If Your Are Reading This, You Are At Our Old, Defunct Site
If Your Are Reading This, You Are At Our Old, Defunct Site
If you reach this blog directly, make sure you bookmark "www.coyoteblog.com" or "coyoteblog.com" and not some other variation (look up and see what is in the address bar right now). Old URLs containing "typepad.com" will no longer update. And URL's beginning with www.CoyoteBlog.com/coyote_blog will also not work anymore, though you should get an error page redirecting you to the correct address (old permalinks in this format will still work, just not the home page. That is the real trick of the typepad to wordpress migration, getting the permalinks around the Internet to remain valid).
For those of you who read through feeds, you should be reading the feeds.feedburner.com/CoyoteBlog feed. If this is showing up in your feed, then you have the wrong feed address, and it will no longer update. The easiest way to get the new feed is to go to www.CoyoteBlog.com and click on the feed icon either in the address bar or in the right sidebar and get the correct feed.
Coyoteblog is Moving -- YOU ARE AT THE OLD SITE
We are about 12 hours into the 24-48 hours that it will take our new site settings to totally migrate through the Internet. If you reach this blog directly, make sure you bookmark "www.coyoteblog.com" or "coyoteblog.com" and not some other variation (look up and see what is in the address bar right now). Old URLs containing "typepad.com" will no longer update. And URL's beginning with www.CoyoteBlog.com/coyote_blog will also not work anymore, though you should get an error page redirecting you to the correct address (old permalinks in this format will still work, just not the home page. That is the real trick of the typepad to wordpress migration, getting the permalinks around the Internet to remain valid).
For those of you who read through feeds, you should be reading the feeds.feedburner.com/CoyoteBlog feed. Any other feed will no longer update. If you are not seeing posts this next week on your feed, go to www.CoyoteBlog.com and click on the feed icon either in the address bar or in the right sidebar and get the correct feed.
Thanks for your patience. You will know if you have the new site -- it looks a lot different.
Update: The comment threads on this and any newer post are not going to work. Don't try. The whole point is to get you off this site and onto the new and improved site.
In a post on letting GM fail, I discussed what I called "corporate DNA"
A corporation has physical plant (like factories) and workers of various skill levels who have productive potential. These physical and human assets are overlaid with what we generally shortcut as "management" but which includes not just the actual humans currently managing the company but the organization approach, the culture, the management processes, its systems, the traditions, its contracts, its unions, the intellectual property, etc. etc. In fact, by calling all this summed together "management", we falsely create the impression that it can easily be changed out, by firing the overpaid bums and getting new smarter guys. This is not the case - Just ask Ross Perot. You could fire the top 20 guys at GM and replace them all with the consensus all-brilliant team and I still am not sure they could fix it.
Corporate DNA acts as a value multiplier. The best corporate DNA has a multiplier greater than one, meaning that it increases the value of the people and physical assets in the corporation....Every company that has ever grown rapidly has had a DNA that provided a multiplier greater than one... for a while.
But things change. Sometimes that change is slow, like a creeping climate change, or sometimes it is rapid, like the dinosaur-killing comet. DNA that was robust no longer matches what the market needs, or some other entity with better DNA comes along and out-competes you. When this happens, when a corporation becomes senescent, when its DNA is out of date, then its multiplier slips below one. The corporation is killing the value of its assets. Smart people are made stupid by a bad organization and systems and culture. In the case of GM, hordes of brilliant engineers teamed with highly-skilled production workers and modern robotic manufacturing plants are turning out cars no one wants, at prices no one wants to pay.
To John Shook, a former Toyota manager who worked at a joint-venture plant run by the Japanese company and GM in Fremont, California, that explains why the two automakers are in such different shape today. When it comes to engineering and manufacturing, Shook says, Toyota and GM are about equal. Where they differ is in their corporate cultures.
“Toyota is built on trial and error, on admitting you don’t know the future and that you have to experiment,” Shook said. “At GM, they say, ‘I’m senior management. There’s a right answer, and I’m supposed to know it.’ This makes it harder to try things.”
The whole Bloomberg article this comes from is quite good. Its pretty clear that GM had every reason to anticipate the current mess 3-4 years ago, and basically fiddled while the cash burned. My strongest reaction from the article was, please let me have an epitaph better than this one:
Wagoner, a 31-year GM veteran, was the embodiment of its culture, an apostle of incremental change. Exciting as a Saturn, quotable as an owner’s manual....
We're All Technocrats
A bailout-weary Congress killed a $14 billion package to aid struggling U.S. automakers Thursday night after a partisan dispute over union wage cuts derailed a last-ditch effort to revive the emergency aid before year's end.
Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit's beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.
Good. Chapter 11 was made for this kind of situation, and folks will quickly come to understand that productive assets don't go *poof* in a bankruptcy (though equity values can).
By the way, you will note that Senate Republicans did not suddenly become economic libertarians. Their objection seems to be that the bill does not micro-manage the auto industry they same way they would want to micro-manage the auto industry. You can see in these political battles that Congress brings its usual identity politics to these decisions: Republicans want to hammer the unions, Democrats want to hammer executive pay. Which is why these restructuring discussions don't belong in Congress.
Add GM, Ford, and Chrysler to this List
Via TJIC, who had a much better title, "poor credit risks remain poor credit risks, even after you give them a free pony"
Recent data suggests that many borrowers who received help with mortgage modifications earlier this year tended to re-default on their payments, a top U.S. banking regulator said on Monday.
“The results, I confess, were somewhat surprising, and not in a good way,” said John Dugan, head of the U.S. Office of the Comptroller of the Currency, in prepared remarks for a U.S. housing forum.
You can absolutely, without a doubt, add the Big 3 to the list of folks who will be facing default once again just months after getting their first dollop of federal money.
No Issue Too Small To Get Attention from the State
License-plate frames that celebrate your favorite college or sports team become illegal next month if the frame obscures the state's name.
Starting Jan. 1, police can stop you if "Arizona" isn't clearly visible at the top of the plate. Violators will be fined an average of $135, plus court fees, depending on the city where the violation is discovered.
Wow, while the police are chasing after that guy with a joint, lets make sure we also have the boys in blue vigilant for this. And I am sure this new law will be enforced as equally and fairly as all the others and these guys will be he first to get tickets:
On Tuesday, half the 26 vehicles in the Arizona Senate parking lot bore frames obscuring the word "Arizona."
Yeah, right. This is just another "probably cause" for Sheriff Joe Arpaio and his boys to pull over every person with brown skin they run into.
I Want Design Input
I run this blog mainly for my own enjoyment, so I mostly am just designing the new Wordpress version whatever the hell way I want it.
But, I am split on the issue of fixed vs. variable width. This blog currently is variable width. Text expands and contracts to fill the screen width. The pro of variable width is that it allows people with wider monitors to actually take advantage of the real estate they invested in. The con is the site almost never looks as aesthetically nice as a fixed width site, where everything is a bit more in control (example here of fixed width).
Any preferences out there? Please comment.
More Auto Bailout Thoughts
I don't think I have ever gotten as much mail from as many different readers as I have received on the auto bailout. Readers seem fairly unified in their outrage and horror at the prospect.
There is already an available process for operating companies that cannot meet their obligations where all the parties take a haircut: Its called chapter 11. We have about a zillion man-years of experience with it, in companies great and small. And it does not take idiotic Senators flashing billions of our tax money to mediate it.
The auto industry is tremendously magnetic for wannabee technocrats in Congress, in large part because in perhaps no other industry is there a bigger gap between what the average American wants to buy and what the country's intelligentsia things they should buy.
But US automakers are failing because they have not been very responsive to customers; they have grown fat and complacent, feeling protected by their monopoly power position; they have consistently failed over decades-long periods to make tough decisions vis-a-vis labor and costs; and they have refused to make real prioritization decisions (GM brand strategy is a good example). It is therefore hilarious that Congress thinks it can do better, because wouldn't these same traits be high on the list of failings of the Federal Government itself?
And this is funny, if you have not seen it yet.
More Thoughts On Recent Employment Losses
I posted some data this morning showing the current jobs report ranked not on absolute job losses but as a percentage of the total work force. I have now pulled the whole data set from the BLS, which goes back to about 1939, and this is what the entire monthly series looks like of employment changes as a percentage of total employment (the purple line is a 3-month moving average).
Folks familiar with this data base may know of reasons the data has become less volatile (perhaps improved seasonal adjustments?) but never-the-less, I have a hard time reconciling this with the popular leftish notion that the decline of traditional American manufacturers (e.g. autos) and unions have led to increasing risk and job/income volatility. I played around with a couple of ways to summarize the trends. Here is the number of substantially negative (monthly losses greater than 0.25% of the workforce) jobs reports per decade:
And here is a metric of the volatility of the jobs number. Since most folks don't really buy the classic economic argument that "risk" equates to volatility up or down, but feel that risk is only to the downside, I have looked at what is sometimes called the downside standard deviation of the jobs change numbers, in which all monthly data greater than zero are set to zero, and then a normal standard deviation is taken on the data.
You've Been Warned
I am switching over domain registrars as the first step in the porcupine mating ritual that will eventually lead to a migration of this blog to Wordpress. There may be short downtimes of the site or of the email associated with this blog as I futz around with nameservers and cnames and such. But since I am unable right now to publish any content on typepad that includes a graph or drawing, I am willing to bear some problems to get on a new platform.
Typepad is Sick Again
Something is wrong in the Typepad editor such that trying to include images is causing the system to hang. This is the third or fourth time I have had to stop posting until Typepad cleans this up, all since Typepad introduced its new editor which is really driving me crazy. As soon as I can get the site to migrate correctly with all links intact to Wordpress, I am moving off Typepad.
Q: What's The Fastest Way to Get 5 Million Green Jobs?
A: Start with 10 million current jobs.
Kenneth Green argues that Obama's claim that obsoleting current infrastructure and requiring its replacement with new, greener infrastucture creates jobs is just the broken windows fallacy (where have you heard anyone else say that?)
Unfortunately, the idea of government "job creation" is a classic example of the broken window fallacy, which was explained by French economist Frédéric Bastiat way back in 1850. It is discouraging to think that nearly 160 years later, politicians still do not understand Bastiat's basic economic insight....
Now consider Obama's "green jobs" plan, which includes regulations, subsidies, and renewable-power mandates. The "broken windows" in this case would be lost jobs and lost capital in the coal, oil, gas, nuclear, and automobile industries. Currently, these industries directly employ more than 1 million people. Conventional power plants would be closed, and massive amounts of energy infrastructure would be dismantled. After breaking these windows, the Obama plan would then create new jobs in the renewable energy sector. The costs of replacing those windows would ultimately be passed on to taxpayers and energy consumers.
New Era in Race Relations
Our new era in race relations begins this week with the Federal government sending me a nasty-gram that I have not yet proven to the government that I know the race of every one of my employees. The EEO-1, a quite distasteful annual requirement from the feds, is a report we must file showing the number of people we have employed of various races and ethnicities. Rest assured, readers, I have, after naively believing that race was irrelevant in evaluating my employees, now educated myself as to the race and gender of all my employees and reported this understanding to the government.
The 41st Worst Jobs Report Ever
This was sent to me by a reader: Much as looking at percentage moves in the Dow is much more meaningful than looking at nominal points moves (500 points means a lot less when the average is at 10,000 than when it is at 1,000), it is useful to look at the recent jobs report in the same way. While 553,000 lost jobs is certainly a lot, it is only the 41st worst loss since WWII when looked at as a percentage of the workforce (and it would be much further down the list if we had similar metrics back into the 1930's and 1920's). Via Bespoke Investment Group:
This tends to confirm the statement I made last week, that this recession is likely worse than anything a 20-something Obama supporter can remember, but is not yet even close to some of the problem years of the 1970's, much less the 1930's.
By the way, it is interesting to see all those 1950's dates in there but no dates in the last 25 years, given there are many who have been writing about the current economy being so much riskier for workers than the 1950's.
The Glass Floor
I also thought about titling this post "Recession: Rich, white males hardest hit." This is one of the more interesting economic/demographics charts I have seen of late (of course from Mark Perry):
See Mark Perry's post for more, and some guesses at explanations.
Be Very Afraid
This was sent to me by a loyal reader, with the email subject "Be very afraid"
D-Mass., predicted that 2009 will be the "best year" for public policy since the
Speaking before the Consumer Federation of America Thursday, Frank said
Congress would pass a regulatory overhaul comparable to the antitrust laws of
the late 19th century and the creation of the Securities and Exchange Commission
Democrats will tighten consumer protections for credit cards, put "very tough
rules in" to govern subprime lending and give "appropriate liability" to the
institutions that securitize mortgage loans, he said.
Frank said the economic crisis has run counter to the philosophy first
espoused by President Ronald Reagan that "government is part of the problem." He
said the goal would be to diminish excessive risk-taking within the context of
investor and consumer protections.
"This has not become an anti-capitalist society," Frank said. "I think we can
make the argument, as the New Deal did, that in fact we are being very
Frank said that securitization - used to repackage mortgage loans and sell
them to investors as bonds - has "good aspects" when done right but can also
lead to abuses.
Frank predicted that legislation to tighten consumer protections in the credit
card market and to crack down on mortgage lending abuses would become law. He
also said bank regulators would adopt a code of unfair and deceptive practices.
No mention from Frank of the constant work he did over the last 10 years to prevent many similar such regulations from being imposed on Fannie and Freddie.
MaxedOutMamma (an economist somewhere but she seems to only drop tantalizing clues as to where she plies her trade) is concerned:
I guess you may have to put me in the majority. I certainly don't doubt that we are headed for a recession. And it would not surprise me if this is the worst recession that most 20-something Obama voters have experienced, though that is not saying much. But I am not sure we are even facing the Seventies in this one and we certainly are not facing the 1930s.
Here is the problem that we more casual consumers of economic news must struggle with -- the media has fairly accurately predicted 20 of the last 3 economic downturns. Everywhere you turn, you see analogies to the Great Depression, a period of time where unemployment topped 25%. Given the media's track record and the nearly breathless panic about the looming economic disaster, any sane person has to put a divide-by-X filter on economic news. It is certainly possible that I and other are using too large of an X as a correction factor, but is that my fault, or the fault of the purveyors of information who can't tell any story straight.
By the way, for us Polyannas, here are several interesting posts from Mark Perry
- Housing affodability highest since 2002
- Loan delinquency rates at historical lows (except mortgages, but mortgage delinquency rates still below 1991)
- Real estate bubble limited to less than 10 states (and really only four)
Debate on the Left
Apparently, there is a debate on the Left as to whether the 0.01% change in the world's atmospheric composition over the past century is sufficient justification for implementing fascist rule in the US. David Roberts argues yes. Kevin Drum, to his credit, argues no.
A Civics Lesson in One Sentance
A month or two back, I was participating in the California Regional Council of Rural Counties annual meeting. At this conference, I was there to have a sort of informal debate on climate change with Joe Nation, a former California State legislator and currently a private consultant on climate issues.
To some extent my role was frustrating for the audience, because they were already stuck with complying with California's AB32 (a sort of state CO2 cap and trade system) and arguing that such legislation was pointless only served to upset them (my presentation, both in powerpoint and video is here). By the way, we often lump "government" together, but I can tell you that while the governor and the legislature of California may be 100% behind CO2 alarmism, the county commissioners were very sympathetic to the skeptic position.
Anyway, towards the end of my presentation I made a plea for a carbon tax over cap-and-trade, and said in fact that California's AB32 was living proof of my argument. The California Air Resources Board (CARB), which is tasked with implementing the plan, has already added hundreds of people to its staff and worked for over two years, is still no where near finished with rule-making. The complexity, and the battling political constituencies, is simply mind-boggling. It is already clear that the result is going to be a Byzantine, Rube Goldberg structure of detailed industry-specific reporting and permitting rules. Nearly 100% of CARB's time is taken up today with various groups running to them begging for some sort of special treatment (think "carbon bailout" and you will get the idea). No one thinks the process is fair or rational.
Under cap-and-trade, every single industry will report greenhouse gasses, have industry and firm-specific limits, myriads of permits, etc. For example, we had detailed discussions that day of how cattle flatulence will be treated and measured. The alternative is a carbon tax, which is dead simple. There is one single rate to set - the tax per weight of carbon in fuel. Fuels with more carbon per BTU, like coal, thereby get higher taxes. The system works like a sales tax, and could be administered by the BOE (who runs the California sales tax system) in its sleep.
The cap-and-trade system is far more expensive than a carbon tax. By the basic laws of supply and demand, both systems have to raise the cost of burning certain fuels by about the same amount to get about the same reduction in use. But the cap-and-trade system brings a huge overhead burden, both in government bureaucracy as well as compliance costs, that make it far, far more expensive for the same amount of benefit. Until he started sitting on the boards of companies who depend on these inefficiencies in the cap and trade system to make money, Al Gore advocated a straight carbon tax over cap-and-trade.
But we had an opportunity that day. Because the man who claims to be the author of AB32 is none other than Joe Nation, who was right there in the room. So we asked him why he took this approach. Here is what he said, really a civics lesson in one sentence:
If you can understand why this is, you can understand a lot about government. Because all these concerns that you and I might have about crafting rational public policy are not important to legislators. Here is how they think about it:
- Private implementation and compliance costs are meaningless to legislators. There is no public measurement or accountability for these costs, and most of these costs fall on businesses, who can be ignored as unsympathetic in political discourse. I operate in Mono County, California, and they put out a new set of reporting requirements driven, they said, by the needs to save a few hours a year of their auditors' time. But compliance with these new rules costs our company 10-20 hours, at least, a year. And we are just one of many, many companies reporting. I complained that it was crazy for them to ask taxpayers to spend hundreds of hours of labor to save them just a few, but they could not have cared less.
- For legislators, particularly in California, creating large new bureaucracies is good. It creates a patronage relationship between the legislators and these new government employees that is almost quasi-feudal. Public employees are an enormous source of support for incumbent politicians, and these bureaucracies also offer future employment opportunities for legislators once they leave office (nice article here).
- First, last, and always, the vast majority of politicians are gutless. That means if they can pass the same tax in a way that is more hidden (ie cap-and-trade vs. carbon tax) they will prefer this approach, even if it means the tax is substantially less efficient. In the case of cap-and-trade, since costs are hidden and spread around like peanut butter rather than easily identifiable, they can pretend the costs don't exist and, if someone starts worrying about rising electricity costs that result, simply blame the rising costs on the evil power/oil/coal/etc companies. Obama has brilliantly taken this one step further, by outrageously claiming, in the broken windows fallacy of all time, that cap-and-trade will actually boost the economy through green job creation.
- A carbon tax gives politicians very little room to extract personal value from the electorate. Really, there is only one number for everyone to argue over. But cap-and-trade is a Disneyland for lobbyists. There can be special exemptions, industry specific caps, firm-specific caps, geography-specific caps. Once everyone sees the first few guys giving campaign donations and parading into CARB for special treatment, everyone feels like they have to in order to avoid being the one guy left out. My guess is that cap-and-trade will spawn more lobbying than any other legislation in US history. And politicians, no matter what their public stance, love lobbying, because everyone who comes to ask them for something knows there has to be a quid pro quo.
Update: A number of related thoughts and posts here, at Reason.
Jon Stewart on Mumbai
Pretty funny. Even funnier when you consider it is probably the most dead-on analysis of terrorism you will see in the MSM this week.
Person Who Will Lose a Lot of Money in GM Bankrupcy Says that GM Bankrupcy Would Be Bad
In order to save the value of their executive stock portfolios, which are a large part of their compensation, auto executives are promoting the line now that consumers will for some reason stop buying GM cars if the company is operating under Chapter 11 protection.
The auto-makers real strategy is to get some kind of money, almost any amount will do, from the government ASAP. It really doesn't matter how much, because with their cash burn rate almost any amount Congress gives them right now will not last much more than 6 months, and certainly will not be enough to reach recovery (their requests go up by a few billion each time they appear in front of Congress). Automakers are facing potentially several years of recession, and any real restructuring would take 5 years or more (and even that is doubtful since the industry has had 30 years of notice on these issues and have not done anything). But if they get some cash, then there will be a psychological pull for Congress to put in more. They will say -- well, you've already put in $5 billion. If you don't put in another X billion, that first 5 will have been wasted (few people understand that "sunk costs are sunk" and Congress is no exception). This is how expensive transit projects are funded.
The position that customers will stop buying the product due to some loss of confidence in chapter 11 doesn't hold up. Most every airline traveler has flown on an airline operating under chapter 11 in the last 10 years or so, and if I can have enough confidence that an aircraft is being adequately maintained in bankruptcy, I can probably muster the courage to buy a car. I presume the issue here is downstream warranty support. But this is about the last thing that would ever be slashed in a chapter 11. For God sakes, airlines have never even substantially disavowed frequent flier miles in a bankruptcy, surely a much more obvious target than warranty repairs.
I would argue that it is uncertainty that is driving any loss of confidence (in fact, sales have plummeted already, ahead of any chapter 11). A chapter 11 filing would actually increase certainty, as those running the receivership could quickly communicate principles to be followed in the bankruptcy, such as protection of warranties. Right now, people have a perception that in a bankruptcy, GM would go *poof*. Once it actually files a chapter 11, the media and executives would switch modes from fanning panic to actually explaining how receivership works.
In fact, if there is any fear on the issue of long-term warranty support, it is being created by executives like Henderson who are fanning the flames of fear in a brinkmanship game to try to avoid chapter 11. If he were really worried about this loss of confidence, he and other auto executives would be out there assuring people that their cars and servicing and dealers will also survive a chapter 11 filing. But he is not. This is totally disingenuous.
So, We Are All to Blame
I blame the English and all of us in the media for the 9/11 attacks on Manhattan. If we had just stuck with "New Amsterdam" rather than having the name forcibly changed to New York by Anglo chauvinists, the WTC would never have been attacked. We all conspired in this tragedy by continuing to call it "New York."
Crazy? I would have thought so, but apparently this logic is quite in vogue
Postscript: I find it moderately hilarious to see folks on the left defending names imposed by western colonialists over indigenous names. But if it makes us Westerners to blame for terrorism, I guess it's in a good cause.
United In Film Criticism
Kevin Drum and I disagree about many things. I read his blog specifically to find things to refute. But it turns out we had the exact same two reactions to Quantum of Solace:
If Only the US Been Part of the Soviet Economy...
... then it would be much easier to reduce CO2 production, because we could just shut down stupid-inefficient boneheaded and outdated Soviet-era industry, like Poland has:
Amount of Polish CO2 reduction that would not have happened anyway in the course of modernizing their economy and is instead due to focus on CO2: Zero.
More on how the vast majority of European progress towards Kyoto goals is due to the shutdown of Soviet industry, and how this is the primary reason the 1990 benchmark date was chosen, here.
New Climate Presentation (From the RCRC Climate Debate)
I have finally been able to publish a video of my presentation at the climate debate held by the Regional Council of Rural Counties last September. The entire video is about an hour long. As usual, I am offering several ways to view it. First, it has been posted on YouTube but had to be broken into seven parts. The playlist of all seven parts is below:
The playlist link is here: RCRC Climate Debate (Skeptic's Side)
Unfortunately, YouTube crushes the resolution so many of the charts are hard to read. You can download the full resolution windows media version (about 96MB) as long as my bandwidth holds out by right-clicking and downloading form this link: Download RCRC Climate Debate (wmv)
Also, you can stream higher resolution version of this film (and all my other climate films) at this site. The resolution is not as good as the downloadable version but is much better than YouTube. Again, bandwidth pending.
In the future, all of my videos and presentations will be available via the links just under the banner at Climate Skeptic.