View From a Height

Index Funds - An Ongoing Study

A few weeks ago, I posited that the popularity of Index Funds could be increasing the volatility of the markets.

This is a testable hypothesis to a point. We can at least see a correlation, and see if volatility has grown with Index Fund investment.

Since it looks like I'll have a little extra time on my hands for the next few weeks, I'm going to go ahead and use public information sources, pull down the prices for the Dow Jones Industrials since 1/1/1970, and see if any of this works.

Obviously, this is a multi-step process, so I invite the readers of this blog to check the math, check the methodology, and work on this along with me.

Franchise Failure

Dane over at Business Opportunities Weblog quotes Steve Strauss on franchise survival rates:

The good news is that the likelihood of you failing as a franchisee is fairly remote According to the Small Business Administration (SBA), roughly 30% of all non-franchise businesses fail within the first year, but that number falls to 5% when discussing franchises.

Strauss then goes on to discuss reasons franchises fail.

It's a good piece, with two quibbles. According to a 1998 study for Sloan Management Review, about 15% of franchises fail in their first year, and by the third year, they match that 30% failure rate. It may be that franchises have refined their systems since then, but 95% sounds pretty good, 85% less so, and a longer-term view is much less rosy then either.

Secondly, Strauss fails to warn potential franchisees that franchisors will sometimes buy back successful operations an have the company run them directly. This not only breaks faith with the franchisee, who's buying a revenue stream as much as a process and name. It also suggests that the franchisor's attentions aren't where they need to be: in brand-building, marketing, and chain-growing.

CU Exit Strategy

I laid off the Ward Churchill blogging last week, mostly because it looked like the week's big story, the Great Hawaiian I'm Not an Indian Admission, blew over the day after. Then, of course, it turns out he forged a painting and took a swing at a reporter who asked him about it.

This week, it's the return of the inmates, as CU professors demand an end to the investigation, and the administration begins making noises about a settlement. This is what an "exit strategy" brings you, and it ain't pretty.

Meanwhile Jim "Strawman" Spencer is hard at work turning Churchill into a mildly outspoken martyr who just got in over his head. Sure, the department's tenuring of someone as blatantly unqualified as Churchill is rare. But it could only have happened in a series of departments so beset by groupthink that nobody bothered to challenge what was happening.

Spencer also joins the profs in trying to limit the issue to free speech. I don't care even for that case in this event, but the fact is that Churchill now stands accused of offending academia even on its own, more insular, terms. He has, evidently, deliberately distorted the plain meaning of texts, made stuff up, stolen other stuff, lied about himself, his past, his ethnicity, bullied students and newspapers who dared to ask questions.

The professors call this a "distraction." I'm sure it is.

Last word goes to reader Merlin Klotz:

The position of academics who suggest that "it is going to be extremely difficult, if academic freedom is on the block, for us to hire and keep good faculty members" rings hollow if good faculty members are reduced to only those that support multiple forms of academic fraud. On the contrary, the very best in faculty candidates would be embarrassed to be associated with an institution that supports in its very principles the standards of ethics and truth set by Mr. Churchill.

Carnival of the Capitalists

Congrats to the Coyote Blog, located just south and west of here, for all the hard work.

Paden for Golden

Pending signature validation, Friend of the Alliance, and foot doctor extraordinaire Barbara Paden is now officially a candidate for the vacant Golden City Council Seat.

This means that her campaign is taking contributions, for one thing.

Barbara was a blogger before she was a candidate, so her campaign blog should be good reading in its own right, as opposed to most politicans' blogs. That alone is reason to help out.

Sporadic Oscar Bloggng

Vox Bloguli - Go Reed. Thomas Reed

Welcome Hugh Hewitt readers!

Hugh's offering a choice in response to Sen. Harry Reid's threat of judicial obstructionism. McClellan vs. Grant. Look, if your option is a general who treats victories like defeats (and pulls back) or one who defeats like victories (and advances), hey, whiskey for everyone! The analogy works in another way: Lincoln, seeing McClellan's inaction, famously asked him, "if you're not going to use the Army, do you mind if I borrow it for a while?" There's a reason you fight to win elections - to make judicious use of the institutions you win control of.

That said, I've alluded to a far closer analogy before. In Barbara Tuchman's wonderful survey of Europe and the US before WWI, The Proud Tower, she devotes a few pages to Republican Speaker of the House Thomas Reed, and his decision to overturn the "silent quorum." This was a means by which members could have a quorum for debate, and then prevent a vote by refusing to answer the roll. Since the Republican majority was so slim, it was difficult to assure an absolute majority of members would be present to vote, and the "silent quorum" was killing the House's ability to transact business.

Reed simply decided to end the practice. On the first quorum call, concerning the seating of two new House members, he ordered the clerk to mark as "present" a House member who didn't answer. When the representative objected, Reed boomed out, "the Speaker is merely noting that the Representative is present. Does he wish to dispute the fact?"

The floor of the House erupted. Realizing that he was risking renewed civil hostilities, Reed agreed to several days' debate on the question, and eventually he prevailed.

One interesting twist to the story. Reed was able to summon up the moral courage to win by deciding that he'd simply retire if he lost. He was an unmatched debater, and would have returned to Maine and resumed his successful law practice. Likewise, Sen. Frist is not running for re-election in 2006, so he has almost nothing to lose by standing up for the right to vote on judges.

Harry Reid, you're no Thomas Reed.

The Counter-Reformation

If Hugh Hewitt is right, and blogging represents the Reformation, then the counter-Reformation can't be far behind.

Today saw the publication of three pieces of literature, ranging from analysis to polemic, that will be brought together in the new storyline of a vast Republican media conspiracy.

First, Anne Lewis at the DSSC seizes on Ken Mehlman of the RNC comment that "we don't have to pay for our grassroots," a reference to the paid help that the Dems' GOTV effort relied on. First on Lewis's list: the South Dakota Alliance, and Jon Lauck. Lauck did indeed receive money from the Thune campaign, disclosed this fact, and went on to cover the campaign and the Argus-Leader's distortions in great depth and with great insight. He had a point of view, he was not a shill. This doesn't prevent Lewis from claiming that he never told anyone about his payment.

Then, Jan Frel at Personal Democracy posts a long piece claiming to uncover the real strategy of the South Dakota Alliance. That strategy was to "get inside the heads" of the Argus-Leader's staff covering the campaign.

Actually, the strategy was to force the A-L to straighten up and fly right, something blogs have been all about for a while now. Dan Gillmor, formerly of the San Jose Mercury News who now blogs about the media, treats this as a startling revelation. But Frel notes that the Alliance made this goal public in a Platform.

Gannon-Guckert also makes an appearance in Frel's article.

And today, Jay Rosen puts the Gannon-Guckert kerfuffle into a larger context, what he sees as the Administration's efforts to discredit the print MSM. Let me be clear: I think Rosen is acting in good faith, and is putting together some pieces that should be aired. Rosen's a smart guy, and should be taken seriously, and argued with seriously. At the same time, this is a storyline that will be quickly twisted into the larger "conservative-media-as-paid-tools" storyline.

That storyline is the counterattack.

It matters not that the South Dakota Alliance, or Powerline, or the Swifties operated from facts. Or that the CBS memos were fake-but-untrue, or that Eason Jordan had a history of questionable statements and ethics, or that (to address Jay Rosen's point) the mainstream press long ago abandoned professionalism for politics.

What matters is that the Administration and the campaign found a way to get around the filter.

It's a political counterattack, not a reasoned one, so it relies on ignoring facts and smearing all opponents with the same brush. The hope is to create an image in the public mind, not to win debating points. It's to change the image of bloggers and those who support them, from public heroes (which was always over-stated, anyway) to being something slightly disreputable, and suspect.

It's part of the game of discrediting conservative journalism, in an attempt to re-establish the MSM as the only source of critical analysis of the administration.

We Put the "W" in Qwality

Well, you have to give them credit for trying, even if they can't get any other kind of credit.

Qwest has revised its offer, speeding the cash payout to MCI, and offering to make good any losses if Qwest stock drops before the deal is done. Moreover, consumer groups are claiming that the Verizon deal is anti-competitive.

Color me unimpressed.

The latest word is that MCI's board will stand by Verizon, even as it fulfills its fiduciary responsibility to play wastepaper basketball with each individual sheet of Qwest's new offer. Owning 5% of something is better than owning 40% of nothing The board has obviously made its decision, but the whole deal will still need to pass shareholder muster.

First, the consumer groups. Consumer groups take a notably static view of the world. Their cry of "anti-competitive" is only true if you assume that there are no other competing technologies. I can see why the Post would pick up the refrain to boost the hometown boys, especially given the jobs at stake, but with cable companies, satellite companies, VOIP, all out there, the idea that anyone's market position is unassailable or even particularly stable is short-sighted. The only thing they can do is to sow uncertainty in MCI shareholders that the Verizon deal would get regulatory approval.

As for the deal itself, it contains a "put," in effect, an offer to make good any losses if Qwest stock drops below $4.15 a share before the deal is sealed. Which is all well and good. Put options are frequently included in buyouts, to reassure the buyers that they're getting something worthwhile. (This reinforces my interpretation that Qwest is not so much acquiring MCI, as offering a minority stake of itself for sale.)

The problem is, all Qwest has to offer is more shares, i.e., a bigger piece of a smaller pie. It's a meaningless offer, and everyone knows it.

The wildcard remains the shareholders, who include a growing number of hedge funds moving in to make a quick profit on a hoped-for bidding war (paid subscription required). They're expecting Verizon to up its offer, and will be putting pressure on MCI's board to make them do so.

Two problems with this. First, the broader market isn't buying, with MCI stock down from its premium over Verizon's offer. It's still trading a little higher than Verizon would pay, but much lower than Qwest's offer. And they can't all get out at that price, either. Second, MCI released its quarterlies, showing yet another operating loss. This means that MCI lost money for both the 2nd and 4th quarters, and will be down for the year. The early efforts by interested investors to promote MCI as a cash cow rather than a cash hoard don't hold up to scrutiny.

If the shareholders, including the short-term hedge funds, were to stampede shareholders into rejecting Verizon's offer, they'll get what they deserve.

Ethel Merman

For those of you who happened to be listening yesterday, yes, that was me on Hugh's story recounting the story of Donald O'Connor's Merman-induced hearing loss.

Naturally, as soon as I hung up, I remembered that the show was "Call Me Madam," and the look on O'Connor's face as she slams his head down on her shoulder and starts to sing is priceless.

"What's Wifi?"

In a debate on Senate Bill SB05-152, which would prevent municipalities from directly building telecom networks and competing with private companies, committee chairman Sen. Deanna Hanna was heard to ask one opponent of the bill, "What's Wifi?" Way to do your homework, Senator.

Glenn Fleishmann has written eloquently and persuasively about the need to keep open the option of municipal wifi networks, and the attempts by various state legislatures to foreclose the option.

My own inclination is that governments shouldn't be competing against private industry where it's at all avoidable. The inherent regulatory conflicts of interest are too obvious. DU Professor Ron Rizzuto reiterated his study that municipal telecom networks almost never pay for themselves, but that the temptation to mix in funds from, say, the electric utility, is too tempting. In the long run, such services tend to benefit from relaxed treatment, and deliver substandard service at a high, hidden cost.

That said, a blanket ban on municipal or county telecom networks is probably a mistake. The argument comes down to what a utility is, and what the government's role in providing that utility should be. I do believe that wifi will quickly become a utility, just as cellphone service has in the last decade or so. Such a utility could be quite profitable in a large city like Denver or Boulder. But small towns and rural areas might want access, as well. There, the co-op model already provides electricity and water, and in some cases phone service, without competing with an non-existent incumbent.

In the end, my main goal is to get all the phone poles torn down, and have us all using VOIP, anyway, so whatever speeds that transition has my ear. Locking out an option on principle rather than experience seems a little hasty.

Sen. Roseanna-Roseanna Deanna Hanna

In a surprise slap to their usually reliable allies the Progressives, the Denver Post this morning editorializes against yesterday's state Senate Business, Labor, and Technology Committee vote to pass the Keep Jobs in America Act along to the full Senate. I don't think they're necessarily reading this blog, but it's encouraging that they do repeat a number of the arguments made and referred to here. Heh.

As noted before, the Act would have all sorts of consequences for the state's budget and ability to function, without materially affecting the US or world economies. I wonder if sponsor Sen. Hanna also thinks that declaring Boulder a nuclear-free zone would dissuade the incoming missiles...

DU CR CPAC

By a quirk of fate, DU College Republicans meet right after my risk management class in the same room. It turns out that a bunch of them went to CPAC, and I got a chance to see what about the conference a set of enthusiastic, starstruck Republican undergrads found most interesting.

The five students who attended were Charlie Smith, Conor McGahey, Melanie Harmon, Dan Cutts, and Nichole Walker (who wasn't in school, but in the hospital instead).

The biggest hits were Newt, Ann Coulter, Wayne LaPierre, and Ken Mehlman. Mehlman pointed out that the Dems met all of their vote goals - they just got outvoted. The Republicans, having more real estate to work with, were able to get 1 or 2 more votes per precinct and out-gain the Dems enough for a decisive win.

I asked them about their impressions for '08, and all four of them pointed to George "The Future Is Now" Allen. Allen's speech was apparently very successful, very forward-looking and optimistic. And while he's a Senator now, he has been governor of Virginia, which gives him an executive mentality lacking in most legislators. Plus, he went to a very good school.

Sounded like they have a terrific time, and came back charged up and ready to continue the fight.

Foot in the Door

Friend of the Alliance, Barbara Paden, AKA Girl in Right, is just a few signatures short of a ballot line.

No, really. She's trying to make the leap from the commentariat to the secretariat, running for a vacant seat on the Golden City Council, and she needs just a few more signatures to guarantee a line.

If you live in Golden, and are eligible to vote, and are registered to vote, and aren't a felon, and don't expect to get paid for your signature, please stop by, or contact her campaign (303-525-1503), and she'll make arrangements to collect your signature.

Sort of Like Spam, But Without the Bitter Aftertaste

For those of you who would like to receive new postings by email, there's a subscription form over on the left-hand side (scroll down a little). Just enter your email address, and new postings will be mailed to you as they appear. You won't get offers from jailed Nigerian businessmen and what happens at View, stays at View, so your email address stops here.

President Hoffman Speaks

Just came from a Republican House caucus meeting, where CU Regent Tom Lucero and CU President Betsy Hoffman both spoke. Both knew there was press in the room, so both knew their talks were on the record.

Probably the most interesting moment came when one representative asked about the man/woman imbalance at college, with almost all schools having many more women undergrads than men. Hoffman replied that CU has a 51/49 male-to-female ratio, so they hadn't entered that world yet. "And," she continued, "in a school with a stronger science and math component, you're less likely to see that sort of imbalance."

She did not offer to explain, nor was she asked, why that might be the case. Nevertheless, she's not the only one to notice.

Hoffman also spoke about the Ward Churchill affair, going over the very strong tenure procedures that exist at the school, and once again proving that the problem is almost never one of process, and almost always one of judgment.

President Hoffman did spend a fair amount of time reminding us of CU's contributions to the state as a research institution, both in space and in medical research. Example: I remember having a discussion recently where the subject of blindness cause by macular degeneration came up, and I winced at the mention. CU has a drug - Macugen - poised for final FDA approval which will help reverse its effects and become the leading treatment.

In all the controversy - and it's been considerable this year - it's easy to lose sight of exactly why we do care about the school.

Media Bias Down Under

For those of us who think that media bias is even primarily an American phenomenon, I'd recommend to you Australian Gerard Henderson's Media Watch postings. Henderson is executive Director of the Sydney Institute, where he writes a weekly column. He also seems to appear in The Age with some regularity.

Not Paying Attention

The brilliant Mark Steyn's latest devastating column centers on Arthur Miller's inflated reputation, and the uses to which it has been put:

Miller was the most useful of the useful idiots. It was a marvelous inspiration to recast the communist "hysteria" of the 1950s as the Salem witch trials of the 1690s. Many people have pointed out the obvious flaw with "The Crucible" — that there were no witches, whereas there were certainly communists. For one thing, they were gobbling up a lot of real estate: they seized Poland in 1945, Bulgaria in '46, Hungary and Romania in '47, Czechoslovakia in '48, China in '49; they very nearly grabbed Greece and Italy; they were the main influence on the nationalist movements of Africa and Asia. Imagine the Massachusetts witch trials if the witches were running Virginia, New York and New Hampshire, and you might have a working allegory.

As it is, Miller's play is an early example of the distinguishing characteristic of the modern Western left: its hermetically sealed parochialism. His genius was to give his fellow lefties what has become their most cherished article of faith — that any kind of urgent national defense is, by definition, paranoid and hysterical. It was untrue in the '50s, and it's untrue today. Indeed, the hysteria about hysteria — the "criminalization" of "dissent" — is far more hysterical than the hysteria about Reds.

"The Crucible" will survive because it is the modular furniture of left-wing agitprop: whatever the cause du jour, you can attach it to and it functions no better or worse than to anything else, mainly because it is perfectly pitched to the narcissism of the left.

Steyn is the theater critic for the New Criterion, and reason enough to subscribe.

Baby You Can Drive My Car

Now, let's see. I work during the week. I can't go test-drive cars on Saturday. It's illegal for a dealership to sell me a car on Sunday. Read that again. Walking through a large parking lot tell me nothing - < DeNiro as Capone Voice >nothing < /DeNiro as Capone Voice > - about the car. Which means that I have to take time off work to go buy a car, if I want to see it by anything brighter than the light of the silvery moon. What's more, if I owned a car dealership, I'd need to be closed both Saturday and Sunday.

Let's keep it that way.

Others said most dealerships don't want to open Sundays because it gives employees the day off and levels the competition if all lots are closed. Others said it gives consumers a day to look at cars without salespeople hovering over them.

This doesn't have anything to do with employees' religious observance. I realize that most car salesmen could use all the time in church they can get, but my guess is that this isn't where most of the are going. It has to do with car companies keeping their costs down, helped out by the government. While a specific car may be something of an impulse buy, my guess is that most people and business that are going to buy cars are going to buy them anyway. So the dealerships know they can stay closed and still make the same number of sales.

We have a chain of hobby stores here called "Hobby Lobby." You know, they sell frames and mirrors and cardboard and ribbons and buttons and bows. They're closed on Sunday. Michael's, the national chain, isn't. Hobby Lobby believes in this enough to take the hit. Why does Freeway Ford get a free pass?

I want to see people in church on Sunday, too, but if they're in church, they're not out buying the cars, either. Seriously, if an auto dealership advertised itself as "Sundays-off, Family-friendly," and if that mattered to people, which it clearly does, then they could make a point of shopping there.

Tell you what. Give 'em Wednesday off, and don't open until noon on Sundays. Or, if you're close on Saturdays, you don't have to be closed on Sundays.

Either that, or get The Progressives to propose a bill requiring that employers give employees time off to go buy a car. Heh.

UPDATE: Bill Scanlon of the Rocky replies to an email, "Rep. Weissman pushed it, knowing it would fail, but wanting to see how much support it would have. He said he though he had 29 votes. The voice vote seemed to indicate that he had about that many, although a later formal vote indicated that he only had 13."

So this was clearly bipartisan nannying.

No, Real Prawns Aren't Kosher

But don't let that stop you from visiting the Carnival of the Capitalists.

A Poll Too Late

About a week ago, the Washington Post reported on how The Commute is faring in my old hometown. ("Painful Commutes Don't Stop Drivers", and accompanying poll.) If anything, things seem to have deteriorated even further since I left, and the traffic was one of the aggravating factors in my leaving.

Unfortunately, I seem to be a carrier, because the Denver area seems destined to repeat DC's mistakes. I wish this article and survey had been available last year when our friends at the Independence Institute were trying to persuade us that FasTracks was a mistake.

The one thing they seem most unwilling to do is give up their cars, so they accept long and frustrating commutes as the price for other lifestyle choices.

...

"There's nothing we can do to fix it," said Dan Tangherlini, the District's transportation director. "There are things we can do to try to influence it. But it is a little frustrating when most people sit around and agree that people are making all the wrong choices and yet more and more people are doing it."

Naturally, the people are making "all the wrong choices." Yes, I agree. Foremost among those wrong choices was an expensive below-ground subway system that was obsolete as soon as it was approved. It's completely unequipped to handle cross-county commuting, and it ends in what are now the inner suburbs. It picked winners and losers, can't possibly have nearly enough spokes or parking to be near enough people to be worthwhile or convenient.

Blaming people because they'd rather sit in their own private car, listening to what they please, rather than sweat it out, lurching along with a few dozen co-commters in tunnels where they can't call to say they'll be late? Yes, that's the worst of the bureaucratic mentality at work. Everyone is just making that "wrong choice" that they'd rather have flexibility and comfort, even at the price of a long, unpredictable commute. That's not a "wrong choice," that's a "trade-off."

Sadly, even Washingonians don't seem to have learned the lesson:

Solid majorities of area residents polled support a variety of big-ticket items to help ease traffic congestion, from extending Metro to Dulles International Airport to building an intercounty connector in the Maryland suburbs. Half would even be willing to pay higher gasoline taxes to fund transportation projects, compared with a third nationally.

I suspect the same flawed logic is at work here as built Metro in the first place, and that led to FasTracks: we'll build this, and that will get everyone else off my road.

Look, Maryland has been a terrible roadblock back there. A lot of DC's congestion is through truck traffic that has no place to go but the Beltway. DC won't finish I-95 through the city; and Maryland has blocked both eastern bypasses (to permit I-95 traffic to flow around the city), and western bypasses (to let other I-95 traffic connect with I-70 or I-270). Next time a shipment of nails from Birmingham bound for Camden spills and turns Northern Virginia into a parking lot for 10 hours, send your complaints to Annapolis.

One big reason that drives are longer here is that traffic tie-ups are far more frequent. Nearly 6 in 10 commuters say they get tangled up in traffic jams at least once a week. And more than 1 in 4 -- 28 percent -- said they encounter serious tie-ups every day, compared with 9 percent of commuters nationally.

Inconsistency is a classic symptom of a system operating near the edge.

"Sometimes it's just plain scary," said Danitza Valdivia, 31, a project assistant who lives in Northwest Washington and works near MCI Center -- a four-mile commute as the crow flies that takes her a half-hour to negotiate. "I get to work and have to take a coffee break before I start my workday."

The last few times I've gone back to DC, it's been Highway Culture Shock. I had forgotten how erratic the drivers are there. Of course, this doesn't get them more than a few car lengths during the course of an hour, and is probably responsible for a fair number of the accidents and tie-ups.

There's no question that traffic here is worse, and the drivers more aggressive than they were eight years ago when I moved here. Still, people assimilate. It's rare to get beeped at for not jack-rabbiting off a green light, for instance.

Still, it's still a manageable problem. C-470/E-470 is helping, and plans to widen US-36 between Denver and Boulder are an absolute must.

People are not going to get out of their cars, by and large.

About Wikipedia

Wikipedia is an online encyclopedia that operates like a moderated blog. It believes that it has both technical and social means to control trolls, cranks, and partisans, and still publish a high-quality product.

About.com relies on a centralized set of experts to edit its articles, mimicking a traditional encyclopedia, but on line.

Guess which one the New York Times bought for $410 million?

Typically, the Times report of the purchase doesn't even mention Wikipedia. It's couched entirely in terms of the added revenue stream, which is probably true. Until the Times editors get their glummies into About.com, and the Wikipedians start fact-checking the thing.

Mental Ward

From today's Rocky, more interviews with the foxes guarding the henhouse a few years back:

The idea of placing Churchill in communications came from then-Dean of Arts and Sciences Charles Middleton, the former department chairman, John Bowers, recalled Thursday.

Bowers said Middleton didn't mention Churchill's ethnicity.

"It didn't need to be said," recalled Bowers, who has since retired and lives in Oregon.

"I understood it that way, but it wasn't just that I understood it that way from the dean. I mean, it pervaded the whole organization, and still does, I believe.

Does anyone still not get the idea of groupthink? There didn't have to be a conspiracy. All they needed was complete uniformity of opinion on the matter of genetic diversity.

"And I agree with that. I'm not saying that critically," he added.

No doubt. Nothing reinforces the true believer's faith like contrary evidence.

"We were always trying to add diversity to the faculty," Middleton said. "But the qualifications for faculty appointments always govern the parameters within which we can consider somebody."

Granting tenure to new hires is not precluded by university rules, Middleton said.

We followed the rules! Yes, of course you followed the rules. Nobody's saying you didn't sign all the right papers. They're saying that you got to the point where an ideological commitment to ethnic bean-counting led to a complete suspension of judgment.

And there were a few other faculty members who, like Churchill, lacked a doctorate.

Yes, I'm sure there were. I'm sure that there were exceptional intellects who lacked this or that qualification. They're expected to make up for their weaknesses with other strengths. We tolerate all sorts of weaknesses in people we admire because we value other strengths, but you don't pattern yourself after those weaknesses. Churchill is like the football player who's slow and makes up for it by being small. And even now, the coach can't admit he can't remember just what he was thinking when he put him on the squad.

"...What is Your Qwest?"

"What is your name?"
"Richard Notebaert."
"What is your Qwest?"
"Um, a technically bankrupt phone company."
"What is your favorite telecom?"
"Local or long-distance?"

After listening to Qwest's conference call, let's just say that Notebaert didn't sound too happy. When a guy starts talking about "keeping options open," and "seeing how the deal plays out," it's pretty clear there's no Plan B. They're going straight to Plan 9.

I've written about this non-deal before, here, here and here, so there's little point in repeating the details. What's astonishing is that Qwest isn't giving up.

Qwest's letter to MCI is somewhere between the sad and pathetic (click below to Read the Whole Thing). It sounds as though Qwest is being manipulated by a couple of large MCI shareholders who want a higher premium from Verizon. Some of them were arguing that MCI had a fine cash stream, when in fact it does not, and Leon Cooperman has been out there pushing MCI hard.

In fact, Notebaert really has very little left to bid with. Any more cash is essentially coming from MCI's own account, and defeating the purpose of the merger - cash for Qwest. Any more stock, and it becomes unclear just who's buying whom. So what's he going to offer? Mountain view property in Elbert County?

The only card Notebaert has to play is the MCI board's fiduciary responsibility to the shareholders, so that's the case he's trying to build. If the shareholders see through it, there's always a slight chance that the SEC, FTC, or Czar Spitzer might think otherwise.

It remains to be seen how far Qwest is willing to push this, but if they want to spend time negotiating deals, they have some bondholders who are probably folding their arms and tapping their feet impatiently right about now.

On second thought, maybe it's more like the Black Knight.

February 17, 2005

The Board of Directors
MCI, Inc.
Attention: Chairman, Board of Directors
22001 Loudoun County Parkway
Ashburn, VA 20147

Dear Mr. Katzenbach:

I am writing this letter to request information from you regarding Qwest's proposal to acquire MCI.

On February 11, Qwest submitted a written proposal to acquire MCI. On February 13, Qwest reconfirmed the terms of our proposal in writing to MCI's Board.

We are aware that MCI has signed an agreement to be acquired by Verizon Communications Inc. As of the writing of this letter, we have just received a copy of this agreement and we are in the process of evaluating it. Published reports, including public disclosures by MCI's President and CEO, indicate that the consideration to MCI shareholders in the Verizon proposal is substantially less than the consideration Qwest offered to MCI shareholders. In addition to the superior merger consideration offered by Qwest to your shareholders compared to the Verizon offer, we would like to remind you that Qwest's proposal is superior to the Verizon proposal because our regulatory approval process is likely to be completed at least six months more quickly and the value to the MCI shareholders from participation in approximately 40% of the synergies in a Qwest transaction will substantially exceed the value of synergies that would be received by MCI Shareholders in a Verizon deal.

To date, we have not received any response from MCI or its advisors on the terms of our February 11 proposal, as reconfirmed on February 13. If we had received this response, we may have been already able to communicate to you a modified offer that would be beneficial to MCI shareholders. In addition, we were provided limited access to due diligence information regarding MCI, which we have been informed was substantially less than the access provided to other parties.

In addition, we would like to advise you that once we have completed our review of the Verizon merger agreement, we do intend to submit a modified offer to acquire MCI and we would expect MCI and its advisors to engage us in a meaningful dialog regarding the merits of our offer and we would further expect access to due diligence information consistent with that offered other parties.

Sincerely yours,

Richard C. Notebaert
Chairman and Chief Executive Officer

Review

The Blink review is up. It's a good book. But then, I only read good books.

McMad Revisited

A couple of weeks ago, I had a very nice, very long conversation with Ms. Adams, who appears in the prior posting about McMad and its fight against McDonald's. I came away with the impression that the Rocky had made a couple of mistakes in its reporting. I also see why the neighbors might be a little hacked off at the company. They do have some legitimate complaints. At the same time, they're burying those complaints under a mound of inflated rhetoric, which doesn't bear up under scrutiny.

First, what the Rocky missed. They claimed that the demos were going on outside the vacant buildings - they're not. The protesters demonstrate outside the existing Glencoe St. McD's. This makes much more sense.

Secondly, the claims that seem valid. I can believe that this may not be the best intersection for a drive-thru. Krameria doesn't have a left-turn signal, there's an offset when crossing Colfax, and the Neighbors claim to have a study showing that this intersection is the most dangerous between Monaco and Colorado. (This may well be true; an email request to the group for the numbers went unanswered.) There is a garbage problem from the Good Times across the street, and Ms. Adams front yard will, evidently, have a front-row seat for the traffic exiting onto Leyden.

All of these problems (except for the offset) could be easily fixed by the city. However, there are no plans to put in a left-hand turn signal, nor will the city allow them to put in a "porkchop " to turn the traffic away from the side-streets and back onto Colfax. Between a company they believe has been duplicitous and hostile, and a government that seems utterly unresponsive, I'd be frustrated, too.

(Aside: there are other, unverified claims that they make against McDonald's, the developer, and the franchisee. I haven't spoken to them yet, and I don't wish to repeat them until I do. I mention them here to explain the neighbors' sense of being locked in an iron box, but I don't wish to give them substance without at least giving the other guys a chance to talk. What can I say? I'm busy.)

That said, I think the neighbors' frustration has led them to make claims that are simply wild and unrealistic, in order to garner support from a broader community. For instance, the area that they wish to turn into a Town Center, on the Stapleton or Lowry model is roughly 9 square blocks. Putting a McDonald's on the fringe barely affects the rest of it. Small businesses could easily be lured in, just like the coexist with Panera and Starbucks in other developments. The only signal it sends is, "open for business."

Also, Ms. Adams believes that overlooking a drive-thru from the adjacent apartments is worse that overlooking a parking lot. Except that now, while the parking lot entrance is on the side-street, the actual drive-thru lane is away from the apartments, on the Colfax side of the restaurant.

Ms. Adams also said something about this being "the worst possible business" to put there. Well, I can think of two or three other businesses that Colfax has plenty of that would be worse. Just ask Denny Naegle. She's worried about her daughter playing in the front yard with all the traffic. Fair enough. I'd be more worried about some of the role models for young ladies inhabiting this street out in Aurora.

I also haven't been in touch with Ms. Johnson, but it seems passing strange that a City Councilman can't prevail on the traffic department to bend a few rules and upgrade the intersection. For instance The Grid is hardly sacred.

...where traffic patterns are painful to your gears.
The Lowery development leaves you close to tears!
There are even places where it completely disappears,
Why, in Congress Park they haven't used it for years.

And what's so hard about putting in a left-turn light? It's not as though the traffc engineers in this town know anything about synchronizing the lights, anyway. People would hardly notice.

It seems to me that the bad guy here - to the extent that there is one - isn't the landowner or the restauranteur, but a city government that could solve the problem in one afternoon but chooses not to.

Thanks

Many thanks to local DreamMaker Bath & Kitchen franchisee Skip Carson for taking an hour out of a very busy day to talk to our DU group about the challenges of franchising. We're analyzing the problem for a local firm looking to expand, and Skip's business has enough similarities to make it a good model to look to. If you need a kitchen or bath remodeled, keep him in mind. (This ad is completely unsolicited and unpaid-for.)

Stain Remover

KNUS-710 is running ads for something called "zero-rez," which always sounds to me like a promo for Ward Churchill's ancestral homeland...

Speaking of which, the Rocky has now apparently decided to treat Ward Churchill like my dog treated the only rabbit he ever caught. In rapid succession, then, there were abundant warning signs. Anyone who can make Vernon Bellecourt sound like a reasonable man has pretty much pegged the lunacy meter. Note to MSM: be careful with this guy; he's been voted "Most Likely to Overstate his Claims" several times. There's a lot of internal politics we don't quite get here.

In the meantime, none of the parties involved can seem to remember exactly what process led them to suspend all judgment in giving this guy tenure. I applaud the academy's willingness to make exceptions for exceptional people lacking credentials. But if you're not going to focus on inputs, you'd better take a long, hard look at the outputs before you do that.

And former Senator Ben Campbell is upset that the position didn't go to a real Indian instead. I'm more upset that it didn't go to a real scholar.

Update on HIV Bill

Senator Windels has apparently decided (or been advised) that her bill, as written, isn't going to work.

The Judiciary Committee has held it over indefinitely.

Stop the Branding, Get Back to Teaching

Cold Spring Shops has an excellent post on the rot in academic scholarship. I would just repeat that the faculty has managed to free itself from any meaningful oversight. We can talk about fixing the tenure process all we want, but I have an increasingly uncomfortable feeling that the problem is tenure itself.

The venerable Harvey Mansfield has a masterpiece on fixing the curriculum up at the Claremont Review of Books.

MSM - Not Dead Yet

The Rocky - including reporter Charlie Brennan, who I thought shied away from asking some tough questions early in this story - is all over CU this morning like a cheap suit.

A fuller accounting of how Churchill got tenure in the first place is available, as well as some rumblings of a lawsuit that Owens had thought might be in the offing. And now the CU Foundation is resisting an audit, practically begging the legislature to pry open their books.

A couple of quick points. First, this is what we want and expect from the MSM. They have the resources to do the job right if they want. Frequently, if the subject isn't themselves, they want.

Second, note to the CU Foundation: this might not be the best time in the world to pick a fight over independence. When the secret fraternity greeting is "Drinks and Hookers for Everyone!" and the secret handshake is clinking glasses, I'd say you're better off at least looking contrite. Ron Tupa is a left-leaning legislator with ambitions for higher office. He's your friend, not your enemy.

For discussion: what outside force will cause academia to reform?

Not Gonna Play That Game

At first, I thought, "oooh goody. Hate mail."

Then I saw that Deb Frisch, an adjuct lecturer at the University of Arizona, has apparently decided to declare guerilla cyber-war on Professor Bainbridge. The brain balks, unable to exaggerate the mismatch.

The professor can take care of himself. Ms. Frisch has commented here recently, and, as is my habit on this blog, in the comments section, I've cheerfully ignored her. But if she has a problem with some third party, she's got her own blog.

I'm not going to allow my site to be used as a proxy for this sort of thing. People like this tend to be like burrs. Ms. Frisch has the singular distinction of being the only non-poker, non-porn-based individual banned from trackbacks and comments.

Congressional Legislative Blogging

The only reason the last two posts were possible at all is because the Colorado General Assembly posts bills and their Financial Impact Assessments online as soon as each is available.

Mark Tapscott, Director of The Heritage Foundation's Center for Media and Public Policy, wrote to suggest a similar project at the Congressional level, allowing bloggers to subject legislation to the same dissection that we do everything else.

Bring. It. On.

Hanna Barbarians

The self-proclaimed Progressives (I like Bainbridge's point that they're Leftists hijacking the word "progressive") are throwing their - weight - behind a bill to require all contractors to the state to perform their work in the US. SB-05-023 is sponsored in the Senate by Sen. Deanna Hanna (D-Westminster).

The bill provides for a pre-contract certification, penalties if any of the work is shifted overseas, the right for the state the sue, and a 3-year lockout from future contracts if any work is offshored.

There are plenty of good macroeconomic reasons for offshoring work:

In July, economist Martin N. Baily, chairman of the Council of Economic Advisers under President Clinton, looked at who benefits from outsourcing. He found that... on balance, the U.S. economy gains $1.12 to $1.14 for every $1 invested in outsourcing.

In August, economist Charles Schultze, chairman of the CEA under President Carter, looked at the number of jobs lost to outsourcing. He found that between the end of 2000 and the end of 2003, at most 215,000 jobs service sector jobs were lost.

... U.S. imports of computing services -- the most controversial area of outsourcing -- came to just 0.4 percent of the gross domestic product in 2003.

(Hat Tip: EconLog)

And plenty of reasons to think that the only "deflation" is of leftist economic trial balloons.

More importantly, it's terrible budget sense. It all seems so reasonable. But for a gang that got elected promising to be fiscal conservatives, this ain't cheap.

Every bill has to have a Fiscal Impact Summary, describing, well, fiscal impact. This one doesn't even bother to estimate the costs, because they can't:

This bill may increase expenditures for a number of state agencies that contract for services with companies that perform services from sites located outside the United States. In most cases, the increases are not quantifiable, but stem from either (1) the limitation of vendor competition, or (2)
the elimination of potential vendors altogether. The following are examples of projects when departments would have incurred higher costs because of this bill's vendor limitations. These examples are not intended to be comprehensive but rather to provide anecdotal evidence for the types of state expenditure increases that would be incurred.

Here's anecdotal evidence:

Department of Personnel and Administration. The bill would affect the Division of Information Technology. Currently, the state's main central processing unit is made by IBM, whose primary support service headquarters is located in Asia. This bill would prohibit the state from obtaining any technical support with regard to the CPU. The division also utilizes two important software packages that are produced in London and Israel, respectively. This bill would affect the division's ability to both utilize and receive technical service on these packages.

Look, it's not like this kind of this hasn't been tried before. It's been very costly. And just remember whose capital it is that's going to fund this.

I will give them points for proper use of the term "paleocon," something that frequently eludes the Left, which suggests that maybe these guys are coachable, even if they do choose to associate themselves with the conservative economic illiterates.

Say it with me: Progressively More Expensive. Progressively More Intrusive. Progressively More Restrictive.

Oh, And About That Cigarette...

The health mullahs move forward. Having spent the better part of a century trying to get the government out of the bedroom, the Progressives (sic), are now using "health concerns" wedge their way back into it. Tomorrow, Sue Windels's bill to make having AIDS and having sex a crime comes up for a hearing in the Judiciary Committee.

Michael had noted this before, as well as suggesting a possible disparate impact objection.

After the bill defines "sexual intercourse," it goes on to make an exception if the infected tells the soon-to-be-infected beforehand. Romantic as that sounds, I'm sure it's only a matter of time before strict liability forces bars to keep a small quiet table in the corner reserved for the notary public.

And then there's this debate going on over at Legal Affairs (hat tip: the Instapundit).

Say it with me: Progressively more expensive. Progressively more intrusive. Progressively more restrictive.

"Hi, Are You Registered to Vote..."

Evidently, the LPR is beginning to fulfill its mission. A Friend of the Alliance is now seeking to be a Friend of the People. Girl in Right, who hails from the Golden State but now lives in Golden, CO, is preparing a run for City Council.

Golden, for those of you who don't know, was the first territorial capital of Colorado, and is now an adjuct to the Colorado Mills Mall...

Hat Tip: Clay

Scandal

I couldn't agree more.

The Liberal Case for Sacking Churchill

Paul Campos makes the liberal case for sacking Ward Churchill:

Churchill thus represents the reductio ad absurdum of the contemporary university's willingness to subordinate all other values to affirmative action. When such a grotesque fraud - a white man pretending to be an Indian, an intellectual charlatan spewing polemical garbage festooned with phony footnotes, a shameless demagogue fabricating imaginary historical incidents to justify his pathological hatreds, an apparent plagiarist who steals and distorts the work of real scholars - manages to scam his way into a full professorship at what is still a serious research university, we know the practice of affirmative action has hit rock bottom. Or at least we can hope so.

...

Affirmative action is based, in part, on the idea that it will help us understand the viewpoints of the conquered as well as those of the conqueror, of the weak as well as the strong, of those far from power as well as those who wield it.

Too often, these sentiments are abused by those who sacrifice intellectual integrity while engaging in the most extreme forms of preferential hiring. Ward Churchill's career provides a lurid illustration of what can happen - indeed, of what we know will happen - when academic standards are prostituted in the name of increasing diversity.

If only the MSM could be as self-critical about its privileges.

I would disagree that affirmative action is necessary for alternate viewpoints to be heard. Whites can teach effectively about Indian history, and (actual) Indians about the westward expansion, for that matter. Campos believes that intellectual diversity is what matters, but he wants to hold onto the idea that affirmative action can promote, rather than stunt it.

Light Blogging Today

Busy, busy, busy. This evening, I hope to have a review of Blink up. In the meantime, go read the rest of the Alliance.

Double-Dipping II

I asked State Treasurer Mike Coffman why leaving early and collecting PERA benefits made a difference to the state. It seemed to me that if you weren't accumulating seniority, you might start getting benefits early, but they'd be lower than if you waited.

Turns out there are two cases where that's not true. A friend of mine pointed out that after 25 years, PERA benefits don't increase. Which means that someone double-dipping really is costing the system money.

In the case Coffman cited to me, under PERA, you can buy years of benefits ahead of time. The problem is that until recently, the discount rate used to estimate the pre-payment was so high that it didn't cover the costs. If I pre-pay assuming that the government will make 8%, but it can only return 5%, the pension plan will be on the hook for the extra 3% in a defined-benefit plan.

I should also point out that Coffman has bond immunized College Invest, a pre-paid college tuition plan that had fallen short of its projected needs. By buying bonds to match known outgoing cash flows, Coffman has made sure that the system can cover those flows. Presumably the fund managers will still have to work at rebalancing from time to time, but that's a much easier job that playing catch-up.

The Iraq-Vietnam Parallels Continue to Mount

I did notice this somewhat rueful quote from GM's President concerning the Fiat debacle:

"To be honest, when you do deals, you don't do the deal you want to, you do the deal you can do."

Aha! The President of GM is quoting (sort of) the Secretary of Defense. Remember, McNamara was President of Ford before leading into Vietnam as...Secretary of Defense!

It's just too spooky for words. Don't tell the RMPN.

GM Buckles

It looks as though GM has decided to go ahead and meet Fiat's demand for protection money to avoid a protracted legal battle. Analysts had estimated that Fiat would want about $2 Billion to make it to the next fill-up, and lo and behold! that's what they got.

GM can pay the cash, although unhappily, and the bond market analysts, those little engines of profit themselves, didn't seem to like the effect on the balance sheet. GM is hovering just above junk status, for the moment. Any new long-term debt is going to cost almost 2.5% more than comparable Treasuries. Ouch!

This whole thing was a disaster beginning to end, despite GM's attempts to put a happy face on it. The spent money to get in, lost money on they way, and got maneuvered into almost doubling their loss to get out.

LPR Report

Clay has a superb report from the Leadership Program of the Rockies retreat. A terrific lineup. The LPR people did a dynamite job of pulling in the top-rank talent from across the country, the people really contributing ideas.

I've only met Jim Spencer once, and he was pleasant enough, but I think the group was much better-served by having Littwin there. Even though they're both Virginians, and Tidewater Virginians, at that.

Brand U - II

You know your brand has a problem when it starts showing up in Scrappleface.

"Venezuela, an oil-rich land of 25 million citizens, has suffered for years under the vagaries of democracy and capitalism," said an unnamed professor at the University of Colorado (C.U.), "but Mr. Chavez has ushered in a new golden age of Venezuelan glory...

Wholesale Blogging

This week's Carnival of the Capitalists is up.

Stop reading about politics for a moment. Go there. Change your paradigm.