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Joshua Sharf

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« September 2005 | Main | November 2005 »

October 31, 2005

Carnival of the Capitalists

It may be Halloween, but there's nothing spooky or mysterious about business.

Salazar's Feelings Wounded

Turns out there's no truth to the rumor that Scalia recommended Alito for the Court just to get his hands on the new justice's Italian recipes, featuring the famous Sauce Alito.

OK, if you're still with me, we can get down to business.

Turns out our new junior Senator has a pretty thin skin. According to the Post, Salazar, sulking outside his office like an Achilles heel (although Achilles didn't usually call press conferences to complain),

Speaking with reporters Monday outside his office in Denver, the freshman senator said he was dismayed that "there was no consultation whatsoever with members of the Senate" over the choice, which he said was part of deal the "Gang of 14" senators hashed out.

"That is disrespectful," Salazar said, noting he learned of Bush's latest choice on TV.

Oh, the horror of it all, having to hear about it on television! The shame, the insult, the embarassment, the sheer humiliation! Maybe Salazar is having a flashback to his prom or Sadie Hawkins dance. There must have been some glitch in the system, because as part of the vast right-wing blogospheric conspiracy, my own personal elk came by at about 5:00 AM Mountain Time. Since I haven't heard anyone else complaining about being dissed, maybe Sen. Ken just forgot to set his clock back, although according to Chuck "The Phish" Schumer, if he's confirmed, Alito will be doing that for the whole country. Maybe with the extra sleep, Salazar won't be such a grouch.

Also note how Salazar thinks that the White House is governed by an agreement among Senators concerning their own procedures. And never mind that there was obviously plenty of consultation in advance of the Miers nomination. I'm sure her name wasn't the only one that came up; it's obvious from media reports at the time that Alito was being considered, so obviously there was consultation, whatever that means, about the Judge. The whole thing looks like an Official Senatorial Temper Tantrum, which I understand is part of freshman orientation.

Salazar also complained that Bush did not nominate a woman to replace Sandra Day O'Connor. At least three suitable candidates are available in Colorado alone, Salazar said - including Colorado Supreme Court Justice Rebecca Kourlis, "a Republican well-versed in western water law."

OK, scratch the part about Sadie Hawkins. Salazar's been pushing Kourlis for months now, but really, neither he nor she is all that important, and with all due respect to western water, it's just not that big a deal, either.

Salazar said he hopes to meet with Alito, as he did with then-chief justice nominee John Roberts and with Miers. Salazar voted for Roberts, but said he hadn't decided on Miers before her nomination "was basically killed by the religious right."

Can the Senator name a single leader of a major conservative or evangelical religious group who came out against Miers? I know this is now part of the established mythology, but the National Review Online was the loudest voice complaining about Miers. They're certainly to the right, and some of them are even religious, but somehow I don't think that's was Sen Ken was trying to allude to.

Other Democrats are questioning Alito's past opinions, saying he could tilt court positions against abortion rights. But abortion for Salazar "is not a litmus test," he said.

One of the standards he'll use in evaluating Alito is the extent to which the judge respects legal precedent and has an ideology to impose on Americans.

Of course, "precedent" and "ideology" are the current focus-group-tested liberal code words for "abortion," there being only one precedent that matters (or, if you're Arlen Specter, "super-precedent," or "super-duper-precedent"), and only one ideology that's acceptable. So this is a little like my saying that I won't hold my food to a kosher litmus-test, but I do check to see if it's got a little O-U on it. I'm far from the Catholic or conservative Christian position on abortion, but any legal position that claims that first-term abortion can only be protected by legalizing infanticide has to be classified as an "ideology."

So Salazar is pouting over invented Senatorial privileges (which really takes some imagination at this point), making up political dynamics, and talking in code like a Navajo during WWII. I think our junior Senator needs to grow up.

Fall Snow in Aspen

OK, I know there's all sorts of big news out there, all sorts of political news, earnings reports, that sort of thing. So instead, here are some pictures from this weekend's snowfall near Aspen. As always, click to enlarge.


October 28, 2005

A War Like No Other

New review posted, of Victor Davis Hanson's latest.

Southwest Effect II

Well, that sure didn't take long. Next year's fares from DIA to Chicago, Vegas, and Phoenix drop to match Southwest's. So far, not all the carriers who had been low-fare have moved to match, and for some reason United it still $40 higher on the Las Vegas route. It'll be interesting to see which airlines try to maintain higher fares, and for how long.

October 27, 2005

The Southwest Effect?

Southwest Airlines finally announced its initial routes and fares from Denver, and as promised, it's a small start. With 13 daily departures, they'll have more than jetBlue and Airtran, but fewer than such titans as United (309), Frontier (153), and Great Lakes (66). (Hey, don't laugh. Great Lakes can get you from Denver to Kingman, AZ in just five easy hops.)

They'll fly to Chicago ($79 one-way), Las Vegas, and Phonenix ($59 one-way, each), starting on January 3, with a 21-day advance purchase. Just for fun, I looked up the current low airfares from Denver to each of those cities, roundtrip, January 5, returning January 8. They are, Chicago: $252, Las Vegas, $206, and Phoenix, $178. (Source: Orbitz)

Now, of course, I'll have to track those numbers daily until service starts, to see if there really is going to be a Southwest effect.

Why Baseball is Like Finance

My first year in college, I was introduced to Bill James. He practically invented modern baseball statistical analysis, making up new statistics like Runs Created and Win Shares to measure performance. He created the baseball Pythagorean Theorem relating runs scored/allowed and wins. He quantified mean reversion for teams that showed unusual improvement, and showed how stolen bases are overrated, and explained park effects.

He did this by doing what any good analyst does - asking the right questions, collecting as much data as possible, and then putting it together in inventive and original ways.

Which is also what any good financial analyst should do. Any competent analyst can look up the numbers, harmonize financial statements across competing companies, and compare the existing ratios. Anyone with a decent background can create fairly good spreadsheet models. (This isn't to say it's easy; nothing's easy; only to say that it's part of an analyst's basic skill set.)

But a really good analyst, a creative guy who's trying to push back the frontiers a little, will invent his own stats, invent his own ratios, his own ways of looking at the numbers. Maybe there are ways of describing how a company manages its debt, or what it's raising it's debt to do, that are different from simple debt ratios or capital structures. Maybe there are ways of including other long-term liabilities (read: pensions) into the model. Cash flow statements are still relatively new, but the main ratios to come from them use the overall cash flow number, and Quality of Earnings (how much income is from operating cash flow). There must be other ways of using all those line items.

The great revelation for me, as a programmer who had never really thought much about the nuts and bolts of the system that I earned my living in, was that the line items on the financial statements represented ideas and concepts, not just bookkeeping entries. I'm just starting out, so for me, it's largely a matter of mastering the existing tools. But the fun part, and the part that more analysts ought to be focusing on, is putting those numbers together in new ways, to tease out new information, and to describe businesses - and even whole industries - in new ways.

Otherwise, we're just a batting-average outfit in a OPS world.

Nice Little Business You Got There...'d be a shame if we had to start telling you how much to pay people:

Corporate directors must rein in soaring U.S. executive pay or face the prospect of government regulation, said the judge who presided over a landmark pay case involving entertainment group Disney Co. on Tuesday.

Delaware Chancery Court Judge William Chandler -- who let Disney directors off the hook in August for Michael Ovitz's huge $140 million 1996 payoff after a brief failed term as Disney president -- warned in a speech to a directors' group that regulation would be a "blunt instrument."

"If neither the courts nor the markets are able to restrain executive compensation, and if you the decision-makers fail ... the result will be imposition of regulatory controls," said Chandler, whose court handles many important business cases.

I don't disagree that executive pay is out of whack. Given the quality of management at a whole host of large corporations, there's no question that a whole lot of guys sitting in AAA could step up to the big leagues without much loss of quality. That is, the talent pool is probably a whole lot deeper than we think it is, and the actual bottom-line worth of any individual executive, with a few exceptions, is much lower than they're paying.

But it's up to them to figure it out.

First of all, salaries, as salary have already been regulated, and companies just find other ways (deferred compensation, options, etc.) to pay executives. Money will find a way, whether it's around McCain-Feingold, or around judges and regulators who fancy themselves better managers than HR and corporate boards.

But also notice the little bait-and-switch in the judge's last paragraph. "If neither the courts nor the markets...the result will be...regulatory controls." What does he think court-mandated controls are, if not regulation by another name? I don't care what party this guy is, or who appointed or promoted him. This is a perfect example of someone assuming that by definition, the courts are free to roam where they will, even into company salary negotiations.

So Much For That

The AP is reporting that Harriet Miers has withdrawn her nomination to the Supreme Court. It appears that they've taken the Krauthammer route, blaming a separation-of-powers struggle over internal documents. While the Democrats made this an issue during the Roberts confirmation, he had enough of a paper trail of speeches and articles, as well as his time in the White House Counsel's office, that the Solicitor General's papers seemed like piling on. Time will tell if blaming the withdrawal of a poor nominee on a turf struggle is the wisest course of action. Given that another nominee is now due, it shouldn't be much time.

It's hard to escape the idea that this was the right thing to do. While an embarassment to the administration, in all likelihood, Miss Miers's name will simply become the answer to a trivia question, like Kimba Wood or Douglas Ginsburg or Harold Carswell. The political effect on a Presidency of a Supreme Court nomination is usually pretty minor during that Presidency.

The White House involvement is usually limited to the selection, and the nominee stands or falls on his own. In the end, rejecting clearly highly-qualified nominees has tended to hurt the Democrats more than losing them has hurt the Republicans. This is a live, winning issue now.

The President now has a chance to get it right.

October 26, 2005

Congrats to the White Sox, and to the Houston Fans

When the White Sox had to win games, they did. The got out to that fantastic lead, and then played a little over .500 ball. When Cleveland went on a red-hot tear, the press called it "a collapse," and handing the division to the Indians. Chicago never even surrendered the division lead. And then, they went 11-1 in the post-season. They won the games that mattered. Good for them.

The whole 88-year thing seems a little ginned up, mostly because the White Sox weren't around the Series often enough to remind us of it. But it's a big deal in Chicago.

When you see the replay of Jose Uribe following that foul ball into the stands, watch how the Houston fans react. Sure, Uribe's a big guy, but they're all standing above him, and most of them have gloves. If any of them wanted to, they could have caught the ball a la Bartman. With the World Series arguably on the line, they didn't.

October 23, 2005

Carnival of the Capitalists

This week, with an extra, added course of law-blogging thrown in, just to remind us all of who the ruling class really is.

Ecclesiastes To You

Sukkot (and its appendage holiday, Shemini Atzeret) is eight days long, so it always falls on at least one Shabbat. Never able to resist the temptation to lengthen the service, the rabbis instituted the practice of reading the Book of Kohelet (that's Ecclesiastes to you). It's a longish book, and it usually adds about half an hour to the service, but it's one of my favorites.

Academics will tell you that Kohelet is a perfect example of ancient "Wisdom Literature," turning the book's author, King Solomon, into a earlier-day Poor Richard, without the poor. In fact, it's a Jewish "Carpe Diem," which on reflection risks turning the great King into Robin Williams. Nonetheless, it's a perfect counterpoint to Rosh Hashanah & Yom Kippur, where we spend the whole day reflecting on what we've done wrong. While "Unetaneh Tokef" reminds us that life is fleeting, and once it's gone, it's gone, "Kohelet" gives us a reason to care about living that life.

Some Rachels Are More Equal Than Others

Tom Gross notes in this week's Spectator (London) that for some reason, if you're Jewish, your death in a terror attack is likely to get a lot less attention ("Dead Jews Aren't News"):

ven though Thaler was a British citizen, born in London, where her grandparents still live, her death has never been mentioned in a British newspaper.

Rachel Corrie, on the other hand, an American radical who died in 2003 while acting as a human shield during an Israeli anti-terror operation in Gaza, has been widely featured in the British press. According to the Guardian website, she has been written about or referred to on 57 separate occasions in the Guardian alone, including three articles the Saturday before last.

The cult of Rachel Corrie doesn’t stop there. Last week the play, My Name is Rachel Corrie, reopened at the larger downstairs auditorium at the Royal Court Theatre (a venue which the New York Times recently described as ‘the most important theatre in Europe’). It previously played to sold-out audiences at the upstairs theatre when it opened in April. (It is very rare to revive a play so quickly.)

On 1 November the ‘Cantata concert for Rachel Corrie’ — co-sponsored by the Arts Council — has its world premiere at the Hackney Empire.

But Rachel Thaler, unlike Rachel Corrie, was Jewish. And unlike Corrie, Jewish victims of Middle East violence have not become a cause célèbre in Britain. This lack of response is all the more disturbing at a time when an increasing number of British Jews feel that there has been a sharp rise in anti-Semitism.

Thaler is by no means the only Jewish Rachel whose violent death has been entirely ignored by the British media. Other victims of the Intifada include Rachel Levy (aged 17, blown up in a grocery store), Rachel Levi (19, shot while waiting for the bus), Rachel Gavish (killed with her husband, son and father while at home celebrating a Passover meal), Rachel Charhi (blown up while sitting in a Tel Aviv cafe, leaving three young children), Rachel Shabo (murdered with her three sons aged 5, 13 and 16 while at home) and Rachel Kol, 53, who worked at a Jerusalem hospital and was killed with her husband in a Palestinian terrorist attack in July a few days after the London bombs.

While we have the blogosphere to cover these things, the British press apparently has been less than vigilant. While Charles Johnson has been all over the story about the ISM & its anti-Semitism, and exactly what it was that Rachel Corrie was "defending" when she put herself in front of a bulldozer,

However, in many hundreds of articles on Corrie published in the last two years, most papers have been careful to omit such details. So have actor Alan Rickman and Guardian journalist Katharine Viner, co-creators of My Name is Rachel Corrie, leaving almost all the critics who reviewed the play completely ignorant about the background to the events with which it deals.

No wonder he's a natural for Snape.

Sadly the American press doesn't do much better. The Denver Public Library has an extensive full-text newspaper search archive. Here's the score:

Rachel Corrie 685 Rachel Thaler 3 Rachel Levy 19 Rachel Levi 2 Rachel Gavish 0 Rachel Charhi 0 Rachel Shabo 26 Rachel Kol 2

Even this overstates the case. Most of the mentions of Miss Levy come either from reports of the First Lady condemning terror attacks, or from an infamous New York Times piece equating her and her murderer. Rachel Shabo is only mentioned in the context of the Israeli response to the infiltration that killed her, again, carefully juxtaposed to her neighbors' desire for "revenge." And Rachel Kol is only mentioned in one news piece (the other is an oped by Uri Dan), which focuses on the Palestinians' anticipation of the Gaza pullout.

Rachel Corrie's memory is the beneficiary of an active propaganda campaign, by her parents and by sympathetic leftists, aided and abetted by a media too lazy and biased to question the official story line. Meanwhile, if Israel doesn't respond, or doesn't capitulate, its victims barely get a mention at all.

October 20, 2005

Why Nobody Loves the White Sox

Since the White Sox haven't won a World Series since before the Red Sox last won (1917, vs. 1918 for Boston), they just assume that they're entitled to the same sympathy and underdog status that the Red Sox and the Cubs get. They just can't understand why 88 years isn't a bigger deal than 86 years.

Here are five reasons why.

1 - Success
The Cubs and the Red Sox have had more success than the White Sox. They've each had more appearances at every postseason level, and with the exception of the current White Sox run of 1sts and 2nds in a diluted division format, they've had them longer. Yes, both teams were miserable for long stretches, too, the Cubs in the 40s, 50s, and 60s, and the Red Sox in the 20s, 50s, and 60s. (From 1922-1932, the Red Sox finished last 9 times; nobody was more relieved to see Connie Mack coming than Boston fans.)

But this was largely after their legends were established. The Cubs won pennant after pennant in the World Series's early years, as did the Bosox. Their failures stood in contrast to their early success. And they've had their chances since. Which leads to...

2 - Heartbreaking Losses
The Bosox lost the World Series in 1946, 1968, 1975, and 1986. All in 7 games. They blew a 14-game lead in 1978. Everyone knows this. The Cubs may not have won since 1908, but they've played Detroit a couple of times, and ran into a couple of Yankees buzz-saws. They were one stupid frat-boy Steve Garvey home run away from a pennant in 1984. They blew a 9-game lead to the Mets in 1969.

The White Sox haven't taken a series to the final game in their entire history. Finding new ways to lose a 7-game series is the stuff of grand opera. Losing 4-2 to the Dodgers or 3-1 to the Orioles is par for a series.

3 - Curses
Look, you trade away Babe Ruth, whom everyone loves, to the Yankees, whom everyone hates, that's baseball mythology. Turning away an Old Man and His Goat is a Stephen King novel at worst, kinda cute at best. You can't win a series after that, and people just marvel at hidden powers.

You throw a series, get your whole team barred for life, destroy the integrity of the game, and force baseball to hand over powers not seen since Sulla to a second-rate judge in order to fix things, well, if you can't win a series, it's justice. No wonder they weren't missed. They were lucky still to be playing.

4 - Poets
The Red Sox get Bart Giamatti. The Cubs get George Will. The White Sox, yeah, right.

5 - Ballparks
Face it, right up until the moment in 2003 when Bartman interfered with Aaron Bleeping Boone's home run, or whatever, baseball fans were jazzed about a series played in Wrigley and Fenway. And not just because of the age, although that matters, too. Because of the continuity.

Look, nobody liked the old Comisky (once the novelty of fireworks for home runs wore off), and nobody likes the new Comisky. It's called "The Cell," ostensibly after US Cellular, but parks get the names they deserve. And it's not like Luke Appling or Luis Aparicio played there. If you're going to exorcise ghosts (or have them continue to haunt), the ghosts need to be there. The Cell has no ghosts.

Bonus Reason - 88 Years Is Too Long
In 1986, when the Red Sox hadn't won in 68 years, that was accessable. There were Red Sox fans who still could remember their last title. Sixty-eight years is a little less than a normal lifespan, so while Red Sox fans might die without seeing another title, they probably weren't going to die never having seen one. By 2004, when it was 86 years, I had stopped counting. Now, nobody remembered their last title, and nobody had been around for all 86 years of failure. So it was just a number.

Eight-eight's just a bigger number.

I'll probably be rooting for the White Sox against the Astros anyway. I still hold their orange construction-sign-uniform-plagued and Astro-turf-ridden history against them, for one thing. For another, I'm an American League guy. But really, other than that, I couldn't care less if the White Sox had been waiting 100 years for a title.

Hey, 2008's only 3 years away, Cubs fans.

LPR Reception

We're not supposed to blog about specifics with the LPR, but the official website mentions this evening's class reception at the Governor's Mansion.

Not sure about pictures, but I wonder if I should bring a polarizing filter, in honor of Refs C & D?

Southwest Plants in Denver - But Can It Grow?

Southwest Airlines has announced plans to come to Denver, after a twenty-year absence. Since fares historically begin dropping on the announcement that Southwest plans to enter a market, I can't begin to tell you how happy this makes me.

In the conference call, CEO Gary Kelly noted a number things contributing to LUV's decision: 1) Denver's a large a growing market, with the 9th-largest origin-destination traffic in the country, 2) the airport's per-passenger costs have declined dramatically, from over $20 to around $9, where Southwest wants to be, 3) weather. OK, he didn't actually say, "weather;" what he said was that the taxi and turnaround times were more reliable, blah blah blah. But Stapleton, like the Fairfax County School System, was about 20 miles closer to the mountains and used to close on the prediction of snow. (One of the concourse shops was actually called, "Bread, Milk, and Toilet Paper," and only opened on snow days.) Since the airline's Statement of Values says "Thou Shalt Not Idle Your Engines," that alone probably contributed mightily to their 1986 on-time departure from Denver.

One might argue Southwest will have a hard time dealing with a competitor who doesn't have to pay its bills on time. However, United is under pressure to emerge from bankruptcy, which requires a business model that's actually profitable. That just got less likely, so for the moment, Platte River communities downriver from Denver are going to have to keep filtiering red ink out of their drinking water.

Naturally, the company wants to grow, and here's where there could be some trouble. Note that Frontier has been trying to pry United's hands off its under-used gates for years, but neither the city's half-hearted efforts nor the company's threatening to find a new hub has been able to loosen United's death-grip on Concourse B. Those gates represent vitrually all of United's competitive advantage, and it's worth noting that it's a completely contrived advantage, the result of poor negotiating by the city.

Kelly was asked several times about growth, and while he continued to repeat that those were the plans, comparing Denver's size to that of Boston and LaGuardia. But when USA Today asked about a rapid buildup, a la Philadelphia, he sounded very unsure: "I believe we will have the facilities we will need, although that's not definitive. (emphasis added - ed.)"

I sincerely hope that Southwest has more than a wing and a prayer when it comes to those gates. It's not clear where they're going to come from, and if I were Frontier, I'd be hopping mad about seeing a long-term rival expand, so there may be legal action coming from that quarter. On the other hand, there's no question that United's near-monopoly status has enabled their Baby Doe Tabor impersonation ("Hold on to will pay millions again"). So maybe Frontier will welcome the entrant.

A couple of side-points. First, Southwest apparently had been planning to enter the Denver market in late 2006, but pushed up the date when lots of planes became available from New Orleans. Since their model relies on being the low-cost provider, they don't want those planes sitting idle, and moved up their Denver entry,possibly before they actually had those long-term facilities nailed down. (Kelly was extremely careful to make all the right noises about the expansion not coming at New Orleans's expense, about rebuilding their New Orleans service, but "according to needs," so my guess is that a lot of those planes are permanently available now.)

Secondly, when asked about other major markets the airline didn't serve (the reporter in question was probably looking for Limits to Growth), the first city he mentioned was Minneapolis-St. Paul. Ahem.

October 19, 2005

Recycling Doesn't Pay

In the process of making this year's sukkah, I finally got around to clearing Sukkah 2.0 out of the back yard. While the current V 3.0 is made of PVC, Tinker-Toy-like, the older version was a homey, but very heavy and unweildy wooden version. I spent hours pounding a 2x4 frame onto 4x8 sheets of plywood, joining the corners with hinges, creating a swinging door, adding fold-down shelves and the like. While it was great fun to sit in, it took a crew of 3 several days to assemble, and required constant protection from the rain. Eventually, it was more trouble than it was worth.

So I pried it apart, and cut the 4x8s into 4x4s or smaller. When it turned out that the men paid to take away the garbage didn't consider this garbagy enough, but more like building materials, I stacked the against the house and started looking for Plan B.

Plan B was to have them recycled. I take them to a recycler, they pulverize the wood, turn it into new plywood, and re-sell the results. Now since I'm providing their raw material, they should pay me, right? Or maybe just take the wood for free? No, I would have had to pay them something like $6 a linear yard to take the wood. In the case of the plywood, that's coming close to what I paid for the wood in the first place.

If a wood recycling business is only economically feasible when they have to make money on both ends, maybe that says something about the economic value of recycling wood. In the end, especially given gas prices this year, I would have been better off burning the stuff to keep the house warm. Assuming, that is, I could find enough Blue Days to burn all of it. (Eventually, I found a friend who's having his house rebuilt - er, remodeled - with enough room in his dumpster.)

But that's an interesting question. Given the price of gas, I suspect a lot of homes will be keeping their wood for their fireplaces rather than paying extortion rates to subsidize someone else's business. Will that end up having an effect on how much those recyclers charge?

Carnival of the Capitalists

The second half of the Two-Year Anniversary Special is up.

That's Tabernacles to You

For those of you wondering where the blog has been the last two days, Monday night was the start of an 8-day Jewish Festival known as Sukkot (most of the Christian world knows it as the Feast of Tabernacles, which isn't quite the same thing). There's a fall harvest component to the holiday, but the main thrust of it is the booths, or Sukkot, that Jews build to eat and spend time in during the holiday. It's dark now, of course, but I'll get my own sukkah pictures up tomorrow.

The other main symbols are the lulav and the etrog. The lulav is a bundle of myrtle, willow, and a palm frond, while the etrog is a more-or-less-inedible citrus, apparently only grown in Israel. Most of the palms come from Egypt for some reason. Now, the palms in southern California and Arizona are, in fact, Kosher for Festival Use, and to the best of my knowledge, the country also has some areas that do fairly well in producing citrus. So why on earth someone hasn't put together a local business growing these things is beyond me. There's a market of at least several hundred thousand for the etrogs, and there's only a palm tree on every other corner in LA, SD, and Phoenix.

Go here or here for further information.

October 16, 2005

Energy Independence Mythology

The Wall Street Journal has a terrific review article tomorrow about natural gas, and how the industry (with some encouragement from regulators) has gotten caught short. There's a lot of good stuff in there, about utility hedging, exploration, and supply chain management. This, though, caught my eye:

Natural gas has swung to scarcity from abundance in recent years as energy companies run out of easy-to-tap wells. Unlike oil, it's hard to ship natural gas across the ocean, so more than 97% of U.S. supply comes from North America.


On the supply side, there likely will be more LNG terminals, perhaps outside the hurricane-prone Gulf region. (LNG is Liquified Natural Gas, the only cost-efficient way to ship gas in tankers - ed.)

So, we're basically completely energy-independent when it comes to natural gas. And yet, the price has risen in response to the supply-and-demand equation. (Gas is harder to extract now, partly from regulation, and partly from depletion of the low-hanging fruit. This makes the more expensive extraction techniques cost-effective. This will bring tremendous new fields into play; this country has plenty of natural gas.)

But part of the proposed solution is to tie the country more closely into the world market for gas.

In any event, the morons who prattle on about energy independence are living in a fantasy world. The last time we may have had actual energy independence was when we were clear-cutting our forests and Quaker State Oil was in the can, not just on the label.

October 15, 2005

Book Reviews in the Hopper

Good news about Yom Tovim: lots of time to read. Bad news about Yom Tovim: no time to write the reviews. Awaiting review: In the Company of Soldiers, An Empire of Wealth, Rubicon, and that old chestnut, The Foundation Trilogy.

I'm sure there's a place in the Yom Kippur confession for a lack of patience, and I already need to say it next year.


Well, it only took them 10 years, but Virginia finally beat Florida State again, this time 26-21 in Charlottesville. In 1995, U.Va. (!) became the first ACC team to beat FSU in conference play, 33-28, and apparently the team made a big deal out of it for this game. Seems to have inspired the troops.

I don't normally blog much about Virginia sports, and there's a reason for that. Big wins are rare, and usually followed by big losses, making gloating an exercise in tempting fate. (The exception is the lacrosse team, which has won 3 national titles over the years.) But this game is an exception, since conference losses to BC and Maryland have left Virginia out of the conference picture, anyway.

October 14, 2005


Tuesday night, I saw an advance screening of Cameron Crowe's latest, Elizabethtown. A fast-enhanced flu, along with the holiday itself, prevented a timely review, but I've still managed to sneak in it under the deadline.

Elizabethtown follows Drew Baylor (Orlando Bloom) for what has to be the most eventful week in his life. Baylor works for a barely-disguised Nike (the CEO's name is Phil, and the company is based in Oregon). He is, apparently, a shoe designer who is personally responsible for a $972 million fiasco called the "Spasmodica," feted at the company, ignored by the public. After falling on his sword figuratively for a business magazine article, Drew heads back to his apartment to fall on a kitchen knife and end it all.

No, the cell phone ringing is not a call from his girlfriend, but from his sister, to let him know that his father had died on a trip back to his home, Elizabethtown, KY. Drew's job is to fly to Kentucky, pick up the ashes, and bring them home. His father's hometown, and a borderline-crazy airline attendant, Clair Colburn (Kirsten Dunst), have other ideas.

The story idea is appealing. A little reminiscent of Garden State, but without the medication. This part of the film is autobiographical for Crowe, and his affection for this side of his family, and the country, shows. Crowe avoids making fun of small-town, borderline-southern society, while still managing to present them as human.

The chemistry between Bloom and Dunst is unmistakeable. The two actors are likeable on their own, and they work well together here. Claire is clearly a little nuts, but not dangerously so, and she knows enough not to push but to lead. Even Claire's detailed scripting of Drew's closing roadtrip is more helpful than overbearing. (The roadtrip is a pleasant ending, but it seemed a little heavy on the politics, and occupies far too central a place in the movie's marketing given its actual length.)

Baylor's Kentucky relatives accept him as he is, knowing he won't be around long. But Drew is still recovering from his shoe-fiasco, so his character is a little too passive to pass judgment, anyway. As a result, there's mercifully little of the Big City vs. the Small-Town South that grates on actual Southerners.

And yet, other interactions don't seem quite right. Susan Sarandon plays Hollie Baylor, Drew's mom, and she reacts to her sudden widowhood with all enough self-absorption that we understand why all the Kentuckians think she lives in California. The stand-up performance she gives at her husband's memorial is so completely out of place, so completely about her and not him, that I found myself wondering exactly why it was supposed to win us over.

There are a few signs of overdirecting, as well. The voice-over at the beginning, as Drew flies in the company helicopter to meet his doom, is pretentious. During a brief montage of Drew remembering his father, we see dad buckling little Drew into the front seat of the car. That's followed, later, by Drew buckling in the urn with his dad's ashes. For some reason, Crowe found it necessary to make the counterpoint explicit by repeating the memory. When Drew drives into town, one of the local stores has a sign thanking the troops, which helps set the scene. Crowe beats in the pro-military contrast with the Left Coast, though, as Uncle Dale presents Drew with his father's West Point ring.

I've more or less given up on Hollywood understanding anything at all about business, but the failures here are worth noticing. No mere shoe designer could possibly cost a Nike almost $1 billion. Companies make mistakes all the time, although I've yet to see Nike's test-marketers blow one this badly. And when New Coke bombed, Coca-Cola fired VPs and directors, not the chemist. I understand Crowe's cinematic need to make Baylor a public failure, but with the dot-com days over, 30-year-old prodigies are usually only given those sorts of budgets in Hollywood.

The question with any film is how much to take as reality, and how much to take as representational. Elizabethtown seems to want to be taken literally, but there's too much that's not real for that to work. And yet, at the end, I left the theater happy about the fate of the characters, which may be more important.

October 11, 2005

How To Make a Plane Disappear

B Relevant is asking questions about a Cessna Citation that was stolen from St. Augustine, Florida, showing up at Gwinett, Georgia. The question I'd be asking is why anyone would take a plane to Gwinett?

B Relevant asks:

What is particularly troubling is that police have "narrowed down" the plane's arrival time at Briscoe Field in Gwinnett County to between 9:00 PM Saturday and 6:30 AM Sunday. That is a mighty big window of time. How is it possible that we can't say more precisely when this plane landed?

and Michelle Malkin asks:

Ok. How does a $7 million charter jet just disappear from Florida and mysteriously appear in Atlanta without anyone finding out until after the plane has landed and the pilot(s) disappeared?

To answer B Relevant, because the towers at both Gwinnett and St. Augustine are only open from 7:00 AM to 9:00 PM. It may sound like a big deal that Gwinett is Georgia's third-busiest airport, but almost all the traffic runs through the Atlanta airport, and Peachtree-DeKalb, which has twice the traffic of Gwinnett.

That also begins to answer Ms. Malkin's question. The plane didn't land in Atlanta, it landed well outside Atlanta. If the plane took off under Visual Flight Rules, it wouldn't have needed to file a flight plan. It could simply have taken off from St. Augustine and flown to Gwinnett. At 275 nautical miles, that would just about have been enough time for a Citation to get its engines warm.

It wouldn't have needed flight following. This means that it would just have shown up on Jacksonville and Atlanta regional radar as another blip, more or less indistinguishable from any other plane, except perhaps for its speed. And again, given the distance, it wouldn't have to be flying that fast to begin with.

Why do they say it was a pilot familiar with Gwinnett? Because there are obstructions at both ends of the single runway. And because you need to know where to park the thing once you land, so as not to arouse suspicion.

In fact, if I had made this flight in a Cessna C172, there would have been nothing at all unusual about it, except for the fact that my medical is out of date, and I live in Denver. What is unusual (other than someone desperately wanting to get to Gwinnett) is that they did this in a Citation, whose almost always flies under Instrument Flight Rules.

Let's also remember that the tower is not responsible for airport security: it's responsible for maintaining separation between planes on the ground and in the air. When the Gwinnett controllers reported for work in the morning, assuming the plane wasn't parked in the middle of the runway, they would have probably shrugged. And the St. Augustine controllers almost certainly wouldn't have even noticed that one was missing. Trust me on this: controllers are plenty busy booting up systems and looking over the morning's departures & arrivals without having to take inventory of the hundreds of airplanes based on the field.

This is a charter jet, evidently not based at St. Augustine. It was a holiday weekend. It isn't the kind of plane you take out to practice turns about a point. So again, it's not surprising that the pilots parked the thing, went home, and didn't notice until they arrived Monday that their ride was gone. (Memo to Pinnacle Air: make sure your pilots lock the doors when they park the plane. Maybe get some better locks.)

To be honest, I don't want a system where the airport or the government is responsible for the planes.

Hat Tip: InstaGlenn. PhotoDude also has a good post and some good comments.

October 10, 2005

Denver Post: Free Speech = "Loopholes"

For the Denver Post, First Amendment protections apparently are "loopholes" to be examined.

In an article about free speech campaign finance restrictions, the Post focuses on conservative groups' efforts, while biasing the article in favor of such restrictions in general.

(This isn't the first site to notice the - oddity - of the state Democrats becoming concerned about the new campaign finance laws just as the Republicans begin to figure them out. Apparently the game is to keep the rules moving just fast enough to stay ahead of your opponents in understanding them, while retaining the moral high ground of "reform.")

The Post has not always been so solicitous of public opinion, especially when it comes to illegal immigration and gay marriage.

Even if government lawyers or state legislators come up with ways to better regulate the flow of money...

No, no assumptions here. In an article about "loopholes," "better regulate" means closing those "loopholes," or further restricting speech. won't be in time to impact the 2006 elections. The contests include an open governor's race and an open seat in the 7th Congressional District, 65 state House races and 17 Senate seats. Republicans could regain a majority in the Senate by taking back just one seat.

How, exactly, is this last more relevant than the Democrats gaining a majority of the state's Congressional delegation through tha open 7th District seat? Or the effect of any number of other electoral outcomes? Apparently, the main issue is the tenuous nature of Democratic control of the State Senate.

In 2002, Colorado voters overwhelmingly passed Amendment 27, which overhauled campaign- finance disclosure rules in an effort to get big money out of politics. The measure limited campaign contributions, encouraged candidates to curb their spending and banned corporate and union contributions to candidates and parties.

The unintended effect, say some political observers, has been to encourage interest groups to exploit gray areas in the law and invoke broad constitutional protections such as free speech to continue the activities voters sought to regulate.

Imagine that! People using First Amendment guarantees to safeguard their free political speech.

For instance, the Independence Institute has been accused of running political ads couched as educational material. Critics say the Golden-based think tank should disclose donors who have supported its radio ads about Referendums C and D. The institute says it is merely educating the public.

Apparently, they missed this proclamation by a 501(c)3 in favor of Referenda C and D. This decision has been defended on the grounds that it's a referendum, not a candidate being supported, a distinction that apparently escaped the notice of the Post when writing about the Institute.

In fact, the main abuse of system was by Democrats in the 2004 State legislative campaigns:

Colorado Democrats used the loophole last year, a maneuver largely credited with giving Democrats control of both legislative chambers.

That's the extent of the article's mention of 2004. The fact that not all of these activities were exactly, uh, legal seems to have evaded Mesdames Caldwell and Crummy.

In fact, the article devotes 78 words to Democratic and union groups, and 328 words to offenses - real or imagined - by conservative or Republican groups.

Loopholes grow in election law

As more groups win court battles and find ways to skirt campaign-finance rules, some are considering more regulations.

By Alicia Caldwell and Karen E. Crummy
Denver Post Staff Writers

Three years after Colorado voters overwhelmingly passed campaign-finance reforms, political and ideological groups are finding new ways around election-law restrictions.

They're winning important battles in the courtroom, and with campaigning already underway for several major 2006 races, these groups are pushing their agendas in ways unforeseen - and largely unregulated.

These developments have the Colorado secretary of state's office and key state legislators considering whether the state should pass new regulations.

"You can only hold water in your hands so long before it begins to seep through your fingers," said state House Majority Leader Alice Madden, a Boulder Democrat, who said it may be time for the legislature to revisit campaign-finance reform.

Independent political groups, whose identities and funding sources are difficult to discern, took advantage of a tax loophole to funnel millions of dollars into Colorado state elections last year. Routing money through these so-called 527 committees is expected to increase in key races next year.

Even if government lawyers or state legislators come up with ways to better regulate the flow of money, it won't be in time to impact the 2006 elections. The contests include an open governor's race and an open seat in the 7th Congressional District, 65 state House races and 17 Senate seats. Republicans could regain a majority in the Senate by taking back just one seat.

In 2002, Colorado voters overwhelmingly passed Amendment 27, which overhauled campaign- finance disclosure rules in an effort to get big money out of politics. The measure limited campaign contributions, encouraged candidates to curb their spending and banned corporate and union contributions to candidates and parties.

The unintended effect, say some political observers, has been to encourage interest groups to exploit gray areas in the law and invoke broad constitutional protections such as free speech to continue the activities voters sought to regulate.

For instance, the Independence Institute has been accused of running political ads couched as educational material. Critics say the Golden-based think tank should disclose donors who have supported its radio ads about Referendums C and D. The institute says it is merely educating the public.

Last week, a federal judge made a ruling in a similar case that could open the door for hundreds of advocacy groups to engage in politicking without having to file financial disclosures.

In a case brought by Colorado Right to Life, a judge declared Colorado's definition of a political committee unconstitutional as applied to the group, which is a nonprofit advocacy corporation.

The group had, among other activities, run a radio ad in the 2002 general election comparing the abortion stances of Fourth Congressional District candidates Stan Matsunaka and Marilyn Musgrave, which was broadcast on Denver and Longmont stations. The group also encouraged people to call Matsunaka, a state senator at the time, and ask him to support a bill important to anti-abortion activists.

James Bopp, an Indiana lawyer who represented the group, said he believes dozens, if not hundreds, of Colorado groups could seek the same exemption that the federal judge found in the Colorado Right to Life case.

"And I hope they do, frankly," Bopp said. "I think it's outrageous that they're subjected to these unconstitutional restrictions."

In another case with implications for campaign-finance rules, the secretary of state is looking at whether Republican gubernatorial candidate Marc Holtzman skirted state election laws by appearing in television ads against Referendums C and D. If passed, those measures would allow the state to keep more tax money. The campaign to oppose Referendums C and D is funded in part by a $100,000 donation from Holtzman's father.

Critics accuse Holtzman of using his opposition ads as a backdoor way to bolster his campaign for governor and get around $1,000 contribution limits for candidates.

And in a recent administrative law decision now being appealed, a judge ruled that members of two Colorado teachers unions could, among other things, walk precincts with a state Senate candidate distributing the candidate's campaign literature. The judge found that the unions' voluntary activities didn't make them an arm of the candidate's campaign, which is prohibited by state laws.

The shifting campaign-finance scene in Colorado is in step with the rest of the country, said election-law experts. Many states, including Colorado, are trying to come up with reforms that are faithful to voter intent yet protect free-speech rights. Complicating matters, states have to navigate a separate tier of federal campaign-finance regulations.

"It's a mess," said Heather Gerken, an election-law expert at Harvard Law School. "The distinctions are muddied and get sillier and sillier."

The uncertainty in Colorado has led the state attorney general and the secretary of state's office to consider whether they need to more clearly define regulations, including a clearer definition of political committees, said Deputy Secretary of State William Hobbs.

Pete Maysmith, executive director of Colorado Common Cause, one of the architects of Amendment 27, said the initiative has largely worked. And while he doesn't oppose fine-tuning, he said he would look closely at proposed changes.

"There have been moves and there will be moves to turn on the spigot to push big money back into the campaigns," Maysmith said. "We think there's no place for that, and we oppose that."

Republican Rep. Keith King, a former House majority leader from Colorado Springs, called Amendment 27 a disaster that needs to be revisited.

"The intent was to force more accountability, and what it did was force more money to unaccountable 527s," King said.

The boom in so-called 527 committees, named after the applicable section of the tax code, was a result of a 2002 move by Congress to ban "soft money" contributions to national political parties. Soft money is money that is given to a political party but is not given to support a particular candidate.

A loophole in the law, however, allows 527 groups to claim tax-exempt status as political organizations while avoiding regulation under state and federal law. That makes it difficult to track their money.

Colorado Democrats used the loophole last year, a maneuver largely credited with giving Democrats control of both legislative chambers.

Republicans have started to form their own 527 groups. The increase in money flowing through these groups, in combination with newly defined loopholes for ideological and union groups, is set to change Colorado election dynamics in 2006.

Staff writer Alicia Caldwell can be reached at 303-820-1930 or

Staff writer Karen E. Crummy can be reached at 303-820-1594 or

Muddying the water of campaign finance
Amendment 27

Passed by Colorado voters in 2002:

Contributions from individuals and political committees are capped at $200 for legislative offices and $500 for governor, attorney general and other statewide offices.

Voluntary spending limits are permitted at $2.5 million, for example, for a gubernatorial candidate, descending from there for smaller campaigns to $65,000 for a state House seat. A candidate who accepts limits when their opponent does not may receive double the maximum contribution from individuals.

Corporations and labor organizations cannot provide funding for electioneering communication.

"Small donor committees" can collect $50 or less from individuals, and contribute 10 times more to candidates than the individual caps allow.

Direct corporate and union donations are banned.

Issue committees cannot contribute to political parties, political committees or candidate committees.

Political committees cannot contribute to issue committees.

Political ads must include who is paying for them.

All candidate, political, issue and small donor committees must disclose the contributors and include the occupation and employer of anyone contributing more than $100.
Tax code 527

Allows a tax-exempt organization created primarily to influence the nomination, election, appointment or defeat of candidates for public office.

Contribution restrictions: There are no upper limits on contributions to these committees, and no spending limits. Any type of donor may contribute, from individuals to unions to corporations, even other nonprofits. There is no specific prohibition on foreign contributions.

Disclosure requirements: All 527 groups have to register with the IRS and have to file periodic reports of contributions and expenditures.

Spending on federal candidates: 527s cannot coordinate with or contribute to a federal candidate in any way. They also may not expressly advocate for the election or defeat of a specific federal candidate, although 527s are free to portray federal candidates in such a way that there is little doubt as to the message.

State level spending: At the state level, the rules are different. Section 527 organizations generally can, and frequently do, give money directly to state and local candidates.

Sources: Amendment 27, Wikipedia, The Center for Public Integrity

What Karl Told James

Probably nothing that we haven't already heard. But Sen. Schumer and Sen. Salazar, and Sen. Specter (to the extent that he can be distinguished from them) want Dobson to let them in on the briefing.

The irony here is that conservatives are the ones that have been worried about Miers, while Harry Reid put her on the "approve" list he submitted to the White House. My guess is that Rove & Bush wanted to use Dobson to reassure social conservatives, since he's as likely as anyone to be a tough critic of this nomination. It wouldn't surprise me in the least if Dobson's little aside about "things I probably shouldn't know" is calculated more to enhance his reputation that Miers's.

While I don't really believe that any backroom deals have been cut, using Dobson as the evangelical pointman on this nomination probably wasn't the most savvy move available. In the past, his comments have gone a long way towards persuading me that he wants conservative activists, not Constitutionalists.

In any event, the notion of Senate Democrats, of all people, decrying the "demeaning of the process," would be funny if it weren't so relevant. While backroom deals to get on the Court would make a mockery of the process, the fact is Rove is in no position to make such promises on Miers's behalf, and Dobson would be powerless to enforce them, in any event.

Neither such set of condition obtains with regard to Senate Democrats, who only seem to be elected for life, but who in fact were caught taking marching orders from their own interest groups on judicial nominations.

Economic Illiteracy Spreads to Salazar

Which Salazar? Take your pick. But in this case, it's Ken's brother John, the first-termer from Colorado's Third District. Evidently, he and Diana DeGette have been attending the same economics classes. The Congressman is in high dudgeon over Rep. Joe Barton's bill to promote new refining capacity. Aside from the usual blather about how increased supply won't affect prices, the Pueblo Chieftain carried this remarkable statement:

Salazar said the measure also requires the government to make $3 billion in oil available to oil companies from the Strategic Petroleum Reserve, but does not set any limits on what oil companies can charge customers for that fuel at the gas pump.

Aside from the fact that oil companies don't (usually) charge consumers for gas at the pump, this statement reveals a mind-boggling (if such a thing is still possible) ignorance of how inventory works. Look at any income statement, and you'll see a line like "Cost of Goods Sold." This is, roughly, the base cost of the inventory that was sold. It doesn't include operating costs, so it's a good measure of the company's efficiency in turning inventory into sales.

Companies use one of three methods for valuing their inventory. FIFO, or First-In-First-Out; LIFO, or Last-In-First-Out, and Weighted Average Cost of Goods. The classic classroom example for FIFO is milk. It's got a short shelf-life, so most of the milk that comes in early gets sold early. The classic LIFO example is televisions, or hardware. Since these don't decay, you just put new widgets at the front of the shelf. The older widgets stay there, unless there's a run on widgets.

The classic classroom example for Weighted Average Cost of Goods is - heh - gasoline in a storage tank. The gas truck pulls up, pumps in 1500 gallons to top off your 3000-gallon inventory, and all the gas mixes together. When the time comes to report your COGS, you just divide the gallons sold by the price you paid for it. It lets you smooth out your pricing, simplifies your accounting, and accurately reflects your business processes. The same is true for refineries, which have multiple lines feeding multiple barrels of oil into the maw at the front end, with the back end releasing gasoline, nicely blended from all of them, into multiple trucks. If I even wanted to try to keep track of what oil ended up in which consumers' cars, I couldn't do it.

Let's go back to the simpler case of the gas station alone. In fact, LIFO (which is what Salazar is really proposing here) simply can't be calculated. Since I never fully empty out that underground tank, every gallon I pump out is a mixture of every delivery ever emptied into it. Sure, I could pretend that it works on a LIFO basis, but to what end? To provide a fictional paper-trail for some publicity-hungry Champion-of-the-People DA or AG who's got nothing better to do than to calculate my gross profit margin on a daily basis?

Carnival of the Capitalists

The Carnival enters the Terrible Twos.

October 7, 2005

Chicken Soup for the Panicked

Holman Jenkins had this to say in Thursday's WSJ Political Journal:

Without counting heads, it's safe to say that among beltway types now sounding the alarm about avian flu are advocates of intelligent design. What they're fretting about is the workings of evolution, also known as natural selection. Not only would a human-transmissible bird flu virus have to emerge through mutation, but it would have to be hardy enough to surivive and reproduce in its animal host, and also versatile enough to find its way to a human host and reproduce there, without killing off its host so quickly as to snuff out its own spread.

These are high hurdles for natural selection to overcome by accident. Any forecaster who cared about his reputation would have to predict, given these odds, that a worst-case pandemic won't occur. Flu is inevitable; a particular mutation of a particular virus is not. Thank the Lord, then, for giving us a nature that operates on principles of unintelligent design.

One excellent sign is that the flu has already migrated to people, yet the outbreaks have been limited in scope, so perhaps it does kill too quickly. While that's not much consolation to the guy testing positive, it's much better for the person standing next to him.

October 6, 2005


While I have no loafers in which to be light, and in which I wouldn't be light, in any case, I do like design. From the Cooper-Hewitt to the Denver Art Museum to The Look of the Century, I like design. When I look at typefaces, or at prospective logos for my current employer, I ask what decade it reminds me of, and then, whether that decade has the associations I want. It's art married to function at the most basic level, but it's practical art in a very American sense.

The next time some Frenchman calls you a Philistine, show him this. If you want, mention that it ran on time, too. And if you really want to rub it in, remind him of the name of the designer. Yes, they're still around.

So, over there, on the left, after the Jewish blogs. there's a new section on design. It'll be a while before I can write intelligently about it, but when I read something interesting, I'll pass it along.

Refining and Environmental Regulations

Stephen Karlson over at Cold Springs Shops makes the following statement about refining and environmental regulation:

Note that I haven't mentioned two popular explanations. Some people have blamed environmental regulations that impede the construction of new refineries. That argument is special pleading. U.S. refinery capacity and production have both been increasing steadily since 1982, shortly after the end of the crude oil price controls in place during the Nixon, Ford, and Carter administrations as well as the severe recession early in the Reagan administration. There is a chart available from the BP Statistical Review of World Energy from June 2005 and some commentary by James D. Hamilton, an economist at the University of California, San Diego, at his web journal. Another economist, Steve Verdon, in his web journal, notes some evidence of oil companies using the environmental regulations to thwart their competitors' construction of refineries, which the Foundation for Taxpayer and Consumer Rights has been following closely. Such behavior doesn't surprise me. It reminds me of the way trucking companies would use the Interstate Commerce Commission to impede competition. “The existing service is adequate. If additional service is required, the existing carriers are ready to provide it. The applicant is incompetent to provide the service.”

I'm not sure how the evidence supports the claim of "special pleading." The chart actually shows that while production has been increasing since 1982, capacity has only been increasing since about 1992. This has largely been a process of squeezing out more efficiency - a noble process to be sure, but one that also carries with it risks, such as greater vulnerability and, quite likely, deferred maintenance. Also, Hamilton's post argues that regulation has been hampering efforts to bring new capacity online, which is driving up prices now. As for the fact that oil companies have been playing the regulatory game to protect their position, that only points out that the problems with regulation run in many directions; it doesn't negate those effects.

UPDATE: I would also add two things: 1) Karlson implies the solution in his post: deregulate refining the way that we deregulated trucking. 2) My sympathies are not with the existing or big oil companies, they are quite selfishly with me, the consumer. What I want is increased capacity, whether it comes from StartupOil, or ExxonMobilChevronShell.

(Very) Minor Celebrity

So we're walking to a friend's house for lunch yesterday after shul, and after about 15 minutes' discussion with the couple who are also guests, the subject of this blog comes up.

"Oh," says the wife, "what's the name of your blog?"

"Since we're in Denver, it's called View From a Height."

"Are you, like, sometimes on the radio?"

"Well, as a caller, locally occasionally as a guest."

"We know you. You're with that Rocky Mountain Alliance thing that Hugh Hewitt is always talking about, aren't you?"

That's never gonna get old. Of course, fame's the easiest one, and also the least substantial. Better than "I've heard of you" is "you write really well," or "you changed my mind about something," or "I learned something on your blog." Because Hollywood is filled with basically inconsequential people we've all heard of.

None of those, however, is nearly as good as, "here's the advance check for your book."

The Cost of Lawsuits

The Wall Street Journal this morning discusses our unpreparedness for an avian flu pandemic:

The U.S. once boasted a large vaccine industry. But in recent decades drug makers have exited the business, for reasons including low profit margins, exposure to lawsuits and manufacturing difficulties. As a result, the U.S. has lost much of its capacity to produce vaccines for seasonal flu, leaving it largely dependent on a plant in Pennsylvania, which is owned by Paris-based Sanofi-Aventis Group

Let's leave the question of whether or not Senator Salazar still thinks medical lawsuits are cheap, or whether he'll think so after the poultry-farming population of his state heads for the cities.

Tellingly, the Washington Post covers the story as a governmental issue:

"The good news is, we do have a vaccine," Leavitt added. But he also said there isn't an ability to produce it quickly enough or in sufficient quantity in the event of an emergency.


As for treatment, HHS last month began spending $100 million for the first large-scale production of a bird flu vaccine. But the department has been criticized for only stockpiling enough of the anti-flu drug Tamiflu for several million people. The Senate last week passed legislation that would increase those purchases by $3 billion.

Even the business section focuses on the local company, rather than the national problem:

The government recently awarded a $100 million contract to Sanofi-Aventis SA for an undisclosed number of vaccines that target the current strain circulating, called H5N1. But there are about 16 strains of bird flu, and the government wants Gaithersburg-based MedImmune to create vaccines for each.

And Washingtonians think provincials are, well, provincial. There's no discussion, none at all, of the wider reasons why our vaccine-production capacity is so limited in the first place, and no discussion of what's being proposed to fix the problem.

None of this is to suggest that invididually, businessmen are better decision-makers than bureaucrats. The Journal continues:

Though infectious diseases are huge killers, with about 35,000 to 40,000 Americans dying each year from seasonal flu, big drug companies are largely ignoring investing in vaccines. Instead, they are placing their bets on chronic diseases or on lifestyle drugs with big profit potential, resulting in a growing public-health problem.

But collectively, dispersed decision-making is better than central control, because the ideas will likely be there come crunch time. And don't let the sheer number of biotechs fool you. Much of the funding for the small, startups comes from the large drug companies, who will still set the research priorities.

As in other cases, Washington has over-regulated an industry (in this case, through lawsuits), taxing away its ability to place multiple bets and invest in excess capacity, and is now wishing to snap its fingers and will the product out of thin air. It's not surprising that a business newspaper would understand this, while a Washington paper would focus on the government's disaster-response planning. But enlightened regulatory policy can make governance easier down the line. This is a textbook case of bias-by-omission, where questions don't get asked, ideas don't get considered, conclusions don't get drawn, because they don't fit the underlying assumptions.

October 5, 2005

It's the Most Wonderful Time of the Year

The Baseball playoffs have started. I love watching playoff baseball, even if this year's Jewish holiday calendar interferes more than I'd like. The whole feel of the game is different, although I agree with Bob Costas that three rounds of playoffs is one too many. (Yes, I know that that means that the Red Sox, Angels, and Marlins wouldn't have made the postseason. Too bad.)

I followed the Orioles as a kid, and celebrated their 1983 Series win, but was really spoiled by the 1985 and 1986 playoffs. Go look them up.

History Lessons

I've been reading John Steele Gordon's An Empire of Wealth: The Epic History of American Economic Power, over the last few days, and it contains a number of interesting nuggets.

The one that stands out, given the questions about Chief Justice Roberts and prospective Justice Miers, concerns the difference between political and judicial philosophy. Salmon Chase, as Lincoln's Secretary of the Treasury, helped push through the first income tax to help finance the War of Northern Aggression. Later, as Chief Justice, he ruled it unconstitutional, although by then the war was over.

There is a difference between political and legal opinion.

Oh, yes. The book is very interesting, and hopefully I'll be posting a review shortly.

October 3, 2005

OK, I Lied

I hadn't intended to write anything else, but just for fun, to see if the cheerful, upbeat, economically literate folks over at the Regressives noticed the latest jobs report or the latest Supply Managers' survey.


But they did find time to write a typically homework-deprived posting about an out-of-state House race. Apparently it's news when a left-of-center (although by no means leftist) John McCain-endorsed candidate makes news by not chasing the Bush mantle. One pretty clearly nailed down by another candidate, anyway.

This district isn't exactly the Colorado 7th. Chris Cox won it with 2/3 of the vote last year. It's going to go Republican. Brewer figures that her only chance to win is by forcing a runoff and carrying the Democratic vote 9-1.

In the meantime, the Regressives can fantasize all they want about what would happen if elections were held on the first Tuesday in October in years divisible by 5. Bush might or might not win the election today. It's pretty clear he'd carry this district.

Shanah Tovah

Blog's going dark for the next two days - Rosh Hashanah, 5766.

Shanah Tovah, and a happy, healthy new year to everyone.


by Jack Welch

In Good To Great, Jim Collins discusses companies' Hedgehog Ideas, their core, driving business: what can we be the best in the world at, that we love to do? GE posed a particular problem for him. It didn't enter a market where it couldn't be first or second, and nevertheless it was in a tremendous number of different markets. Collins finally decided that GE's core business was developing CEOs, and indeed, GE alumni are all over the country's executive suites.

Given that, you expect a lot from a management book by the CEO of CEOs, Jack Welch, who ran GE for over 20 years. Given that, Winning is surprisingly uneven, yet still manages to deliver a fair amount of wisdom to the aspiring executive.

Welch divides the book into four parts: the underlying company attitude, managing people, managing organizations, and managing yourself - your career. He argues that the company's attitude is defined by three things: its mission, its values, and candor coming from the top. Too often companies confusion vision with mission, and the mission statement either doesn't say enough or drifts off over time. A good mission statement needs to be concrete, usually inspiring with ideals, while giving concrete behaviors to follow. The same is true of the values statement.

But Welch's passion really comes through when he's discussion candor - and nobody can doubt he means it. Welch was an engineer by training, and clear-cut straight talk is indispensible when discussing what chemicals will or won't do the job. Remember also that the clearest thinkers are also usually the clearest speakers, whether or not you agree with them. You know when someone's giving you a line, and so do their employees. In addition, candor is the only thing that will get people involved in those contentious debates over strategy, budgeting, and the million other decisions you want all your employees contributing to. And an executive who's committed to speaking candidly will find it easier to act decisively, rather than becoming a politician who's more interested in splitting differences.

The sections on hiring and firing, mergers, and budgeting also stood out. Welch never got an MBA, so his concern with mergers focused much more on dealmaking and corporate culture than on accounting. As a result, his list of red flags is a must-read for those looking to merge or grow by acquisition. Most of these deals fail, and while Deals From Hell covers the ground in more detail, Welch outlines it nicely here.

As for career management, Welch doens't cut any corners, especially when discussing work-life balance. Some of us moved out West for a better balance, but Welch makes it clear that no matter how understanding the company, it's really up to the employee to make that work. My guess is that he's right when he says that efficient workers probably also set up efficient processes at home, so they're less likely to need special dispensations, and more likely to get them.

What does come through is the tremendous joy that Welch got from business. He clearly loved coming in, solving problems, dealing with people, making the business work. While Welch doesn't harp on it, the fact is that dealing with these problems cheerfully rather than grumpily is half the battle.

One of the more disappointing sections in on strategy. "Figure out what to do, and then implement the heck out of it," is about as far as he gets. One gets the feeling that this was a publisher-driven, rather than an author-driven chapter. It's not like this is a neglected subject - my personal favorites are Jim Collins and Michael Porter, but that's hardly an excuse.

Winning is not Jack Welch's autobiography, but not surprisingly it does draw extensively from personal and second-hand experience running GE. Welch manages to come across as supremely self-assured without being a jerk. Probably half the stories are about mistakes that he made as he learned the ropes - in order to show what those mistakes cost him and the organization. But an equal number are about successes, and GE is a tremendously successful company.

Don't believe the jacket blurb - there will be other management books needed. Still, there are a lot worse places to start.

Justice Harriet Miers

The Wall Street Journal is reporting that President Bush will nominate Harriet Miers to succeed Sandra Day O'Connor on the Supreme Court. Miers is a trusted advisor and White House counsel. She had been rumored to be on the short list since last week.

The President was, evidently, looking for someone he believed he could trust who also hadn't left a paper trail a mile long for Senate Democrats to pick on. In addition, there's simply nothing for the Democrats to subpoena, since so much of her current work would be covered by executive privilege. Perhaps since Roberts worked in the Counsel's office, Bush went back to that well.

Here's a WaPo profile from June, before we knew there would be two openings.

Another Clinton, Same Blair

This speech by Hillary Clinton is interesting:

President Abbas must be held accountable for any and all actions that take place under his leadership. The disengagement has shown a bright spotlight on the Palestinian people and their leadership. The excuses have had to end. They now have responsibility for Gaza. The world will see whether they are capable of exercising responsible leadership. Will they be able and willing to pursue a path of peaceful coexistence? Or will they be overrun by the extremists the terrorists, whose only vision of the future is the destruction of Israel? Will they build roads and infrastructure or will they loot buildings, greenhouses and synagogues?

... a nuclear-armed Iran would shake the foundations of global security to its very core.

Mind you, I don't think a President Hillary Clinton would actully do anything to hold the Palestinians accountable, nor let Israel do so for very long. Nor do I think she's got either a clue or an interest in confronting the mullahs or toppling their regime. This could simply be more triangulation.

Or, she could really remember the shellacking she took at that post-9/11 benefit concert. And if she is serious, the risk for the country is a dramatic shift to the left domestically, covered by a serious foreign policy.

I've believed for some time that Hillary believes that 2008 will look a lot like 1968, with herself taking the place of Nixon.

Via the new Weekly Standard blog.

October 2, 2005

Regulation Begets Regulation

There ought to be a required reading list for members of Congress. High up on that list should be Thomas Sowell's Basic Economics. Any freshman Congressman who fails a test on the contents should not be allowed to take his seat. All sitting Congressmen and Senators would be required to pass before beginning the next session.

I'd be happy to run in the special election to succeed Diana DeGette.

UPDATE: More on this subject here.

According to the AP from last Thursday, Republican members of Congress are interested in relieving the supply shortage of oil, natural gas, gasoline by - get this - relaxing environmental regulations so we can expand exploration, and build new refineries. (The last US refinery was built in 1976. There's a sad joke in there about energy independence, but let's not get sidetracked.)

Our distinguished, but economically illiterate representative from Colorado's first district had this to say:

Some Democrats, however, called Barton's bill a subsidy to an energy industry that is reaping huge profits from high oil and gasoline prices and criticized the proposals for not addressing price gouging at the pump. They also argued it would gut major clean-air requirements on refineries.

"It's ... not going to do anything to help consumers" and will "run roughshod" over environmental laws and local involvement in deciding where refineries are located, said U.S. Rep. Diana DeGette, D-Colo.

DeGette is supporting a push by congressional Democrats that would give the Federal Trade Commission enforcement authority over energy companies that engage in price gouging.

The legislation would allow the FTC to punish companies that sell gasoline or other petroleum products at prices that are "unconscionably excessive" or that indicate the seller is "taking unfair advantage of the circumstances to increase prices unreasonably."

Quick question for any Democrats: if relaxing a regulation is a subsidy, is imposing it in the first place a tax? Just asking.

Only someone driven not by reason but by blind ideology could argue that increasing supply won't help consumers. Only someone who needed the time spent in gas lines to catch up on her reading would propose price controls. DeGette's about 9 years older than I am: she lived through 1979 and still wants to control prices. Add to that the fact that a law containing language like "unconscionably excessive" and "unfair advantage" is so utterly meaningless that only a properly-greased bureaucrat could possibly know what it means.

The Post thinks that it's got a scoop on gas prices: the refiners are making money hand over fist during a shortage. Eventually the article quotes someone noting that maybe supply and demand have something to do with it, but that's an afterthought. (Finny, I don't remember the Post being worried for the financial health of refiners when I paid 79.9 for a gallon of gas in the fall of 1998.)

So we have an artificially-induced shortage leading to a fragile system operating near capacity all of the time, and people are surprised when action at the margins leads to shortages. Naturally, DeGette's answer is to prevent the refiners from making money, and to prevent them from expanding, which would increase supply. Keep that up year after year, and this problem is only going to feed the vicious circle:

With profit margins soaring and political pressure building to increase gasoline output, the nation's refiners face a dilemma as their fall maintenance season nears.

Going ahead with the maintenance schedule would mean shutting down refinery production, adding to the shortfalls caused by hurricanes Rita and Katrina, and keeping gasoline supplies tight and prices high. But postponing maintenance, needed to keep their refineries in top running condition, could increase the chance of accidents, potentially disrupting even more production.

I'm sure that next, DeGette will be asking about helicopter owners who are "price-gouging:"

A lack of sufficient workers, helicopters and equipment is hampering efforts to assess damage to offshore Gulf of Mexico oil and natural-gas facilities and restart production, which remains mostly shut down nearly a week after Hurricane Rita came ashore.

The Federal meddling is already creating long-term effects. The refiners, sensitive to gouging accusations, are holding prices down at their company-owned service stations. That's terrific if you happen to be one of those stations. But if you're an independent, you've got a problem:

In such a climate, he says, economy chains and big-box retailers have three choices: sell well above the average retail price, sell at a loss or shut off their pumps temporarily.

Jawboning price controls has the same effect as legislating them. Since even the Post understands that the guys with the margins here aren't the ones cleaning your winddhield, it's got to be clear that if independent stations start going under, that means less consumer-level competition in the future. No doubt Eliot Spitzer is already preparing a lawsuit alleging that the refiners are "selling" gasoline to themselves at a lower price than they charge their customer-competition.

The net result of all this is higher prices than necessary, and a government that's going to start asking us to wear sweaters again, as though we couldn't figure that out on our own. Having created the mess in the first place, they now want to make sure it goes on in perpetuity.

Seriously, a reading list.


Power, Faith, and Fantasy

Six Days of War

An Army of Davids

Learning to Read Midrash

Size Matters

Deals From Hell

A War Like No Other


A Civil War

Supreme Command

The (Mis)Behavior of Markets

The Wisdom of Crowds

Inventing Money

When Genius Failed

Blink: The Power of Thinking Without Thinking

Back in Action : An American Soldier's Story of Courage, Faith and Fortitude

How Would You Move Mt. Fuji?

Good to Great

Built to Last

Financial Fine Print

The Day the Universe Changed


The Multiple Identities of the Middle-East

The Case for Democracy

A Better War: The Unexamined Victories and Final Tragedy of America's Last Years in Vietnam

The Italians

Zakhor: Jewish History and Jewish Memory

Beyond the Verse: Talmudic Readings and Lectures

Reading Levinas/Reading Talmud