Category: Uncategorized

A very smart friend was visiting from Manhattan this weekend. His proximity to Wall Street gives him a window into the world of finance. His tendency to be out of sync with the average American protects him from the herd instinct. Despite having a demanding academic science job, he has been a successful individual investor for a couple of decades. In the spring of 2008, with the Dow at 13,000, he moved all of his family’s investments into bonds.

When conversation turned to the latest sag in the stock market, he opined that much worse was yet to come and that the Dow might get back down toward 7000. He cited the moribund U.S. economy and the profligate U.S. government (people who argue for stimulus spending tend to underestimate the government’s ability to waste money, e.g., putting a 6-year-old girl on the no-fly list (story)).

I have trouble letting go of the Efficient Market Hypothesis. If the Dow is at 9700 right now then that is the best estimate of where it will be a few years from now (plus whatever the yield on a TIPS bond is, i.e., 1-2% per year). With the U.S. state and federal governments amping up taxes and handing out the money to the retired, the world’s least efficient health care system, and political cronies, and 15 million Americans unemployed, how can the S&P 500 not be dragged down? My argument is that most of the companies in the S&P 500 aren’t dependent on the continued prosperity of working Americans. General Electric can build factories in and sell products to customers in any part of the world that is thriving economically. Intel can sell processors to families in Turkey, Brazil, and India. Walt Disney can welcome visitors to its Shanghai theme park. Admittedly many of the companies in the S&P 500 would appear to be dependent on American consumers, e.g., Southwest Airlines or various insurers. But even these should still produce good profits. The U.S. economy may end up with big shifts in wealth, e.g., from workers to retirees, from the private sector to government employees, and from competitive industries to government-sponsored industries. The per capita income of the U.S. may fall, as the population increases and the GDP remains constant. But as long as GDP does not fall, the same amount of money is there circulating for a company to collect as profit. [In January 2009, I wrote a posting about how the U.S. economy does not need to crash or boom; it can simply slide sideways as England’s did for decades.]

What do readers think? What plausible scenario causes the multinational companies in the S&P 500 to become worth significantly less than they are now?

Full post, including comments

At dinner this evening folks were discussing why the tens of thousands of deaths on U.S. roads every year don’t get people more upset. I said that I was surprised that cars didn’t have transponders and a warning system. For example, a lot of accidents occur as people make left turns or pull out of driveways or side streets onto busy undivided highways. In those cases, a car that was aware of the position and velocity of other cars would be able to suggest “wait” and/or flash a red light in a heads-up display. Airliners have TCAS; why can’t cars have something similar?

[One friend objected that adding advanced electronics of this type would simply enable drivers to pay even less attention than they do currently, thus bringing the accident risk back to where it was (“risk compensation”).]

Full post, including comments

Camera nerds: I have updated/tested the Photoshop script that I use to convert camera RAW files to multiple sizes of JPEG (adding EXIF and visible copyright information in the process) for Web publication. These are now tested with Adobe Photoshop CS5, which itself seems to be a very stable product on my 4-year-old Dell Windows XP machine.

All of the necessary scripts are free and open-source; download from http://photo.net/learn/photoshop/

Full post, including comments

My friend Diane is an avid serious reader and told me about The English Major, the latest novel from Jim Harrison. I associate Harrison with macho fishing and hunting backwoods stories, so the fact that a woman enjoyed the book was a strong recommendation. The book concerns a 60-year-old Michigan farmer whose wife divorces him (“he bores the tits off me”), prompting a road trip. Now that people are living so much longer, our built-up stock of midlife crisis/adjustment literature may be losing some of its relevance. There are plenty of novels about people who confront big changes in their 40s, but not about those who are 60 and have to plan out the next 20 or 30 years without some of the resources that they had planned on.

Full post, including comments

A reader was kind enough to send me “How to Make an American Job Before It’s Too Late” by Andy Grove, CEO of Intel during its 1987-2005 ascendancy to world dominance. The article contains some interesting points, including statistics on how much it cost to create jobs at Intel and National Semiconductor ($3600 and $2000 in today’s dollars; compare to estimates of $100,000 to $1 million per job created by the latest government stimulus spending (example; official report)).

The article contains the familiar list of woes that have beset the American worker, as manufacturing industries have migrated to Asia. I rather expected the article to end with an inspiring call to make the U.S. a more attractive place to do business. The wise Andy Grove, an immigrant from the planned economy of Hungary, would advocate for better educated workers, a tax and regulatory environment that encouraged business formation, a government that did not spend all of our money on retired public employees, the world’s dumbest health care system, etc. Instead I was shocked to read that his big solution is a massive tax on imported goods and then recycle that tax into expansion capital for growing companies.

Now that so many of our manufacturing industries are well and truly dead, I don’t see how taxing Chinese-made goods helps American firms. There aren’t any U.S. companies making mobile phones or PC components here, are there? As for the tax revenues being recycled into capital funds, the entire world is already awash in capital. Have we seen news stories about U.S. manufacturing firms eager to expand but constrained due to a lack of capital? If we were to implement Andy Grove’s idea, wouldn’t the government-run capital fund simply displace existing private capital sources? The U.S. private economy isn’t growing, which means that it doesn’t need much capital. If all the capital needs of those U.S. companies that are expanding (taking the place of the shrinking ones) were supplied by a government fund, the private sources of capital would have to lend all of their money in Asia, Latin America, etc.

I’m surprised at how many people think that we can cheat our way out of the economic doldrums, i.e., doing something other than making the U.S. a more attractive place to do business (as I suggest in my economic recovery plan). If it were that easy, why would poor African nations still be poor?

Full post, including comments

The Social Security Administration was kind enough to send a statement that arrived in today’s mail. It listed my taxed earnings in every year since 1978 (33 years of paying in). If I continue to pay Social Security taxes until I’m aged 70, I’ll be entitled to collect $2,113 per month starting in the year 2033. That’s the good news.

The bad news came towards the end of the letter: “… by 2037, the Social Security Trust Fund will be exhausted …”

Full post, including comments

A friend of mine has her own medical practice. She has two office staffers and I casually mentioned that they must be busy negotiating with insurance companies and Medicare. The doctor replied “They could never do that. The people who do that have degrees in medical billing. I pay a service to do all of my billing.” How much does that cost? “They take seven percent of whatever they can collect.”

Young people: http://www.medicalbillingandcoding.org/ has some information about how to get an Associates or Bachelors degree in this growing field.

Full post, including comments

“Americans are treated, and overtreated, to death” came across my desk today. The article is about U.S. doctors playing to Americans’ hope of being cured, spending hundreds of thousands of dollars in the process of slowly and painfully killing someone: “Cancer that can’t be cured is often called daunting but not hopeless. So that’s what patients hear. Hope is the last thing to go. People don’t give that up easily.”

It made me think of our nation-building efforts in Afghanistan and Iraq. Had we elected a president without hope in 2008, the first thing he or she would have done is called up Stewart and Dover and said “Fuel up the C5 cargo planes; we’re bringing everyone home tomorrow”. Congressional approval is required to start a war, but not to end one. A president full of hope, however, might be inclined to say “We’ve spent a 1-3 trillion dollars so far [various estimates] without much to show, but maybe if we spend another few years and trillion dollars we can accomplish something.”

Hope is usually considered a positive trait, but perhaps Americans have more of it than we can afford.

Full post, including comments

My friend Tom and I had a bet on the direction of the Cambridge real estate market. In November 2008, with everyone running around panicked, I argued that it was unlikely to get worse. Tom thought Harvard Square condo prices would fall further and bet dinner. A year later we asked an expert real estate agent which way the market had gone. She said “up maybe 2 percent.” So Tom lost his bet and will be buying me dinner tonight.

I would like to take credit for being smarter than Tom, a professional “money guy”, but further reflection makes me realize that I was wrong about the market fundamentals. The economy stagnated and demand for real estate continued to deteriorate during the period of our bet. Tom’s prediction was correct as far as that went. What Tom failed to predict was government action. He did not expect, apparently, the government to hand out $8,000 to every condo buyer (this alone is about 2% of the cost of a condo in Cambridge, where the median price is about $400,000). Nor did he expect the government to buy mortgage-backed securities or prop up Fannie Mae with almost $400 billion in tax money (nytimes).

I wonder if the money-dumb guy winning this bet with the money-smart guy indicates that traditional financial and business acumen are becoming obsolete in the U.S. The most important skill may be an ability to predict what the government is going to do next.

Full post, including comments

I’m experimenting with video editing software for a Sony HDR-CX350V camcorder. This captures video in AVCHD format, one quality step up from the Flip’s works-everywhere .mp4.

I thought “For trimming and assembly editing, surely I don’t need a heavyweight solution such as Adobe Premiere. Perhaps Windows Live Movie Maker, bundled free with Windows, will be sufficient and simpler.” So I downloaded Movie Maker and found that it could play the AVCHD videos, but there was no sound. The computer clearly has the necessary codecs to play the sound because the unedited AVCHD files would play in Windows Media Player. One theory for why this failed is that some versions of Windows 7 have the Dolby sound codec disabled, perhaps so that Microsoft doesn’t have to pay royalties to Dolby? The computer had originally been shipped with Windows Vista and was upgraded to Windows 7 Home Premium. Windows Live may have erroneously decided not to work (as far as we can tell, it is supposed to work with AVCHD files on “home premium”).

So… you’ve got an operating system that nobody understands what it does. And it comes in about seven different versions, whose distinguishing features nobody can remember. And possibly the Microsoft programmers were tasked with breaking stuff intentionally on top of their usual job of breaking stuff unintentionally.

The software shipped on DVD-ROM with the $800 Sony is much less powerful than what comes on a $100 Flip. You can’t even rename a clip from inside the Sony browser. Meanwhile the files produced by the camcorder are useless for sharing unless you go through some transcoding, so the software becomes much more critical than on the Flip.

I think it is time to give up on Microsoft. What are some alternatives, other than the obvious ones of spending big $$ on a copy of Adobe Premiere or a Macintosh (I assume the bundled iMovie software would have no trouble with AVCHD)?

Full post, including comments