Angry Political Optimist Rants


The Wall Street Journal recently (Thursday July 14, 2011) published an article in the Marketplace section where various analysts reported valuing the company at $100 billion and upwards. Redpoint Venures’ Geoff Yang notes that Facebook created a new ecosystem – the ‘social web’. His valuation was based on a $25BB market in online ad revenue with Facebook having a 27% share. In 2015 that $25BB will grow to $45BB and Facebook’s share translates to $7BB in revenue. Add in the local advertising market today estimated at $133BB and project that to the future for $150BB. With the Internet taking 20% and Facebook 20% of that, add $6BB in revenue. Add in international revenue and the estimated 2015 revenue goes to $19BB. With a P/E of 25, Facebook is worth $140BB in 2015. The high end of the scale in the report was $240BB valuation. Some of the higher P/Es are undoubtedly because Facebook is still a private company, lots of investor want in, and the law of supply and demand is active.

Going back to Geoff Yang’s comment about a new ecosystem, the thing about ecosystems is that they contain lots of niches, some beneficial and some not so beneficial. Looking at Facebook as a social media, people automatically assume that Facebook is about communications. This couldn’t be farther from the truth. In fact, Facebook has the ‘potential’ to be a communications tool but to be specific, one has to remember that, as Claude Shannon established, communications requires three elements: a sender, a channel and a receiver. Social media over the Internet is clearly the channel and the millions of members participating are senders. I am not so certain about the receivers.

Facebook is a means for participants to throw out to the world (dare I say ‘vomit’) pithy comments about life, mostly as a means to assuage their egos and establish that their thoughts are somehow worthy of publication. Admittedly, blog writers succumb to the same predisposition, as do contributors to refereed journals. In our case as well as the case with journals, we impose some sort of peer review.

The problem comes when participants believe and expect that Facebook is, in fact, a means of communication, when it typically is not. Personally, being inoculated by Inter-relay Chat (IRC) in earlier days, I know enough to not assess my self-worth by a post or response to a post that comes flying my way, and do not participate in “flame wars”. There are lots of people out there using Facebook with less unassailable egos, fragile personalities and low self-esteem. When these persons become involved in Facebook interactions; and the inevitable trolls and digital demagogues line up like sharks at a chumming, the potential for damage is high.

In verbal communications, most people learn quickly that a self-imposed delay between thinking and speaking is a survival trait. Facebook provides minimal feedback to reinforce an equivalent delay between thought and post. This is not a new concept – books have been written on email etiquette. What is new is that email did not have the potential to impact participants to the same degree. Technology has provided enablers: streams of friend’s posts requires bandwidth; computational power; and storage – all of which have made significant improvements over the last ten years. The result of which is a much more rapid and wider dissemination of accidental stupidity and intentional cruelty.

A 2009 report showed that 1 in 5 divorces are attributed to Facebook. Verbal bullying on Facebook has been reported and is increasing. Blackmail related to Facebook posting of photos is noted. Some interesting work on the phenomena is found here.

Returning to Facebook’s valuation, an infelicitous confluence of factors – high valuations, widespread usage and the potential for material damage (psychological – resulting in treatment costs; suicides, etc.) make Facebook an obvious target for tort lawyers. Expect novel theories of liability to emerge directly in proportion to Facebook’s rising valuation.

At noon on December 9th, Lt Dan Neubauer of Marine Corps Fighter Attack Training Squadron 101, a F/A-18D pilot, after a series of bad decisions all around, made a final bad decision to attempt to make the Miramar runway and crashed into a house killing three members of a family (Young Mi Yoon, who was in her mid-30s; her 2-month-old daughter, Rachel; and her mother, Suk Im Kim). The pilot, on a training mission off CVN-72, the aircraft carrier Abraham Lincoln, ejected after the left engine failed. He was flying on one engine after being forced to shut down the right engine due to an oil leak.

On September 10, 2003, in a session of the House Financial Services Committee, Representative Barney Frank (D. Mass.), in response to concerns about the GSEs Fannie Mae and Freddie Mac, said “I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios.” On September 25, 2003, in response to the request for additional regulation on Fannie and Freddie, Frank opined “I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing.” Rep. Maxine Waters (D., Calif.), speaking to Housing and Urban Development Secretary Mel Martinez said “Secretary Martinez, if it ain’t broke, why do you want to fix it? Have the GSEs [government-sponsored enterprises] ever missed their housing goals?” Senator Chris Dodd (D. Connecticut), Chairman of the Senate Banking Committee which regulates mortgage lending, has been linked to preferential mortgage terms as a friend of Countrywide CEO Angelo Mozilo.

Countrywide Financial has crashed due to management and regulatory failures. The entire mortgage banking system crashed as a result of bad loans securitized by FNMA and FHLMC. See Fit to Fail.


So we have two crashes. One of an F/A-18D killing a family of four, and one of the entire US financial system and world banking market. What do we observe in the aftermath?

The marines, in court, brought charges and discharged four member of the Corps. The commander of the squadron, its maintenance officer and two others have been relieved of duty. Nine other Marines have received other disciplinary action. The disciplinary action cites deferred maintenance, faulty aircraft-ground communications, and bad decisions. The F/A-18D was flying on a left engine which had been logged with a faulty fuel-low sensor indicator, and rather than perform maintenance flew 146 additional missions. When the right engine was shut down on an oil leak, the left engine ran out of fuel. Poor maintenance decisions contributed to the crash. The pilot was also criticized in the report for failing to use his emergency checklist. While the Lincoln’s controllers advised of a North Island landing, the squadron officers requested the pilot to make for Miramar, a decision which relied on unrealistic assumptions about the aircraft’s condition. Collectively, the duty officer, the operations officer and commanding officer exhibited poor judgment. For all the criticism of the US Military, the US Marine Corp owned up to its mistakes and took decisive corrective action.

The US Congress has yet to own up to its role in the crises and in fact now wants us to believe that it, and more regulatory agencies, are in fact, the solution. When are we going to see an equivalent acceptance of responsibility? My suggestions:

  1. Rep. Barney Frank, discharged from Congress for gross incompetence and dereliction of duty.
  2. Senator Chris Dodd, discharged from the Senate, for ethics violations, conduct unbecoming, and gross dereliction of duty.
  3. Rep. Maxine Waters, discharged from Congress for incompetence and gross dereliction of duty.
  4. Speaker Nancy Pelosi, discharged from Congress and banned from ever holding a public office, for incompetence and gross dereliction of duty.
  5. Rep. Henry Waxman, discharged for cowardice in the face of the enemy, dereliction of duty, insubordination, and conduct unbecoming.

Money down the Drain

Do your pockets feel a little lighter than they used to? Perhaps about $7,000 lighter? Well don’t worry, that’s just the cost of the economic stimulus for each tax paying American! That emptiness you feel is just feeling of our economy being stimulated by Obama’s package! So now that we’re out $7,000 each the question is, will it work? Will our economy finally get the treatment it needs to get up again? Will we be driven into the cold deadly arms of Socialism? Is Obama’s $825 billion package really as big as everyone seems to think it is?

The Angry Men weigh in on the issue, and hopefully you, dear reader, will as well. We want to know, what do you think of Obama’s package?


Angry Midwesterner

Despite having voted for Obama over McCain, I have to agree with McCain on this issue, the so called “stimulus package” is mostly pork. Even the slightest bit of research shows us that only around 3% of the stimulus money will be spent in the next year, and in two years time only 16% of that money will be spent. A huge chunk of the money isn’t even marked to spent before 2011. So how exactly is this the crucial time sensitive stimulus it was sold as? How does it help America if the money isn’t even being spent? This isn’t about reviving our economy, it’s about never letting a crisis go to waste, as Rahm Emanuel has mentioned, many times.

The worst of it is, the pork isn’t even good pork. It’s mostly wasteful spending probably driven by lobbyists. If Obama really wanted to pork the US so badly, I at least wish he’d had the decency to not lie to us and claim it would stimulate our economy while the special interest groups he is beholden to got theirs too. This stimulus package is a violation of the trust America put in Obama, and is most definitely not the change we voted for.


Angry Diesel Engineer

 
I don’t see how this massive piece of legislation (almost 500 pages in the form Obama signed) is supposed to “spend us out of our recession.”  

While I completely disdain Obama’s socialist utopia (believing that I am better suited to manage my affairs than Uncle Sam), I am interested to see what happens with all this oversight that gets put in place.  If you haven’t checked it out yet, Recovery.gov is an interesting website, with lots of ambiguous statements about how our crazy reckless spending is going to help everyone keep their job.  I am disappointed that millions of dollars are going to create government bureaucratic jobs for said oversight positions though.

I am interested to see where this takes us especially with health care.  I’m not sure how making all medical records electronic will help save jobs (unless you get a job on the H.I.T. board).  All in all, I have great distrust in the government making health care decisions for me.  If they were making decisions for you over  100 years ago, your free health care would have been mandated by the gov. to let your blood.  In a field that is constantly improving in technique and knowledge, free market is the only logical way to go.


Angry Overeducated Catholic

 

I think Angry Midwesterner’s boiling it down to $7000 per taxpayer is a great way to think about this. Another is how much money is being spent per job created (about $300,000 if I recall). And a third is to note the areas most impacted by the current economic woes, the areas where the most money is going, and then notice that they don’t really line up:  

http://money.cnn.com/news/storysupplement/economy/stimulus_jobs/

At first glance, Nevada, for example, should be up in arms. In fact, that map doesn’t look at all like the map of a package intended to help out those hurt by the recession. Actually, though, the per-capita map shows you that it’s not really that bad, but it’s still somewhat disconnected from the unemployment rate.

Because, after all, it’s not really about helping those hurt by economic turmoil…it’s about buliding the Great Society v2.0 (aka New Deal v3.0).

And that $7000 price tag? Only going to go up folks, or should I say, suckers! You tax-paying, hardworking chumps whose money will be systematically confiscated and transferred to the ne’er-do-wells, luckless souls, aging Boomers, shiftless bums, and criminal classes across this great land! The Democratic leadership views you as so many stupid hick sheep to be sheared for the Greater Glory of the People’s Government. It’s just the start!

Remember: Obama is going to cure cancer…with your money, all of it if that’s what it takes.


Angry Political Optimist
 

The size of the stimulus package is not so much of an issue. At the end of World War II, the debt as a fraction of GDP approached 100%. Even if the dire predictions of the Republicans bear out, and Obama’s administration creates a $4T running deficit, a functional United States of America can recover in less than ten years. 

What should be worrying people is the implicit surrender of what makes America great that is embedded in these packages. Since when do Americans look to the government for assistance? Remember when people listed the classical set of great lies and number two on the list was “I’m from the government and I’m here to help you?” Americans need to look inwards to themselves and to each other for support, not to Obama and his minions. If we accept what Obama and the Congress tells us we are — what is implicit in this package — then we will NEVER recover as a nation.

As a practical matter, spending money requires an efficient bureaucracy, even if they only spend on themselves. Bush’s Katrina fiasco was caused not by an unwillingness to assist black residents but by the total unwieldiness of the FEMA distribution system. Wal-Mart, and for that matter, the US Military were on site and assisting within days (only to be rebuffed and hindered by FEMA). Does anyone really think that doubling down on the bureaucracy in Washington will allow them to spend the stimulus money. Do the math. You have to distribute $2.2B a day. (I realize that this is not the way it works, but really, by 2010, I bet that most of the money is still just an allocation on the liability side of the balance sheet. One that can be wiped away with a stroke of a pen in 2010 I might add.)

Obama and the Congress have shown their true colors. They make the Republican porkers look like pikers. Let them have their day in the sun, and then in two years bury the bastards for another 40.

As is traditional we put aside our usual bickering, pissing and moaning for national holidays. As my comrades are being lazy of late, I’m going to post my list and people should add comments or just edit.

Mildly Piqued Academician is thankful for a lot of things this year. Aside from the usual stuff:

  1. That his brother fully recovered from what was supposed to be major but routine surgery but which turned into life-threatening internal bleeding…
  2. That he’s got a stable job in a decidedly unstable time, with very good colleagues and students…
  3. That his retired parents pulled their money out of the stock market six months ago…
  4. That certain important deadlines were—finally—set… and met. 🙂

The Angry Immigrant is thankful…

  1. for safe travel across country to visit family back in the old country.
  2. for fun visiting little nephew #1 and little nephew #2
  3. for fun building breakfast and lunch meals for the homeless for today. All those years of making sandwiches for school lunch came in very handy.
  4. that my latest project appears finished, so I can spend evenings at home instead of at the movie studio.

The Angry Midwesterner is thankful…

  1. That he is spending the holiday in the Midwest.
  2. For loving family, all across the country.
  3. Open roads lined with farms, and a sky free of pollution.
  4. Good friends, good fellowship and good food.

The Angry Political Optimist is thankful…

  1. That the election is over and that the cumulative exhaustion is finally wearing off
  2. That, in spite of Libor peaking on November 17th, the day his ARM reset, his interest rate went down
  3. That the silver lining of the economic meltdown is that people are taking the time to reassess their goals and turning away from rampant consumerism
  4. That the price of oil is less than $50/barrel and gasoline is $1.56 a gallon; and that Chavez, the Saudis, and Medvedev/Putin are scrambling so hard to right their respective boats that they aren’t causing trouble
  5. That all those people who were wishing secretly and not so secretly for the United States to crash and burn, have decided that “eh, maybe not” such a good idea

At 12AngryMen, we have a protocol of sort where one of us writes an article (“rant”) and others of us review it prior to publication so as to insure that the grammar is somewhat correct and that the links actually work. Intellectually we also have to get into the mindset of the author to see if what he is trying to say is conveyed in an effective manner. We suggest changes from time-to-time and even do a few of our own edits, but by and large, the work that appears on the blog is the work of the author. The fun part is getting to read stuff early.

Now a lot of the stuff we write doesn’t make it off the draft pages, either because it ages out in terms of newsworthy, or frankly because the author just doesn’t give a damn anymore. So it is fraught with peril to suggest to our viewers that one of our members will actually publish something, or for that matter anything (Angry Biologist comes to mind).

However, recently I had the opportunity to skim over a draft rant of Angry Midwesterner. Seldom has a theme resonated with me as strongly as this, and I’m sure that this piece will be picked up and go viral through the blogosphere. Even now I can’t help but to assign characters to the people in AM’s analogy. Rahm Emanuel as The Mouth of Sauron, implementing his dark master’s will at Morannon, the Gate of Mordor at Udun, is merely the first of a long string of associations. I look forward to AM’s publication and urge you to stop back to see if it’s up.

We are in for a wild ride for the next two years.

The effect seems worldwide. A political class is addicted to spending your money, a worldwide financial crises occurs and sources of funding dry up. Craving their next fix, they suddenly realize that they really can’t raise taxes to the level they want because everyone and their sister is pointing out that it was FDR not Hoover that caused the Great Depression with bad policy and higher taxes after the banking/market crises of 1929. And with the latest bailout programs the deficit is already at record highs. What’s a politico to do?

Cast their eyes about and find the pools of available cash. What pools are there? Private endowments. Corporate philanthropy. 401(k)s. Pension funds.

Senator Charles Grassley (R – Iowa) and Representative Peter Welsh (D-Vermont) are looking into how universities and colleges are spending their endowments. Seems like any college with over $500 MM in ready cash may be required to allow Congress to tell them how to spend it. Welsh is introducing legislation to force colleges to spend a minimum of 5% per year of their endowments to offset tuition. Guess who gets to make the rules on how it’s spent? Is this enforceable? How many colleges rely on government student loans; or research grants from NSF, NIH, and the like?

Corporate philanthropy? California legislators want to require foundations to report race, gender, and sexual orientation of their trustees, staff and recipients. And what if the giving isn’t in line with the legislative vogue? Kiss off those tax deductions.

Governor Rod Blagojevich, has already raided the State of Illinois’ retirement and pension funds. They are currently underfunded by billions, courtesy of a raid to continue spending on RodWerks.

Anyone remember Alicia Munnell of the first years (1995) of the Clinton administration, before Newt Gingrich rode in to block the insanity? She eyed the trillions of dollars invested in pension plans and devised a “one-time tax” plan to take $450BB of the money because its previous tax deferred status was deemed unfair.

And the effect is not just in the US. Take Argentina where, on October 21st, President Christina Kirchner has nationalized $30BB of pensions to access the cash for her debt payments. Congress is paying attention to Argentina. Speaker Pelosi and House Ways and Means Chairman McDermott are hearing ideas on what is effectively the nationalization of 401(k) plans in a “lets get a head start on socialism” special session of the House. Wall Street investors obviously can’t be trusted to generate a decent rate of return. Congress would guarantee 3% under one plan. That is provided that they didn’t suck the funds dry like that other “lockbox” fund we now have.

As I have mentioned before, having a government of the Party, by the Party and for the Party is a guarantee that wild spending will not perish from the Earth. So does government in general and Congress in specific have the wherewithall to make the optimal decisions on how to spend your money?


Several years ago I heard a Millercomm talk by Charles Townes, the inventor of the maser. Interesting fellow. One of his talking points was the creation of the government institute for sponsoring science at the end of WWII. The US had the Radiation Lab, which extended development of the radar, and the Manhattan Project at Los Alamos and Oak Ridge which developed atomic energy, as well as the precursors to IBM and digital computers. All very successful and arguably responsible for ending WWII in a victory.

Harvard President James Bryant Conant was the head of this group whose purpose was to direct government funding to obtain the most bang for the buck. Conant and Vannevar Bush believed in big government sponsored science. They honestly believed that they could effectively direct science in the United States and provide the best use of public funds.

Townes pointed out that the post war government spend billions on investigating science directed by these intellectuals. And that they missed a few things: the invention of the maser and its daughter the laser; the transistor and the integrated circuit; fiber optics; polymers; (the list goes on). The program was good at giving money to the big labs but the transitional technologies that created today’s world were generated out of the free market.

Let’s keep our assets out of Congressional control and let the free market, which allowed America to become a place where people can attain their visions, thrive.

ash-heap

From The Ash Heap of History

It seems like just a few years ago people were commenting that Communism and Socialism were discredited and flung onto the ash heap of history. I suppose that it is fitting that it’s Halloween because like the living dead, the zombie of socialism is rising from that ash heap to suck the brains of the free market, and the lifeblood of America.

Look at that ash heap. Estonia and Lithuania, Baltic republics, once fully integrated into the U.S.S.R. shed collectivism and redistribution with alacrity and embraced the free market, including a flat tax, and low corporate tax rates. Add to that the Czech Republic, Romania, Serbia, and Ukraine. Places where socialism has been tried have largely failed and are embracing democracy and the free market. Sweden is hailed as a socialism success, but is it? A more detailed analysis says no.

Even China, where the collectivism of Mao’s Communist Party still reigns supreme, has evolved to a hybrid capitalist system with practitioners who put the worst robber barons of the United States to shame. Clearly profit motives trump any sense of responsibility to the collective society. A sad example of the failed tenets of socialism being steadily abandoned in favor of pure, unadulterated capitalism.

The world has cast its vote and the ideals of Friedrich Engels, Karl Marx, Leon Trotsky, and V.I Lenin have been dismissed. They don’t work no matter how lofty the motives and how deep the ethical foundations. The process is as important as the goals.

So now we are engaged in an election, testing whether the last holdouts of collectivism and income redistribution, emaciated idealists from the 60’s, can prevail. One keymaster, riding the discontent directed towards an embattled President, lubricated by liquid Harvard consonants and with a fluidity of principles contorted to mean whatever the listener believes, stands at the gate. And behind him the zombies wait.


 

America is the land of opportunity. America is the shining beacon on the hill that attracts people from all over the world who want that chance to succeed where they couldn’t in their motherland. America is a land of entrepreneurs and of creativity — people who do for themselves and solve problems rather than sit and petition the government for redress. And for the most part, people who aren’t opposed to others making millions because they know that these same people demonstrate conclusively that the opportunity is there. When the richest man in the world is a computer geek, and two college kids can create a business with $500 billion in capitalization, America is demonstratably a land of opportunity.

So how can elected officials not understand what drives America? Are they so firmly wedded to their ideology that the raw fish slap in the face of economic fact is interpreted as a sea breeze from the shores of Finland? What does it say about Americans who let people like Speaker Pelosi, Rep. Barney (Ruble) Frank, Rep. Waxman, and Senator Reid achieve the highest legislative offices of the land when they don’t have a clue about what makes America great, what America’s fundamental strengths are, and how we came to be the world’s only super power.

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