Heckman on early childhood education

Interview with Nobel Laureate James Heckman on early childhood education

PBS:  It Pays Off to Invest in Early Education, Says Nobel Economist Who Boosts Kids' IQs

Here is a summary of his work

David Warsh:  Early Childhood: the Nub of the Problem

and here is his website

Heckman

this is important stuff.

Likely the first and last time that I blog about NASCAR..

NBC Sports:  Danica's Daytona impact important off the track
Joe Posnanski writes that a Danica Patrick win at this year's Daytona 500 (she has the pole position) will mean much more than a notable "first woman to win Daytona".  Patrick serves as a role model to his eight year old daughter Katie.  Not because Katie will grow up to be a race car driver but because by Patrick being one of (and perhaps the) best at she does she is serving as a model for Katie that she can aspire to do anything she wants with her life.  I have never been a NASCAR fan but I may even watch some of tomorrows race.  I now have a personal interest in it.  I want to see Patrick win ...because of what a win will mean to thousands or millions of young girls like Katie.

This got me to thinking.  What has a Barack Obama presidency meant for millions of young African American children?  What would a Hillary Clinton presidency mean for millions of young girls?  How much impact do role models have on a child's future achievement?  Looking around the internet it is surprisingly difficult to find polls of children's role models.

Here is a poll of 845 readers of Highlights Magazine asking "who is a person you admire and respect".  Top responses were friends (28.4%), teachers (17.2%), and family members (12.9%).  Celebrities got less than 5% of the vote.  Here is a discussion of these results.

Here are the results from a poll of school children (no age range or sample size) as to who their favorite movie role model is.  Number one is Hermione Granger from Harry Potter.

Here is a poll of 1,121 children ages 8-12 on their favorite celebrity role model.  Taylor Swift edges out Justin Bieber.  I can't find the original poll and the article does not make clear what the question asked was exactly.

Here is a poll of 13-17 year olds asking them to identify the person whom they admire most today as a role model, other than their parents.  This is targeting a slightly older group but we do get detailed results.  To summarize the results; another family member (37%), teachers and coaches (11%), friends (9%), religious leaders they know personally (6%), entertainers (6%), sports heroes (5%), political leaders (4%), faith leaders (4%), business leaders (1%), authors (1%), science and medical professionals (1%), other artists (1%), and members of the military (1%).  "The high-profile leaders most commonly named were President Obama (3%) and Jesus Christ (3%). Other “celebrities” mentioned by multiple teenagers in the study included entertainers Tyra Banks, Rob Dyrdrek, Lady Gaga, Demi Lovato, Paul McCartney, Taylor Swift, Steven Spielberg and Oprah Winfrey. The only athletes who earned multiple mentions were LeBron James, Peyton Manning, Michael Phelps, Mike Tyson and David Wright. In the spiritual domain, besides Jesus, teens were most likely to admire Mahatma Gandhi and the Pope. Social and business leaders garnering teen attention included Walt Disney, Bill Gates, and Martin Luther King, Jr. The writers who captured the imagination of teens included Yumi Tamura (Japanese Manga artist) and Alan Moore (English comic book writer)."

The results above suggest that youngsters do not model themselves on celebrities but instead look to parents, relatives, and friends for role models.  I tend to think that the result understate the impact of famous people on children - but I don't really have any hard evidence.  While looking through Highlights State of the Kid Poll 2011 I did find the below.  Perhaps after Sunday it will change.  Go Danica!

JFK and the civil rights movement

AP:  Despite questions, JFK holds important role in history of civil rights movement
Interesting article about about JFKs relationship to the civil rights movement and specifically about how his legacy is perceived within the black community.  Here is an article by Robert Dallek which describes the evolution of JFKs stance on civil rights.  One point the AP does not fully address is the mixed support for civil rights within the the Kennedy administration.  J. Edgar Hoover was openly hostile to racial integration and the civil rights protesters.  Robert Kennedy - like his brother - alternated between political pragmatism and veiled moral support for the protesters.  However  others within the administration - notably Harris Wofford, John Seigenthaler, and Burke Marshall - were firmly on the side of Dr. King and the civil rights movement.

Eminently sensible?

New Yorker:  Letter From California - Home Economics
 Mortgage Resolution partners has an idea for solving the foreclosure crisis - localities should condemn underwater properties (properties whose market value is below the principle of the mortgage on the property) and then reissue the mortgages at a lower principle value.  Their argument goes something like this:

A homeowner gets a USD 300,000 mortgage to finance a home purchase.  After he buys the house the value of the home falls to USD 200,000.  Who is now at risk?  Answer - whoever is the current holder of the mortgage.  Should the homeowner continue to pay the mortgage then eventually the mortgage holder will get paid back.  However should the homeowner default and be foreclosed upon then the mortgage holder will take possession of an asset only worth USD 200,000 and will hence realize a USD 100,000 loss - at least.  The process of foreclosing and reselling incurs some cost as well so the loss to the mortgage holder is greater than USD 100,000.

From the above argument it is easy to see that if a property goes underwater then it is in the mortgage holders interest to keep the homeowner in the house and paying the mortgage.  In fact faced with an imminent default by the homeowner it should be in the mortgage holders interest to reduce the principle value of the loan down to the market value of the home rather than foreclose and realize the same loss plus some additional charges.  Some banks have in fact been reducing principle values (see here) but there are three outstanding problems:

1. The bargaining problem.  If a homeowner know that a mortgage holder will reduce the principle value of his loan if the homeowner is about to default then it is in the homeowners interest to threaten to default.  How does the mortgage holder distinguish between a homeowner who really is about to default and one who would continue paying the existing mortgage?
2. Many mortgages (especially recent troubled vintages) are not currently held by a single party but were sold off to SPVs who sliced and diced the cash flows into RMBS and sold the resulting securities off to many investors.  Modifying these mortgages prior to an actual default may be very difficult.
3. If a mortgage issuer reduces the principle then he must realize the loss from an accounting standpoint.  If the homeowner defaults and the mortgage issuer sells off the property at market value below principle value then the mortgage issuer must realize the loss from an accounting standpoint.  However if the mortgage issuer can keep the homeowner paying the original mortgage then he does not need to realize any loss - at least not yet.  This clearly produces a bad incentive to push the problem off into the future.

Mortgage Resolution Partners plan goes like this.  The locality would use its power of eminent domain to seize the mortgage.  They would pay the current mortgage holder ( SPV / bondholder / ) 80% of the current market value of the property (which would be USD 160,000 in the above example).  The locality would then arrange for a new mortgage with principle value equal to 95% of the current market value of the property (which would be USD 190,000 in the above example).  The 15% difference between the value of the new mortgage and what was paid to the former mortgage holders would be divided between the locality, the issuers of the new mortgage, closing costs for the new mortgage, and USD 4,500 for MRP.  Mortgage holders hate this plan for two reasons

1. The bargaining problem again.  Why reduce the mortgage for a homeowner who would have paid the full principle value off anyways.  The homeowner purchased an asset that declined in value and now the mortgage holder is being penalized for it.
2. The mortgage holder only receives 80% of the current market value of the property.  MRP argues that 80% is where Fannie and Freddy have marked their own portfolio.  The mortgage issuers argue that MRP and the localities are just stealing 20% of the principle value for themselves.
3. The mortgage issuers are forced to realize the loss today.  They don't come right out and say this but it is obviously a disincentive.

Iran->Turkey Gas For Gold Trade

Reuters:  Turkey to Iran gold trade wiped out by new U.S. sanction
"Turkey, Iran's biggest natural gas customer, has been paying Iran for its imports with Turkish lira, because sanctions prevent it from paying in dollars or euros.  Iranians then use those lira, held in Halkbank accounts, to buy gold in Turkey, and couriers carry bullion worth millions of dollars in hand luggage to Dubai, where it can be sold for foreign currency or shipped to Iran.  Halkbank had also been processing a portion of India's payments for Iranian oil.  A provision of U.S. sanctions, made law last summer and implemented from February 6, effectively tightens control on sales of precious metals to Iran and prevents Halkbank from processing oil payments by other countries back to Tehran, bankers said...Trade in Turkish gold bars to Iran via Dubai was already drying up as banks and dealers declined to buy the bullion to avoid sanctions risks associated with the trade...Turkey like China, India and Japan is heavily dependent on imported energy and, while it has cut back on oil from Iran, has made clear it cannot simply stop buying Iranian oil and gas.  "With so many restrictions, Iran's cash may accumulate in Halkbank accounts... they may have difficulty getting some of that money out of Turkey," another senior Turkish banker said." "

per here (see chart reproduced below) it appears that Turkey is getting 20% of their natural gas imports from Iran.  That is their second largest import source behind Russia.  I did not realize that Turkey was so dependent on Iranian gas...hmmm I wonder if Israel could export natural gas from the new Leviathan field to Turkey.  That would be a win win for Israel as they get a new export market and simultaneously stick it to Iran...A quick Google of "Israel Leviathan exports Turkey" and it seems I am not the only one thinking this....

TodaysZaman:  Turkey's Zorlu Group pushing Israel to approve gas exports
"The Zorlu Group, one of Turkey's biggest holdings, is lobbying Israeli authorities to approve a possible gas sale to Turkey despite icy relations between the two nations.  Israel's Haaretz claimed on Thursday that the Zorlu Group is planning to build an undersea pipeline from Israeli-owned offshore gas rigs to Turkey's south coast, which will be shortest and cheapest gas pipeline project Turkey has ever been part of.  The daily reported that the Turkish conglomerate has been working in recent months to convince the Israeli government and Israel's Leviathan gas field partners to approve energy exports to Turkey...Zorlu's plan is to lay an undersea pipeline from the Leviathan field 130 kilometers off Haifa to Turkey's south coast. The pipeline would deliver between 8 billion and 10 billion cubic meters of gas annually. The Zorlu Group has assets worth $1 billion in Israel...The Leviathan gas drill, 130 km (80 miles) off the port of Haifa, is the world's biggest deepwater gas find in the past decade. Israel could earn at least $150 billion in gas revenues."

By country of origin (in mcm)	2006	2007	2008	2009	2010	%Total 2010
Azerbaijan	..	1258	4580	4960	4521	11.89%
Iran	5594	6054	4113	5252	7766	20.42%
Russia	19316	22752	22962	19473	17575	46.21%
Algeria	4130	4205	4148	4487	3907	10.27%
Egypt					270	0.71%
Nigeria	1100	1396	1017	903	1189	3.13%
Qatar					1845	4.85%
Trinidad & Tobago					240	0.63%
Other	76	1425	333	781	724	1.90%
Total	30219	35832	37153	35856	38037	100%
%Total Consumption	96.91%	97.90%	101.39%	102.11%	99.78%
c = confidential; - = nill; ..= not available
Source: Natural gas information 2011 & OECD/IEA, 2011

Filiblather

Washington Examiner:  In Hagel filibuster, all eyes on McCain
"Hagel opponents will also seek to convince McCain’s allies, Sens. Lindsey Graham and Kelly Ayotte, that they should continue to filibuster Hagel even if their demands on Benghazi have been (somewhat) satisfied.  Indeed, in the absence of any Democratic defections, the anti-Hagel group needs to keep McCain, Graham, and Ayotte — plus every other Republican who voted against Hagel on Thursday — in the fold if they expect to use the filibuster to actually stop the Hagel nomination."

Strange article by Byron York.  It focuses on the Republicnans strategy for stopping the Hagel nomination.  However nowhere in the article is there any reference as to "why" the Senate Republicans would want to stop the Hagel nomination.  It seems to be taken for granted that they would want to stop his nomination.

My opinion.  Hagel always seemed like a - shoot straight and let the chips fall where they may - type of guy which can be rare in Washington - for that he deserves a lot of respect.  Would he be a good Secretary of Defense?   It is not obvious to me that he would or would not be.

Comings and Goings...

Bloomberg:  Michael McGlone, Commodity Director, Left S&P Dow Jones Indices
Mike McGlone is a smart and creative guy.  I worked with him at ABN AMRO and always found his takes on the market well thought out.  Hope he lands on his feet.

But I ask...

TPMMuckraker:  Feds File Charges Against Jacksons, Husband And Wife
"After months of rumors and reports, the federal charges against former Rep. Jesse Jackson Jr. (D-IL) and his wife, former Chicago Ald. Sandi Jackson, became official on Friday.  A document filed in U.S. District Court for the District of Columbia alleged that Jackson Jr. used about USD 750,000 in campaign funds for his personal benefit...In detailing the charges against Jackson Jr., prosecutors alleged, among other things, that the former lawmaker used campaign credit cards to make USD 582,773 in personal expenses, and directly used USD 57,793 in campaign money for personal expenses. Among the items purchased were a USD 43,350 gold-plated Rolex watch, USD 9,588 worth of children’s furniture, and USD 5,150 worth of fur capes and parkas purchased by an unnamed co-conspirator. Other items purchased include tens of thousands of dollars worth of Bruce Lee memorabilia, Michael Jackson memorabilia, Malcolm X memorabilia, and Jimi Hendrix memorabilia, plus items described by prosecutors simply as “Michael Jackson hat,” “Michael Jackson fedora,” and “Michael Jackson and Eddie Van Halen guitar.” "

If true this is very disappointing.  I worked on his first campaign and he always seemed like a pretty good guy.  But I ask...what sort of Bruce Lee memorabilia?   That actually sounds pretty cool.

Alternative Histories

Alternative history is "a genre of fiction consisting of stories that are set in worlds in which history has diverged from the actual history of the world."  Like what would have happened if the South had won the Civil War or if the US did not enter World War II."

And then there is this.  Yeah it was three years ago when she said this - but it is still as idiotic today as it was then.

Just for the record

• it was "Smoot-Hawley" not "Hoot-Smalley".  
• Smoot-Hawley was not enacted under FDR.  It was enacted under Hoover - two years prior to FDR's election.  
• Senator Reed Smoot and Rep. Willis Hawley were both Republicans.
• In the Senate 39 Republicans and 5 Democrats voted for Smoot-Hawley.  In the House 244 Republicans and 20 Democrats voted in favor of the bill.  (see here)  
• As part of FDR's 1932 campaign he pledged to reduce tariffs.  In 1934 the Democratic House and Senate passed the Reciprocal Trade Agreements Act to roll back the tariff.
• Coolidge became president in August of 1923.  Roosevelt  took office in March 1933.  From the graph below of Industrial Production its pretty clear that Roosevelt inherited a much worse situation.

So she got everything correct in the story..except for all of the facts.  As a work of alternative history this one seems kind of bland.  I am not seeing a best seller here.

A hopeful sign?

Bloomberg:   Egypt Pound Drop Slows as Central Bank Curbs Move, Boosts Supply
"The Egyptian pound weakened the least in almost six weeks at an auction today after the central bank introduced new curbs to slow the depreciation and offered more U.S. currency. The benchmark dollar bonds rose...The regulator auctioned USD 49.2 million at a weighted average price of 6.7043, compared with 6.702 a dollar yesterday, according to its data on Bloomberg. Banks received 43 percent on average of what they sought, up from 24 percent yesterday, the data show. The central bank sold USD 172 million at this week’s sales, a three-week high, according to the data."

or maybe just a breather?

"“The central bank’s measures this week have helped reduce the gap between the official and parallel exchange rates and lower the panic on the street with respect to the currency,” Mohamed Kotb, regional asset management director at Cairo-based Naeem Financial, said by phone...“Fundamentally, nothing has changed as far as Egypt’s macroeconomic situation, which remains dire,” Kotb said."

I am not so sure about that. If the Central Bank has engineered a devaluation without a run on the currency that is certainly a positive.  It may not cure the overall macro situation but it prevents a bad situation from getting significantly worse.

USD 10 Trillion is a big number...

FT:  Crunch feared if collateral rules enforced
"New clearing regulations could suck in USD 10tn of safe assets...European parliamentarians this week debated plans to make safer the financial derivatives industry – an essential cog in the global economy – where the notional amounts outstanding on over-the-counter deals exceed USD 600tn. Regulators want more trades processed through transparent exchanges and cleared through “central counterparties”, back office institutions that stand between two parties in a trade, ensuring they are completed even if one side defaults...Regulators are pushing for non-centrally cleared trades to be backed by high levels of collateral, such as cash or government bonds. This is where the USD 10tn figure comes in. It is the amount of extra collateral that could be required according to estimates by the International Swaps and Derivatives Association...A separate IMF paper published last week by Manmohan Singh, ...puts the total additional collateral requirements resulting from regulatory changes at between USD 2tn and USD 4tn – less than the USD 10tn figure cited by the ISDA derivatives lobby, but still the same order of size, for instance, as the European Central Bank’s balance sheet...
But central banks are also, inadvertently, restricting collateral supplies. Mr Singh points out that bond purchases by the Swiss National Bank to prevent its currency’s appreciation “withdraw the best and most liquid collateral from the [neighbouring] eurozone”. Similarly, Fed purchases of US Treasuries and mortgage backed securities “could silo over USD 1tn additional good collateral in 2013”.

Quoting myself from a September 9, 2012  post

"My second thought was:   Centralized clearing has huge advantages in terms of risk mitigation.  However if some of our current economic problems are due to a shortage of high grade collateral (see link and abstract below) then the move to centralized clearing may also have some significant negative consequences as it further strains the supply of high quality collateral.

Ricard Cabellero - On the Macroeconomics of Asset Shortages

Abstract:   The world has a shortage of financial assets.  Asset supply is having a hard time keeping up with the global demand for store of value and collateral by households, corporations, governments, insurance companies, and financial intermediaries more broadly.  The equilibrium response of asset prices and valuations to these shortages has played a central role in global economic developments over the last twenty years.  The so-called "global imbalances", the recurrent emergence of speculative bubbles (which recently have transited from emerging market, to the dot-coms, to real estate, to gold...), the historically low real interest rates and associated "interest rate conundrum," and even the widespread low inflation environment and deflationary episodes in parts of the world, all fall into place once one adopts the asset shortage perspective. "

I am not sure that I would attribute as much as Cabellero does to the demand for high quality assets but there probably is something to his story.  And in case you were wondering, threatening to default on US Treasury debt does not help the situation.

Venezuela's (first) devaluation

NYTimes:  Venezuela Devalues Currency by a Third Amid Shortages and Inflation

"The currency, the bolívar, will be set at 6.3 to the dollar. It had been set at 4.3...Government spending soared last year during the campaign to re-elect Mr. Chávez, leading to a large deficit, even though, at more than USD 100 a barrel, the price of oil is very high...Pressure to devalue had been building for months, as the black market exchange rate rose to more than four times the official rate. The imbalance was evident in the prices of many goods. A Big Mac at McDonald’s costs 70 bolívars, or USD 16.27, at the official pre-devaluation rate.  But the devaluation will also make imported goods more expensive, which will probably make inflation worse. Inflation for the 12 months ended on Jan. 31 was 22.2 percent, one of the highest rates in Latin America" 

Bloomberg:  Chavez Risks Backlash After Venezuela Devalues Bolivar 32%

What is going on here?  The Venezuelan (Chavez) government went on a spending spree last year prior to elections.  Despite having the world's second (or perhaps first?) largest oil reserves they are now drowning in red ink.  Oil is priced in US Dollars so the government receives USD for the oil that the state oil company PDVSA sells to the world market. Venezuelan importers / exporters swap USD for Bolivar's through the Venezuelan Central Bank's Cadivi system.  By devaluing the Bolivar that means for each USD the government receives for oil they will get more Bolivars which they can use to cover their deficit.  But the cost is that importers will now have to pay more Bolivars for each USD and hence the price of imported goods will go up.  So effectively the Venezuelan government is taxing imports to cover their deficit.

Here is betting there is more to come.  Their economy is a mess.

Currency crisis update

Egypt Independent:  Central bank cancels currency auction, to announce new mechanism on Monday
 "In a brief statement, the central bank did not say why it had cancelled Sunday's auction - one of three it had been holding each week for the last few weeks. The new central bank governor, Hesham Ramez, was due to take up his post on Sunday"

Trade Arabia:  c.bank tightens dollar trading band
"Egypt's central bank has tightened the pound's trading band in the interbank foreign exchange market in an apparent move to slow the currency's decline, a forex dealer at a Cairo bank said on Monday.  Banks may now only buy or sell dollars or their equivalent to other banks in a band of 0.01 pounds above or below the weighted average bid at the central bank's regular currency auctions, the dealer said.  Previously, the limit had been 0.5 per cent above or below the average bid."

Unbelievable...

How many times have you heard right wingers compare Clinton-Gore-Hillary-Obama-liberals-Democrats to fascists-Hitler-Nazis etc.(in case you missed it try this)  I had always assumed that this was meant to be an insult.  But..but..apparently not.  Here is Eliana Johnson of the National Review Online

"Nazism may have been an ideology to which the United States was — and to which the president is — implacably opposed, but it is hardly “senseless.” By the early 1930s, the Nazi party had hundreds of thousands of devoted members and repeatedly attracted a third of the votes in German elections; its political leaders campaigned on a platform comprising 25 non-senseless points, including the “unification of all Germans,” a demand for “land and territory for the sustenance of our people,” and an assertion that “no Jew can be a member of the race.” Suffice it to say, many sensible Germans were persuaded. "

If the National Review had any standards whatsoever Ms. Johnson would be looking for a new job.

The future of mining (or how Aquaman got the bling)

National Geographic:  Will Deep-sea Mining Yield an Underwater Gold Rush?
"A mile beneath the ocean's waves waits a buried cache beyond any treasure hunter's wildest dreams: gold, copper, zinc, and other valuable minerals. Scientists have known about the bounty for decades, but only recently has rising demand for such commodities sparked interest in actually surfacing it. The treasure doesn't lie in the holds of sunken ships, but in natural mineral deposits that a handful of companies are poised to begin mining sometime in the next one to five years...While different vent systems contain varying concentrations of precious minerals, the deep sea contains enough mineable gold that there's nine pounds (four kilograms) of it for every person on Earth, according to the National Oceanic and Atmospheric Administration's (NOAA) National Ocean Service.  At today's gold prices, that's a volume worth more than USD 150 trillion."

Hmmm USD 150 trillion in gold sounds like a lot.  Assuming a current price of USD 1667 per troy oz. that would mean the underseas supply would be nearly 90 BB troy oz.  In 2011 the world production of Gold was 2,700,000 kgs or 86 MM troy oz.  So the underseas supply is equivalent to 1000+ years of current production...call me skeptical.  I wonder if we applied the concept of proven reserves (see below) to underseas minerals what sort of estimates we would get?  I assume there exists a substantial quantity of underseas minerals which could not be recovered at a any reasonable cost.

Definition of Proven Reserves from Wikipedia
"Proven reserves, also called proved reserves, measured reserves, 1P, and Reserves, are business or political terms regarding fossil fuel energy sources. (see prove: usage). They are defined as a "Quantity of energy sources estimated with reasonable certainty, from the analysis of geologic and engineering data, to be recoverable from well established or known reservoirs with the existing equipment and under the existing operating conditions."[1] These terms relate to common fossil fuel reserves such as oil reserves (see main article), natural gas reserves, or coal reserves.  Operating conditions includes operational break-even price, regulatory and contractual approvals, of which without these items cannot be classified as proven and are usually classified into probable. Price changes therefore can have a large impact on classification of proven reserves. Regulatory and contractual conditions may change, and also affect proven reserves amount."

Hope is on the way!

Hostess Brands Inc. Selects Stalking Horse Bid for Majority of the Assets of Snack Cake Business, Including Iconic Twinkies® Brand
- Apollo Global Management, LLC and Metropoulos & Co. Submit $410 Million Offer
- Agreement Includes Both Hostess® and Dolly Madison® Brands
- Company Requests Court Permission to Conduct Auction to Obtain Highest and Best Offer

Egypt currency crisis update

There has been a lot going on on the Egyptian political front, which no doubt affects the exchange rate and the demand for dollars.  I have avoided discussing the political side in order to limit the scope of postings.  Obviously if President Morsi can come to a stable agreement with the opposition or if the army ends up stepping in again that will affect the FX situation.  But for now...

Ahram Online:  Eyptian pound falls at 16th currency auction
A short story but it contains two interesting points

• "The auction saw USD 48.7 million sold to local banks, which was less than the USD 50 million it had initially offered."
• "The bank decided two weeks ago to holding three auctions per week, instead of daily sales."

The original auctions were for USD 75MM five times per week but now they are auctioning USD 50MM three times per week.  And according to this article the last auction was not fully subscribed.  Perhaps there is more confidence that an all out run on the pound can be avoided.

Financial Times:  Post-Arab Spring: Egypt in four charts
Two interesting graphs for those tracking the central banks attempt to engineer an orderly devaluation