Friday Special 78

Defining natural beauty from Natural Geographic

Progress, South American style

Tornado forming during football game

The Window Tax

1696-1851. The Pharaohs would not have approved.

My kind of fun

Volkswagen’s shares more than doubled on Monday after Porsche moved to cement its control of Europe’s biggest carmaker and hedge funds, rushing to cover short positions, were forced to buy stock from a shrinking pool of shares in free float.

VW shares rose 147 per cent after Porsche unexpectedly disclosed that through the use of derivatives it had increased its stake in VW from 35 to 74.1 per cent, sparking outcry among investors, analysts and corporate governance experts.

Shares in VW closed up €309.15 at €520, giving it a market capitalisation of €153bn, more than all the other US and European carmakers put together.

The FT has the full story, hat tip MR.

Merv is surprised a hedge fund hadn't pulled this one over other hedge funds in the past (although granted, it would need to be on something smaller than VW). I am surprised too, but who knows - maybe someone somewhere has just updated their bag of tricks.

Does any reader know what happens if you have borrowed shares to short and *can't* give them back?

Postscript: There's something about the commentary on the financial crisis that reminds me of sports interviews; firstly, the lack of content and repetition of cliches, secondly the use of language:

“This was supposed to be a very low-risk trade and it’s a nuclear bomb which has gone off in people’s faces,” said one hedge fund manager.

If it's a nuclear bomb it doesn't need to go off in your face, and if it goes off in your face it doesn't have to be nuclear.

The normal distribution

This beautiful image comes courtesy of W. J. Youden.

I've been reading Edward Tufte's superb The Visual Display of Quantitative Information - perhaps the most perfect book I've ever come across. Almost every page is a revelation, so expect me to be posting more of the wonderful graphs Tufte has collected in the future.

Friday Special 77

Schadenfreude

KATMANDU, Nepal (AP) — The chief of the state-owned utility company said Thursday that former King Gyanendra and his relatives will be forced to pay outstanding electricity bills totaling more than $1 million.

Gyanendra and his relatives have not paid the state-owned Nepal Electricity Authority since he seized absolute power in 2005.

Arjun Karki, chief of the company, said 22 buildings and compounds are covered by the bills. Many are private residences of the ex-king and homes belonging to his daughter, sisters and cousins. Some of the buildings on the list, like the royal palaces, have since been nationalized by the government.

The company has given a 15-day deadline for the bills to be paid, Karki said. If they remain unpaid, the electricity will be cut off, he said.

The UFO files

Page 172: Claim in a newspaper article that ‘a man from the government’
visited two young girls in Leeds who reported seeing a UFO landing.

Page 173: Cutting from the Sunday Mirror 17 May 1987 quoting the Admiral Lord Peter Hill-Norton, a former Chief of Defence Staff, who had become a UFO believer on retirement from the MoD.

Pages 189 - 202: This section of the file contains a full copy of BUFORA’s 1986 publication Mystery of the Circles, a pamphlet co-authored by Jenny Randles and Paul Fuller on the crop circle mystery.

Page 214: In May 1985 Ralph Noyes wrote to his successor as head of DS8 (which became Sec(AS) in 1985) asking if MoD had retained copies of “interesting gun-camera clips” taken by RAF aircrew during the 1950s that “suggested the existence of a puzzling phenomenon.”

This is from the Highlights Guide to The UFO files just released to the National Archives by the Ministry of Defence, containing reported sightings of UFOs from 1986-1992.

Read all about the near collision of a passenger jet and UFO in Kent and the pilots of a US Air Force jet being ordered to shoot down a UFO over East Anglia, and make sure you wander through the rest of the excellent National Archives website. Who knows, maybe you end up with a PhD in economic history.

I like it when you talk dirty

I have always thought that the issue of the relationship between financial markets and the "real economy" was really deep. I thought that it was a critical part of macroeconomic theory that was poorly developed. But the economics profession for the past thirty years instead focused on producing stochastic calculus porn to satisfy young men's urge for mathematical masturbation.

This is Arnold Kling, in a very well written post.

Working paper 666

Facts about the financial crisis:

1. Interbank borrowing and lending rates have risen to unprecedented levels relative to U.S. Treasury Bills.
2. Several major financial institutions have failed.

Myths about the financial crisis:

1. Bank lending to nonfinancial corporations and individuals has declined sharply.
2. Interbank lending is essentially nonexistent.
3. Commercial paper issuance by nonfinancial corporations has declined sharply and rates have risen to unprecedented levels.
4. Banks play a large role in channeling funds from savers to borrowers.

All four debunked in 2 pages of text and a collection of graphs. Required reading, ht Alex Tabarrok.

The importance of being clear

A formatting fubar involving an Excel spreadsheet has left Barclays Capital with contracts involving collapsed investment bank Lehman Brothers than it never meant to acquire.

Working to a tight deadline, a junior law associate at Cleary Gottlieb Steen & Hamilton LLP converted an Excel file into a PDF format document. The doc was to be posted on a bankruptcy court's website before a midnight purchase offer deadline on 18 September, just four hours after Barclays sent the spreadsheet to the lawyers. The Excel file contained 1,000 rows of data and 24,000 cells.

Some of these details on various trading contracts were marked as hidden because they were not intended to form part of Barclays' proposed deal. However, this "hidden" distinction was ignored during the reformatting process so that Barclays ended up offering to take on an additional 179 contracts as part of its bankruptcy buyout deal, Finextra reports.

The Register has the full story. As Merv has always warned, 'horrible things happen when you hide cells in excel'.

I see this as a manifestation of a wider lack of education on the importance of communicating information efficiently. The Spartans, Tufte, Strunk and White, the Economist, Picasso and numerous econometricians have done a lot to improve things, but management-speak, TV advertising and other such phenomena show we still have a long way to go.

Friday Special 76

Think tank of Julia Fullerton-Batten - Award winning photographer

What if the whole world could vote in the US Presidential election? BetaVota 2008

Paul Krugman, Nobel Laureate

I suddenly realized the remarkable extent to which the methodology of economics creates blind spots. We just don't see what we can't formalize. And the biggest blind spot of all has involved increasing returns.

That's Krugman from an essay on how he works. Here is a taste of his dark side. I also know many people who will agree that George W. Bush, apart from all his other failings, also managed to make the world a much more boring place via his effect on Krugman.

Reading The Accidental Theoristat a tender age was a revelation for me, and it started a chain reaction that changed my life in a way no other book has. Paul Krugman, thank you; and the most heartfelt congratulations!

Friday Special 75

More pictures that capture the essence of the moment

Heaven on earth: Maldives

Get out and play

Kill your dictator

In “Hit or Miss? The Effect of Assassinations on Institutions and War,” Olken and Jones looked at the effects of political assassination, using a strict empirical methodology that takes into account economic conditions at the time of the killing and what Olken calls a “novel data set” of assas­sination attempts, successful and unsuccessful, between 1875 and 2004.

Olken and Jones discovered that a country was “more likely to see democratization follow­ing the assassination of an autocratic leader,” but found no substantial “effect following assassinations—or assassination attempts—on democratic leaders.” They concluded that “on average, successful assassinations of autocrats produce sustained moves toward democracy.”

From a profile of Ben Olken in the American. And here's the paper (free access).

Video of the day

Lehman's Richard Fuld makes the case for a long-dated compensation system.

Addendum: And this, ladies and gentlemen, is what passes for journalism.

Friday Special 74

I.O.U.S.A. One Nation. Under Stress. In Debt.

Google Maps now features train schedules

Mastering the art of photography

Who killed the economy?