Ctrl BG: A Shortcut to Financial News 11/15

This week was actually quite eventful.

It started off with China announcing a $600 billion fiscal stimulus plan effective from now until 2010, to be spent on infrastructure and social projects. Even this Asia powerhouse is not imperious to the global economic downturn, they are expecting growth to slow down to 8-9% as opposed to the double digit growth in the last 5 years. On the plus side, at least they're able to and are doing something to increase the liquidity in their economy.

Over in Europe, things are not so positive. Latvia a small European country, part of the former Soviet Union, just took over their second largest bank, Parex, last weekend. Are they going to be the next Iceland?

Back in the US, American Express got approved to become a bank holding company on Tuesday (just like Goldman Sachs and Morgan Stanley). This way, they'll have better access to capital both from deposits AND from the government, which is probably a good move since consumer loans is expected to hit next and Amex has a LOT of business in that (obviously).

The latest bank in the spotlight is Citigroup. The good news is that on Tuesday, they joint the ranks of Bank of America and JP Morgan to refinance mortgages to help people stay in their homes. The bad news is that Citigroup will be laying off 10% of their workforce (which may add up to 40,000 layoffs!) and doing some serious cost cutting. People are also not very happy with their (relatively) new CEO Vikram Pandit. He lost the Wachovia deal to Wells Fargo and the share price has gone down from $50 last year to $9 on Friday. The board is now questioning whether he's up for the job after all (granted it really wasn't his fault that Citi is in such deep trouble, he was just called in to fix Chuck Prince's mess). He is expected to be making a huge speech about all this on Monday.

On Wednesday, Paulson announced that they were changing their strategy for the use of the $700bn bailout- now known as the Troubled Asset Relief Program (TARP) funds. Instead of buying up bad mortgage debt, they are now going to use the remainder of the funds to directly inject capital into financial institutions. They realized that given the current situation, the original plan was becoming cumbersome and it was just easier and more efficient this way to directly inject capital in order to stabilize the financial system and get lending going, which right now they seem to have achieved (temporarily anyway). But then the question becomes, at which point do they stop giving capital injections to anyone who asks?

This question is especially interesting with the current fiasco in the auto industry. The big 3 are now desperately lobbying for a $25 billion financial aid package to save them from filing for chapter 7 bankruptcy, which means liquidation and going out of business. This would potentially indirectly lead to millions of job losses, due to its huge supply chain. Obama and the democrats are all for it, but some of the Republicans are more reluctant. I can actually see where they are coming from. Bailing out the banking industry is one thing, since banks are a huge part of our economy and will still be around in 50 years time. The auto industry on the other hand, is a dying industry. American cars are simply not globally competitive enough to survive on the long term. They are not as luxurious as European cars, they are not as cheap as Chinese cars and they are not as endurable and gimmicky as Japanese cars. They would slowly go out of business anyway. The current economic situation is just speeding up the process. I'd invest in a Chanel flap bag because I know that it will still be elegant and classic 20 years down the road, but I wouldn't spend the same amount of money on a Coach bag, even if it is limited edition and super luxed up. But I guess the $25 billion will buy us more time to "prepare", so it doesn't add to oil to the current fire. They are also quibbling about where this money should be coming from. The Democrats want it to come out of the TARP money (which makes sense, especially given the "new" strategy) and Bush wants to widen the budget deficit. I believe they're hoping to approve the package this week in the lame-duck session (if anyone is interested in why it is called the lame-duck session, as I was, check it out here).

The G20 also had a meeting on Saturday to discuss the world economy. There weren't any specific guidelines, but they agreed to join their efforts to achieve common objectives, like to improve the regulations and functioning of the financial markets. It's a start. And the power of 20 is definitely more powerful than that of one.

Myron Rolle: Smart Guy

Considering the name of this site, I like to recognize good examples of "Smart Football" when I see them. Well, Myron Rolle pretty much is the walking personification of "Smart Football." Rolle is a finalist to be named a Rhodes Scholar.



The standards for the Rhodes Scholarship are:

literary and scholastic attainments;

energy to use one's talents to the full, as exemplified by fondness for and success in sports;

truth, courage, devotion to duty, sympathy for and protection of the weak, kindliness, unselfishness and fellowship;

moral force of character and instincts to lead, and to take an interest in one's fellow beings.

By all accounts, Rolle seems to qualify. Top student, and the guy is one of the top, top, top players in the country; this isn't some punter who happened to be bright. This guy is fast, strong, and can lay the wood when he hits you. I also want to give Bobby Bowden and FSU some credit -- though with some of the other stories out of there they may not have had much choice -- for letting Rolle off for a rather important game against Maryland. Sometimes, football comes second.

In any event, along with other famous Rhodes Scholars, like Bill Clinton, one of my favorites (for the nickname if nothing else) is Byron "Whizzer" White. The Whizzer earned the nickname as a running back at the University of Colorado.

Try this for a timeline: He is awarded the Rhodes Scholarship, but defers it to play football for the Pittsburgh Pirates (now Steelers, obviously). He leads the NFL in rushing as a rookie. As an encore, he goes off to Oxford to study for a year. Then he returns to the NFL, this time with the Detroit Lions, and leads the NFL in rushing again. His career is then cut short when he entered the Navy during World War II.

Then, after the war, he finds a pretty good second career after football: White graduated from Yale Law School, and, of course, became one of the longest sitting Supreme Court Justices, having been nominated by John F. Kennedy

Wedding Gifts

So next weekend, it is my first cousin's wedding in Sydney. He is the first in my "generation" to get married, so it's kind of big news. Unfortunately I cannot make it to his wedding because I can't take any days off and frankly, there didn't seem to be any point to fly 36 hours to and back for the weekend and spend 12 hours there (as much as I LOVE the excellent seafood in Sydney). So in my stead, I was thinking of sending them a gift. This is my wedding first wedding gift, so here are a few of my ideas (for a couple who has everything, and did not register in any stores- they really should!):
My first thought was to turn to Disney, because they absolutely ADORE Winne the Pooh. Unfortunately I googled up the story and it turns out that there is absolutely no romance in Winnie the Pooh (for maybe 5 seconds, I thought maybe Pooh and the Piglet were a couple, but the I realized that Piglet was a boy- as I'd originally thought), so it didn't seem appropriate to give them a Pooh snow globe. So I'm left with the two snow globes above- you can even personalize the plate! I'm thinking Cinderella, since Mickey and Minnie are an acquired taste. Unfortunately they don't sell these at the store and the delivery cost is the same as the actual globe!
So I tried looking for other super cute couply stuff to get. I quite like this block building photoframe (left). Very clean and meaningful of a relationship, no? And if cutesy is not their thing, there is always a simple personalized silver frame to fall back on (right).
If they actually needed more knick knack around the house, I thought these rabbit design kitchen ware were kind of cute (left). And I love these modern looking vases (right)!
And a bit outside the box, there is this cute pair of pillow cases with a bride and groom (left)! Isn't it adorable? Has anyone seen the pillow cases of a couple and it's connected with a string? That is super cute too. Or more practically, you can always get them stock certificate for shares in Tiffany or other companies. They apparently sell them framed on gift.com.

Maybe I'll go back to the globes. You'd think it should be easy to find super sweet couply gifts online....apparently not. Any other cute wedding gift ideas? What do people generally give to other people on their weddings? Tips on what to write inside the card would also be appreciated. Is it congratulations and best wishes? I remember vaguely on Gilmore Girls that it is congrats to the groom and best wishes to the bride?

Image Source: Disney and Gifts.com

Football, Luck, and Noise

I received a surprising amount of pushback via email regarding my last post about Texas Tech and the Hot Hand Theory. At first I was confused, but then I realized that many readers do not share a rather fundamental assumption I hold about football: an incredible amount of the game is determined by "luck." Now, when I say luck, I do not mean fluke events, or the ol' bounce a da ball, or things like that. What I mean is that almost any and every outcome in football is not set in stone, but rather, there is some probability that the outcome will be X, another probability that the outcome will be Y, and maybe even a chance that it will be Z.


Theological questions aside, I really think this is a rule of life and not just football. But the point is that at no point in a football game, be it success of a play or even a determination of what the other side is actually doing, do you have fixed answers. Instead, you have probabilities, and even then your probabilities are merely estimates of the actual probabilities. So when I talk about "coolly flipping coins," I mean that everything is probabalistic. Just like when Michael Jordan went to the free-throw line, no matter what any sports writer tells you, he is never destined to make the shot, or destined to make the game-winner. Tiger Woods is never destined to hit the putt, and Tom Brady or Peyton Manning were neither destined to win the Super Bowl or hit any particular pass.

Instead, it was merely "highly likely" that each was going to do those things, because each is very good at what they do. But at no point is anything determinate.

Indeed, one of the criticisms of my post was that the probabilities dramatically increase regarding offensive success because you gain more information as time goes on. But that argument doesn't hold water. If Michael Jordan can only max-out his free-throw percentage to a point, then there is no way to max out offensive production in football when at all turns you have a human (or group of them) making choices on the other side in ways that shift your probabilities. That is a far too nebulous cloud to assume certitude.

And any playcaller will tell you the same thing. As Norm Chow says, you are never quite sure what coverage they are in, but instead you take pieces of the field or pieces of the defensive front and attack those, and therein lies success. Mike Leach does not even require his guys to memorize coverages in the sense of "Hey they are in Cover 4!" Instead, they group them into things they can recognize and they probe areas. But at every stage, things are probabalistic. I've even discussed the notion that a purely random approach to offensive and defensive calls might even be optimal.

When I made the point about the hot hand theory, part of it was about how you cannot always extrapolate how good an offense is versus a defense just because they scored on a drive, or even if they scored a lot in a half or game, because the standard deviation is too high. Some people argued that things would even out over the course of a game; I think that is sort-of true, but I still think the variance is higher than they account for. But that's an empirical question we can solve later.

But another (amazing) site, Advanced NFL Stats, made the point about the difficulty of extrapolating skill levels from even successful outcomes:

Consider a very simple example game. Assume both [Pittsburgh] and [Cleveland] each get 12 1st downs in a game against each other. PIT's 1st downs come as 6 separate bunches of 2 consecutive 1st downs followed by a punt. CLE's 1st downs come as 2 bunches of 6 consecutive 1st downs resulting in 2 TDs. CLE's remaining drives are all 3-and-outs followed by a solid punt. Each team performed equally well, but the random "bunching" of successful events gave CLE a 14-0 shutout.

The bunching effect doesn't have to be that extreme to make the difference in a game, but it illustrates my point. Natural and normal phenomena can conspire to overcome the difference between skill, talent, ability, strategy, and everything else that makes one team "better" than another.

And adding support for my argument about the high degree of variance, Advanced NFL Stats went on to try to nail down exactly how much in the way of outcomes can be attributed to skill versus luck in the NFL. You can read the details of the explanation there, and NFL teams obviously are closer in relative skill levels than most college teams, but the results are nevertheless striking:

...By comparing the two distributions, we can calculate that of the 160 season outcomes, only 78 of them differ from what we'd expect from a pure luck distribution. That's only 48%, which would suggest that in 52% of NFL games, luck is the deciding factor!

There might yet be more to it than these calculations, but the point is that variance is high in outcomes in football games. This is not to say that skill is unimportant, but the lesson is instead that you cannot merely look to actual statistics and actual outcomes to determine who is the best. Football games are tests of ranges of probabilities put up against one another:

Will all eleven players execute their assignments; will the quarterback make the right reads; will the coaches accurately assess the opponent's schemes; will the sun shine in the receiver's eye; will the ball become sweaty where the ballcarrier holds it; will there be an injury on the play; and if these factors randomly cut 50/50, will they work in our favor enough times in a row to get us in field goal or touchdown range.

In other words, lots of football fans, players, and even coaches suffer from a Fooled by Randomness problem when they analyze the game. Football is more quantum mechanics than it is Newtonian physics (though with a splash of game theory). Yet the belief in absolute determinism is natural: we intuitively want results to be indicative of objective truths, and it is much less complex to analyze easy to observe statistics and outcomes than it is to try to estimate the underlying probabilities. But football doesn't always give us large enough sample sizes to believe that results are as instructive as we'd like. So, if we want real answers, we have to admit that there's lots of luck around.

(And if you're a fan of the Michigan Wolverines, this gives you an (incredibly weak) excuse: "It's all the result of bad luck!")

Weak In The Knees

I'm in love.

Loeffler Randall captured my heart early last year when I saw a sunshine yellow ruffled bikini. This Fall she has me tied around her finger with her seemingly simple looks, but plays with my emotions with her excruciatingly incredible detail. Yes, her designs are so absolutely amazing that it hurts.

I don't know what to do with myself. Look at how immaculate everything is. And this dress below, Loeffler, you had me at the pleats (and then she added ruffles).

Who knew something as ordinary as black and white could result in the above.
...and then there are her shoes.

All I can do is lust after these treasures, as my paycheck will probably let me buy around... perhaps a sleeve of that pink dress (not even). So I turned to Etsy, my online heaven of everything crafty and creative, and found this lovely little designer, LEMONSTORY by Kimenna. Pleats and ruffles, ruffles and pleats all over again - at a more affordable price. My heart is hurting, but my love endures.

Image Source: Loeffler Randall, LEMONSTORY by Kimenna, Shopstyle, Eluxury, Basic Boutique, Shop Goldyn, Saks Fifth Avenue,

Aishwarya to love Hrithik in Bhansali's next

Volcano erupted when Aishwarya lip-locked Hrithik Roshan in Dhoom 2. The Bachchan family reacted strongly against the intimate scene and even approached the maker to delete it. But when the film released, the chemistry between Ash and Hrithik well appreciated and latter they became the hot favorite jodi of the cine-buffs. After the success of Jodhaa Akbar, the anger of the Bachchans calmed down and out of joy, they even threw an impromptu success party. Looking at the success factor, director Sanjay Leela Bhansali is making a deliberate effort to bring together Ash and Hrithik for the third time.

News is rife that Sanjay is planning a mature love story starring Ash and Hrithik. Though Bhansali has not made any official announcement, it is known that Ash and Hrithik will sign the film very soon. Bhansali who has given Ash the massive hit Hum Dil De Chuke Sanam is keen to cast her again. The film in question is a mature romantic tale to be penned by the director himself. If Hrithik sign the project then it would be his first film with Bhansali.

Aishwarya to love Hrithik in Bhansali's next

Volcano erupted when Aishwarya lip-locked Hrithik Roshan in Dhoom 2. The Bachchan family reacted strongly against the intimate scene and even approached the maker to delete it. But when the film released, the chemistry between Ash and Hrithik well appreciated and latter they became the hot favorite jodi of the cine-buffs. After the success of Jodhaa Akbar, the anger of the Bachchans calmed down and out of joy, they even threw an impromptu success party. Looking at the success factor, director Sanjay Leela Bhansali is making a deliberate effort to bring together Ash and Hrithik for the third time.

News is rife that Sanjay is planning a mature love story starring Ash and Hrithik. Though Bhansali has not made any official announcement, it is known that Ash and Hrithik will sign the film very soon. Bhansali who has given Ash the massive hit Hum Dil De Chuke Sanam is keen to cast her again. The film in question is a mature romantic tale to be penned by the director himself. If Hrithik sign the project then it would be his first film with Bhansali.

MINT Jodi Arnold

Remember this absolutely darling gray and yellow block dress from this summer?
Well the makers of it, MINT Jodi Arnold, are having an online sample sale taking 60% off more genius pieces from today until the end of November. Frankly, we get a lot of emails about these online sample sales etc and we usually whiz pass them, just because there are so many and because they're not always designs that we endorse. But MINT caught my eye (because it reminded me of the block dress above) and I spent a bit more time looking into it and I LOVE the collection.
Especially these two dresses which are absolutely refreshing, youthful AND flattering to wear too. They are just so different from the dresses on the racks in stores, one is artsy, pop and cool (left), while the other is feminine and romantic (right).
Then they have more usual designs with a twist. I am loving the asymmetrical shoulder of the gray dress, this model does not do the dress justice. And this sequins dress is very reminiscent of the FCUK dress from last year, but the neckline jazzes it up.
The silhouette of this strapless dress with the folds at the bodice is just darling. The thin gold belt also brings a bit of the holiday spirit to it. And I just love the details on the collar of this coat!

So if anyone is interested. From now until the end of the month is a good time.

Image Source: Mint

The New Perspective

I never used to like Mango. I could never find anything that fit properly and just didn't understand the craze (everyone in my high school wore something by Mango). But today I've gained some new found respect for the store. I ventured into the store as a last resort trying to desperately find a dress for a wedding. I came out surprised and happy, it was absolutely perfect. I couldn't believe it: I actually found something I liked, and I liked it a lot.


And while Mango has been around forever, it seems so new to me and I'm finding numerous pieces that I preparing to purchase. You see, I'm stubborn and once I don't like something, I hardly ever go back. But good job, Mango. You changed my mind.


These two dresses are beautiful! Especially the first one. I love those frills on the neckline! You could definitely make it casual by adding a pair of skinny jeans and converse/flats. You could also just wear it with a pair of pumps for the evening. And in winter...tights with legwarmers and boots! I just loved the silver dress, ever so elegant and very simple.

Image source: Mango, Mango Shop

Texas Tech's Offense and the Hot Hand Theory

After Texas Tech's drubbing of Oklahaoma St, and the much-quoted fact that they scored a touchdown on seven straight possessions, I heard yet another commentator say that their offense was "streaky." And you hear this about other offenses too, and you hear it constantly in other sports, particularly about shooters in basketball and hitters in baseball. As I've written about previously, I think the idea of "hot streaks" are overblown.


Try flipping a coin fifty times. If you chart out the results, I would wager that it does not look as even as you might expect. Just because it's an equal chance of heads or tails doesn't mean you neatly get heads-heads followed by tails-tails. Instead you get seemingly bizarre - seemingly streaky - patterns of, say, fourteen heads followed by a few back and forth then sixteen tails. The probabilities aren't all that different.

So it is with most offenses. There's an imaginary equilibrium of how much we'd expect a particular offense to score against a particular defense. This is the average score if, say, Alabama played LSU a thousand times. But there's variance; each game is different. And once you look at it like that, you see how silly it can be to get too wrapped up into comparing a couple of drives back to back.

The answer with a team like Texas Tech is that they have a hell of an offense, and we can just expect them to score a lot. How they get those points, in what order, all in the first half, all in the second, is largely a function of variance, or in other words, luck.

I am reminded of all this because the game that seemed a shining example of this was Texas Tech's 31 point comeback in their bowl game against Minnesota a couple of years back. Tech was down 31 in the second half, and, after a barrage of passes from then-sophomore quarterback Graham Harrell, Tech won, and Glen Mason lost his job. As I stated:

As most of you know, Texas Tech came back from 31 down with 7 minutes to go in the third quarter to beat Minnesota. What was amazing to me, as I watched the game, was that despite the short time frame, the entire thing happened almost sleepily. The "comeback" appeared like some odd mixture of luck and manifest destiny. Minnesota did not really lose the game like most teams who give up huge comebacks do. Indeed, Minnesota should be a team designed to control second half leads: they have an impressive running game and a methodical passing game to complement it. Minnesota did not turn the ball over in the second half, and got a number of first downs. Tech did not get particularly good field position, either. The most frantic moment of the entire game was Tech's 90+ yard drive to kick a 52-year field goal, and even that still seemed surprisingly serene. . . .

There actually is an entire field of study dedicated to this idea regarding sports, investing, and other facets of life and it is called the "hot hand fallacy." (See also here, and here.) Surely we've all experienced and witnessed the "hot streak" or the "cold streak" in basketball where a shooter has a poor half and then literally can't miss in the second. We see the swing in momentum, the crowd cheering or silenced, the shooter's swagger, his confidence, his teammates feeding him the ball, and his confidence to shoot it from anywhere on the court with a hand in his face.

Except that is an illusion. At least according to researchers Gillovich, Vallone, and Tversky: If you're a 40% field goal shooter for the season, you're pretty much a 40% shooter all the time, even if in one game you shot 20-22 and another 1-15. It evens out over time. The difference is just chance.

This same logic applies to football, and to no offense in football more than Texas Tech's. Clearly, over the last several years Tech's offense has been one of the most productive in football. It's been well documented that Leach's offense often sputters for a quarter or two before exploding to score points at an almost ridiculous pace. So maybe the comeback wasn't such an aberration. 44 points is not so abnormal for them--what's the difference if they had scored those touchdowns on every other drive over the course of the entire game, rather than scoring them all in the second half?

I did note an exception to this, though. Not all football teams or quarterbacks act like coins; sometimes they can get rattled, and the probabilities can change on the basis of perceived adversity. The "human coin" would be someone like Michael Jordan. He's shot millions of free-throws, and he was not going to be rattled. If he missed five free-throws in a row, it wasn't because he was rattled, it was because that's how the coin flip turned out (though it was a stacked coin, with 90% heads and 10% tails).

But with young players, they might let it get to them. I noted this with Harrell in that game: he was but a sophomore then, but he had a full-season under his belt. Had he not, I do not think he would have had the confidence to keep the probabilities the same. Flash forward to now. Last second drives against Texas, falling behind early against Oklahoma State. Not an issue. Harrell's just out there coolly flipping his coins. I will end with what I said about the end of that comeback game, which has renewed relevance now.

The upshot of all this is simply that, particularly from an offensive standpoint, you practice to remove emotion and to remove the hot hand effect. You want to be Michael Jordan looking at the game winning free throw like it is just the 156th free throw after a routine practice. I think what made Leach come to tears after the game is that everyone on the team - coaches, player, fans - went about their business as usual. Tech didn't come back by launching hail marys, running trick plays, grabbing turnovers, or even really getting lucky breaks. Everyone bought into the system and the program, did their job, played smart football, and performed.

I think what brought Leach to tears was the realization that, for young kids in a hyperbolic football world, sometimes it's brave and valiant simply to do your job.

* As a final note, sorry for all being all Texas Tech all-the-time recently, but (a) I've been acutely familiar with Leach (once had a long conversation with him about applying the pythagorean theorem to calculate how long a QB's throw was) and that offense for over a decade, so it's nice for me to see their success, and (b) their past two prime-time games have really been the only football I've been able to see recently. In any event, there might be a bit of a delay before my next post, because I'm working on some more detailed substantive posts - or as Orson Swindle likes to call them, my "coach porn" articles - about Florida's offense along with a couple of passing concepts in vogue right now. So stay tuned for those.