He was executed. I feel a bit sad. I am not saying he is a good man. I am not saying he deserves alive. Yes he killed 148 Shiite in 1982. But it is obvious enough to me that this is simply an excuse of excuting him. The real reason behind is our worst president Bush. Bush hates him and wants he to die, as simple as that. Hussein was captured by the US, claiming there are weapon of mass destruction in Iraq. So, if the US cannot find the weapons, why not released him?
Hussein was borned at the wrong time, in the wrong place. He is bad. He deserves to die, but not due to personal conflict with Bush. Politics is just too dirty.
The lesson is it is much easier and better to be just one of ordinary people.
Saturday, December 30, 2006
Friday, December 29, 2006
income inequality
There are debates in the recent years that our income inequality is increasing. rich people is getting richer. Poor people is getting poorer. News on the wall street bankers' annual bonus is scary for an unemployed me. Obviously enough, those who care about income inequality are mostly the loser - the poors (aside some socialogists or policy makers). Since I am one of the loser, let me think about what is income inequality means to me.
A standard way to measure income inequality is Gini coefficient. Lets think about the following 2 situations:
There are 2 societies, A and B. Each one has 100 residents. Society A has 99 residents with $1 income per year, and 1 resident has $1 million per year. Societry B has 50 residents with $1 per year, and 50 residents has $20,000.98 per year. So, total income is the same for both countries.
The question here is which country you (as a poor one) want to stay? From the Gini coefficient sense, society A has higher inequality (pretty close to 1). So, from a Gini guy point of view, a poor may want to stay in society B. Is that really make sense?
Living in society A means that it is most likely the one you came across has the same status as you. Living in society B means every other resident you came across are way richer than you. For me, since I am one of the poor, I may prefer to stay in A. I prefer to meet with people with similar status.
So, income inequality is rising, but it is not the full picture. More important is the distribution of the wealth. If only 0.1% of the population accumulates 99.9% of the country's wealth, while 99.9% population have equal share of the rest, AND if the equal share of the rest is sufficient for a decent living, the society may not be too bad afterall.
Are we in such a society?
A standard way to measure income inequality is Gini coefficient. Lets think about the following 2 situations:
There are 2 societies, A and B. Each one has 100 residents. Society A has 99 residents with $1 income per year, and 1 resident has $1 million per year. Societry B has 50 residents with $1 per year, and 50 residents has $20,000.98 per year. So, total income is the same for both countries.
The question here is which country you (as a poor one) want to stay? From the Gini coefficient sense, society A has higher inequality (pretty close to 1). So, from a Gini guy point of view, a poor may want to stay in society B. Is that really make sense?
Living in society A means that it is most likely the one you came across has the same status as you. Living in society B means every other resident you came across are way richer than you. For me, since I am one of the poor, I may prefer to stay in A. I prefer to meet with people with similar status.
So, income inequality is rising, but it is not the full picture. More important is the distribution of the wealth. If only 0.1% of the population accumulates 99.9% of the country's wealth, while 99.9% population have equal share of the rest, AND if the equal share of the rest is sufficient for a decent living, the society may not be too bad afterall.
Are we in such a society?
Thursday, December 28, 2006
global liquidity
The past years are years of high global liquidity. G-3 interest rates are at historically low levels. Huge amount of Asian money moves to US treasury bills, while US capitals move to Asian and Latin American equities. Both the developed and developing countries are benefitted from this high liquidities. Indeed, it is a good opportunity for the developing countries to explore the benefits.
In the past, those countries have high external debts, denominated in foreign currencies. They have kept the currency from depreciation in order to avoid the currency mismatches. They accumulated international reserves to support their FX.
With today's high liquidity, and low yield in the developed countries' debt instruments, money pours into their markets. By keeping their exchange rate from appreciation, they are able to accumulate international reserves to very high levels. Sterilzation together with relaxation of domestic debt market participation by foreigners, money are poured into local markets. As a result, they are able to develop their domestic yield curve. Partly because of the local yield curve benchmark, some of the countries are now able to issue their debts in the international market denominated in their own currencies.
This financial development are complemented with the strong regional growth in Asia. China and India's demand for raw materials push up global commodity demand. Commodity exporting countries like Chile, Russia, etc. are all winners.
Of course, policies are pursued diffferently than in the past as well. Partly because strong global demand and partly because governments realized the importance of fiscal discipline, their public balance are mostly in control. Inflation targeting are mostly adopted and viewed credibly by investors. Their domestic economies are now more stable than before. Public and private balance sheets are much improved.
So, with the internal and external environment supports, many emerging economies are able to put their houses in shape. Now, external risks are lower than before. They worry more FX appreciation than depreciation. They worry too much capital inflow more than capital outflow. They worry too much international reserve more than too little international reserve. They worry the crisis from the slow down of US economy than from their own economies.
So, what now? Emerging economies need to put their softwares in order. Transparency is needed to make the financial market more efficient and liquid. Recent Thailand's capital control is one interesting example. It illustrates the thai government realized too much capital inflow may not be good, reflecting the fact that its financail market development has not matured enough. It is easy to build tangible assets like buildings. But build a intangible asset like management skill and corporate goverance takes much longer. More importantly, it is harder to detect the weakness of an intangible asset than the weakness of a tangible.
In the past, those countries have high external debts, denominated in foreign currencies. They have kept the currency from depreciation in order to avoid the currency mismatches. They accumulated international reserves to support their FX.
With today's high liquidity, and low yield in the developed countries' debt instruments, money pours into their markets. By keeping their exchange rate from appreciation, they are able to accumulate international reserves to very high levels. Sterilzation together with relaxation of domestic debt market participation by foreigners, money are poured into local markets. As a result, they are able to develop their domestic yield curve. Partly because of the local yield curve benchmark, some of the countries are now able to issue their debts in the international market denominated in their own currencies.
This financial development are complemented with the strong regional growth in Asia. China and India's demand for raw materials push up global commodity demand. Commodity exporting countries like Chile, Russia, etc. are all winners.
Of course, policies are pursued diffferently than in the past as well. Partly because strong global demand and partly because governments realized the importance of fiscal discipline, their public balance are mostly in control. Inflation targeting are mostly adopted and viewed credibly by investors. Their domestic economies are now more stable than before. Public and private balance sheets are much improved.
So, with the internal and external environment supports, many emerging economies are able to put their houses in shape. Now, external risks are lower than before. They worry more FX appreciation than depreciation. They worry too much capital inflow more than capital outflow. They worry too much international reserve more than too little international reserve. They worry the crisis from the slow down of US economy than from their own economies.
So, what now? Emerging economies need to put their softwares in order. Transparency is needed to make the financial market more efficient and liquid. Recent Thailand's capital control is one interesting example. It illustrates the thai government realized too much capital inflow may not be good, reflecting the fact that its financail market development has not matured enough. It is easy to build tangible assets like buildings. But build a intangible asset like management skill and corporate goverance takes much longer. More importantly, it is harder to detect the weakness of an intangible asset than the weakness of a tangible.
job selection
One of my friends ask me what college major should he takes? The standard answer from an American parents is take the one that you are interested. The standard answer from Asian parents is engineering or computer science. My standard answer is: if you are smart, take anything, in which the future job will be in the tradable sector. If you are not smart, take anything, in which the future job will be in the non-tradable sector.
A job in the tradable sector will have a bigger market due to globalization. If you are smart enough, you will be make lots of money from a big market. If you are not smart enough, non-tradable sector will have less competitions. You will survive much easier and make a decent living. The question then is which one is tradable, which one is non-tradable. It is now easy to find a tradable sector, but getting harder to pin point a non-tradable sector. People can now do a medical surgury in India. How about the typical textbook example: haircut or a local hamburger store?
Anyhow, not sure if students nowadays really take this into account when choosing a college major. or if they really know whether they are smart or not...
A job in the tradable sector will have a bigger market due to globalization. If you are smart enough, you will be make lots of money from a big market. If you are not smart enough, non-tradable sector will have less competitions. You will survive much easier and make a decent living. The question then is which one is tradable, which one is non-tradable. It is now easy to find a tradable sector, but getting harder to pin point a non-tradable sector. People can now do a medical surgury in India. How about the typical textbook example: haircut or a local hamburger store?
Anyhow, not sure if students nowadays really take this into account when choosing a college major. or if they really know whether they are smart or not...
Wednesday, December 27, 2006
gift cards
Christmas is the gifting giving season. No doubt that the trend of giving gift card is flouishing. There are a lot of interesting arguments why gift may be better than gift card and why gift card may be better than cash. It is also clear that from pure monetary point of view, cash is better than gift card and in many cases, gift card is better than gift. Since gift card is popular today, it is not too hard to imagine that bank or other financial institution will jump into the bandwagon sooner or later. Unlike Walmart selling Walmart gift card, which is only useful in Walnart shopping, why not Bank X sells BankX cash card. A BankX cash card will have some cash balance that can be spent anywhere?
There are several reasons why so far cash card is not as popular as a ordinary gift card. One obvious reason is that those banks have no incentive to sell this cash card. If the bank does not charge any fee, why the bank has to spend the transaction cost to administer this product? If the bank charges a fee, will customers will to buy the $x valued cash card for $x+$fee? and what will the optimum fee to make the card competitive in the gift card market?
Bank may add free cash card service to its account holders. But I doubt how many new customers can the bank attract by adding this service.
Because of the popularity of gift cards, and because of different people places different value on it, the auction and swap market for gift card is also flouishing. Surfing the web shows there are a nunber of websites doing this business. Of course, the price pay for the gift card must not be greater than the value of the card in the auction. The difference is the inflexibility premium (assuming there is no default risk).
I checked one of the gift card swap website: http://www.cardavenue.com
As of Dec 27th, there are about 450 card auctions. I complied the value, the latest auction price and the days of auction remaining for the whole list. Average card value is $157.8, average latest auction price is $110.96, and the average remaining days of auction is 4.268 days. The price value differential is $46.92, or almost 30% of the card value. No doubt that the price value differential will be tigther in the next 4+days, but most likely that the differential will remain strictly positive.
Can the bank based on this premium to market their cash card with the fee equals to or a little lower than this inflexibility premium that are beneficial to both the banks and the gift card shoppers? thoughts?
There are several reasons why so far cash card is not as popular as a ordinary gift card. One obvious reason is that those banks have no incentive to sell this cash card. If the bank does not charge any fee, why the bank has to spend the transaction cost to administer this product? If the bank charges a fee, will customers will to buy the $x valued cash card for $x+$fee? and what will the optimum fee to make the card competitive in the gift card market?
Bank may add free cash card service to its account holders. But I doubt how many new customers can the bank attract by adding this service.
Because of the popularity of gift cards, and because of different people places different value on it, the auction and swap market for gift card is also flouishing. Surfing the web shows there are a nunber of websites doing this business. Of course, the price pay for the gift card must not be greater than the value of the card in the auction. The difference is the inflexibility premium (assuming there is no default risk).
I checked one of the gift card swap website: http://www.cardavenue.com
As of Dec 27th, there are about 450 card auctions. I complied the value, the latest auction price and the days of auction remaining for the whole list. Average card value is $157.8, average latest auction price is $110.96, and the average remaining days of auction is 4.268 days. The price value differential is $46.92, or almost 30% of the card value. No doubt that the price value differential will be tigther in the next 4+days, but most likely that the differential will remain strictly positive.
Can the bank based on this premium to market their cash card with the fee equals to or a little lower than this inflexibility premium that are beneficial to both the banks and the gift card shoppers? thoughts?
Tuesday, December 26, 2006
DUI
we all know DUI is bad, so why some of us still drive after drinking? I had dinner in the city with friends last weekend, and of course drank some. I took a cab home and left my car in the city. The cab fare is about $40, the garage parking cost $30. I came back to pick up the car the day after cost $10. Total cost of not driving was about $80. Quite a lot of money, considering the dinner/person was about $50-60.
The probability of being caught is small. Surfing the web suggest that the cost of first time DUI is not too high in California either. The exact penality is different in each county, but is about 3-5 years of court probition, $1,400-$1,800 fine, 6 months loss of CA License, DUI school and 48 hours jail time (may be replaced by social service).
http://www.kandblaw.com/penalty_chart.html#first
Lets do some guestimation: The median income for a 4-person family in CA is about $68,000 (2003 US census). Suppose 2 of 4 are working. Each work 52 weeks in a year, 40 hours a week. This translates into $16.3/hour. Average commute time for a typical San Franciscan is about 29.2min (2002 US census). Suppose during the 6 months of license suspension, you double your travel time. 6 months loss of CA license costs extra $8 a day, or $1,040 for the 6 months (26 weeks x 5 days x $8). DUI school costs about $50. 48 hours (2 days jail time) loss of income $260 (16.3 x 16 hours). These sum up to $3,150. Don't know how much costs for the probation. Lets all round up to total cost at $4,000.
Put this together, the probability of being caught should be about 0.02 to make a risk neutral driver indifferent between driving or not driving. I would guess the actual probability of being caught is way lower than that. I guess that is one of the many reasons why people DUI.
I have heard that the accident rate in US is higher than Germany, why? I have also heard that some areas in Germany have no speed limit, any correlation there?
Another thing I notice is that in some cities, car is a luxury goods. Only wealthy people can afford a car. Public transportation is good enough to accomodate most prople's need. In this case, those with cars are wealthy people. The cost of having an accidient is high enough that they will drive safely. Accidient tends to be lower as a result. The accident rate in this case will drop more than proportional to the number of car on the road due to this selection process. This is another reason (in addition to lower air pollution) why we want to promote public mass transportation.
AN UPDATE: MSN has an article suggesting the cost of DUI is about $11,000, including car towing, future rise of insumance premium, attorney fee, etc. The probability then becomes 0.007. Is that good enough? probably still not, but honestly I don't know, but I do know many of us do not know this figure. The police may want to advertise the cost of DUI more publicly...
The probability of being caught is small. Surfing the web suggest that the cost of first time DUI is not too high in California either. The exact penality is different in each county, but is about 3-5 years of court probition, $1,400-$1,800 fine, 6 months loss of CA License, DUI school and 48 hours jail time (may be replaced by social service).
http://www.kandblaw.com/penalty_chart.html#first
Lets do some guestimation: The median income for a 4-person family in CA is about $68,000 (2003 US census). Suppose 2 of 4 are working. Each work 52 weeks in a year, 40 hours a week. This translates into $16.3/hour. Average commute time for a typical San Franciscan is about 29.2min (2002 US census). Suppose during the 6 months of license suspension, you double your travel time. 6 months loss of CA license costs extra $8 a day, or $1,040 for the 6 months (26 weeks x 5 days x $8). DUI school costs about $50. 48 hours (2 days jail time) loss of income $260 (16.3 x 16 hours). These sum up to $3,150. Don't know how much costs for the probation. Lets all round up to total cost at $4,000.
Put this together, the probability of being caught should be about 0.02 to make a risk neutral driver indifferent between driving or not driving. I would guess the actual probability of being caught is way lower than that. I guess that is one of the many reasons why people DUI.
I have heard that the accident rate in US is higher than Germany, why? I have also heard that some areas in Germany have no speed limit, any correlation there?
Another thing I notice is that in some cities, car is a luxury goods. Only wealthy people can afford a car. Public transportation is good enough to accomodate most prople's need. In this case, those with cars are wealthy people. The cost of having an accidient is high enough that they will drive safely. Accidient tends to be lower as a result. The accident rate in this case will drop more than proportional to the number of car on the road due to this selection process. This is another reason (in addition to lower air pollution) why we want to promote public mass transportation.
AN UPDATE: MSN has an article suggesting the cost of DUI is about $11,000, including car towing, future rise of insumance premium, attorney fee, etc. The probability then becomes 0.007. Is that good enough? probably still not, but honestly I don't know, but I do know many of us do not know this figure. The police may want to advertise the cost of DUI more publicly...
Friday, December 22, 2006
Yen
I follow the movement of Yen for a few years. Current level is 118.84/$. I think almost all
Over the past decade, the central bank kept the interest rate at 0%. The liquidity in the market is huge. With the postal reform, money is able (or at least expected to be able) to move abroad. We are talking about trillions of Yen. Of course, if I am a Japanese portfolio manager, I will do it now, expecting Yen will depreciate in the future. This is in contrast to US bankers' view. Of course, Yen is depreciating currently, meaning that the outflow force from
I looked at the bond indices for a set of countries (
Here is the thought experiment: when Japanese investors decide to invest in the
I first assume Japanese investors have adaptive expectation, adapted from the past two years. What I found is that if their decision was based on past two years' experience, they were wrong. From 2000 to 2001, from Japanese investors' prospective, investing in
I did the same exercise from 2005 to 2006. If investors are forward looking and if realized return in 2005-2006 is what they expected, it is hard to know in advance where to put their money. Between 2005 and 2006, Return in Europe is slightly higher than the
If the capital flow story is true, Japanese investors care more on return than risk. 0.7% return differential is enough to compensate for the 0.36 correlation differential. The "excess" savings in
Looking forward, interest rates across the regions are the key variables to monitor.
Thursday, December 21, 2006
ebay
You may wonder how I survive being unemployed. It is not easy at all. I am at barely subsistence level for quite a long time. I have some tiny income from selling stuffs in eBay for the past years. It is indeed there are a few things I found very interesting. All are from seller's prospectives.
Since I am one of thousand sellers of identical product, price competition is severe. As I mentioned, I make a living , which means that the price I charge covered by my own labor cost (or time value). This is expected.
What is unexpected is there are a few types of sellers. After a few years in this "industry", I sometimes can identify which type some sellers belongs to. My pricing strategy adjusted accordingly.
One common type is the active type: they charge at a price 1 cent below their competitors. Of course, this is what the Betrand model predict. Since it is not a one time game, every seller has incentive to keep the price at particular high level initially. Then drop by 1 cent in each increment. As a result, there is positive "profit" for prolong period of time.
If I am not busy, I am happy to follow. But in some busy occassions, I need to signal them that I don't have time to "update" the price frequently. I drop the price significantly, say 1 dollar, whenever they charge 1 cents lower than me. By repeating that strategy a few times, they recognize my signal and stop dropping 1 cent, but keep their price at the level as everyone else. (of course, after a while they drop the price 1 cents again, expecting I am away). This strategy sometimes work.
The second type is the passive type: they always set the price identical to others , hopfully to persuade others that sharing the monopoly profit is better than sharing 0 profit. I love them and more than happy to follow. But there are not many of them, as expected.
The third type is the aggressively type. they drop the price aggressively and quickly in order to capture the profit. Almost all of them are one time player. They disappear quickly. I try not compete with them.
Of course, there are a fourth type, which does not have any pre-defined strategy.
time to reset the price...
Since I am one of thousand sellers of identical product, price competition is severe. As I mentioned, I make a living , which means that the price I charge covered by my own labor cost (or time value). This is expected.
What is unexpected is there are a few types of sellers. After a few years in this "industry", I sometimes can identify which type some sellers belongs to. My pricing strategy adjusted accordingly.
One common type is the active type: they charge at a price 1 cent below their competitors. Of course, this is what the Betrand model predict. Since it is not a one time game, every seller has incentive to keep the price at particular high level initially. Then drop by 1 cent in each increment. As a result, there is positive "profit" for prolong period of time.
If I am not busy, I am happy to follow. But in some busy occassions, I need to signal them that I don't have time to "update" the price frequently. I drop the price significantly, say 1 dollar, whenever they charge 1 cents lower than me. By repeating that strategy a few times, they recognize my signal and stop dropping 1 cent, but keep their price at the level as everyone else. (of course, after a while they drop the price 1 cents again, expecting I am away). This strategy sometimes work.
The second type is the passive type: they always set the price identical to others , hopfully to persuade others that sharing the monopoly profit is better than sharing 0 profit. I love them and more than happy to follow. But there are not many of them, as expected.
The third type is the aggressively type. they drop the price aggressively and quickly in order to capture the profit. Almost all of them are one time player. They disappear quickly. I try not compete with them.
Of course, there are a fourth type, which does not have any pre-defined strategy.
time to reset the price...
Monday, December 18, 2006
Trans fats or not
New York bans the Trans fats on cooking. This policy is wrong if we can answer the following questions:
1. what is the negative impact of Trans fat?
if you know the answer, then:
2. how much Trans fat is bad for health? I think it is a function of body weigh, amount of exercise one does, amount og vegetables one consumes, etc. (I really don't know...)
if you know the answer, then:
3. How much Trans fats in each meal of your typical day? and how much trans fat in each dish you ordered in each restaurant?
if you know the answer, then:
4. Can you add up and remember the amount of Trans fat you have taken during the course of a day?
if you can, then:
5. Do you have self control?
if you do, then: You should oppose the law.
if you do not, then:
6. are you able to pay for your medical bill, not subsidized by the government (tax payer)?
if you are able, you should oppose the law.
I am sure I fail to answer almost all questions above, so, I support the law.
1. what is the negative impact of Trans fat?
if you know the answer, then:
2. how much Trans fat is bad for health? I think it is a function of body weigh, amount of exercise one does, amount og vegetables one consumes, etc. (I really don't know...)
if you know the answer, then:
3. How much Trans fats in each meal of your typical day? and how much trans fat in each dish you ordered in each restaurant?
if you know the answer, then:
4. Can you add up and remember the amount of Trans fat you have taken during the course of a day?
if you can, then:
5. Do you have self control?
if you do, then: You should oppose the law.
if you do not, then:
6. are you able to pay for your medical bill, not subsidized by the government (tax payer)?
if you are able, you should oppose the law.
I am sure I fail to answer almost all questions above, so, I support the law.
Friday, December 15, 2006
Temp job or not
I came across an article today in WSJ: "For Welfare Clients, Temporary Jobs Can Be a Roadblock". One research concludes that "Encouraging low-skilled workers to take temporary help agency jobs is no more effective -- and possibly less effective -- than providing no job placements at all". It sounds surprising, but seems reasonable as well.
It looks like the lemon market introduced by the Akerlof. Those with high skill tend to look for the job directly. Those with low skill get a job through temp agency. the temp job employers knows that. So, they offer jobs with low skill required and little experience accumulation potential. By the end, the low skill workers continue to be low skill with no experience. Therefore, no better prospect for higher wage or better employment.
The article also said that "The Bush administration recently signed a law updating welfare rules that will push states to move even more welfare recipients toward work and job training. The law requires that states place 50% of all their welfare cases into "work activities" and restricts what qualifies as work. Many college classes, for instance, will no longer count toward the work requirement as they once did. Credit for drug- and other substance-abuse programs is also limited."
If this story is true, the new law will not be useful. The available jobs offered by the government-spornored program will not help much. The pool of those government-spornored jobs will be low skilled added.
A better way seems to improve the skill set of the unemployed directly (rather than through the temp jobs), but I am not sure from my experience how effective the government will be in this area.
Here is the article from WSJ:
http://online.wsj.com/article/SB116611481972750289.html
It looks like the lemon market introduced by the Akerlof. Those with high skill tend to look for the job directly. Those with low skill get a job through temp agency. the temp job employers knows that. So, they offer jobs with low skill required and little experience accumulation potential. By the end, the low skill workers continue to be low skill with no experience. Therefore, no better prospect for higher wage or better employment.
The article also said that "The Bush administration recently signed a law updating welfare rules that will push states to move even more welfare recipients toward work and job training. The law requires that states place 50% of all their welfare cases into "work activities" and restricts what qualifies as work. Many college classes, for instance, will no longer count toward the work requirement as they once did. Credit for drug- and other substance-abuse programs is also limited."
If this story is true, the new law will not be useful. The available jobs offered by the government-spornored program will not help much. The pool of those government-spornored jobs will be low skilled added.
A better way seems to improve the skill set of the unemployed directly (rather than through the temp jobs), but I am not sure from my experience how effective the government will be in this area.
Here is the article from WSJ:
http://online.wsj.com/article/SB116611481972750289.html
Thursday, December 14, 2006
why blog
as my name indicated, I am unemployed. So time value is close to zero. Reading is the only job for me and so is Blog.
This blog will devote to any interesting observations that I found: economics, noneconomics, fact or opinion, bias or unbias (the word unbias is by itself bias....no drunk people admits he/she is drunk) ...
Post will not be made in daily basis, but will be in incidental basis...but check it out...and feedback.
Regards,
unemployed observer
This blog will devote to any interesting observations that I found: economics, noneconomics, fact or opinion, bias or unbias (the word unbias is by itself bias....no drunk people admits he/she is drunk) ...
Post will not be made in daily basis, but will be in incidental basis...but check it out...and feedback.
Regards,
unemployed observer
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