New York’s most fascinating park, The High Line, is set for a grand expansion. Fast Company has some drawings, along with a video simulation of what the new section of the park will look like:
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Video after the jump
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Last weekend, we discussed issues of Wall Street compensation and liability in placing a natural limit to excessive risk-taking: Delay Pay? Try Partnership Liability.
This week, Floyd Norris received an email from a retired investment banker regarding what Wall Street compensation used to look like, and why that curtailed excessive behavior, and private gains, socialized losses:
“The old pay system (era of John Whitehead): you work at an investment bank for 30 years, have a reasonable draw and cash bonus, build up stock in the firm as most of your bonus, and when you decide to retire you request of the partners their permission to go limited. If they assent, you get to withdraw your money over five years, all the while continuing to expose the balance to the risks of the enterprise.
The new pay system post-Donald Lufkin Jenrette’s original I.P.O.: you’re a young 29-year-old punk playing with OPM (Other People’s Money), taking huge risks for which you get huge bonuses, while the outsiders shoulder the losses on your bets. You make all the money you’ll ever need in three years, stay around 15 years to pile up five times as much as you need, and then you retire with your cash hoard, buy a winery in Napa/Sonoma or a huge farm in Connecticut, living above the fray for the rest of your life.
Which system, do you think, makes people consider the downside of their actions?”
Note once again the impact of partnership liability — a negative incentive towards speculation — on banker behavior.
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Source:
Old Wall Street Discusses the New
Floyd Norris
Notions on High and Low Finance June 21, 2010
http://norris.blogs.nytimes.com/2010/06/21/old-wall-street-discusses-the-new/
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AntennaSys, which specializes in “antenna design, integration and consulting” has the single best explanation of how cell phone antennas have evolved. It also is the best description of how this has impacted the iPhone 4.0 antennae issues — PC Mag, Gizmodo, Engadget — we have seen to date:
“The FCC puts strict limits on the amount of energy from a handheld device that may be absorbed by the body. We call this Specific Absorbtion Rate, or SAR. In the olden days, when I walked ten miles to school in three feet of snow, uphill in both directions, cell phones had pull-up antennas. This allowed the designer to use a half-wave antenna variant, and put the point of maximum radiation somewhat away from the user’s cranium. Of course, most people did not think it was necessary and kept the antenna stowed. Motorola’s flip phone acutally had a second helical antenna that was switched into place when this was the case. But, more importantly, SAR rules were not yet in effect.
Flip phones became yesterday’s style, and phones were becoming more monolithic. Some phones, like the early Treo, kept the antenna in the traditional location at the top of the phone, near one edge, but reduced it to a short stub. Whips became stubs, stubs became bumps, and finally antennas were embedded into the rectangular volume of the phone. The trouble was SAR; if you left the antenna at the top, the user was now pressing it into their head, insuring lots of tissue heating. Enter the bottom-located cellphone antenna.
Just about every cell phone in current production has the antenna located at the bottom. This insures that the radiating portion of the antenna is furthest from the head. Apple was not the first to locate the antenna on the bottom, and certainly won’t be the last. The problem is that humans have their hands below their ears, so the most natural position for the hand is covering the antenna. This can’t be a good design decision, can it? How can we be stuck with this conundrum? It’s the FCC’s fault.”
The rest is just as informative . . .
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Source:
Apple iPhone 4 Antennas…
AntennaSys, JUNE 24, 2010 3:50PM
http://www.antennasys.com/antennasys-blog/2010/6/24/apple-iphone-4-antennas.html
Professor Philip Zimbardo conveys how our individual perspectives of time affect our work, health and well-being. Time influences who we are as a person, how we view relationships and how we act in the world.
“States are going to have to cut back spending and raise taxes the same way Greece and Spain are. That runs counter to stimulating the economy and will put a big damper on the recovery in the latter half of this year.”
-Dean Baker, co- director of the Center for Economic and Policy Research in Washington.
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Interesting discussion at Bloomberg.com about the coming budget crunches in US states and cities:
Even as the U.S. appears to be on the mend — gross domestic product has climbed three straight quarters — finances in Arizona, Illinois, New Jersey, New York and other states show few signs of improvement. Forty-six states face budget shortfalls that add up to $112 billion for the fiscal year ending next June, according to the Center on Budget and Policy Priorities, a Washington research institution. State spending is 12 percent of U.S. GDP . . .
State budget woes are a worsening drag on growth as the federal government tries to wean the economy from two years of extraordinary support. By Jan. 1, funds from the $787 billion federal stimulus bill will dry up. That money from Washington has helped cushion state budgets as tax revenue has plunged.
State leaders won’t be able to ride out this cycle the way they have in the past. The budget holes are too large. For the first time since 1962, sales and income tax revenue fell for five straight quarters, through December 2009, according to the Nelson A. Rockefeller Institute of Government at the State University of New York at Albany.
That is an ugly statistic. And I agree with Gluskin Sheff’s David Rosenberg — massive budget cuts and tax hikes will only make the situation worse, not better. The time to raise taxes and cut spending is during an expansion, not immediately post-contraction.
As I have noted previously, we — governments and individuals — are better off when they spend counter-cyclically . . .
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Source:
States of Crisis for 46 Governments Facing Greek-Style Deficits
Edward Robinson
Bloomberg, June 25 2010
http://noir.bloomberg.com/apps/news?pid=20601109&sid=atxrhPqbty_4&
See also:
Ben Bernanke needs fresh monetary blitz as US recovery falters
Ambrose Evans-Pritchard
Telegraph 9:44PM BST 24 Jun 2010
http://www.telegraph.co.uk/finance/economics/7852945/Ben-Bernanke-needs-fresh-monetary-blitz-as-US-recovery-falters.html
FDIC Chairman Sheila Bair talks to WSJ economics editor David Wessel about the financial-regulatory legislation pending in Congress, the current health of the banking business and what it’s like to be the sole woman among a band of powerful men.
8 minute mark: “Wall Street got bailed out, Main St did not.”
18:50 minutes
6/25/2010 9:36:23 AM
The Risk of Recession
June 25, 2010
By John Mauldin
We are halfway through the year (where did the time go?) and it is time to make some predictions about the last half of the year. This week we look at what the leading indicators are telling us, size up a new indicator, drop in on banking data, and do a whole lot more.
Quickly, I will be on Larry Kudlow’s show next Tuesday, which is at 7 pm Eastern. Larry has promised that we will spend some quality time on some of the current issues facing us. See you there! And now, let’s jump in.
I am on record as saying I think there is a 50-50 chance we slip back into recession in 2011, as I think the economy will soften in the latter half of the year and a large tax increase in 2011 (from the expiring Bush tax cuts) will tip us into recession.
This was not based on data, but rather on research which shows that tax cuts or tax increases have as much as a 3-times multiplier effect on the economy. If you cut taxes by 1% of GDP then you get as much as a 3% boost in the economy. The reverse is true for tax increases. Christina Romer, Obama’s head of the Council of Economic Advisors, did the research along with her husband, so this is not a Republican conclusion.
If the economy is growing at less than 2% by the end of the year, then a tax increase of more than 1% of GDP could and probably would be the tipping point. Add in an almost equal amount of state and local tax increases (and spending cuts) and you have the recipe for a full-blown recession – at least the way I see it.
I was asked at my recent speech in Milan, what sorts of things could make me wrong? There are a few. First, it could be that tax increases and cuts don’t matter. Some very smart people (like Paul McCulley) feel that tax increases on the wealthy don’t really figure into Romer’s analysis.
Or maybe bank lending starts to pick up and the economy is actually growing at 3-4% by the end of the year – although the chart below suggests that bank lending is still in freefall. Notice that if this trend continues just a little while longer, bank lending will have fallen by 25% in about two years. This is a truly scary chart. It is unprecedented in modern history. Also notice that after the 2001 recession bank lending continued to fall for over two and a half years.
Or perhaps Congress decides to extend the Bush tax cuts or phases in the increase over time. That would be better and maybe not push us into recession. Maybe they vote for more stimulus, although that does not look likely. If Congress cannot extend unemployment benefits, as happened this week, then other stimulus is unlikely.
The uber-Keynesians that are in control of our economic policy clearly do not think that large tax increases matter, or if they do think so they are not speaking out about them. They are conducting an experiment on our economic body without benefit of anesthesia. Here’s a prediction about which I can feel confident: if we do slip back into recession, they will blame some factor other than the tax increase and call for massive stimulus. In fact, they will probably say that the lack of stimulus was the problem in the first place. Paul Krugman will be the head cheerleader.
(For a quick, fun, and instructive read, go to Joshua Brown’s web site [The Reformed Broker] and read about the Econ Gangs of New York, where Joshua describes the various groupings of economic thinkers. Seems I am in the gang led by my friend Mohamed El-Erian, the New Normalers. Krugman, of course, is the leader of the New Jack Keynesians, a most vicious and pernicious gang, in my opinion. http://www.thereformedbroker.com/2010/06/24/econ-gangs-of-new-york/)
I
cannot help but be struck by one thing in this reform bill:
If it were law since the year 2000, the only part of it that might have prevented, or at least slowed down the crisis, was the new minimum underwriting standards for mortgages. No more “No Doc, NINJA, or Liar loans.” That Lenders must verify income, credit history and job status certainly would have prevented the worst vintages of sub-prime and exotic mortgages from ever being written, or subsequently securitized.
Other than that, there is not a single element of the reform that would have prevented the last crisis. I strongly doubt that anything else in this reform package is going to prevent the next one, either.
"I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." -Thomas Jefferson (letter to John Taylor in 1816)
After 3 quarters in a row that averaged just 1.2%, Q4 GDP grew 2.8%, a touch below expectations of 3.0% BUT Nominal GDP grew well below forecasts. Because the price deflator was up just .4% vs the estimate of 1.9%, Nominal GDP was up 3.2% vs the estimate of 4.9%. Personal Consumption rose 2.0% vs the forecast of 2.4%. Fixed Investment rose 3.3% helped by a 5.2% increase in equipment and software spending and residential construction rose by 10.9%. Trade was a slight drag on GDP growth and government spending was as well led by a 12.5% decline on national...
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