Monday, January 28, 2008

A Financial Mini-Rant

It's been a while since I've posted a financial rant on this blog, but we seem to be cursed with "interesting times"....a few random thoughts on the economy:
  • Compared to 2001 the upcoming financial pain has to be worse. If there's any industry I'd want to be at the focus of a bubble-collapse-recession it'd be the computer industry; we're an industry with high growth and usually low unemployment; we bounced back. I think this time around, with housing hit hard it's going to be worse for more people with fewer options.
  • I think the hopes of "decoupling" (the idea that the rest of the global economy will march on, allowing the US to quickly turn around via exports to strong foreign economies) will prove to be a fantasy. Over and over when finance gets ugly, everything moves together. Perhaps it is because there are so many positive feedback cycles. Read the downfall of LTCM - the experts are always surprised by "perfect storms".
  • The stimulus package strikes me as a poor idea. We're in a jam because we've collectively borrowed and spent a lot of money we didn't have - the heart of this financial mess is about insolvency. So borrowing another $150 billion seems like a supremely poor idea. It's like our solution to maxing out our credit cards and getting a pink slip is to go apply for another credit card and immediately max that one out too. I don't know how the US will get over its debt addiction, but buying an eight-ball isn't the right approach.
  • The financial system is parallelized by fear of counter-party risk, but I don't buy that we got anything useful out of the heavily engineered products that got us here. You could make some kind of argument about greater financial efficiency, but it looks to me like Wall Street invented a series of instruments whose primary feature was to make Wall Street rich. If we can't understand how to value these things, are they really helping us manage capital more efficiently?
  • The recent bond-insurance melt-down shows a conflict of purpose to me. On one hand, insurance involves taking money now for services to be rendered later, so there's a lot to be said for your insurance company not going broke. On the other hand, if we don't let financial companies fall flat on their face when they do really stupid things, we introduce a moral hazard. The way to mediate this would have been more regulation - not letting any insurance company play with fire. (And frankly if we didn't have municipal bond insurance, the world would continue to turn. If Louisiana doesn't need bond insurance, no one does.)
Okay that's enough of that for now. I have to go hide my money under the mattress.

Monday, January 07, 2008

Bob Vila Would Not Eat Low-Carb Ice Cream

There is no experience as heart-breaking as coming home from Europe to the US and then eating. I have made this fall from food grace five times now, and it's painful every time. The five steps are:
  1. Denial. The food in the US can't really be that bad, can it?
  2. Anger. Why the hell is our entire country's food supply such a disaster. Why are there hormones in the milk? Why is their E Coli in the meat? Why doesnt' a tomato have any flavor any more? Why is it legal to sell a baked good that can go unrefrigerated for four years?*
  3. Bargaining. So you make a plan - I'll make my own bread, I'll go to whole-foods, I'll give up Doritos, anything!
  4. Depression. What's the point of eating?
  5. Acceptance. Let's go to Taco Bel..
If you haven't been to France or Italy, here's what I have experienced: food is of better quality all the way up and down the spectrum. From the sandwich you buy on the street to a restaurant meal, the ingredients are better, the preparation is better, the experience is just better.

Now if I may tangent slightly, Lori and I made a really really good pizza the other day. The dough was made from scratch (thanks to our bread-maker this is really easy), cooked on stone, with caramelized onions and fresh Mozzarella, it was just a really good pizza.

But if you buy into the latest "healthy eating" trends in the US, what we did was not healthy because it's high in carbohydrates.

So here's my rant: back in the 70s, fat was the evil food. Americans ate a ton of processed food. So the food companies did their best to remove as much fat as possible from processed food. We kept eating processed food (now jam packed with carbohydrates) and we continued to get fat.

Then the Atkins diet gets all trendy*, and the processed food companies try to remove all carbs from processed foods, we keep eating processed foods, and we keep getting fat.

Perhaps we should just stop eating processed foods?

* I had a science teacher in 7th grade who took a Twinky, injected it with water from a local pond (read: water with a heavy concentration of microorganisms) and then left it on top of the blackboard on a shelf. Several years later he took a job in another state. Before he left, he unwrapped the Twinky and cut it in half. There was absolutely no sign of organic growth.

** I know many people who have lost weight from the Atkins diet. But the trend I see is that it really really disrupts your regular eating habits. I can't help but wonder to what extent the Atkins diet causes weight loss by either (1) lowering total caloric intake or (2) eliminating "empty" foods like processed snacks.