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Economists and Christmas

IP — Tue, 27 Dec 2011 06:00:46 +0000

Our Christmas gift came in the form of two reader-suggested articles: yesterday’s and today’s. It’s great to end the year on such a high note! To make us even happier, keep the suggestions coming…

Today’s suggestion is a lighter note: a funny article on Slate about how to maximize value in giving presents. The Atlantic had also published a few days before “the behavioral economist’s guide to buying presents“. Great reading when waiting in line to exchange gifts this week

Brazil and the future

IP — Tue, 13 Dec 2011 18:53:58 +0000

The Financial Times’ Beyond Brics blog has posted an article by PUC-Rio professor Marcio Garcia, and it’s a very sober look at what this country has been through in the years since it was included in the “BRICs” by Jim O’Neill. Much more importantly, however, is the warning about what we must still do if we are to succeed in the future. We have sounded these warning bells many times before, and we will continue to do so.

Catching up

IP — Tue, 29 Nov 2011 17:36:14 +0000

We highlight three articles about old truths and new business models. Speaking of models, the first article is Scientific American’s piece on “why economic models are always wrong” – a few centuries too late, perhaps.

Transitioning from old to new, we have the healthcare sector – and how one start-up is trying to bring transparency to a sector that is as obscure as it is immensely relevant for all global economies. Then we go entirely new and show you a company that is making huge money – US$ 20mm from one “product” – in mobile hardcore gaming, a sector that didn’t exist until the iPhone. How far can it go?

Mario Vargas Llosa

IP — Thu, 10 Nov 2011 06:00:09 +0000

His editorial in the WSJ, actually an essay to celebrate his Alexis de Tocqueville award at the Independent Institute, is about the search for Liberty and how one dedicates his craft to it. Liberalism means different things in different countries, as he points out very well, but “true liberalism”, as he states it, seems to be a lost “art”. Tip o’ the hat to Rodrigo Constantino’s blog, and we’ll leave you with the start of a great passage – just the start, to entice the reader to read the entire text: “This is the core insight of true liberalism: All individual freedoms are part of an inseparable whole. Political and economical liberties cannot be bifurcated. Mankind has inherited this wisdom from millennia of experience (…)”

Economic “Genius” – a history

IP — Fri, 16 Sep 2011 10:00:59 +0000

Roger Lowenstein (author of “When Genius Failed”) wrote a very favorable review of Sylvia Nasar’s “Grand Pursuit: The Story of Economic Genius” book. Now Booz & Co’s Strategy & Business magazine has published a “Thought Leader” interview with her, 10 pages strong. Sylvia Nasar is famous for her book on John Nash, “A Beautiful Mind” (yes, the one made into a blockbuster movie). We haven’t read the book yet and suspect both “heroes” in general (interestingly, each reviewer had a list of ‘heroes’ missing from the book!) and the ascribing of too much importance to Economics – and risk it looking like a “hard” science. We respect it and it belongs to our mental models/ toolkits, but we prefer to seek the high quality companies and business models, with great and aligned managers and controlling shareholders, trading at a price that allows for significant margin of safety.

More reviews by the Washington Post, Fortune, Wall Street Journal (by James Grant of “Grant’s Interest Rate Observer”) and the Christian Science Monitor.

More on budgets and David Brooks

IP — Mon, 14 Mar 2011 20:34:27 +0000

Financial writer Roger Lowenstein recently penned a NYT Magazine piece called “Broke Town, USA“. It’s instructive in terms of the budget crisis in cities and states in the USA, but not as assertive as we would have hoped. Either way, it reminded us of a recent post about David Brooks and two articles by him on budgets. Mr. Brooks has a new book out, and (courtesy of the Farnam Street Blog) we list two reviews of the book – as we like it, one “for” and one “against”. Additionally, courtesy of Simoleon Sense, David Brook’s talk at the very recent TED 2011.

Finally, an article today in the NYT is another in a long line of articles stressing that “broke” states will try their best shots at getting Amazon.com to finally charge sales taxes.

Budget cuts: the new normal

IP — Tue, 01 Mar 2011 20:59:19 +0000

David Brooks is writing a series on the need for budget cuts in the US, and some of it reminded us of what we’ve been writing in our reports both about the US and Brazil in terms of governance, the size of governments, runaway spending and so on. It’s also an interesting timing because of the recently-announced budget cuts in Brazil. Finally, the Economist also published good articles on the subject, available in this post.

Mr. Brooks, of whom we wrote previously, first highlights the Wisconsin imbroglio where that state’s governor has taken a hard line against public sector employee’s benefits (which is good), but chose to single out some categories and not others. David argues that, in Wisconsin as well as in the US, the cuts should “make everybody hurt” (far from a sadist, he wants political viability). Next Mr. Brooks analyzes proposed cuts at the federal level and highlights how the Obama budget has interesting proposals in Education. In fact, he points to a speech by the Secretary of Education as an example of pragmatic, results-driven attempt at reducing budgets. For a relatively conservative Republican, it means a lot.

The Economist this week also has interesting contributions to the subject:

Showdown in Madison – Intro. We love the subtitle: “The fight to bring a little private-sector discipline to America’s public sector has begun at last”

Wisconsin and wider – How the Wisconsin imbroglio can shape the debate in the US.

Meanwhile, in New York… – Democratic governor Andrew Cuomo is also trying to shake things up. Just as we were writing this we received an email alert that the NY legislative was able to secure a vote to delay a shutdown for 2 weeks. Yes, a shutdown – that’s how hard the game is being played.

Tick, tock – The federal government is also under threat of a shutdown, that is, of not having an approved budget for 2011.

Why do economists argue?

IP — Tue, 26 Oct 2010 12:00:36 +0000

Quick post about a NYT story on the inherent difficulties in economics – with obvious applications in investments. Also pretty useful as a teaser for our Castles of Sand introductory text in the Q3 2010 report.

Tidbits:

“It’s not just that there is so little clear signal amid so much noise. It’s that many economists have a unique idea of what signal to listen to and what priority it deserves.”

The next two quotes are by Dan Ariely, of “Predictably Irrational” fame, also mentioned en passant in a 2009 post on Buysiders.com:

“ ‘Pride is not in the model. Revenge is not in the model. Fear is not in the model. Even simple things like the disenchantment of people who are fired from their jobs — the model doesn’t account for how devastating that experience can be.’ ”

“ ‘But there’s a good reason that human irrationality isn’t part of the standard economic models, and this gets to the dilemma of economics. If you have a simple problem, you can offer a simple solution. But the economy is a hugely complex problem. So we either simplify the problem and offer a solution, or embrace the complexity and do nothing’.”

Greece should learn from Brazil – kind of

IP — Thu, 26 Aug 2010 14:29:15 +0000

The Financial Times had a piece about Greece’s woes on August 24th – and how Brazil’s fiscal policy presents an alternative. We feel it’s our duty as Brazilians to inform the FT that they’re basically right: Greece can borrow pages from the playbook of 2002 Brazil (or Lula, since the article mentions him). 2010 Brazil’s fiscal policies, however, should not be copied. What a difference a few years make.

China’s economies

IP — Sat, 21 Aug 2010 00:34:48 +0000

Economies, in the plural, since two recent articles have dealt with the “unofficial” sides of the Chinese Economy. First there was a Bloomberg article on Chinese banks getting the order to move their off-balance sheet stuff to the books. The “not-meant-to-be-funny-but-still-funny” part goes like this: “They want to strengthen their monitoring of the systematic risk related to off-balance sheet management of bad debts,” said Wang Qing, Hong Kong-based economist at Morgan Stanley. “In the near term, the impact on banks’ earnings will be quite limited.” It makes us wonder who still trusts short-term bank earnings in China. We suggest a “translation” to the funny part inside, along with the second article.

Repeating the sentence: “They want to strengthen their monitoring of the systematic risk related to off-balance sheet management of bad debts.”

The translation to that sentence could be: “they know they have been lending recklessly (oh the power of incentives…), don’t have a clue about the true size of the mess and are praying for the inefficiencies of the economy/ transmission channels to dampen the multiplier/ domino effect of this huge but untraceable/irreconcilable collective irresponsibility – and yet want to sound ‘in control’ and ‘knowledgeable’ about it as long as they can”.

The second article is a LEX on China’s “grey” economy, mentioning research by Credit Suisse (which can be found here). In it CS researches China’s “real” wealth distribution, and surprise surprise, it looks more like South than North America. Why? Because incomes may be as much as 90% higher than official stats – please note that stats can be used to tell any story, we know nothing of what sample they used, the questions they asked, etc.

Would the real China please stand up?