Weekend Must-Reads: Unions, Unemployment, Real Estate, Asset Allocation and Auditors

Some of the following links have been open for over a week, but have gotten buried under the onslaught of reading material I’ve accumulated since.  Regardless, the following articles are all very interesting and well-worth reading, unless you think ignorance is, in-fact, bliss.

The Economist, Enemies of progress: The biggest barrier to public-sector reform are the unions

“John Donahue at Harvard’s Kennedy School points out that the egalitarian culture in Western civil services suits those who want to stay put but is bad for high achievers. Heads of departments often get only two or three times the average pay. As Mr Donahue observes, the only American public-sector workers who earn well above $250,000 a year are university sports coaches and the president of the United States. Hank Paulson took a 99.5% pay cut when he left Goldman Sachs to become America’s treasury secretary. Bankers’ fat pay packets have attracted much criticism, but a public-sector system that does not reward high achievers may be a much bigger problem for America.”

Federal Reserve Bank of Atlanta: President Lockhart Describes “Multifaceted” Employment Challenges

Guess what? Between just structural issues and productivity increases, “normal” unemployment could be anywhere from ~5.5%-8%, far higher than the ~5% pre-crisis.  Here’s a thought: productivity has increased for the past ~10-20 years, but it took a shock like the crisis for firms to realize it them.  Anyone who’s worked in a large corporation and isn’t blind to what’s going on around them can attest, there is (was?) LOTS of fat to cut in the employment rolls.  The question is whether firms have cut-down to appropriately lean size, and if so, whether such realization of productivity gains are sustainable.

Saturday Must-Reads (Seriously!)

Bill Gross (not the Pimco one) on why Twitter suspended UberTwitter. I’m assuming the Twitter folks are just really pissed off/jealous/bitter that they didn’t have the (obvious) foresight to buy the most popular interfaces like UberTwitter and Tweetdeck (which, coincidentally, were both bought by Bill Gross’ firm UberMedia.

The other Bill Gross (the Pimco one) continues his long-running streak of rank hypocrisy, blaming the Financial Sector for its own problems, yet not taking any blame himself or for Pimco.  I really hate that guy, but you’ve gotta give him credit.  Pimco might have more influence over the Government than Citigroup or Goldman Sachs.  When you run the largest bond fund in the world, Washington HAS to listen to what you have to say, lest their policy decisions screw over the millions of Pimco fund holders.  His argument is a valid one though, even though he never, ever, ever admits to having any hand in the sort of short-sighted nasty behavior of the Financial Sector (emphasis mine):

As a profession we have failed miserably at our primary function – the efficient and productive allocation of capital: The S&L debacle of the early 1980s, the Asian crisis, LTCM, dotcoms, subprimes, Lehman and the resurrection, instead of the reformation, of Wall Street, are major sins of the modern era of money. Hang your heads, moneychangers …
Financiers have lost their high ground and, if truth be told, we began to lose it a long time ago when we figured out that money was more than a medium of exchange or a poor substitute for a store of value. We figured out a turbocharged way to make money with money and proclaimed ourselves geniuses in the process. Well, we’re not. … the only productive invention to come out of the banking industry over the past generation was the ATM.

Stuff I’m Reading This Weekend: Psy-Fi, Econ Profs, A Blast From My Past, and Blog(ger) Battles

• I’ve had this tab open for a while, but I strongly recommend reading (and bookmarking) The Psy-Fi Blog – “A Sideways look at psychology and finance.”  I’ve also added Psy-Fi to our blog roll.  One of many great articles I’ve read talks about the ways in which the financial services industry obfuscates products so as to give the impression of differentiation, when, in fact, most are largely commoditized.

• I’ve also been dabbling with Columbia/Barnard Economics Professor Rajiv Sethi’s blog, definition worth a look, although I don’t always agree with some of his opinions.

• A bit of an ego boost, although a little bittersweet, FINALLY we’re starting to see some progress, well, “progress” in two areas in which your humble author formerly dabbled: Smart Grid and WiMax.  (about half a decade ago I did some corporate development and strategy work at a tech company.)  I’m a long-time supporter of both technologies – especially the former – but the beautiful thing here is that they’re complementary; adoption of one drives adoption of the other, and vice-versa.  More specifically, Utilities can use WiMax in their Smart Grid infrastructure (instead of cell or proprietary networks) to transmit data and run their transmission, distribution, and metering networks more efficiently and cost-effectively.  Wide-spread industrial and enterprise adoption of WiMax will not only increase visibility of WiMax as a viable wireless technology, but drive-down costs to the point where we may finally see adoption in the consumer market.  I’ll try to get into a more nuanced discussion in a later post if there’s enough interest, but for now, all you need to know is that just like in the Million Dollar Man: We have the technology (we just have to freakin’ use it!)

• I don’t see the Felix Salmon v. Henry Blodget debate as one between two people, but one between two ideologies (or something); Blodget seems to represent the – what I believe to be mostly antiquated and discredited – “the more eyeballs the better, end-of-story” philosophy, while Felix understands that each set of eyeballs is not created equal, that is, its not just quantity, but quality.  I’m also a major proponent of blogs as a form of media, especially those blogs/bloggers committed to best-practices; minimal synthetic click/traffic “creation”, in-line link citation to external content, etc.  So, again, as they say in “Getting to Yes,” I’m not going with who’s right, but what’s right, and, in my not-so-humble opinion, the viewpoint espoused by Felix is correct.  I read Business Insider regularly, but as a reader, I absolutely abhor some of the bullshit practices the site employs:  Misleading, sensationalist headings, slideshows purely to generate clicks, effectively copying others’ content and representing it as their own, etc.  Luckily, every now and then one of the site’s writers – some of whom are pretty damn good in and of themselves – puts up something actually worth reading, but unfortunately, I have to parse through a dozen or more nonsense “articles” just to get there.  Look: I get it, Blodget is trying to make money.  That being said, I don’t see that business model succeeding, not when it doesn’t appear to differentiate, let alone acknowledge the simple fact that certain eyeballs are worth more than others, and should be treated as such.  Felix does a much better job explaining the issues (make sure to click some of the links he mentions as they’re a big part of the story, too), so I’ll end it with this: I wish no ill-will towards Henry or anyone else at Business Insider; quite the contrary, I wish them only the best of luck and the utmost success.