite the fact that the cost of living in Israel is higher than in most of the U.S. (see this ranking by city; Tel Aviv is at 24 while Chicago is down at 108).

Air traffic controllers in Spain could earn more than $1 million per year (see this entry from 2010). A young person would have been foolish indeed to choose a private sector career over a government or government-affiliated job in Spain back in 2010 and in 2012 we see where the country ended up.

How about the U.S.? We certainly have some great opportunities in government. A California state prison guard, who may have no education beyond high school, earns more than an average Harvard graduate (WSJ). It is not uncommon for police and fire department workers to earn $150,000 to $250,000 per year (more if the value of defined benefit pensions are included). Health care jobs in the U.S. must be regarded as quasi-governmental due to the fact that the government pays for roughly half of health care bills. Doctors in the U.S. earn more, on average, than private-sector workers with similar amounts of education (e.g., PhD engineers). Given the regulated nature of banking, the subsidies handed out to Wall Street in 2009 and 2010, it might be argued that some financial industry jobs are really government jobs.

I wonder if we could quantify this by looking at projected 10-year earnings, including the actuarial value of pension commitments, for young workers starting out in different standard careers across a variety of countries. The ones where the government jobs are the plum jobs are the countries whose relative decline we can expect.

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Economists are unable to explain a lot of things (e.g., the Collapse of 2008, whether European governments should spend more or spend less, etc.). One of the persistent mysteries to economists is why Americans vote. There are almost no races that are decided by just one vote. One does not get paid for voting. Here in Massachusetts, the typical citizen is handed a November ballot in which 75 percent of the candidates are running unopposed.

I’m wondering if one reason that people go to the polls is that they feel superior to other Americans after they vote. One often hears people talking about folks who vote for the other party as “stupid”. How could those millions of people, nearly 50 percent of American voters in fact, be taken in by statements that are so obviously false? They must be stupid. If people who vote the opposite of me are stupid… that makes me smart! So after I come back from the polls I can feel smarter than approximately 50 percent of Americans.

Thoughts on this theory?

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Following an in-flight fire on an airplane chartered for his wife, Mitt Romney explains the fire triangle:

“I appreciate the fact that she is on the ground, safe and sound. And I don’t think she knows just how worried some of us were,” Romney said. “When you have a fire in an aircraft, there’s no place to go, exactly, there’s no — and you can’t find any oxygen from outside the aircraft to get in the aircraft, because the windows don’t open. I don’t know why they don’t do that. It’s a real problem. So it’s very dangerous. And she was choking and rubbing her eyes. Fortunately, there was enough oxygen for the pilot and copilot to make a safe landing in Denver. But she’s safe and sound.”

From the Los Angeles Times.

[As a former airline first officer, I appreciate the fact that the copilot got mentioned. It is also nice that no dog was strapped to the roof of this aircraft.]

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I saw an interesting play the other night at the Huntington Theater: Good People. Set in present-day South Boston, the story concerns childhood friends who meet 30 years after high school. One has become a medical doctor and the other is a single mother living paycheck to paycheck. The medical doctor ascribes his success to hard work and personal drive. The single mother reminds him that he didn’t succeed on his own and he owes much of his success to good fortune and assistance from others. A good play made topical by President Obama’s “You didn’t build that” remark.

[Recommended and well-acted. The theater is pretty small and there really aren’t any bad seats.]

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Massachusetts was founded by the Puritans to b a “City Upon a Hill”. How is that vision from 400 years ago doing? Let’s look at the ballot questions for 2012. One of them relates to IT and automobile repair, which is probably not something the Puritans could have had an opinion regarding. The other two are about medical marijuana and assisted suicide. Though I have not looked at any opinion polls, my guess is that both of these will fail. Nonetheless, they are interesting because they show how tough it is to found an enduring social system (on the assumption that the Puritans would not have supported either initiative).

Separately, I am surprised that nobody proposed a ballot initiative limiting the ability of politicians to grant defined benefit pensions to public employees. If the Massachusetts state employee pension fund does not return 8.5 percent per year for the next 50 years (story; state pensions are about 67 percent funded under this rosy scenario, but the state is plainly bankrupt if the fund delivers returns similar to what bond market participants expect), most of the taxpayers will be needing medical marijuana to stave off depression.

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Photokina is happening right now in Germany and a lot of new cameras and lenses are being introduced. Here’s my personal take on stuff…

The most practical tool seems to be the Nikon D600, already available for a price of $2100. That sounds costly, but the image quality should be much higher than the $3500 Canon 5D Mark III (my review). The D600 shares the 14+ f-stop dynamic range of the D800 but without the $3000 and the excessive-for-many-folks 36 MP resolution. See the D600 sensor test from DxO.

The Sony NEX mirrorless system has gotten a big vote of confidence from Hasselblad, which will sell you a $1000 Sony NEX-7 in a fancy case for $6500 (consumers are not impressed). The new Sony NEX-6 is my favorite camera in the line. It doesn’t run Android and therefore lacks full photo-sharing capabilities, but it does have Wi-Fi and can push photos to smartphones and/or to at least one Internet service (Facebook). It has some tricks in the sensor that are supposed to make autofocus work better. Given that the NEX-6 screen folds out, this should be a better videography tool than most DSLRs. Sony also introduced some interesting new lenses, e.g., a super wide zoom (10-18mm; 15-27mm equivalent) and a fast prime image-stabilized normal lens (35/1.8). Bizarrely, Sony also introduced a point-and-shoot camera with a 24x36mm sensor (“full frame” or the same as 35mm film) and a fixed 35/2 lens. This thing costs $2800. Ever since Sony acquired the Minolta line in 2006, I have been expecting Sony to make a serious effort at unseating Nikon or Canon in the DSLR market by coming out with a full professional range of lenses. Instead, the company seems to be putting out one random product after another.

The Nikon S800c compact camera should be the wave of the future. It runs the Android operating system so, in addition to being able to capture photos, it is capable of doing the stuff with photos that people want to do. Samsung supposedly is coming out with a “Galaxy Camera” that will be even better, e.g., with the true Android 4.1 religion installed and a 4G modem.

Panasonic DMC-GH3 seems as though it might be the most interesting four-thirds camera. It can record 1080p high-def video at a frame rate of 60 frames per second (60p). I wonder for whom this will be a significant difference. Sports?

I’ve been a Canon EOS user since 1994, but this year has been enough to challenge one’s faith in the company. Canon introduced a cheap full-frame camera, the EOS 6D, that costs $2100 and does basically everything that the 5D Mark III does. This will be another reason for 5D Mark III buyers to feel stupid, but it does not sound as though they have made any headway in terms of competing with Nikon on image quality. Canon has not introduced any new lenses, though some of their offerings are rather tired (e.g., the 50/1.8 with no USM; no 50mm lens with image stabilization; the 50 macro lens with no USM or IS; the 35/2 lens with no USM). If Sony can put image stabilization into its new prime lenses for the NEX, why can’t Canon do something similar for EF lenses?

For Californians who aren’t satisfied at having spent $327 million on a Web site, Leica offers a camera (the “M”) with the same specs (full frame sensor, 24 MP resolution) as the $2100 Canons and Nikons … for $7000. Leica is also selling a new version of their 30x45mm sensor camera with 37 megapixels (same as a Nikon D800) for $22,000 (don’t ask about lens prices!). Hasselblad has a vaguely similar H5D system with up to 60 MP of resolution from a 37x49mm sensor). The big ‘Blad and Leica cameras are intended primarily for studio use.

Here’s a question for the techies reading this blog… why can’t the latest cameras capture 4K video? The 4K format requires only about 8 MP of resolution, so the sensors in any of the latest cameras put out enough pixels (at least if you’re willing to accept some interpolation of color data). Yet the only camera that I’ve heard of being able to record 4K is the Canon EOS-1D C (announced but not shipping). Is the problem one of CPU power for compressing data at those rates?

 

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If the European economy is not doing well, we can’t blame the Massachusetts State Police. They came to a helicopter fly-in at the Plymouth airport (KPYM) yesterday with their new $10 million Eurocopter EC145 (the base helicopter is about $6 million but this one was loaded with options). This complements their existing fleet of Eurocopters, which also includes the AS355 and the AS350.

What about pilots? It seems that one must have 1000 helicopter hours in order to be pilot in command of this $10 million new toy. Civilian flight schools pay approximately $8 per hour, with no pension or health care benefits, for a pilot with 1000 flying hours of experience. The maximum practical amount of commercial flying is about 1200 hours per year, so the annual cost is about $10,000 per year per pilot. The Massachusetts State Police? Approximately $300,000 per year per pilot, including pension, overtime, and health care costs. How about training? In the civilian world, pilots pay for their own training, typically in Robinson helicopters that cost about $170 per hour to operate. The Massachusetts State Police do their training in-house. Do they own any Robinsons? No. It seems that the primary training is done in the AStar 350 (AS350), a jet-powered 6-seater that can land on top of Mt. Everest. It costs about $1000 per hour to run (that’s after incurring the multi-million dollar purchase price).

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Mitt Romney’s chartered airplane (a ragged-out DC-9 derivative, a tribute to America’s engineering prowess in the early 1960s). It is kind of surprising that nobody has gotten hold of a can of spray paint and written in “but invest in Asia” underneath the “Believe in America”. A tribute to airport security nationwide!

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