Archive for December, 2008

• A Healthy Democracy
  Eddy Elfenbein, December 3rd, 2008 at 11:45 pm

  This is stunning.
  Total Democratic Presidential Votes Since 1932: 745,407,082
  Total Republican Presidential Votes Since 1932: 745,297,123
  Total Third-Party Presidential Votes Since 1932: 66,061,486
  How’s that for parity? That’s a difference of 109,959 votes out of over 1.5 billion cast.
  Here’s a spreadsheet.
  Source: uselectionatlas.org

• Questions about the Wal-Mart Death
  Eddy Elfenbein, December 3rd, 2008 at 4:12 pm

  Wal-Mart is now being sued by the family of the worker who was trampled to death on Long Island. I truly hate these kinds of lawsuits but I can’t say I’m surprised.
  I would like to raise an uncomfortable question. The City of New York went out of its way to block every attempt by Wal-Mart to open a store in the city which included one in Queens.
  According to the Census Bureau, the village of Valley Stream is 7.5% black, while the pictures show that the crowd was heavily black. Would a store located in the neighborhood of its customers have been better able to handle a crowd? Please note: I’m not talking about race but geography.
  I don’t know what the answer is, but I think it’s worth asking. I’m not convinced the anti-Wal-Mart activists helped anyone.

• 100-Year Bonds
  Eddy Elfenbein, December 3rd, 2008 at 12:46 pm

  David Merkel has advocated the U.S. Treasury issue longer-dated bond, as far as 100 years. It makes sense. We can be pretty sure the government will still be around in 2108. The general idea is that the more in debt you are, the longer you want your term structure to be. Fifteen years ago, Disney issued 100 year bonds, and later Ford did. Of course, I don’t know if Ford will be around in 100 years. Perhaps as a minor division of Toyota.
  Now, Peter Fisher, who used to be Treasury undersecretary, has also come out in favor of a 100-year bond. Fisher was the same guy who ditched the 30-year bond a few years ago. Of course, Uncle Sam’s finances looked a lot better then. Fisher was also the guy who got calls from Bob Rubin to help out Enron when it was going under. Fisher told Rubin (correctly) that the economy would survive an Enron bankruptcy.
  I could go one step further and say we need perpetuities—bonds that never mature. The Brits call these consol bonds. Mathematically, there’s something I like about perpetuities. You can ditch the complex YTM formula and simply divide the coupon by the current price of the bond.

• Big Three Seek $34 Billion Aid
  Eddy Elfenbein, December 3rd, 2008 at 10:44 am

  Detroit’s plan for survival includes a lot of our money:

  Detroit’s Big Three auto makers presented turnaround plans to Congress on Tuesday that indicate both General Motors Corp. and Chrysler LLC could collapse by the end of the month unless they get billions of dollars in emergency government loans.
  As part of a renewed bid for a bailout, GM said it needs an immediate injection of $4 billion to stay afloat until the end of the year, a fact it hadn’t before disclosed. In total, the company said it needs $18 billion in loans — $6 billion more than it said it would need just two weeks ago.
  Chrysler’s 14-page summary of its presentation to Congress requests $7 billion, and it said it needs the funds by Dec. 31. Chrysler also wants $6 billion from a Department of Energy program aimed at promoting fuel-efficient vehicles.
  Ford Motor Co. seeks a $9 billion line of credit from the government, though it adds it may not need to tap it. In addition, Ford wants $5 billion from the Energy Department program.
  All three makers said they will consolidate operations and accelerate production of higher-mileage vehicles. In addition, GM and Ford plan to trim their brands.

  I’m not political strategist, but I don’t see how a bailout could pass. The financial bailout was a special situation. But here, the car companies are just going broke.

• Time to Ditch the Extra-Point?
  Eddy Elfenbein, December 2nd, 2008 at 10:23 pm

  Extra-points are getting out of hand this year. The PAT success rate is normally very high, but this year it’s reaching absurd levels. Through week 13, only 3 extra-point attempts failed out of 884 tries. That’s a success rate of 99.66%. Sheesh, that’s even higher than Ivory Soap.

  Sorry, but anything that consistent isn’t a game anymore. To put it in context, the number of missed PATs is down by about 90% from 20 years ago. Remember, football is a game. That means it’s supposed to be, you know, fun to watch. Well, 99.66% ain’t fun to watch. It’s a mockery of sports. The PAT has become a useless play that could only cause injuries.

  So should we just get rid of it? Nah, it’s been around forever, so let’s try modifying it.

  How about moving the extra-point line back? Well, let’s look at the data. In the 20 to 29-yard range, kickers have made 203 of 206 attempts this year for a 98.54% success rate. I’m assuming that’s a median attempt of 24.5 yards, meaning the line of scrimmage is about the 7 or 8. Remarkably, that lower success rate is still higher than the league’s extra-point success rate until 15 years ago.

  One idea would be to move the PAT line back to, say, the 10-yard line. Of course, that would make a two-point conversion much harder. The problem is that the 2-point conversion already can’t compete from the 2-yard line. The success rate runs at 44% which makes it inefficient compared to the 1-point try. The 2 is only used when it has to be. (Do the one- and two-point attempts have to take place at the same place? Hmmm. For simplicity’s sake, I’d say yes).

  Here’s a look at the percent of missed PATs going back to 1974 when the NFL moved the goalposts to the back of the endzone. I should note that there have been some rule changes. For example, running “leaps” by the defense were banned in 1984. Cool to watch but probably a bit dangerous.

  

  The rule change I’d support wouldn’t be to move the extra-point line back, but moving it in a little bit. Perhaps to the one-yard line, or maybe the four- or five-foot line. That would make the 2-point try more competitive while having no impact on the 1-point try. Just like in economics, it’s all about incentives.

  Update: Brian Burke has more. He says to narrow the goal posts.

• Hoofy and Boo Win an Emmy
  Eddy Elfenbein, December 2nd, 2008 at 10:10 pm

  Congratulations to everyone at Minyanville:

  Minyanville Media, the fast growing financial information and entertainment company, today won a Business and Financial Reporting Emmy for its animated news show “Minyanville’s World in Review with Hoofy and Boo.”
  The show was honored by The National Academy of Television Arts and Sciences, in the New Approaches to Financial Reporting category for its groundbreaking weekly show starring the animated icons of finance, Hoofy the Bull and Boo the Bear.
  “It is a humbling honor for us, to be recognized as a leader of business news reporting,” said Minyanville Founder and CEO Todd Harrison. “We continue to do our part in helping narrow the gap between what people know about managing their money and what they need to know,” he added.

• Victoria Secret Model Gets all Pottymouth on CNBC
  Eddy Elfenbein, December 2nd, 2008 at 3:35 pm

  Sorry for the commercial intro. The clip starts at 16 seconds.
  
  Here’s the clip with Victoria Secret’s CEO. Later, Michelle Caruso Cabrera asks who “did the lovely tease for us.”

• 10-Year Yield Drops to 50-Year Low
  Eddy Elfenbein, December 2nd, 2008 at 12:49 pm

  The yield on the 10-year Treasury fell below 2.7%. That’s lowest on the daily records which go back to 1962. The monthly records go back further so it’s the lowest since 1955.
  
  With the S&P 500 currently around 845, this means that index only needs to get to 1073 over the next ten years to beat the Treasury bond. That doesn’t include dividends and the yield on stocks may be higher than 2.7%. (Some in the media have said that the S&P’s yield is already above long-term Treasuries, but I’d rather see how dividend payouts fare in the coming months before I’d say it’s true.)

• Kudlow on the Recession
  Eddy Elfenbein, December 1st, 2008 at 4:06 pm

  From December 5, 2007:

  The Recession Debate Is Over
  There ain’t no recession.
  Today’s ADP private jobs survey of 189,000 could produce a 200,000 non-farm payroll job gain for November. I don’t know — these wacky BLS numbers are subject to huge revisions. But the ADP was a huge number. In fact, jobs seem to be picking up major steam from their August low, rising in September and October. And now I’m expecting a good increase in November to be reported by the BLS this Friday.
  Plus, profits are stronger than people seem to understand. The ISMs are fine. Productivity, reported out today, soared to over 6 percent annually in the third quarter. That’s the best productivity number in four years for output per person.
  On top of that, business inflation is zero. Flat. Nada.
  The recession debate is over. It’s not gonna happen. Time to move on.
  At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come.

• Want to Know About Hedge Funds
  Eddy Elfenbein, December 1st, 2008 at 2:43 pm

  Donald MacKenzie in the London Review of Books has a long article on hedge funds:

  You could walk around Mayfair all day and not notice them. Hedge funds don’t – can’t – advertise. The most you’ll see is a discreet nameplate or two. An address in Mayfair counts in the world of hedge funds. It shows you’re serious, and have the money and confidence to pay the world’s most expensive commercial rents. A nondescript office no larger than a small flat can cost £150,000 a year. Something bigger and in the style that hedge funds like (glass walls, contemporary furniture) can set you back a lot more. It’s fortunate therefore that hedge funds don’t need a lot of space. Two rooms may be enough: one for meetings, for example with potential investors; one for trading and doing the associated bookkeeping. Some funds consist of only four or five people. Even a fairly large fund can operate with twenty or fewer.