One of the problems with out of control government spending is the way it affects the behavior of government itself. Like any other junkie, the government convinces itself it needs "just one more" fix and will do anything to get it. Again like a junkie, the government will prostitute itself and steal from friends and family to keep the drug supply coming.
We see a glaring example of the later when governments simply grab private property in order to pay off their own debts. We have already seen the precedent for pensions being seized by government. Just last week in Hungary the government grabbed $14 billion in private assets. Over the weekend, the Irish government decided to take 15 billion Euros from the future pensions of its citizens to give to the banks. Now France is taking 36 billion Euros from the pension fund to keep its bloated and unsustainable welfare state afloat for just a little while longer.
People need to understand that the United States is not immune to the same financial pressures that caused Hungary, Ireland and France to take these desperate measures. If you are counting on a future pension from the state, you might wish to start making alternate plans. In most states, there is effectively zero chance that you will get everything promised - the state government pension funds are already over $1 trillion in the hole. The gap will only grow as additional obligations are incurred but little new money is available to meet them from the state budget side. It would be completely unsurprising if the more desperate and foolish states attempted to raid these pension funds to "invest" in more unemployment payouts or other attempts to fund general budget spending.
Of course we won't have that problem with Social Security since it is funded entirely by current taxes. Since no such pension fund exists, we don't have to worry about the government grabbing it. Of course that raises the question of which assets the will try to take since the same financial imperatives and the same junkie behavior are at work in Washington as in Budapest, Dublin and Paris. That said, we need to be vigilant for any sign that similar asset seizures are imminent here in the United States since the precedent has already been set. We have been warned by events across the pond.
Monday, 29 November 2010
Wednesday, 24 November 2010
New Video on Risk and Return
I've posted a new video on Risk and Return - it covers the typical material presented in and introductory class from the math of risk and return (Expected returns, standard deviations, covariance and correlation) through Markowitz Portfolio Theory and the Capital Market Line through the CAPM and the Security Market Line. it has a table of contents, so you can skip around. Click on the video below to see it - it's a pretty big file, so it might take a while to load.
In case you don't want to view the whole thing at one sitting (it's a bout 90 minutes), the video is organized as follows (I reference the numbers in the Table of Contents):
In case you don't want to view the whole thing at one sitting (it's a bout 90 minutes), the video is organized as follows (I reference the numbers in the Table of Contents):
- Sections 1-13 (roughly from the beginning to 38 minutes in - the "math" risk and return (Expected Returns, Standard Deviation, Covariance, and Correlation)
- Sections 14-25 (from minutes 38 to 75): Markowitz Portfolio Theory and the Capital Market Line
- Sections 26-32 (Minutes 75 to the end): Systematic and Unsystematic Risk, The CAPM and the Security Market Line
Happy Thanksgiving
It looks like Unknown University is all but deserted the day before Thanksgiving. I finally decided to quit swimming against the tide, and canceled classes for today (I usually only get about 30% attendance on the day before Thanksgiving in the best of times, so it's no big loss).
Instead, I told the students that I'd put up a video with the lectures for the week on Risk and Return. Once it's done, I'll post a link here. I'm pretty happy with it - it runs the gamut of topics from the calculations for standard deviation, covariance, expected returns, etc... to Markowitz Portfolio Theory and the Capital Market Line to the CAPM and the Security Market Line.
Although I don't use all this material in my intro class, I expect to use it in my investments class this spring. So, this should allow me to go a bit faster and cover more material there.
Unfortunately, I have to wait another hour before the video software is done rendering the final version and I can go home. Then it's off the the Unknown In-Laws house tomorrow for turkey overload and football.
Here's wishing you all a Happy and safe Thanksgiving
Instead, I told the students that I'd put up a video with the lectures for the week on Risk and Return. Once it's done, I'll post a link here. I'm pretty happy with it - it runs the gamut of topics from the calculations for standard deviation, covariance, expected returns, etc... to Markowitz Portfolio Theory and the Capital Market Line to the CAPM and the Security Market Line.
Although I don't use all this material in my intro class, I expect to use it in my investments class this spring. So, this should allow me to go a bit faster and cover more material there.
Unfortunately, I have to wait another hour before the video software is done rendering the final version and I can go home. Then it's off the the Unknown In-Laws house tomorrow for turkey overload and football.
Here's wishing you all a Happy and safe Thanksgiving
Tuesday, 23 November 2010
Kissing Up is Good Practice
It's important to be good at the technical aspects of your job. But the "soft" stuff may be even more cirtical - the ability to get along with coworkers (and more important, with bosses) has a lot to do with eventual career success.
Tow researchers (Ithai Stern at Northwestern University and James Westphal at the University of Michigan) recently published a study in Administrative Science Quarterly titled "Stealthy Footsteps to the Boardroom: Executives’ Backgrounds, Sophisticated Interpersonal Infl uence
Behavior, and Board Appointments (here's an ungated copy). They lay out several effective ways of "kissing up" to the boss:
Tow researchers (Ithai Stern at Northwestern University and James Westphal at the University of Michigan) recently published a study in Administrative Science Quarterly titled "Stealthy Footsteps to the Boardroom: Executives’ Backgrounds, Sophisticated Interpersonal Infl uence
Behavior, and Board Appointments (here's an ungated copy). They lay out several effective ways of "kissing up" to the boss:
- Go with discomfort: Preface compliments to the boss with something like "I don't want to embarrass you, but..."
- Frame it in question form: Ask for advice - it's just as flattering as a compliment. goes down a lot easier
- Bait and switch: Start out by disagreeing with the boss and then gradually warm to their opinion. Instead of being a "Yes Man", be a "'No,' then 'Yes'" man).
- Go around the corner: Find a third-party (best if it's a close confidant of the boss), and talk admiringly about the boss. Odds are, it will get passed on.
- Look for common ground: Pick a topic (anything from parenting to religion to politics) and make unsolicited statements and opinions about the matter that you think are also held by your target. Positive impressions will lower the red-flags on future praise.
- Look for common groups: Bring up social affiliations that you may have in common.
Monday, 22 November 2010
Happy Thanksgiving From the TSA
Luckily, we're not flying this Thanksgiving - we live a mere 2 hours from our families. But in case you are, here's a pretty funny clip from SNL.
Now take off you D**n shoes!
Now take off you D**n shoes!
Monday, 15 November 2010
Annoying or Amusing?
I had the genuine pleasure this past Thursday of speaking to 150 new faculty members in the Virginia Community College System. It is always a treat to work with people at the very beginning of their teaching careers. They have such a wonderful opportunity to help change the world.
One of the themes that I explored with the group was the idea of improvement. If you continue to improve as a teacher, year after year, you will get very good and eventually become great. And, the amount of annual improvement doesn’t have to be huge. In connection with their teaching, I suggested that every person work toward making a mere 5 percent improvement per year. That is doable and at that rate, in not too many years, you can become the best teacher in your building.
However, a great majority of teachers get better for awhile but eventually plateau. Many people who were B- teachers two decades ago are still B- teachers. I find that troubling. Why doesn't a B- teacher eventually become an A+ teacher?
There is a point where it simply becomes easy to say “I am what I am and I am never going to get any better so I’m not even going to try.” As you can imagine, that is not an attitude that I like. As far as I’m concerned, if I am not dead, I should be working to get better.
The question comes up, then, as to what causes a teacher to plateau. I have known a fair share of people who were good teachers and then suddenly began to become disgruntled. After that, they never got one bit better.
When does that happen? I have a theory. When you first start teaching, it is easy to find your students amusing. My students are all about 19 years old and I occasionally refer to them as puppies. They are just beginning to try out the responsibilities of adult life. As with growing puppies, this time can often be a very humorous period of transition.
However, there can come a time when those same students and those same actions can become annoying. A student will say something bizarre and instead of finding it amusing, the professor finds the student’s ignorance to be annoying.
In fact, if a professor ever says to you, “students simply aren’t like they used to be,” that is a clear sign that they have gone from viewing students as amusing to annoying.
If you find students in general to be amusing, then you are willing to do the work that is necessary to continue to improve. Five percent improvement is clearly a possibility. But, if the students have started to annoy you, then improvement becomes a much more difficult task. It is very easy, at that essential moment, to hit that plateau where your days of improvement cease.
So, wherever possible, I try to view the actions of my students as relatively amusing. And, even though they do incredibly dumb things at times, I try to avoid staying in a constant state of annoyance. The reason is fairly obvious. I really do want to get better. I want to get 5 percent better by this time next year. And, that is hard to accomplish if everything the students do seems to annoy you.
One of the themes that I explored with the group was the idea of improvement. If you continue to improve as a teacher, year after year, you will get very good and eventually become great. And, the amount of annual improvement doesn’t have to be huge. In connection with their teaching, I suggested that every person work toward making a mere 5 percent improvement per year. That is doable and at that rate, in not too many years, you can become the best teacher in your building.
However, a great majority of teachers get better for awhile but eventually plateau. Many people who were B- teachers two decades ago are still B- teachers. I find that troubling. Why doesn't a B- teacher eventually become an A+ teacher?
There is a point where it simply becomes easy to say “I am what I am and I am never going to get any better so I’m not even going to try.” As you can imagine, that is not an attitude that I like. As far as I’m concerned, if I am not dead, I should be working to get better.
The question comes up, then, as to what causes a teacher to plateau. I have known a fair share of people who were good teachers and then suddenly began to become disgruntled. After that, they never got one bit better.
When does that happen? I have a theory. When you first start teaching, it is easy to find your students amusing. My students are all about 19 years old and I occasionally refer to them as puppies. They are just beginning to try out the responsibilities of adult life. As with growing puppies, this time can often be a very humorous period of transition.
However, there can come a time when those same students and those same actions can become annoying. A student will say something bizarre and instead of finding it amusing, the professor finds the student’s ignorance to be annoying.
In fact, if a professor ever says to you, “students simply aren’t like they used to be,” that is a clear sign that they have gone from viewing students as amusing to annoying.
If you find students in general to be amusing, then you are willing to do the work that is necessary to continue to improve. Five percent improvement is clearly a possibility. But, if the students have started to annoy you, then improvement becomes a much more difficult task. It is very easy, at that essential moment, to hit that plateau where your days of improvement cease.
So, wherever possible, I try to view the actions of my students as relatively amusing. And, even though they do incredibly dumb things at times, I try to avoid staying in a constant state of annoyance. The reason is fairly obvious. I really do want to get better. I want to get 5 percent better by this time next year. And, that is hard to accomplish if everything the students do seems to annoy you.
Sunday, 14 November 2010
Yo Momma is a Data Miner
Having a lot of data makes research easier - we now have more data in easily readable formats than ever before, and an amazing amount of computing power on our desktops (I have far more horsepower on my desk than NASA had in total in the 1980s)..
Unfortunately, there's a flip side to that coin - we can easily find variables (or specifications) that seem to "predict" returns (or just about anything). In reality, we're often just overfitting the data.
Here's a pretty good piece on the topic titled "Yo Momma is a Data Miner", by David Leinwebber in which he fits a polynomial time-series regression to the S&P 500 with surprising (if you don;t follow what he's doing) good results - particularly since he's using things like the sheep population and Bangladesh Butter production as regressors.
Unfortunately, there's a flip side to that coin - we can easily find variables (or specifications) that seem to "predict" returns (or just about anything). In reality, we're often just overfitting the data.
Here's a pretty good piece on the topic titled "Yo Momma is a Data Miner", by David Leinwebber in which he fits a polynomial time-series regression to the S&P 500 with surprising (if you don;t follow what he's doing) good results - particularly since he's using things like the sheep population and Bangladesh Butter production as regressors.
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