"And if an epitaph be my story, I'd have a short one ready for my own: I had a lover's quarrel with the world." -- Robert Frost
Wednesday, March 18, 2009
Immigrants May Save Housing
Yesterday's WSJ had an excellent article from Richard Lefrak and A. Gary Shilling about America's housing problem. If you assume the problem is collapsing housing prices, then the solution--offering accelerated permanent residency in exchange for foreign housing investment--makes sense. We already sell stocks, preferred shares, leases, and government bonds to foreign countries to keep our markets liquid. Lefrak and Shilling's proposed program just adds an individual-to-individual option to increase liquidity.
Tuesday, March 17, 2009
Public Pensions Bills to Surge, Taxpayers on the Hook
The WSJ's Craig Karmin has an interesting article on pensions ("Pension Bills to Surge"):
http://online.wsj.com/article/SB123716064273635495.html
Everyone acknowledges we have to hire good teachers, police officers, and firefighters; however, to prevent the public sector unions from taking more taxpayer funds than necessary, taxpayers need to be ever-vigilant. After all, that's our money and our children's money they're investing and taking.
Public pensions are an especially difficult issue to resolve, because they represent a long-term taxpayer liability. Thus, taxes and services do not need to be immediately raised or cut even if a pension's actuarial projections are incorrect. This absence of a short-term trigger makes it harder to alert taxpayers to the slowly ticking time bomb of pension liabilities.
California's problems are acute because even if pension assets decline substantially, payouts do not change. For example: if a California public pension loses 20% of its assets in one year, retirees still get paid the same amount, even though the pension has to dip into its assets to make the payouts. Why is this a problem? Dipping into a pension's assets usually means the pension is underfunded and will need higher-than-normal returns or more taxes to keep paying retirees. So either taxpayers are on the hook for ever-expanding retiree benefits, GM-style, or pension funds have to take risky investing strategies to bridge the gap between payouts and assets. No incentive exists for prudence. It doesn't have to be this way.
Wisconsin has a prudent policy "of adjusting the amount of benefits paid based on the pension fund's performance." Although this policy causes to retirees receive a benefit reduction, it also creates incentives for conservative investments and fewer tax hikes. If a pension doesn't do well, at least retirees will complain and hopefully cause some changes to be made to sustain the pension without a call for higher taxes (yes, this is partly wishful thinking, but at least someone becomes accountable more immediately). The WSJ also points out that some state employees could be switched to 401k plans, which is something I've advocated in the past. (See here.)
No matter what the solution is to the pension liability problem, action needs to be taken. More of the same isn't acceptable.
Bonus: Shelby Steele writes a very interesting article on Republicans and race:
http://online.wsj.com/article/SB123716282469235861.html
http://online.wsj.com/article/SB123716064273635495.html
Everyone acknowledges we have to hire good teachers, police officers, and firefighters; however, to prevent the public sector unions from taking more taxpayer funds than necessary, taxpayers need to be ever-vigilant. After all, that's our money and our children's money they're investing and taking.
Public pensions are an especially difficult issue to resolve, because they represent a long-term taxpayer liability. Thus, taxes and services do not need to be immediately raised or cut even if a pension's actuarial projections are incorrect. This absence of a short-term trigger makes it harder to alert taxpayers to the slowly ticking time bomb of pension liabilities.
California's problems are acute because even if pension assets decline substantially, payouts do not change. For example: if a California public pension loses 20% of its assets in one year, retirees still get paid the same amount, even though the pension has to dip into its assets to make the payouts. Why is this a problem? Dipping into a pension's assets usually means the pension is underfunded and will need higher-than-normal returns or more taxes to keep paying retirees. So either taxpayers are on the hook for ever-expanding retiree benefits, GM-style, or pension funds have to take risky investing strategies to bridge the gap between payouts and assets. No incentive exists for prudence. It doesn't have to be this way.
Wisconsin has a prudent policy "of adjusting the amount of benefits paid based on the pension fund's performance." Although this policy causes to retirees receive a benefit reduction, it also creates incentives for conservative investments and fewer tax hikes. If a pension doesn't do well, at least retirees will complain and hopefully cause some changes to be made to sustain the pension without a call for higher taxes (yes, this is partly wishful thinking, but at least someone becomes accountable more immediately). The WSJ also points out that some state employees could be switched to 401k plans, which is something I've advocated in the past. (See here.)
No matter what the solution is to the pension liability problem, action needs to be taken. More of the same isn't acceptable.
Bonus: Shelby Steele writes a very interesting article on Republicans and race:
http://online.wsj.com/article/SB123716282469235861.html
Monday, March 16, 2009
Financial Transparency
Daniel Roth had an excellent piece in Wired ("Road Map for Financial Recovery") promoting financial transparency:
http://www.wired.com/techbiz/it/magazine/17-03/wp_reboot
But the volume of data obscures more than it reveals; financial reporting has become so transparent as to be invisible. Answering what should be simple questions—how secure is my cash account? How much of my bank's capital is tied up in risky debt obligations?—often seems to require a legal degree, as well as countless hours to dig through thousands of pages of documents. Undoubtedly, the warning signs of our current crisis—and the next one!—lie somewhere in all those filings, but good luck finding them...
That's why it's not enough to simply give the SEC—or any of its sister regulators—more authority; we need to rethink our entire philosophy of regulation. Instead of assigning oversight responsibility to a finite group of bureaucrats, we should enable every investor to act as a citizen-regulator. We should tap into the massive parallel processing power of people around the world by giving everyone the tools to track, analyze, and publicize financial machinations. The result would be a wave of decentralized innovation that can keep pace with Wall Street and allow the market to regulate itself—naturally punishing companies and investments that don't measure up—more efficiently than the regulators ever could.
Transparency and citizen-advocacy? Sounds positively American.
http://www.wired.com/techbiz/it/magazine/17-03/wp_reboot
But the volume of data obscures more than it reveals; financial reporting has become so transparent as to be invisible. Answering what should be simple questions—how secure is my cash account? How much of my bank's capital is tied up in risky debt obligations?—often seems to require a legal degree, as well as countless hours to dig through thousands of pages of documents. Undoubtedly, the warning signs of our current crisis—and the next one!—lie somewhere in all those filings, but good luck finding them...
That's why it's not enough to simply give the SEC—or any of its sister regulators—more authority; we need to rethink our entire philosophy of regulation. Instead of assigning oversight responsibility to a finite group of bureaucrats, we should enable every investor to act as a citizen-regulator. We should tap into the massive parallel processing power of people around the world by giving everyone the tools to track, analyze, and publicize financial machinations. The result would be a wave of decentralized innovation that can keep pace with Wall Street and allow the market to regulate itself—naturally punishing companies and investments that don't measure up—more efficiently than the regulators ever could.
Transparency and citizen-advocacy? Sounds positively American.
Sunday, March 15, 2009
Universal Healthcare--A Different Perspective
Zeke Emanuel, Chair, Dept of Bioethics, NIJ Clinical Center, came up with a plausible solution to the health care crisis in this month's Commonwealth Club Magazine (page 43, March 2009). I don't have a link to share, but the title of the article is, "Scrapping the System." Mr. Emanuel has a book, Healthcare, Guaranteed.
Bonus: Of course, there's a blog: http://www.healthcareguaranteed.org/blog.cfm
Bonus: Of course, there's a blog: http://www.healthcareguaranteed.org/blog.cfm
Saturday, March 14, 2009
Love in the Time of Automobiles
This NYT piece, about one man's love for his wife, ought to be made into a film:
http://www.nytimes.com/2009/03/08/fashion/08love.html
Kudos to Mr. Layng Martine Jr. for being a good man.
http://www.nytimes.com/2009/03/08/fashion/08love.html
This incredibly capable woman who loved to hike mountains, ride waves, and run marathons, who had cleared our sizable backyard of eight-foot-high brambles and helped me move all our furniture into three houses, suddenly couldn’t do any of those things, ever again.
Not long after getting home from the hospital, when we were having dinner by candlelight at our kitchen table, she burst into tears. “I don’t know if I can do this for the rest of my life,” she said.
All I could say was, “We’ll do it together.”Kudos to Mr. Layng Martine Jr. for being a good man.
Friday, March 13, 2009
Stewart Takes on Cramer, Part 3
Years from now, if anyone wants to see the aftermath of America's financial excesses, they should review these three videos (March 12, 2009, Daily Show).
The most salient part for me was this question, asked facetiously: "A CEO lied to you? Shocking." How did we get to a world where it seems like the last remaining honest CEO is Warren Buffett?
Cramer also makes a great point when he asks, "Where are the indictments for these people?" I remember many banking CEOs going on CNBC proclaiming the safety and financial position of their company. Stewart is right to be angry when he says that CNBC assisted Wall Street in putting the wool over Main Street's eyes. Indeed, where are the indictments?
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