Thoughts on US Presidential Race for 2016

Growing up, I've always been disinterested in politics and the selection process of American presidents. Maybe it was a byproduct of not being able to vote until the last election (2012). Or a general apathy to a world that I did not understand well and to which I had even lesser influence. Today when I'm asked about my political beliefs, my default answer is always between "I don't really follow it to have an opinion" to "I'd say I'm a moderate who leans Republican only on fiscal policy". This all being said, I've been following up this election cycle with marginally more interest and consequently have formed an opinion of my own.

I feel that despite all the posturing and talk/debates from all candidates, the nominees for each party at this point are clear: Hilary Clinton for the Democrats, and Marc Rubio for the Republicans. This may change in case of an unexpected turn of events but should not and it makes sense.

For the Democrats, Hilary, for all her faults and damaged reputation, remains the household name and the most viable of the 3 major candidates. Bernie Sanders is too extreme in his views and Martin O'Malley is either too discrete or too much of a bozo (e.g. a talking head). This is not to say that she'll win the general election at all - in fact, I'd be willing to bet that she'll lose. As I'll get to in a bit, the public has shown an anti-establishment preference in its favoring of Donald Trump and Ben Carson on the Republican side; this runs directly counter to what Hilary stands for, which is a return of the Clinton name and its former policies. Hilary is simply the best candidate from the Democratic contenders, period.

For the Republicans, Rubio makes sense for his mixture of inexperience, age, and potential to bring in the highly-touted Hispanic vote. I understand that Donald Trump and Ben Carson are currently the front-runners but the American people are not stupid to vote for a candidate devoid of any political experience. As much as I dislike politics, it's like a game that you cannot refuse to play as a President - lest the end result be Obama's current situation of a deadlock with a legislative arm (e.g. Congress) refusing to support his ideas and initiatives. Political experience is a major plus, though arguably too much experience is a minus; likewise idealism and fresh spirit are great to have, but too much freshness leads to...green and possibility of ill-advised undertakings. Therefore Trump and Carson would be disasters if they ultimately win the nomination, and I trust that the public recognizes this and will vote accordingly.

At the other end of the spectrum, the other candidates are likewise inexperience (Carly Fiorina), damaging reputation (Chris Christie, Jeb Bush), or general lack of credibility (Rand Paul, Ted Cruz). I know there are others in the field but let's be honest, they should've dropped out by now. To summarize quickly my thoughts on these:
- Carl Fiorina's experience is staked in her tenure as CEO of HP, which was in fact a disaster for the company. She presided a period of accelerated decline for HP and consequently, this is in fact negative experience.
- Chris Christie's reputation for frankness is marred by his questionable role in "bridgegate" and his image in general. Again let's be honest, we vote for candidates who look presidential and this man needs to seriously lose some weight to look the type. The irony is that he may in fact be representative of American obesity but that's something neither the American public nor the rest of the world wants to see.
- Jeb Bush is a Bush and has shown little in terms of initiative. Unfortunately for him, he's running in a crowded field and on a party base tired of establishment players.
- Rand Paul is too much of a flipflopper and this will be exposed if he ends up with the nomination. This is unfortunate as I liked his father (Ron Paul) a lot but whereas dad was consistent, the apple seems to have fallen far from the tree. I like his stance against NSA and government spying on its citizens but in general too wishy-washy as a candidate.
- Ted Cruz is similar to Martin O'Malley and seems to be a bozo. I question his stance against net-neutrality, which hints at some bedroom behavior with the major corporations. 

Thoughts on Michael Brown Shooting and Black Suffrage

Allow me to begin this post by noting that I'm not black/African-American. Instead, I'm an Asian-American who immigrated to this country more than 10 years ago. If my ethnicity automatically disqualifies me from commenting on the Michael Brown shooting event - because I'm not black and therefore cannot comprehend the underlying issues - then so be it. I understand that there are aspects of culture and history of blacks that I may never fully grasp. But I'm going to share my thoughts anyway, as a citizen of America, a bystander, and a part of today's American society.

In short, I agree with the decision by the Ferguson grand jury to not indict Darren Wilson, the police officer who shot Michael Brown in late August 2014. That's not to say that I believe Wilson is completely innocent as there are certainly steps he could've taken to mitigate the confrontation - e.g. drawing his handgun perhaps a bit prematurely, which probably exacerbated Brown's reaction. Yet reading over the witness testimonies and information presented to the grand jury, the simple fact of the matter is that Brown not only refused an officer's orders but outright attacked him maliciously and violently. When a police officer orders you to do something, you comply regardless of the order because he or she is a representative of the rule of law. Any wrongdoing in the order can be argued afterwards.  The punishment (death) doesn't befit the crime in this case, but it's a strictly a matter of right vs. wrong. It's right to follow a police officer's orders and wrong to attack a police officer. 

In other words, if you're stupid enough to attack an armed police officer, then you have to be mindful of the possible consequences of your own ignorance and stupidity. This is irregardless of the earlier reported burglary at a nearby convenience store, which was allegedly carried out by Brown. You just don't attack someone and not expect retaliation. However, this highlights the underlying problem for a small subset of the larger black community/population: lack of respect for the rule of law. 

Rule of law is created to apply for everyone in American society, regardless of your wealth, family background, job, etc. It's the basic fabric of this country and is what makes us the beacon of democracy and freedom to the rest of the world. It sounds cliched but it's the simple truth. There is no preferential treatment or circumvention of the law - not even for the President of the United States. As the U.S. Constitution attests to, we are all under the law and no one is above it. Yet there appears to be a perception within a subset of the black community that the rule of law is rigged against them, and therefore they should fight against it. Unfortunately, this sentiment is so pervasive that one hears oftentimes in songs and stories. Song lyrics like "f*** the police" are not uncommon and one is regarded as "cool" to have defied the police or committed any crime. It's a minor but disturbing nonetheless - and perhaps explains Brown's disposition when first ordered by Wilson to walk on the sidewalk instead of the road. Brown may have been offended at being given orders, especially by a police officer and accompanied by a friend, may have wanted to show off his toughness. The fact of the matter is that he acted defiantly and took steps to express his defiance.

Going a bit further, another underlying issue is the victim mentality of the black community. And this may not be limited to a small subset of the overall population. The victim mentality is commonly understood as derived from the slavery of blacks during the early American history. Slavery oppressed blacks at the time, and its effects still reverberate in today's society. In other words, black people were screwed as slaves and continue to be screwed because they were manipulated and taken advantage throughout the process of nation building. The result is a feeling that society is indebted to blacks and should treat them as preferred citizens of this country. Arguably the best example of this is repeated calls for slavery separations - payments to current blacks for the ills of the past. And herein lies the real shame and the very reason why blacks have not moved forward much since the days of Martin Luther King Jr. 

Self-victimization undermines a sense of accountability for one's actions and ability to influence one's destiny. The perception is that society is unfair and inherently skewed to keeping black people down. The end result is predictable: if you believe the house rules are unfair, then how can you rise up through the inequality? A sense of possibility is greatly diminished and, along with that, the drive to achieve great and wonderful things in life. Furthermore, the darker side of this perception is anger towards the perceived status quo. Fighting back against the inequality would translate to lack of respect for the rule of law and, worse, acting out against the personification of it: police officers. Personally, I this is a damning sentiment and until blacks move beyond disrespecting current laws and rules in place, unfortunate incidents such as Michael Brown shootings will happen. There will be another Trayvon Martin and Michael Brown in the near future.

The greater truth is that blacks are not alone in having been manipulated and used to the building of America. Many differences races and peoples have been too, such as the Irish immigrants in the factories of the Industrial Revolution and the Native Americans whose lands were confiscated and forcibly removed from their homes. The history of sacrifice is shared amongst all Americans and cannot be claimed by a single race or people. But more importantly, the key is moving beyond the tainted past and together building a better future. Or maybe taking the best of the past as constructive lessons to impart to future generations. If one believes the law is unfair and biased, then the action would be to engage the legal mechanisms to make the appropriate amendments. This means voting for the right officials into positions of power who can enact on the changes. Not through aggression towards society at large such as attacking police officers. Life is what you make of it - making the most out of opportunities around you.

Economics of the Health Care Mandate

Looks like I've been on a different planet for the past few months (not completely untrue, as I took a vacation to China recently....). I am talking about President Obama's health care reform legislation. More specifically, how a few hours ago, the U.S. Supreme Court ruled in a 5-4 decision that the health care mandate portion of the legislation was constitutional. In other words, the much-polarized "Obamacare" can continue its due course to being enacted into federal law.

So what is this health care mandate thing? Admittedly I did not know too much about it -- nor of its existence in fact -- until this past hour. Out of sheet curiosity (and not wanting to sound ignorant), I read many articles on the topic. I still have much to learn, but can at least offer an explanation of it in both plain English and economic terms.

In short, the health care mandate is part of Obamacare that is essentially a tax on those who do not have health insurance. Rationale behind this mandate is spread the cost of healthcare insurance more fairly amongst the benefactors of the healhcare industry -- since the uninsured currently still receive the same pricing and benefits without actually paying the cost, e.g. emergency services at hospitals are required by law to treat the sick regardless of whether or not they have insurance. From an economic perspective, the mandate targets the so-called "tragedy of the commons" phenomenon allegedly present in the current system. Revenue generated from this tax would supposedly goes to a government-sponsored pool that, in theory, would contribute to lower health care costs in the long term. The money will probably end up in the coffers of the government health insurance policy that citizens can purchase -- as an alternative to the private options from the likes of UnitedHealth Care, etc. All would be right and well in the world, right?

The reality is much different, and probably why the topic has become so divisive for the public as well as for the Supreme Court justices. From a legal standpoint, the constitutionality of the mandate is questionable as it effectively forces everyone to purchase insurance or face being fined by the government. Not only are the powers of federal government being debated (e.g. whether or not this topic should be left to the states) but also in how the healthcare mandate is treated as an economic entity -- should it be considered a tax, or not? If it is indeed a tax, then there would further implications on the powers of Congress and the IRS. From a civil rights perspective, the point of contention is clear -- the mandate is another encroachment on the civil liberties available to Americans, since it deprives individuals of the right to choose to purchase health insurance. This question then derives further into the penalty itself being leveraged, as some economists have argued that the fine levered of $695 to $12,500 is insignificant in the grand scheme of things. To an individual who must pay $2,000 annually for health insurance, he or she might just pay the $695 fine and remain uninsured.

Personally, I think there are 3 implications of this development that must be noted (which currently are not):

1. Not really helping those it intends to help. The true economic burden of the mandate seems to fall on the poor, since they would be the population that would be most likely not be able to afford insurance and now must pay the fine of not having it. Adding insult to injury, they still wouldn't have insurance after paying the fine. My premise is that if the vast majority of those who can afford health insurance would elect to buy it, and therefore this tax falls on those not being able to afford it -- in other words, the poor. If you think about it for a second, who is really being helped by this mandate?
2. The Supreme Court missed out on a chance to further augment its jurisdiction. By upholding the mandate, the Supreme Court missed an opportunity to expand its powers over the legislation of this country. The issue at is hand is as much legal as economic, since the White House evoked the interstate commerce law to support the legality of this health care mandate. Furthermore, the Supreme Court could have clarified its position on how the mandate constitutes as a tax -- and in the process revising its jurisdiction on the tax laws of this country.
3. Do we really need health insurance in the first place? For all this discussion about the merits of the health care mandate as well as insurance, I think it would be wise to take a step back and reconsider on why we need health insurance anyway. Why can we not just go to the doctors and pay every time we have a medical condition? Setting aside the argument that preventative/proative steps like regular checkups is cheaper than only going to the doctors on a last-ditched effort, this "need-based" model would eliminate the bureaucracy and additional costs of the health insurance industry. Not to mention it would make health care more market-led, such that doctors can choose where and what to practice. It can be regarded as a all-or-nothing question: we can be like Canada and Great Britain where health care is compulsory, or a true libertarian society where individual choice is first and foremost the priority.

Ron Paul for President!

My disdain for Barrack Obama as our President is not something I've hidden from you readers. If it's not already obvious posts such as this or this, then you know now. He seems to be a genuinely good guy based on his personal demeanor and hobbies, but unfit to become the president of a nation. For one, he is spineless when it comes to matters of his own party -- and it often appears he does not have a clue of how to run a country. Obama's 2008 campaign moniker of "Change" has not been realized at all. Instead, we have gone backwards as the country has fallen deeper in debt and unemployment levels at decades-high. Enough of Obama. Time for a breathe of fresh air.

Into this backdrop comes, in my humble opinion, the worthiest candidate thus far declaring his intention to run for the presidency. His name is Ron Paul, a Republican state representative from Texas, who has served many terms in Congress and is well known for his libertarian beliefs. I actually supported him in 2008 -- until his defeat to John McCain in the Republican primaries. but whereas in 2008 I could only provide moral support, this time around, I intend to support him with my vote and (possibly) with campaign contribution.

So why do I like Ron Paul? There are a number of reasons:

1. Consistency. In an era where politicians flip flop on issues faster than the time it took me to type this sentence, Ron Paul is a breath of fresh air. He is part of a minority in Congress who stays true to his platform and vote accordingly. The Ron Paul you see today isn't much different from the one that first appeared 20 years ago.
2. Experience. With age comes experience, something very important in the political arena. If you are naive (e.g. Obama), then others will manipulate you or it will be difficult to build consensus. Ron Paul is old. His age may be a bit worrying, but Ronald Reagan was older when he was first elected.
3. Honesty and frankness. This one may be the biggest reason I like Ron Paul. He is a straight shooter who is not afraid to tell the truth. His frankness may not always be well taken (e.g. when he suggested that September 11 is a result of American imperialism), but we must learn to live in reality. I would like to see a president who can be honest with the country about its issues, and work to resolve them.
4. Platform/Economics. Ron Paul has demonstrated a very high level of economics understanding, particularly in the neo-classical tradition (Austrian school is neo-classical). As an economist myself, I can identify with this. More importantly, his goal would be to implement the ideals of libertarianism such as small government and privitalization. However, I think a lot of people inflate the amount of economics Ron Paul really understands -- he is a doctor too, after all. His statements about the gold standard are not 100% correct from a economic perspective. But he also has a great deal of common sense, which is definitely a good thing for running a country.

Based on what I have read in the news article comments and blogs, a lot of people share my hope for Ron Paul's election. But the snag in the path is winning the Republican primary in order to become anointed as the GOP's challenger to Obama. And herein lies the snag: in a national election between Obama against Ron Paul, the latter would win in a landslide. Yet the political structure is not designed this way -- each GOP candidate must first fight off other candidates in local elections for registered Republicans. These elections are "local" because they take place in only specific states. To make matters worse, those inclined to vote for Ron Paul are likely not registered Republicans (e.g. moderates). This means Ron Paul's chances are entirely to how his message and platform targets a niche segment of the voting population.

I am hopeful that Ron Paul can win the Republican primary. In 2008, he lost due to a lack of name recognition and ostracization by the mainstream media. The latter looks to remain --which is perplexing, as Ron Paul is for deregulation-- but more people know his name know. More importantly, there is tremendous frustration with the direction the country is headed. Obama shouldn't shoulder all the blame for this country's woes on debt and unemployment, but shoulder a considerable portion of it. Looking back at Obama's track record, I am very disappointed.

Bearish Financial Markets = Time to Jump In?

It's been a while since I have shared my (valued?) thoughts about the financial markets. The reason for this is better explained by the bearishness of the markets, rather than my lack of interest. After all, I have invested a considerable portion of my liquidity into certain companies. But I will also admit that it has been tough looking at the market movements over the past couple of months -- wild fluctuations with a generally downward spiral.

The writing of this post coincides with a visit yesterday to my bank, in order to make a deposit I received. My bank's tellers (very nice people) have been attempting to convince me to open a savings account from the day I opened my checking account 6 months ago. I haven't opened a savings account for three reasons: (1) pitiful interest rates, (2) possibility of buying a house, and (3) possibility of investing more into stocks. Now, the first reason remains and I do not think I will be taking up reason two unless something really good comes up. I have been muting on the third reason due to the inactivity of the financial market. Yet I realized moments ago that right now may be a good time to jump in.

The stock market (Dow Jones, Nastaq alike) have been acting crazy for most of the summer. And I do not mean "crazy" in a good way at all -- nor am I glad that a former prediction turned out to be correct. Reasons for its melancholic activity can be attributed first to the slow disintegration of the EU's monetary stability, and now because of the possibility the U.S. will default on its debt. Both are worrying developments with a very real probability of the worst becoming realized. The EU and its single currency system, in spite of looking good on paper, has resulted in all member states tying economic stability to one another. This means that a domino effect -- the economic downfall of one country, say, Italy-- can drag the entire EU bloc into economic hardship. For the U.S.'s debt default problem, the fear is that the current political standoff between Republicans and Democrats will not be resolved in time. Neither party is willing to suck it up for the good of the country.

So where does that put me? Well, I am unsure about how to invest the savings I've been accumulating for the past many months. The only certainty I have it that I need to find elsewhere to park it than my checking account -- which pays an even more pitiful interest rate than the savings one. Problem is, the highest interest rate I can get for a savings account is 2% -- which is at least 3% less than real inflation. This leaves the other viable alternative as jumping back into the stock market. Yet this triggers another question: where or who to invest in?

There are a few options:

1. An obvious course of action is to bolster my current positions, namely in AMD and in Ford (GE grows too slow). AMD is the more attractive option at the moment: not only did its stock price jump up almost 6% today, but the fortunes of its main rival, NVIDIA, has been faltering. (Ford Motor has actually been slowly sinking lately.) But I hesitate to strengthen my hand in AMD further due to a number of concerns. The first is that the microprocessor market may be moving away from x86 architecture in the future and into ARM architecture. I would use Microsoft's demonstration of its Windows 8 OS running on ARM as the evidence to support this; furthermore, the current disparity between processing power is not an unbridgeable gap. Another is the persistent debt-to-asset ratio of AMD -- it's still too high a number.
2. Buy Pepco Holdings. I've been eyeing this stock for almost a year now, namely because of the high dividends the company likes to pay out. It seems stable, with a steadily cashflow, and even possibility of being acquired by a bigger rival (lots of consolidation in this industry). BUT, its stock price has been holding steady, which makes it a GE-clone.
3. Buy Nokia. If you've been reading my posts on "tech news", you'd realize that I am a big fan of Nokia. I have not been thinking of owning its plummeting stock...until I read this article today. The author sounds overly optimistic, but I understand the stated optimism. The CEO sounds like a complete idiot when making statements like this though. More research is needed but, for now, it looks promising.
4. Buy Towers Watson. A very close friend of mine works for this consulting company, which was formed last year out of a merger between two competitors. It appears to be a solid company based on my friend's anecdotes and, if synergy means anything to you, I anticipate an upward movement of its stock price.

There you have it, the options have been documented. Hard part is to decide which one to take -- as I do not have the capital/audacity to try more than one. I am going to think about this for the next couple of days...

The Ultimate "Bridge to Nowhere": China's Jiaozhou Bay Bridge

Today's been a relatively quiet day at work (thus far), which means I am able to do things like read news and blog about them. One of the items I came across is the announcement that the longest sea bridge in the world has become operational. The said bridge is the Jiaozhou Bay Bridge, which connects the city of Qingdao to Huangdao District in southeast China. It spans about 26 miles (the length of a marathon) and took four years to complete.

The first that comes to mind is probably "cool!" or "wow, the Chinese can really build!". These exclamations are warranted by the immense size and scope of the project. The Jiaozhou Bay Bridge took four years to construct, employed around 10,000 construction personnel, and took about 450,000 tons of steel and 2.3 cubic meters of concrete (translated into 5,000 supporting pillars). The cost of the bridge is equally staggering -- at least in Chinese terms. At the time when the U.S. media is stirring anger at the new San Francisco bridge being built in China and then assembled in the U.S. in order to save $400 million, this bridge is estimated to have cost $1 billion to build. The estimated price of the new San Francisco Bay Bridge? $7.2 billion. Although both are enormous sums of money, one is a much greater waste than the other. Can you guess which one?

The answer will probably surprise you. I'd say the Jiaozhou Bay Bridge is a bigger waste of money than the new San Francisco Bay Bridge. While the numbers are significantly different, the former spans connects a sizable city, the latter connects a metropolis together. In addition, the San Francisco version represents the revision of an American landmark; the Jiaozhou Bay Bridge is built somewhere with much less renown. Sure, most Chinese people know Qingdao as a tourist attraction, but how many foreigners know of the place? Perhaps the bridge will bring greater renown to the city of Qingdao -- but I think the spending is mostly unwarranted.

If anything, it represents another fascination by the Chinese (spurred by the government) to break world records with their creation. There is nothing wrong with wanting to break records but, when public money is being spent, one must be reasonable and not waste. This is probably a huge waste of public money, money that could have been spent for much greater purposes like building parks and improving living standards in the region. Instead, it is spending on this colossal heap of steel and concrete that most residents will not be able to afford to travel upon (I assume tolls will be very high). A good comparison is the infamous "bridges to nowhere" that were built in remote regions like Alaska. These bridges hold very little value as an unreasonably low number of citizens have a use for it.

Well done, the city of Qingdao. You have just wasted $1 billion. Is is really worth it to "cut commute time in 1/2, from 40 minutes to 20 minutes"?

Using Children for Political Ends = Crossing the Line

I first got wind of this news from Yahoo! main page, in a video about a congressman's daughter writing a letter in support of a position he did not. It seemed funny at first. Can you imagine if you are a Republican and your children grow up to become Democrats? Some serious rebelliousness issues there. But then I read a little more thoroughly and...was appalled.

As the DailyMail reports, the congressman, state representative Mike Stone, received a batch of letters from third-grade students compelling him to raise the state budget. Among those students writing was his own 8-year old daughter. In particular, the daughter wrote "please raise the budget" and to help keep two teaching assistants. What makes this appalling is that the teacher intentionally organized the students to write on this issue, voicing such a position, for the explicit purpose of sending off to congressmen of influence. In this case, there was direct knowledge that this young girl's father was Mike Stone. Furthermore, it seems like these actions were initiated by the entire public school system.

Representative Stone declared that "as I read through this [letter], anger completely shot through me" -- a sentiment he has every reason to express. Not only is his daughter supporting a political action he objects to, she is too young to understand the issue itself. An eight-year-old girl has much better things to be concerned with than politics, like unicorns and barbies (I kid slightly). It is pretty obvious that she was just being used as a political tool by the teacher/school system for a certain end. How does this come together? The budget issue is about the current clash between the state Republicans and the Democrat governor Beverly Perdue. And as anyone knows, Democrats have the express support of the public school systems and vice versa.

There are methods to influence your representatives, but using their children to do is not one of them. Think about this for a second: do children have the right to vote? The answer is "no", which means they should not be directly contacting their government representatives either. That is the responsibility and right of their parents. Ultimately, children are children -- and not political instruments.

(One thing I just thought of is this: why would the daughter be writing to help the two TAs keep their jobs? Teacher assistants are not needed for most part, unless there are special needs. Teachers should be able to manage their own classes, without further help. If they can't, then maybe they shouldn't be teachers. TAs are largely there to reduce the workload for teacher -- akin to a student taking an exam but having outside help in doing so.)

Obama's Ratings Fall Back to Earth

A few weeks have now elapsed since the news of Osama Bin Laden's death broke out and everyone showered praise onto President Barrack Obama. Although the credit was not entirely justified, we can't say too much just as blame for the current recession was not Obama's work neither. Sometimes very significant events occur without our foresight. One simply has to take things in stride, adjust accordingly, and move forward.

Just as predicted/expected, it appears Obama's public ratings have now fallen back to pre-Bin Laden's death levels. As Yahoo News reports, his approval rating "back" to 47 percent while 49 percent disapprove of his performance. In greater detail, approval rating on the budget deficit is 33 percent (a new low) while 59 percent (a new high) is the new high for his disapproval rating on handling the economy. (All these approvals and disapprovals can be confusing, I know.) This is obviously glim news for Obama's reelection bids.

If it wasn't obvious before, I am no supporter of President Obama. He seems to be a good character, but is largely incompetent and ill-advised on important issues. I will even go as far as saying that, in spite of all the ridicule given to former President George Bush, Bush accomplished more as he was better advised. For example, what exactly has Joe Biden done? Cheney was a crook but at least he knew what he was doing. The bigger waste is always having the power to accomplish something, but not doing anything with that power. My opinion is not politically-based as I am no Republican either -- but largely derived from reviewing Obama's track record since his election.

Do I think Obama will get reelected? I do not, especially if the economy maintains its sluggishness until the end of the year. Inasmuch as the public is charmed by Obama's oratory ability and persona, we also recognize the pressing needs of our country today. Problems such as a tax system with more holes than Swiss cheese, massive government bureaucracy, soaring trade deficit, rising inflation, and rampant unemployment are no jokes. Nor can we afford to defer action on them any longer. What we need is a leader with an intricate understanding of our problems and a willingness to do what is right for the people, rather than for his (or her) political prospects. Tough decisions have to be made and implemented -- decisions that Obama has shown to be incapable of making. Examples? How about an austerity plan to tackle the country's massive deficit? Republicans have come up with a controversial plan, but at least they have a plan.

For one, we need to start making sizable cuts to the military spending. Because what is the point of having a state-of-the-art defense system when there isn't much left to defend?

CNNMoney: "We're in for a weak summer"

And I agree with the statement by a senior trader at ETX Capital, as reported by CNN Money. This summer looks very bearish for the financial markets -- even by their standard inactivity in the summertime. The past two or three weeks has seen stock markets across the world plunge; and it doesn't look like things will change for the better.

I can't say I'm happy because my stocks have been losing ground too. Although losses have not been catastrophic, they largely do not seem to have sense. For example, AMD is making a push on the its Fusion front and Ford's monthly sales are still growing worldwide. But pessimism appears to be contagious in the financial markets. Everyone is scared that the economic recovery is stagnating and might eventually dip downward. This, coupled with high oil prices, means less business activity in general.

But this opens up an opportunity for value investors. As I have written before, it's easy to profit on a bull market but much more difficult in a bear market. It's what differentiates the smart investors from the not-so-smart ones. The famous Warren Buffett once said that "It's only when the tide goes out that you learn who's been swimming naked". Along these lines, I am not sure what I will be doing in the coming months concerning my own positions. Maybe I will invest more and further diversify my portfolio.

Thoughts on Mike Brown as New Lakers Coach

[Contrary to what you may believe, I have interests outside of my job, academics, economics, and even Mandy. This post is about to show that.]

I am not a Lakers fan. Period. If I had to pick a NBA team to support, the Los Angeles Lakers would rank amongst the last teams I would pick. Why? I like to cheer for the underdog and the Lakers always seem to be the top-dog. As a fan of basketball though, I am curious about all sorts of shenanigans NBA teams, coaches, and players get themselves into. Often their decision-making skills are quite laughable (e.g. drafting Kwame Brown) and other times admirable (e.g. trading Kwame Brown for Pau Gasol). I believe the Lakers' decision to hire former Cleveland Cavaliers coach Mike Brown to be of the former sort.

The immediate reason is that Mike Brown's abilities have been grossly exaggerated during his time as the head coach of the Cavaliers. The reason? Why no other than a certain superstar named Lebron James. The impact of Lebron on the entire Cavaliers team was about as important as one player can ever become for his team. Just look at how far the Cavaliers dropped this past season -- from having the NBA's best record a year ago to one of its worst. Everyone knows that Lebron can play, but his impact should not be underestimated on the coach either. I am 100% that the Lakers would not have hired Mike Brown had Brown stayed on for another year in Cleveland, to coach the Lebron-less Cavaliers.

Based on my observations (I like to watch NBA games every now and then), Mike Brown is not as competent as analysts say in, say, his defensive schemes. Solid defense requires personnel and Brown's team had it because everyone knew their roles very well. Everyone knew that Lebron is the "man" of the team; he was someone who exceeded in his weak-side defense. As good as Lebron is good on offense, his defense is better -- the past Bulls vs Heat showed just that, when Lebron guarded Derrick Rose. Both Brown and the Cavaliers relied so much on Lebron that the team imploded when Lebron supposedly "quit on his team" during last year's playoffs. Good coaches make the necessary adjustments and learn to live without its star players (just look at the Houston Rockets). Cleveland's loss reflected on just how poorly prepared Mike Brown was.

But more than his abilities, I fault the Lakers the most for the extravagant pay package they offered to Mike Brown. $18 million total for 4 years? That is a ridiculous sum, especially since Mike Brown was unemployed last year. Brown is no Phil Jackson, but is an unproven coach now that his best player is playing elsewhere. All the high pay package does is set the bar even higher for Brown to hit which, according to my prediction, he will inevitably not hit.

Economics of Oil Prices

Yesterday afternoon, I spent a few minutes explaining the movement of oil prices to a friend of mine. Lots of gestures and real-world analogies later, I think I did a sufficient job at describing the pattern of oil prices movement. I thought it would be worthwhile to explain to all you (imaginary?) readers too.

First off, when I say "oil prices", I am not talking about the price of a barrel of oil at the commodities exchanges worldwide. That would make this blog post too obtuse -- not to mention a bit beyond my knowledge. The term "oil prices" henceforth will only refer to the prices each of us see at the gas station placards. For the past month or so, this price has been steadily increasing above the $4 price mark.

Now let's delve into the economics of explaining the movement of oil prices. To do so, we will need the standard set of economic tools: the classic supply and demand curves. [The following explanation will be a bit cumbersome as I am not able to readily draw the curves myself -- thus I need to "borrow" from other sites. Hopefully my explanations make enough sense.]

We start with the equilibrium price and quantity of oil. The demand curve is reflects the market demand curve, or the desire for oil by everyone in the economy. This ranges from individuals to airline companies, trucking companies, etc. -- the bottom line is that everyone aggregately pays the same price. On the other side are the oil suppliers. Because there are many different suppliers (e.g. Arab countries, North Sea, Alaska), they also aggregately form a supply curve.

As the graph suggests, the slopes of the demand and supply curves are characterized as negative and positive respectively. This makes intuitive sense according to the overarching economic rule of scarcity, which states that the rarer a resource, the more expensive it is. For instance, a rare good like a diamond is expensive largely because it is rare and deemed valuable. The cardinal rule of scarcity is reflected in the demand curve: when an individual only has a small amount of a good, then the price paid (in economic speak, willingness to pay) is high but this prices decreases as we move further along the demand curve. There ultimately reaches a point where an individual no longer wants a good, even when the price is zero (e.g. eating the sixth Big-Max in a row).

The inverse is true for supply -- with the key difference being that suppliers are more reactive to the market price. For instance, when the sale price is low (on the left side of the graph), few suppliers would consider it worthwhile to produce and thus there is a small quantity available. But as the sale/market prices increases, more and more firms enter the market in attempts to profit. Therefore the slope of the supply curve is positive: as the price goes up, the more goods are available on the market.

The intersection point of supply and demand curve is called the equilibrium price and quantity. Here, both "demanders" (or consumers) and suppliers reach a point where both sides are satisfied. The result is zero waste. [In economic jargon, this is where the notion of efficiency kicks in. The equilibrium point is considered Pareto Efficient.]

However, there often are changes (or shocks) to either the demand curve, the supply curve, or both simultaneously. And this is where we return to our subject of oil prices. The price of oil is inherently a supplier-driven economy, as the supply available ultimately determines if we can drive our cars, or fly our airplanes. In other words, suppliers have more control. The price of oil has increased recently due to a contraction in the supply curve (Example II below).

Recent events like the attacks on Libya and other oil-producing countries likely hampered the amount of oil that can be readily brought to the market. The quantity of oil available is reduced (from Q0 to Q1). This leads to the shifting of the supply curve to the left (aka a contraction) which, as the graph shows, results in a higher equilibrium price for the oil (P0 to P1). Gas station owners understandably do not want to bear the burden of the price increase alone, and thereby raise the gas prices charged. In all, this is why we see the higher prices at the pump.

Oil prices fall when either or both of two events happen: (1) the supply curve shifts back out as supply is restored or increased; and (2) the demand also contracts (shifts left). The latter leads to a decrease in price because the point of intersection has now become less than P1 on the previous graph. Oil prices this past week has been falling slightly -- and I believe this to be the reason.

However, the above is only a general description of oil price changes as resulted from economics. In reality, there are many more factors and things can get very complex. One example is the disproportionate effect of commodity traders who trade oil futures (e.g. what it costs you to acquire oil in 6 months time). Sometimes oil prices change not because of major supply shifts, but because of the traders speculating/betting on higher future prices. Oil prices can also go up when demand shifts outward -- a common illustration is China's growing appetite for oil.

[Disclaimer: I realized toward the end that a better term to use in place of "oil prices" could have been "gas prices". Most people understand that "gas" refers to oil, or petroleum. But I am not comfortable with this description...]

Example of Integrity: Family Finds $45,000 and Returns It

It's been a busy day so far at work, and I also haven't been able to find anything worthwhile to blog about. But I came across this article an hour ago, which I think is an awesome display of integrity.

The story is basically about a middle-class family finding $45,000 in cash hidden in the attic of their new home. They quickly concluded that the previous owner must have stowed away the money for his children, so they contacted the said children and forwarded them all their findings. This is quite an amazing feat. Just think for a minute -- what would you do if you were in their position? Use the money to buy new furniture, a new car perhaps?

I don't believe it would have been difficult for the family to rationalize their finding and end up keeping it. In the context provided by the article, this family just purchased the house and we can presume are cash-rich as otherwise. The husband, named Josh Ferrin, even admitted that he thought about spending it on things like fixing up his car or house renovations. But he reached a decision with his wife that the money should be returned, as it did not belong to them. As a father, he reasoned that the previous owner saved the money in order to pass on for his own children -- something he could identify with. It's also interesting on the previous owner did not think about revealing his stash of cash to other family members (before he passed away).

Josh Ferrin's actions absolutely deserve applause, perhaps even a standing ovation. I will not go as far as making ridiculous statements like "his actions have restored my faith in humanity" (like other commenters), but it both very commendable and model behavior for everyone to follow. His gesture is more impressive as he had already purchased the property, which made him effective owner of anything inside the house. The money was his to keep and spend. Yet he chose to give it back. Bravo!

On Strauss-Kahn's Rape Allegations

The week is still young and yet multiple scandals have broken out involving some form of womanizing. One involved the Governator (Arnold Schwhowyouspellit) and his former housemaid, with whom the former fathered a child not many years ago. His wife unsurprisingly has separated from him. This morning I watched news anchors comment on Arnold's ability to have kept the secret for so long. This is true -- how was he able to maintain secrecy for so long?

Anyway, this post is not a discussion on the Governator's woes but rather about a bigger scandal: the allegations of Dominique Strauss-Kahn, a current IMF director and a prominent candidate for French presidency, having attempted to rape a hotel worker in New York. He has since been arrested and imprisoned; the world is in shock from this news. How can such a prominent person be so stupid?

Conspiracy theorists have been hard at work in conjuring possibilities. The main theory is that this is a set-up by the incumbent French President, Nicholas Sakorzy, whose popularity is at the all-time low of his presidency. So it would make sense for Sakorzy to plant a scandal on his biggest challenger. But the fact that the alleged rape happened in New York drills an enormous hole into this theory -- chances of getting exposed are greater when outside your jurisdiction.

What about the theory that the woman is faking it to gain leverage and media exposure? As the TIME article points, Monsieur Dominique has apparently a history of sexual misconduct with women. A few of his former victims have come forward, with one even prepared to file charges in France. The odds seem stacked against Dominique.

Ultimately, I think that the guy is guilty. His history certainly does not help his case. It's just a matter of his arrogance catching up with him -- to attempt to rape a woman who could not be silenced.

Government Budget (Woes)

It's been a few weeks since I wrote a blog entry. Once again, the reasons can mostly be attributed to a laziness impacted by work and schoolwork. Doesn't make much sense...but that's my story and I am sticking to it.

Anyway, I wanted to take this time to write about the current debates involving the national budget for the current fiscal year as well as for the future. Last week's potential government shutdown was avoided by the passing of a spending bill that seemed to satisfy the Republicans' demands for spending cuts -- approximately $40 billion for the rest of the fiscal year. This seems like a staggering amount but, on closer look, the cuts are probably less than $350 million. The reason you may ask? Most of the cuts from the budget are for non-existing programs, aka programs that are supposed to be instated in the future but now never will. But of course, most people do not understand this concept and thus only see the $40 billion number.

A couple of hours ago, it was announced that the U.S. House of Representatives (currently with a Republican majority) that seeks to $4.4 trillion from the budget for the next decade. Democrats are obviously in uproar over the fact that most cuts will come from social programs like Medicare and Medicaid. Republicans are probably grinning to themselves as they just cast a lighted bomb into the President's court. President Obama has only two choices: (1) defuse the bomb through his veto power, or (2) try to work a compromise with the Republicans. This logic is assuming the implausible scenario that the budget gets approved by the U.S. Senate.

I just wanted to express a few thoughts on two topics -- the first is about how these spending cuts are quantified, a very deceptive process. The second is about the nature of government and its role in society. As someone much influenced by neoclassical economics, I believe in a smaller government and allowing the people to determine their own lives.

First about how spending is quantified:

• As in all cases, the figure thrown out seems fantastic: $4.4 trillion compares to the annual $14 trillion of U.S. GDP. However, this figure is always an accumulated figure over a period of time. In this case, the time horizon is 10 years, which means that we are looking about an average of $440 billion per year. Now this still a very high figure but...
• ...this figure is the best-case-scenario, which means $440 billion is the most one can expect to cut from the spending. The real cuts will be significantly less. Furthermore, the time horizon of 10 years masks the fact that spending cuts is an exponential function if graphed: most cuts will occur at the end of the 10-year period, rather than the beginning. This brings up another important point...
• ...the fiscal budget for the federal government must be passed from year-to-year. This means that each administration and Congress can propose new budgets for the next year, and so forth. What are the odds the future governments will stick with this current budget? Answer is: zero, nada, not even if Republicans held both the executive and legislative branches for the next 10 years.
• In sum, the real spending cuts are very much insignificant given the above points. I'd be surprised if even $50 billion is cut from next year's budget (out of the supposed $440 billion proposed cuts).

Now about the role of government in society and how this relates to the budget:

• It doesn't take a rocket scientist to see where the bulk of the cuts is coming from: social safety programs like Medicare, Medicaid, and Social Security to a lesser extent (I haven't seen the details so the last one is largely an assumption). Democrats are in uproar as well as senior citizens, since either their party platform or their livelihood is being targeted. After all, it was FDR, one of the greatest Democratic leaders, who lay the foundation for these programs.
• Democrats are also in uproar over the budget's proposal to streamline the current tax code and reduce taxes across the board. They (of course) push for the elimination of tax breaks for the wealthy. The general populace agree with them, as American corporations are making record profits and the annual list of millionaires/billionaires keeps growing.
• My opinion over the role of government is biased as a I studied economics back in college, and heavily influenced by libertarian ideas as in the writings of Milton Friedman. But I do think that social programs are not the best means to help the needy -- something I supported with a 100-page senior thesis. Social programs serve the good-intention of providing a safety net for individuals, but its mandatory nature is wrong and reduces in prodigious waste. In addition, they create a very negative disincentive for individuals to work and strive for better livelihoods. If it was a clear cut between social programs or no social programs, then I'd argue for the latter.
• But it is political suicide for any politician to push for a complete elimination of social programs, once they have been introduced. The only recourse is to reduce their scope and their impact on the country's finances -- which is actually the optimal (Pareto efficient) solution. In other words, we should have only a few social programs that are truly beneficial.
• For example, I do not understand the difference between Medicare and Medicaid (okay, I do but it seems redundant). I am all for helping out the poor and underprivileged, but creating a wholly different system to cater to their needs is not the answer. For one, it is not fair for the taxpayers who fund these systems; and for another, it creates a perverse incentive against "self-help".
• As someone who studied the negative income tax, I really believe it is the best means to resolve the social woes -- in addition to eliminating the requirement to contribute to social programs. Thus in an ideal world, I would see citizens as having the option to contribute or not to social programs (the latter of which means they would be excluded) and for government to pay out fixed income instead of an amalgam of different programs. Much like the tax code, if we create conditions, then the end-result would be many loops that people ultimately exploit.

I want to end by pointing out a monstrous thing about the budget: defense spending accounts for a good 1/3 of the government spending year-in and year-out. This is absolutely ridiculous!

Thoughts on Labor Unions

This morning during my workout, I watched a segment on CNN about how teachers in Wisconsin are calling sick in-mass as protest against the proposal to cut their wages and benefits. I was appalled that, as a consequences of their actions, many schools were closed down and students unable to attend class. (While students may be happy to be missing school, they don't really know any better...) The cause of all this points to the powerful teacher unions in Wisconsin, as well as many other states. Teacher unions are not much different from other labor unions, like the UAW and the Poster Service Workers Union. In my humble opinion, labor unions largely exist in detriment to modern society.

When someone mentions teacher unions, the example that pops into my mind is the "war" waged by former Washington D.C. schools superintendent Michelle Rhee against her union counterparts. A little background: D.C. public schools have been notorious for many years about its perverse cost-per-student to student performance ratio. Each year, the school systems spends around the same amount of money per student as in New York City but its students perform much poorer than their Big Apple counterparts. In an effort to ameliorate this problem, the former Washington D.C. mayor appointed Michelle Rhee, someone with minimal educational experience aside from a stint with Teach for America, to head reforming the district's education system.

Although she had her own flaws (e.g. overbearing personality and very confrontational with anyone), Michelle Rhee began closing under-performing schools and laying off teachers considered inept. Her ultimate goal was to greatly reduce, if not eventually eliminate teacher unions, and put all teachers on a merit-pay system rather than the common seniority system. And boy did she run into opposition. Teacher unions obviously opposed her actions with ferocity and attempted to stifle Rhee's efforts on every side: politically, financially, etc. Teacher unions also mobilized PSA (Parent Student Associations) to side with them on the matter. Rhee's slugged through the difficulties --largely resulting from her explicit backing of the former governor.

Yet in the end, her effort largely failed and both she and the governor left their positions. (She actually resigned because the governor had lost the reelection to someone else). There were marked improvements in standardized test scores and greater efficiency, but the movement fizzled out with her out of power. I saw on the news last week that the teacher union is pushing the current Washington D.C. mayor to reinstate teachers fired under Rhee, with back-pay for any time lost since their firing. That is absolutely absurd. Rhee's personal flaws aside, she must have had valid reasons to fire the teachers that she did.

I think the problem of modern day education is quality of educators rather than their quantity. I recall during high school (I attended a public high school) that there were many amazing instructors. My biology teacher actually fostered a passion of biology in me and I learned many many things from a number of others. My French teacher, who left before my senior year, actually cried when she admitted ot the class that she had been offered a better position at a nearby university. But for every great teacher, there are probably two average and two poor teachers. I recall that there were some teacher who did not care much for its students -- instead bent on teaching things they considered appropriate, or the minimum possible.

As a student for many years (even now, in graduate school), the teacher plays a pivotal role in the development of not only knowledge but also passion for knowledge. The latter is arguably more important because, only with passion will one have the curiosity to look beyond the obvious and/or beyond the bare minimum. It is the nectar what cultivates future innovation and future leaders.

In the current economic environment, with states facing record budget deficits, government spending must be cut in certain areas. Everyone has to share the financial burden if they want to see the survivability of their jobs. Unfortunately, people tend to be myopic and thus fail to see that having their way now means a bleaker future for themselves and, perhaps more importantly, their children.

Although I agree that teachers today are mostly under-compensated, I think the problem lies in the incentives system currently in place rather than public governance. The merit-pay system seems to be an extremely fair compensation scheme: compensate teachers for how their students perform first and foremost. Although the measure of student performance (e.g. standardized tests) are not the best and can definitely be improved upon, it is much better than the current system of rewarding teachers based on their years of service. This is because years of service is a wholly independent criteria (read: irrelevant) to educational standards. How are the number of years of service indicative of how well you teach? I can see a counterargument of "years of service equals experience" but I would re-counter this with the fact that experience is the antithesis of adjustments needed. Teachers who have tenure have no incentive to change their methods, even if their students are failing left and right. Change is necessary as a precursor to better introduce new and better methods of reaching out to students.

In the end, I argue that labor unions such as teacher unions are antiquated organizations. They are vestiges of a past where companies abused their workers (e.g. 19th century steel manufacturing) and the government did little to help the average Joe. But nowadays, there is a dizzying array of instruments through which anyone aggrieved can seek to address others' wrongdoing. For example, companies know better nowadays than to permit workplace harassment or employment discrimination -- because the government will punish them accordingly. Unions of today have little function than as a collective platform to push for ever-increasing wages and benefits, as well as to limit entry into their areas of profession. They function as artificial barriers of free enterprise and thus very much inefficient/wasteful. With minimal training, I think most of the currently unemployed can work the assembly line or teach in the classroom. There are a great number of intelligent, well-educated individuals eager for jobs like the ones held on union members. Why can't companies just boot out all their union members and hire new non-members instead?

As another example, unions always put their members first and will often force companies to transfer employees than to fire them. Teacher unions are notorious for moving teachers between school districts instead of allowing these teachers to be fired -- about violations of conduct. Albeit with much controversy, I will make the analogy that teacher unions are like the Catholic Church: transfer pedophile priests between churches rather than expelling them outright. The transfer only provides fresh ground for abuses...