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Leveraging Bankruptcy

Suppose I knew a publicly-traded company was going to be bankrupt in the next couple of years. What is the way to make the most money? Shorting the stock is one possibility, but leverage is limited.

I ask this because GE is going to 0 in the next couple of years and I want to make money off it. I've never shorted anything before, but GE might be the first if I can't find any other strategies.


I know that you know that I know...

I have little doubt that the Democratic Party orchestrated an effort to elicit a violent reaction from Tea Party protesters during the Obamacare vote by having Pelosi and the Black Caucus walk through the crowd in an exposed fashion. When that didn't happen, they made up a story about racial epithets that, despite the presence of cameras everywhere and a $100,000 reward, still hasn't been proven.

This was followed a few days letter by threatening voicemails to politicians of both parties. A brick was thrown through the office of a Republican. Soon after a brick was thrown through a Democrat's office. Both parties accused the other of extremism and violence. Both parties also accused the other of pretending to be the opposing party.

Now Instapundit links to crashtheteaparty.org:

Okay, so some people are trying to pretend to be racists. Or are they? Maybe it's double-reverse propaganda. Maybe it's Tea Party sympathizers pretending to be Tea Party antagonists in an effort to make the antagonists look bad. In this day and age, who can tell?


The worst advice is Mom's

Robin Hanson:

Who is the most idealistic about mating? It seems to me it is children, post-menopausal women, and young male “nerds”, i.e., with especially weak current mating prospects. These folks talk as if they hold themselves and others to the highest standards of ideal love, while happening to speak when they have an especially low chance of fertile sex.

This jibes with my experience as well. Some of the most idealistic, naive--and hence, worst--advice ever given to men about "mating" is doled out by their mothers.

But why should the desire for sexy sons only matter when conceiving them, not when it's their turn to sire?


I steal comments

At Econlog, rajeev writes:

I think the question about heritability is a red herring. I am a software engineer in India. In 1991, the Indian economy opened up to the wider world. By the mid-1990s, the Internet had become a major force in commerce. By the late 1990s, there we were, "outsourcing" away like crazy. I was an ignorant young man (as all young men are) and made my career choices for entirely unrelated reasons. Smarter, better people than me went off in other directions, and today earn much less than I do.

Think of Sergey Brin, born in the Soviet Union. If his father had fallen under a tram before they could emigrate, how different all our lives would have been.

Think of the pudgy, nerdy boy (like the one I used to be), who today can expect to inherit the world and whose counterpart, barely 500 years ago, would have been the butt of everybody's jokes all his life. The muscular workmen and fierce warriors of the day would have despised the clumsy, uncoordinated fumbling of the men like us. Well into the early/mid 20th century, we were an underclass of sorts.

The world is a large, highly distributed computation(an order, you say?), and it is childish to whine about what we deserve or do not deserve. We "deserve" nothing but are given everything.

At Sailer, ililioioikikd writes:

I thinketh Sailer underappreciates Americans Foster and Joplin. Maybe their music was 'less august' but it would serve as the basis of the dominant music of the 20th century. Even classical music had humble beginnings in church music and folk melodies. For there to be Beethovens, Berliozes, Wagners, and etc, there had to have been a rich folk tradition in Europe.

Most of the high-minded or 'serious' musical culture in America in the 19th century slavishly looked to and copied Europe and produced little of lasting value. When Dvorak came to America and was amazed by INDIGENOUS American musical traditions, few 'serious' Americans took him seriously--just as it took awhile for Poe and Twain to be taken seriously by Americans. Yet, Dvorak really saw the future as the indigenous folk traditions of American music--negro, hillbilly, folk, etc--would serve as the basis of the worldwide dominant music of the next century. Jazz grew to new heights of sophistication. Country and blues fused to create Rock music. So, Foster and Joplin were geniuses in their own way. In a way, their genius was all the more amazing because they had limited access to musical training. One could say Joplin achieved more in his 'cultural poverty' than many conservatory-trained musicians of 'august' backgrounds. A genius isn't only proficient; he is original. Joplin was that.


Spitting Audio

This is awesome.


Hypothetical about tax revenues

You are the Tax Czar for life of a typical Western democracy. Pick a year far into the future, say 2025. Your goal is to maximize tax revenues in 2025.

What policies would you enact today to achieve that goal?


Samuelson on Obama's budget

The mainstream media is picking up on the dangerousness of the debt situation. Robert Samuelson in WaPo:

When historians recount the momentous events of recent weeks, they will note a curious coincidence. On March 15, Moody's Investors Service -- the bond rating agency -- published a paper warning that the exploding U.S. government debt could cause a downgrade of Treasury bonds. Just six days later, the House of Representatives passed President Obama's health-care legislation costing $900 billion or so over a decade and worsening an already-bleak budget outlook.

Should the United States someday suffer a budget crisis, it will be hard not to conclude that Obama and his allies sowed the seeds, because they ignored conspicuous warnings. A further irony will not escape historians. For two years, Obama and members of Congress have angrily blamed the shortsightedness and selfishness of bankers and rating agencies for causing the recent financial crisis. The president and his supporters, historians will note, were equally shortsighted and self-centered -- though their quest was for political glory, not financial gain.

Let's be clear. A "budget crisis" is not some minor accounting exercise. It's a wrenching political, social and economic upheaval. Large deficits and rising debt -- the accumulation of past deficits -- spook investors, leading to higher interest rates on government loans. The higher rates expand the budget deficit and further unnerve investors. To reverse this calamitous cycle, the government has to cut spending deeply or raise taxes sharply. Lower spending and higher taxes in turn depress the economy and lead to higher unemployment. Not pretty.


Whoa whoa whoa! Who let the crazy old dude in here?!?!

One of my favorite social phenomena is when an individual says something that goes completely against the beliefs of everyone surrounding him, and says it with gusto, not caring what anyone else thinks. After Randy, Ellen, and Kara have praised the performance of an American Idol contestant, Simon Cowell will say, "That was utterly ghastly" in a British accent, as boos from the crowd rain in. But he doesn't care.

Watch this clip in which Marc Faber drops a bomb about halfway through. The reaction from everyone else is as if he stood up, turned around, and dropped his pants.

This is the kind of contrarian strength that, IMO, is vital for successful investing. Watch also how at the end of the clip the CNBC interviewer tries to insult Faber's "doom and gloom". Had he done the slightest bit of research, he'd have known how successful Faber has been. I can only see one really bad trade among many more amazing calls in his 2008 and 2009 picks.   Another interview with Faber on the same topic:

Why have I lately been obsessing about a USG default? Because smart people--contrarians with a track record--like Marc Faber believe it's going to happen. I see the numbers detailing the liabilities and I can't see a way out. People usually conclude, "Taxes will have to rise," but I think they underrate how mobile capital and labor are in this modern era, and how diminished the returns on increased tax rates will be. Additionally, tax hikes are politically unpopular, and spending cuts are disincentivized in a political market.

Just raise the age for Social Security benefits! Even if that was politically possible, that would only make a small dent in the unfunded liabilities.

The dynamic I see is a "point of no return" beyond which it is simply impossible to stop the trainwreck. If we had a benign dictator with absolute power, he might be able to cure our ills, but we live in a democracy, and there are too many factions to make a coherent plan. Obamacare was, IMO, the point of no return, though most likely, it will only accelerate what was already fated.

I don't think raising taxes will be effective (though I'm open to opposing thoughts). Hyperinflation could monetize the debt but I don't think that will change the fundamental dynamic of Western democracies; it will merely enable more entitlements and delay the crash into the future.


Quote of the Day

This echoes my own evolution. I started out highly skeptical about it, but I have come around to where I think of the tea party movement as the last best hope for America. If they fail to elect a Congress and a President who truly are committed to shrinking deficits and shrinking the government, then those of us with a libertarian bent will be reduced to dreaming about seasteads or somesuch.

--Arnold Kling

As a member of TSI, I don't know how exactly to take that, haha.


Breitbart offers $10,000 for proof of N-word

Andrew Breitbart:

Saturday’s “never mind” moment will live in infamy as the Congressional Black Caucus claimed the N-word was hurled 15 times. YouTube video shows that at least two of the men in the procession were carrying video cameras and holding them above the crowd. They have not come forth with evidence to show that even one person hurled the vile racist epithet. The video also shows no head movement one way or another. Wouldn’t the N-word provoke a head turn or two? Is it really possible that in 2010, in a crowd of 30 or 40 thousand people — at the center of a once-in-a-lifetime media circus — not one person’s flipphone, Blackberry, video recorder or a network feed caught a single incident? And if not, then at least someone could have found an honest tea partier to act as an eyewitness — or the Congressional Black Caucus would have confronted the culprit(s). If that had happened, there would be an investigation to see if the perpetrator was a left-wing plant.

...

That’s how much the Democrats need a racist Tea Party moment. To stop it in its tracks. That’s why on Saturday they used the Congressional Black Caucus to try to manufacture the false appearance of one. And when they didn’t get it, they did what they always do: they lied.

...

If we let them get away with Saturday’s stunt — using the imagery of the Civil Rights era and hurtful lies to cast aspersions upon the tea party whole — then they really will have won the day.

It’s time for the allegedly pristine character of Rep. John Lewis to put up or shut up. Therefore, I am offering $10,000 of my own money to provide hard evidence that the N- word was hurled at him not 15 times, as his colleague reported, but just once. Surely one of those two cameras wielded by members of his entourage will prove his point.

And surely if those cameras did not capture such abhorrence, then someone from the mainstream media — those who printed and broadcast his assertions without any reasonable questioning or investigation — must themselves surely have it on camera. Of course we already know they don’t. If they did, you’d have seen it by now.

THOUSANDS OF TIMES.

How badly does the mainstream media need America to be racist? And if they have to pull stunts like this to create racism, what does that say about actual racism?


A slow bloodletting or a quick beheading?

A comment at Hit and Run caught my eye:

If your country is going to collapse and you are 36 years old, would you rather see it collapse over a the course of 60 years or 3 years?

Many of us here have ideas how thigns could be fixed if we were given the power to do whatever we wanted as libertarian super president or if we had a magical brainwash cleansing program to convert 180 million Americans into bonafide Libertian experts overnight...but both of these scenarios are unrealistic.

This country is filled with idiots and led by idiots/evil jerks. Socialism is popular and fascism(public/private partnerships and such) are seen as wholesome goodness. The country is totally fucked. We need more bad legislation as fast as possible...I'd like to be living in a country on the other side of hell by the time I turn 40. You fuckers trying to string this shit out are idiots.

I'm young enough (34) that I'd rather deal with a lot of short term pain if there's some hope for sanity afterwards. A government default would be painful for many, but I'd prefer that to spending the rest of my life in a European-style social democracy.

People have experienced the pain of losing jobs, losing money in an Enron, etc, but have never felt the pain of the government saying, "Sorry, we can't pay you Entitlement X". That will be a harsh, much needed lesson.


Self-Sabotage

Richard Friedman in the NY Times:

“You could say I’ve been unlucky in love,” a young man told me during a recent consultation.

He went on to describe a series of failed romantic relationships, all united by a single theme: he had been mistreated by unsympathetic women who cheated on him.

This was not his only area of disappointment, though. At work, he had just been passed over for a promotion; it went to a colleague whom he viewed as inferior.

I asked him about his work as a computer scientist and discovered that he worked long hours and relished challenging problems. But he also did some curious things to undermine himself. Once, for example, he “forgot” about an important presentation and arrived 30 minutes late, apologizing profusely.

What was striking about this intelligent and articulate young man was his view that he was a hapless victim of bad luck, in the guise of unfaithful women and a capricious boss; there was no sense that he might have had a hand in his own misfortune.

I decided to push him. “Do you ever wonder why so many disappointing things happen to you?” I asked. “Is it just chance, or might you have something to do with it?”

His reply was a resentful question: “You think it’s all my fault, don’t you?”

Now I got it. He was about to turn our first meeting into yet another encounter in which he was mistreated. It seemed he rarely missed an opportunity to feel wronged.

Of all human psychology, self-defeating behavior is among the most puzzling and hard to change. After all, everyone assumes that people hanker after happiness and pleasure. Have you ever heard of a self-help book on being miserable?

So what explains those men and women who repeatedly pursue a path that leads to pain and disappointment? Perhaps there is a hidden psychological reward.

I got a glimpse of it once from another patient, a woman in her early 60s who complained about her ungrateful children and neglectful friends. As she spoke, it was clear she felt that all the major figures in her life had done her wrong. In fact, her status as an injured party afforded her a psychological advantage: she felt morally superior to everyone she felt had mistreated her. This was a role she had no intention of giving up.

As she left my office, she smiled and said, “I don’t expect that you’ll be able to help me.” She was already setting up her next failure: her treatment.

One theory mentioned above is that self-sabotage allows one to feel superior. My experience with many low self-esteem individuals who self-sabotage is that they simply don't believe they deserve the good things in life. I have no good explanation of why such a character trait might exist.


Civil Disobedience to Obamacare

Shikha Dalmia:

It is hardly surprising then that Americans are feeling a growing panic as they watch their constitutional republic descend into a banana republic. President Obama is fond of quoting Mahatma Gandhi's line that "we should be the change we want to see." But Gandhi also said that "civil disobedience becomes a sacred duty when the state has become lawless and corrupt." Americans instinctively understand this which is why pockets of resistance to ObamaCare are already emerging. The question is only whether they can be constructively harnessed into a grassroots, Gandhi-style civil disobedience movement powerful enough to undo this monstrosity.


He allowed saliva to hit my face

Video of the alleged "spitting" incident:

How Cleaver describes it:

But wait: when Rep. Emanuel Cleaver describes to Milloy being “spat” on, it sounds not like an intentional loogie, but like overenthusiastic yelling. He described it to Milloy as a man “who allowed saliva to hit my face,” which sounds unintentional, if not well-mannered.

Yet, every major news outlet simply ran with the story and tied it to the civil rights struggle and portrayed the protesters as the KKK. Simply shameful.

via Instapundit


Bold Prediction

Kevin Williamson:

Our budget deficit is currently about 10 percent of GDP and going higher. Greece’s is 12.7 percent of GDP — significantly higher, sure, but not outrageously so. At the end of fiscal 2009, U.S. federal government debt equaled 83 percent of GDP, 53 percent of which is held by the public. (Another 30 percent is “intra-government” debt, meaning money owed to the mythical Social Security trust fund and the like. The usual approach is to talk only about publicly held debt and to pretend that the rest does not represent real obligations, which is malarkey.) But even that does not tell the whole story: Official government debt figures do not account for the Fannie Mae and Freddie Mac obligations taken on by the government, and those amount to $5 trillion, i.e. more than all 2009 federal spending. They also don’t count remaining liabilities related to the Wall Street bailout.

So here’s a prediction for you: Obamacare is not going to happen, regardless of the fact that the president is going to sign it into law today, regardless of what happens in the 2010 and 2012 elections, and regardless of any speech given anywhere in Washington. The government’s ability to simply say “Make it so!” and ignore economic reality is coming up against its limit. If Nancy Pelosi thinks the Republicans are obstructionists, wait until she wants to borrow money from people who don’t want to lend it to her and don’t have to run for reelection.

What are the chances that he's correct?