Winston Churchill Liveblogs World War II: December 25, 1939
Well, This Is Certainly a Surprise!

Ten Economic Paragraphs Worth Reading: December 26, 2009

1) Paul Krugman: A strange complacency:

[T]he [Washington] Post is being too kind to Bernanke here, by implicitly asserting that past warnings about California housing bubbles had proved wrong. Um, no.... [T]here was indeed a huge CA bubble in the 80s, which burst painfully. Nor was this an obscure bit of knowledge: in fact, people like Calculated Risk and yours truly were quite explicitly using the great California bubble of the 80s as a model for what was going to happen nationally. This whole episode makes me think considerably worse of my former department head.

2) Baruch: Phase Transitions and the Googlephone:

Until now, 4 or 5 names shared out the vast majority of goodies in mobile telephones. Maximum market shares seemed to be limited at 30%-40%; losing or gaining 10 points of share took years. Over long periods those gains or losses would, unless something had gone very wrong with one of the players, tend to mean revert. It seemed a fast, dynamic sector at the time, but really, it wasn’t. Now, software or application markets show us entirely different characteristics, those of Extremistan, where rapidly evolving monopolies and duopolies are much more common.... Apple’s achievement has been to shift the focus of the high-end handset market from voice to apps and browsing. Any old hardware would do for voice and SMS. So vendors added froufrou to differentiate themselves and keep ASPs up.... That’s finished, though the Sony-Ericssons of this world pretend it hasn’t; now it is how nicely your phone can email, surf the web, and most of all, how rich and easy is the ecosystem of applications, that determines whether people buy your product or not. That’s software; precisely the type of market where monopolies or duopolies emerge. For hardware-focused analysts, it’s hard to accept that their reliably mediocre handset market has been transferred to Extremistan.... Many of his peers are still stuck on denial. When pushed, they say things crossly to him like, “well, if you really think no-one’s going to properly compete with Apple, you shouldn’t be owning anything in the space.”  Ahem.

3) Nate Silver: Insurance Stocks Rise on News of Health Care Deal; What's It Mean?:

[W]ith the news over the weekend that Ben Nelson would support the package, a more reasonable estimation is that it went from having roughly a 50 percent chance of passing to about a 90 percent chance -- an improvement of 40 percent.... This would mean that the total value added from passage of the bill is $16.04 billion. That's a lot of money: $16 billion. But relative to the total outlay from the bill, it is fairly small. Over the course of the next ten years, the Senate's bill directs about $447 billion in public subsidies to people for the purchase of private health insurance.... [T]he Senate's bill will add about 17 million nonelderly members to the private insurance companies' enrollment... a 9.6 percent increase in their customer base.... [T]he total gain to these companies from passage of the bill (vis-à-vis the status quo) is 8.5 percent. You should see that these two numbers -- 9.6 percent and 8.5 percent -- are broadly comparable. What this probably implies is that the increase in share prices today reflects an expectation of higher volumes -- but probably not higher profit margins, which are likely to remain fairly low in the industry...

4) Jeff Frankel on Greg Mankiw:

I don’t agree... [that] “the policy environment seems adverse to business.”... Greg cites trade policy, fiscal imbalances, and energy costs.... Trade. I wasn’t happy in September when the White House put tariffs on imports of Chinese tires. But President Obama... has yet to succumb to any protectionist measures as big or as blatantly in violation of international trade agreements as... Reagan's... or George W. Bush’s.... Budget.... It is known to those who look carefully at the budget numbers that Obama’s recent actions are a distant 5th on the list of contributors [to the deficit].... #2 are the long term effects of Bush’s tax cuts.  A close #3 are the effects of Bush’s spending increases (including the wars in Iraq and Iran and the expansion of Medicare benefits, among other things).... Energy costs. Greg Mankiw in fact believes that a system of energy taxes or cap-and-trad.... I am skeptical that investment is currently depressed by perceptions of an anti-business climate. But if the average businessperson does in fact have the perception that recent Democratic administrations have been worse for business than Republican administrations, I suggest setting aside campaign rhetoric and looking at actual history...

5) Baruch: Phase Transitions and the Googlephone II:

The fact that it IS happening is the only reasonable explanation I can come up with for the otherwise obviously insane step Google just took, which was to leak to the WSJ their upcoming “Googlephone“, a Google-branded Android phone made by HTC.... Google is the epitome of a company used to Extremistan-like environments; compared to how things worked in the old days in handsets, Android adoption has been excellent. But in Extremistan it’s not enough. Android app catalogues are neglected, and the best ones come from Google. It’s forced to write the apps itself because independent developers have limited resources; having to tailor apps for the different hardware specifications of all the different Android phones is too annoying, the ecosystem too fragmented. Much better to write for iPhone first.... Google know they need to do something, and the endgame may be rapidly approaching. Last week PALM reported, and the stock tanked; they basically admitted they were embarking on a death-or-glory spending spree, which if successful might see them make a bit of money for their investors, but probably not much. The downside of course is zero; Baruch has a hard time getting his PALM model to produce a positive result...

6) Alex Tabarrok: Pricing Copenhagen:

"U.S. President Barack Obama said the climate-change accord he reached with China and most of the 193 attending nations on Dec. 18 was an “unprecedented” first step to slow global warming. Environmental groups such as Friends of the Earth called it a failure... " And the market says? "European and United Nations carbon prices fell the most since February after the Copenhagen climate accord didn’t set targets that would boost demand for permits. European Union carbon-dioxide allowances for delivery in December 2010 declined 8.3 percent to close at 12.45 euros ($17.82) on the European Climate Exchange in London. Today was the first day of trading since the summit concluded Dec. 19. The agreed targets in the Copenhagen deal amount to a 'bunch of negotiation ranges' that investors had already factored in, Trevor Sikorski, an emissions analysts for Barclays Capital, said in a phone interview after returning to London from the Danish capital. 'It seems to be below even our modest expectations.'

7) Justin Fox: News about the Curious Capitalist:

This just went out on Businesswire. For those who don't believe in clicking through, it says I've got a new job, editorial director of the Harvard Business Review Group. I start Jan. 25, and I'll still be at TIME and writing this blog through Jan. 22. (I'm pretty sure the blogging over the next month will be a lot better than it has been for the past month, because I now no longer have a big secret I can't write about.) I'll keep writing occasional columns for TIME even after that, but my Internet home will be up north at My TIME colleagues are likely to hatch plans soon to replace or expand upon this here blog—I'll keep you posted if they tell me anything.

8) BEST NON-ECONOMICS THING I'VE READ TODAY: Will Wilkinson: Two Thoughts on Searle on Free Will at Google:

[T]the optical illusions to which we’re subject aren’t like extra little easter eggs evolution had to program in; they’re side effects of a certain kind of perceptual system that it was too costly to get rid of. And indeed, the reason you’d end up with this kind of illusion seems much more obvious than in he perceptual case. As Searle himself notes, the subjective sense of freedom is a “gappy feeling” between our premises and our decisions. But of course if you’ve got an information processing system that’s conscious, the part where it’s working to the conclusion will seem “gappy” or “open” because it hasn’t gotten there yet. To feel like the conclusion or the output of your mental process was compelled or inevitable, you’d have to be conscious of its result before the termination of the process that makes you conscious of its result. So there’s just no reason to suppose that the “gappy feeling” is something extraneous evolution had to pay some extra price to inject...

9) STUPIDEST THING I'VE READ TODAY: Outsourced to Invictus of The Big Picture: Luskin: Buy Stocks, Buy Citi (11/07) Sell Stocks (3/09):

I’ve been reviewing some older columns that stood out to me as giving especially bad advice during  the period near the market peak. One in particular stands out as especially bad — poorly reasoned, not well thought out, full of weak analysis. It was amongst the worst of the money losing financial advice Smart Money has ever run.... Don Luskin, a top Ideological Hack Hall of Famer, told us the 11 Reasons to Buy Now — this was in November 2007, a month AFTER the top, that Abu Dhabi’s investment in Citi was proof that Citigroup and the market were both cheap: “ADIA’s investment in Citi means that stocks have gotten very, very cheap. Mega-investors like that only step in with $7 billion when they are getting a deep bargain.” Or not.... It’s not just his pompous, arrogant, know-it-all attitude that is annoying about Mr. Luskin. Rather, its that all of his commentary seems to be that of a broken clock. He has been bullish as long as he has been on TV. The only time I have seen him bearish was yhis one exception: On March 6, 2009, he finally capitulated his bullish stance. Of course, this was RIGHT AT GENERATIONAL MARKET LOWS. Luskin wrote in Even Worse Than the Great Depression that: “We can’t blame President Obama for the mess he inherited. But we can definitely blame him for making it worse. Stocks are off 28.4% since his election, 15.2% since his inauguration, and 17.2% since his so-called “stimulus” bill was enacted. To say the very least, whatever he’s doing, it ain’t working.” And there is the partisan hackery he is so famous for. Since that politically inspired post, the S&P has rallied 63%. No word from DL as to what this rally means...

10) FROM THE ARCHIVES (not mine: Fafblog's): No to the Outsourcing of Torture!:

Fafblog! the whole worlds only source for Fafblog.: Giblets is outraged! Congressional Republicans are trying to sneak provisions into the 9/11 Recommendations Implementation Act of 2004 that would legalize the foul practice of "extraordinary rendition" - the transfer of suspected terrorists to other countries to be tortured for information. To pass the bill in this form would be inconceivable - for how can any red-blooded pro-torture Congressman justify outsourcing our nation's torture work when American torturers are losing their jobs every day? Giblets is a proud supporter of torture. After all, an increasingly pervasive federal government isn't going to be torturing people like you or Giblets - it will be torturing nothing but Very Bad People, or other people who have been foolish enough to share the same ethnic features or religious beliefs as Very Bad People. As a good honest citizen you have nothing to worry about! Americans should be proud that the state is willing to electrocute our genitals and pull out our nails in order to protect us. But it looks like our lawmakers aren't very proud of this rich new American tradition, approving it in the closet while pushing the labor force out to cheap foreign torturers in Pakistan! If we want to legalize torture, Giblets demands we go all the way and give torture some public, homegrown respect! Giblets wants to see the brave men and women of the 101st US Torture Brigades, Dick Cheney beating prisoners with rods on CSPAN, George Bush standing in front of a pile of naked and bleeding Iraqis under a "MISSION ACCOMPLISHED" banner!... Torture is as American as baseball, apple pie, preventive war, the equating of dissent with treason, and the principle of a commander-in-chief who stands above the law. So stand proud, Americans...