Wednesday, April 07, 2010

Economic Biases; Poor Reasoning



A great post on The Big Picture Blog describing how our biases have guided how we perceive the economic changes over the last several years. 

While this type of behavior isn't anything new--we are all human after all--biases and irrational conclusions seem to be getting a stronger lift through media outlets on both sides.   It is still amazing to me that even among individuals who are educated fall victim to biases and do nothing to change their habits.  They rarely weed through their ideology to get to the real truth.  As a psychologist once told me, "People are afraid of what they don't know or what makes them uncomfortable."

How do individuals perceive FINANCIAL REGULATORY REFORM, INFLATION, CREDIT CRISIS, MARKETS? Read ON HERE



Tuesday, April 06, 2010

Bank Failure Counter

This doesn't even make the last "block" of a newscast anymore. Yes, bank failures continue. This year, its the regional banks versus the larger banks.

NUMBER OF BANK FAILURES:

2000: 2
2001: 4
2002: 11
2003: 3
2004: 4
2005: 0
2006: 0
2007: 3
2008: 25
2009: 140

2010 (April 5th): 66

Sunday, April 04, 2010

2010 Pecota Projections Are FINAL

The 2010 Baseball season is here. PECOTA, the Player Empirical Comparison and Optimization Test Algorithm is a statistical method for evaluating players. Using this method, accurate predictions have been made on overall team performance.

Snapshot of the American League Central.


Full link: http://www.baseballprospectus.com/fantasy/dc/

Thanks to Roy Neyer of ESPN.com for this baseball note:

Box score of the last game in which a player went 7 for 7.

Box Score Snapshot:

Full link: http://www.baseball-reference.com/boxes/CHN/CHN197509160.shtml

Friday, April 02, 2010

Very First Satelllite Photo Anniversary


Try forecasting with an image like this in 2010. It was 50 years ago when TIROS-1 (Television Infrared Observation Satellite) sent the first images of cloud cover over the United States. The mission last only 78 days but the data proved incredibly valuable in developing future satellites to enhance weather prediction. Imagine hurricane forecasting without satellite technology?

FULL STORY HERE FROM NOAA

Friday, March 26, 2010

Map of Health Markets thru Stimulus and GDP

We've been through a round of bailouts in 2008 and stimulus in 2009/10. Here is how the bailouts/stimulus money compares to the GDP of other countries and the US.


Courtesy: HARVARD BUSINESS REVIEW

Monday, March 22, 2010

How Should Financial Reform Look?

Another great article from THE BIG PICTURE BLOG on what financial reform should look like to get the job done.

For me, Number 5, 7 and 8 are incredibly important. Reinstate Glass-Steagall, Only one regulator, Reform the SEC. Way too many crooks and bad, unhealthy transactions and deals fell through the cracks.

CLICK HERE FOR THE COMPLETE ARTICLE

Monday, March 01, 2010

Why We believe in CONSPIRACY THEORIES

I found this blog called the VOLOKH CONSPIRACY. Its a commentary blog from a large group of law professors. Most of what the blog contains are random comments by a number of writers on issues with a law slant. In a post from early 2008, they tackle the issue of political ignorance and pervasive nature of conspiracy theories in explaining major political events.

A very interesting read.

The first paragraph of the post:

"...For example, they cite survey data showing that some one third of Americans believe that federal government officials either carried out the 9/11 attacks themselves or deliberately allowed them to happen. Large numbers of people also believe that John F. Kennedy's assassination was the result of a wide ranging conspiracy in the government, that the AIDS virus was secretly produced in a government laboratory for the purpose of infecting blacks, and that the government is covering up evidence of alien visitation of Earth."

Since the housing bubble and subsequent credit crisis, the 2008 market crash, high oil prices before the 2008 election, the 2008-2009 bailouts and most recently, high unemployment, this study really hits home as many of us take comfort in conspiracy theories in an attempt at explaining the volatile world that we live in. Yet the study offers a very convincing reason why our human nature takes over in times of crisis.

The last two paragraphs of the post are below:

"In the political realm, on the other hand, widespread rational ignorance helps to spread conspiracy theory in two ways. First, the more ignorant you are about politics and economics, the more plausible simple conspiracy theory explanations of events are likely to seem. If you don't understand basic economics, you are more likely to believe that rising oil prices are caused by a conspiracy among oil companies or that the subprime crisis was caused by a conspiracy among banks. If you don't understand the basic workings of our political system, you are more likely to swallow the idea that the federal government could carry out something like the 9/11 attack and then (falsely) blame it on Osama Bin Laden without the truth being quickly exposed through leaks and hostile media coverage.

Second, the rationality of political ignorance implies that even people who do have considerable knowledge are likely to be more susceptible to conspiracy theories about political events than in their personal lives. As I explain in this paper (see also Bryan Caplan's excellent book), the rationality of political ignorance not only reduces people's incentives to acquire political information, it also undercuts incentives to rationally evaluate the information they do learn. As a result, we are more likely to be highly biased in the way we evaluate political information than information about most other subjects. Many people embrace political conspiracy theories because they are more entertaining and emotionally satisfying than alternative, more prosaic explanations of events. Unlike in our nonpolitical lives, most people have little incentive to critically evaluate their political beliefs in order to weed out biases and and ensure their truth."
That is not to say that people are uniformly rational in their nonpolitical decisions. Far from it. But they are likely to be a great deal less irrational than they are about politics."

The full post is here:
http://volokh.com/archives/archive_2008_01_27-2008_02_02.shtml#1201989369

The study link is here:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=916963

Monday, January 18, 2010

McGwire and the Steroid Saga

Mark McGwire finally admitted to what we all suspected. He took steroids while playing baseball including his then record setting season of 1998.

We've all been over this before with other ballplayers who either came out and either flat out admitted their usage of performance enhancing drugs or apologized to everyone in earshot yet not divulging what they actually did to warrant the apology. Regretably, the former is far less common than the latter.

I understand why McGwire didn't admit to it when he testified in front of congress in 2005. His lawyers got in his ear staunchly apposing any heart-felt confession so as to not implicate him either by direct evidence or otherwise (Jose Conseco's book) to any steroid investigation at that time or in the future. I remember watching his testimony on C-SPAN. I waited for an admission or some act of contrition. Once he pleaded the 5th, my heart sank. His "pleading the 5th" might as well have been a guilty verdict in the court of public opinion. He collectively lost the paying fans and the hard-core baseball traditionalists in his evading the subject. As we have seen before, once the court of public opinion comes to a verdict, it is very difficult to change that verdict.

McGwire said he wanted to say something in 2005 while in front of congress. He didn't. Now almost 5 years later, his motives for speaking out are in question. People will will lump in the same group as the Rafael Palmeiro's of the world who, to this day, deny the test was accurate or claim it was someone else.

Back in the 1990s, we all lived in the moment. We watched McGwire and Sosa make history. It was the ultimate feel-good moment after the strike of 1994. It followed Cal Ripken's consecutive game streak record in late 1995. The resurgence of baseball into the national collective consciousness was an elixor that everyone was drinking up. Attendance was up. People were making money...and lots of it. It was like the strike that wiped out the World Series never happened. By 1998, we were all inebriated on baseball. And it felt real good!

Since the early 2000s when the Balco investigation implicating many players including the current season homerun record holder Barry Bonds became everyday news, the publication of Jose Conseco's tell-all book and the subsequent leaking of 104 players who tested positive for PEDs in 2003 was spread over the internet, we as fans felt increasingly duped and cheated. Now, we question every homerun hit back then as super-charged with roids.

Yet we all feel cheated by the players. We feel let down by the players who we thought played for the love of the game. Almost overnight, our baseball buzz became the ultimate hangover that no amount of sleep or spirin would cure. The focus was on the players. That's were our distain ended. Truthfully, our distain should have only begun there.

The owners for years have denied that they had any knowledge of the drug usage of their players. The commissioner has also said he was in the dark. The players' union likewise has said that they never promoted the use of PEDs with their union members. (They evaded the question answering without saying yes or no). The managers, coaches and front office personnel have also issued statements underlining their obliviousness to what was going on.

Am I missing something here?

These business savy owners were making tens of millions of dollars with world-class athletes as their "workers" and they had no idea? These ownership groups affiliated with countless other high end business ventures with billions of dollars in capital investment had no idea? The most powerful union on the planet had no idea what their union members were doing?

Your damn right they did!

Back in the late 80s and early 90s, the FBI was investigating illegal steroid distribution. Eventually, they uncovered the doping regiments of many athletes. By 1993, McGwire's steroid use was known by the FBI. Back then, the authorities were going after the suppliers not the users like ballplayers so no charges were filed against any athletes.In 1994, the FBI shared their finding with Major League Baseball, specifically Kevin Hallinan, baseball's security head. Whether or not the information matriculated through MLB brass is not known. Hallinan says they could have done nothing because MLB had no testing program in place at that timee.

Years later, Canseco's book came out, Balco was revealed and the federal government got involved. As quickly as the owners could stash their cash, put their blinders on, lawyered up and hunkered down until the dust cleared or until they were subpoenaed in front of congress which ever came first.

It was an act of congress, so to speak, that brought Bud Selig, baseball commissioner and Donald Fehr, head of the players' union to Capitol Hill to testify. Nothing came of it. There hands were tied due to the collective bargining agreement which had no testing procedure. Only after strong suggestions by leaders in Congress did testing became more strict and inline with the other main sports. Yes, Bud Selig asked George Mitchell to do an independant investigation--a PR move--on the depth of the usage of steroids in baseball afterward. The report basically corroberated what we all knew from the get go and that steroids, HGH, etc permeated the game. That was several years ago and as of this writing in 2010, we have yet to hear Selig give an apology or an 'I'm Sorry."

But that won't happen. Its his legacy on the line. After all, he's due to step down in 2012. How about the owners? Not a peep. They are still unscathed by the whole thing.

If we all claim to be purests. If we all claim to put the game of baseball ahead of any interests, then we must also look deeply into the actions of the owners, management and players' union who benefited from the steroid era along with the players. All of the groups are equally at fault. The owners and players' union allowed this to happen. They knew what was going on but choose not to address it. They turned a blind eye and continued to watch the balls fly out of the ballpark as their bank accounts grew. All of baseball is implicated in this era.

I am by no means abdicating the players of their behavior. They took advantage of the times and made their money too. They took PEDs because it gave them an edge. They knew it was artificial but they did it anyway. The short-term statistical and monetary gain to the playeers, like the owners, seemed worth it at the expense of the now apparent long term damage to themselves and game.

If the players are punished (no entrance into the hall of fame) then the owners and players' union should be punished too. Yet how do we punish them for which there is no hard evidence? The answer is we can't. Unless there are documents that show collusion among the owners and management to cover up the rampant usage of steroid and other drugs among the players back then, the truth will stay unknown. If such documents exist then what? How do you punish them? Do they fork over money to the players or the players' union like they did in the 1980S free agency collusion case? How can you? They are implicated in this too. Using the same rationale, can we punish the players who have not tested positive or played before 2003 with a blanket gulity verdict? No we can't. Yet the players are under a cloud of suspicion while the owners and players' union are virtually untouchable and they know it.

The story isn't over. There are more than 100 names that tested positive back in 2003. Those names are out there. Eventually, these names will get out. Only then will we have concrete information that illustrates the scope of PEDs in baseball. Granted, its not all inclusive but its the best we'll have. As more information about the late 90s and early 2000s comes to the surface and is digested by all, the true indicator of what PEDs meant to the game will be readily apparent.

Historians will say that corruption has been a part of baseball since its inception in the 1860s. Gamblers stalked ballgames affecting outcomes for decades leading up to the 1919 Black Sox Scandal. Fights broke out in stands between players and fans and umpires. If that were to happen now, Psychologists would be touting it as the ultimate degredation of society unmatched in any time in history.

Since then, gambling, although not totally eradicated, is not what it once was. Baseball is better organized and well-governed compared to its historically cousin. I am sure that Ruth and Cobb would have juiced if PEDs were available back then. You can bet that Judge Kennesaw Mountain Landis, Commissioner of Baseball in the 1920s, would have had them banned for life if he found out.

Players now have something to gain about not talking. That is their legacy. The owners, management and the players' union also have something to gain and that's power and leverage. By talking, they dissolve that steady hand they've been waving for years. To them, like the players, the eluring scent of power and financial gain is a far bigger motivator than doing what is right for the game. I want to believe that McGwire is genuine in opening up. Yet he has something to gain and that is a paycheck as a hitting coach. His remarks on how the steroids didn't help him hit homeruns only clouds the legitamacy of his statements and his character. I really want to get behind him. I honestly do. But I just can't bring myself to it. As these names like McGwire's come out, remember this:

Like the players of the past, The players duped us. The owners, the management, the commissioner, the union also duped us.