Monday, October 3, 2011

I got published in the Leeds Student

American Jobs, Hopefully

They even made a cartoon just for the article!

Sunday, September 18, 2011


Exactly in line with popular belief, it rains a lot in England. Two days ago I had to run 15 minutes through a total downpour. The strange thing, though, is how long things take to dry in England. My shoes are still wet. Does water have a higher boiling point in England? Is that why it rains so much?

My hall, or "flat," has six rooms on it that share a kitchen. So far, four of the rooms have been taken by Americans, and we were hoping British people would move into the other two. No such luck. Yesterday a girl from Ohio suddenly appeared in one of the rooms.

Why would they quarantine the Americans like this? It's not like we're Burmese or Estonian, some rare people who don't speak English and desperately need a home base of ethnic homogeneity. We are freaking Americans. Can we not live abroad unless we have someone within ten feet who knows about college football? I'm kind of annoyed. Getting invited to parties is going to be harder.

Friday, September 16, 2011


In the UK, some coins are worth an entire Five Hour Energy Drink. This is a big change. Whenever I go up to buy something, it takes me so long to sort out my change that the counter person usually just does it for me. I am thinking of acquiring some accent more exotic than an American accent to make people more sympathetic to my problem.

Most students here are undergrads. I had never anticipated how strange it would be to walk through life surrounded by people too young to have seen Pete and Pete. The other day, I met a group of british guys in the bathroom of a bar, and they invited me to their table to drink. The medley of hot girls at the table were uncharacteristically interested in me. When me and the main dude went to get beers, we had the following conversation:

British Bro: "Is the drinking age in the states still 21?"
Me: "Yeah, why?"
BB: "Well it must be exciting here to be able to drink right?"
Me: "I'm about to turn 25. How old are you?"
BB: "I'm 18. Don't worry though. Age is just in your mind once you get to uni."

It's pretty cute that he tried to console me, assuming I must be really tired and defeated after enduring an entire quarter century on the earth.

Wednesday, September 14, 2011

Leeds Arrival

Today was my first day in the UK. I have this urge to ask any random british person literally any question about where things are, as if they're all employees at a big theme park.

I've been placed in a flat with three other Americans doing one-year masters programs. This is a setback. I pictured being invited to kick a soccer ball around by british flatmates. I just have to keep a stiff upper lip, as the british say. The flat across the hall is an all Chinese girls flat. This is not a setback.

Tonight I am going to a session where you learn British pub etiquette--an event that will combine manners, condescension, and pubs for a triple play of British stereotypes.

It's cool that I can speak the language here, but it's kind of like listening to fighter pilots speak. They're saying english words, but I can't actually understand what they mean. Like today at the store the only types of pillowcases were called "housewife pillowcases." It was a variety, not a brand name. But why would a housewife's pillowcases be different than those of a high-powered executive mother of three--in short, a woman who has it all?

The streets in Leeds do not have street signs on them. Day one at the institute for transport studies I am going to try to clear this up.

My body literally has no idea what time it is. I have slept in three 2 hour bursts over the last 24 hours. I took melatonin on the plane at what would be bedtime in leeds last night, to get my body adjusted, but then "King's Speech" came on.

The airline clearly arranged the movies to give us Americans an inferiority complex. Why else would they follow "Something Borrowed" with "King's Speech"?

Saturday, June 25, 2011

Tropical Lagoon

Freelancing day 6: Today I changed my desktop background to a picture of a tropical lagoon. My worries melted away.

Thursday, May 26, 2011

Sympathy for the Savers

Bloomberg news reports: "Savers May Be Hobbled for 15 Years: Gross"

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said investors may be at a disadvantage for as long as 15 years as the U.S. keeps borrowing rates low to reduce its debt burden.

“Savers are being disadvantaged” when compared with debtors, Gross said during an interview on Bloomberg Television’s “Surveillance Midday” with Tom Keene. “What policy makers are trying to do is rebalance this imbalance, in terms of too much debt and too attractive rates on savings. It’s basically called financial repression. We call it pocket picking.”

First, "investors" are not disadvantaged, as claimed in the first line. You can invest in stocks, bonds, commodities, currencies, etc. Gross means people cannot earn money simply by parking their money in a liquid, risk-free asset. You can still earn plenty of money by doing a good job at investing. Nothing entitles you to earn money by doing absolutely nothing other than having money.

If the real rate of return on money is low, that means many people want to hold safe, liquid assets. It's supply and demand. Saving might be a virtue, and you might feel entitled to a reward for delaying gratification. But the price system still holds and your virtue will be no more highly rewarded than will the industriousness of an unskilled Chinese laborer in a country full of industrious unskilled laborers.

Households have lost real estate value, which many people perceived as risk-free. Now they want to rebuild their supply of safe assets. Since many people want to buy safe assets, their price rises and their yield falls.

The Fed is not doing anything extraordinary to keep real returns low. If the Fed were acting extraordinarily, then nominal GDP would not be growing at a 3.9% rate, as disclosed today. Nominal GDP grew at a 5% rate for most of recent history.

Wednesday, May 25, 2011

Brett Arends Is Wrong

It hurts my heart when I see people misleading amateur investors. So I'm going to write take-downs of bad columnists.

Last week award-winning finance columnist Brett Arends published an editorial on MarketWatch full of wrong assertions and contradictions about QE2. Here I'll call them out:

"[QE2] cost $600 billion of your money."

Actually QE2 didn't "cost" money. The Fed traded $600 billion of one financial asset for $600 billion of another financial asset. This could cost something if the transactions were still conducted on paper, since in that case you'd have to buy the paper. Fortunately they're on computers.

One day someone takes $100,000 out of a CD and buys $100,000 in savings bonds. Does he need to cut expenses, since the savings bonds "cost" $100,000? No, because now he has $100,000 in savings bonds. Savings are unchanged.

Later in the column he gives a shout-out to Austrians who advocate a gold standard. But even in a gold standard the monetary authorities have to purchase gold half the time to keep its value from falling. To my knowledge, no advocates of a gold standard would say this half of their policy "costs" anything.

"According to the U.S. Labor Department, since last August the number of full-time workers has gone up by just 700,000, from 111.8 million to 112.5 million.At a cost of $600 billion, that’s $850,000 a job."

Last August is when I moved into my new apartment in Shadyside. That's 700,000 jobs per apartment that I rent. Of course, you might say you can't draw one-to-one effects between any two things that happen simultaneously.

Imagine that instead of buying the assets over a number of months, the Fed bought assets over the course of 50 years and called it QE2. Over the next 50 years, the number of jobs will definitely increase by tens of millions. Obviously, by spacing out its purchases over 50 years, the Fed would make QE2 impotent. According to Brett Arends, though, it would make more jobs attributable to QE2, since more jobs would be created during the time QE2 was going on.

"Meanwhile QE2 has created an entirely artificial bubble in all dollar-based assets."

This is a fine claim to make. But Arends follows his claims with reasons the "bubble" is not, in fact, artificial.

"What’s really happened is a decline in the value of the dollars that the shares [of the stocks on the S&P 500] are measured in."

If the dollar is actually devalued, that is evidence against a bubble. If dollars are worse less--or are going to be worse less--then higher share prices are rational. Just like it was rational that, after Argentina devalued its currency against the dollar, tradable products in Argentina started to cost more pesos.

A bubble is when an asset price will predictably fall. So to say shares are in a bubble is to say that the dollar is down temporarily but it's right about to gain lots of value.

But I don't think Arends believes the dollar is about to gain lots of value. He just hasn't thought about his assertions. He's just saying "bubble" and "devalued" dollar together because they're both negative things you could say about QE2.

"Measured in hard currencies, the stock market boom has been much less impressive. In Swiss francs, the S&P has risen by just 8.4% since Aug. 27. In currencies like the Swedish krone and Australian dollars it’s even less. Measured in gold, the S&P 500 is up just 4.5%."

First, gold is not a currency. Show me a menu with prices in gold.

Second, there are many currencies in the world, and they go up and down every day. At any time, you can measure a price against one of the currencies that has risen and claim the rise is actually, deep down, invisibly unjustified. Have you ever heard someone say "That house seems expensive, but what's it worth in Swedish krones?" If so, then you have been to Sweden.

Third, is devaluation a result of QE2 or the continuation of a trend driven by real factors? Here is the USD vs. the Australian dollar over a ten year period.

FRED Graph

Australia is a country with tons of natural resources and few people. In a world with growing population and a growing number of machines that require natural resources, demand for things in Australia will rise. The Australian central bank will either let prices rise in Australia, or it will let the Australian dollar rise.

"Meanwhile the illusion of a boom is causing all sorts of investors to take crazy risks. Witness LinkedIn’s IPO."

If LinkedIn's share price is so certifiably inflated that it can be used as a piece of evidence in another argument, then Arends should write a column telling everyone to sell LinkedIn. You can make a fortune if you know for a fact that a share price will fall. Look at John Paulson.

More importantly, there is no logical link between investor's appetite for particular stocks and the Fed's policies. QE2 should raise share prices on average, because it will raise expectations of future nominal spending and hence corporate profits. But Arends denies share prices are really up on average. And more importantly, the potential "bubble" aspect of LinkedIn's share prices exists in investors' perception of its future profits relative to the profit growth of all other companies.

Why QE2 would suddenly make investors turn "crazy" is unclear. If there is a reliable, provable link between fed policy and the ability of professional investors to pick stocks, then Arends could win the Nobel Memorial Prize in Economics for making the link indisputable.

You get the picture. Arends is wrong/illogical.