Understanding the Meltdown

The more you read about CDOs, synthetic CDOs, Credit Default Swaps, Tranches, and the absurd lack of reality on the part of our financial elite, the more you wonder just how dangerous it is to leave our lives in the hands of the elite.

I’m a big fan of the movie “Idiocracy,” where the premise is that it is the dumbest who will procreate and supplant the intelligent. (the movie is better viewed as critique of the institutions entrusted with transmitting our culture than it is a Darwinist Future).

The amazing thing is that a nation run by Sarah Palins and Joe-the-Plumbers (perceived as dumb, when in fact they are merely people who haven’t had their common sense ‘edu-ma-cated’ out of them) could scarcely do worse than the “big brains” from Haaaavaaad and Goldman Sachs that destroyed our banking system and economy.

For proof of what I mean, please read the article linked below. My middle class radio audience in Waukegan saw this coming in early 2006, but the top 5% of the top 5%, blinded by an equation that a 8th grader could poke holes in, couldn’t figure it out.

Recipe for Disaster: The Formula That Killed Wall Street

For five years, Li’s formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels.

It was a brilliant simplification of an intractable problem. [Bruno's comment - sort of like the simplistic nonsense of "single payer...but I digress] And Li didn’t just radically dumb down the difficulty of working out correlations; he decided not to even bother trying to map and calculate all the nearly infinite relationships between the various loans that made up a pool. What happens when the number of pool members increases or when you mix negative correlations with positive ones? Never mind all that, he said. The only thing that matters is the final correlation number—one clean, simple, all-sufficient figure that sums up everything.

Forget that the sum is horribly wrong…

“Everyone was pinning their hopes on house prices continuing to rise,” says Kai Gilkes of the credit research firm CreditSights, who spent 10 years working at ratings agencies. “When they stopped rising, pretty much everyone was caught on the wrong side, because the sensitivity to house prices was huge. And there was just no getting around it. Why didn’t rating agencies build in some cushion for this sensitivity to a house-price-depreciation scenario? Because if they had, they would have never rated a single mortgage-backed CDO.”

Proving my point that “rating agencies” full of MBAs aren’t as smart as angry white males in Waukegan?

I would strongly suggest you read the entire linked article. It really explains the meltdown, both mathematically and sociologically.

The essential unseriousness of the ideological left

On its own, the story below is just another silly story about a silly bill by silly people who gravitate toward politics because they are too dumb to work in the private sector.

In the context of all the problems facing our culture right now, we can see the utter intellectual and moral vacuity of those who promoted and passed this bill.

Bill to Restrict Shipment of Primates Passes

The House passed legislation Tuesday that would prohibit the interstate shipment of pet monkeys and other primates, over Republican complaints that the bill is a waste of time.

The bill (HR 80) passed by a vote of 323-95. The House took it up a week after a Connecticut woman was mauled by a chimpanzee kept as a pet. The bill would amend the Lacey Act Amendments of 1981 (PL 97-79) to ban the interstate sale or transport of non-human primates for use as pets.

There are about 15,000 pet primates in the United States. Twenty states ban ownership of such pets, but it is still easy to purchase monkeys and other primates from another state or over the Internet. The bill would make it easier to enforce state prohibitions, and may encourage additional states to prohibit primate ownership.

“It is an important signal for state legislatures around the country to provide protection,” said Rep. Earl Blumenauer , D-Ore., the bill’s sponsor.

A similar measure passed the House last year, but Sen. Tom Coburn , R-Okla., raised procedural hurdles to block it in the Senate.

House Republicans objected that the bill would waste resources at the U.S. Fish and Wildlife Service. They said the issue is best handled at the state level.

“At a time when we are suffering economic pain, I find it somewhat incomprehensible that we are debating an issue that clearly falls under state fish and wildlife agencies,” said Rep. Rob Bishop , R-Utah.

Of course, these same group of idiots who want to ban the transport of chimps across state lines tend to see nothing wrong with transporting humans across state lines to abort babies. They generally are of the same ilk.

Union Hijinx in District 15

If you know some one in Palatine district 215, forward this video to them.

And your I-Pod doesn’t strike or demand unwarranted pensions

With entire states careening toward bankruptcy because of teacher, administrator, and other public payroll and pension spending, there will never be a better time for technology to decimate the unwarranted numbers of “education” employees.

Cheaper and better.

‘iTunes university’ better than the real thing

Students have been handed another excuse to skip class from an unusual quarter. New psychological research suggests that university students who download a podcast lecture achieve substantially higher exam results than those who attend the lecture in person.

Podcasted lectures offer students the chance to replay difficult parts of a lecture and therefore take better notes, says Dani McKinney, a psychologist at the State University of New York in Fredonia, who led the study.

“It isn’t so much that you have a podcast, it’s what you do with it,” she says.

To find out how much students really can learn from podcast lectures alone – mimicking a missed class – McKinney’s team presented 64 students with a single lecture on visual perception, from an introductory psychology course.

Half of the students attended the class in person and received a printout of the slides from the lecture. The other 32 downloaded a podcast that included audio from the same lecture synchronised with video of the slides. These students also received a printed handout of the material.

The researchers told the students they would be tested on the material in a week, and they also asked students to hold onto their class notes.

Though her team’s paper is subtitled “Can podcasts replace Professors,” McKinney thinks these technologies can buttress traditional lectures, particularly for a generation that has grown up with the Internet.

“I do think it’s a tool. I think that these kids are programmed differently than kids 20 years ago,” she says.

If you shed your “be true to your school” dogma, you can see 1000s of places where technology can replace the bloat and bureaucracy of our education system. Sure, there will always be a place for a talented conveyor of content (which is all a teacher or professor really is). Let’s dump the ones we don’t need.

More and more people are coming around…

Illinois doesn’t have the insane income tax of California, but our low income tax is all that separates Illinois from the oblivion of California, New York, or the other soon-to-be ungovernable “social democracies” eating away at America.

While I despise the insane packages of isolated corporate chieftains who drive their companies into bankruptcy as much as I despise the CEOs getting bailouts that mark the worst policy decisions in history, I must say that it is the greed and mendacity of public employees that are doing the most damage to the national fabric.

More and more people are starting to see that. It is time to start sounding the call, and to drastically cut budgets for public payroll. Tell them they can take low pay and secure pensions, or pay that equals the private sector, but only with defined contributions for their retirement.

They never deserved both, and their greed is killing us.

Death of the Dream
California has come back before, but ‘hysterical greens’ aren’t helping.

To many longtime California observers, the inability of the political, business and academic elites to adequately anticipate and address the state’s persistent problems has been a source of consternation and wonderment. In my view, the key to understanding California’s precipitous decline transcends terms like liberal or conservative, Democratic and Republican. The real culprit lies in the politics of narcissism.

Lest you think California is the only state suffering from narcissism, note that Obama, Blagojevich and Burris are all narcissists of one stripe or another, and you all elected them.

California, like any gorgeously endowed person, has a natural inclination toward self-absorption. It has always been a place of unsurpassed splendor; it has inspired and attracted writers, artists, dreamers, savants and philosophers. That’s especially true of the Bay Area—ground zero for California narcissism and arguably the most attractive urban expanse on the continent; Neil Morgan in 1960 described San Francisco as “the narcissus of the West,” a place whose fundamental asset was first its own beauty, followed by its own culture of self-regard.

Today the politics of narcissism is most evident among “progressives.” Although the Republicans can still block massive tax increases, the predominant force in California politics lies with two groups—the gentry liberals and the public sector. The public-sector unions, once relatively poorly paid, now enjoy wages and benefits unavailable to most middle-class Californians, and do so with little regard to the fiscal and overall economic impact. Currently barely 3 percent of the state budget goes to building roads or water systems, compared with nearly 20 percent in the Pat Brown era; instead we’re funding gilt-edged pensions and lifetime guaranteed health care. It’s often a case of I’m all right, Jack—and the hell with everyone else.

I’ve been way ahead of the curve on this, but as I’ve stated 1000 times, you can’t fund a child’s education when you are funding bloated teacher and administrative payroll, pork, pensions and perks. It is time for some one (anyone) to start the ball rolling, and call these groups out as the greedy and narcissistic parasites that they are.

As the air deflates from the Obama balloon, we will have an excellent opportunity for some one to direct the national mood toward the real culprits responsible for our financial decline.

Avoiding pain a stronger motivator than achieving pleasure

There is a long and growing body of evidence that explains a large chunk of human behavior. We tend to measure ourselves against others, and we tend to feel worst when our position drops relative to others. This explains much of the doom and gloom we feel these days.

The article below starts with the obvious – that money can’t buy us happiness – but contains some nuggets that explain some more important concepts.

Wealth does not always add up to happinessHat tip to Bros. Judd

It’s true. Researchers have found that, once people can meet basic needs, psychological dividends from additional money steadily decrease. Making $100,000 does not make you twice as happy as making $50,000.

So why does losing money, and the prospect of losing money, make us so miserable?

The short answer is that it doesn’t have to. If you think about money in the context of what economics says about true fulfillment, having less of it shouldn’t be quite so painful.

Tell that to the Union Thugs who, at a time where entire states are going bankrupt due to their greed, refuse to even entertain cuts in their obscene pay and pension benefits. But I digress…

Wrapped up in the above little nugget of extreme wisdom, is the explanation of why most people will fight harder to avoid pain than to achieve pleasure. It is one of the reasons angry people stay angry, fat people tend to stay fat, and ignorant people tend to stay ignorant. It is also the reason we all clamor for “reform” to our friends, but elect the same corrupt hacks every election. (Yes Virgina, Obama is just as – or more – venal and corrupt as Bush, he just doles out goodies to different friends.)

The effort at actually changing is far more difficult/painful than most are willing to undertake. On the other hand, even though the benefits of “change” are great (ask any person who has permanently achieved weight loss), they are too distant for most to make the necessary effort.

An object in motion tends to remain in motion, and an object at rest tends to remain in bed.

It is possible to lead a full, meaningful, contented life without a Cadillac Escalade in the driveway or a second home in Aruba.

We knew this, of course. Jesus, Buddha, and others told us. We always forget it in the fat years and begin remembering when the rouge rubs off and the vanities go up in flames.

But now science proves it, more or less. A growing body of research suggests that money, if not the root of evil, is not the fount of satisfaction, either. And many of our feelings about money and financial loss are flat-out irrational.

More recent investigation has found that the negative emotions that investors feel when losing money are more intense than their pleasure when gaining an equal amount.

Neither of which is rational. Your neighbor’s lifestyle, no matter how luxurious, has zero material effect on you. If you weren’t over the moon when the 401(k) went up $50,000, maybe you should not need therapy when it crashes by the same amount.

I keep trying to tell y’all that humans are NOT rational beings, but rationalizing beings. We tend to wish for a result, or we seek a comfortable worldview, and once chosen, all data must conform to that view. It isn’t rational to ignore our good fortune when we have it, but lament the drop in our net worth when it drops, but we do it anyway. To reverse this pathology – and yes, I DO see the people in the scenario below as bordering on mentally ill – the first thing we need to do is become conscious of it, and then reject it.

Last month, the New York Times illustrated the tendency to focus on relative wealth. Reporter Peg Tyre profiled a couple in Darien, Conn.

The husband lost a Wall Street job. The family economized by replacing a full-time nanny with an au pair and taking less-expensive vacations. They still resided in an upscale town, belonged to the country club, had paid off their mortgage, and had saved money for the children’s college.

Even accounting for setbacks, they lived better than 99 percent of everybody who ever existed. Yet they were stressed and worried.

In the grand scheme, money is less important than other assets anyway, happiness experts say. In the long run, friendship, marriage, education, sex, group memberships, and exercise all promote happiness in ways that mere income and consumption cannot.

Well Duh! So why are we, or, why have we become so materialistic? So focused on our “standing” relative to others? I blame much of it on the libertarian right’s and the Marxist Left’s insane focus on measuring human value in terms of material wealth. A good friend of mine says “Hey, money is just a way of keeping score.”

I’d argue that it is a lousy way of keeping score – stupid at best, evil at worst. I’m just as interested as the next guy in not having to worry about food, housing and heat. I also wouldn’t mind the lifestyle that allows me to travel where I want when I want to, or have access to the coolest toys. But I’m not so stupid as to feel bad about myself because I haven’t destroyed my mental and physical health chasing money.

More from this great book.

Life is difficult. This is a great truth, one of the greatest truths. It is a great truth because once we truly see this truth, we transcend it. Once we truly know that life is difficult–once we truly understand and accept it–then life is no longer difficult. Because once it is accepted, the fact that life is difficult no longer matters.

Everything going wrong in our economy and culture right now, from fake easy loans, collapsing asset values, our obscenely expensive yet under-performing public schools, as well as private sector and public union greed, and even obesity- all of it – can be laid on the doorstep of a people who believe that “life should be easy.”

All the pharmaceuticals, bailouts, stimulus packages, or forced mortgage renegotiations in the world will not cheat that reality. The sooner we realize this, and stop “avoiding pain”, the sooner we will again be able to achieve the pleasure of a more just society.

Obushma VII

Obama administration tries to kill e-mail case (PETE YOST, 2/21/09, Associated Press)

The Obama administration, siding with former President George W. Bush, is trying to kill a lawsuit that seeks to recover what could be millions of missing White House e-mails.

Two advocacy groups suing the Executive Office of the President say that large amounts of White House e-mail documenting Bush’s eight years in office may still be missing, and that the government must undertake an extensive recovery effort. They expressed disappointment that Obama’s Justice Department is continuing the Bush administration’s bid to get the lawsuits dismissed.

Obama Widens Missile Strikes Inside Pakistan (MARK MAZZETTI and DAVID E. SANGER, February 20, 2009 , NY Times)

The missile strikes on training camps run by Baitullah Mehsud represent a broadening of the American campaign inside Pakistan, which has been largely carried out by drone aircraft. Under President Bush, the United States frequently attacked militants from Al Qaeda and the Taliban involved in cross-border attacks into Afghanistan, but had stopped short of raids aimed at Mr. Mehsud and his followers, who have played less of a direct role in attacks on American troops.

The strikes are another sign that President Obama is continuing, and in some cases extending, Bush administration policy in using American spy agencies against terrorism suspects in Pakistan, as he had promised to do during his presidential campaign.

Critique of Obama’s weekly address

All stimulus all the time. Ohhh! Barack!! Stimulate Me!!

Remember that you can get this on I-tunes, or download past podcasts by going to the feed on the right side of the page.

MP3 File

You can’t stimulate and shut down the economy at the same time

Ahh, the collapse of the “Anthropic Global Warmists.” It’s going to be fun to watch.

War Over The Climate Heats Up Even As Climate Itself Cools Down

Get ready for a three-ring circus. In one corner you find those concerned with the recovery of the economy, in the second corner those concerned about threats to national security and in the third corner global warmers who agonize about catastrophic climate change.

The battle between these three factions will revolve about the use of energy and will play out in the White House and in Congress, but also in the public arena:

• Obama’s economic advisers at Treasury and the Budget Office will try to delay any major climate policies that could adversely impact economic recovery.

• The National Security Council and Defense Department, and to a lesser extent the State Department, will be concerned with maintaining a strong U.S. economy to be able to act forcefully when foreign problems arise.

• The global warmers will be led by energy-climate czarina Carol Browner, EPA chief during the Clinton years, and by science adviser John Holdren, who testified that a billion people might die by 2020 unless greenhouse-gas emissions are sharply reduced.

Using all the powers of the Clean Air Act, the EPA may try to impose severe regulations on carbon dioxide, which they would like to label as a pollutant. If successful, it would bring economic activity to a halt.

The outcome of such internal battles is never certain. In Germany, the minister for industry has just stepped down because he opposed the drastic climate actions demanded by Chancellor Angela Merkel.

On the other hand, Australian Prime Minister Kevin Rudd has walked away from the commitments of his Labor Party to institute a “cap and trade” scheme.

David Brooks schools the ILL GOP on their incompetence

The Republican Party in Illinois, which I affectionately call the “ILL GOP”, is still run by the apparatchiks put in place by the likes of Edgar, Thompson and Hastert. These apparatchiks are now more interested in filling an ever expanding number of patronage positions (merely replacing Democrat with Republican apparatchiks) than they are in articulating a moral and just form of governance. This is why they have so utterly failed the Republican rank and file who so foolishly give them their votes.

I don’t agree with everything David Brooks writes (he’s a bit milquetoast for me), but he nails it here.

Q+A: David Brooks

As the Republican Party seeks to regain political control after the last election, some conservatives are calling for a new image.

“As Republicans sort out the reasons for their defeat, they likely will overlook or dismiss the gorilla in the pulpit,” Kathleen Parker wrote for The Washington Post. “To be more specific, the evangelical, right-wing, oogedy-boogedy branch of the GOP is what ails the erstwhile conservative party and will continue to afflict and marginalize its constituents if reckoning doesn’t soon cometh.”

Evangelicals make up about a quarter of the electorate, and about 62 percent of them identify themselves with the Republican Party. David Brooks spoke with Christianity Today in Wheaton, Illinois, about how evangelicals can change their image.

Do you see evangelicals as the core of the Republican Party or as weighing on the neck?

I see them as the core of the party. Just sheer numbers, politically, the party would be dead without evangelical voters, or without a lot of evangelical voters. But even more seriously, spiritually, … the moral core of the party is provided by social conservatives. Without that core, it would just be a party of tax cuts, and that wouldn’t be a very inspiring party. I think social conservatives will always be the core of the Republican Party.

Any political consultant in IL, or ILL GOP apparatchik, should be sued for malpractice (or laughed out their business) if they tell you anything other than the above bold text. The people who say “only a moderate can win” are, and always have been, wrong. This is not to say a ‘moderate’ can’t win, but that moderate had better have a pretty good relationship with the social conservatives. If he think he can win in IL absent their support (even if grudging), he doesn’t understand the party rank and file.

Can Christian conservatives repackage certain issues?

Life issues will always be center — life and death issues will always be central. I guess what I would think is the core issue — which is possible [issue] around which to build bridges — is the family, issues about family togetherness, reducing divorce rates, helping kids do missionary work or aid work in Africa. All that stuff should come from the core pro-life community to a broader community.

How does religion make a difference in the Republican Party, as opposed to just promoting conservative values?

Religion connects you to a set of moral principles that are more than just conserving the past or the free market. Americans like the free market, they like capitalism, but it’s not that inspiring. To really inspire people and inspire young people, you’ve got have a more serious moral mission. So I think social conservatives at their best provide that. As long as it’s not a social conservatism that is about how sinful everybody else is.

I agree with Brooks that there ways for social conservatives to moderate and improve their message, but there is nothing wrong with people standing on their principles if they are good at articulating them.