Its Own Drummer

AAPL has recovered its losses following the July 24th earnings announcement.

Apple shares plunged last week in the wake of disappointing earnings "that missed expectations by a country mile" and a lowered near-term outlook.

The stock began to recover, then received a further boost on Monday when securities analyst Toni Sacconaghi argued that the time was "ripe for Apple’s potential inclusion in the DJIA [Dow Jones Industrial Average]", as well as an Apple stock split. His reasons:

(1) Technology companies are under-represented in Dow (compared to the S&P 500 the Dow is under-weight technology by ~370 bps), with IBM accounting for over two-thirds of the current tech weighting;

(2) A stock split would enable AAPL to be considered for Dow inclusion, given that is a price based index;

(3) Apple’s recent introduction of a dividend is consistent with other Dow components, all of whom pay a dividend.

In the Internet age a meme goes viral and becomes seemingly unstoppable. However, in this case it's way premature. No one in a position of authority has said that a stock split, much less Apple joining the Dow, has even been discussed. It took years of cash accumulation (plus the death of Steve Jobs) to occur before Apple began to pay a dividend. Besides,

Apple’s got other things on its mind these days; locking horns with Samsung in court, figuring out what to do or not do with its $100 billion plus cash hoard, not planning the unannounced launch of the unannounced iPhone 5 on the not-confirmed date of Sept. 12.

So, we’d imagine the company isn’t thinking about whether or not it might be added to, or belongs, in the Dow Jones Industrial Average.

One thing is certain: the Dow needs Apple more than Apple needs the Dow.

They'll Come Back Home

Twenty years ago Francis Fukuyama declared the End of History to be at hand with the triumph of liberal democratic capitalism.

Charles Murray argues that this consensus has crumbled:

"Capitalist" has become an accusation. The creative destruction that is at the heart of a growing economy is now seen as evil. Americans increasingly appear to accept the mind-set that kept the world in poverty for millennia: If you've gotten rich, it is because you made someone else poorer.

Mr. Murray attributes the negative attitude toward capitalism to several factors:

the prevalence of crony capitalism, i.e., winners win by pulling strings with friends in high places;

the accumulation of fabulous wealth through financial legerdemain;

the many successful liberal capitalists, such as those here in the Bay Area, who won't defend the system through which they produced their wealth;

the segregation of capitalism from virtue, i.e., "The freedom to act and a stern moral obligation to act in certain ways were seen as two sides of the same American coin. Little of that has survived."

This humble observer is not as pessimistic as Mr. Murray. The alternative to capitalism is statism. The crises of the past decade swept statists into power throughout the West, and they were given rein to implement their pet solutions to major problems. For the most part they failed.

Capitalism in practice always looks bad compared to other "-isms" in theory. Now that citizens have had a chance to see how the alternatives operate in the real world, they'll come back home.

We Serve by Cooking and Listening

For years we've been making variations of a simple baked chicken dish for the Sunday lunch at the community center. Our clientele finishes everything we prepare, but just because they're easy to please isn't a reason for not improving their sensory experience.

The chicken in the basic recipe is quite bland, so on Saturday I steeped the drumsticks in a marinade of soy sauce, brown sugar, garlic, and a dash of whiskey. On Sunday morning I stir-fried some onions and spooned them into the rice and cream-of-mushroom soup. After browning, the chicken was laid on top of the mixture and covered with aluminum foil.

Before entering the oven

et voila

Into the oven went the two trays before I headed off to church. One feature of this recipe is that the chicken can be overcooked without drying out or degrading. It was a good thing that I had the luck or foresight to turn the oven down to 325 degrees, because our minister turned out to be especially loquacious this morning. The chicken had been cooking for over two hours when I returned home.

Our customers consumed all seven trays (each) of chicken and salad that we had prepared. One of them insisted on engaging in an extended theological discussion about the nature of evil, the doom that awaits those who live in the Bay Area, and the messages that are written on rocks (which he proceeded to pick up and show me).

Sure, it would have been a lot easier to write a check and have someone else prepare the food. But then I wouldn't have been able to test whether my modifications were an improvement to the recipe (they were) or learned about the world of mystery in a small pebble.

The act of charity affects those who give and those who receive in ways sometimes unforeseen.

Fool Me Twice, Shame on Me

The troubles of too-big-to-fail banks weren't the only reason that the world financial system nearly collapsed in 2008.

Another major problem was the widespread use of complex financial products that didn't react as their investors thought they would to changing market conditions . The most infamous of these are derivatives, which Warren Buffett prophesied in 2003 were "financial weapons of mass destruction".

Less well-known, but just as damaging, were bonds based on securitizations of cash-generating assets such as credit-card receivables, home mortgages, or airplane leases. In a typical securitization thousands of assets are sold by one or more financial institutions to a special-purpose vehicle (SPV) that issues bonds to pay for the assets.

Quantitative modeling by investment banks "proved" through stress-testing that, for example, the "AAA" tranche of bonds will always get paid its principal and interest even under dire economic circumstances. The AAA bonds were able to command a low interest rate because they were low-risk; the B and C tranches had higher risk because they had a lower priority in the cash flow "waterfall" and had to pay a higher interest rate. Through the magic of financial structuring and computer modeling, the total of A, B, and C bond proceeds often exceeded the cost of the original assets, and financial institutions were able to make a pretty penny by flipping their portfolios into securitization SPV's.

Of course, when people stopped paying their mortgages, credit cards, and leases, it turned out that the administration of late payments, penalties, interest, and liquidation proceeds was much trickier than had been designed on paper. Even the triple-A bondholders had to take a haircut.

Which brings us to the latest brainstorm by the creative geniuses on Wall Street: the securitization of rents on foreclosed homes. There are many questions about how this securitization would work, beginning with whether the SPV actually owned the homes or merely owned the rents under contract. If the SPV did not own the homes, it seems to this observer that there is too great a risk of conflict with the property owner. Also, the bonds would have to pay too high a rate to make a securitization worthwhile. So it's likely the property, as well as the rents, is part of the deal.

Whatever the structure or yield, I can't see how or why any prudential investor would want to invest in this stuff now, having been burned very recently. Caveat emptor.

Brave Knights Dispel Dark Nights

Thought for the day, from C.S. Lewis:

“Since it is so likely that (children) will meet cruel enemies, let them at least have heard of brave knights and heroic courage. Otherwise you are making their destiny not brighter but darker.”

Now He Tells Us

Sandy Weill, retired Citicorp chairman and one of the principal architects of the too-big-to-fail banking system which was in large part responsible for the 2008 financial crisis, has called for breaking up the big banks.

The former Citigroup chairman now believes it was a mistake to scrap the Glass-Steagall separation of commercial and investment banking, once seen as one of his crowning achievements. As stunning as this admission was, he was only catching up with what markets already think.

Given the interconnectedness of financial markets and financial institutions, a full reinstatement of the Glass-Steagall Act would probably be too expensive to implement, even allowing for the benefit of reduced risk to the financial system.

Nevertheless, expect some Glass-Steagall-inspired ideas, such as the Volcker Rule, to be adopted in the near future:

the Volcker Rule....is intended to limit the ability of big banks to make large “proprietary” bets. (Proprietary trading is jargon for speculation – betting on asset prices going up and down.)

The basic idea of this is simple and completely compelling. Paul A. Volcker, the former chairman of the Federal Reserve System, has stressed that this measure will help us move away from an arrangement in which the people who run big banks get the upside when they are lucky – and the rest of us are stuck with some enormous, awful bill when things go awry.

Let's pause in our mockery, even vilification, of Sandy Weill to recognize how difficult it is for the very rich and powerful to admit that they were wrong. Okay, time's up, resume your mockery and vilification.

Intellectual Propriety

The mess that is the U.S. patent system has become a major impediment to both technological innovation and economic efficiency.

In an attempt to provide clarity and reduce litigation, Court of Appeals Judge Richard Posner, who "commands a respect and influence surpassed on the federal judiciary only by the nine justices of the U.S. Supreme Court", recently threw out a lawsuit between Apple and Google in which the tech giants accused the other of patent infringement. Judge Posner has deplored the "social waste" of phenomena such as defensive patenting and patent trolls:

Defensive patenting means getting a patent not because you need it to prevent copycats from making inroads into your market, but because you want to make sure that you're not accused of infringing when you bring your own product to market. The cost of patenting and the cost of resolving disputes that may arise when competitors have patents are a social waste.

Patent trolls are companies that acquire patents not to protect their market for a product they want to produce -- patent trolls are not producers -- but to lay traps for producers, for a patentee can sue for infringement even if it doesn't make the product that it holds a patent on.

The Apple-Google case that Judge Posner dismissed was just a warm-up to the Apple-Samsung "Patent Trial of the Century" that began this week in San Jose. The case's resolution could well alter the "trajectory" of future litigation. The issues are complex and important. One example--the rules for standards-essential patents:

When an industry decides that a technology shall become the standard, companies with those patents on the technology get an immediate financial windfall, because everyone has to pay for its use.

The trade-off for those companies: agreements and rules to prevent them from price gouging. Holders of standards-essential patents typically agree to license them on terms that are "fair, reasonable and nondiscriminatory."

But what constitutes a "fair" or "reasonable" price is a matter of much debate. What should happen if a company balks at a licensing offer and uses the patent anyway is also an unsettled matter.

The law surrounding them is "extremely murky," according to Brian J. Love, a patent expert and law professor at Santa Clara University. The Apple v. Samsung case could provide some clarity.

43-year-old Judge Lucy H. Koh will need the wisdom of Solomon to sort through all the claims and steer the jury toward a satisfactory resolution.

They Do Know Jack

While California tech companies duke out their intellectual-property battles in overburdened courtrooms, one venerable Tennessee company shows how these situations are resolved in a civilized manner.

When Jack Daniel's Properties thought that the design for a book cover (see below) too closely resembled the label of the famous whiskey, it asked that the author change the cover when the book is reprinted and offered to help pay for the redesign. Jack Daniel's didn't even require that current copies be removed from shelves.

I think I'll forego that daily dose (for medicinal purposes) of wine and polish off that bottle of Jack that's been sitting in the cupboard. Then I'll replenish the inventory with one of those new large bottles that I saw for $30 at Costco.

My gullet is only too pleased to reward examples of good corporate citizenship.

Image from Mashable

Limits to Loopholes

Businesses are passing up tax deductions and credits, not because of ignorance but because of complexity:

Executives, particularly at small and medium-size companies, complain that many of the tax deductions are either too cumbersome or too confusing. In some cases, the cost of obtaining the tax benefit is greater than the benefit itself....The result: many companies are saying "no, thanks" and are likely paying more taxes than legally required. And corporate breaks that Washington hopes will boost the economy often prove ineffective.

In our middle-class household we are eligible for several tax breaks that we decline to claim because of the complexity of record-keeping and the incremental expense to our business tax software (not Turbotax). Last year we didn't bother filing the forms for the Domestic Production Activities Deduction or the Foreign Tax Credit, whose complexity is daunting even to professionals. (We did take the FTC as a deduction--less beneficial than a credit--but much easier to claim.)

Jobs, health care, and war and peace will be the main concerns of the electorate this November. As for this voter and long-suffering tax filer,

If any of the political candidates had a credible program to simplify the tax code, I would support that candidate in a heartbeat even if it meant that my bill would be, say, 10% higher, and in our case we’re talking about an increase of thousands of dollars.

Keeping it Going

A few repairs needed

The tandem bicycle has been out of commission for over a year. I took it to Talbots for service. Replacement tires, brakes, and seats, plus other repair work, will cost about $200. That's a bargain when compared to the cost of a new bike, especially one of the newfangled $2,000 electric models that the WSJ featured this weekend.

The repairs will be done in ten days, and I signed the estimate. The bike should be perfectly satisfactory....at least until a certain tech company springs a surprise entry in the bike market.

Diagram from Patently Apple

Government Workers Fired Because They "Hid" Surplus

Friday's Chronicle headline

Ex-Director Ruth Coleman (Sac Bee photo)

"Surplus Scandal": an only-in-California headline:

The director of California's state parks department resigned, her deputy was fired and the state attorney general launched an investigation Friday after state officials said the agency hid a surplus [bold added] of $53 million over the past 12 years.

Comment: if they had merely spent (wasted) the money, they would not only have kept their jobs, they'd probably have gotten promotions.

Question: if they had told the higher-ups about the surplus, would it still be there?

Quit laughing so hard, you'll hurt yourself.

Oh No, Not Again

Oh no, not again. Multiple killing of innocents by another human being.

Many thousands of words will be written about the shooter's motivations, mental condition, life story, and political/sexual/religious orientation. Thousands more will be written about the prevalence of guns.

Will new insights be gleaned? Will there be agreements about solutions? I think we all know the answer.

Politicians had the good sense to cancel today's rallies and asked their supporters to put politics aside.

President Obama: “There are going to be other days for politics. This, I think, is a day for prayer and reflection.....And what matters at the end of the day is not the small things, it’s not the trivial things which so often consume us in our daily lives. Ultimately it is how we choose to treat one another and how we love one another.”

Governor Romney: “I stand before you today not as a man running for office, but as a father and grandfather, a husband, an American. This is a time for each of us to look into our hearts and remember how much we love one or another, and how much we love and how much we care for our great country,”

If It Was Easy, I'd Have Already Done It

I've made fitful attempts to clear the clutter.

Larger items, though physically more difficult to dispose of, are the easiest to toss or give away, like I did last month with some furniture.

The thousands of letters, photos, financial records, and other documents are what stymie me. I need to scan and tag them electronically, perhaps adding a detailed description. Then they must either be disposed of or organized in a rational filing system.

This process also carries with it a lot of emotional baggage. Kathleen Hughes, baby-boomer writer who is well along in her task, describes the paradox of keeping.

The longer you keep something, the more valuable it seems but the less anyone seems to know about its origins.

Ms. Hughes adds:

Taking heed, I am adding descriptions to every scan. "You're not that interested now," I tell my children. "But one day you're going to be very interested. Trust me."

When motivation flags, remember that we're doing it for the children:

One of the best gifts that parents can leave their children is an organized life. Harried heirs often must sort through decades of memories and clutter, clueless about items' significance. Of course, it's better to communicate the details of one's estate while one is alive, but that's a difficult conversation that understandably keeps getting postponed.

I hope that, as with exercise, I make a habit of clearing up. Getting started is tough, but the end result is a source of happiness. Gretchen Rubin:

Now when I look around my office, I feel a shock of relief. All those clean surfaces! No more stacks of papers and books teetering on the edge of the desk! No more feeling harassed by uncompleted tasks! It gave me a real boost.

Waiting For The Next iPhone

WSJ: iPhone 4S vs. next iPhone

The leaks about the next iPhone ("iPhone 5"?) have become more credible. The WSJ publishes some of the specs: a thinner screen using "in-cell" technology, a larger 4" display, and a new IOS 6 operating system that will contain 200 new features,

including enhancements to “voice assistant” Siri; a new 3-D maps service with turn-by-turn navigation; integration with Facebook; a “Do Not Disturb” feature to avoid unwanted messages at night; and a new app called Passbook organizes loyalty cards, tickets and boarding passes to display the right card when needed.

The next iPhone will likely be announced in the fall, perhaps as early as August 7th. We plan to upgrade two iPhones whose contracts will expire on 7/29/12 and 9/15/12.

The uncertainty is the carrier: we have become disenchanted by AT&T's continuing rate increases accompanied by no improvement in service, and our experience with Verizon on the iPad data plan has been similar. We'll be giving Sprint a look.

Taking My Medicine

I dropped by the local Lucky Supermarket to pick up a few items, and as usual I got distracted by a promotional display. Seagram's Escapes is a wine cooler in a tropical wrapping (actually, the bottle's fine print labels it "flavored beer").

I've been trying to cut down on the soda, and Escapes seems like an excellent replacement. It contains 3.2% alcohol--medical experts advise that a bottle a day is good for the health--and the price was right at 10 for $10.

In the interest of health research I will try each flavor over the next ten days. We must make sacrifices in the pursuit of knowledge.

Big Fail on the Turing Test

Proofreading is a low priority in the age of Twitter, but sometimes the English is so mistake-ridden or the style so tin-earish that it is reasonable to suppose that a computer must be the author, or perhaps the translator of a piece originally written in another language.

Below is an example of such writing, an article about Apple.

The headline with the phrase "...More Smaller and Cheaper iPad" makes a poor first impression, of course, but may not have been the fault of the writer. The lead sentence, however, made me wince:

Apple Inc. (NASDAQ:AAPL) is working on smaller and cheaper iPad model in an effort to compete with the rival products in Tablet Market like Google’s Nexus 7 and Amazon’s Kindle Fire, according to a report.

Why are the articles a and the missing? Why is Tablet Market capitalized?

A quick scan of the piece reveals that every sentence has at least one grammatical or vocabulary error but strangely, there are no spelling mistakes.

Perhaps this is another sign that a computer wrote this. If so, it's not up to the standard of the better robot reporters.

On the Way to Clearing the Inbox

I came across this marketing missive.

The juxtaposition at first is amusing until male customers think about a secondary meaning. I winced, clicked delete, and moved on.

Say--or Yelp--It Ain't So

Trying to live up to the motto.

I'm a regular subscriber (and occasional contributor) to Yelp reviews. I've checked out restaurants, plumbers, doctors, and just about everyone I buy from. With Yelp having such influence over consumers like me, it's no surprise that vendors are trying to game the widely used review website.

Yelp uncovered what it dubbed a "review-swapping ring" composed of members of a Los Angeles-area business networking group. Yelp said it was a coordinated effort by members to boost their ratings by posting glowing reviews about one another's businesses. [snip]

Concerns are growing about the authenticity of online ratings. People making comments often don't give their full or real names; others don't disclose their relationship with the business they're reviewing. That can allow business owners to pad their scores with rosy testimonials from friends, family, even themselves. Some pay so-called review mills to churn out positive statements. Others have trashed rivals with negative comments.

As many as 4 out of 10 online reviews are phony or biased [bold added] in some way, said Bing Liu, a computer science professor at the University of Illinois in Chicago who develops software to detect fake reviews. Liu said the challenge for Yelp and other review sites is in keeping pace with the latest tactics.

"It's going to be a problem forever because the incentive is too high," he said. [snip]

To fight back against cheats, Yelp has developed sophisticated algorithms to root out phony testimonials. And it employs a team of staffers whose job it is to detect fraudsters. The company also relies on tips from its users who flag reviews that appear to be bogus. Yelp's policy also bars members of networking groups from reviewing one another because of the conflict of interest.

It's a shame but not surprising that a high percentage of reviewers have motives other than giving an honest assessment to other consumers. It's in Yelp's interest to excise the fakers. I hope that it succeeds.

Hollywood's Greatest Musical Turns Sixty

The first time I saw Gene Kelly's famous song-and-dance number from Singin' in the Rain it was part of another movie.

That's Entertainment!, distributed in 1974, was a compilation of hits from some of MGM's greatest musicals from the previous half century. That's Entertainment! was a revelation; musicals that were nothing special to look at on a small black-and-white TV set became a glorious viewing experience on a widescreen.

I thought that Gene Kelly's solo, while very accomplished, paled before mega-productions in other movies, like the Broadway Melody or his own An American in Paris. In my youth I was always impressed by spectacle. Then I saw Singin' when it was reissued to theaters on its 25th anniversary. Now I know better.

Per one critic:

"Singin' in the Rain," which is celebrating its 60th anniversary this year with a new Blu-ray DVD edition, is the all-time greatest movie musical. Though not a blockbuster or an Oscar winner when first released in 1952, it was a hit, and it has been deemed a classic ever since, ranked by the American Film Institute as the single greatest musical and the fifth-greatest American movie.

A guy dancing alone on the street, just like one guy strumming by himself on his guitar, can be more magical than a cast of thousands.

Doughnuts Can Kill

Spinning doughnuts will get you arrested, and no, they're not Mayor Bloomberg's latest front in the war on excess carbs.  Doughnuts are a driving maneuver that some young men, often fortified with alcohol, attempt to emulate.  Last week a 19-year-old passenger was killed when the car flipped over; the 18-year-old driver has been charged with five felony counts.

These guys haven't completely lost their marbles. They see jaw-dropping stunts like in the video below, and they want to try them.  Perhaps such videos should come with a warning label?

Something's Got to Give

Governor Brown's administration "has been moving at full speed" to implement California's participation in the Medicaid (Medi-Cal) expansion that is part of the Patient Protection and Affordable Care Act, aka "Obamacare." The Supreme Court ruled that a state could stand pat in the current Medicaid program without having to expand it under Obamacare, and there is much agonizing among the governors about which way their states should go. In our overwhelmingly social democratic state, there was never any hesitation about California's participation.

Whether or not one supports Obamacare, practical considerations suggest that Medi-Cal is headed for a train wreck. Under the existing program Medi-Cal's low reimbursement rates have resulted in doctors refusing to take new Medi-Cal patients, and long waiting times occur frequently. A few doctor's tales, per the Mercury News:

When Dr. Jerold Kaplan made a home visit last year to a man with a foot wound, he billed Medi-Cal -- the state's health care program for the poor and disabled -- what he thought was a modest $90.

His payment: $8.96.

The Berkeley wound surgeon received a bit more for his home visit to a quadriplegic last year: $13.44. [snip]

Medi-Cal pays [Los Gatos ear, nose, and throat Dr. William] Lewis $15 to $20 for an office visit, compared with the $50 he gets from Medicare and $60 to $70 from a private insurer. The Medi-Cal rates are so low, Lewis said, he doesn't bother billing for it because it's not worth the hassle. He just eats the cost.

Lewis typically declines to see new Medi-Cal patients unless it is a follow-up visit with someone he treated in a hospital emergency room.

"You cannot run a practice seeing Medi-Cal patients," he said. "You can't pay your employees and pay for your overhead and keep your doors open."

One patient's story:

When San Mateo mom Macrina Mota's daughter injured her foot playing soccer last year, the two spent 13 hours in an emergency room to treat a sprained foot.

"They're just overbooked; they're overloaded," Mota said.

Medi-Cal already covers 7.7 million Californians, and an estimated 1.5 million are projected to be added under Obamacare. Reimbursement rates are being cut, doctors are leaving the system, and over a million patients are being added. In economic terms demand is up, supply is down, and the normal mechanism for increasing supply, i.e., price, is being kept low by government fiat.

It's not going to be pretty.

Do You Sincerely Want to be Nirodha?

The facts: Facebook engaged Alice Van Ness to teach yoga to Facebook employees. She asked students to turn off their cellphones during her classes. One student began to text in the middle of a session. Alice gave the student a "stern" look.  The employee complained, and Alice was fired. (Technically, her contract was terminated because she is a subcontractor for the fitness contractor that Facebook hired.)

I can understand why the fitness company had to terminate Alice Van Ness; it couldn't afford to jeopardize its contract with a major corporate customer.  And all's well that ends well: after the incident was publicized Alice was offered a job at a yoga studio.

I blame Facebook for not coaching its employee: 1) to have respect for the teacher's rules regardless of  how important the student or her work may be outside the class, 2) to learn other ways of dealing with  humiliation besides getting someone fired, 3) to observe cellphone etiquette---for example, if she simply had to text she could have excused herself temporarily.

Let's hope this was a teachable moment.

[Update - 7/12/12, SJ Mercury columnist Mike Cassidy chimes in:

...this is Facebook. This is a company that grew from nothing to the biggest thing going in about 15 minutes. This is a company that changes its privacy policy every half-hour. This is a place that is all about the social network, which by the way, has nothing to do with making eye contact with your yoga instructor and everything to do with constant access to a keyboard and screen. 

And the sad truth is that when you work at the biggest thing going, you sometimes forget that other people are important, too.]

[Update - 7/14/12, Yoga instructor Alice Van Ness was told in advance that she couldn't forbid cellphones. More from Mike Cassidy:

Van Ness had been warned by her bosses before the class that she could not enforce a cell phone ban while she was teaching yoga. That's what the termination letter that Van Ness shared with The Associated Press says. [snip] 

Now whether staring daggers at someone who is disrupting your class constitutes "precluding fitness center users from answering their phones," I'll leave up to the lawyers in the crowd.]

"Their Initiative is Insane"

Pre-1923 Hetch Hetchy  (Bancroft Library via SJ Mercury)

One of America's oldest environmental disputes will continue at the ballot box this November. San Franciscans will decide whether to create a plan to drain the Hetch Hetchy reservoir; if the measure passes and a credible plan is drafted, the vote to proceed will likely occur in four years.

After the great earthquake and fire of 1906 San Francisco cast about for stable sources of water. In 1923 the newly built O'Shaughnessy Dam flooded the Hetch Hetchy Valley in Yosemite National Park over the objections of the Sierra Club and its founder, John Muir. Today the Hetch Hetchy Reservoir serves about two million customers in the San Francisco Bay Area, including the 30,000 people in our town of Foster City.

Photos show that pre-1923 Hetch Hetchy rivals the beauty of Yosemite Valley itself, and one can sympathize with the environmentalists of one hundred years ago.  However, by 2012 Northern Californians have become so dependent on Hetch Hetchy water that many of environmentalism's normally strongest supporters, such as Democratic Party politicians and Silicon Valley businesses, are opposed to even considering the draining of the reservoir.

"We have to stop this one," said Carl Guardino, president of the Silicon Valley Leadership Group. "Hetch Hetchy is a critical water source not only for San Francisco, but throughout Silicon Valley. It is critical to our economy. We care deeply about this."

San Francisco Mayor Ed Lee was more blunt. "Their initiative is insane and attempts to fool voters into wasting millions to restudy local water sustainability projects that are already being implemented in San Francisco," he said.

Opposition to the Hetch Hetchy restoration initiative is another example of an elementary fact of political life:  over time the benefits from government programs attract powerful constituencies, and the programs become nearly impossible to shrink, let alone eliminate.  This is true regardless of the merits of the case. In November count on the initiative to fail.

MacBook Power Cord

Free replacement cords from the Apple Store.

The MacBook power cord is, like other Steve Jobs inventions, cooler, more complicated, and more expensive than its PC counterparts. The cord connects to the computer magnetically so that an errant footstep would avoid the tripping and tearing problems found with PC power cords.

The downside is that the MacBook power cord is delicate. It has a mini-circuit board and LED that are susceptible to damage from constant stuffing into computer bags.

In our household we have three MacBooks and four power cords, two of them broken. I didn't want to spend $80 buying another one, and a fix would require tools and knowledge beyond the capabilities of your humble servant

But the Internet is a wonderful disseminator of knowledge. In a settlement of a class action lawsuit late last year Apple agreed to replace non-working power cords. I promptly made an appointment at the local Apple store.

The service rep asked for the serial number of my MacBook (just showing him the laptop was good enough) in order--I'm guessing--to make sure I wasn't a junk dealer trying to get free replacements for damaged parts. The process took about ten minutes, and I left with two new power cords.

This is the only material benefit I've ever received from a class action lawsuit, so, if only for a little while, I was grateful to the plaintiffs' bar. I was also, of course, happy with how the problem was resolved.

I promised to return when the next new, amazing, exciting shiny object is announced. One thing is certain: it'll cost more than $80.

Back to Reality

The day after I returned from Hawaii we headed over to the church.  The bins of clothing were piling up, and the PARCA truck was coming tomorrow.

We put the clothes and other items in trash bags and taped on labels, a superfluous step, because a) no one in our sleepy suburb was going to touch the items and b) the PARCA driver had been to the church before.

I always get a good feeling from clearing clutter, and it's doubly good knowing that it can be of use to someone else ("one man's trash etc.")

The act of charity can be as rewarding to the giver as it is to the receiver.

Our Friend, the Higgs Boson

Photo from Amazon

My understanding of physics hasn't advanced much beyond Our Friend the Atom, the 1950's book and movie that were produced by Walt Disney for elementary school children.

According to OFTA, electrons, protons, and neutrons made up the building blocks of the universe, and that grade-school template was sufficient to get me through high school chemistry and even AP physics, which at the time stopped with Newton's principles (which is like ending the study of economics with Adam Smith).

It turns out that the universe is much more complicated than Walt Disney said it was. According to what physicists call the Standard Model, protons and neutrons are made up of even smaller particles like leptons, gluons, and quarks. These particles are acted upon by four fundamental forces: electro-magnetism, the "strong" nuclear force that binds protons and neutrons into nuclei, gravity, and the "weak" nuclear force that is manifested in radioactive decay.

The Standard Model still has some holes; it doesn't have a complete explanation of how gravity or so-called "dark" matter and energy fit in. Nevertheless, it has held up experimentally although there was one piece of evidence missing, the Higgs Boson. That is, until last Wednesday. On July 4th scientists at CERN announced that they have likely found the elusive particle (they're being very cautious--there's a one-in-3.5 million ("five sigma") chance that they haven't).

The discovery of the Higgs Boson is important because it validates the Standard Model, scientists say. We'd like to join the party, but someone still needs to explain in layman's terms why this is important to non-physicists, i.e. 99.99% of the world.

Over to you, Walt.

High Speed Rail: From the Middle Out

"Middle-out" is becoming a popular design approach, whether one is talking about philosophies of engineering or economics. Middle-out also appears to be an apt description of the just-approved California high-speed rail (HSR)project.

Central Valley (in green) will be operational first.

The long-time dream of California planners has been to connect the San Francisco and Los Angeles megalopolises with rail transportation that is quick, cheap, and good (here we go again with the Project Triangle). [HSR is not total fantasy: both the shinkansen(Japanese bullet train) and TGV(French high-speed rail) have shown that the technologies and business models are feasible.]

But they're going to start in the middle, i.e., the Central Valley, where the labor and land are cheaper and environmental obstacles less restrictive. After the expenditure of an estimated $6 billion, HSR will be operational between Fresno (pop. 350,000) and Bakersfield (pop. 500,000) in 2017.

This may be engineering-wise but politically foolish. IMHO, it would have been more astute to build out from population centers, say the SF Bay Area (pop. 7 million) to Gilroy or Greater Los Angeles (pop. 17 million) to Bakersfield first. Serving the long-range commuter would accumulate political capital for problematic future funding requests amounting to tens of billions of dollars.

Just to make clear, your humble observer is not in favor of the HSR project.  It's expense ($65 billion in today's dollars and $90+ billion, including inflation ) is only defensible under the wildest pie-in-the-sky scenarios. When one looks at the sad history of California construction overruns in projects like the Bay Bridge extension, San Francisco airport, and BART, it is even more improbable that the final cost will be justified, and it won't matter much whether it was built top-down, bottom-up, or middle-out.

A Welcome Trend

Health care costs in the United States had already begun to moderate years before President Obama came into office:

Adjusted for inflation, U.S. per-person spending on health care grew at an annual average rate of 2.1% between 2005 and 2010 compared with 4.3% in the five previous years and 3.2% in the five years before that. 

One explanation:

Americans are using less health care because they are being forced to pay more out of pocket. Indeed, the share of insured workers with deductibles of $1,000 or more rose to 31% in 2011 from 18% in 2008, Kaiser estimates. Indeed, the share of insured workers with deductibles of $1,000 or more rose to 31% in 2011 from 18% in 2008, Kaiser estimates. "A lot of people are saying: Do I really need this?" [Harvard economist David] Cutler says, who notes a distinct slowing in the pace of spending on CT scans, MRIs and other imaging.

I do not expect the Patient Protection and Affordable Care Act to continue this welcome trend of slower cost growth. Whenever government becomes heavily involved in or imposes drastic change to a market---think, for example, of education, defense, housing, and alternative energy---costs accelerate.

I hope I am wrong, but I doubt it.

Happy 4th!

Photo from fostercity.patch.com

We spent most of the day getting ready for another trip. In the evening some of us fought the traffic in and out of Foster City, as we were inundated by hordes coming to watch the fireworks. Others viewed the spinners, rockets, Roman candles, and strobes from a mile away on the Beach Park bridge.

Life in America in 2012 is good.

Happy 4th!

Lazy, Hazy Day

A lazy, hazy day in Hawaii is better than the best day in most other places (okay, I'm a homer).

Highlight of the Tour

Tony began the tour with a presentation. He showed how 19th-century Waikiki looked before the swamps were drained. He talked about the Moana hotel's construction in 1901,Jane Stanford's murder, how Duke Kahanamoku brought surfing to the West Coast from Hawaii, and the popularization of Hawaiian music across America by radio.

The bombing of Pearl Harbor transformed the face of Hawaii, as vast armadas of men and materiel traversed the Crossroads of the Pacific toward Japan. The U.S. military brought something else, Spam, the canned meat product that is now a fixture of Island cuisine.

Tony proudly displayed his visual aid: twelve varieties of Spam that he had found on the shelves of local markets. His wife allowed the purchases only if he promised to eat every can, which he did. One does not have to rush one's enjoyment of Spam---your humble servant recently purchased cans marked "Best by 2015".

The tour wended through the old wing of the Moana and ended by the banyan that has grown to dominate the rear patio. We bade aloha and mahalo to Tony, who lives less than a mile away in Kapahulu. A man who has found his calling.

(The historical tour of the Moana runs from 11 to 12:15 on M-W-F.)

Makes You Want to Lick the Plate

The dessert tart reminds me of a certain iconic image.

Inspired commentary escapes your humble servant---dozens of double entendres using "tongue" or "lips" are not worth mentioning, and "rolling scone" doesn't make any sense.

Well, it was good going down.