watsa_is_a_randian_hero

Thank you - very good article.

I couldn't agree more. Sports stadiums a public necessity? A public good? This is the one of the worst uses of public funds. It is reverse wealth redistribution. Society bears the cost; owners and players (already wealthy) bear the rewards.

How about a $5000 (refundable) tax credit for every citizen? This isn't exactly dropping $ out of a helicopter as Ben originally spoke about, but it is essentially the same thing. Yet it would accomplish the same thing. Yes, some of this money will end up in banks or paying down debt, and so have no effect. However, at some point, $ will be spent. If $5000 is to small, how about a $1,000,000 refundable tax credit for every citizen. All of a sudden, a huge amount of inflation will occur. There is some level at which policy can inflate. These guys are not helpless.

I'm originally from Cleveland, but I totally agree with you. My friends from Cleveland, and Dan Gilbert have done an awful lot of trash talking lately. However, the bottom line is, James had a contract with Cleveland. He fulfilled his contract. Its his choice to go where he wants. He owes Cleveland and its fans nothing. He is not a coward for wanting to leave a team, after trying for 7 years with an organization to win a title, and failing. James put it best at his first Heat conference. He said something about Kobe being 6 for 24 (i think thats what he said) from the field in lakers game 7, and the lakers still won. If Bosh, Wade, or him put up numbers like that, there is no way their respective teams would have won. They just didn't have the support. The Cavs did not put the support around James necessary build a championship team.

If we do face inflation, using margin will have turned out to be very good. Right now I pay a little less than 2% through interactive brokers. I can essentially lock in a margin rate by shorting bond futures (or a bond ETF for those that don't have access).

I have used. Overall, added much more volatility to 2007-2009, but also increased total returns as I was able to buy more FFH & options as market was declining. I would not use any amount of debt that if you faced a total loss, and had to repay the debt from other resources, would put your retirement or your family's financial security in jeopardy. Basically, if you have extra resources to speculate with.

Though I think him, Hoisington, and Rosenberg all make good arguments for deflation, and would be right in the absence of policy interference, I think I am beginning to side more with Jim Grant here. At the end of the day "Helicopter Ben's" idea that a persistent government can always beat deflation has merits. Not that he will literally dump cash from a helicopter, but what about a $5,000 tax credit for every citizen? Consensus is worried that the gov has run out of ammo...I wouldn't underestimate Bernanke though.

Sure, and I own WMT and think it represents a good value. I'm certainly not trying to dispute that the odds are WMT will remain dominant, and its management and distribution system will allow it to outperform relative to its competitors (and even if it doesn't there is a good margin for safety built into the stock). However, I would argue that a company like WMT has a higher level of risk than KO or MCD. As for JCP, JWN (which I also own), SHLD, M, and Hudsons, I would argue that these are the exception to the rule (though I am no expert in the retailing space, and this is merely my opinion). I think the risk is that WMT turns into the A&E of the 21st century.

As a follow up, this is just anecdotal evidence, but Good to Great identifies 3 retailers among its "good to great" list: Krogers, Walgreens, and Circuit City. In the relatively short time since this book was published (less than a decade), one of these supposedly "great" companies, selected among thousands screened, is now defunct (Circuit City).

I don't know if I'd bet on Wal-Mart being around for the next 50 years either as a sure thing. Retailers seem to have a short shelf-life (no pun intended). Now, I do own stock in Wal-Mart (because I think its cheap), I'm just providing the devil's-advocate case here - Wal-Mart is not without risk. The history of retailers in the US is littered with defunct companies; Wikipedia even has a page devoted to defuct US retailers, subdivided by niche: http://en.wikipedia.org/wiki/Category:Defunct_retail_companies_of_the_United_States Consumer preferences seem to change faster than most retailers have historically been able to adapt to. I don't think there is a "Coca-Cola" of retailing; an enduring brand with value. I believe Wal-Mart is a good value at this point, but I also think there is a fairly decent chance that another company will surpass it as the "dominant" US retailer within the next 50 years.

I was really turned off when I read that part. Economics is not a zero sum game. One person having money doesn't prevent another person from having money. Maybe the homeless guy had physical/mental conditions preventing him from a job, but it is hard not to say "the guy in the Mercedes isn't preventing the homeless guy from working, not being addicted to drugs, and getting a meal."

Attached is the conference boards LEI year over year change. In the past 30 years, this figure has only been higher once (in the early 80's).

Crip - Do you live in downtown Chicago? I'm in the Lincoln Park area. Things were going crazy the other night...people in the streets and cabs honking all night, literally had trouble sleeping. I am originally from out of state, but we do not have a real hockey team where I'm from, so I've tried to adopt the blackhawks the last couple years. I have a friend who is a diehard fan, holds season tickets, and was stuck on a flight from Chi to Seattle for work during the game...that's just cruel.

hahaha...i like that.

CPI-W is called the "The Consumer Price Index for Urban Wage Earners and Clerical Workers" So that too is "urban". Perhaps the Bloomberg figures are for "core" CPI, excluding food and energy costs? I've been trying to find what those numbers would be fore the "core" CPI, but I haven't been able to find them. I was hoping to locate them so that we could at least see if they match up with the Bloomberg numbers. Refer to the post above, I can't seem to find the same numbers in bloomberg i found yesterday, just playing around with their stupid codes for everything. However, in addition to the chart posted above, here is Real GDP Per Capita. This does not adjust for hours worked, but is the total economy, not just non-supervisory production workers.

I agree with opihiman2 that discussion of intangibles doesn't really make sense, as it's highly subjective and will depend on personal experience. I kind of regret even going into that. Most people, especially on this board, would definitely have a higher standard of living today than 30 years ago, simply because of age bias (i.e. a broke college student in the 80s is now a successful professional, or a newly arrived immigrant family in the 80s is now a thriving family business, after years of hard work, etc.). My point was simply that I don't think that the standard of living increased so significantly since 1980, that it should be obvious to a fifth grader. It's not obvious to me. I don't think CPI-U vs CPI-W would be so different. Using CPI-W tables, your quoted median wage of $7.12 in 1980 is equivalent to $19.33 in 2010 dollars. That's a decrease when compared to your quoted median wage of $18.85 for 2010. The table used: http://www.ssa.gov/OACT/STATS/avgcpi.html I don't see how you're getting a 36% increase. No, I'm typing this message from Mars. Like I already said, I regret pulling some of those intangible comparisons, as they're highly subjective. My point is simply that wages decreased or stayed flat (see above), prices for "important" items such as health care and higher education have increased significantly (no data to prove that, just guessing), and prices for "unimportant" items such as computers or phones have decreased. But how does that make "standard of living" higher? And what is "standard of living" anyway? The cars maybe better, but they still take you from A to B as they did in 1980, and cost about the same. The housing quality is better? Not sure. Definitely bigger, but better? I keep hearing horror stories of quality of residential construction built in 1990s and 2000s, as compared to older houses. But again, just anecdotal and highly subjective. The food -- definitely cheaper and more mass produced now compared to then. But if I taste a beautiful, big, shiny, nicely waxed apple from Whole Foods, and compare what I taste to an ugly-looking, smallish apple with a worm inside from a bazaar in a third-world country or from a private orchard, the comparison is not good for the former. That's roughly what I meant by "food quality", but yeah, otherwise there's plenty of it, quantity-wise in 2010 than in 1980. Again, these intangibles are highly subjective, let's not get bogged down debating these. so I can't seem to find the same charts on bloomberg now that I referred to last time, I guess I wan't expecting people to question the fact wages have risen over the last 30 years. So here is something better; I'm attaching a chart of real wages (already adjusted for inflation). This is for non-supervisory workers only, this doesn't include management. The one for all private workers they don't have data going back that to 1980 available. So...Non-supervisory workers have risen about 10-15%...less than the amount I quoted last time. However, (a) this is a positive increase, and (b) it has been documented that wages for those with college/masters degrees have risen faster than those without over the last few decades, leading one to believe supervisory wages (not included in attachment) were also positive, and likely exhibited much more growth.

Yes well, I didn't mix apples/oranges on purpose. I assumed that CPI-U is what we wanted because you didn't mention otherwise and I figured you just accidentally pulled the wrong data from somewhere. CPI-U is what the US Treasury uses to calculate the adjustments for TIPS -- they don't have a "national" CPI for that. Do you mind adding links to the national wage data and "national" CPI data? I must admit I have not heard of the "national CPI" before. I went to Wikipedia's article on the CPI and I still cant figure out which one it may be. Here is the Wikipedia link: http://en.wikipedia.org/wiki/United_States_Consumer_Price_Index It mentions the CPI-U and CPI-W, and "Core CPI", but neglects to mention "national" CPI. I used bloomberg to pull (which accesses the bls) - i think the w is wage earners, that is national, not just urban. i can send you the bloomberg screen shots if you'd like

These are figures directly from BLS: 1980 CPI: 89.7 2010 CPI: 173.8 1980 Median Hourly Wage: $7.12 2010 Median Hourly Wage: $18.85 Adjusting for HOURS WORKED, and adjusting for CPI there has been a 36% increase in take home wages. -This does not account for the fact that many things (Computers, telephones, tvs, medicine) are better today but cost the same or less -This also does not account for the expansion of FEMALES in the workforce (more jobs have been created for females that wanted to join workforce) The fallacy here is to assume the CPI is correct. There is alot of controversy surrounding the inflation index. I do not believe 2% inflation is right. I think 4% is more accurate. Using 4% as the adjusted inflation index, I see median wages falling. Also, debating whether we have better standard of living now than before is moot. It's all relative and debatable. What basis do you have for your 4%? To the contrary, most economists would argue the CPI OVERSTATES actual inflation and that the GDP Deflator Understates actual inflation, and true inflation is somewhere in between. There are many reasons why the CPI has the potential to overstate inflation; the availability for individuals to alter to substitute goods when prices rise in one particular good is not accounted for (because fixed weights are used).

These are figures directly from BLS: 1980 CPI: 89.7 2010 CPI: 173.8 1980 Median Hourly Wage: $7.12 2010 Median Hourly Wage: $18.85 Adjusting for HOURS WORKED, and adjusting for CPI there has been a 36% increase in take home wages. -This does not account for the fact that many things (Computers, telephones, tvs, medicine) are better today but cost the same or less -This also does not account for the expansion of FEMALES in the workforce (more jobs have been created for females that wanted to join workforce) There are different CPI's that the BLS publishes (CPI-W, CPI-U, etc...) The CPI-U (All urban consumers) does not support your conclusion... In fact the CPI-U suggests a slight decrease in what you are calling take home wages. Jan 1980: 77.8 Apr 2010: 218 218 / 77.8 = 2.8 $7.12 * 2.8 = $19.93 (adjusting 1980 wages for rise in CPI-U of 2.8x) $19.93 > $18.85 Here is the link to the CPI-U data: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt If you are going to use the CPI-U data (urban only), then you would have to use the wage data for urban-only. What I gave was national, so neither were urban only, and if you want to do an apples-to-apples comparison you shouldn't use the CPI-U.

Myth- you bring up excellent points regarding standard of living in 1980 vs. 2010 and additional factors that are not accounted in the cold, hard 36% increase in hourly wages (racism, sexism, other issues we've grown out of or continuing to grow out of). I think that particular question on the survey, the one regarding standard of living, is meant to take advantage of logic flaws some make, in particular the heuristics nostalgia bias.

These are figures directly from BLS: 1980 CPI: 89.7 2010 CPI: 173.8 1980 Median Hourly Wage: $7.12 2010 Median Hourly Wage: $18.85 Adjusting for HOURS WORKED, and adjusting for CPI there has been a 36% increase in take home wages. -This does not account for the fact that many things (Computers, telephones, tvs, medicine) are better today but cost the same or less -This also does not account for the expansion of FEMALES in the workforce (more jobs have been created for females that wanted to join workforce)

I have not read that, but what you say makes sense. The two most telling questions to me are the standard of living question and the monopoly question. I don't see how any of those are biased, and both 90% of students of a college econ course should be able to answer correctly. This author complains that the question is confusing because it is a necessity but of a monopoly but not a sufficiency. However, this is just a simply test of logic, almost like a gimme GMAT question (all monopolies have largest market share but not all companies with largest market shares are monopolies). I resubmit my claim that those who do not have the intellect to answer a question this easy should not be influencing the policies of this nation.

Well, I wasn't actually looking for people on this board to answer the questions and post answers here. The point was to share a WSJ article I found interesting. Personally, I am conservative economically and liberal on social issues. However, this article confirms a personal experience I have with friends, where regardless of the issue, the more liberal leaning on economic issues seem to not grasp economic issues as strongly. For Instance, the question regarding is our standard of living higher today than 30 years ago. I think this study confirms people with liberal economic tendencies do not seem to grasp the concept that, yes, in fact our standard of living is much higher than 30 years ago (think of all the technological innovations). More liberals answered that wrong by a factor of 4:1. Same with the monopoly question - that is pretty cut and dry. If you don't know the answer to "A company with the largest market share is a monopoly," you shouldn't really be making decisions that affect the country, in my opinion.

Again, the questions weren't supposed to be do you agree or disagree with the policy. I agree with the policy of having licensed heart surgeons. However, I recognize that requiring licensing will increase the cost of heart surgery, as it restricts supply. The question in that instance is "Mandatory licensing of professional services increases the prices of those services." I think you would have a pretty hard time arguing that by not allowing just anyone to perform heart surgery, the cost is higher. The questions are restricted to a specific economic impact, and determining how many people do not understand that impact. I'm not trying to argue for or against licensing of heart surgeons; but it is undeniable that by restricting just anyone from becoming one, you restrict supply, and therefore increase cost. Almost ANY economist, liberal or conservative, would agree with this statement.

I think they tried to control for those who thought the question was bias by not counting E as an incorrect answer and telling that to the person ahead of time. Either way, there of a few questions that there are no excuse for getting wrong (such as the monopoly question or the standard of living question). And they attempted to structure the questions in a way such that regardless of whether or not you agreed with the policy in the statement, the statement is not asking if you agree with the policy, which may be a subject of debate, it is asking the economic response to the policy. There was still an objective right or wrong answer provable from an economic perspective. For instance, in the licensing question, regardless or whether or your liberal or conservative, or whether you think that professional licensing is good or bad on a whole, liberal and conservative economists would agree licensing would raise costs (it still may validly be argued that licensing is good, but failing to acknowledge limitations on supply will increase costs is ignoring reality).