Hiatus

Blogging will likely be less frequent for a while as I begin my new job .

Autopsy

Perhaps health care reform is not quite dead but additional delays are likely to be fatal. I believe Yglesias is correct that the sudden collapse of support is a sign that many Democrats were not very enthusiastic about reform. Hence the lack of urgency and delays chronicled in this TPM timeline . Support for reform in general has always been greater than support for any specific reform proposal making it easy to underestimate how difficult it will be to pass a specific proposal.

Bipartisan

What does it mean for an initiative to be bipartisan? In my view it means it has majority support from both parties. Perhaps this is too stringent but it should at least have substantial support in both parties. But this is not what the Democrats mean when they talk about bipartisan. They are not proposing true compromises that would be supported by a majority of Republicans, instead they just want to attract a small number of Republicans in order to put a Democratic initiative over the top. This might be a sensible strategy but it is not in my view a bipartisan strategy.

Principal reductions

Felix Salmon asks why banks are reluctant to modify loans rather than foreclose and concludes:

Why are the banks behaving like this? I think the obvious answer is the right one: they’re holding these loans on their books at much more than they’re really worth, and they can’t afford to take the write-downs which would accompany principal reductions of roughly the same magnitude as the decline in housing prices. This kind of head-in-the-sand behavior can only possibly work if housing prices suddenly rebound in the next couple of years, and that ain’t gonna happen.

The obvious alternative explanation is principal reductions generally are not in the banks best interest. Most people with underwater mortgages will not in fact default. So writing everyone down to market value is a loser for banks, the amount they may gain by avoiding foreclosures is outweighed by the losses on the mortgages that would have been paid in full.

And I think the harm caused by foreclosures is being exaggerated. Foreclosures are associated with falling market values but this does not mean they cause falling market values. Instead falling market values cause foreclosures.

There has been a lot of talk about keeping people in their homes but in many cases everyone is better off with a quick and clean default.

SOTU

I didn't watch President Obama's State of the Union speech but I did read the transcript . On the whole it seemed competent enough but I doubt it will change many minds. Some random comments on excerpts follow.

To recover the rest, I've proposed a fee on the biggest banks. (Applause.) Now, I know Wall Street isn't keen on this idea. But if these firms can afford to hand out big bonuses again, they can afford a modest fee to pay back the taxpayers who rescued them in their time of need. (Applause.)

This sounds reasonable but as I understand it Obama also wants the banks to pay for the bailout of GM and Chrysler which seems less so.

Tomorrow, I'll visit Tampa, Florida, where workers will soon break ground on a new high-speed railroad funded by the Recovery Act. ...

I don't understand the liberal fascination with high speed rail which is expensive and pointless. As I understand it this is a multibillion dollar project to build a high speed rail line between Orlando and Tampa. It seems like it would a lot cheaper and more flexible to buy a few buses.

... where prosperity was built on a housing bubble ...

Here Obama acknowledges there was a destructive housing bubble but elsewhere in the speech appears to think it would a good thing if housing prices returned to bubble levels.

... And that means building a new generation of safe, clean nuclear power plants in this country ...

Nice to see some good words for nuclear power.

... That's why we're working to lift the value of a family's single largest investment –- their home. The steps we took last year to shore up the housing market have allowed millions of Americans to take out new loans and save an average of $1,500 on mortgage payments.

Why try to preserve bubble prices? It is expensive and likely futile in the long run.


This year, we will step up refinancing so that homeowners can move into more affordable mortgages. ...

Again this is a subsidy for housing by keeping mortgage rates artificially low. This is the thinking that got us into trouble.

... And it is precisely to relieve the burden on middle-class families that we still need health insurance reform.

This is disingenuous. The current reform proposals are largely a massive new welfare program which will primarily benefit the poor. It is hard to see how this will relieve the burden on the middle-class.

... And we should continue the work of fixing our broken immigration system -– to secure our borders and enforce our laws, and ensure that everyone who plays by the rules can contribute to our economy and enrich our nation.

This sounds good.

Wine errors

Felix Salmon discusses cases where people order expensive bottles of wine by mistake and receive an unexpected bill for thousands of dollars. He is strangely unsympathetic ("... you have no one to blame but yourself ...") considering his position when people accidentally trigger exorbitant bank fees. In my view it is the restaurant's responsibility to make sure people know the price when it is out of line with the rest of the meal. Especially since expensive wine is basically a scam (people can't distinguish expensive wines in blind taste tests).

I don't actually know the legalities if someone refuses to pay (based on a sincere misunderstanding). There was no contract because there was no meeting of minds (mutual agreement on terms). I don't know what courts do in such cases, where the transaction can't be unwound, perhaps try for an equitable resolution of some sort.

Abortion and rape

Liberals sometimes claim to not understand why some people who generally think abortion should be illegal are willing to make an exception in rape cases. For example Kevin Drum :

... I still don't get the rape and incest exception, though. If it's murder, why is it OK to murder children born of rape or incest?

This is a bit muddled, a fetus doesn't become a child until it is born. And if abortion is legal in rape cases then it isn't murder as murder is a legal term for certain unlawful killings. Statements that abortion is murder are really claims that killing a human fetus is analogous to killing a human child or adult and should be illegal for similar reasons. But these reasons are not sufficient for society to make all killing illegal, in exceptional cases such as self-defense killing is allowed. So there is no logical reason society cannot allow some abortions to be legal as well when outlawing them would also impose an unjust burden as is arguably the case for rape.

New job

I have accepted the employment offer which I received last month. I will begin work Monday, February 1. It appears best I say nothing more about the specifics of the job. It will likely leave less time for blogging.

Individual mandate

Apparently the most unpopular part of the Democratic health care reform proposals is the individual mandate. Kevin Drum claims:

And the least popular feature? The individual mandate, by a landslide. It's even less popular than the $900 billion cost, which is pretty remarkable. Unfortunately, the whole plan falls apart without a mandate, so there's not much we can do about that. Just learn how to explain adverse selection to your relatives when you're trying to sell them on the plan, OK?

However it would be easy to devise plans without an individual mandate. The requirement for a mandate is the consequence of the following liberal beliefs about health insurance.

1. Everybody should be covered.
2. Everybody should pay the same rate.
3. Everybody should receive the same, gold plated, coverage.

The primary reason liberal plans have a mandate is that liberals want everybody to be covered whether they want to be or not. Without a mandate some people will choose not to buy insurance. The number of such people is greatly increased by incorporating the other liberal beliefs in designing plans. Charging everybody the same rate means some people are being greatly overcharged making them more likely to want out. Similarly some people who would voluntarily buy cheap insurance will balk at being forced to buy expensive gold plated plans.

There are numerous ways to encourage people to voluntarily buy insurance compatible with basic economics. Such plans would not lead to everybody being covered but neither will a plan that can't get through Congress.

Coldest days

In terms of historical averages (for White Plains ) the coldest days of the year around here lie in the range January 16-21. After a cold start of the year the last week or so hasn't been bad. Still it is nice that temperatures are now rising on average.

The hottest days are a bit more than six months later from July 29 to August 13.

Edwards

Thursday, John Edwards belatedly admitted paternity of his mistress's child. Edwards had sought the 2008 Democratic nomination for President while carrying on an affair with Rielle Hunter .

To me, the most interesting part of this story was the extreme reluctance of many mainstream media organizations to cover it. It is a reminder of how narrow the range of "respectable" opinion can be and how cowardly the news media can be about covering any story that might offend the establishment.

Post-mortem

In the aftermath of the Republican victory in the Massachusetts Senate special election health care reform (HCR) appears in deep trouble. Many Democrats were never very enthusiastic about HCR but didn't want to openly oppose it. Hence its long and tortuous path through Congress to date. But it is hard to see a path to passage at this point although a simulacrum of life may remain for while as no one wants to be the one to declare HCR officially dead. Of course I have been mistaken before about HCR's chances.

If HCR does fail this will be pretty bad for the Democrats. In my view it was a mistake for the Democrats to make HCR their main priority. They would have been better off passing some incremental changes (like extending COBRA) while concentrating on the economy and financial reforms. Unfortunately it will be difficult to change course at this point. They have thrown away a lot of political capital for nothing and the window for passing strong financial reforms may have passed. This would have been easiest accomplished at the height of the crisis when the banks needed government help to survive. Now the administration has no leverage. Nor do they seem all that determined, perhaps because Obama just isn't that interested in the economy.

Brown beats Coakley

I was pleased to see Scott Brown defeat Martha Coakley in the Massachusetts Senate special election. The Democrats changed the rules for filling a Senate vacancy after Kennedy died. This was the second such rules change motivated by considerations of partisan advantage since 2004. Yglesias defended this here :

... But when you have a state whose state legislature is firmly and forever in the hands of one political party, the smart thing is for the legislature to be constantly changing rules based on short-term considerations. ...

Perhaps it wasn't so smart after all.

Bundling

People sometimes complain about being forced to buy cable TV channels they don't want because they are typically sold in bundles. Here is Felix Salmon. These people seem to be under the delusion that if for example the bundle price for say 50 channels was $25 per month then the a-la-carte price would be $.50 per channel. But that is not how volume pricing works, the individual prices would be higher and any consumer savings would have considerable cost in the form of fewer channels available. A-la-carte pricing is the sort of thing that mostly sounds good only because people don't understand how it would actually work out in practice.

Brown vrs Coakley

The special election for Ted Kennedy's former Senate seat takes place next Tuesday. Republican Scott Brown is running against Democrat Martha Coakley. The Democrat would normally be heavily favored in Massachusetts but the race appears to be competitive . In fact currently on Intrade Brown is favored by about 3-2. I think I would bet on Coakley, mostly because I want Brown to win and betting on Coakley would be a form of hedging. If Brown won I could think of the bet as the equivalent of a campaign contribution and if Coakley won I would have my winnings as solace. Also at those odds it doesn't seem like a bad bet although I know little about Massachusetts' politics.

Turbotax Deluxe 2009

I have always done my state and federal income taxes manually. However this year I decided to try Turbotax. I had hoped to receive it in time to figure my final estimated tax payment (due January 15). However due my procrastination and refusal to pay more for expedited shipping I didn't receive it until Saturday so I had estimate what my taxes would be manually anyway.

Having now received it I can report my first impressions. I got the Deluxe version which includes 1 state return and federal efile.

To start I found the data entry a bit awkward as it assumes you have all your W-2, 1099 and similar forms in front of you and it is not always clear how to proceed if you don't. And when I tried to import my dividends received from Quicken it lumped them all together which is not correct. It also kept trying to sell me a fancier version to handle investments although I think this is unnecessary.

Another problem is my 2009 taxes are affected by my 2008 taxes. If I had used Turbotax last year this would presumably have been no problem but as it is I had to enter a lot of data from 2008 including data from worksheets. This would have been easier if Turbotax had given the location (page numbers) of the worksheets.

In general it seems that I may not save all that much time. Having done my taxes manually for many years I know which calculations to skip as they won't save me money. However Turbotax has me spend time figuring credits that I ultimately don't qualify for. Of course it could turn out I have been overlooking something for years. On the other hand Turbotax seemed overly willing to assume a state tax refund I received was taxable income.

So my initial impressions are a bit negative. Of course my mood was not improved by learning that the AMT is going to be a considerably larger hit for me in 2009 than it had been in previous years.

Zero at the Bone

I recently read "Zero at the Bone" by John Heidenry. This is a true crime account of the 1953 kidnapping and murder of Bobby Greenlease, a 6 year old boy, by two alcoholic losers who were quickly caught and executed. I did not find it very worthwhile.

In part this is because of the depressing subject matter. The two perpetrators, Carl Austin Hall and Bonnie Heady, are completely unsympathetic planning to kill the little boy from the start. Heady's role was to remove the boy from his school by posing as his aunt. Hall killed the boy and then sent ransom demands to his parents eventually collecting a $600000 ransom. Hall didn't enjoy the money long as he quickly drew attention to himself and was arrested. As was Heady who seems to have been in a drunken stupor for most of their time on the run. Nor are the police very appealing only catching Hall after being tipped and then apparently stealing half the ransom.

But it is also because the author does not tell the story in a very interesting manner spending far too much time for example in a tedious recounting of Hall's exact movements after he collected the ransom and before he was caught.

So in summary this is a not very enthralling account of a lurid but ultimately not very significant crime. Give it a pass.

The Myth of the Rational Market

I recently read "The Myth of the Rational Market" by Justin Fox. This book is largely a history of the development of academic models of the stock market. I found it interesting although perhaps a bit long. I was already familiar with these models in general terms which probably made the book easier to follow.

As the book notes models are simplifications of reality. As such they are never completely correct but may nevertheless be useful. However you must be aware of their limitations. Unfortunately financial modelers often have excessive faith in their models and this can lead to problems. One common problem is failure to properly take tail risk into account. Tail risk is the risk from rare events. Because the events are rare they are easy to ignore but this can be dangerous as one bad day can wipe out several profitable years. This is especially a problem with new financial products that don't have a big experience base to reveal problems.

Another problem is a preference for mathematically elegant models even when they don't match reality. For example modeling stock prices is easier if you assume they move continuously but real stock prices sometimes jump discontinuously. A continuous model can still be useful but you shouldn't forget that stock prices don't always move continuously. Unfortunately academic economists have a tendency to fall in love with their models and come up with elaborate explanations for why apparent discrepancies with the real world are illusory. As with strained claims that real world bubbles don't exist because their models don't predict them.

The recent financial crisis has left financial modelers somewhat discredited. Although as the book observes the problems were primarily outside the stock market which has been the primary focus of academic work. I don't think the answer is to throw out models entirely but to be more cautious in relying on them. Particularly when they are being used to sell new financial products.

Ruthless default again

Last month I posted my thoughts on ruthless default concluding that, where legal, it is not particularly wrong.

Megan McArdle continues to argue the anti-default position. I found her arguments muddled and unconvincing.

First her list of pro-default arguments omits the main one, that it can be a legal way of saving yourself hundreds of thousands of dollars. A moral obligation has to be pretty strong to compel you to give up that much money and I don't see the case here. Note it doesn't make any sense to default if you are just a little bit underwater, this is only an issue for people who are way underwater. If you are happy with your home how much over market value would someone have to offer to get you to move? Quite a bit for me and I believe most other people.

Additionally many of McArdle's arguments against other pro default arguments don't make a lot of sense to me. For example:

All well and good, except that if you are walking away from a mortgage simply because the house is underwater, you have no authority to punish them. After all, the reason it was stupid to lend money to you is not that they were lending money to someone who probably couldn't pay it back; you can. The reason that it was stupid to lend money to you is that you're a deadbeat--a foolish deadbeat, who thought that house prices are a magic route to free money. That's not something they could reasonably have been expected to know. Also, "banks need to be punished for being almost as stupid and greedy as I am" doesn't have much of a ring to it.

But of course it is not foolish to obtain a loan on favorable terms. If house prices went up you got the profit, if they went down the bank took the loss. Heads I win tails you lose is not a foolish bet for me. And it is in fact stupid for banks to lend on such terms.

McArdle continued:

Moreover, those cheerleading such behavior seem to be under the misimpression that this will somehow be targeted at banks that made stupid loans. But the people who are walking away simply because the price dropped are not going to distinguish between good, sound credit unions with a conservative loan book, and big, greedy pension funds and charity endowments that bought residential mortgage backed securities. They're going to walk away from anyone holding the loan on a house where the price has dropped by more than the downpayment--which in places like California and Florida, is probably any house purchased between 2004-2007, no matter how conservative the underwriting.

Of course it is targeted at banks that made stupid loans. Which most non-recourse loans that don't require a substantial down payment are. And as I noted above people won't walk away just because they are a little underwater. This is especially true where a substantial down payment was required. Since people are reluctant to take losses they are a lot less likely to default when it means forfeiting a substantial down payment. So banks with conservative underwriting will have fewer borrowers walk away and they will lose less on the ones that do.

McArdle also claimed:

Okay, first of all, nothing would have stopped people from writing awful loans at the height of the bubble, because they didn't think the loans were going to go bad like they did. ...

This is nonsense. A legal requirement of 20% down would have stopped a lot of bad loans. Just as margin requirements prevent a lot of bad loans against stock.

McArdle also argued:

Except that banks would probably flood DC and state capitols with lobbyists trying to change the rules. There hasn't really been much value, up until now, in changing the recourse rules--I mean, banks probably prefer one to the other, but it's not their top priority, because people almost never default on their house unless things are so dire that there's no hope of recovering much anyway. If that changes, tougher rules become a top priority--and eventually, they'll probably get them, if the alternative is tougher underwriting, higher interest rates, and bigger downpayments.

First nothing is changing, people have always been willing to walk away when it was legal and greatly to their advantage. They didn't do so in great numbers in the past because banks maintained sensible underwriting standards. Second even if more people defaulting leads to changing the law (which I think is unlikely) this is not a moral argument against defaulting. You are not morally obligated to refrain from taking advantage of a tax provision just because if too many people take advantage of it the provision will be changed.

In summary McArdle asks people to voluntarily refrain from exercising legal options potentially worth hundreds of thousands of dollars for nebulous moral reasons. I don't understand why anyone would expect this to happen.

Hudson ice report

I walked in Croton Point Park last Thursday and noted the Hudson was largely ice free. I walked in the park again on Monday and was surprised at how much difference a few days made as I saw little if any clear water.

Keynes

I recently read Peter Clarke's relatively brief (180 page) biography, "Keynes". I found it a bit disappointing. I am most interested in Keynes's views on economics but these aren't discussed in any great depth. More space is devoted to the British politics of the time and Keynes's participation therein which I am not all that interested in.

One good point the book makes is that Keynes's beliefs evolved over time as he came to believe the economics he had been taught was inadequate to explain the real economy and he struggled to formulate better theories. So charges that his published works are inconsistent are true but pointless. It also means that Keynes's own writings aren't necessarily the best explication of Keynesian economics as his followers continued to refine and clarify his ideas.

I was interested to read that, with respect to his personal finances, Keynes was a risk-taker who in 1920 persuaded family and friends to back him in a currency speculation syndicate that was wiped out within months but that he was then able to obtain additional funds from his backers and soon recovered all of the losses.

Another point about his personal life that I found interesting was that although Keynes was a practising homosexual for 20 years he then entered into a seemingly normal and successful marriage. Apparently this was not unique in his milieu. Which makes me wonder how true the current party line that homosexuality is immutable really is.

In summary this book is not a good introduction to Keynesian economics. I found some points of interest in the discussion of his personal life but I found a lot of the material less than compelling. In general this book is probably mostly of specialized interest.

Two star movies

I have previously listed the Netflix movies I rated five star and four star . Below I give a list of those movies I rated two star (didn't like it). I haven't rated any movies one star (hated it).

This list represents my personal reaction to the movie. I suspect I may get some push back as many of these movies were popular and/or critically acclaimed. There are some reasons for this. First I don't tend to order movies that nobody liked. Second the distinctive features that cause some people to really like a movie may cause me to dislike it. Finally in a few cases I may have felt the film didn't live up to its reviews.

Here is the list:

Unforgiven, Blazing Saddles, The Lord of the Rings: The Two Towers, The General, LOTR: The Return of the King, The Bicycle Thief, Warlock Moon, The Producers, Barefoot in the Park, V for Vendetta, Network, The Pursuit of Happyness, Painted Lady, Ocean's Eleven, Sudden Impact, Lethal Weapon 3, Wall-E, The Lovers of the Arctic Circle, Ed Wood.

Quicken bugs

I have had a copy of Quicken Premier 2010 , a personal finance program, for several months now. I can't be too negative as I have been using it and it has saved me some money but it certainly has annoying aspects.

One of which is the data entry is quite buggy in a strange way. Sometimes when you correct a mistaken entry the change is not correctly propagated throughout the program. Traces of the mistaken entry remain fouling things up. I generally have been able to find work arounds (although one case still has me baffled) to force the program to accept the correct data but it is really annoying. In my opinion it also reflects badly on the program design. It seems like the program has a lot of hidden state, previously calculated intermediate values and the like, which can cause problems which are hard to diagnose as the hidden state is invisible to the user. It seems questionable that any gains in computation time are worth the added complexity and error potential. At a minimum it seems like there should be some way to force everything to be recalculated from scratch when the program gets confused.

Suze Orman's 2009 Action Plan

Last year I read a spirited defense of personal finance guru, Suze Orman, by Felix Salmon. I knew little about her so when I saw one of her books, "Suze Orman's 2009 Action Plan", in the library a few days ago I checked it out.

I have now read it. It consists of simple conservative (in the cautious sense) conventional wisdom about personal finance. Don't live above your means, pay off your credit cards, save for retirement, that sort of thing. There wasn't anything in it that I found of much interest as similar advice can be found in many other places. Of course I am not her target audience but I expect even many financially unsophisticated people have encountered similar advice. Perhaps she is better at getting people to actually follow the advice. And she does give some specific advice about college loans and good resources for people in financial trouble.

Still the advice is pretty elementary and I can sort of understand the jealous resentment of her critics that it has earned her tens of millions of dollars. And there were a couple of things I found jarring. On page 3-4 she promises "... I will never steer you wrong or put your dreams of a secure future in peril. ... ". I don't think this is a promise it is possible to honestly make. And on page 12, while discussing the origins of the recent crisis, she renders CDO as "Credit Default Obligation" when in fact it stands for Collateralized Debt Obligation . This did not exactly enhance my faith in her financial knowledge (or the fact checking process for the book). On the other hand I agree with Salmon that her advice (at least in this book) is generally sound and that people can do a lot worse.

So in summary this is basically personal finance for dummies. If you aren't a dummy about personal finance this book probably won't be of much interest.

Winter walk

One of things I dislike about winter here is that it is often unpleasant to take walks because of cold weather and/or snow on the ground. It was sunny and in the thirties Thursday and we haven't had too much snow yet so I decided to take a walk as there might not be more opportunities for a while. I went to Croton Point Park . The park was almost deserted but it was actually pretty nice. There was a little snow in places that don't get much sun but not enough to make walking difficult.

The picture is looking north. The Hudson was iced over a little in the cove on the north side of the peninsula but otherwise ice free. I guess it is still early in the winter although it has been cold and there may be more ice by mid February.

Discretion

Someone asked in comments whether I could talk about what I would be doing in my potential new job . The short answer is no. At the moment I don't know the exact limits about what I would be allowed to talk about but it is clearly not very much and I would prefer not to say anything rather than worry about inadvertently crossing a line. This is another reason I have some mixed feelings about this offer.

Casey Serin

The recent housing bubble was driven in part by speculation and fraud accompanied by a complete collapse of mortgage underwriting standards. The short career of Casey Serin as a real estate speculator illustrates this. The wikipedia article on Serin summarizes his career as follows:

... In his early twenties, however, Serin decided to quit working full-time in order to pursue house flipping as a means of generating income. Beginning in October 2005 and continuing through the following year, Serin purchased eight houses in four southwest U.S. states, and then began blogging about the foreclosure[2] process on the properties he was unable to resell. In time, five of the eight properties foreclosed. ...

An USA today article describes some of his activities:

He found a Sacramento couple who'd twice cut the price on their home and were asking $360,000. Aware that the market was softening, Serin successfully bid $330,000, including his closing costs. But he also wanted to pay off his credit cards. So he took out a $360,000 mortgage and asked the sellers to give him $30,000 in cash once the deal closed.

This is a common fraud . The buyer and seller agree on an inflated sales price and then the seller returns part of it in cash to the buyer after the closing. Note it is expedited by the availability of 100% financing. On another deal Serin was able to get $50000 back:

"I basically used up all of the equity... and the market is already going down," Serin says. "But it made sense to me at the time because I'll take the $50,000 (cash back from the seller). I'm finding it takes a lot more money than I thought, and what if I run out of the money I already took out?"

This can continue for a while as you can use the cash back to pay the mortgages (perhaps with low initial teaser rates) for a while but eventually it is likely to all come crashing down as it did for Serin costing his lenders a substantial amount.

This 2005 article on the role of speculation in the housing bubble noted:

A recent report by the National Association of Realtors (NAR) reported that 23% of all homes nationwide were bought by investors. Another 13% of homes were purchased as second homes. In Miami, it was reported that 85% of "all condominium sales in the downtown Miami market are accounted for by investors and speculators". This is clear evidence of speculation.

As the article explains sales to speculators inflate demand as a bubble inflates driving prices up and then increase supply (as speculators lose faith that prices will continue to rise and try to dump their properties) and drive prices down as a bubble pops.

And here is a Wall Street Journal article about "hidden speculators" who falsely claimed on loan applications to be planning to live in the homes being bought. This is something Serin did as well:

But Serin also deceived the bank by saying he'd live in the home. Banks typically charge higher rates and require larger down payments for investment properties.

Along with speculators like Serin who obtained fraudulent loans but did plan to pay them back after flipping properties in a rising market there were numerous complete frauds who never had any intention of paying back the loans and who were just interested in extracting as much cash as possible by for example selling properties to themselves (or hapless straw buyers) at inflated prices with 100% financing.

While fraud should of course be illegal and be prosecuted the best way to minimize this sort of thing is to maintain reasonable underwriting standards and not leave yourself wide open as the lenders did. Prosecution is not much of a deterrent when fraud is as pervasive as it was as it becomes clear to everybody that it is not feasible to prosecute more than a tiny fraction of the cases.

Four star movies

A few days ago I listed the Netflix movies I had rated with five stars. Here is a list of the movies I rated four stars (really liked it).

The Treasure of the Sierra Madre, Psycho, The Third Man, A Few Good Men, The Player, Laura, The Killing, On the Waterfront, In the Heat of the Night, White Heat, Something New, The Usual Suspects, Double Indemnity, The Long Goodbye, Witness for the Prosecution, The Man who would be King, Pirates of the Caribbean: Black Pearl, Capote, Philadelphia Story, Apollo 13, The Shawshank Redemption, The Naked City, Raise the Red Lantern, The Roaring Twenties, In a Lonely Place, Red Rock West, Robocop, Wall Street.

Google and free speech

This blog is hosted on Blogger which is now owned by Google. I have found it easy to use and of course it is free. However it appears Blogger has a downside. Blogs are sometimes removed with no advance notice, warnings or explanation. If you are lucky they may reappear a few days later again with no explanation. Here is the story of one such case. Google is within its rights to do this as the Blogger terms of service specify that the service can be discontinued at any time and also require adherence to a rather vague content policy . I don't actually object to the terms as such (although I might not draw the lines in the same place) but the way they are implemented with blogs disappearing without warning, meaningful explanation or transparent avenues of appeal certainly has a chilling effect on free speech.

A really egregious example occurred last night when John Hempton's Bronte Capital financial blog was removed immediately after a post noting among many other things that certain Biden family members do not have as many degrees of separation as one might wish from a bunch of financial frauds. Felix Salmon broke the story . Fortunately for Hempton, he and especially Salmon are well known enough to get Google's attention. Hempton's blog is now up again and Google is claiming it was some sort of technical glitch. It seems likely however that a less prominent blogger could have been in limbo for a considerable period of time.

Perhaps this will embarrass Google into adopting a more reasonable policy. In the meantime it seems prudent to back up your blog regularly.

Alright

It has come to my attention that some misguided people don't think the spelling "alright" (which I used recently) is all right. For more about this debate see here which concludes:

And perhaps the most important factor in determining whether alright is acceptable or not is that the Microsoft spell checker does not flag it as an error. This gives millions the justification to use the term with impunity.

This is true of the blogger spell checker also. If it had objected I would probably have changed to "all right". But it didn't and I don't think it should have. "Alright" is in fact common usage and as Pam Peters notes "all right" "injects the distracting sense of “all correct.”" which was not my intended meaning.

Five star movies

I have been a member of Netflix for a bit over 4 years. I mostly watch old TV series episodes now but I have watched a fair number of movies. I rate (using the Netflix 1-5 star system) the things I watch but it doesn't seem to help Netflix too much for suggestions. Perhaps because I have a tendency to rate everything three star (liked it). A list of the movies I rated five star (loved it) follows.

The Thin Man, Miller's Crossing, Black Hawk Down, The Battle of Algiers, Sunset Boulevard, Lone Star, The Right Stuff, LA Confidential, All About Eve, Dial M for Murder, The Asphalt Jungle, Body Heat, Gone With the Wind, The Searchers, Goodfellas, The Public Enemy, Shadow of a Doubt, The Aviator, Hero, Same Time Next Year, Broadcast News, The Devil Wears Prada, Bonnie and Clyde.