Street Smarts Versus Book Smarts—Explained!

In business school, I took a couple classes that were taught jointly to both business and law school students. One of those was a class on entertainment law, but it was mostly about music law, also known as how music companies still rape musicians to this day (metaphorically speaking, of course).

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Conspiracy Theories

There are some who believe in conspiracy theories, such idle ideas as the Plunge Protection Team and Zeitgeist.  Silly people.  I mean, other than the fact that the PPT exists, much of Zeitgeist has already occurred, and the DJIA has finished up on every Friday of 2013, i.e., 9 times in a row, there's really nothing to these silly ideas. 

Editorial Note: I added this additional information after the original post.... Perhaps you're saying to yourself, 9 Fridays in a row with the Dow Jones Industrial Average closing up on the day, is not really any big deal. It's merely coincidence. So let's look at this line of reasoning. First, the "gut check" approach. How often have you seen someone spin a single color (red or black) on a roulette wheel, 9 times in a row? It's entirely possible you have, but extremely unlikely unless you happen to work the roulette wheel at a casino, you're a degenerate gambler with a love for roulette, or perhaps a graduate student in mathematics. The actual likelihood of this occurring is the probability of a single occurrence, to tge power of the number of observations. So if the Dow is up half the time, down half the time, the probability is simply .5 for a single occurrence. With 9 Fridays thus far, the probability that the Dow would be up 9 consecutive Fridays is (.5)^9, which equals 0.001953125, which is simply 0.2%, which means that such an event randomly occurs, by chance, roughly 1 out of every 500 times (the actual number is 512, which is the solution of 2^9). To be more real world, one should account for the fact that over long periods, the stock market indices have a positive slope, which is to say, they tend to go up as a function of growth in the economy, population, and inflation, among other things. So, the probability of the market being up on a given day may be somewhat more than 50%. How much? Who knows? It's not critical for this example. I think a generous number to use is .60, while I think the right number is probably closer to .55. If one uses .60, the resulting probability is about 1%, five times larger but still not very likely to occur (i.e., it should occur one time out of 100 sets of 9 Fridays, all else being equal). You may want to note two footnotes to this footnote, fn^2 you could call them. One is that if you assume that up days have more magnitude than down days, then up days and down days could still be 50/50 and have a positive slope. Secondly, roulette is not a 50/50 proposition, since there are two green spots on the wheel, for 0 and 00. That's the casino's payout: 2/38 = 1/19 ~ 5% to the house, generally (also called the rake, or edge). Against a player betting a color, the casino's odds of winning are 20/38 ~ 53%.

A Funny Thing Happened on the Not-So-Hasty Retreat from the Subprime Meltdown

Finally, some dinner theatre around this place.  Master, servant, pimp, whore?  I'm not sure, but I do think it's funny when you are accused of being one of the foregoing, and your response is to issue a lengthy press release trying to absolve yourself on several theories, including these:  (1) Technically, legally, given the environment and the players, and our First Amendment rights, we really didn't do anything wrong (that's a paraphrase, but I'm pretty sure they didn't use the words ethically or morally); (2) Hey, other people did it, too, but you're only picking on us.

Uh, okay.  Let me help you, since you seem to be unclear on the concept:

"Hey, man, we might be bad, but look what we got paid.  It's not like we were working for Heidi Fleiss; at these rates we're just common streetwalkers!  Seriously, when these banks pay us for a rating, scratch that, pay us to independently review an issuance and give a completely impartial, non-biased third-party opinion from the best of the brightest minds from only Ivy League schools, we're getting paid for the equivalent of a hummer, while offering full service and party favors, which is simply unfair. You can hardly visit the Hamptons with that kind of pay, let alone buy a place."

See, that sort of appeals to the DOJ's sense of fair play, that the investment banks are more evil than you, since they were the ones buying the ratings, oops I mean paying for the independent reviews.

Not really, I'm just kidding.  You're screwed.  But, hey, I'm pretty sure the folks being referenced in #2 above are in the on-deck circle right now.

Editorial Note:  Yes, that's right, the rating agencies have asserted that their ratings are protected by the First Amendment, and in most cases the courts have agreed. What they fail to mention is that this is to protect them from being sued when they either say something bad about a company, or make an unintentional mistake. I'm pretty sure wholesale fraud and lying are frowned upon and not protected, just like they are for the rest of us chumps.

Here's the source article:

DOJ Complaint Against S&P Filed in Central District of California

Solving the Healthcare "Crisis"

Let's skip the wordy preamble, shall we?  I've thrown these ideas out countless times to those who should understand, and I'm always told that I'm impractical.  Then again, I worked with people for several years who thought that new business ideas comprised dredging up the same vomit they spewed two years earlier, and pretending like it was something new under the sun.  So maybe I'm not the impractical one:

My Solution to Our Nation's Education "Dilemma"

This one might actually be short.  Because the solutions are so damn simple.  Here we go (not to be confused with a beer-fetching dog):

1. Abolish the Department of Education.  Seriously, would you want anyone in Washington teaching your children?  And what could they possibly teach them?  Bribery, embezzlement, clandestine sexual relations, blackmail, genocide, chicanery, fraud, misappropriation of funds, whoring, pimping, lying, cheating?  Well, I think you get the idea.

This is from the U.S. Department of Education's homepage:

"ED currently administers a budget of $68.1 billion in discretionary appropriations (including discretionary Pell Grant funding) and operates programs that touch on every area and level of education. The Department's elementary and secondary programs annually serve nearly 16,000 school districts and approximately 49 million students attending more than 98,000 public schools and 28,000 private schools. Department programs also provide grant, loan, and work-study assistance to more than 15 million postsecondary students.

That said, it is important to point out that education in America is primarily a State and local responsibility, and ED's budget is only a small part of both total national education spending and the overall Federal budget [....]."

A Brief Lesson in Economics

Bloomberg Reports that Housing Is Rocketing Skyward!!!

Hey, hey, housing starts are up!  That means housing has turned the corner, right?  Not so fast, Panama Red.

I have no problem with reporting the data, but I do have a problem with the way it's reported.  Every time I see these headlines, the heady writing always includes something like "this shows that demand for homes is picking up."  In fact, that is a blatant lie, or a misunderstanding of the simplest concept of Econ 101.