Bear Market Charts

While it is notoriously challenging and mostly futile to predict the precise path of anything in the future (e.g., weather, sports, eschatology, financial markets), it is thankfully much easier to look back in the history and compare. In that vein, I found a couple of interesting pictures of the U.S. stock market at Doug Short's website. (Click on these charts for the latest versions, as they are updated daily.)

The chart above tracks the progression of the current "bear market" (in blue), starting from October 9, 2007, relative to three other periods of protracted downturn in the U.S. stock market. It shows that the cumulative drop in the stock market over the past 14 months is roughly comparable to the magnitude of maximum drop experienced during 1973-74 first oil shock and 2000-2002 dot com bust, but we have suffered greater acceleration in the speed of decline since this summer, mostly due to much more tangible concerns about the health of the financial companies around the globe and the potential negative knock-on impact on the economy. The optimists can argue that we are pretty close to the bottom, if the current business and financial cycle proves to be similar to 1973-74 or 2000-2002. The pessimists can argue that there is still a long way down, pointing to the Great Depression era.

Those brave investors with a longer-term vision should take a look at the chart below which shows the stock market since 1950. Ignore for the moment the precisely drawn red trend line (which, despite what it appears, is not the average growth rate because this chart is drawn on log of 10). Two takeaways for me are: a) the stock market does a reasonably good job in reflecting macroeconomic conditions, as the market's troughs have occurred during or near recessions and b) the long-term trend for the stock market has been positive, at least since 1950, despite many periods of sustained downturn. That is something to be cheerful about, I think.

Purple America 2008 Edition

I do realize that the Presidential election last month feels so long ago. But, for the sake of completeness, above is the 2008 version of "Purple America" map, courtesy of Professor Robert Vanderbei at Princeton where more election maps are available.

Purple America

I have come to dislike the widespread use of "blue-red" state maps. Take a look at this interesting set of maps at Professor Robert Vanderbei's website at Princeton University (shown above) and one can appreciate how misleading those two-color maps can be. It uses shades of purple to reflect percentages of voters for each candidate. Professor Vanderbei explains:

Using County-by-County election return data from USA Today together with County boundary data from the US Census' Tiger database we produced the following graphic depicting the results. Of course, blue is for the democrats, red is for the republicans, and green is for all other. Each county's color is a mix of these three color components in proportion to the results for that county.

Much better!

PS. See this website (Maps and cartograms of the 2004 US presidential election results) for other election maps.

Definition of Value

Earlier this year, I attended a meeting where a professor discussed her recently-published book about visual arts management in China. In spite of (perhaps thanks to) my lack of knowledge in visual arts, I ended up learning a lot about the fascinating world of artists, galleries, auction houses and museums in contemporary China as well as their interactions with their peers in the United States and Europe. I also came away with an appreciation for the often crucial role government policies play in shaping production, distribution and consumption of arts in both countries.

One side discussion dealt with the rapid increase in the price of Chinese art over the past few years and whether such an increase was warranted. "The auction value of Chinese contemporary art has skyrocketed, not necessarily because they are excellent and therefore deserve high prices, but because some hedge fund managers are willing to pay high prices for even some mediocre pieces," went one casual comment. [I am paraphrasing here and not quoting verbatim.]

Which begs this age-old and one of my favorite questions: what do we mean by the word "value"? Why? Doesn't everyone know what value means? No! I have seen many instances of public policy discussions where the meaning of this (sometimes emotional and ideological) word is unclear at best and confused at worst.

Personally, I am a big fan of the following definition which comes from a rather dated but emphatically not outdated source.

The word value, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called "value in use"; the other, "value in exchange." The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it. [emphasis added] (Book 1, Chapter 4)

Adam Smith published these words during that revolutionary year of 1776 in his monumental book, An Inquiry into the Nature And Causes of the Wealth of Nations, which singlehandedly laid the foundation for the economics as an academic discipline.

One criticism of "value in exchange" is that it often appears to be capricious and not grounded in fundamental factors. This concern is implicit in the quote above about the current auction value of Chinese contemporary art and is known as paradox of value.

While I am highly sympathetic to this criticism (who would not be given well-known speculative episodes such as tulip mania), I also believe strongly that we should be careful in delineating normative (say, moral) concerns from positive (say, technical) questions, lest good intentions introduce unintended malfunction or distortions to the marketplace. Of course, we, as members of a capitalistic and democratic nation, should continue to debate fiercely about questions such as whether the difference between "value in use" (intrinsic value) and "value in exchange" (extrinsic value) is warranted and, if so, whether it should be tolerated. But, in my view, our political debates (necessary under the democracy) about economic issues will not improve unless we become clearer and more precise about the basic concept of this important word, value.

What do you think?

Black Conservatism

As someone who practically spent every Thursday evening watching the Cosby Show on NBC from late 1980s until its final episode in 1992, I could not resist clicking the link to the article "The audacity of Bill Cosby’s black conservatism," written by Ta-Nehisi Coate and published in this month's Atlantic Monthly. I found the article to be informative and well-written. We need more thoughtful expositions about racial experience, particularly in light of this year's political, social and religious controversies related to U.S. Senator Barack Obama's presidential campaign.

Somewhat surprisingly, what I ended up appreciating the most about this article was Mr. Coate's anchoring of Mr. Cosby's messages into much longer historical context. In addition, I relished sidenotes to two Atlantic Monthly articles from more than a century ago (written by Booker T. Washington and W.E.B. Du Bois in 1896 and 1897, respectively) which brought back some faded yet fond memories from the U.S. history classes I have taken.

Below are some illustrative passages from the article.

Excerpt 1: Cosby vs Dyson is analogous to Washington vs Du Bois a century ago

The split between Cosby and critics such as Dyson mirrors not only America’s broader conservative/liberal split but black America’s own historic intellectual divide. Cosby’s most obvious antecedent is Booker T. Washington. At the turn of the 20th century, Washington married a defense of the white South with a call for black self-reliance and became the most prominent black leader of his day. He argued that southern whites should be given time to adjust to emancipation; in the meantime, blacks should advance themselves not by voting and running for office but by working, and ultimately owning, the land.

W. E. B. Du Bois, the integrationist model for the Dysons of our day, saw Washington as an apologist for white racism and thought that his willingness to sacrifice the black vote was heretical. History ultimately rendered half of Washington’s argument moot. His famous Atlanta Compromise—in which he endorsed segregation as a temporary means of making peace with southerners—was answered by lynchings, land theft, and general racial terrorism. But Washington’s appeal to black self-sufficiency endured.

After Washington’s death, in 1915, the black conservative tradition he had fathered found a permanent and natural home in the emerging ideology of Black Nationalism. Marcus Garvey, its patron saint, turned the Atlanta Compromise on its head, implicitly endorsing segregation not as an olive branch to whites but as a statement of black supremacy. Black Nationalists scorned the Du Boisian integrationists as stooges or traitors, content to beg for help from people who hated them.

Excerpt 2: The organic black conservatism is a response to failed government policies

The rise of the organic black conservative tradition is also a response to America’s retreat from its second attempt at Reconstruction. Blacks have watched as the courts have weakened affirmative action, arguably the country’s greatest symbol of state-sponsored inclusion. They’ve seen a fraudulent war on drugs that, judging by the casualties, looks like a war on black people. They’ve seen themselves bandied about as playthings in the presidential campaigns of Ronald Reagan (with his 1980 invocation of states’ rights” in Mississippi), George Bush (Willie Horton), Bill Clinton (Sister Souljah), and George W. Bush (McCain’s fabled black love-child). They’ve seen the utter failures of school busing and housing desegregation, as well as the horrors of Katrina. The result is a broad distrust of government as the primary tool for black progress.

Excerpt 3: Cosby's rhetoric is not new

Indeed, a century ago, the black brain trust was pushing the same rhetoric that Cosby is pushing today. It was concerned that slavery had essentially destroyed the black family and was obsessed with seemingly the same issues—crime, wanton sexuality, and general moral turpitude—that Cosby claims are recent developments.

Excerpt 4: Cosby's activism is driven by a sense of rage caused by the failure of Liberalism

Part of what drives Cosby’s activism, and reinforces his message, is the rage that lives in all African Americans, a collective feeling of disgrace that borders on self-hatred. ...[truncated] Liberalism, with its pat logic and focus on structural inequities, offers no balm for this sort of raw pain. Like the people he preaches to, Cosby has grown tired of hanging his head.

Matthäuspassion

Music by Johann Sebastian Bach (1685-1750)
Libretto [in German] by Christian Friedrich Henrici (1700-1764)

Matthäuspassion is my favorite sacred music. Such an inspiring work! This clip shows the opening chorus, Kommt, ihr Töchter, helft mir Klagen, which begins the first part of the work referring to events and words found in Matthew 26:1-13.