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I’ve drafted a review of a More Money than God, a history of hedge funds. Comments and corrections would be appreciated. I’m particularly interested to hear what folks have to think about my theory that the tendency of retail investors to buy near peaks and sell after crashes (i.e., near troughs) is a consistent source of gains for hedge funds.

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We went to the Metropolitan Opera’s Tosca last night. The singing and orchestra were excellent as always. The 2009 sets were very plain, as you might expect from an organization whose Form 990 indicates that it pays its general manager $1.5 million per year (what could they have left over for fancy sets, especially since donations were down about 40 percent?). The staging was designed to ensure maximum frustration among those who paid hundreds of dollars for box seats along the sides of the cavernous theater; for no obvious dramatic purpose singers would stand in side corners of the stage for minutes at a time. They were thus rendered invisible to hundreds of audience members. I emailed a composer friend just before the concert started and he replied with the following:

“I do not go to the MET as I am severely allergic to the smell of formaldehyde. These large orchestral organizations of this country should be tried for cultural treason, for they have suffocated the birth of our own orchestral voice. Any New Yorker or American that could give money to support these institutions has no self esteem. And why are we so concerned with the acoustics of our classical concert halls when ninety percent of the audience has hearing aids.”

Until I read James Wolfensohn’s autobiography, it seemed odd to me that donors would give so readily to cultural organizations that manifestly do not need the money. In my non-profit ideas page, I calculated that $5 million would suffice to create a free Internet library of most of the world’s classical music. But being on the board of an organization that has no fancy hall, no Chagall murals, no gala opening night, etc., is not going to advance one’s business or personal interests.

My companion summed up the evening succinctly: “I doubt that there is any other opera where such a high percentage of the characters are dead by the end.”

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The Book of Mormon, the new Broadway musical by the South park creators, gets a lot of cheap laughs from the audience by depicting naive earnest young white kids who believe in (to non-Mormons) apparently absurd stories. But the spine of the show is the question of theodicy. If God is omnipotent and benevolent, why are the innocent Ugandans encountered by the 19-year-old missionaries suffering so badly? And what is the best thing that a moral person can do to alleviate that suffering? The answers aren’t necessarily profound and the evening might be better spent reading Leibniz, but it makes for a very entertaining, if somewhat forgettable, two hours in the theater.

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To one of the 20+ million unemployed, underemployed, or “discouraged” Americans, the U.S. economic situation of 2009-2011 (let’s call it “the Obamaconomy” for shorthand, having been preceded by the “Bush Bubble” and the “Clinton Boom”) remains painful. Yet folks with jobs and the kind of rich people who have political influence (e.g., the folks who attended a $30,800/person fundraising dinner that resulted in the shutdown of one quarter of Manhattan on Tuesday night) don’t seem overly concerned about unemployment, government debt, or any of the other problems facing the U.S. going forward. The newspapers are filled with stories about our new Libyan war rather than what is happening to families of the chronically unemployed.

As part of my efforts to complete 2010 taxes, I took a look at my investment portfolio, which is probably pretty typical for an American (sadly it is not sized like a Wall Streeter’s or plastic surgeon’s, but the allocations are likely similar). It turns out that I have unintentionally disinvested in the U.S. About ten years ago I invested in a mixture of mutual funds. The U.S. large capitalization stocks (S&P 500) have stagnated. They’re worth about the same in nominal dollars, but the dollar has been debased relative to Euros, gold, oil, or almost any other yardstick. So the U.S. stocks are worth about 30 percent less. The foreign stocks have held up reasonably well, especially the emerging markets. Meanwhile the S&P 500 companies have experienced so much more growth in foreign countries, that a healthy fraction of an investment in the S&P 500 is now foreign economy exposure.

If my foreign market exposure was about 30 percent ten years ago, it is now closer to 60 percent, despite the fact that I haven’t made any trades. Simply as a consequence of the poor performance of U.S. equities and the U.S. dollar, only those folks who’ve been conscientious about portfolio rebalancing are still primarily investors in the U.S. economy. So it would be nice if the U.S. economy grew fast enough to create some jobs for the unemployed, but really the typical investor’s main financial interest is in the growth of other economies.

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Today marks the kickoff of our spring Groupon helicopter lesson promotion (link). We’ve refined our offer somewhat from what we did a year ago. The price is slightly higher, $99 instead of $69, in order to try to get people who are more likely to continue taking lessons at our regular rates. We’re explicitly offering people the choice of hitting the books and coming to ground school or using their Groupon for a short demonstration flight in which an instructor will patiently explain to them (and probably their two kids in the back seat as well; they get to bring three passengers total) how the airport works, how air traffic control works, how flying a helicopter works, etc., while also giving them a nice view of the towns that surround our airport.

Overall the Groupon experience has been positive for us as a merchant. It took a while for business to build and the very first customers who redeemed the Groupons weren’t very likely to return, but we’ve noticed that we’ve gradually gotten busier with students and quite a few of the Grouponers come back for second and third lessons. One guy got a Groupon as a gift from his son and has now flown about 120 hours with us (he’s most of the way through his helicopter instrument rating). Though our R44 rates are the lowest in the world, that’s still 120*$349/hour = $42,000 of revenue.

If this offer is successful, I am going to officially declare that we won’t have to do any marketing other than via Groupon. It can seem like a lot of effort to welcome so many people to the school who aren’t likely to return, but we do roughly break even on the helicopter operating cost and each person who comes to us knows where the school is, knows what we sell, and is in a position to educate others about helicopters and learning to fly them.

I think that our biggest obstacle to converting more people to the cause is the FAA’s pilot certification structure. There should be a “pilot’s license” that people can get who are able to take off, fly around, and land without the instructor needing to take the controls. This is the James Bond level of flying skill and it can be learned in about 10 hours ($3500). After that, the pilot can rent a helicopter any time, with an instructor as co-pilot, and take two passengers in the back seat. Why can’t the FAA recognize that as the achievement that it is? Students always ask “How much does it cost to get a license?” and the answer ($14,000+) discourages them. An FAA Private certificate, though, demands that a person demonstrate the ability to handle a helicopter in an emergency,e .g., after an engine failure, or navigate to the other side of the state without a GPS, land on a slope, land in a confined area, etc. None of these skills are required by the person who wants to rent a helicopter and fly from airport to airport with an instructor-copilot. That person might not be the most skilled pilot on the planet, but who among us is? And who among us is such a great pilot that we can’t benefit from having a copilot? So how about an FAA certificate that is kind of like the JAA “multipilot-only” certificate (handed out to airline first officers who can press buttons in a sim, but have so little experience in real aircraft that they are considered helpless without a captain), but given to learners who’ve mastered the basic skills of aircraft control?

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Having been Diet Coke-free all morning, on Sunday around 1 pm I set out to shop for food at a local farm. I stopped on the way at a convenience store and purchased three cans of Diet Coke. Unable to wait to sit down at lunch, I cracked one open, took a sip, and set it into the cup holder between the seats of my car. A few minutes later, I went into the farm shop, leaving Ollie the Collie imprisoned in his Japanese leather-upholstered kennel. In order to get a better view, Ollie likes to perch on top of the armrest between the front seats. When I returned to the car, I found that he had his front paws on the back of the armrest and was basically sitting on the front portion of the armrest, which includes the cupholders. I.e., he was sitting on my open can of Diet Coke.

Shortly after I started the car, Ollie relocated himself to the front passenger seat for greater stability in motion, thus revealing the soda from beneath his furry tail. I hesitated, looked at the can and didn’t see any dirt on it, then took another sip.

The first step in a Twelve Step Program is “We admitted we were powerless over Diet Coke—that our lives had become unmanageable.” I believe that I am there.

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Aside from wondering who will pay more than the cost of a Wall Street Journal subscription in order to subscribe to the New York Times, my biggest question right now is how the NY Times spent a reported $40-50 million writing the code (Bloomberg; other sources are consistent). Google was financed with $25 million. The New York Times already had a credit card processing system for selling home delivery. It already had a database management system for keeping track of Web site registrants. What did they spend the $40-50 million on? A monster database server to keep track of which readers downloaded how many articles? They should already have been tracking some of that for ad targeting. In any case, a rack of database servers shouldn’t cost $40 million.

What am I missing?

[I built a pay wall back in 1995 for the MIT Press, restricting access to some of their journals, e.g., Cell, to individual subscribers and people whose IP addresses indicated that they were at institutions with site-wide subscriptions. I can’t remember exactly what I charged the Press, but it was only a few days of work and I think the invoice worked out to approximately $40 million less than $40 million.]

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This nytimes article describes how GE, despite being America’s largest corporation, does not owe any corporate income tax. The company’s shareholders, of course, pay income tax on dividends, and the company collects sales tax, pays payroll taxes, pays real estate tax, etc., but through cleverness, trickery, and, mostly, lobbying, GE escapes the 35 percent corporate income tax.

The author of the article explains to some extent how GE’s purchase of a Congressman (New York’s Charles Rangel) enabled them to get the tax breaks they wanted, but mostly the author interviews people who believe that the system can somehow be “reformed” so that GE will pay more in the future.

Given that our politicians are more or less openly for sale, I don’t see how a company with more than $100 billion in annual revenue can be denied the laws that it wants, particularly if those laws are obscure and hard for the general public to understand. Is it reasonable to believe that somehow the laws will be adjusted so that small companies, without the resources to purchase Representatives and Senators, or even attend $5,000 per person dinners, pay less while GE pays more?

Wouldn’t it make more sense to scrap the corporate income tax (which a lot of economists have never liked) and replace it with something less susceptible to lobbying by the largest companies?

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A physicist friend sent me this nytimes article on Californians rejecting electric meters that transmit information back to the utility via radio: “the signals cause headaches, nausea and dizziness”. In other words, they hold their mobile phone or cordless phone right next to their brains to call up PG&E and complain that the radio transmitter on the side of their house is making them ill.

I pointed out that California led the way in anti-Microwave oven hysteria, forcing restaurants to post warning signs “microwave in use”. The same folks who couldn’t accept a 2.45 GHz signal confined inside a Faraday cage in their kitchen subsequently were happy to accept a 1.9 Ghz signal broadcast from next to their ear directly into their brain.

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If you have a home aquarium, and wish to assist the Japanese in recovering from the tsunami, purchase some Hikari fish food. This is regarded by many aquarists as the best flake and pellet food available and the prices are similar to American- and German-made food.

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