noisewar internetlainen - games, politics, and sarcasm

No doubt you've heard the news that Henry Paulson wants to tighten standards on banks now that the country is falling apart. Sit back, 'cuz I got a heck of a story for you:

While I am completely sympathetic to how much people hate our current President and his disastrously arrogant administration, it infuriates me to hear people claim Bush brought about this recession. We've been in a recession since Nixon, we just didn't know it yet. The worst is how people believe that Clinton balanced the budget, and that Bush subsequently ruined it. How slick is Willy. I think I need to explain exactly why this is an outright urban legend.

The whole charade depends on the semantics of accounting. We actually have two different debts that add up to become the National Debt. They are Public Debt and Intergovermental Debt. The first is what the people owe, the second is what the government owes itself (that the people will repay). The government owes itself? Right, the government, much like our brains, is actually several semi-independent entities that interact to govern, and therefore can take loans from each other as if they were separate.

What Clinton did was borrow from the government (Intergovernmental Debt) to pay off Public Debt. If you check the U.S. Treasury records, National Debt continued to increase throughout the Clinton administration, albeit slower than the previous presidencies. How in the world can increasing National Debt be considered a budget surplus?

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Here's a choice bit of wisdom from Warren Buffet's Q&A with Emory's Goizueta Business School and McCombs School of Business at UT Austin. He and Charles E. Kirk of The Kirk Report have been the people I look up to the most in investing, because they outperform everyone else yet remain humble, and morally uncompromised. This is Warren's take on happiness and success:

I enjoy what I do, I tap dance to work every day. I work with people I love, doing what I love. The only thing I would pay to get rid of is firing people. I spend my time thinking about the future, not the past. The future is exciting. As Bertrand Russell says, “Success is getting what you want, happiness is wanting what you get.” I won the ovarian lottery the day I was born and so did all of you. We’re all successful, intelligent, educated. To focus on what you don’t have is a terrible mistake. With the gifts all of us have, if you are unhappy, it’s your own fault.

I know a woman in her 80’s, a Polish Jew woman forced into a concentration camp with her family but not all of them came out. She says, “I am slow to make friends because when I look at people, I have one question in mind; would they hide me?” If you get to be my age, or younger for that matter, and have a lot of people that would hide you, then you can feel pretty good about how you’ve lived your life. I know people on the Forbes 400 list whose children would not hide them. “He’s in the attic, he’s in the attic.” Some of them keep compensating by joining board seats or getting honorary degrees, but it doesn’t change the fact that no one will give a damn when they are gone. The most powerful force in the world is unconditional love. To horde it is a terrible mistake in life. The more you try to give it away, the more you get it back. At an individual level, it’s important to make sure that for the people that count to you, you count to them.

What if you could buy 10% of one of your classmates and their future earnings? You wouldn’t buy the ones with the highest IQ, the best grades, etc, but the most effective. You like people who are generous, go out of their way, straight shooters. Now imagine that you could short 10% of one of your classmates. This part is usually more fun as you start looking around the room. You wouldn’t choose the ones with the poorest grades. Look for people nobody wants to be around, that are obnoxious or like to take all the credit. If you have a 500 HP engine and only get 50 HP out of it, you’ll be beat by someone else that has a 300 HP engine but gets 250 HP output. The difference between potential and output comes from human qualities. You can make a list of the qualities you admire and those you despise. To turn the tables, think if this is the way I react to the qualities on the list, which is the way the world will react to me. You can learn to turn on those qualities you want and turn off those qualities you wish to avoid. The chains of habit are too light to be felt until they are too heavy to be broken. You can’t change at 60; the time to look at that list is now.

Tony Hawk 9: Proving Grounds for the PS2 has passed first submission! Hooray! Yeah yeah Halo 3 blah blah... Meanwhiles, I've been moved onto the next unannounced project, and was brought on full-time. Finally, I get a chance to be in game design from pre-production, and there's a heck of a lot of work to be wrassled.

While I did get a small breather, I realize that game designers are essentially busiest at the beginning and the end of the development cycle. First to make the stack of rules and concepts that will be made... then later on to corral the shards leftover by artists and engineers into a seemly, playable, lump of broken dreams. I'm just kidding, but you get the idea. In fact, it's extremely exciting to wrangle ideas to appeal both to our client, who's given us their IP, their baby, and our internal machinations for such games as go-for-broke developers. Learning exec speak, crafting proposals that we won't hate ourselves for later, "prototyping" UI ideas, and just trying to capture the essence of an IP I don't fully understand, these are the challenges I'm learning from everyday.

Meanwhiles in the rest of the world, you've probably seen the froth in the stock market when the Fed announced an interest rate cut of half a point. I was careful to avoid trying to jump in recklessly when I saw how that day rose on such weak volume, and since the rally it seems like the traders have lost much steam. Chances are, we'll see another rate cut by the end of the year. Helicopter Ben's strategy will be to pre-empt recessionary talk with offensive injections of liquidity. Stock markets will rally until the weight of a collapsing housing market pulls it down. I will try to profit from it all.

As Tokyo Game Show raged into the land of the rising yen, I tried to skim off of the abundant Dualshock 3's rumble rumors by buying Immersion Corp. (NYSE:IMMR) stock. It didn't pan out. I got in and got out with a 4% gain, never looked back. These kinds of speculative plays, while fun, are dangerous even for people who think they know everything in their own industry. Caveat investor.

I've been flinching since last month but the blow didn't come til this week. The stock market took a beating this past week, and I was fortunate to have put myself in a safe place before it happened. Well, relatively safe. My 5-year cyclical safety portfolio has been losing half of what the S&P 500 has been losing, which is comforting considering it still has some dividend help, but I made a bad decision on keeping some real estate. Overall, I've lost the majority of my gain since two months ago, but it wasn't much to begin with. The bulk should still come from dividends and long-term growth.

On my trading portfolio, I put myself in a very safe place with international stocks and the Brazillian index, but putting money on gold as a hedge hasn't worked out. The problem is that the market is not falling on inflation data or other economic symptoms. Rather it's a adverse reaction to the end of cheap money, the credit that's been fueling leveraged buy-outs and sub-prime mortgages. In this situation, it's a general aversion to risk and credit, and therefore gold suffers as well.

Other than that, I've been doing very very well this year. However, my inclination is that the stock market is going to get worse before it gets better. The fact that the market pierced its trendline so fiercely without any sign of a let up by Friday is not good. There aren't too many safe spots to stand at the moment.

-------------- Original message ----------------------
From: "noisewar"
>
> Dear Prof. Chen and co.,
>
> I have been a longtime reader of your site, and it has been the greatest
> influence on my interest in macroeconomics. Your analysis is exceptional,
> and very entertaining, timely, and readable.
>
> I had a question about your views of future Japanese policies. Since it is
> of the website's opinion that the propping of the high Dollar comes from a
> collaborative effort, do you think that after their recession, the
> Japanese are still as eager to depreciate the yen? In other words, is the
> U.S. in danger of being at the mercy of a new Japan switching from exports
> to services, or will the old relationship resume? Or perhaps could China
> take over that role? Who is going to prop the dollar now?
>
> Thanks you sirs, and I commend you again on an impressive site!
>

Dear Noisewar:

Sorry to be late for the reply. I must confess that I am a lazy viewer of
e-mails. As for Japan, yes, Japan has no choice but to prop up the dollar. As has
been said in article 1 and many other places, the first phase of propping up
dollar has been done with Japan's super low interest rate that has started in 1995;
it ushered in the now infamous yen carry trades and pushed the dollar high
until 1998.

In the dollar debacle of 2003 to 2004, yen carry trade played not much
role since FED has lowered interest rates to around 1% (Japan was 0% at that
time), so Japanese government spent 400 billion dollars to prop up dollar. After
that phase, it has been the turn of FED to prop up dollar by raising interest
rate and reinduced yen carry trades. The danger of constantly propping up dollar
is now vividly shown as yen carry trade unwound, and the global stock markets
were hit one by one in a chain reaction.

Japan is the closest ally of USA, and cannot afford to see USA goes down the drain. The situation of dollar is now very touchy. If FED wants to lower the interest rate from whatever reason, it must ask Japan to prepare for another dollar buying frenzy, otherwise dollar will suffer a total collapse and the current globalization scheme will come to its end. I must remind you that my view of the globalization is totally different from tranditional economic theory. Actually I do not care very much about the modern economics because I think it only applies to an isolated economic entity and worked well in pre-globalization era, but has
failed miserably since globalization took hold.

With best regard.

Chih Kwan

The last few days, we saw global markets take a frightening stumble. Beginning with the Shanghai Index (FXI), falling 8.8% by day's end, Japan, Europe, and the Dow took smaller but equally rough spills. Taiwan, on a holiday, didn't see the gut punch until the next day. NYSE computers, unable to keep up, were backed up until a server switch caused the ticker to plummet with backlogged orders, exacerbating the situation and dropping stop levels all around. Welcome to the digital age.

The bright side of the story is that the ticker has recovered about half the loss. But as a lesson in volatility, I hope it was heard. Stories of people in China borrowing against mortgages so that they could "avoid risk" by buying only one stock... well let's just say the market is healthier when homebrew speculators are spooked.

It was also no surprise that the correction came on the heels of Bank of Japan's tightening of interest, and thusly putting the dent on global liquidity. I'm going to set my prediction in solid stone right now. After this correction, markets will continue at the same pace, and any further corrections will be saved by the influx of private equity (read: buyouts from the blue). Once they're involved, volatility will be insane, and they will move in and out of the market at will as the worst hedge funds do. Personal investors beware: I think it is impossible to ignore the technological mechanics of trading anymore. This ain't your daddy's Buffet's exchange, and the horizon for fundamentals to presevere in is longer and choppier than before.

Nothing in gaming to talk about, other than that we (personally) are seeing new prospects I hope to talk about soon. In the meantime, enjoy this very interesting economics article:

Taipei's Magic Ring