Prologue
The grade I'd give a US President isn't fixed over time.
A good example is actually the first Bush Administration: six months in I gave him a D, which I thought to be a well-established and potentially stable mark. The policies were dumb and wrong-headed, but at least he hadn't gotten us into a war yet.
His grade probably would've peaked at a C- about nine months later, after he recovered from the jolt on September 11 with the relatively successful war by proxy in Afghanistan and before his folks' ambitions for aggression in Iraq were nakedly revealed. It's an F, of course, from then on, until such point as we kick him out of the classroom when it becomes apparent the Iraq whole thing was planned to be a stage-managed photo op to make him look good in his re-election campaign.
Botched, like everything else, Bushite Misrule showed that two negatives--bad policies, badly executed--don't make a positive. Just chaos.
Still, Obama represents such a pivot toward the light that the range of grades I'd consider would only go from A+ to C. I think a solid B is tough but fair, as I'll explain over the three critical dimensions: economic, diplomatic, and political.
Wednesday, March 04, 2009
Tuesday, March 03, 2009
Obama 1st 6-weeks' period Grade: B
Part I
It's stupid, the economy.
I continue to be amazed that nobody is connecting the dots on the purchases of toxic assets and figuring out where the bottom is--we're headed straight for it at ninety miles an hour.
I believe that our National Buggy has passed the inflection point: the angle of descent into the Great Crater has passed its maximum. Soon we will be on the long, gentle slope that leads into the depressed plain, and drag will cause our velocity to slow down--the real-life economic manifestation of this physical analogy will be a reduction in volatility of markets, and this will signal an end to the hysterical tone, which is the all-important first step towards regaining our balance. Right now we're just riding in the cart, taking the bumps which are coming at us too fast to dodge.
The sad flatline zone of the plain at the bottom of the Crater has to be traversed, and it ideally should be crossed directly opposite to the orientation we came down upon. If we try shortcuts off to the side, we will run up partway and slide or roll back down--this is what happened in the '30's. I will grade performance by how well Obama finds the right answers from the outset and sticks to them, not how well he improvises when he goes astray.
Obama described the path he wants to take across, which means the path out of here, as being based upon initiatives in energy, health care, and education which will transform the core of the country's economy. Are they the right ones? I'd say yes. Course corrections will be required, no doubt, but we've got the right azimuth, in general terms.
Beyond that, I don't know what anyone can expect. One thing we don't know is how far across the moonscape-like plain it will be. I say that, then rashly predict: I think the timing will be such that a nascent recovery will not be evident by the 2010 midterm elections, even with the course being maintained properly.
This will translate into a tough, but not impossible, fight to hold onto the safe margins the Democrats enjoy in both Houses of Congress. I would say the midpoint of expectations would be the loss of 20-30 seats by the Democrats in the House, which will keep them in the majority, but less securely. I think the Senate will stay more or less the same in 2010, regardless, and thus Obama will retain a Congress sufficiently compliant to complete his first-term program.
The rest, as they say, will become history.
It's stupid, the economy.
I continue to be amazed that nobody is connecting the dots on the purchases of toxic assets and figuring out where the bottom is--we're headed straight for it at ninety miles an hour.
I believe that our National Buggy has passed the inflection point: the angle of descent into the Great Crater has passed its maximum. Soon we will be on the long, gentle slope that leads into the depressed plain, and drag will cause our velocity to slow down--the real-life economic manifestation of this physical analogy will be a reduction in volatility of markets, and this will signal an end to the hysterical tone, which is the all-important first step towards regaining our balance. Right now we're just riding in the cart, taking the bumps which are coming at us too fast to dodge.
The sad flatline zone of the plain at the bottom of the Crater has to be traversed, and it ideally should be crossed directly opposite to the orientation we came down upon. If we try shortcuts off to the side, we will run up partway and slide or roll back down--this is what happened in the '30's. I will grade performance by how well Obama finds the right answers from the outset and sticks to them, not how well he improvises when he goes astray.
Obama described the path he wants to take across, which means the path out of here, as being based upon initiatives in energy, health care, and education which will transform the core of the country's economy. Are they the right ones? I'd say yes. Course corrections will be required, no doubt, but we've got the right azimuth, in general terms.
Beyond that, I don't know what anyone can expect. One thing we don't know is how far across the moonscape-like plain it will be. I say that, then rashly predict: I think the timing will be such that a nascent recovery will not be evident by the 2010 midterm elections, even with the course being maintained properly.
This will translate into a tough, but not impossible, fight to hold onto the safe margins the Democrats enjoy in both Houses of Congress. I would say the midpoint of expectations would be the loss of 20-30 seats by the Democrats in the House, which will keep them in the majority, but less securely. I think the Senate will stay more or less the same in 2010, regardless, and thus Obama will retain a Congress sufficiently compliant to complete his first-term program.
The rest, as they say, will become history.
Obama 1st 6-weeks' period Grade: B
Part II
Foreign policy is central to my grading of the performance of a Presidency of the US. It includes military policy (just ask Clausewitz), which is equally vital and equally controllable from the White House. In this regard F.P. is unlike economic policy (the outcome of which is normally not controllable, just as we are seeing) or, say, sports boosterism (a traditional Presidential activity, of little importance--I saw Daddy O caught the Bulls when they came to visit in DC the other day).
Obama, Hillary, and the key envoys Mitchell and Holbrooke have yet to make a big mark diplomatically of any kind. But it's only been 40 days!
I see vision behind the mundane diplomatic developments viewed so far.
The biggest news was Susan Rice's statement at the U.N. that the U.S. was not going to put up with failed states taking out their sickness on their citizens any more, but that we are going to take this up in the U.N. itself. This suggests a major Charter revision, and I hail that intention.
I believe that the Obama Administration has correctly identified Russia as the key dance partner in these early months' diplomacy. The Kremlin has so much leverage toward our success with Iran, with China, North Korea, Pakistan.
As an example, the US needs a redundantly-secure supply line toward its theater in South Asia (the existing primary one being through Kuwait), in other words a second safe staging area near the region, and I don't think Turkey is going to provide it in the short run. It won't run through Russia's sacred soil itself, but it will cross their sphere of influence at some point or it won't exist. Meaning, they will have to tolerate any new basing we develop as we leave Iraq. That needs to get worked out.
I even see some relevance to the urgently rising problem in Eastern Europe. The Eastern European nations have made the mistake of looking entirely to the near neighbors to the West, which have scorned them in their hour of crisis. I wouldn't mistake Russia for a benign financial influence, but an American initiative which fortifies the financial system for both Russia and the Eastern European nations, including basket cases like the Ukraine, will promote the general global welfare and lower tensions.
In the US' Second Front of diplomacy, the Middle East, Mitchell and Co. have no choice but to wait for the Israeli dust to settle--both from the Gaza incursion and the parliamentary elections. So they correctly build up relationships with all parties.
One hopes that includes the Israeli Arabs, the key group required for a successful peaceful resolution in Palestine; I believe their voice may, one day soon, become the means for the extra-Israeli Palestinians to develop consensus policies. If and when Netanyahu gets the P.M. job and then fails to make progress, there may be an opportunity for a Center-Left government of Kadima/Labor/Arabs-plus a few to create a major diplomatic opening. Of course we have to let the Israelis reach this in their own time.
WOT is Dis?
I think so far the Obama formulation of War On Terror is to make it regional rather than global. Well, it least it's not GWOT no more! That's progress, but only of a certain kind.
I think the withdrawal targets in Iraq are fine, if Iraq validates the SOFA worked out in the latter days of Bushite Misrule. If things are cool over there with our planned rate of departure, we should be on the low side of estimates all the way and not sweat it too much. If they don't tolerate our withdrawal plan, there's going to be a sense of impending doom over the whole process which will no doubt be self-fulfilling. As for timing and numbers, I don't mind the extra three months, but I think Obama does owe an explanation of how the 5000 or so he campaigned upon became 35,000 or so.
As for Afghanistan/Pakistan, though, the critics are right: we need to see the other side of the buildup curve, and it needs to be a promise to the American people. Maybe the buildup--over 24 months, to 50,000 in both countries (half in active combat roles, half in training roles)--followed by a dotted line of indeterminate width (6-24 months) depending on how long it takes to get OBL&Co. onto the run again, then a promised reduction curve of appropriate steepness (roughly crossing the 2009 starting level at Election Day 2012), with a long, low tail of 5000 or so--not 35,000--and their primary role being to protect an international corps of aid engineers.
Foreign policy is central to my grading of the performance of a Presidency of the US. It includes military policy (just ask Clausewitz), which is equally vital and equally controllable from the White House. In this regard F.P. is unlike economic policy (the outcome of which is normally not controllable, just as we are seeing) or, say, sports boosterism (a traditional Presidential activity, of little importance--I saw Daddy O caught the Bulls when they came to visit in DC the other day).
Obama, Hillary, and the key envoys Mitchell and Holbrooke have yet to make a big mark diplomatically of any kind. But it's only been 40 days!
I see vision behind the mundane diplomatic developments viewed so far.
The biggest news was Susan Rice's statement at the U.N. that the U.S. was not going to put up with failed states taking out their sickness on their citizens any more, but that we are going to take this up in the U.N. itself. This suggests a major Charter revision, and I hail that intention.
I believe that the Obama Administration has correctly identified Russia as the key dance partner in these early months' diplomacy. The Kremlin has so much leverage toward our success with Iran, with China, North Korea, Pakistan.
As an example, the US needs a redundantly-secure supply line toward its theater in South Asia (the existing primary one being through Kuwait), in other words a second safe staging area near the region, and I don't think Turkey is going to provide it in the short run. It won't run through Russia's sacred soil itself, but it will cross their sphere of influence at some point or it won't exist. Meaning, they will have to tolerate any new basing we develop as we leave Iraq. That needs to get worked out.
I even see some relevance to the urgently rising problem in Eastern Europe. The Eastern European nations have made the mistake of looking entirely to the near neighbors to the West, which have scorned them in their hour of crisis. I wouldn't mistake Russia for a benign financial influence, but an American initiative which fortifies the financial system for both Russia and the Eastern European nations, including basket cases like the Ukraine, will promote the general global welfare and lower tensions.
In the US' Second Front of diplomacy, the Middle East, Mitchell and Co. have no choice but to wait for the Israeli dust to settle--both from the Gaza incursion and the parliamentary elections. So they correctly build up relationships with all parties.
One hopes that includes the Israeli Arabs, the key group required for a successful peaceful resolution in Palestine; I believe their voice may, one day soon, become the means for the extra-Israeli Palestinians to develop consensus policies. If and when Netanyahu gets the P.M. job and then fails to make progress, there may be an opportunity for a Center-Left government of Kadima/Labor/Arabs-plus a few to create a major diplomatic opening. Of course we have to let the Israelis reach this in their own time.
WOT is Dis?
I think so far the Obama formulation of War On Terror is to make it regional rather than global. Well, it least it's not GWOT no more! That's progress, but only of a certain kind.
I think the withdrawal targets in Iraq are fine, if Iraq validates the SOFA worked out in the latter days of Bushite Misrule. If things are cool over there with our planned rate of departure, we should be on the low side of estimates all the way and not sweat it too much. If they don't tolerate our withdrawal plan, there's going to be a sense of impending doom over the whole process which will no doubt be self-fulfilling. As for timing and numbers, I don't mind the extra three months, but I think Obama does owe an explanation of how the 5000 or so he campaigned upon became 35,000 or so.
As for Afghanistan/Pakistan, though, the critics are right: we need to see the other side of the buildup curve, and it needs to be a promise to the American people. Maybe the buildup--over 24 months, to 50,000 in both countries (half in active combat roles, half in training roles)--followed by a dotted line of indeterminate width (6-24 months) depending on how long it takes to get OBL&Co. onto the run again, then a promised reduction curve of appropriate steepness (roughly crossing the 2009 starting level at Election Day 2012), with a long, low tail of 5000 or so--not 35,000--and their primary role being to protect an international corps of aid engineers.
Obama 1st 6-weeks' period Grade: B
Part III
The Republicans are losing the political war, even if they're winning a couple of battles. A good example is this "omnibus spending bill larded with earmarks", which it is. It is also going to pass, and Obama is going to sign it. All of which infuriates John McCain, who was thinking specifically of this bill when he made all his threats about "You will know their names!" in the campaign.
McCain fulminated ineffectively in favor of his amendment to cut local earmarks:
Actually, I can probably justify most of that without even reading the specifics to which he referred: "pig odor research" would be a study dealing with the huge problem of handling the massive volume of excretions pig farming produces, and I guess they're thinking of a chemical treatment to neutralize it or make it useful; "astronomy in Hawaii" is a good way to save money vs. launching a new Hubble Space Telescope, worthy as that kind of initiative will be in a few years (when we've got a new manned launching platform worked out); accidentally-imported termites are creating nearly infinitely-large colonies causing a sci-fi-type national defense issue (with an ideal breeding ground in the abandoned districts of N'awlins); and, I'll let my entomologist sister argue this better some other time, but intelligent use of "natural" cross-breeding informed by superb knowledge of grape vine DNA sounds like a great way to build up resistance to mold and other pests, not to mention major potential gains in productivity, and thus, jobs in upstate New York.
So, yeah, I'd vote for those.
Your Mission, Barack, is to Atomize Them, Not Us
The Republicans seemed embarked on a no-win strategy with their opposition to stimulus spending: if Obama succeeds, they become history's dust; if he doesn't, we're all dead anyway.
They passed up an opportunity to come inside the tent, which is really the only way to have any influence over what happens in there. The three Senators who crossed over are the only Republicans who did their careers any good.
I would like to see a quicker descent for the budget deficits in the outer projected years (2013-2015) of the Obama Administration's new proposal. If this stuff is working, we should be back to budget deficits in the $200-400 billion range, or better. I don't doubt that it's a good idea to under-promise and over-deliver, but the quality represented in the proposed budget's out years isn't high enough to gain acceptability from anyone. It will get changed in the negotiations, and Obama will live with the revised targets.
The Republicans are losing the political war, even if they're winning a couple of battles. A good example is this "omnibus spending bill larded with earmarks", which it is. It is also going to pass, and Obama is going to sign it. All of which infuriates John McCain, who was thinking specifically of this bill when he made all his threats about "You will know their names!" in the campaign.
McCain fulminated ineffectively in favor of his amendment to cut local earmarks:
"How does anyone justify some of these earmarks: $1.7 million for pig odor research in Iowa; $2 million 'for the promotion of astronomy' in Hawaii; $6.6 million for termite research in New Orleans; $2.1 million for the Center for Grape Genetics in New York," he said.
Actually, I can probably justify most of that without even reading the specifics to which he referred: "pig odor research" would be a study dealing with the huge problem of handling the massive volume of excretions pig farming produces, and I guess they're thinking of a chemical treatment to neutralize it or make it useful; "astronomy in Hawaii" is a good way to save money vs. launching a new Hubble Space Telescope, worthy as that kind of initiative will be in a few years (when we've got a new manned launching platform worked out); accidentally-imported termites are creating nearly infinitely-large colonies causing a sci-fi-type national defense issue (with an ideal breeding ground in the abandoned districts of N'awlins); and, I'll let my entomologist sister argue this better some other time, but intelligent use of "natural" cross-breeding informed by superb knowledge of grape vine DNA sounds like a great way to build up resistance to mold and other pests, not to mention major potential gains in productivity, and thus, jobs in upstate New York.
So, yeah, I'd vote for those.
Your Mission, Barack, is to Atomize Them, Not Us
The Republicans seemed embarked on a no-win strategy with their opposition to stimulus spending: if Obama succeeds, they become history's dust; if he doesn't, we're all dead anyway.
They passed up an opportunity to come inside the tent, which is really the only way to have any influence over what happens in there. The three Senators who crossed over are the only Republicans who did their careers any good.
I would like to see a quicker descent for the budget deficits in the outer projected years (2013-2015) of the Obama Administration's new proposal. If this stuff is working, we should be back to budget deficits in the $200-400 billion range, or better. I don't doubt that it's a good idea to under-promise and over-deliver, but the quality represented in the proposed budget's out years isn't high enough to gain acceptability from anyone. It will get changed in the negotiations, and Obama will live with the revised targets.
Thursday, February 26, 2009
An Early Thaw
This post establishes the unreality of the blogging system; it's one I didn't post last month.
The correct title should be "A Late Snowfall"; that's what happened last week. Three days in a row in the 70's, though, has allowed me to move my ice melt and snowshovels to the back of the shed.
The correct title should be "A Late Snowfall"; that's what happened last week. Three days in a row in the 70's, though, has allowed me to move my ice melt and snowshovels to the back of the shed.
Friday, February 06, 2009
Carbon Tax
I've been thinking about the Big C.T. lately, as opposed to the cap-and-trade, or C&T, that Obama and others have proposed.
One statement that really struck me came from Al Gore, I believe. It was that Big CT could generate enough tax revenue to allow us to eliminate the payroll tax (Soc. Security and Medicare), and that change would generate millions of new jobs.
The last part--the new jobs that could come out of the economy's rally if payroll taxes for workers and employers were eliminated or cut sharply--sounds right to me, and an extremely relevant prescription for the current Great Crater, towards the bottom of which we are currently rolling at top speed.
I also think that Big CT could be a lot simpler to implement than C&T, which promises to be a grim vertical turf war for cap room through loopholes and other Mickey Mouse (think of NBA trades and the contortions taken on in order for teams to bid on LeBron in '10).
I've got two problems with Big CT, before I endorse it fully:
1) All this theoretical stuff sounds fine, but I've got to think we're talking about estimated carbon usage as the basis for both the Big CT and C&T systems. The weak link in this chain seems to be measurement of actual carbon usage. Consider, as a close analogy, the difference between "Estimated EPA mpg" and "what one gets". If the little gizmos that measure the carbon usage aren't in place, aren't sufficiently accurate or are somehow tricked, we let the cheaters take the advantage, with a possible cascade toward defeating the environmental objective. (possible investment tip--find the gizmo makers and buy them?)
2) If we eliminated the payroll tax and then--heaven forbid!--we succeed in reducing our carbon usage, then how are we going to pay for Social Security and Medicare? Better not eliminate the mechanism, ever. It would still be significant to cut the rates (!) by 20-25%, phasing in Big CT sooner rather than later, but keeping Big CT rates relatively low in the initial stages to control inflation. I actually like this approach better than the tax rate cuts proposed in the stimulus plan, though I know those are pretty close to a core Obama position.
One statement that really struck me came from Al Gore, I believe. It was that Big CT could generate enough tax revenue to allow us to eliminate the payroll tax (Soc. Security and Medicare), and that change would generate millions of new jobs.
The last part--the new jobs that could come out of the economy's rally if payroll taxes for workers and employers were eliminated or cut sharply--sounds right to me, and an extremely relevant prescription for the current Great Crater, towards the bottom of which we are currently rolling at top speed.
I also think that Big CT could be a lot simpler to implement than C&T, which promises to be a grim vertical turf war for cap room through loopholes and other Mickey Mouse (think of NBA trades and the contortions taken on in order for teams to bid on LeBron in '10).
I've got two problems with Big CT, before I endorse it fully:
1) All this theoretical stuff sounds fine, but I've got to think we're talking about estimated carbon usage as the basis for both the Big CT and C&T systems. The weak link in this chain seems to be measurement of actual carbon usage. Consider, as a close analogy, the difference between "Estimated EPA mpg" and "what one gets". If the little gizmos that measure the carbon usage aren't in place, aren't sufficiently accurate or are somehow tricked, we let the cheaters take the advantage, with a possible cascade toward defeating the environmental objective. (possible investment tip--find the gizmo makers and buy them?)
2) If we eliminated the payroll tax and then--heaven forbid!--we succeed in reducing our carbon usage, then how are we going to pay for Social Security and Medicare? Better not eliminate the mechanism, ever. It would still be significant to cut the rates (!) by 20-25%, phasing in Big CT sooner rather than later, but keeping Big CT rates relatively low in the initial stages to control inflation. I actually like this approach better than the tax rate cuts proposed in the stimulus plan, though I know those are pretty close to a core Obama position.
Wednesday, February 04, 2009
Good Sports
If you watched the Australian Open men's finals, you saw a great match: Nadal vs. Federer, first time ever matched up Down Under. A battle all the way, until Nadal broke Roger's serve midway through the final set.
If you saw the post-match ceremony, Roger cracked up and cried. Quite a lot, actually. One could excuse it as being the emotion of the moment, but I think there was something really for him to mourn. I think that match finally convinced him that he was really #2. Not that #1 ranking is gone for good, necessarily, but that it is not a fluke and Rafael is really ahead of him for now. Nadal was gracious and kind to Federer, who has always been a champion of the first order.
As for the Super Bowl, it wasn't quite as Stupor Bowl as usual. XLIII was one of only about VIII that were really contested (something like XV-XX PC).
The finish was dramatic, after the record-setting comeback of the Cardinals highlighted by Fitzgerald's brilliant catch and run for the lead. What surprised me most was that the incredible play in which LB Harrison of the Steelers ran back an interception 100 yards just at halftime, falling into the endzone as time ran out, did not settle--could not be argued to have settled--the game's outcome. Normally, a big break like that, worth at least 10 points in a tight game, would push the Super Bowl Teeter-Totter of Destiny over to one side for good.
Salutes to both QB in particular. Roethlisberger and Kurt Warner should both be destined for football's HOF, even though Roethl. may have a short career, and Warner's is checkered. Football is a little more forgiving than baseball of those who didn't rack up huge career stats and recognizing of brilliance over a period of, say, a dozen years.
If you saw the post-match ceremony, Roger cracked up and cried. Quite a lot, actually. One could excuse it as being the emotion of the moment, but I think there was something really for him to mourn. I think that match finally convinced him that he was really #2. Not that #1 ranking is gone for good, necessarily, but that it is not a fluke and Rafael is really ahead of him for now. Nadal was gracious and kind to Federer, who has always been a champion of the first order.
As for the Super Bowl, it wasn't quite as Stupor Bowl as usual. XLIII was one of only about VIII that were really contested (something like XV-XX PC).
The finish was dramatic, after the record-setting comeback of the Cardinals highlighted by Fitzgerald's brilliant catch and run for the lead. What surprised me most was that the incredible play in which LB Harrison of the Steelers ran back an interception 100 yards just at halftime, falling into the endzone as time ran out, did not settle--could not be argued to have settled--the game's outcome. Normally, a big break like that, worth at least 10 points in a tight game, would push the Super Bowl Teeter-Totter of Destiny over to one side for good.
Salutes to both QB in particular. Roethlisberger and Kurt Warner should both be destined for football's HOF, even though Roethl. may have a short career, and Warner's is checkered. Football is a little more forgiving than baseball of those who didn't rack up huge career stats and recognizing of brilliance over a period of, say, a dozen years.
Sunday, February 01, 2009
Whatsa Matter with this Crisis, Already?
The proposed stimulus bill and the financial industry interventions are remarkable commitments toward recovery, but the feeling out here remains that there is still more new pain to be felt.
At the heart of that uneasy feeling* is the continuing uncertainty about the devaluations of mortgage- and mortgage-related assets--there has been a substantial writedown, but is it enough? We still hear people saying, "no one has any idea how big this may be".
We also hear people saying, "the problem of transparency is that it would reveal just how large the hole is, and we can't fill it". This statement is almost certainly wrong, though knowing the exact location of all the skeletons would modify the cemetery's size for many a deserving institution. The fact that "no one knows", though, means that people can say that sort of thing without being contradicted, which prolongs the lives of such Unconventional Unwisdom.
It's time to plumb that hole and find out how deep is the bottomless pit, and I'm considering offering to do so for the U.S. Treasury. Time to put myself back in the cave, to see if I can find the light so I can show it to them all.
The Learning Process Has Begun, Though
I explain the bad feeling to the simple requirement of time to adjust to a new reality in America. If anyone were ever asked, we would say that the natural trend of property values, virtually anywhere in this country where there's a market to speak of, is upward. And it would've been true. You didn't even have to think about it.
I think the possibility has dawned that this may not be true anymore. At least, somewhere between many and most people would say that they have their doubts. Not that real estate prices should be descending on an ongoing basis, either; more like, it's possible that the total value of real estate is about what it should be. Some places will go up, some down.
Recall the real estate meltdown in Japan, probably the closest model to what is happening in the USA (and spreading outward). The steady increase on to infinity doesn't really seem like a sustainable model.
*Credits to Matt Johnson and The The for use of that song title.
At the heart of that uneasy feeling* is the continuing uncertainty about the devaluations of mortgage- and mortgage-related assets--there has been a substantial writedown, but is it enough? We still hear people saying, "no one has any idea how big this may be".
We also hear people saying, "the problem of transparency is that it would reveal just how large the hole is, and we can't fill it". This statement is almost certainly wrong, though knowing the exact location of all the skeletons would modify the cemetery's size for many a deserving institution. The fact that "no one knows", though, means that people can say that sort of thing without being contradicted, which prolongs the lives of such Unconventional Unwisdom.
It's time to plumb that hole and find out how deep is the bottomless pit, and I'm considering offering to do so for the U.S. Treasury. Time to put myself back in the cave, to see if I can find the light so I can show it to them all.
The Learning Process Has Begun, Though
I explain the bad feeling to the simple requirement of time to adjust to a new reality in America. If anyone were ever asked, we would say that the natural trend of property values, virtually anywhere in this country where there's a market to speak of, is upward. And it would've been true. You didn't even have to think about it.
I think the possibility has dawned that this may not be true anymore. At least, somewhere between many and most people would say that they have their doubts. Not that real estate prices should be descending on an ongoing basis, either; more like, it's possible that the total value of real estate is about what it should be. Some places will go up, some down.
Recall the real estate meltdown in Japan, probably the closest model to what is happening in the USA (and spreading outward). The steady increase on to infinity doesn't really seem like a sustainable model.
*Credits to Matt Johnson and The The for use of that song title.
Great Letter to Editor
Toward a More Secure Retirement
(Published: January 31, 2009)
The writer is president and chief executive of TIAA-CREF, which manages retirement savings on behalf of 3.6 million individuals and 15,000 institutions, and a former vice chairman of the Federal Reserve. He is a member of President Obama’s Transition Economic Advisory Board.--NYT
I am particularly interested by the comment about annuities, which would probably need some Federal support to be viable. On the one hand, I wish I had converted some of my assets into annuities when I went into semi-retirement (I investigated them but was discouraged by very high fees). On the other, one has to wonder how well annuity structures might've survived the recent financial holocaust. Still, the author expresses an important point, one that will become central to future economic planning discussions.
(Published: January 31, 2009)
Re “From Here to Retirement” (editorial, Jan. 26):
The financial crisis and the decision by some companies to cut matching contributions to their 401(k) plans highlight the need to think anew about how Americans achieve lifetime financial security and the mechanisms in place to help them do so. The 401(k) plans upon which most workers now rely were never conceived as a holistic retirement system.
What is needed is a retirement system that combines the best of portable, individually owned accounts with guarantees to help make sure that individuals do not outlive their savings. The system would automatically enroll workers, tie savings increases to raises, include provisions for health care needs, offer objective investment advice to help them plan, and assure a lifelong income base by automatically converting some of their savings to a low-cost annuity at retirement.
Such protections, while not shielding individuals from investment risk, would significantly bolster Americans’ economic security.
Roger W. Ferguson Jr.
New York, Jan. 26, 2009
The writer is president and chief executive of TIAA-CREF, which manages retirement savings on behalf of 3.6 million individuals and 15,000 institutions, and a former vice chairman of the Federal Reserve. He is a member of President Obama’s Transition Economic Advisory Board.--NYT
I am particularly interested by the comment about annuities, which would probably need some Federal support to be viable. On the one hand, I wish I had converted some of my assets into annuities when I went into semi-retirement (I investigated them but was discouraged by very high fees). On the other, one has to wonder how well annuity structures might've survived the recent financial holocaust. Still, the author expresses an important point, one that will become central to future economic planning discussions.
Saturday, January 31, 2009
This is What We're Talking About
US envoy backs UN's 'responsibility' to civilians
By JOHN HEILPRIN – 1 day ago
The first argument might be expected to inflame China and Russia (click on this post's title for an excellent article on Russia's latest human-rights embarrassment, in Chechnya), but I think they actually will suck it up and move on: Do they really care? I think not. Security Council votes apply to other countries, ones that don't have vetoes. At least we'll be on the right side of some of these issues as we go forward.
Meanwhile, Russia has already signaled that the phony outrage over missile defense is over. We won't pretend we can stop their missiles, and they won't pretend they can build a missile defense, either.
As for the Israel bit, we can see here that this "even-handed support" for the Israelis that the Obama administration is attempting is clearly proving to be tricky. As almost any Israeli (or Palestinian) would tell you: You can not support my enemy and be my friend. To ignore the danger in this position is to invite a problem like Ronald Reagan had when he put the Marines into Lebanon (and how, exactly, did he survive that disaster politically? Frankly, I can't remember.)
Here's a thought: When the two states are headed by Hamas and by Benyamin Netanyahu--as that seems to be where events are pointing--how can there be any solution?
Democratically-elected state leaders are far from immune from looking to use warfare as a political tool. Just look at our last eight years (though the democratically-elected part could be debated). In the case of Olmert, his Israeli left-center government, and the attacks on Gaza, it now appears not to have worked politically, after all.
I think it would be great if George Mitchell could get a strong cease-fire into place in Gaza (with some kind of Egyptian support). That would be an unambiguously positive development and give some time to calm things down, hopefully prevent or limit Netanyahu's electoral victory, and give folks time to work out exactly how many states and what kind of solvent.
By JOHN HEILPRIN – 1 day ago
UNITED NATIONS (AP) — U.S. Ambassador Susan Rice, in her first appearance before the U.N. Security Council, signaled Thursday that the new U.S. administration feels a "responsibility" to sometimes take on nations that abuse their own citizens.
"As agreed to by member states in 2005 and by the Security Council in 2006, the international community has a responsibility to protect civilian populations from violations of international humanitarian law when states are unwilling or unable to do so," Rice told the council in a closed-door session.
"The United States takes this responsibility seriously," Rice said, according to a transcript of her remarks.
During the past year the U.N. has debated whether it has a responsibility to protect civilians in such cases. Last May the council discussed a proposal by France to authorize the U.N. to enter Myanmar and deliver aid without waiting for approval from the nation's ruling military junta. Several countries, citing issues of sovereignty, blocked the idea.
Rice also emphasized that the U.S. would work to strengthen protections for civilians in conflict zones and support international prosecutions of war crimes.
"It is in this spirit of cooperation and determination that we will seek to use this body of international law to minimize human suffering and protect vulnerable populations," Rice said.
She said the International Criminal Court "looks to become an important and credible instrument for trying to hold accountable the senior leadership responsible for atrocities committed in the Congo, Uganda, and Darfur."
The U.S. opposed the court's creation and for the past decade refused to join it. Nevertheless, it has been a key supporter of bringing Sudan's president before the court on charges of orchestrating atrocities in Sudan's Darfur region.
Rice also defended Israel while pressuring it to account for its military actions.
"Violations of international humanitarian law have been perpetrated by Hamas through its rocket attacks against Israeli civilians in southern Israel and the use of civilian facilities to provide protection for its terrorist attacks. There have also been numerous allegations made against Israel some of which are deliberately designed to inflame," Rice said.
"We expect Israel will meet its international obligations to investigate," she said.
Hosted by Google
Copyright © 2009 The Associated Press. All rights reserved.
The first argument might be expected to inflame China and Russia (click on this post's title for an excellent article on Russia's latest human-rights embarrassment, in Chechnya), but I think they actually will suck it up and move on: Do they really care? I think not. Security Council votes apply to other countries, ones that don't have vetoes. At least we'll be on the right side of some of these issues as we go forward.
Meanwhile, Russia has already signaled that the phony outrage over missile defense is over. We won't pretend we can stop their missiles, and they won't pretend they can build a missile defense, either.
As for the Israel bit, we can see here that this "even-handed support" for the Israelis that the Obama administration is attempting is clearly proving to be tricky. As almost any Israeli (or Palestinian) would tell you: You can not support my enemy and be my friend. To ignore the danger in this position is to invite a problem like Ronald Reagan had when he put the Marines into Lebanon (and how, exactly, did he survive that disaster politically? Frankly, I can't remember.)
Here's a thought: When the two states are headed by Hamas and by Benyamin Netanyahu--as that seems to be where events are pointing--how can there be any solution?
Democratically-elected state leaders are far from immune from looking to use warfare as a political tool. Just look at our last eight years (though the democratically-elected part could be debated). In the case of Olmert, his Israeli left-center government, and the attacks on Gaza, it now appears not to have worked politically, after all.
I think it would be great if George Mitchell could get a strong cease-fire into place in Gaza (with some kind of Egyptian support). That would be an unambiguously positive development and give some time to calm things down, hopefully prevent or limit Netanyahu's electoral victory, and give folks time to work out exactly how many states and what kind of solvent.
Monday, January 26, 2009
Ten Day/Point Update
If this columnist is to be believed, Obama has already completed one of the key changes we expect from him, ending what we like to call GWOT:
U.S. President Barack Obama reaffirmed the rule of law over U.S. foreign policy, dialing back a number of the expansive and, to many experts, illegal powers invested in the executive branch during the Bush administration. Obama prohibited the CIA from maintaining secret prisons and nullified every legal opinion regarding interrogations issued by any executive-branch lawyer since the 9/11 attacks. In addition, Obama banned the practices of torture and rendition and called for new rules regarding the treatment and legal situation of detainees -- effectively ending the Bush-era "war on terror." get link article by Dana Priest, Bush's 'War' On Terror Comes to a Sudden End http://www.washingtonpost.com/wp-dyn/content/article/2009/01/22/AR2009012203929.html(WaPo?)
Personally, I think it's too early to declare that Mission Accomplished; however, it is undeniable progress.
Here's a quick read on my 10-point program, and how Obama's doing:
1.. Get control of climate-changing gases. Expecting progress, too early .
2. Preserve our biosphere. Same, TETS. (Too Early to Say.)
3. Rebuild our relations with the world. Already well underway. Fortunately, the world is well-disposed for its part.
4. Visualize our children’s / grandchildren’s society, and the implications of that vision. Somewhat, but mostly lip service thus far.
5. Reform the UN Charter. Second-term business.
6. Get control of armaments. See previous comment.
7. Establish clearly the political dimensions of privacy and of permissible government intrusions into it. This will be a running battle, nuanced and complex, with my expectations largely favorable at this point. Obama was a Con Law professor at U of Chicago: this suggests a thinking-man's approach to these issues, but not a clearcut ideological one.
8. Provide health care to our people. Not underway yet, and Daschle running into thickets on confirmation isn't such a good sign, either.
9. Electoral reform. Actually, I may be looking for help on this one from the wrong party--Obama was more harmful to the cause then helpful in his campaign, and why would he want to change a system he totally outfoxed last year?
10. End the "War on Drugs" (or at least give it some focus on the more harmful ones). Obama would like to postpone this one until the second term, but I don't think he will be able to do so. It will keep popping up until he takes some clear position.
U.S. President Barack Obama reaffirmed the rule of law over U.S. foreign policy, dialing back a number of the expansive and, to many experts, illegal powers invested in the executive branch during the Bush administration. Obama prohibited the CIA from maintaining secret prisons and nullified every legal opinion regarding interrogations issued by any executive-branch lawyer since the 9/11 attacks. In addition, Obama banned the practices of torture and rendition and called for new rules regarding the treatment and legal situation of detainees -- effectively ending the Bush-era "war on terror." get link article by Dana Priest, Bush's 'War' On Terror Comes to a Sudden End http://www.washingtonpost.com/wp-dyn/content/article/2009/01/22/AR2009012203929.html(WaPo?)
Personally, I think it's too early to declare that Mission Accomplished; however, it is undeniable progress.
Here's a quick read on my 10-point program, and how Obama's doing:
1.. Get control of climate-changing gases. Expecting progress, too early .
2. Preserve our biosphere. Same, TETS. (Too Early to Say.)
3. Rebuild our relations with the world. Already well underway. Fortunately, the world is well-disposed for its part.
4. Visualize our children’s / grandchildren’s society, and the implications of that vision. Somewhat, but mostly lip service thus far.
5. Reform the UN Charter. Second-term business.
6. Get control of armaments. See previous comment.
7. Establish clearly the political dimensions of privacy and of permissible government intrusions into it. This will be a running battle, nuanced and complex, with my expectations largely favorable at this point. Obama was a Con Law professor at U of Chicago: this suggests a thinking-man's approach to these issues, but not a clearcut ideological one.
8. Provide health care to our people. Not underway yet, and Daschle running into thickets on confirmation isn't such a good sign, either.
9. Electoral reform. Actually, I may be looking for help on this one from the wrong party--Obama was more harmful to the cause then helpful in his campaign, and why would he want to change a system he totally outfoxed last year?
10. End the "War on Drugs" (or at least give it some focus on the more harmful ones). Obama would like to postpone this one until the second term, but I don't think he will be able to do so. It will keep popping up until he takes some clear position.
Sunday, January 18, 2009
Official Pre-Inauguration Post
Is it hard or not?
Some would emphasize the opportunity part of this "danger opportunity", as the Chinese might or might not say. All Obama needs to do is deliver the economic recovery, and re-election is virtually guaranteed.
They think back to Reagan, who outlived the previous "worst recession since the Depression". The application of high interest rates broke the back of stagflation, and he had enough time to make tax cuts work to recover from the resulting high unemployment. It just takes a couple of years.
I agree with them on the last point, at least. I'm not of the "100 Days" philosophy, that somehow Obama has 3 1/3 months to set the tone and establish his Administration's fate. He can enunciate principles and initial efforts now, and work on making it all real in the following months, as his Administration's appointments in the domestic departments all come on line and re-discover their moribund (or worse: evil-minded) organizations' potential value. It does take a couple of years.
It is the return of competence that should ultimately prove Obama's great strength, and about which I have the highest confidence and greatest expectations. Obama's hires are experienced, seasoned leaders of great knowledge and integrity, who should work through consultation and up-to-date, purposeful communication methods to produce policies built on principle and sound reasoning. I think we're off to a good start with this, but it's so easy to be derailed.
This is not easy stuff; no job for a latter-day Ronald Reagan.
Expectations: Scylla, or Charybdis?
Expressions of what people expect from the Obamadministration seem drawn by the currents toward the extremes: maximalism and "putting his feet to the fire" demands on one side, and lowered-bar, minimalist ones on the other.
Those who advocate the lower expectations have plenty of history on their side, and they quite reasonably argue that Washington will demand its accommodations and Obama have to make his, as well.
Obama's inclination is clearly to emphasize the practical outcome, even while maintaining a high-quality discourse and moral tone. If there are any of his supporters doomed to be continually disappointed, they would be the ones who are looking for symbolic gestures that have no direct practical import. No capital is likely to be expended for their benefit.
A good example would be federal liberalization of marijuana laws. He might support it, but has shown no sign of doing so--if it were to happen with Obama I would not expect anything until the second term. Ending the "don't ask, don't tell" in the military, on the other hand, will probably be decided soon, and on a caluclation of the net benefit--additions due to the "open tent", as it were, versus losing some homophobic veterans.
My own expectations are ambitious, but only somewhat so. I expect Obama to be the best President since I've become aware of politics. But I don't think that's saying so much--I expected that of HRC when she was practically crowned, and I think Obama can be a much better President than she could have done.
(For the record, I wasn't really what I'd call aware of politics when JFK was assassinated, though I did observe what was going on, and certainly had my own opinions by the next time around.)
From the first term, I expect improvement in the healthcare insurance offerings available to those who are not full-time employees. I expect a reasonable muddle on Social Security (which isn't so broken) and some modest improvement on the out-of-control growth-rates of Medicare. I expect some upward adjustment in taxes paid by those in higher tax brackets by the end of the term, including retirees. No change in tax loopholes--we're looking to protect jobs here, not eliminate them, right?
Foreign policy progress may develop faster than I expect, because I don't expect much for six months or so. Still, there can be huge improvements. I'm waiting to see Obama's initial position toward Russia, which will have to be carefully considered. I expect Obama to meet with both al-Sistani in Iraq and Khamenei in Iran before the first term is over, and I am hopeful that a confrontation with Iran over nuclear weapons can be avoided.
I think the most nuanced policy to come from Obama will be in the area of executive powers, those extended by the Bushites in the interest of the "unitary executive". He will pull back only selectively; in other words, he will give back the Bushite power-grabs only when they were applied incompetently or abusively, not on principle. I now suspect that Obama will retain the Hobbesian principle of a theoretically unlimited state, as long as nations are in a state of nature amongst themselves.
In order to address that last issue--the complete disrespect of international organizations by the Bushites--he will have to tread on the shaky ground of U.N. Charter reform, but I believe that will be a second-term initiative.
My pick for the most likely Obama quote for his inaugural address is this bit, which could be properly planted into the declaration of a new posture toward the rest of the world:
It's from Lincoln's Second Inaugural ("with malice toward none..."), the greatest touchstone for Obama's whole approach.
As for the economy....
I'm going to withhold judgment until I see it, but I am somewhat skeptical of the stimulus package. The question is whether we know what sort of deficit spending and what sort of tax reductions will produce the desired result (i.e., a turnaround in the recessionary trend without rampant inflation).
Tax cuts are the attempt to provide direct stimulus to the largest number of people. The problem is, spread so thin, people don't get enough to change their behavior much. I see only marginal relief, in the form of some recovery in consumption levels, from those.
It's really a matter of the spending and whether it will produce sustainable jobs. On this one, I'm afraid that there's a real question if there's enough real need for labor to go around (i.e., maintain our lifestyle) in normal times. I think that the experience of the last dozen or so years has clearly shown that we don't need to be in the manufacture of cheap plastic items, that we don't know how to run a proper financial cartel, and that the Internet is fully portable (as in, no boundaries).
On the other hand, we have a good start in providing services in the Internet, and we still have abundant natural resources (even if we've depleted our crude oil more than some). We also have a central role in the evolving World culture, and that is something we have earned and from which we will be hard to displace. I find the argument that most of the deficit spending should be directed towards creating a new strength in energy technology and its application to be a compelling one, but it will also be slow in creating jobs.
My bottom line expectation is that Obama can "arrest the decline by end of oh-nine"; that may not be a good-enough result to produce his re-election, but I say we can't expect more.
Some would emphasize the opportunity part of this "danger opportunity", as the Chinese might or might not say. All Obama needs to do is deliver the economic recovery, and re-election is virtually guaranteed.
They think back to Reagan, who outlived the previous "worst recession since the Depression". The application of high interest rates broke the back of stagflation, and he had enough time to make tax cuts work to recover from the resulting high unemployment. It just takes a couple of years.
I agree with them on the last point, at least. I'm not of the "100 Days" philosophy, that somehow Obama has 3 1/3 months to set the tone and establish his Administration's fate. He can enunciate principles and initial efforts now, and work on making it all real in the following months, as his Administration's appointments in the domestic departments all come on line and re-discover their moribund (or worse: evil-minded) organizations' potential value. It does take a couple of years.
It is the return of competence that should ultimately prove Obama's great strength, and about which I have the highest confidence and greatest expectations. Obama's hires are experienced, seasoned leaders of great knowledge and integrity, who should work through consultation and up-to-date, purposeful communication methods to produce policies built on principle and sound reasoning. I think we're off to a good start with this, but it's so easy to be derailed.
This is not easy stuff; no job for a latter-day Ronald Reagan.
Expectations: Scylla, or Charybdis?
Expressions of what people expect from the Obamadministration seem drawn by the currents toward the extremes: maximalism and "putting his feet to the fire" demands on one side, and lowered-bar, minimalist ones on the other.
Those who advocate the lower expectations have plenty of history on their side, and they quite reasonably argue that Washington will demand its accommodations and Obama have to make his, as well.
Obama's inclination is clearly to emphasize the practical outcome, even while maintaining a high-quality discourse and moral tone. If there are any of his supporters doomed to be continually disappointed, they would be the ones who are looking for symbolic gestures that have no direct practical import. No capital is likely to be expended for their benefit.
A good example would be federal liberalization of marijuana laws. He might support it, but has shown no sign of doing so--if it were to happen with Obama I would not expect anything until the second term. Ending the "don't ask, don't tell" in the military, on the other hand, will probably be decided soon, and on a caluclation of the net benefit--additions due to the "open tent", as it were, versus losing some homophobic veterans.
My own expectations are ambitious, but only somewhat so. I expect Obama to be the best President since I've become aware of politics. But I don't think that's saying so much--I expected that of HRC when she was practically crowned, and I think Obama can be a much better President than she could have done.
(For the record, I wasn't really what I'd call aware of politics when JFK was assassinated, though I did observe what was going on, and certainly had my own opinions by the next time around.)
From the first term, I expect improvement in the healthcare insurance offerings available to those who are not full-time employees. I expect a reasonable muddle on Social Security (which isn't so broken) and some modest improvement on the out-of-control growth-rates of Medicare. I expect some upward adjustment in taxes paid by those in higher tax brackets by the end of the term, including retirees. No change in tax loopholes--we're looking to protect jobs here, not eliminate them, right?
Foreign policy progress may develop faster than I expect, because I don't expect much for six months or so. Still, there can be huge improvements. I'm waiting to see Obama's initial position toward Russia, which will have to be carefully considered. I expect Obama to meet with both al-Sistani in Iraq and Khamenei in Iran before the first term is over, and I am hopeful that a confrontation with Iran over nuclear weapons can be avoided.
I think the most nuanced policy to come from Obama will be in the area of executive powers, those extended by the Bushites in the interest of the "unitary executive". He will pull back only selectively; in other words, he will give back the Bushite power-grabs only when they were applied incompetently or abusively, not on principle. I now suspect that Obama will retain the Hobbesian principle of a theoretically unlimited state, as long as nations are in a state of nature amongst themselves.
In order to address that last issue--the complete disrespect of international organizations by the Bushites--he will have to tread on the shaky ground of U.N. Charter reform, but I believe that will be a second-term initiative.
My pick for the most likely Obama quote for his inaugural address is this bit, which could be properly planted into the declaration of a new posture toward the rest of the world:
to do all which may achieve and cherish a just and lasting peace among ourselves and with all nations.
It's from Lincoln's Second Inaugural ("with malice toward none..."), the greatest touchstone for Obama's whole approach.
As for the economy....
I'm going to withhold judgment until I see it, but I am somewhat skeptical of the stimulus package. The question is whether we know what sort of deficit spending and what sort of tax reductions will produce the desired result (i.e., a turnaround in the recessionary trend without rampant inflation).
Tax cuts are the attempt to provide direct stimulus to the largest number of people. The problem is, spread so thin, people don't get enough to change their behavior much. I see only marginal relief, in the form of some recovery in consumption levels, from those.
It's really a matter of the spending and whether it will produce sustainable jobs. On this one, I'm afraid that there's a real question if there's enough real need for labor to go around (i.e., maintain our lifestyle) in normal times. I think that the experience of the last dozen or so years has clearly shown that we don't need to be in the manufacture of cheap plastic items, that we don't know how to run a proper financial cartel, and that the Internet is fully portable (as in, no boundaries).
On the other hand, we have a good start in providing services in the Internet, and we still have abundant natural resources (even if we've depleted our crude oil more than some). We also have a central role in the evolving World culture, and that is something we have earned and from which we will be hard to displace. I find the argument that most of the deficit spending should be directed towards creating a new strength in energy technology and its application to be a compelling one, but it will also be slow in creating jobs.
My bottom line expectation is that Obama can "arrest the decline by end of oh-nine"; that may not be a good-enough result to produce his re-election, but I say we can't expect more.
Friday, January 09, 2009
We Are Tomorrow's Fossil Fuels
I think when future geologists look back upon the Plasticiferous period deposits and their abundant long-string carbon molecules, they will be impressed. What iridium?--the Cenozoic monsters poisoned all competing genotypes, but in so doing, poisoned themselves.
And I can see the pipelines running from today's landfills to power future homes with clean-burning natural gas!
And I can see the pipelines running from today's landfills to power future homes with clean-burning natural gas!
Wednesday, January 07, 2009
The Financial Modelers' Manifesto
by
Emanuel Derman and
Paul Wilmott
Preface
A spectre is haunting Markets – the spectre of illiquidity, frozen credit, and the failure of financial models.
Beginning with the 2007 collapse in subprime mortgages, financial markets have shifted to new regimes characterized by violent movements, epidemics of contagion from market to market, and almost unimaginable anomalies (who would have ever thought that swap spreads to Treasuries could go negative?). Familiar valuation models have become increasingly unreliable. Where is the risk manager that has not ascribed his losses to a once-in-a-century tsunami?
To this end, we have assembled in New York City and written the following manifesto.
Manifesto
In finance we study how to manage funds – from simple securities like dollars and yen, stocks and bonds to complex ones like futures and options, subprime CDOs and credit default swaps. We build financial models to estimate the fair value of securities, to estimate their risks and to show how those risks can be controlled. How can a model tell you the value of a security? And how did these models fail so badly in the case of the subprime CDO market?
Physics, because of its astonishing success at predicting the future behavior of material objects from their present state, has inspired most financial modeling. Physicists study the world by repeating the same experiments over and over again to discover forces and their almost magical mathematical laws. Galileo dropped balls off the leaning tower, giant teams in Geneva collide protons on protons, over and over again. If a law is proposed and its predictions contradict experiments, it's back to the drawing board. The method works. The laws of atomic physics are accurate to more than ten decimal places.
It's a different story with finance and economics, which are concerned with the mental world of monetary value. Financial theory has tried hard to emulate the style and elegance of physics in order to discover its own laws. But markets are made of people, who are influenced by events, by their ephemeral feelings about events and by their expectations of other people's feelings. The truth is that there are no fundamental laws in finance. And even if there were, there is no way to run repeatable experiments to verify them.
You can hardly find a better example of confusedly elegant modeling than models of CDOs. The CDO research papers apply abstract probability theory to the price co-movements of thousands of mortgages. The relationships between so many mortgages can be vastly complex. The modelers, having built up their fantastical theory, need to make it useable; they resort to sweeping under the model's rug all unknown dynamics; with the dirt ignored, all that's left is a single number, called the default correlation. From the sublime to the elegantly ridiculous: all uncertainty is reduced to a single parameter that, when entered into the model by a trader, produces a CDO value. This over-reliance on probability and statistics is a severe limitation. Statistics is shallow description, quite unlike the deeper cause and effect of physics, and can't easily capture the complex dynamics of default.
Models are at bottom tools for approximate thinking; they serve to transform your intuition about the future into a price for a security today. It's easier to think intuitively about future housing prices, default rates and default correlations than it is about CDO prices. CDO models turn your guess about future housing prices, mortgage default rates and a simplistic default correlation into the model's output: a current CDO price.
Our experience in the financial arena has taught us to be very humble in applying mathematics to markets, and to be extremely wary of ambitious theories, which are in the end trying to model human behavior. We like simplicity, but we like to remember that it is our models that are simple, not the world.
Unfortunately, the teachers of finance haven't learned these lessons. You have only to glance at business school textbooks on finance to discover stilts of mathematical axioms supporting a house of numbered theorems, lemmas and results. Who would think that the textbook is at bottom dealing with people and money? It should be obvious to anyone with common sense that every financial axiom is wrong, and that finance can never in its wildest dreams be Euclid. Different endeavors, as Aristotle wrote, require different degrees of precision. Finance is not one of the natural sciences, and its invisible worm is its dark secret love of mathematical elegance and too much exactitude.
We do need models and mathematics – you cannot think about finance and economics without them – but one must never forget that models are not the world. Whenever we make a model of something involving human beings, we are trying to force the ugly stepsister's foot into Cinderella's pretty glass slipper. It doesn't fit without cutting off some essential parts. And in cutting off parts for the sake of beauty and precision, models inevitably mask the true risk rather than exposing it. The most important question about any financial model is how wrong it is likely to be, and how useful it is despite its assumptions. You must start with models and then overlay them with common sense and experience.
Many academics imagine that one beautiful day we will find the 'right' model. But there is no right model, because the world changes in response to the ones we use. Progress in financial modeling is fleeting and temporary. Markets change and newer models become necessary. Simple clear models with explicit assumptions about small numbers of variables are therefore the best way to leverage your intuition without deluding yourself.
All models sweep dirt under the rug. A good model makes the absence of the dirt visible. In this regard, we believe that the Black-Scholes model of options valuation, now often unjustly maligned, is a model for models; it is clear and robust. Clear, because it is based on true engineering; it tells you how to manufacture an option out of stocks and bonds and what that will cost you, under ideal dirt-free circumstances that it defines. Its method of valuation is analogous to figuring out the price of a can of fruit salad from the cost of fruit, sugar, labor and transportation. The world of markets doesn't exactly match the ideal circumstances Black-Scholes requires, but the model is robust because it allows an intelligent trader to qualitatively adjust for those mismatches. You know what you are assuming when you use the model, and you know exactly what has been swept out of view.
Building financial models is challenging and worthwhile: you need to combine the qualitative and the quantitative, imagination and observation, art and science, all in the service of finding approximate patterns in the behavior of markets and securities. The greatest danger is the age-old sin of idolatry. Financial markets are alive but a model, however beautiful, is an artifice. No matter how hard you try, you will not be able to breathe life into it. To confuse the model with the world is to embrace a future disaster driven by the belief that humans obey mathematical rules.
MODELERS OF ALL MARKETS, UNITE! You have nothing to lose but your illusions.
The Modelers' Hippocratic Oath
~ I will remember that I didn't make the world, and it doesn't satisfy my equations.
~ Though I will use models boldly to estimate value, I will not be overly impressed by mathematics.
~ I will never sacrifice reality for elegance without explaining why I have done so.
~ Nor will I give the people who use my model false comfort about its accuracy.
Instead, I will make explicit its assumptions and oversights.
~ I understand that my work may have enormous effects on society and the economy,
many of them beyond my comprehension.
Paul Wilmott
Emanuel Derman January 7 2009
I'll comment where I should--in the comments.
Emanuel Derman and
Paul Wilmott
Preface
A spectre is haunting Markets – the spectre of illiquidity, frozen credit, and the failure of financial models.
Beginning with the 2007 collapse in subprime mortgages, financial markets have shifted to new regimes characterized by violent movements, epidemics of contagion from market to market, and almost unimaginable anomalies (who would have ever thought that swap spreads to Treasuries could go negative?). Familiar valuation models have become increasingly unreliable. Where is the risk manager that has not ascribed his losses to a once-in-a-century tsunami?
To this end, we have assembled in New York City and written the following manifesto.
Manifesto
In finance we study how to manage funds – from simple securities like dollars and yen, stocks and bonds to complex ones like futures and options, subprime CDOs and credit default swaps. We build financial models to estimate the fair value of securities, to estimate their risks and to show how those risks can be controlled. How can a model tell you the value of a security? And how did these models fail so badly in the case of the subprime CDO market?
Physics, because of its astonishing success at predicting the future behavior of material objects from their present state, has inspired most financial modeling. Physicists study the world by repeating the same experiments over and over again to discover forces and their almost magical mathematical laws. Galileo dropped balls off the leaning tower, giant teams in Geneva collide protons on protons, over and over again. If a law is proposed and its predictions contradict experiments, it's back to the drawing board. The method works. The laws of atomic physics are accurate to more than ten decimal places.
It's a different story with finance and economics, which are concerned with the mental world of monetary value. Financial theory has tried hard to emulate the style and elegance of physics in order to discover its own laws. But markets are made of people, who are influenced by events, by their ephemeral feelings about events and by their expectations of other people's feelings. The truth is that there are no fundamental laws in finance. And even if there were, there is no way to run repeatable experiments to verify them.
You can hardly find a better example of confusedly elegant modeling than models of CDOs. The CDO research papers apply abstract probability theory to the price co-movements of thousands of mortgages. The relationships between so many mortgages can be vastly complex. The modelers, having built up their fantastical theory, need to make it useable; they resort to sweeping under the model's rug all unknown dynamics; with the dirt ignored, all that's left is a single number, called the default correlation. From the sublime to the elegantly ridiculous: all uncertainty is reduced to a single parameter that, when entered into the model by a trader, produces a CDO value. This over-reliance on probability and statistics is a severe limitation. Statistics is shallow description, quite unlike the deeper cause and effect of physics, and can't easily capture the complex dynamics of default.
Models are at bottom tools for approximate thinking; they serve to transform your intuition about the future into a price for a security today. It's easier to think intuitively about future housing prices, default rates and default correlations than it is about CDO prices. CDO models turn your guess about future housing prices, mortgage default rates and a simplistic default correlation into the model's output: a current CDO price.
Our experience in the financial arena has taught us to be very humble in applying mathematics to markets, and to be extremely wary of ambitious theories, which are in the end trying to model human behavior. We like simplicity, but we like to remember that it is our models that are simple, not the world.
Unfortunately, the teachers of finance haven't learned these lessons. You have only to glance at business school textbooks on finance to discover stilts of mathematical axioms supporting a house of numbered theorems, lemmas and results. Who would think that the textbook is at bottom dealing with people and money? It should be obvious to anyone with common sense that every financial axiom is wrong, and that finance can never in its wildest dreams be Euclid. Different endeavors, as Aristotle wrote, require different degrees of precision. Finance is not one of the natural sciences, and its invisible worm is its dark secret love of mathematical elegance and too much exactitude.
We do need models and mathematics – you cannot think about finance and economics without them – but one must never forget that models are not the world. Whenever we make a model of something involving human beings, we are trying to force the ugly stepsister's foot into Cinderella's pretty glass slipper. It doesn't fit without cutting off some essential parts. And in cutting off parts for the sake of beauty and precision, models inevitably mask the true risk rather than exposing it. The most important question about any financial model is how wrong it is likely to be, and how useful it is despite its assumptions. You must start with models and then overlay them with common sense and experience.
Many academics imagine that one beautiful day we will find the 'right' model. But there is no right model, because the world changes in response to the ones we use. Progress in financial modeling is fleeting and temporary. Markets change and newer models become necessary. Simple clear models with explicit assumptions about small numbers of variables are therefore the best way to leverage your intuition without deluding yourself.
All models sweep dirt under the rug. A good model makes the absence of the dirt visible. In this regard, we believe that the Black-Scholes model of options valuation, now often unjustly maligned, is a model for models; it is clear and robust. Clear, because it is based on true engineering; it tells you how to manufacture an option out of stocks and bonds and what that will cost you, under ideal dirt-free circumstances that it defines. Its method of valuation is analogous to figuring out the price of a can of fruit salad from the cost of fruit, sugar, labor and transportation. The world of markets doesn't exactly match the ideal circumstances Black-Scholes requires, but the model is robust because it allows an intelligent trader to qualitatively adjust for those mismatches. You know what you are assuming when you use the model, and you know exactly what has been swept out of view.
Building financial models is challenging and worthwhile: you need to combine the qualitative and the quantitative, imagination and observation, art and science, all in the service of finding approximate patterns in the behavior of markets and securities. The greatest danger is the age-old sin of idolatry. Financial markets are alive but a model, however beautiful, is an artifice. No matter how hard you try, you will not be able to breathe life into it. To confuse the model with the world is to embrace a future disaster driven by the belief that humans obey mathematical rules.
MODELERS OF ALL MARKETS, UNITE! You have nothing to lose but your illusions.
The Modelers' Hippocratic Oath
~ I will remember that I didn't make the world, and it doesn't satisfy my equations.
~ Though I will use models boldly to estimate value, I will not be overly impressed by mathematics.
~ I will never sacrifice reality for elegance without explaining why I have done so.
~ Nor will I give the people who use my model false comfort about its accuracy.
Instead, I will make explicit its assumptions and oversights.
~ I understand that my work may have enormous effects on society and the economy,
many of them beyond my comprehension.
Paul Wilmott
Emanuel Derman January 7 2009
I'll comment where I should--in the comments.
Tracking "The Nation"
I'm going to make an effort going forward to review articles and arguments from "The Nation". This is one way of saying I've decided to go ahead and fulfill my subscription past the 4-issue-free offer.
Like many a good entertainment, my experience with "The Nation" lately has been one of hit or miss. This works, from the point of view of commenting upon it for my blog. I really appreciate that they go for the big ones.
"Chicks dig the big taters"--that's what some baseball slugger (for some reason, I want to say George Scott) was quoted as saying, and it caught on.
It was either that, or the exciting new product, "Save-a-Blade" (comes with a full grooming kit for only 14.99, after the rebate). The economics thereof, and embed at the front lines of shaving.
Like many a good entertainment, my experience with "The Nation" lately has been one of hit or miss. This works, from the point of view of commenting upon it for my blog. I really appreciate that they go for the big ones.
"Chicks dig the big taters"--that's what some baseball slugger (for some reason, I want to say George Scott) was quoted as saying, and it caught on.
It was either that, or the exciting new product, "Save-a-Blade" (comes with a full grooming kit for only 14.99, after the rebate). The economics thereof, and embed at the front lines of shaving.
Tuesday, January 06, 2009
Value at Risk?
What a great name for a quantity! I prefer "stakes on the table", or "contribution to the pot". But, anyway, "Risk Mismanagement" by Joe Nocera in the Times on Sunday was a great contribution to the level of understanding which your normally well-educated person might gain of the crisis and what's behind it.
Clearly the understanding between the Risk Management function of the financial institutions and the business management went haywire. Whether it was bad communication or just willing suspension of belief (not to mention of disbelief) may have differed by the institution. What was needed was the ability to walk away from the conventional wisdom, and too few mustered it.
I thought risk management--in the traditional sense of credit risk management, to which Nocera refers briefly--got off way too easy in his assessment, though. The mortgage lenders never showed much serious interest in understanding the risk in their portfolios due to the possibility of falling real estate values. This, not the buildup of toxic assets, was the unexpected occurrence, and the balance sheet disaster just the snowballing result of it.
Great quotes from my good friend Aaron Brown, and I loved the writer's attempts to reason with Nassim Nicholas Taleb, or Nicholas the Terrible (NT for short).
Clearly the understanding between the Risk Management function of the financial institutions and the business management went haywire. Whether it was bad communication or just willing suspension of belief (not to mention of disbelief) may have differed by the institution. What was needed was the ability to walk away from the conventional wisdom, and too few mustered it.
I thought risk management--in the traditional sense of credit risk management, to which Nocera refers briefly--got off way too easy in his assessment, though. The mortgage lenders never showed much serious interest in understanding the risk in their portfolios due to the possibility of falling real estate values. This, not the buildup of toxic assets, was the unexpected occurrence, and the balance sheet disaster just the snowballing result of it.
Great quotes from my good friend Aaron Brown, and I loved the writer's attempts to reason with Nassim Nicholas Taleb, or Nicholas the Terrible (NT for short).
E.J. Dionne Had It Right
...with the title at least: "Coming Soon: The 21st Century". Jan, 2009 will be the true beginning of the Third Millennium, or, if you will, the Twenty-First Century. After a good lead, he didn't really go into it, surprisingly, instead rehearsing some commonplace wisdom about what's to come.
Basically, we had a false start in 2000 (or, for purists, in 2001). The 2000 election set the tone with total confusion being the winner, and progress denied. September 11, 2001 derailed the initial, tentative notions of the reality with which we finished the last decade, but it put nothing into place. Some thought for a time that the chaotic, sputtering, misdirected efforts which followed amounted to a direction, but the Bushite Recovery ended with complete exhaustion--morally, spiritually, and financially.
So now we begin anew and face the dangerous, but exciting future we have built for ourselves.
With the exception of the fact of overpopulation and resulting overconsumption of resources, we live in a manner not just befit for kings, but of which kings would only have dreamed three centuries ago.
It is time to begin to live the way we all know we should.
Basically, we had a false start in 2000 (or, for purists, in 2001). The 2000 election set the tone with total confusion being the winner, and progress denied. September 11, 2001 derailed the initial, tentative notions of the reality with which we finished the last decade, but it put nothing into place. Some thought for a time that the chaotic, sputtering, misdirected efforts which followed amounted to a direction, but the Bushite Recovery ended with complete exhaustion--morally, spiritually, and financially.
So now we begin anew and face the dangerous, but exciting future we have built for ourselves.
With the exception of the fact of overpopulation and resulting overconsumption of resources, we live in a manner not just befit for kings, but of which kings would only have dreamed three centuries ago.
It is time to begin to live the way we all know we should.
King Powder Has Surely Come
On a base that was already solid and deep, we had an insane amount of powdery snow on Sunday. In town, about 12 inches; a couple of feet in the Taos Ski Valley. The fog is lifting to reveal incredible white vistas everywhere.
This will be one of the weeks that the aficionados talk about for years.
I can't go until Friday, and I have to make sure my knees and respiration (recent cold) are in full repair.
This will be one of the weeks that the aficionados talk about for years.
I can't go until Friday, and I have to make sure my knees and respiration (recent cold) are in full repair.
Monday, January 05, 2009
Israel-Hamas: Huffington Posted
I joined in the fracas on Mitchell Bard's posting (click on title above for link) stating that Hamas is responsible for the civilian casualties:
Mitchell,
I admire your writing and I'm, officially, "a fan". Mostly, I agree with this post but most heartily disagree with one statement you pose as a fact, without any support:
"The long-term answer to the Israeli-Palestinian conflict is two side-by-side states, each respecting the other and its right to exist."
First of all, it looks like the number of states we are now talking about is three, not two: Abbas and the PA have no real claim to authority over Gaza, and that reality is unlikely to change anytime soon.
The real argument, though, is that the famous "two-state solution" is not a long-term answer to the conflict. It will put in place implacable rivals which will prolong the rivalry (ed.: should've been "standoff") indefinitely.
The only long-term answer is a federation, bringing together a state which is one geographically, but with the various social and religious constituencies' rights and political representation guaranteed. Like Lebanon's formula, but bigger: it should include Lebanon! This is an outcome more difficult to achieve than the two-state solution, but it is a better one.
Keep these arguments in mind when the endless, fruitless diplomacy about the two-state solution begins anew, after this crisis reaches its inevitable end: Israelis withdraw partially; embittered Gazans rally around an underground Hamas, and no one party can speak for the Palestinians, while the Israelis have no clue what line of diplomacy can produce any results.
I got this reply from "shanghaislim"
So would that be the same model as IRAQ? Sunnis, Shiites, Christians all living side by side with a federation to rule across.
As Dr. Phil would say.......
...."How's that workin' for ya?"
Which I appreciated but had to demur:
No, not the same model at all. What they are attempting (emphasis--attempting) to do in Iraq is have a strong central government. Shiite parties are attempting to utilize their narrow majority to dominate the politics in the nation.
They have no choice but to live together--not side by side, but mingled complexly within the same land, under the law--or to war. The choice then in Iraq is the same as the Jews and Arabs in Palestine. I can hope for a better solution than that emerging in Iraq.
Mitchell,
I admire your writing and I'm, officially, "a fan". Mostly, I agree with this post but most heartily disagree with one statement you pose as a fact, without any support:
"The long-term answer to the Israeli-Palestinian conflict is two side-by-side states, each respecting the other and its right to exist."
First of all, it looks like the number of states we are now talking about is three, not two: Abbas and the PA have no real claim to authority over Gaza, and that reality is unlikely to change anytime soon.
The real argument, though, is that the famous "two-state solution" is not a long-term answer to the conflict. It will put in place implacable rivals which will prolong the rivalry (ed.: should've been "standoff") indefinitely.
The only long-term answer is a federation, bringing together a state which is one geographically, but with the various social and religious constituencies' rights and political representation guaranteed. Like Lebanon's formula, but bigger: it should include Lebanon! This is an outcome more difficult to achieve than the two-state solution, but it is a better one.
Keep these arguments in mind when the endless, fruitless diplomacy about the two-state solution begins anew, after this crisis reaches its inevitable end: Israelis withdraw partially; embittered Gazans rally around an underground Hamas, and no one party can speak for the Palestinians, while the Israelis have no clue what line of diplomacy can produce any results.
I got this reply from "shanghaislim"
So would that be the same model as IRAQ? Sunnis, Shiites, Christians all living side by side with a federation to rule across.
As Dr. Phil would say.......
...."How's that workin' for ya?"
Which I appreciated but had to demur:
No, not the same model at all. What they are attempting (emphasis--attempting) to do in Iraq is have a strong central government. Shiite parties are attempting to utilize their narrow majority to dominate the politics in the nation.
They have no choice but to live together--not side by side, but mingled complexly within the same land, under the law--or to war. The choice then in Iraq is the same as the Jews and Arabs in Palestine. I can hope for a better solution than that emerging in Iraq.
Saturday, January 03, 2009
Wrathful Gripes (Two)
We are above all grateful as we enter the New Year, but let us now get the two greatest irritations of the season out of the way:
College Football--I'm with Obama all the way. It's impossible to make a coherent argument in support of the current approach except that it is, and that therefore it requires some initiative to change it. No one seems to know how to make that happen.
This year's outrage is the exclusion-by-accident of USC and Texas from the so-called Championship Game. These two teams lost a single game, narrowly and somewhat flukishly, as did the two Championship contenders, Oklahoma and Florida. I don't begrudge either its spot in the final--ultimately they came as winners of the Big 12 and SEC championship games (themselves being a great target for elimination when we go to a 3-round playoff).
Texas was excluded from that Big 12 game (Oklahoma against non-factor Missouri--there's a great argument for eliminating the conference championships, as it didn't even produce a game between the two best teams in the conference!) because of its lower ranking in one of the polls. SC had the misfortune of not being South Carolina, a longtime member of the SEC. As it turned out, Florida's opponent was #1-ranked-and-undefeated Alabama, which itself would've been in the C.G. The subsequent underwhelming performances of Alabama and Texas don't prove they didn't belong, really: they were playing in the Unpopular Bowl, parts 1 and 2. Alabama's loss came to undefeated Utah, yet another reason for an inclusive playoff (even if it's a longshot for a low seed to win through).
I'm flexible: I would even go for a 6-team playoff (with a couple of bye teams) if it became necessary to make a compromise which does not lengthen the season excessively. The basic idea is to move the crux of decisioning to a level lower among the leaders: between 6 and 7, say, or between 8 and 9. Now it's always between 2 and 3. But Something. Must. Be done.
I suggest Obama appoint George W. Bush to settle the matter, Bush-style. Contrary opinions from college presidents will be noted, then politely ignored (as should much of what they do). They (O.-Dubya.) can probably see eye to eye on this one.
If this doesn't happen, what are the remedies to us, those who must endure this? I'd recommend boycotting those games like Rose, Fiesta, Sugar, which are in the BCS Championships but don't mean #1 or #2. Of course, I'd never go to one of those, anyway. We should avoid talking about them, or even acknowledging the legitimacy of their existence. TV Ratings Matter Not?
Movie Release TimingThe basic concept here is to minimize the amount of time from general release to Oscar nomination (Jan. 22). That is, if there are nominations to be had. Voting for Oscars seems to have a halflife of about four weeks.
I feel the only way to counter that is to urge voting for those like "The Dark Knight" and "Tropic Thunder" that dared to open early--and make the money. There is an exception, which will be duly recognized on Oscar night: Heath Ledger will be invulnerable to the time decay calculations on voting, because Death is Forever. (screams: Movie Title!)
It's impossible for a layman to comment on the quality of nominations--the number of movies issued in the last week of the year would preclude my seeing the key ones before nominations are finalized, if the limited and localized relases (to those not Academy members) were not enough.
I did manage to catch "...Benjamin Button", and "Doubt". If it comes down to those two, I'll have no Doubt--Button is better. Lead actor, actress, direction, and best film. From "Doubt", I'd choose Amy Adams (over Viola Adams, also from the D-word-flick) as supporting actress. Ledger for S-Actor (of course).
For me, "...Benjamin Button" is more a throwback to "Little Big Man" than to the vastly inferior "Forrest Gump", the prizewinner to which it is often compared. Prosthetic makeup was basically given its first pioneering example in Dustin Hoffman's portrayal of the 110-year-old (or so) Sam Crabb. Of the two lead characters in "Button", I'd say Cate Blanchett's aged appearance is more award-worthy from the Best Actress point of view, but the movie will also be up for awards in technical creation, as in Brad Pitt's aged portrayal.
As for "Doubt", I thought a tense and interesting set-up had a fairly routine climax and denouement (particularly the latter, for which I thought Meryl Streep was a bit unconvincing).
College Football--I'm with Obama all the way. It's impossible to make a coherent argument in support of the current approach except that it is, and that therefore it requires some initiative to change it. No one seems to know how to make that happen.
This year's outrage is the exclusion-by-accident of USC and Texas from the so-called Championship Game. These two teams lost a single game, narrowly and somewhat flukishly, as did the two Championship contenders, Oklahoma and Florida. I don't begrudge either its spot in the final--ultimately they came as winners of the Big 12 and SEC championship games (themselves being a great target for elimination when we go to a 3-round playoff).
Texas was excluded from that Big 12 game (Oklahoma against non-factor Missouri--there's a great argument for eliminating the conference championships, as it didn't even produce a game between the two best teams in the conference!) because of its lower ranking in one of the polls. SC had the misfortune of not being South Carolina, a longtime member of the SEC. As it turned out, Florida's opponent was #1-ranked-and-undefeated Alabama, which itself would've been in the C.G. The subsequent underwhelming performances of Alabama and Texas don't prove they didn't belong, really: they were playing in the Unpopular Bowl, parts 1 and 2. Alabama's loss came to undefeated Utah, yet another reason for an inclusive playoff (even if it's a longshot for a low seed to win through).
I'm flexible: I would even go for a 6-team playoff (with a couple of bye teams) if it became necessary to make a compromise which does not lengthen the season excessively. The basic idea is to move the crux of decisioning to a level lower among the leaders: between 6 and 7, say, or between 8 and 9. Now it's always between 2 and 3. But Something. Must. Be done.
I suggest Obama appoint George W. Bush to settle the matter, Bush-style. Contrary opinions from college presidents will be noted, then politely ignored (as should much of what they do). They (O.-Dubya.) can probably see eye to eye on this one.
If this doesn't happen, what are the remedies to us, those who must endure this? I'd recommend boycotting those games like Rose, Fiesta, Sugar, which are in the BCS Championships but don't mean #1 or #2. Of course, I'd never go to one of those, anyway. We should avoid talking about them, or even acknowledging the legitimacy of their existence. TV Ratings Matter Not?
Movie Release TimingThe basic concept here is to minimize the amount of time from general release to Oscar nomination (Jan. 22). That is, if there are nominations to be had. Voting for Oscars seems to have a halflife of about four weeks.
I feel the only way to counter that is to urge voting for those like "The Dark Knight" and "Tropic Thunder" that dared to open early--and make the money. There is an exception, which will be duly recognized on Oscar night: Heath Ledger will be invulnerable to the time decay calculations on voting, because Death is Forever. (screams: Movie Title!)
It's impossible for a layman to comment on the quality of nominations--the number of movies issued in the last week of the year would preclude my seeing the key ones before nominations are finalized, if the limited and localized relases (to those not Academy members) were not enough.
I did manage to catch "...Benjamin Button", and "Doubt". If it comes down to those two, I'll have no Doubt--Button is better. Lead actor, actress, direction, and best film. From "Doubt", I'd choose Amy Adams (over Viola Adams, also from the D-word-flick) as supporting actress. Ledger for S-Actor (of course).
For me, "...Benjamin Button" is more a throwback to "Little Big Man" than to the vastly inferior "Forrest Gump", the prizewinner to which it is often compared. Prosthetic makeup was basically given its first pioneering example in Dustin Hoffman's portrayal of the 110-year-old (or so) Sam Crabb. Of the two lead characters in "Button", I'd say Cate Blanchett's aged appearance is more award-worthy from the Best Actress point of view, but the movie will also be up for awards in technical creation, as in Brad Pitt's aged portrayal.
As for "Doubt", I thought a tense and interesting set-up had a fairly routine climax and denouement (particularly the latter, for which I thought Meryl Streep was a bit unconvincing).
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