Why should a Wall Street Trader make more than an Air Force Pilot?

Alan Reynolds (Senior Fellow at the Cato Institute) wrote an opinion piece in the WSJ on 12/06/11 entitled "Tax Rates, Inequality and the 1%"

He (perhaps facetiously) subtitled it "Those who obsess over income shares should welcome stock market crashes and deep recessions because such calamities invariably reduce 'inequality.'

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My response... DAMN THAT IS DISINGENUOUS OBFUSCATION!

 

While he makes a valid point about fairly factoring in how tax rate changes may likely have influenced how compensation is structured and thus measured, the bulk of it is specious garbage.

 

1) His subtitle's implication is that every OWS supporter "obsesses" about income shares as if that would be invalid (in fact or manner). Further, more perniciously, it explicitly argues that every supporter of OWS wants to punish the wealthy just for being wealthy (and even if it means hurting the poor). This is insulting and obscene.

It would be comparable to a crackpot OWS protestor shouting "The richest 1% want to eat the poor's babies."

And, to be fair, I only did that for one month. ;-)

 

2) On to the substance...

Certainly different tax codes should indeed be factored into economic analysis. But if changing tax codes mean we can't compare different time periods then the entire study of economics would devolve from an aspiring science (q.v. objectivity, isolating variables, testing predictions etc.) into a subjective art perhaps more akin to dogmatic cults (q.v. theories can't be challenged by facts, ideology trumps real world experience).

 

Different people imagine different idealized future worlds. But for those with substantially similar goals there must be objective measures. This is so we may assess the effectiveness of proposed policies based on their past performance. 

 

A country's most basic/fundamental economic measure is the income of the citizenry (as a barometer of their prosperity). On this crucial point, is there any serious doubt that wages have been largely flat for the majority of Americans over the past 30 years? Conversely, does anyone earnestly challenge the notion that the top 1% (or 0.1% or maybe 0.01%) have been increasing their incomes at an rate much faster/greater than that of the rest of the American population?

 

Of course, the truly great deserve great success. American culture embraces this celebration of superiority in part to motivate further greatness. I am not any different. So the question that interests me is: By what measure is one determined to be truly great? 

 

If someone is entrepreneurial and creates a business (or hedge fund or law firm etc.) then he certainly deserves greater success than the person who merely performs a job he was trained to do (even if that job has billions on the line). Why should the trader who controls $1billion in investment assets make more than the Air Force pilot who controls a $2billion B-2 bomber? (let alone over 50x more)

 

The biggest issues for the OWS movement are:

 

a) Increasing Inequality with zero structure in place to counterbalance this scary trajectory (and even so most there barely aspire to Canadian-style "socialism").

 

b) Banks got bailed out (through TARP and the trillions in loans and balance sheet transfers of "toxic assets") all on the taxpayers' dime and then these same banks had the temerity to claim they had "record profits" in order to shamelessly rationalize excessive bonuses.

 

>>> NOTE: I'm all for unfathomably large bonuses for the investment managers who outperform the market. But, for a given set of risk & objectives, if mutual fund manager "X" massively underperforms a comparable (mindless) index fund, why should he make anything at all? (let alone tens of millions).

Don't Blame Homebuyers: Part 2

This post is "Part 2" of my post "Blame the Homebuyers Only if You Reject Your Doctor's Advice…."
• http://corpania.blogspot.com/2011/12/blame-homebuyers-only-if-you-reject.html

Please only read the following post after having read "Part 1". Thank you.

Here is PART 2:

 Regarding Libertarian Banker-Apologists' second specious point: 

- "It's not the banks' fault at all. The government 'MADE' the banks loan to non-creditworthy homebuyers."

 

The federal government law to which those bank-apologists are referring is primarily the "Community Reinvestment Act" that requires banks to make loans inside their respective communities. Basically, a bank can't take all the deposits from one neighborhood (e.g. the ghetto) and then exclusively make loans to a different neighborhood (e.g. the suburbs).

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

 

BUT THAT LAW HAS FUNDAMENTALLY BEEN IN EFFECT SINCE 1977!

 

So the libertarian bank-apologists really think that the cause of the housing bubble/bust of the GWBush years was only the community-reinvestment regulations that have been substantially identical for 30+ years?

No, that's simply laughably absurd.

 

Instead, all should consider the legitimate possibility that a major cause was the changes in regulations (i.e. the REDUCTION and RELAXATION of REGULATIONS) around 1999 & 2000. Yes, that's right, I'm blaming Bill Clinton and his Treasury Secretary Robert Rubin. While Phil Graham and the Republicans primarily were championing these horrible deregulations and strong-arming the Democrats to go along, they couldn't have done it without Bill Clinton. For you policy wonks, here's what they passed:

 

• http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act (which repealed the decades-long successful Glass-Steagal protections)

 

• http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000 (which enabled the proliferation of dangerously leveraged derivatives that Warren Buffet calls "Financial Weapons of Mass Destruction").

 

So when trying to diagnose the cause of a problem do you look at the nearest cause or the farthest cause? If you get food poisoning tonight do you think it was from today's lunch or from the cake you had on your seventh birthday?

 

Yes, I will concede that government action helped cause the GWBush financial crisis but it was the Republican-led government action of DEREGULATION that allowed the banks to ruin our economy in the 21st century.

 

Let's think practically here.

 

Say you control a casino.

Would you allow someone who is worth $1 million to bet $100k on credit you extend to him?

How about gambling $1 million on your credit? How about $6 million? How about $32 million?

How much would it matter if the gambler was a purportedly very successful poker player and only wanted to use your extended credit to play poker?

What if that poker player somehow lost half the $32 million he borrowed from you? 

But since the fundamental existence of the poker game in your casino was at stake when he lost that money, you fronted him the $16 million loss. His accountants then count that $16 million example of taxpayer generosity to fortify the gambler's balance sheet and ensure he appears to be profitable (despite the $16 million he lost).

Would you then be OK with him paying himself a $1 million bonus? How about a $2 million bonus?

 

Well that's all highly analogous to what the banks did to the American people.

Their "capital requirement" / "capital asset ratio" regulations were relaxed so that they could use depositors' funds as collateral for massive risk. And on that collateral they were allowed to "leverage" themselves and gamble at 32 times the amount they actually had (including their depositors' investments which don't even belong to the bank). This new, massive increase in leverage was tantamount to a commensurate (artificial) increase in "demand". That much more money being loaned out to buy stocks & real estate during the GWBush years meant increased prices (i.e. an artificial bubble).

Then, when the bust inevitably occurred the banks required the TARP bailout from us taxpayers (which, to be fair, they largely paid back already). But concurrently these banks also required the unprecedented moving of "toxic assets" off their balance sheets in the TRILLIONS with a "T" (not billions with a "B"). With these absurdly "cleaned-up balance sheets" they got to claim massive profitability and therefore shamelessly "justify" giving themselves gigantic bonuses that are virtually entirely unearned.

Please read Matt Taibbi and Robert Scheer for more about this…

• http://www.rollingstone.com/politics/blogs/taibblog/owss-beef-wall-street-isnt-winning-its-cheating-20111025

• http://www.truthdig.com/report/category/scheer/

 

But in the interest of true fairness and balance…

 

I will concede that the GSEs Fannie & Freddie must also share in the blame.

 

And, of course, the microscopic percentage of homebuyers who actively deceived their loan officers in a criminal attempt to get a bigger loan (that they knew they couldn't afford to repay) - well, sure, they're guilty, too.

 

But before you blow that miniscule fact out of proportion consider the ramifications. A mortgage is virtually always more expensive than rent. In a standard loan, you pay some interest PLUS SOME PRINCIPLE. Taking out a bigger loan than you can afford necessarily means eventually getting evicted (for being so "upside down" = owing more than the home is worth). Once you get caught like that you get evicted and all of your principle is lost. So you will have paid more in the form of a mortgage than you would have if you rented! Under normal/historic circumstances, even for a criminal there is no upside to getting a bigger loan than he can afford.

 

The only ways to "game" such a normal/historic system are to either:
a) "deliberately not pay until they actually evict you" (thus getting "free rent" until eviction).

OR…

b) get an "interest only loan", paying that artificially lower mortgage until the principal payments kick-in, years later, and then stop paying & move out (thus getting de facto "subsidized rent").

 

But both such immoral actions are minimally dangerous under 1960s/70s/80s style financial regulations. Whereas they are significant risks thanks to GOP-led deregulation.

 

In any event, you can't blame the homebuyers for the GWBush financial meltdown.

Firstly - The banks should have only given loans to those who could afford to pay. It's the banks' primary job to find good lenders. Otherwise you shouldn't want banks to exist and instead you should prefer only a system of "safety deposit boxes" coupled with a paypal-like money transfer system. When unemployment spikes to 9% the effect on the financial system should be tolerable. When in a massively-leveraged bubble (due to deregulation) such cyclical shifts can threaten to become cataclysmic dangers.

Secondly - The government/regulators shouldn't allow any industry to threaten the existence of America. Remember Warren Buffet's repeated warning that massively leveraged derivatives are still "Financial Weapons of Mass Destruction". We simply shouldn't let banks gamble at such absurd multiples of their net worth. And if one does need a bailout then draconian strings should be attached (e.g. I think "In the event of financial bailout, every one of the bank's management should be personally financially 'wiped out' to no more than $1million in net worth before a single dollar is borrowed from the taxpayer."). It's crazy "reverse-Robin Hood" GOP thinking that a school teacher should pay 20% of their 50K annual salary so that a foolish trader on Wall Street (who has lost more in his career than he has made) can keep his millions in ill-gotten gains (and pay a lower percentage tax rate).

For the record: I'm really not against Wall Street traders/investors/hedge fund managers etc. Some are good friends of mine (since high school). Those who, over the years, earn more on their investments than they lose should be well-compensated. Those whose clients' investments, over the years, earn an ROI greater than the market (e.g. S&P) deserve substantially greater compensation. Conversely, those so called "investment professionals" who underperform the market shouldn't be well compensated at all. In my opinion those who underperform are worth less than minimum wage because the clients would have been better off investing in a mindless index fund. It should be obvious to all with at least a minimal understanding of finance that, in a normal statistical distribution, the majority can't beat the average.

In a purported meritocracy, only those who excel should profit. The market can't fix this problem no matter what the delusional ivory tower libertarian economists think. We need regulation to protect us. We need a democratic government seeking to protect the 99% from the fundamental corruptions that naturally spring up in all markets.

Again, if you haven't yet, please read my post about how "Libertarianism is a Quaint Anachronism".

• http://corpania.blogspot.com/2008/10/regulations-are-crucial-libertarianism.html

 

 

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LINKS:

• http://en.wikipedia.org/wiki/Community_Reinvestment_Act - Basically, a bank can't take all the deposits from one neighborhood (e.g. the ghetto) and then exclusively make loans to a different neighborhood (e.g. the suburbs).

• http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act - which repealed the decades-long successful Glass-Steagal protections.

 

• http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000 - which enabled the proliferation of dangerously leveraged derivatives that Warren Buffet calls "Financial Weapons of Mass Destruction".

• http://en.wikipedia.org/wiki/Capital_requirement  & http://en.wikipedia.org/wiki/Capital_adequacy_ratio

• http://www.rollingstone.com/politics/blogs/taibblog/owss-beef-wall-street-isnt-winning-its-cheating-20111025

• http://www.truthdig.com/report/category/scheer/

• http://en.wikipedia.org/wiki/Government-sponsored_enterprise

Again, if you haven't yet, please read my post about how "Libertarianism is a Quaint Anachronism".

• http://corpania.blogspot.com/2008/10/regulations-are-crucial-libertarianism.html

Blame the Homebuyers Only if You Reject Your Doctor's Advice….

Blame the Homebuyers Only if You Reject Your Doctor's Advice….

 

This post is for those who reject (or simply don't understand) the Occupy Wall Street movement.

 

Libertarian, bank-apologists who are against "the 99%" all too often make two particularly specious arguments that I will definitively debunk here. They fraudulently claim...

 

1) "It's not the banks' fault at all. The only guilty people are the homebuyers who took out loans they couldn't afford."

 

2) "It's not the banks' fault at all. The government 'MADE' the banks loan to non-creditworthy homebuyers."

 

BOTH OF THOSE STATEMENTS ARE VIRTUALLY 100% BULLSHIT.

 

Here's why…

 

1) Consider this analogy: You go to the doctor thinking you are OK but he hypothesizes that you may be sick with cancer. He states the only way for him to find out for sure is for you to get an expensive high-tech scan.

 

Now, how often do you reject the doctor's recommendation? I wouldn't be surprised if the average person (with insurance) probably gets the recommended test 99 times out of 100.

 

Why? It's because the doctor is the professionally-educated, government-regulated expert with explicit obligations to look out for the patient's interest. Well over 99% of the time the patient is necessarily less-educated than the doctor is on medical issues. So, naturally, the patient defers to the expertise of the doctor. In an advanced economy with an increasingly specialized division of labor this is as it should be; standardized deference to expertise.

 

Now examine how analogous that is to a typical homebuyer going to his "personal banker" at the bank where he has been a checking/savings customer for years. He goes in because he wants to buy a house. (Maybe he was even "cold-called" and invited to come in by that banker). This typical homebuyer knows what he spends every month for rent but has no knowledge whatsoever about the rules, norms & pitfalls of home-buying.

Virtually identical to the doctor's relationship to a patient, the banker is a professionally-educated, government-regulated expert with explicit obligations to look out for the customer's interest. But instead of sticking to decades-proven norms of "Always put at least 20% down" and "Mortgage shouldn't be more than 30% of your income" the entire banking industry (most especially from 2000 to 2008) was exploding with "Liar Loans" that were outright fraud as well as "Interest Only Loans" that doubled after an introductory period. These shady loan sharks might have delusionally rationalized to themselves "Hey, if the real estate prices keep going up these poor schlubs can always refinance." But these bankers were wrong and you simply can't blame the customers for trusting their banker.

 

"Caveat Emptor (Let the Buyer Beware)" the libertarian, banker apologists scream. But unless you expect everyone to become expert in everything then you don't really believe that. The world has simply evolved to a level of complexity that requires expertise and therefore trust in experts.

(See my post "Libertarianism is a Quaint Anachronism")

• http://corpania.blogspot.com/2008/10/regulations-are-crucial-libertarianism.html

 

If you don't think the customer should be able to trust his professional, regulated expert then how do you feel about the following hypothetical situations?

 

a) Your accountant says certain deductions are legitimate (which seems intuitively plausible to a reasonable person) but when the IRS comes to arrest you for tax evasion he flees and bears no responsibility.

IN TRUTH: You can sue your accountant in such situations and the judges in tax court generally give such suckered filers some leeway (at least compared to self-filers).

 

b) Your lawyer assures you that it is completely legal to use Mickey Mouse's image in your company's advertisements because the Mickey Mouse character first appeared in the animated short "Steamboat Willie". Copyrights expired 50 years after the death of the author and Walt Disney died in 1956. But then Disney corp sues the crap out of you and your attorney flees responsibility claiming that he told you true facts.

IN TRUTH: I am not a lawyer but you CANNOT use Mickey Mouse's image in your advertisements without permission from Disney (in part because copyrights have since been extended and in part because Mickey Mouse is also protected by trademark law).

 

C) While getting your oil changed on a cross country trip, the mechanic (who is very sinister, unbeknownst to you) advises you to get new brakes and, in the interest of safety, you agree. But he switches your fully-functional brakes with used/worn-out garbage brakes. You drive right on to the highway and the brakes fail completely causing you to rear-end another car. The accident kills the baby who was going to grow-up and cure cancer.

IN TRUTH: (again I'm not a lawyer) While there is such a thing as a true non-negligent accident it doesn't really apply here. In this example the mechanic is more culpable for manslaughter than you are. Plus that baby was just going to save his cancer cure for his cult-followers on his racist micro-nation island and then unleash a cancer epidemic on the world like a Bond villain. So don't be too hard on yourself for getting your brakes changed.

 

Ok, that's enough for one post.

 

On my next post I will address libertarian, bank apologists' second specious argument - "It's not the banks' fault at all. The government 'MADE' the banks loan to non-creditworthy homebuyers."

Don't worry I will completely debunk that, too.

Why god allows evil to exist: Agnostic sees argument "All Evil Reduces to Zero"

Here's a random quasi-philosophical thought:

Though I'm still a skeptical thinker and an ardent agnostic, I nevertheless take pride in my deliberate humility on this issue especially. I know I could be wrong so I'm aggressively open-minded. I recently arrived at an interesting idea (notice I didn't write "I came up with it" because I'm sure someone else has thought of this before me). 

Here it is... 

There's a logical/internally coherent response to the atheist's perennial question: 

"How can an omnipotent, omniscient, omnibenevolent god still allow so much evil in the world?"

• http://en.wikipedia.org/wiki/Problem_of_evil

Personally, I never found the "free will" justification compelling. 

The trick I like here is in boldly challenging the premise that there is "so much" evil. (Basically, I'm merely reformulating the "Afterlife" argument - theodicy). I call this idea "All Evil Reduces to Zero".

NOTE: Assume the position of the faithful (i.e. believe that god exists and is omnipotent, omniscient and omnibenevolent and also believe that heaven exists for all eternity) and still recognize all the evil that exists in the world (e.g. crime, war, famine, disease etc.).

Point#1) As you age, your perception of time changes such that periods of time that seemed like eternities as a child (e.g. a car ride) seem like trivial blips when you're older. (q.v. Cracked.com's article on immortality if you had to live forever on earth http://www.cracked.com/article_18708_5-reasons-immortality-would-be-worse-than-death_p2.html ) 

Point#2) Similarly, we recalibrate our concepts of pain and justice as we age. 

PAIN: The needle of an inoculation shot seems terrifying and excruciating as a child but for adults seems absurdly inconsequential compared to the benefits. 

JUSTICE: A teenage girl stealing her sister's boyfriend seems perfectly fair (to herself) in the moment but is viewed differently (e.g. it's not "right" but also it's just not that big of a deal in the grand scheme of things) as she matures and gains a greater understanding of the world.

Point#3) Given points #1 and #2 and the assumption that the eternity of time in "heaven" is truly infinite then one must necessarily conclude that a given human's entire time on earth will thus "reduce to zero" (as will all of humanity's time on earth) compared to the infinite afterlife.

Consider this: a child's perception is that "this one-hour car ride took forever" and "the doctor's needle shot is the worst pain in my life" but by the time he's 30 years old both seem absurdly meaningless. Given those assumptions, isn't it reasonable to extrapolate that all such pains/crimes/atrocities will similarly recalibrate downward when viewed along a broad-enough timeline? 

One murder is a tragedy for the victim's family and friends but it's merely a statistic to the rest of the population in that time period. Even worse, that statistic is likely less-and-less known while becoming more-and-more irrelevant to subsequent generations. The Holocaust is still relatively fresh in our collective minds because some people who survived it still testify and, as a culture, we remember to retell the history. Compare that to slavery in America hundreds of years ago or Stalin or Mao where multiple times as many human beings were killed (q.v. Who killed the most humans; Hitler or Stalin or Mao?).The further back in time the evil goes the less relevant it is to us, necessarily. 

Even if you live on earth for 100 years, remember that 100 divided by Infinity = Zero.

That isn't meant to be a nihilistic criticism that life is meaningless but rather, to the faithful, life on earth is relatively meaningless compared to the eternity of life in heaven. Thus making "getting into heaven" (q.v. faith) all the more important and "good deeds"/"repairing the world" much less important.

So while this whole argument ("All Evil Reduces to Zero") is interesting to me for its internal coherence it is still fatally flawed from a fully rational point of view. That's because it requires its assumptions (e.g. the existence of God & Heaven) to be correct in order for the conclusions (e.g. have faith in the existence of God & Heaven) to be correct. Such a circular argument is both irrational and without evidence and thus dismissible by any critical thinker who requires evidence.

NOTE: To my friends who genuinely have faith - please forgive me. I don't mean to offend. Perhaps you can take, as an amends, my explicit recognition that I could be wrong.

increasing taxes on the rich doesn't discourage production

Conservative & Libertarian apologists for absurd supply-side policies (e.g. flat tax, end capital gains taxes etc.) always feature as part of their argument something tantamount to - "increasing taxes on the rich 'discourages' production and wealth creation" but let's all embrace reality and call that bull crap. If you didn't know the facts, you could imagine evidence for their assertion would include lower production & wealth creation under Clinton and higher production & wealth creation under GWBush. BUT, IN REAL LIFE, THE EXACT OPPOSITE HAPPENED. Thus eviscerating their argument. QED. >>> SECONDARILY - Conservatives & Libertarians consistently make the superficially plausible argument that "private industry is always better than government". Let's leave aside the myriad examples where the results prove that, at a minimum, their claim isn't true 100% of the time (q.v. private contractors in modern wars etc.) >Instead let me mention that, in the current situation where private industry is sitting on $2 TRILLION in cash and not spending it on growth/jobs in the US (because demand is so weak), giving further tax breaks to the wealthy and to corporations (which are enjoying RECORD PROFITS, literally) is a bad idea because they've proven that THEY WON'T SPEND IT on America. Whereas government-run FDR-style plans will actually put money into the American economy. >>> Finally, let's remember that the current GOP talking points about "regulation & taxes are choking industry" is complete bullshit by any historical standards or reasonable appraisal of rival countries. "Regulations, taxes aren't killing small business, owners say"> http://www.mcclatchydc.com/2011/09/01/122865/regulations-taxes-arent-killing.html .

Price Everything Based on "Duration of Utility"- MY NEW ECON THEORY

I've been thinking more and more about my brilliant proposal: "Universal Value and 'Years of Sustenance' System". If you haven't read it yet please at least skim it before you continue reading this post. http://corpania.blogspot.com/2010/05/universal-value-price-dollar-to-years.html When you buy a product you expect it to give you some utility. An apple is supposed to be edible (sate your hunger and give you calories/vitamins). If it falls short of that expected utility (e.g. because it's poisoned) you have the right of redress in the courts (using some sort of fraud statute - again I ain't a lawyer). When you buy a TV you expect it to work with your DVR & gaming system and function for some period of time. The very concept of a warranty is a direct endorsement of this paradigm. With that as the foundation, explore this philosophical leap with me... Instead of buying products for what they are and their implied duration of utility, everything (and I do mean virtually everything) should be priced in terms of "DURATION OF UTILITY". For reference: Most supermarket shelves helpfully note the price-per-ounce/use so you can better compare prices. The bigger container of cereal may not necessarily have the best price value. Perhaps, that day, buying two 9-ounce boxes is cheaper than buying one 18-ounce box. Similarly, the "ultra-concentrated detergent" that has enough cleaning power for 20 loads in its tiny 20-ounce container needs to differentiate itself from the competitor in a conspicuously larger 30-ounce container that is substantially more watered-down and thus only can clean 10 loads. In a somewhat related example, most cable systems rent you their cable box on a monthly basis rather than make you pay up-front to own the box outright. These companies recognize that the up-front cost & size of the container is virtually moot compared to the amount/duration of utility it's offering the consumer. All I'm advocating is to advance the entire economic system to its next step in a logical and beneficial evolution. All (almost literally "all") products should be required to offer warranties and price them accordingly. For example: Samonite Luggage - instead of selling a $200 piece of luggage it could keep its existing 10-year warranty and consistently price at $20 per year and still demand to sell in 10-year bundles. Consumers would ultimately see the "bottom line price" just before they decide on their transaction but they'd first be presented with the "cost per year". This new paradigm would enable better long-term decision-making. DEVIL'S ADVOCATE: Yes, I concede that this adds a potentially undesirable level of complexity to the buying process. RESPONSE TO THE DEVIL'S ADVOCATE: Sure but that's a good thing. Life is WAY more complicated than it was just 50 years ago and the "complexification" is only accelerating. It's time we all kept up. We need to propel critical thinking and root-out the malefactors. Again, you need to know about how I think of currency value to get my argument... http://corpania.blogspot.com/2010/05/universal-value-price-dollar-to-years.html I'm eager for your feedback but please don't type anything until you've read and really understand what I'm trying to convey. Thanks and good karma to you.

Why "Sex with Your Mom" Jokes Used to Be More Offensive (NSFW)

Here's one of my more eccentric theories and many of you may have already heard me present it in NSFW conversation. Why "Sex with Your Mom" Jokes Used to Be More Offensive... Don't get me wrong. I love a good "your mamma" joke. Nevertheless, I think we can all agree that, back in the day (especially before 1950s), making reference to having sex with somebody's mother (or sister or daughter) was maximally offensive and virtually "fighting words". Whereas today it's not nearly as big of deal. One could validly argue that's due to America's "ever decaying morals" and the world's "continual descent into prurient hedonism". But I have a different explanation. It is provocative and, as yet, unsubstantiated. Even so, I think it's worth posting. Especially back before the 1950s, they didn't even really have the concept of "date rape" or "marital rape". Plus, there wasn't a culture promoting "sexually satisfying a woman". It took the "sexual revolution" and decades of books & TV shows about sex for the culture to advance to the point where unselfishly, sensitively satisfying a woman was a good thing. With that in perspective, most especially before the 1950s, it is therefore necessary to conclude that sex was normally much less fun for the woman. It is less provable but still my theory that it was culturally acceptable, back then, for guys to often be brutally selfish, even violent (e.g. How many movies had a hero slapping a woman back then compared to today?). So if you're a man back then (who by modern standards would be validly considered a detestable, violent, date-raper) and someone mocks you by referencing having sex with your mother (or sister or daughter) of course you would feel maximally offended because you would want no such act perpetrated on the women in your family. Similarly, if you were a mother back then, of course you would warn your daughter not to have sex before marriage. Heck, you might even encourage a life as a nun! Contrast that with 2011, where sex is now supposed to be fun for all involved and selfish behavior is culturally discouraged (not to mention the thankfully widespread, valid public support for comparatively recent laws outlawing violent behavior that would have been tolerated if not encouraged back then). Sure, there are still reasonable taboos that make "sex with your mamma..." jokes dangerous enough to enhance the comedy and increase the NSFW warnings. But generally you want everyone you know to have a full life which normally includes sex. It's still gross and creepy to consider when you're hit with such a joke. But it's no longer a culturally acceptable reason to kill someone. With that earnest attempt at "gender studies" scholarship established, here are a few of my current favorite "sex with your mamma" bits of comedy: 1) You're mamma is such a whore that when she blows me for free I have to declare it as income. (Yes, that's my slightly rewritten version of the joke I recently wrote as if I was roasting Charlie Sheen). 2) SNL's *NSFW* music video "Mother Lover" (censored link). Here's the UNCENSORED version: http://www.nbc.com/saturday-night-live/video/digital-short-motherlover-uncensored/1103443/ http://www.hulu.com/watch/73123/saturday-night-live-snl-digital-short-motherlover-uncensored 3) Ray William Johnson's NSFW music video "Doin' Your Mom": http://www.youtube.com/watch?v=WfYyBp4Ln2s Comment here if you think I should re-post without those comedy links. .

Ok, I was wrong on about my "14th" prediction.

Ok, I was trying to bold and interesting with my predictions. But it didn't work out because I was completely wrong when I thought there was some serious chance that Obama would use the "14th Amendment" to resolve the debt ceiling issue in August 20111. I, yet again, conflated what I thought would happen with what I wanted to happen. To be fair, most prognosticators are inherently vulnerable to this problem. Nevertheless, I'm maintaining my intellectual integrity by keeping up my bad predictions as well as the good. Anyone who indulges in selective deletion is deceptively altering readers' perception of his efficacy. .

Give me odds & I'll bet Obama uses the "14th" to solve the debt ceiling crisis

As I've been mentioning for a couple of weeks now, I think it's increasingly likely Obama will use the "14th Amendment argument" to unilaterally raise the debt ceiling to avoid default. I know my politically savvy, in-the-know friends (who attend Drinking Liberally functions) have rationally argued that since the Boehner(GOP) and Reid(Democrat) plans are so similar they should just come together and strike a deal. And a month ago, I was buying Cenk Uygur's prediction that the GOP was simply engaging in brinksmanship to get better terms with the ever-cowering Democrats but in the end the corporate-controlled GOP would make a deal since a default would be disastrous for the corporate interests. But now I think the politics trumps the reasonable policy. The GOP members of congress are terrified of getting primary challenges by some Tea Party nutcases from out of the blue. The Tea Party groups are so extreme they even oppose Boehner's plans (which have unprecedented concessions from the spineless Democrats). So the GOP simply can't approve of any deal even though most (behind closed doors) might admit that they don't actually want a default. By "letting" Obama use the "14th Amendment plan" the GOP can thus preserve their conservative "purity" with their Tea Party base. Plus, as a bonus, if Obama does unilaterally raise the debt ceiling on 14th amendment grounds then the GOP gets what it thinks is a great campaign point about Obama's "unconstitutional, dictatorial power grab". On the flip side, Obama's liberal base wants a clean debt-ceiling raise without any concessions/compromises and they don't care how that happens. Consequently, the GOP would be happy with a "14th Amendment plan" and so would the Democrats. The only things left to consider would be the ramifications. PRIMARILY... *Would the Supreme Court overturn it?* > I say no for three reasons:         a) Law Professors say it would be tough for a litigant to prove "standing".         b) If interest rates don't spike (because there was "no default") then any judge would be loathe to intervene for fear of spooking the now-soothed markets.         c) Even the right-wing members of the Supreme Court travel in corporate & money circles (not so much with the less-educated, low-brow Tea Party members). So the corporate interests who are terrified of default will influence/put pressure on powerful judges to not intervene/overturn Obama.       AND SECONDARILY... *"Do the politics of using the "14th plan" cut particularly poorly against Obama?" > I say no for four reasons:          a) Assuming interest rates don't spike, Obama can effectively argue the necessity of his action (using the counter-factual: "if I hadn't then rates would've spiked").          b) If rates do spike, Obama can argue that they were caused by GOP brinksmanship which necessitated his use of the "14th Amendment plan".          c) Obama can make Clinton's argument that the increase in the debt ceiling was for "the dinner we already ordered and ate and therefore had to pay".          d) The global intelligentsia (from Greenspan to Buffet to the head of the IMF) think that America's "debt ceiling" shouldn't even exist. Just my quick analysis and long shot prediction. I could quickly & easily be proved wrong. But I hope I have the intellectual integrity to keep this post up either way. We'll see what happens. .

COMEDY TEXTBOOK: Taxonomy Continued - "Extend the Analogy Inappropriately"

I continue to try to add to my 18+ year back-burner project of compiling a "Comedy Textbook". COMEDY TAXONOMY - Technique: "Extend the Analogy Inappropriately" Take an analogy that is apt & universally accepted and then extend it ("Yes and...") further with over-the-top inappropriate examples. I give credit to comedy writer Tim Carvell for inspiring me with his funny tweets: #accuratekatyperrylyrics • "Baby, you're a firework! You frighten animals and people can buy you by the side of the road in New England!"  • "'Cause baby, you're a firework! You're loud and smoke and sometimes take children's thumbs off!" Eventually, I do hope to complete the textbook.

How soon before corporations demand the right to vote?

Anybody care to predict when corporations will earnestly attempt to get rights to vote in elections? Take any of their absurd arguments for legally buying politicians (q.v. Citizens United supreme court decision)  and tell me how a reasonable person with integrity would defend that and not the maximally obscene idea of corporations getting the right to vote for President (or congress etc.). I note this here on my blog as yet another time stamp to test my predictive powers. I hope I'm merely being provocative and extreme in this prediction. I hope I am proven wrong about corporations demanding the right to vote. I fear this post will be like the meme that says there is no satirical Onion article so extreme that someone won't believe it's true.

Random idea: Wedding Registry - Cable,Cell,Utility Bills

Don't know if I'm the first to think of this but I'm pretty sure, at a minimum, it ain't popular yet: "Wedding/Baby Registry for Bills" This would be in addition to or instead of couples registering for random gravy boats and place settings for grand dinner parties they'll rarely, if ever, have. Maybe I'm overly-practical or iconoclastic but this idea is undeniably useful. Plus, it's less crass than cash since you're buying, for example, a month of "the works" cable package and can take vicarious pleasure from them recounting the great shows/movies they saw. But it's as useful as cash since they likely would be spending that money anyway (or a substantial portion of it if they ordinarily have more scaled-down cable packages). This should be particularly attractive to cable companies since people are often lazy and stick with the extra channels once they've signed up on a trial basis. The cable companies could have an extra-special discount deal for newly married couples who sign-up for the registry package. And of course this system could apply to any recurring bill (cable, Hulu, cell phone, landline, water, electric, trash, club memberships, annual vacations, even rent & taxes!). The key is that it would be quantified in days, weeks, months with corresponding amounts. "Thanks for the two weeks of electricity. You know we're using it!" SIDE NOTE: The paternalistic giver can take pleasure in knowing bills will be paid (pre-paid) especially in the case of particularly young or impulsive couples (e.g. those with gambling or drug addition problems). Hey, it's no worse than registering at half the cheesy stores out there.

CORRECTION: On February 24, 2011 - I actually wrote $86 (not $87)

CORRECTION: In my June 23, 2011 post (http://corpania.blogspot.com/2011/06/get-out-of-your-short-position-on-oil.html) I made an error. I erroneously mentioned that on February 24, 2011 - (http://corpania.blogspot.com/2011/02/oil-at-100-seems-really-highshort-it.html) I wrote $87 was my target price. The correct number was $86. And my June 23, 2011 advice is to get out before the target in order to "book the win" so my consistently profitable prediction streak continues. But don't forget that my prediction was nevertheless still good since following my advice would have netted you a nearly 9% profit in 4 months. NOTE - I include my errors, corrections and bad predictions on my blog to further prove the integrity of the posts. .

Get out of your short position on Oil

CAVEAT: I am not a professional financial adviser. Please consult one before you consider taking any of my advice. This blog is for entertainment purposes only. On February 24th, 2011 - I advised selling oil short (when it was $100 a barrel). http://corpania.blogspot.com/2011/02/oil-at-100-seems-really-highshort-it.html "Oil at $100 seems really high since the fundamental use (demand) and availability (supply) substantially haven't changed (IMHO)." Well it's June 23rd, 2011 - And now that oil is at $91.04 I'm advising you to get out of your short position and book the roughly 9%+ profit in 4 months. My amazingly great oil price prediction streak continues. Has anybody noticed or fully appreciated that? BTW - It could go lower still but I love the validation of making consistently profitable recommendations. So even though I originally said sell at $87, I'm saying now book the win and be content. .

Words Invisibly Recalibrate: Another Reason Testing Predictions is More Valuable Than Reviewing History

I'm a longstanding proponent of using science over history in determining future policy. The Scientific Method insists on "Testing Predictions" which enables crucial falsifiability. Whereas History can be cherry-picked for only the confirming data. This is much like con-artist tarot card readers whose "cold reading" techniques use "confirmation bias" to trick suckers into thinking supernatural/paranormal powers exist. But this post is about how "Words Invisibly Recalibrate". When you were a small child you probably thought regular black pepper was "spicy". As you got older you probably recalibrated to simply consider it a "seasoning" and then you thought that jalapenos were spicy. If you grew up in a home that enjoyed a lot of Spanish or Indian cuisine then you probably don't think that jalapenos are that spicy. And so maybe a Habanero chili pepper or Bhut Jolokia is your new defining spicy ingredient. The Scoville Scale scientifically measures "spiciness". Here are some examples: Pimento: 100 - 500 Scoville units Tabasco Sauce: 2,500 - 5,000 Jalapenos: 2,500 - 8,000 Habaneros: 100,000 - 350,000 Now if I quoted you as having said "Black Pepper is the spiciest thing in the world." That shouldn't mean much if you were 7 years-old at the time and have since gone on to taste much spicier foods. Similarly, when we quote historical figures we should be equally skeptical even when they use the same words we use today. Consider these powerful words : Freedom, Free-Trade, Socialism, Protectionism Recall your own quotes about them. What if they meant something different back then? Surely they did, if only with respect to context and their particular factors. NOTE - I have previously blogged about "Republicans' Shifting Definition of Socialism". When you read The Old Testament of The Bible there are grandiose-for-the-time phrases like "the land flowing with milk and honey" to communicate abundance. When today virtually every single first world country (and surely every Western country) does indeed "flow" with milk and honey. Why didn't The Bible describe the comparatively much more glorious cornucopia of bounties in a modern, standard Costco? Penn Jillette is among the skeptics who say something to the effect of: "If the average Vegas magician did his act 2000 years ago he would have been heralded as a god." And don't forget Arthur C. Clarke's 3rd law: "Any sufficiently advanced technology is indistinguishable from magic." History necessarily uses the same words (or translations) when the contextual differences have rendered the thoughts moot. That's because history as a social science is most flawed at "isolating the variable for measurement". Another historical term that offends me (even though I'm Agnostic) is the term "King of Kings". As if the power differential between a human king to a regular person would be at all equivalent to that of an Omnipotent Supreme Being compared to a human king. Though I'm sure it was a useful comparison in the time of kings. But that's my point - communication is meant for its time and its desired audience. To take quotes out of that context is to make any statement that was possibly "valid-for-the-circumstances" potentially vulnerable to complete or partial invalidation. For example: 1) Ptolemy vs. Copernicus 2) The original U.S. Constitution protected freedoms & voting rights for only white men who owned property. Whereas today we recognize that as absurdly narrow and unfair. Next time someone attempts to assert the supposedly unassailable authority of our Founding Fathers you can dismiss him because he used to think black pepper was spicy. .

Reminder to Self - Explore & Write about Probability Problems

Don't really expect anybody to read this. Just a reminder to myself to write about probability problems.... 1) http://en.wikipedia.org/wiki/Two_envelopes_problem 2) http://en.wikipedia.org/wiki/Saint_Petersburg_Paradox 3) http://en.wikipedia.org/wiki/Expected_utility_hypothesis 4) http://en.wikipedia.org/wiki/Monty_Hall_problem Crux of my point here is what I believe to be the crucial distinction between odds before an event happens vs. the odds after an event happens when you're not yet aware of the outcome. Maybe this is a semantic & meaningless distinction. Have to give it a lot more thought. But for economic and political policy reasons I currently think the distinction is important and woefully under-examined. Example: You and I want to bet on a fair coin-toss. If we bet before the coin is tossed then we can fairly reduce the variables down to the intuitively fair bet of 50/50. But if I toss the coin first and cover it before we bet then you can choose to implement heuristics and treat it as an identical situation. Consequently you think the odds are still 50/50. But the reality is the odds are 100/0 and you simply don't know which is which. I currently think this is a subtle but important point. Because I think it can nullify some of the counter-intuitive paradoxes (in the links above). In the two-envelopes problem it is obvious to everyone that switching for infinity can't actually increase your expected utility. I'm envisioning the permutation tree of possible outcomes for a given event. Standing at the point where it branches into two possible timelines is different from standing past that point and simply being blind to your position when you make a bet. My intuition is telling me that because the latter is a sucker bet for one side it is thus necessarily more game-able (cheat-able). Consequently, it requires greater protections/constraints on potential cheaters. This is related to the supposed geniuses who wrecked our economy by creating financial models that didn't appropriately track to the real world while nonetheless convincing investors otherwise.

Advise your boss to "pretend he's guilty"

The old saying about political scandals is: "The cover-up is often worse than the crime." Most recent evidence (as of June 2011) : Republican Senator Coburn and Democratic Congressman Weiner. So here's my recommendation to all those working for any politician: If you hear about a scandal involving your boss, no matter how 'unbelievable', take him aside and say the following: "Don't deny the rumor! Just pretend you're guilty. Then make a public admission and apology. The media is always fixated on scandals (especially sex scandals) because they're much easier to understand compared to policy issues. Let's simply admit it because only that will enable us to move on to the important issues." This tactic may be just enough of a dissembling kabuki dance to get some of the actually guilty people to make the right choice instead of letting instinctual defensiveness compel a futile strategy of denial. Hopefully, the actually innocent will maintain their innocence. Whereas the guilty will thus have enough of a face-saving "out" to tell the truth (while only pretending that they're lying). Of course this won't work with true sociopaths. But it's worth a shot. .

I add to the reasons why property crime rates keep dropping.

WSJ notes reasons for the continued drop in crime rates: - increased incarceration - rejection of previous notion that high unemployment necessarily means higher crime - potential victims better at protecting themselves - better policing - 80% drop in lead levels in Americans' blood (bravo to the EPA!) - decreased cocaine use - increased abortion reduced numbers of children most likely to commit crimes (q.v. controversial research cited in "Freakonomics") HERE'S MY ADDITIONAL REASON (at least regarding "property crimes"): Tech goods dropped in price. Consider this: in 1980, a stereo or VCR cost $300+ and that amount would be like $800 today. Whereas the modern equivalents of those devices are 1/10th the price. And expensive modern TVs are just too big to getaway with in a practical way. Relatively speaking, it's simply tougher for a modern burglar to steal valuable things that can be easily resold. Just my quick little "brainstorm". I could easily be proven wrong on this. ------------------------------------------------------------- NOTE: My favorite part of the article... http://online.wsj.com/article/SB10001424052702304066504576345553135009870.html There may also be a medical reason for the decline in crime. For decades, doctors have known that children with lots of lead in their blood are much more likely to be aggressive, violent and delinquent. In 1974, the Environmental Protection Agency required oil companies to stop putting lead in gasoline. At the same time, lead in paint was banned for any new home (though old buildings still have lead paint, which children can absorb). Tests have shown that the amount of lead in Americans' blood fell by four-fifths between 1975 and 1991. A 2007 study by the economist Jessica Wolpaw Reyes contended that the reduction in gasoline lead produced more than half of the decline in violent crime during the 1990s in the U.S. and might bring about greater declines in the future. Another economist, Rick Nevin, has made the same argument for other nations.