March 2009
49 posts
“New research from the McKinsey Global Institute shows that the economic impact...”
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The economic impact of increased US savings - The McKinsey Quarterly - The economic impact of increased US savings - Economic Studies - Country Reports
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Bayes Rules
I am a believer in the power of simple Bayesian statistics as a way to model the complexity of the world.
In the past two days I read two very interesting papers on the application of Bayes theorem to the semantic web and machine translation at The Unreasonable Effectivenes of Data and Introduction to Statistical Machine Translation.
Finally, here is Paul Graham’s original essay on a...
“In other words, the world may be asked to transition from an American to a...”
– Harold James - Is China the New America?
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Simon Johnson Said It
Former IMF Chief Economist and MIT Sloan Professor Simon Johnson has an excellent followup on his “oligarchs” theory and nationalization on The Quiet Coup - The Atlantic
(May 2009).
It is a long but worth to the last word read. [Spoiler Warning] A quote from the last paragraph is below, where someone finally said it:
The conventional wisdom among the elite is still that the current...
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“In less competitive markets, firms earn excessive profits and restrict both...”
– RGE - Improving the performance of Italy’s labor market
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Government Bonds Auctions Can Fail. And They Just...
It had to happen sooner or later. It happened in the UK.
Via The Telegraph:
The UK Debt Management Office (DMO) attracted just £1.67bn in bids for its sale of £1.75bn of 2049 gilts this morning, its first uncovered auction of conventional gilts since 1995.
The cover of just 0.93 times is believed to be the lowest in history and far worse than the 0.99 times in 1995. The average cover of the...
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Blurring Roles Of Corporate Stakeholders
I believe that the current financial crisis is much deeper than people would like to think. From a macroeconomic perspective, the era of ease of credit and global expansion that started in 1971, when President Nixon unilaterally stopped the convertibility of dollars into gold, may have come to an end.
From a microeconomic perspective, organization of corporations based on the distinction between...
“I believe that banking institutions are more dangerous to our liberties than...”
– Scenes from the recession - The Big Picture - Boston.com (via mdv)
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A Trillion A Day
US Treasury Secretary Tim Geithner released his
Public Private Partnership Investment Program.
It seems like private investors can borrow from the government, invest a little equity and buy “toxic assets”. Would you invest $6 to buy $100 of face value of asset-backed loans? I certainly would. And so would Pimco manager Bill Gross.
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What Are Central Banks Doing?
James Saft sheds some light on the current state of the securitization world: The state-sponsored shadow banking system.
Banks now lend money to homebuyers, businesses and consumers, turn those loans into securities, park the security with a friendly central bank and get cash back, thus allowing them to effectively take on more risk and continue lending despite balance sheet pressure.
I am...
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How Much Is A Trillion Dollar?
Yesterday the Fed announced that they are going to print an additional $1.15 trillion, divided up as follows:
$750 billion to purchase agency mortgage-backed securities
$100 billion to purchase agency debt
$300 billion to purchase longer-term Treasury securities
But just how much is a trillion dollar?
To put that amount of paper dollars in perspective, $1.15 trillion is roughly equal to:
...
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Data Methods & Health
This is a hint to the possibilities: Google Flu Trends
Searches of flu are a more timely metrics than medical reports.
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“Financial innovation left transparency in the dust. Wall Street devoted much of...”
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Reality Bites - John Mauldin’s Outside the Box - InvestorsInsight Publishing
The Untold Story of the World's Biggest Diamond... →
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“Covering 1% of Continental U.S. with 20% efficient PV systems would provide all...”
– 1366 Technologies. Solar at the cost of Coal.
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“In the initial collapse of the Russian stock market from May to October last...”
– The Last Days of the Oligarchs? - NYTimes.com
“In my 35 years or so in business I’ve been through Nixon taking us off the...”
– Aviation Capital Group MD and CEO R. Stephen Hannahs
System Dynamics Applied To Housing Crisis
Some more scary figures on the real estate downturn:
19 million apartments or houses, or one in seven, are vacant across the US
Out of 19 million, 6 million are up for sale or rent
One in nine mortgages is delinquent or in foreclosure
Let me apply some system dynamics methodology to understanding the real estate market, in terms of stocks (or the inventory of houses available for sale) and...
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Wolfram's Cellular Automata
Reading an interesting article on the coming computational search engine by Wolfram Research (the authors of the Mathematica software package): Wolfram Alpha is Coming — and It Could be as Important as Google.
The fact that natural intelligence itself is based on interaction between massive amounts of simple units (100 billion of neurons in the human brain), makes me think that parallelism...
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The Biggest Ponzi Scheme Of All
That is not Madoff. It is the pension system. And people are starting to find out.
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An Austrian Explanation To The Credit Crisis
The so-called Austrian School of Economics came up in the early 20th century with an interesting theory on boom and busts driven by savings glut, fiat money and central banks expansionary monetary policies. If it sounds familiar, it’s because we are going through that right now …
Read Austrian Business Cycle Theory and you will be amazed.
The boom-bust cycle of generalised...
“What is needed for a sound expansion of production is additional capital goods,...”
– Ludwig von Mises (1949)
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On Time
Now, this is fascinating. The missing link between quantum physics and general relativity that might lead to a holistic theory of the universe is that time is not an independent variable but a statistical measurement of micro phenomena. Just like temperature is the observable effect of kinetic energy of atoms. That blows my mind.
That Rovelli’s approach [Carlo Rovelli is the scientist that...
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5-Fold Decrease In Capital Flows To Emerging...
Just read some astonishing figures from the RGE Monitor newsletter:
The Institute of International Finance (IIF) estimates that net private sector capital flows to Emerging Markets in 2009 will be $165bn in 2009, less than half the 2008 inflow of $466bn and $929bn in 2007. The decline in capital flows is equivalent to about 6% of the combined GDP of EMs, way larger than the 3.5% of GDP during...
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A Run On The Insurance
There has been a lot of talk and a few actual instances of “run on banks”. It seems that the spectre of a run on insurance is even scarier and was enough to convince the US government to do whatever it takes to save AIG from bankruptcy. From a confidential 21-page document making the rounds in Washington:
“A ‘run on the bank’ in the life and retirement business would have sweeping...
“AIG exploited a huge gap in the regulatory system, there was no oversight of the...”
– Ben Bernanke
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“In the fourth quarter, A.I.G. said it lost $61.7 billion. That amounts to...”
– $465,421 Per Minute - Floyd Norris Blog - NYTimes.com
“As of the 2000 census, the Los Angeles region’s urbanized area had the highest...”
– Los Angeles Transportation Facts and Fiction: Sprawl - Freakonomics Blog - NYTimes.com
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Trillions
I like all-encompassing figures:
World GDP: $50 trillion per year
Cigarettes smoked worldwide in a year: 5.5 trillion
SMS sent globally in 2008: 2 trillion
Total Cost of Iraqi War: $3 trillion
Amount that Americans owe on their homes: $11 trillion
US Government liabilities incurred in 2008-2009 financial meltdown: $4.6 trillion
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More On Textbooks, Universities and Open Education
The day after Amazon released its self-publishing platform, I found an interesting article on University 2.0, based on open source course materials and textbooks: Connexions: An Open Source Initiative to Kill Textbooks | College Mogul.
From 1088 when the first university was founded (in my home town Bologna, Italy …) to about 50 years ago, only noble or rich people could go to university....
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Amazon Launches Self-Publishing Site
Finally Amazon did what everyone expected: they launched a self-publishing platform where authors can just upload their e-books and tap into the kindle provisioning platform.
I think we are getting closer to the tipping point between paper and e-ink screens. Amazon seems very well positioned to lead the change as Apple did for music. The biggest market to attack is the university textbook market,...
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On Personal Branding
I’ve been reading more and more Seth Godin’s blog, it’s probably one of my favorites now. He recently wrote about an issue that I’ve been thinking about a lot recently: Personal branding in the age of Google.
Everything we do online is on record and is easily searchable. I’m always surprised by how some people became very comfortable with sharing online things that...
Bubblegeneration Strategy Lab →
WatchEvan Williams on Twitter at TED
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I Read Berkshire's Letter to Shareholders So You...
Warren Buffet wrote the usual letter to shareholders (pdf).
Here are some quotes:
On “Cash is king” mantra:
In God we trust. All others pay cash.
On having excess liquidity to survive through crises:
We never want to count on the kindness of strangers in order to meet tomorrow’s obligations
On General RE winding down its derivatives business:
Upon leaving, our feelings...