The Only New York Times Editorial Today I Agree WIth
The Times says that analysts were the accomplices in Enron's rise and fall. The analysis is dead on -- talking to classmates about their experience with research analysts shows clearly that the fox is guarding the henhouse.
I think the problem isn't so much that the banks sold their analysts verdicts in order to get IPO and M&A business -- although I think it's pretty clear that they did. The editorial points out that banks who wanted to do business with Enron had it made clear to them that they'd better not probe too deeply into the financial statements. I'm sure that the banks will pay in plaintiff's verdicts and legal fees for their decision to go along.
Even if this weren't the case, however, the analysts would STILL be ridiculously optimistic about companies, because their stock in trade is information on those firms -- and if they aren't optimistic, they don't get access. Buy side is probably better in this regard -- but not too much better, because the companies can always cut off the flow, and the analysts know it. If you're specializing in an industry, you can't afford to piss off a major player, buy side or sell side.
Personally, I think the whole process of banks selling research reports should be abolished (although this would put a number of close friends out of work). The chinese wall has not only been breached, but has a welcome mat in front of the opening, and those who don't know better take the reports seriously. The final point made by this editorial is that while banks feel bad now, what is truly remarkable about the big banks is that they never learn from the past. Sure as the sun rises tomorrow, when the market rises again, there will be Abby Cohens and Mary Meekers ready to help us believe that there really IS a Santa Claus, one that dispenses money without requiring effort or thought to earn it. WHile I am generally not a fan of government regulation, I think that in this case, we must change the system or be doomed to repeat its mistakes. Either keep the big boys from rooking the little old lady in Paducah with phony reports -- or make them print "Caveat Emptor" on the cover.
Outstanding editorial by John Podhoretz on the Dem's treatment of Ashcroft. Best line: "The democrats seem to be in danger of forgetting that America's a war zone -- and John Ashcroft is not the enemy."
IMHO, the democrats are making a major political miscalculation. Outside of the chattering classes, there is no appetite for
a) Partisan bickering b) Whining about civil liberties for suspected terrorists.
There is certainly a legitimate argument against the military tribunals. Personally, I don't buy it -- I think that these are clearly prisoners of war/perpetrators of war crimes, and therefore should be tried by tribunal. I especially don't think that we should have an international anything, given that the UN seems to be mostly a forum for whining that the US is the root cause of the corrupt, inept, and otherwise unsavory parts of the world where poverty, brutality, and inequity seem likely to reign for the forseeable future. We'll decide what is justice for our victims, because to be perfectly honest, the rest of the world doesn't seem to much care about the smoking remains of thousands of lives at which I am currently looking.
Nonetheless, there is a legitimate case, as is there against the detentions and eavesdropping. I think the latter are even more flimsy than the argument about the tribunals. Slippery slope my Aunt Fanny -- FDR not only sanctioned much broader and more intrusive violations, but also detained American citizens of Japanese descent -- and anyone he couldn't lock up under the extremely broad powers he awarded himself ended up involuntarily committed to St. Elizabeth's, the Washington mental hospital, For the Duration. Nonetheless, we do not have broad wiretapping, suspended habeas corpus, detention centers, or political uses of psych committals today -- everyone understood that when the war ended, so did the emergency powers. So I don't buy the argument.
But I do see that there are people who legitimately believe that these emergency actions are the first step on the road to totalitarian perdition. However, the partisan way in which the Democrats are pursuing that case will not stand them in good stead at the midterm elections -- although of course voters may forget about that eleven months from now. They may.
This editorial in the New York Post points out that our boys & girls overseas won't be home for Christmas, and urges us to write postcards for them. A good idea, and I'm certainly going to try to make the time.
I don't know why I pointed this out, except that it put me in mind of Bing Crosby's song "I'll Be Home for Christmas" -- and I realized for the first time, what it meant to a nation of people who were missing large chunks of their family during the holiday season. After all this, World War II nostalgia is simultaneously less romantic and more moving.
The other day as I was driving one of the senior guys around the site in a gator, the subject of the weather came up. It has been unseasonably warm here, and those of us who will be suffering in a trailer this winter (especially those of us who are sitting directly beneath the outtake duct, and are thus chilled by the draft even on relatively warm days) are extremely grateful for the respite.
"You know, Meg, I'm not really a religious man," he said (He DID! I know it sounds like something from a Reader's Digest anectdote, but there you are, he said it. And it sounded, coming from him, not at all hokey.) "I wish I were. But I can't help but thinking that after everything -- the disaster, and the plane crash [a large number of people here live in Rockaway; a majority have relatives there. This man's son was among the police stationed here, and then in Rockaway when it happened. He's seen more bodies in the last months than anyone should. So the plane crash, for us, feels very close.] -- I can't help but think that God's giving us a break when we need it."
The same thought had passed through my mind several times, although I, like he, am not as religious as I could be. A priest once told me that "God never gives any of us a cross larger than we can bear." Right now I am agreed that the cross was almost larger than any of us could bear, together -- and that feeling the sun on your face at the beginning of December feels even to this agnostic, like a little bit of God's grace.
Just talked to one of my friends from school, who has unfortunately shared my fate with DiamondCluster.
It seems that Merril Lynch has laid off a considerable portion of their associate class, including the entire telecom group. I don't know how many of my friends and schoolmates are affected yet, but I'm sure quite a number. Considering the motto that it is a recession when your brother-in-law gets laid off, a depression when you are, this is a Great Depression.
Supreme Court pulls No Show in the War Over Affirmative Action
A bulletin in the Wall Street Journal (requires subscription) says that the Court is refusing to rule on Adarand, an affirmative action case that was widely expected to overturn affirmative action in government contracting -- and hence eventually in almost all colleges, according to my Human Resources and Labor professor, because the schools take oceans of federal money.
The court is apparently refusing to rule on procedural grounds, saying that Adarand has no standing to contest because the law under which the company originally sued no longer stands, and it is unclear whether or not Adarand would be hurt by the current law. Conspiracy theorists on the left seem to think that the Court is waiting for another appointment by Bush to seal the verdict; those on the right that they are ducking the issue. Right wing plotters or moral no-shows? You decide.
An editorial in the New York Post points out the surge in crime in New York since the September 11th attacks. No, this isn't due to the trauma of the disaster forcing otherwise law-abiding citizens to commit armed robbery in order to work off a little existential angst; the Post's (plausible) argument is that crime has dropped because the police are off hunting terrorists or working security details instead of fighting ordinary crime, and the criminals know it.
One of the hardest problems for those arguing that Giuliani (and the style of policing that his commissioners favored) was actually responsible for the drop in crime that has fostered the resurgance of New York. There were always other factors -- demographics, for example (a drop in the number of teenage boys) that his detractors dragged out, with some justification.
Now we have what amounts to a controlled experiment. We had a lot of police, now we don't. Crime has gone up. Surprise, surprise -- enforcement really does matter.
Here's a fascinating experiment: what do you get when you search The New York Times for Michael Bellesiles (author of the widely-lauded and now apparently thoroughly debunked book on gun ownership in early America which purported to prove that the "gun culture" didn't emerge until the Civil War)?
A list of positive reviews, is what, with no mention of the fact that the Boston Globe and other media outlets have offered convincing evidence that Bellesiles deliberately misrepresented facts (to put it mildly) in order to support his thesis. Nine positive reviews, no mention of the criticism. I've mentioned before that I think the Times is spending the principal, so to speak, of its reputation in order to push an increasingly obvious political agenda. So no surprise here -- but nonetheless, it makes me sad.
It turns out that when things fall apart, the center not only holds, but also sucks in a good portion of the perimter. This article in Reason points out that even as the sensible left is backtracking on the reflexive anti-Americanism/anti-militarism of the last generation, so the right is backing away from reflexive anti-government or socially conservative positions.
Good point, and amply demonstrated by the right's laudable reviling of the Rev. Jerry Falwell and their ilk. I still don't believe that the right has come as far, as fast, as the left did. Nor in fact do I think they should -- I think it's good for society to have some inflexible moralists, just to keep the rest of us from jumping off the deep end into libertine excess (not that they seem to be having a noticeable effect on the twentysomethings I hang out with, mind you, but still. . . )
He makes a strange point, though -- he slips in a reference to Fr. Michal Judge, the FDNY chaplain, being gay. I have never heard this, which is not of course to say that it couldn't be true. But sexual preference in a priest is irrelevant -- they're not supposed to do anything about any sort of sexual urges, so the kind of urges they get are moot. If he's suggesting that the father did do something, then he'd better be able to substantiate it.
I hope he's not arguing that Judge was gay because he's a priest, or regurgitating the kinds of spurious statements ACT-UP likes to make about orthodox religionists. But it seemed oddly pointless here.
I suppose I must have known this, somehow, and objectively there's no reason that crashing the plane into the ground is worse than crashing it into the White House -- except that it's so futile. When they crashed the plane, even in their own minds, they weren't freedom fighters trying to stage a vivid demonstration -- they were just trying to kill a lot of people because they could.
The biblical sense of justice in me says that the appropriate response is to take their families, stick them in a plane, and crash it. I have no doubt that this would effectively end terrorism against the US.
But the civilized part of me (which I hope is much harder) recoils in horror from the innocent wife or child of a terrorist experiencing what our people did. Which is why we can never do it. Because we are civilized. Because we are civilized, we don't even entertain the notion in any serious way.
I get nearly as much of a sense of biblical justice from the fact that although our civilized nature is what made it easy to hit us, it is also what will allow us to prevail against barbarians hiding in caves.
Mr. Dauvin sees an exit to the current slump through a pickup in business spending on technology, among other things. He said companies' desire for higher productivity combined with low interest rates that encourage capital expenditures mean companies will invest in new high-tech equipment that uses semiconductors.
I think he's missing an important point: the ROI on semiconductor technology for companies has decreased. I don't know anything about the manufacturing sector, where there may be incipient demand if capital costs fall low enough. But I worked in the networking and telecomm area before I went to b-school, and my considered opinion is that there is little demand for new networking equipment or PC/Server equipment at any price. There is little added business value to speeding up your network at this point -- streaming video is more likely to decrease productivity than increase it. Ditto improving the speed of the PC's on peoples' desks -- there just isn't THAT much benefit to improving from a P-200 or PII-300 to the latest processor, while there was huge added value in switching from 486 or low-end Pentium machines to newer models. Applications will continue to be added, and will require servers -- but I don't see it happening at the pace of the nineties. Given that the semiconductor industry hasn't really shed much capacity, I don't see how the sector can pick up.
According to the Wall Street Journal, Mckinsey is laying off support staff. No consultants as of yet, leaving the Big Three still the only firms that haven't cut professionals.
Perhaps the recession is bottoming, as people say -- but to me, consulting and banking is the canary in the mine. As long as no one's financing growth or looking for help to manage it, in my view we've still got a long way to go.
This article is too good to miss: the CIA refuses to hire or train adequate linguists. Apparently, the more likely you are to speak fluently (either being a native, or having spent significant time immersing yourself in the culture) the less likely the CIA is to hire you. Further, no one wants to study languages, because time spent in class takes you off the fast track.
The OSS seems like it really was the kind of organization the movies imagine the CIA to be -- competent, secretive, and willing to do whatever it took to get the job done. Now it seems that it's just another bureaucracy -- far more concerned with self perpetuation than actually achieving anything.
Newsflash: Environmental laws have costs, just like everything else
This article suggests that the reason the WTC collapsed was that the columns were constructed without asbestos, due to new environmental regulations in effect at the time of construction.
While the article has a "see? Environmental laws are stupid!" tone that makes me wince a little, its facts sound plausible. The more interesting point to me is that I would bet that no one ever heard a public debate on whether it was better to have asbestos columns or the risk of collapse. My guess is that the answer would be "risk of collapse" -- no, don't shoot me, but at the time the building was built a fire fueled by that much avgas was an extremely unlikely (somewhere to the right of six sigma range, I'd guess) event, while asbestosis was a clear and present danger. Just as it is very possible that if we had a public debate about higher fuel efficiency vs. auto safety (increasing the mpg of cars results in a significant increase in auto deaths because they have to make the cars lighter, and therefore unable to sustain as much damage without injury to the occupant) we would come out on the side of fuel efficiency. My problem is that we never do have that debate -- whether because the auto makers are incompetent at PR, or because the media finds it easier to write stories from an "evil big corporation does it again" viewpoint, I do not know.
Another interesting tidbit from the Weekly Standard(subscription may be required): the author says that there is a resurgance of religious orthodoxyamong young people going back at least five years. Basically it attributes the decline in mainline protestantism and the rise in evangelical/orthodox faiths of all stripes to the same feeling I noticed among my mainline classmates: why bother going to a church that rehashes what you heard in sociology class last week, with a dash of feel-good movie of the week flavor to make it go down easier? The kind of religion that strives to incude all possible viewpoints cannot help but be reduced to platitudes that engage no one.
That said, MY classmates (class of 1994) seemed more likely to turn to SD&R than their rosaries. The article seemed somewhat anecdotal to me, but it's based on a longer book that may sport the data. Still, a very interesting read.
Perusing the new Weekly Standard, I came across an item in their scrapbook (subscription may be required; I have one, so I can't tell what's subscriber material & what's not). Don Rumsfeld announced that they aren't parachuting horses into Afghanistan because they get enough broken ankles with people.
I adore roller coasters with a passion seldom found in one so young, and have wanted to try skydiving for a long time. I was held back because my ankles are weaker than Bill Clinton's excuses for the Rich pardon. I have sprained my ankle walking along perfectly level surfaces. However, two friends who tried it swore up and down that you couldn't break your ankles because the jump boots are so stiff. I think I'll believe Rumsfeld over people who took a three hour class at a suburban airport, thank you. So no skydiving for Megan.
We went to friends for Thanksgiving, so on Friday, my mother cooked a whole new turkey just so we could have leftovers. Stuffed myself AGAIN.
Interesting discussion at the table about the meaning of the word "speculation" as applied to investments. My feeling is that any stock that's purchased with the expectation that some other idiot will buy it from you at a higher price is speculative. Basically, there are two different ways that stocks can be valued: either they are valued based on the cash that they will eventually return to their owners, either through dividends or through the company (or an aquisitor) repurchasing the stock; or they are valued based on the expectation that someone will pay a higher price for the stock later. This latter is called "the Greater Fool Theory".
So in other words, when you buy a stock, you are either betting on your ability to correctly evaluate a company's balance sheet and future growth potential, or you are betting that there is another, greater fool out there, and that you can correctly evaluate his psychology in order to sell at the right moment. That's why its speculative -- because unless you are PT Barnum, few of us have any idea which way the suckers are going to jump.
I think that we are still in the throes of the great idiot boom of the late nineties. Valuations seem to me, by any mathematical metric, to be insane -- no one could possibly think they're going to get that kind of money back out of these companies. But it's like the end of a relationship. We just can't believe it's over. We go out to dinner to see how things are going, and the next thing you know, we're giving it one more try. The rising market -- hey, it's just like it was a couple of years ago. Maybe this can work. We all know how this ends up -- you, a bottle of whiskey, and a lost weekend, followed by months trying to recollect that tattered shreds of your dignity.
To sum up -- THIS MARKET IS INSANE. Where is the good news coming from -- other than a relentless will to believe -- that would justify the resurgance of the Dow?
Interesting side note -- most people believe that the down bottomed out during the crash of '29. Actually, it bottomed out two years later, after several tenative rises. A warning light goes on in my head.
Just got this in from Jeff Otto. Found it hilarious.
To: Cavemates Subject: The Cave Hi guys. We've all been putting in long hours but we've really come together as a group and I love that. Big thanks to Omar for putting up the poster that says "There is no I in team" as well as the one that says "Hang In There, Baby." That cat is hilarious. However, while we are fighting a jihad, we can't forget to take care of the cave. And frankly I have a few concerns.
First of all, while it's good to be concerned about cruise missiles, we should be even more concerned about the scorpions in our cave. Hey, you don't want to be stung and neither do I, so we need to sweep the cave daily. I've posted a sign-up sheet near the main cave opening.
Second, it's not often I make a video address but when I do, I'm trying to scare the most powerful country on earth, okay? That means that while we're taping, please do not ride your razor scooter in the background. Just while we're taping. Thanks.
Third point, and this is a touchy one. As you know, by edict, we're not supposed to shave our beards. But I need everyone to just think hygiene, especially after mealtime. We're all in this together.
Fourth: food. I bought a box of Cheez-Its recently, clearly wrote "Osama" on the front, and put it on the top shelf. Today, my Cheez-Its were gone. Consideration. That's all I'm saying.
Finally, we've heard that there may be American soldiers in disguise trying to infiltrate our ranks. I want to set up patrols to look for them. First patrol will be Omar, Muhammed, Abdul, Akbar, and Richard.
Love you lots, Osama
I think it's amazing (not to mention a cheering sign of a basically healthy nation) that the flood of Osama jokes continues. The reason I like this one so much is that I could email it to my grandmother, if she knew how to operate a computer.
