Thursday, 8 October 2009 by bbbeard.

First, a cautionary tale. Some time ago I read a critique of multiculturalism, the central parable of which went as follows: it seems that there was once a classics professor, tasked with teaching a sophomore course in Plato’s Apology. As the professor explains:

I first learned about the notion that Socrates was black several years ago, from a student in my second-year Greek course on Plato’s Apology, his account of Socrates’ trial and conviction. Throughout the entire semester the student had regarded me with sullen hostility. A year or so later she apologized. She explained that she thought I had been concealing the truth about Socrates’ origins. In a course in Afro-American studies she had been told that he was black, and my silence about his African ancestry seemed to her to be a confirmation of the Eurocentric arrogance her instructor had warned her about. After she had taken my course, the student pursued the question on her own, and was satisfied that I had been telling her the truth: so far as we know, Socrates was ethnically no different from other Athenians.

The professor is Mary Lefkowitz, of Wellesley College. The student is fortunate to remain nameless. But I recall this story from time to time, because it is a reminder that even very intelligent people can be enticed, perhaps by cultish isolation, into a worldview that is not only counterfactual, but antisocial in its effect.

Now, the truth is that for a long time I have been privy to a set of facts regarding the period known as “the Red Scare”. I use the word “privy” advisedly, because these facts are readily available to anyone willing to look into the matter — but these facts are nonetheless not only widely disbelieved, but sharply discouraged by the larger culture. For instance, I am painfully aware that people are profoundly uncomfortable with any voicing of the fact that, in the 1930’s and ’40’s, Joseph Stalin had hundreds of agents operating in many areas of American culture and government, ranging from Hollywood to the Executive Office of the President. I have friends who continue to insist, despite all evidence to the contrary, that Alger Hiss was framed. I know there are many people who continue to believe the Rosenbergs were innocent, unpersuaded even by the recent confession of Morton Sobell. And of course, to the extent that they think of it at all, most people are content to fall back on the conventional wisdom that the Hollywood Blacklist was our equivalent of Stalin’s Gulag, and that the Red Scare was based on a false premise.

And so I am left with the same feeling that Professor Lefkowitz’s student must have had: why does no one mention this? Are they all deluded? Or am I? But all my investigations lead to the same conclusion. The more I learn about the extent of Soviet infiltration, the more it is apparent that the indictment is true. Alger Hiss was a spy. Rosenberg and Sobell were traitors. Whittaker Chambers told the truth. Dalton Trumbo was a Communist. Elia Kazan told the truth. I.F. Stone was a paid agent of Stalin. And the more I learn, the less the official reaction makes sense. Why did half of Hollywood’s elite sit on their hands when Kazan was given a lifetime achievement award? How can Ivy Meeropol make a film about her grandparents (the Rosenbergs) that remains resolutely ambiguous about their guilt? And why do people treat these facts about Communism — and the Left’s defense of it — as disconnected from the flow of American history?

So I am led to ask the question that Orwell left implicit in the climax of 1984: can facts be defeated by simple fiat of the guardians of the culture?  Winston Smith is finally stripped of all his humanity and forced to accept O’Brien’s demand that 2+2=5 (as the Wikipedia author remarks, “a phrase that has entered the lexicon to represent obedience to ideology over rational truth or fact”). As the previous blog post remarks, we live in an age in which — in accordance with the ascendant ideology — the facts of the past are dismissed out of hand as irrelevant to the problems of the present. Is this the fate of those who oppose the cult of personality, to suffer the ‘jackboot stamping on a human face, forever’?

Or is this just another Black Socrates moment?

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Tuesday, 6 October 2009 by bbbeard.

Michelle Malkin has tweaked the other Michelle about her remembrance of things past — specifically, about her memories of sitting in her daddy’s lap while watching Carl Lewis at the Olympics. The fact that Michelle O was 20 years old when Lewis first ran in the Olympics makes her remark a trifle unsettling. Well, okay, in fairness, MO started her sentence by referring to Olga Korbut and Nadia Comaneci, earlier competitors, but the sentence doesn’t parse in any way that is flattering either to her or to her dad. Maybe Barack was borrowing the teleprompter. And fair’s fair, W was pilloried for less creepy assaults on his mother tongue. As it were.

In any case, it put me in mind of our President’s strange detachment from facts about the past. There have been gross errors in interpretation, as when he expressed a belief that leaders like FDR and Kennedy showed the path of virtue by negotiating with our enemies. Well, Kennedy did at least have a summit with Khrushchev, although the summit itself has been described as “disastrous”. But FDR never met with any Axis leader; nor was Joseph Stalin considered an enemy to the United States during FDR’s lifetime. But there have also been peculiar personal exaggerations, as when Obama claimed his parents met because of the (1965) march on Selma — which happened four years after BHO was born. And he has engaged in unnecessary mangling of family history, too, as when he claimed his uncle helped to liberate Auschwitz. Auschwitz, Buchenwald — so sue me!

My personal favorite is when he credited Muslims with inventing the magnetic compass, an assertion that no doubt came as a surprise to our Chinese friends. This claim came in his Cairo speech, in which he more egregiously (and erroneously) claimed that John Adams wrote “The United States has in itself no character of enmity against the laws, religion or tranquility of Muslims.” Those words appear in the English version of the text of the Treaty of Tripoli, and are attributed to Joel Barlow, not John Adams. Of course, the fact that Obama even thought it was a good idea to bring up the Treaty of Tripoli in an entreaty to the Muslim world is baffling. The Pasha of Tripoli abrogated the Treaty in 1801 when Jefferson refused to pay, initiating a chain of events that are memorialized in the Marines’ Hymn.

Most recently, he visited the United Nations and claimed “Democracy cannot be imposed on any nation from the outside.” Again, this is a very odd statement from a self-proclaimed “student of history”. One imagines the German and Japanese Ambassadors exchanging puzzled glances over this claim, thinking their translators had malfunctioned.

I fear that we are led by a man whose “study” of history has been seriously distorted by the Marxists he sought out on the Columbia campus, by the race-baiter in the pews of whose church he sat for twenty years, by the political allies he made in Chicago, and by the friends he has chosen to man his administration and to help draft legislation.

In Decline of the West, Oswald Spengler urged his readers to understand the times in which they live, in order that they might participate in history and not merely stand outside as spectators. Obama seems to have intuited that, at this moment of world history, the Leader has no need for Comprehension, for Understanding of What Is, for Appreciation of What Has Gone Before, the Leader only has a need to have a vision of What the World Could Be. His dwindling but still-numerous followers seem to agree.

And that is a cause for apprehension.

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Wednesday, 5 August 2009 by bbbeard.

One of the minor stories making the rounds of the blogs this week is about an anonymous artist who is posting a depiction of President Obama as the Joker from The Dark Knight.

Reactions range from chuckles on the right to hysteria on the left.

Personally, I found a revelatory moment in this. My entire life has been lived in the era of “modern art”, promulgated for the most part by talentless hacks who hide behind any of a number of rubrics, e.g. “art is about challenging our preconceptions”, “art is about getting us to see things differently”, “art is about knocking out the scaffolding under the structure of power”, “art is about getting government money from the National Endowment for the Arts” &c.

Here at last is a true specimen of what those modart poseurs were claiming to try to achieve (well, except for the NEA part). The poster attacks and undercuts the most powerful man in the world with visceral imagery — tied cleverly to pop culture — and a single loaded word, “socialism”, that carries an enormous amount of cultural baggage. The subversive message cannot be countered or argued away, because the message is visceral and not intellectualized. It is aesthetic precisely because it is a tonic to counter our anesthetic age.

It’s not hard to find commenters who are baffled by the association of the statist Obama with the anarchist Joker, but to me the message is clear: Obama is a person bent on destroying the ‘old’ order of this country (in which freedom is a higher value than equality), and he is using the even older tropes of the left to do it. Obamaphiles can’t see this happening, of course, so they are bewildered by the spreading anger that this President inspires. They lash out with charges of racism, and try to diminish the poster as “dangerous and mean“. They really don’t “get it”. Their outrage is undercut, as usual, by their record of passivity in response to similar images of the previous occupant of the White House.

The anonymity of the artist lends an air of credibility — literally “street cred” in this case — to this satire. An anonymous street artist speaks volumes with a single image, while the Bush-bashing images of incorporated media like Vanity Fair (Bush as Joker) and LA Weekly (Bush as Vampire) and the New York Times (Bush as Frankenstein/Hitler) are merely tired and asinine.

And to those who might find anonymous posters unfair and disturbing, I suggest that the government-organized cult of personality around President Obama is far more creepy.  A thousand U.S. elementary students make the world’s largest beaded mosaic to celebrate the leader’s birthday!? Yes, we can! Remind you of anybody?

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Friday, 31 July 2009 by bbbeard.

WASHINGTON.D.C. (BBB) — The Obama administration today touted the latest results of the Rasmussen Daily Presidential Tracking Poll. Robert Gibbs, the White House Press Secretary, said to an admiring press corps, “We would like people to note that the latest results of the Rasmussen Daily Presidential Tracking Poll are tout-worthy. In particular we want to focus on the unprecedented number of likely voters who feel strongly about President Obama. Early in this administration, we struggled with ’strongly’ numbers in the low 60%-ish range, but our non-stop efforts to engage Americans in the political process have boosted the total number of strongly feeling voters into the 70% range.”

After uncharacteristically pointed questions about the proportion of strongly feeling voters who actually approve of the President, Gibbs urged the press corps to focus on the overall trend, and not try to “micro-interpret” subcategories of poll results. “We feel the hard part is getting people to feel engaged in the political process, and we feel we’ve been doing a great job with that. We don’t want to dwell on day-to-day shifts in ‘approve/disapprove’ numbers because in the long run those don’t count nearly as much as getting people involved. We like to say, ‘We are the people you’ve been waiting on. Um, for.’ ”

For a closer view of the trends in the Rasmussen poll, click on the thumbnail below.

For a closer look at the “not strongly” voters, click on the next thumbnail:

Asked what it would take to get more of the “weakly feeling” likely voters to feel strongly about the President, Mr. Gibbs suggested that upcoming plans to bring the overnight package delivery business up to the government standards would be a centerpiece of fall plans to rejuvenate the economy. “Once we purge greedy doctors, greedy bankers, and greedy oil companies from the public square, it will be time to purge greedy overnight package delivery companies. You know, why should it be fifty times the cost of stamp to deliver a package overnight? Americans pay a higher percentage of their GDP to overnight package delivery companies than any other country. We are way overdue for reform. And our polls indicate that this issue will help more people than ever feel strongly about the Obama Presidency.”

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Thursday, 2 July 2009 by bbbeard.

On the heels of today’s dismal unemployment report, the Wall Street Journal has an article out today:

Republicans Blame Obama Policies for Job Losses

Republicans are using today’s report on further U.S. job losses and the highest unemployment rate, 9.5%, in 25 years to criticize President Barack Obama’s administration on its fiscal policies.

While I certainly concur that Mr. Obama’s economic policies are worthy of severe criticism, I think this particular grandstanding is  unwarranted. The reason is that unemployment is a lagging indicator of the economy’s performance. In layman’s terms, that means that unemployment peaks sometime after the trough of an economic downturn, not at the trough, or before. A rule of thumb is that unemployment lags about six months, although sometimes the lag can be longer. So June’s unemployment is largely due to factors in place before Mr. Obama’s inauguration.

Now, arguably, Mr. Obama’s party gets the lion’s share of the blame in setting up the mortgage crisis that triggered the current downturn. But I understand that reasonable people can differ on the causal factors that brought us to our current juncture.

And there are those who point to Mr. Obama’s election as being a turning point in economic expectations. After the election of the most leftist President in our history,  this argument goes, money started to flow out of investments and into various safehavens (like mattresses and gold). The main datum supporting this theory is the continued lackluster performance of the stock markets. The DJIA, for instance, is still down 13% from election day, including a 200-ish point drop today (the NASDAQ Composite, though, is up 1.2% since election day). By this theory, we should set the line of scrimmage not on inauguration day, but on election day plus one, when Mr. Obama set up his Office of the President-Elect. And again by this theory, the six-month lag was struck in early May 2009.

But I’m not arguing that right now. Maybe I believe it, maybe I don’t — I’m still on the fence. In the long run I don’t think it will matter much, because in the long run I think we are in for a Japanese-style “Lost Decade“, due fully to the incompetence of the Obama administration. But only time will tell.

However, one thing is clear at this early juncture — Mr. Obama’s economic team thought they were immune from the normal operations of the national economy, including the lagging indicators. The blog Innocent Bystanders has been standing by, holding their feet to the fire, as it were. Back before the memory of most Obama voters, when the administration was arguing for its trillionish “stimulus” bill, they put out a claim that without the stimulus bill, unemployment would peak at around 9% in the third quarter of 2010. With the stimulus bill, they claimed, unemployment would peak at 7.5% in the third quarter of 2009. Here’s is IB’s graphical summary of their prognosticatory skills:

One might be tempted to judge the Obama team’s economic competence by this yardstick. I am.

Now, it is a hopeful sign that the rate of increase of unemployment slowed. I hope this is a harbinger of moderation in our economic situation. I think the next couple of months will tell us a great deal about the future.  If unemployment continues to climb — and in particular, if it resumes its previous rate of increase, watch out. On the other hand, if June really was the peak month, if unemployment drops back to 9% by the fall, the markets may stabilize, money may begin to flow back into investments, and no one will remember how badly the Obama team blew their economic predictions.

But I am not hopeful. The Democrat-controlled House  of Representatives just passed H.R. 2454, the ACES Act, which will raise the cost of energy — which is to say, the cost of just about everything — by a hefty amount (the discussion over at Transterrestrial Musings suggests about 25%). Recent reports also suggest an unwillingness of international lenders to fund the Obama deficit. Democrats are determined to take action on the health insurance situation, and many bystanders fear the worst. None of these leading indicators bode well.

Now the official LEI put out by the Conference Board shows three consecutive months of increases in the leading index. But it doesn’t take into account the political environment. We shall have to see if economics can trump politics. If the recklessness of Congress can be restrained — if ACESA is held up or stripped in the Senate, if “health care reform” can be stopped — then maybe we’ll get through this, even with the massive deficits that Mr. Obama has created. By the way, here’s a reminder:

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Thursday, 11 June 2009 by bbbeard.

Now the Obama administration wants to limit ‘executive’ pay across the private sector, not just for companies receiving TARP funds. People were warned this is the next step. This is crazy. The people in government who think this is an appropriate function of government skipped a few classes somewhere along the line — maybe they should google ‘enumerated powers’. They have no wisdom or insight, only power. Corruption empowers, and absolute corruption empowers absolutely. Hayek warned us.

Do we really want some idiot in Washington deciding how much we earn, whether we get promoted, and ultimately who we work for? The ostensible  principle here is that companies, and by extension, people, are not competent  to decide how to allocate their resources, so people with guns helpful government bureaucrats must step in. The reality is that government, far from being competent to run our lives, is corrupt and incompetent.

Some folks said the TARP limits were justified because those companies came to the government “hat in hand” for help, and other folks nodded their heads. Now the excuse for the power grab is that companies do not act in their own “long-term” interest. When the limits are extended to lower and lower level employees, they will stop referring to “executives” and claim the government must control all salaries out of “fairness” — after all, why should my secretary earn more than the secretary next door? They, the leftist/statist/socialist/communist/progressive/fascists — call them what you will — believe there is no room for freedom in this country, and that “society”, by which they mean themselves, must decide what is fair. They have no idea how the economy operates, and they don’t care, because they cling to some mistaken concept of how it “should” run. They have no idea how wealth is created, and they don’t care, because they think no one should be wealthy. They have a word for such a society: Utopia. (It means ‘nowhere’, but they think that’s ironic, not prophetic).

Michael Moore, famed left-wing economist, now wants to turn GM into a railroad and windmill company. Moore once formulated a principle upon which he thought the economy should be based: no one should make anything they can’t afford to buy. So, no yachts. No luxury cars. Oh, and by the way, no buildings larger than the minimum construction worker can afford to buy. No airplanes larger than a kit plane. No railroads (I guess he’ll make an exception for high-speed rail). No factories. No oil wells. No power plants. No shipping containers and no ships. No MRI machines. No radio telescopes and no space stations.

The problem — apart from the simple fact that in this Utopia, life will be poor, nasty, brutish, and short –  is that decapitating the economy starts a cascade. If no one is allowed to own a yacht or a Cadillac, then no one will be hired to make them, and those people will be thrown out of work. If no one is allowed to make a power plant, no one will have electricity. If there are no airplanes or railroads or ships, all your goods will have to be produced within walking distance. This is not some weird fevered right-wing chimera — this is social policy as formulated by Michael Moore and left-wing idols like Mahatma Gandhi. Another description of Gandhi’s Utopia is “crushing poverty”. Think Calcutta, not Knightsbridge.

Hope and change, indeed. More like envy and disaster.

UPDATE: The Yahoo link to the original story is broken (as happens a lot with time-limited news stories), so I replaced it with a screen shot of the story. Sorry for the inconvenience.

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Wednesday, 3 June 2009 by bbbeard.

For those of you who don’t read French, the title says, “One of the biggest Muslim countries on the planet”. That’s Barack Obama, talking about the United States. At least, that is what is being reported in Le Monde. Bet you didn’t know that fun fact about America, did you?

Just for the record, the Wikipedia entry on Islam indicates that the Muslim population of the United States is between 1.8 and 3 million. And the only countries with larger Muslim populations are Afghanistan, Albania, Algeria, Azerbaijan, Bangladesh, Burkina Faso, Cameroon, Chad, China, Democratic Republic of the Congo, the Ivory Coast, Egypt, Ethiopia, France, Germany, Ghana, Guinea, India, Indonesia, Iran, Iraq, Jordan, Kazakhstan, Kyrgyzstan, Libya, Malaysia, Mali, Mauritania, Morocco, Mozambique, Niger, Nigeria, Pakistan, the Philippines, Russia, Saudi Arabia, Senegal, Sierra Leone, Somalia, Sudan, Syria, Tajikstan, Tanzania, Tunisia, Turkey, Turkmenistan, Uganda, Uzbekistan, and Yemen, not to mention the West Bank and Gaza, which are not a country, and so are necessarily exempted from the President’s sweeping proclamation. But I suspect that if you are not a totally off-the-wall Obamaphile, you already knew that the Muslim population in the U.S. is tiny.

What on Earth was he thinking? Does he really believe that the U.S. is one of the biggest Muslim countries in the world? What Kool-Aid has been drinking? This is the kind of weird, insular, eccentric comment that gets Republicans — or Dennis Kucinich — branded as oddballs for life. Do any of you Obama supporters out there have an explanation for this? Is this supposed to be some kind of wacky-Jedi-mind-trick that Obama is trying to pull on the Islamic world? Does he really think that Muslims — especially rulers of Muslim countries — are that ignorant? My theory is that he really believes it because (a) he has known a lot of Muslims, and (b) he is not good with numbers.

Number One Son says: “It’s too bad we can’t impeach him just for being an idiot.”

h/t Belmont Club

UPDATE: Jeff Zeleny of the New York Times Caucus Blog reports on Obama’s Big Muslim Gaffe with the deeply dishonest title, “Obama Says U.S. Could Be Seen As  Muslim Country, Too.” No, Jeff, as you admit in the second paragraph, he said the U.S. is one of the biggest Muslim countries on the planet. (Again: why would anyone defend this worldview?) And Zeleny reports — without irony! — that Obama also said “the United States and other parts of the Western world ‘have to educate ourselves more effectively on Islam.’ ” So — not only does our President live in a fantasy world where the U.S. is chock full of Muslims, he blames Americans for being uneducated about Islam. Unbelievable.

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Thursday, 30 April 2009 by bbbeard.

Snippets from the infocean:

Cliff May took on Jon Stewart on the Daily Show: or was it vice versa?  Among other things, they talked about WWII and lessons we might have learned about torture from that epic, traumatic conflict. Backed into a corner, Stewart averred that he believed that Harry Truman was a war criminal. Setting aside the fact that I have been known to make virtually identical statements, this notion raises the amusing prospect of a parallel universe in which Dwight Eisenhower prosecuted Harry Truman for war crimes.

Coincidentally, Mr. Obama cited Winston Churchill (reportedly by way of the London Times — or was it Andrew Sullivan?) as an authority on winning wars without creating indelicate situations: “We don’t torture”. It seems to me that Mr. Bush made virtually identical statements. I suspect neither man was being quite so virtuous as to meet the current standards of the radical left.

And the Times story by Ben Mcintyre isn’t quite as elevating as one might hope. Mcintyre tells us about Churchill’s spy-breaker Robin Stephens. Mcintyre tells us that Stephens eschewed physical violence. However, the plain reading of the account tells us that Stephens was more than willing to use sleep deprivation, threats of violence, drugs, and alcohol to try to break down his prisoners. (Why did he think a drugged, sleep-deprived prisoner was more likely to produce truthful intelligence than one who has been slapped or “walled”?) None of these techniques are allowed under the Geneva Convention — which, by the way, just as in the current situation with Al Qaeda, is not applicable to spies and other non-uniformed combatants. The use of drugs or alcohol to “disrupt profoundly the sense or the personality” is explicitly illegal under Title XVIII, as is the threat of imminent death. So Stephens would have been liable for sanctions under current U.S. law. It is not even clear whether Stephens’ bag of psychological techniques would pass muster under current U.S. law, either.

But the amusing part of all this for me is that the advocates for Zubaydah et al. seem only recently to have discovered World War II as a precedent. When it was important to understand why we went to Iraq, why the war was taking so long, why there were reverses as well as advances and pointless as well as necessary deaths, the left would not hear of it.

Stewart  raised a point I have made myself, though he takes the wrong lesson from it, I think. He noted that the Japanese, who were atom-bombed at the end of the war, would seem to have thereby earned the perfect right by the “ticking time bomb argument” to torture Allied prisoners in the hopes of gaining actionable intelligence. But then he asks stupidly if that means we should apologize to the Japanese for prosecuting their soldiers. Of course not — Harry Truman is dead, and Stewart’s absurdity is just another specimen of the pernicious practice of blaming and apologizing for previous generations.

What it does mean is that we should be careful about assuming that it was noble to prosecute Japanese soldiers for mistreatment of their prisoners. Are we sure that the Allies never thought of those prosecutions as punishment for Pearl Harbor? Was there a failure of imagination, an inability to see how the deaths of 500,000 Japanese civilians in the 1945 firebombing of Tokyo and 66 other cities could lead to more brutality, not less? Granted, the now-famous prosecution of Yukio Asano did not hinge on the gathering of intelligence. By all accounts Asano was merely a sadist, more like a serious version of the Abu Ghraib Nine than the interrogators of Khalid Sheik Mohammed. But what if the Japanese had hints of the development of an atomic bomb? What if they had captured a pilot who they believed knew the whereabouts of the base from which the atomic bombings were to be launched? A partisan interested only in sullying the reputation of the Bush administration might not admit it, but there is certainly a case to be made that the Japanese would have been justified in using “enhanced interrogation” to coerce this information from their captive. From our perspective a generation later, it might have been better that the 220,000 civilians who were vaporized in the atomic bombings had not died. And from our perspective on this scenario, there would have been more than a little component of retributive justice in prosecuting persons associated with those interrogations.

Of course, in the case of the WWII prosecutions, the accusers were the victors. In the current case, the accusers are… Democrats. Who do they think the enemy is?

UPDATE:

Well, of course, in hindsight I should have predicted that Churchill’s hands were most probably not as clean as Andrew Sullivan and Ben Mcintyre would have us believe (in their vicious quest to paint Mr. Bush as the new Hitler). The ever-obliging gents at the Guardian pass along the story of the Cage, where on a posh street in Kensington Palace Gardens, captured Nazis — including civilians — were tortured throughout the war and for several years after. [h/t Michael Tomasky]

UPDATE 2:

As usual, Frank J. explains it all with his scintillating moral clarity.

UPDATE 3:

The Churchill scholars are coming out of the woodwork on this one. Richard Langworth tells us that there are precisely 156 instances where the word “torture” appears in the 50 million words written by (15M) and about (35M) Sir Winston.  None of the uses are consistent in meaning with Mr. Obama’s quote. [h/t Powerline]

UPDATE 4:

This story keeps sprouting new legs. The lovable-but-wooden Bill Whittle, PJTV guy, takes Jon Stewart apart with surgical precision in a video that is deservedly gaining wide viewership. (Shouldn’t this spawn a new gerund, “Whittling”?) Stewart apologized, sort of, saying, gee, well, WWII was, you know, complicated. As Allahpundit remarked,

The moral calculus about how far to go in roughing up jihadis to save how many lives is difficult, as was the calculus about how many lives would be saved in the long run by incinerating Japanese kids in Hiroshima and Nagasaki to end the war. The fact that Stewart is a hard no on the former yet considers the latter iffy suggests a mentality I simply can’t fathom.

Me neither.

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Tuesday, 21 April 2009 by bbbeard.

Obama’s latest ploy is to dress his imperial majesty in budget-cutter clothing, demanding sacrifice around the Cabinet table. One Hundred Million Dollars! Sure sounds like a lot of money. But even the AP isn’t fooled, having borrowed a calculator with scientific notation from the geeky guy in IT and concluded that 100 million dollars per annum to the federal government is like a large latte and a scone to a middle class family. Per year, that is. My colleague Rand Simberg calls it “100 MicroBaracks” which does not quite roll off the tongue like Brian Riedl’s acute observation that $100M is the amount the federal government spends every 13 minutes.

None of which means anything to Obama’s target audience, which is the vast shallow sea of government-educated folks who are fuzzy on the difference between a million and a trillion, who don’t order scones, who couldn’t quite explain the difference between $6 a day and $6 a year, or for that matter, the difference between 13 minutes a day and 13 minutes a year.

The ideal target audience, in other words, for the desperate ploy by some conservatives to downbrand the Democratic Party as the Democratic Fascist Party. Jonah Goldberg wrote the illuminating text “Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Change“, which drew jeers and cheers from the usual suspects but which went largely unnoticed by Mr. and Mrs. Everywhere. Now Jim Lindgren reports that the liberal=fascist meme is starting to break out into the general conversation, to the extent that liberal commentators are girding their defenses.

What does it all mean? It means that the political class believes that a non-negligible percentage of the voting population is composed of idiots. To some non-negligible extent, they may be right.

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Tuesday, 3 March 2009 by bbbeard.

“What you’re now seeing is a profit and earnings ratios get to the point that buying stocks is a good thing if you have a long-term perspective on it.”

Do you think He knows what “P/E ratio” stands for? I’ve listened to the video a couple of times and, even allowing for off-the-cuffiness of the exchange, it’s not clear to me that he does.

UPDATE (10 March 09):

Delta Foxtrot says I’m being cryptic. So here are some deeper observations that flesh out this particular complaint:

Well, the superficial observation is that at first and second listening Obama apparently refers to the “profit and earning ratios” of publicly traded companies. The problem with that is that the meaning of “P/E ratio” is “price / earnings ratio”, not “profit / earnings ratio”. To a market already badly shaken in its faith in our 44th President, to confuse “profit” with “price” is a faux pas that would only send the market down further. He should consider bringing a TelePrompTer before he says anything at all about the markets.

But this is a quibble. Perhaps he meant to say, “corporate profit [COMMA] and [IMPLICTLY: price / ] earnings ratios”. However, this reflects a deeper confusion about the meaning of the P/E ratio.

The “price” in “P/E ratio” means the per-share stock price times the number of shares outstanding. What determines the price? Conventionally, a company is ‘worth’ its net present value (NPV). The NPV is the total present value of all anticipated future net profit streams, discounted using the usual formula for time value of money. In quant form, the present value is discounted from the future value by a factor that depends geometrically on time, that is, PV(t) = FV(t)*exp(-k*t), where k is an interest rate.

Now, for a company working in a ’static’ (slow-growth) industry, like, say, a paper company, next year’s earnings are likely similar to this year’s earnings. So if you compute the NPV of a static income stream, the NPV is just (this year’s earnings) divided by (the discount interest rate k), e.g. if k=8%, the P/E should be about 12.5. So ceteris paribus, the companies in a given sector should all be priced with similar P/E ratios. This tells an analyst whether a stock is overpriced or underpriced. Small changes in a company’s prospects can shift the actual P/E up or down. If a company is in a high-growth sector (like computers 10 years ago), the P/E ratio can be very high, because the anticipated growth of the company’s revenue can exceed the discount rate(!). So many tech stocks were trading at P/E’s over 100 (until the bubble burst)….

So, here’s the rub — if a company, or an entire sector, has P/E’s lower than historical averages, it means that investors believe that profit streams are likely on a downward trend. It doesn’t necessarily mean that the company is a great buy. And when an entire market has low P/E, it means that the assessment is that the economy is in a long-term downward spiral. It doesn’t mean the market is a good buy at the low P/E. It just means that investors have taken into account all the currently available information and have concluded that the net present value of each and every stock that has a low P/E, is low.

So, when Mr. Obama gets up in front of international film crew and says, “Hey! Buy now! P/E ratios are really low!” that’s well, kind of ass-backwards, not to mention a little scary. The P/E ratios are low because he has convinced the market he is out to ruin the market system, or at least, he really doesn’t care enough about capital markets to learn the first thing about them.

More thoughts about the P/E ratio: stocks in general behave a bit like “martingales” (link to a book here), that is, a “martingale” is a random variable that changes erratically as time passes, in a way that the expectation of a future value is equal to its current value. Stocks are a bit different than pure martingales because of the time value of money (”TVM”), but the martingale concept can still be applied with some adjustment. What that means, in short, is that there really isn’t anything like a time when “stocks are a great buy” or when “stocks are overpriced”. Unless you know something about the future that the market doesn’t know. For example, you might “know” that Obama is about to repudiate all the economy-hostile measures he has promoted (like the trillion-dollar deficit). In that case, the market assessment of values (tied to the projection of the future profit stream) for nearly all stocks would increase. And before the repudiation, stocks would be a great buy. Or you might “know” that Obama is going to announce the forced merger of GM, Ford, and Chrysler into a single government-run “American Motor Company” — prior to the announcement would be a good time to sell your stocks (or buy “puts”).

Nonetheless, one of the ways in which stocks do not simply behave like TVM martingales is that their price includes an implicit risk deflator. That is, the projection for the expected value of GM stock might be that profits will start to grow year-on-year at say, 5%, leading to a per-share price of, say, $100. But there might be considerable uncertainty about the projection — some analysts might predict a 3% yearly growth, others, 7%. The effect of the uncertainty will be to depress the stock price. Even though the expected value of the net present value of the future profit stream is $100 per share, the uncertainty might drive the stock price to, say, $90 per share. The difference is called a “risk premium” by analysts. If the uncertainty grows, the stock price declines even further.

Now, it is quite apparent that a huge risk premium is attached to stock prices right now, in addition to the penalty exacted for the impacts of massive deficits, the impending cap-and-trade tax, and massive tax increases on the productive class. Not all of this is Obama’s fault, of course — we live in interesting times! But inasmuch as the market incorporates all available information, including, e.g. North Korea’s pronouncement that shooting down their missile will spark a wider conflict, Obama’s incompetence in foreign relations also exacts a toll on the markets.

Now, the thing is, as time passes, projected risk diminishes — a year from now we will know what GM’s profit in 2009 will have been. So, a year from now, we will have a better, albeit still incomplete, idea of how Obama’s policies will play out. By March 2010, we will know if he got his trillion-dollar deficit passed, we will know if foreign investors abandoned Treasury securities or stuck with us, we will have a better idea how the November 2010 elections will turn out. Thing is — even if the news is bad, removing the uncertainty can drive the market up. The catch is, as time passes, uncertainty can also increase. If Obama’s actions in the domestic and foreign policy arenas become increasingly erratic, it may keep the markets depressed even as the economy recovers.

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