Summer Cleaning

Who knew that cleaning could be so nostalgiac? Every thing I pick up seems to make me think, whether it be computer magazines from the height of the dot-com boom to the piece of paper with a number on it that facilitated a certain prank on the last day of school. I’m a terrible packrat, and for the past four years I’ve been saving tons of schoolwork, assignments, handouts, absent notes, everything because of some misconcieved notion that somehow I might need it at some point in the future. The downside to this was of course when I did need something I had so much other stuff I had the hardest time finding the thing that I was looking for. The other thing that strikes me is all the stuff that I saved that hasn’t been used since. It has put me into a strange mood, but the cleaning must go on. I just hope I don’t throw away anything important.

Terrorist Alert! (from Charleen)

The President of the United States, George W. Bush, has asked that all Americans and Canadians unite together in a common action to root out terrorists hiding in our community.

Since the Taliban cannot stand nudity and consider it a sin to see a naked woman that is not one’s wife, on Saturday afternoon at 2:00 p.m., EST, all North American women are asked to walk out of their house completely naked to help weed out any neighborhood terrorists. Circling your block for one hour is recommended for this antiterrorist effort. All men should position themselves in lawn chairs in front of your house to prove that you think it’s OK to see other women nude. (Since they do not approve of alcohol, a cold six-pack at your side is further proof of your anti-Taliban sentiment.) Names and addresses of non-participants should be sent to CIA Headquarters, Langley, Virginia.

The United States of America appreciates your efforts to root out terrorists and applauds your efforts. Please, by all means, send this to your fellow Patriots to ensure 100% participation.

Thank you for your participation,
Bill Clinton, Former President of the United States

New design

Today is the first of what will be 12 designs over the next year, each themed for the month they’re released. Happy July! (a little early) Please leave any comments on this theme below.


Back in Houston, finally, and it’s nice adjusting back to old habits and comforts. Besides family and pets, I think the thing I missed most were my speakers, and it’s bliss to hear high fidelity sound again. Uploaded the last day from the trip, so enjoy! I’m also working on some layout/design changes for this site. The plan is to have a different theme for every month.

Hurricanes are great!

A common misconception of students of economics is that events that normally would be viewed as economic detractors actually stimulated. I’ve heard this called the ‘window’ argument before: if someone walks down the street and throws rocks at all the windows, then all of a sudden the window man has work! He will use that money to eat at restaurants, buy clothes, send his child to college, and the world will be a better place. From the beginning this argument sounds a little off, and in this context, the flaws of the argument are especially obvious.

The money that was used for repairing existing facilities could have been better redirected towards capital investment, or any other sort of monetary allocation that increases long-term growth prospects. Anything that promotes inefficient allocation of resources (regulations, quotas, mandates, tariffs, etc.) ultimately hurts the country in the long run. It would take someone pretty heartless to bring this up in the context of the Trade Center, but in situations such as hurricanes where there is usually high property damage but only minimal loss in life the argument still seems to rear its ugly head. Perhaps it’s a simply a misinterpretation of creative destruction :).


I can’t find time to write everyday, but there is almost always a new day in the photolog. Baltimore was a blast today, and the Orioles/Yankee game was one of the best I’ve ever seen, live or on TV. I hope that the teams in Houston can bring back the magic that they seem to have lost.

Stock options and Congress

There is a huge argument on Wall Street and Capital hill right about what’s the proper way to account for stock options, and the whole thing is muddied further by the fact that neither side understands the whole thing. The Republicans actually have a very nice argument, but none of them can seem to articulate it.

On one side of the fence you have Greenspan and, surprisingly, the democrats. Greenspan has said that all the serious analysts have already factored in the dilution of stock options into their analysis, so releasing the data publicly should have no real effect on the markets. This is a very potent argument because if it’s not going to make a difference, what do you have to hide? Basically this falls in line with Greenspan�s drift towards transparency. The democrats are suggesting that stock options be shown in the bottom line. Republicans argue that it’s hard to accurately value stock options, but the dems are quick to counter that if it’s not worth anything, employees wouldn’t accept it as a form of compensation and if it is worth something than it should be reflected in the company’s books when they give it out. Wall Street, whose opinions are influenced more from the frenzy following Enron than anything else, also follows this line.

On the other side of the aisle, there is incredulity that people are suggesting that the books are tainted with something that cannot, as things stand, be accurately valued. There is a duality in options in that they are both income and remuneration. What it all really comes down to though is that options don’t cost the company money. The FASB almost mandated subtracting options from the bottom line but after an uproar from Silicon Valley and the Senate banking committee (most notable Phil Gramm) the proposal was reduced to a footnote, and with good reason. If my company has 5 million in profits from selling widgets, and I’ve given employees a million dollars worth of options, the company has still made 5 million dollars from widgets, there’s no reason that I should subtract a million dollars from my reported profits when it doesn’t accurately reflect my business.
There are a number of ways to account for options out there, most notable the Black-Schoals model that the most common, however not because it is good, but it’s simply the best out there. There are also guidelines for reporting options in taxes, and many have suggested that these should simply be applied to accounting. There are several problems with this, but the most serious is that tax laws are written to encourage and discourage businesses from doing certain things, and by definition accounting should be neutral, so if these suggested methods are introduced as accounting standards then suddenly there are very persuasive elements in the books that are going to change the way companies do business, and not necessarily for the better. Also, the minute that congress starts telling accountants what to do; accounting will become the only federally regulated profession out there. Doctors, lawyers, brokers, all exercise the right of self-regulation. You don’t see anyone suggesting that congress go create mandates for lawyers after Enron, even though arguably their law firm (whose name escapes me at the moment) is just as responsible for the situation as their creative accountants.

While I’m on this tangent I would like to suggest that the long term solution to the problems in the accounting business is to introduce competition into the field. Among large corporations there is a monopoly among the “Big Four” that now dominate the field, and there is really no incentive for them to rock the boat too much. If meaningful competition exists for the big accounts, such as GE and Fannie Mae, I think we’ll start to see the market forces drive accounting like they drive nearly every other profession.

Anyway, reporting stock options in the manner that the democrats and the more liberal media are suggesting will ultimately stifle the way business is done and hinder productivity, and therefore growth, in the long-term. Options give firms the oppurtunity to attract talent to the company that they could otherwise not afford, and give the employees’s of a stake in the company and interest in seeing that the company does well. A conversation earlier today Wayne Abernathi really clarified many of the things I’d been reading on the subject, and offered many of the insights here. He’s a really great staffer on the Senate Banking committee who deserves more recognition. He was one of the driving forces behind the Gramm-Leach-Bliley bill that revolutionize, amoung other things, banking regulation