Kevin Drum

Chocolate and the Efficient Market Hypothesis

| Tue Sep. 8, 2009 9:42 AM PDT

Kraft Foods has made a $16 billion bid to acquire Cadbury PLC, maker of fine British chocolates.  Naturally, Cadbury turned them down:

Prior to Kraft going public with its offer on Monday, Cadbury had already rebuffed the advance in private. In publicly rejecting it, Cadbury said the offer, a 31% premium to its closing share price on Friday, "fundamentally undervalues" the company.

This is precisely what every company always says whenever someone offers to buy them: even though the offer price is 20% or 30% or 40% higher than the current stock price, it always "fundamentally undervalues" the firm.

In other words, corporate CEOs universally reject the efficient market hypothesis, and since Wall Street as a whole seems to agree, that means that essentially the entire finance industry rejects the EMH.  So if that's the case, why should anyone else believe it?

POSTSCRIPT: Related trivia: my mother once had a cat named Cadbury.  I conducted a blind taste test once of British-made Cadbury's chocolate and its American-made twin, and everyone involved could taste the difference and preferred the British version.  Cadbury Australia has a phenomenal selection of varieties, far more than the pitiful three or four we have in America.  The last time I was there in the early 90s, one of the varieties was chocolate with a creamy chocolate filling, and it was great.  Sadly, their website suggests it's no longer made.  Sic transit etc.  On the other hand, some of the other varieties look well worth a try.

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Healthcare in 1,000 Words or Less

| Tue Sep. 8, 2009 8:55 AM PDT

Jon Cohn assesses the state of play of healthcare reform over at TNR, and he's on pretty much the same page as me: August didn't kill it; Democrats are finally facing the reality that they can't count on any Republican votes; reconciliation is now a serious threat; and Dems fully understand that failing to pass something would be calamitous.  So he's cautiously optimistic.  The difference is that his version of this is based on real expertise and extensive reporting, not just a gut feel.  Go read.

Quote of the Day

| Mon Sep. 7, 2009 9:25 AM PDT

From James Joyner:

When Thomas Friedman loses faith in a war, it’s time to give up.

The subject is Afghanistan, and Friedman doesn't quite say that we should withdraw.  He says, "This is a much bigger undertaking than we originally signed up for."  He says it's become a war between light black and dark black and "light black is simply not good enough to ask Americans to pay for with blood or treasure."  He says, "I feel a vast and rising ambivalence about this in the American public today, and adopting a baby you are ambivalent about is a prescription for disaster."

You'd think anyone who could write all that would take the obvious next step and recommend that we get out.  But no.  The farthest Friedman is willing to go is to suggest that the war in Afghanistan ought to be "debated anew."  Sheesh.

Happy Labor Day!

| Sun Sep. 6, 2009 8:53 PM PDT

Michael Moore Takes On Wall Street

| Sun Sep. 6, 2009 12:03 PM PDT

The Venice film festival is in full swing, and today the Guardian reviews Michael Moore's latest film, Capitalism: A Love Story:

Moore jabs his finger at everyone from Reagan to Bush Jr, Hank Paulson to Alan Greenspan. He drags the viewer through a thicket of insurance scams, sub-prime bubbles and derivative trading so wilfully obfuscatory that even the experts can't explain how it works.

The big villain, of course, is capitalism itself, which the film paints as a wily old philanderer intent on lining the pockets of the few at the expense of the many. America, enthuses a leaked Citibank report, is now a modern-day "plutonomy" where the top 1% of the population control 95% of the wealth. Does Barack Obama's election spell an end to all this? The director has his doubts, pointing out that Goldman Sachs — depicted here as the principal agent of wickedness — was the largest private contributor to the Obama campaign.

I say: sit back and enjoy.  There's no need any longer for the ritual fainthearted acknowledgments that "Moore sometimes goes a bit too far" or "Moore sometimes prefers theater to getting the facts straight" or any of that.  It's probably true, but why bother anymore? The wingers have already decided that we're all a bunch of radicalfascistextremistcommunistunamericansocialistchicagothugs anyway, so what the hell.  Might as well just enjoy some lefty porn along with a big bag of popcorn and hail Michael Moore as a true American prophet.  What more can they call us, after all?

Glenn Beck Gets a Scalp

| Sat Sep. 5, 2009 10:58 PM PDT

A few days ago, after a month of low-level sniping, Glenn Beck declared full-on war against Van Jones, an environmental activist who had been appointed an advisor on green jobs to the White House Council on Environmental Quality.  Why?  Well, Jones had been fairly radical in the early 90s, which was probably enough, but it's more likely that the real reason had to do with a recent boycott of Beck's show spearheaded by ColorOfChange.com, a group that Jones co-founded in 2005.  Jones left the group a couple of years ago, but no matter: Beck wanted revenge and Jones was an easy target.

I don't have the stomach to repeat all the smears that have been leveled at Jones, so you'll have to google it if you haven't been keeping up with this.  And none of it would have mattered much if (a) a YouTube of Jones calling Republicans "assholes" hadn't gone viral and (b) he hadn't signed a petition in 2004 from 911Truth.org asking for an investigation into charges that the "current administration may indeed have deliberately allowed 9/11 to happen."

But it did, and he did, and tonight Jones resigned.  "I cannot in good conscience ask my colleagues to expend precious time and energy defending or explaining my past," he said. "We need all hands on deck, fighting for the future."

So now Beck has his scalp and our effort to generate green jobs during a recession will be just a little less effective.  Lovely.

UPDATE: More here from Gawker ("The story of how the President's Special Advisor for Green Jobs became the biggest, scariest villain of the right wing (this week, anyway) is also the story of how the right wing information delivery process works now") and David Roberts ("For the record, Jones isn’t a truther").  The wingers, of course, are ecstatic over all this.

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The Battle of Jericho

| Sat Sep. 5, 2009 12:15 PM PDT

When the fire chief of Jericho, Arkansas, finally got fed up and went to court a few days ago to challenge his second traffic ticket in as many days, the town's entire 7-man police force showed up for the hearing.  And then shot him.

Seriously.  Apparently a scuffle broke out and one of the cops pulled out his gun and shot the guy in open court.  He's OK, but the police department, which was already in deep trouble for its habit of ticketing everything on wheels that rolled through Jericho, has been disbanded and all outstanding tickets have been voided.  The town's part-time judge has quit too.  And nobody knows what's happened to all the ticket revenue.

Story here.  Happy Labor Day!  (Via OTB.)

Melville and Bin Laden

| Sat Sep. 5, 2009 9:04 AM PDT

Is Moby Dick America's great national epic, as Matt Yglesias (along with his tame cabal1 of American Lit professors) says?  Or is it really a terrorist handbook meant to indoctrinate our youth in anti-whale2 hysteria?  The New Yorker's Close Read blog shows itself unafraid to confront the truth:

Richard Brody [...] has been writing about “The Baader Meinhof Complex.” But one detail he doesn’t explore is the appearance of a German edition of “Moby-Dick” in the movie: imprisoned members of the Red Army Faction use it as the key to their enciphered messages to co-conspirators on the outside. It turns out that Gudrun Ensslin, one of the group’s founders, was obsessed with the book, and thought that it told the story of the R.A.F.’s struggle against the state. She gave the terrorists Moby-codenames: Baader was Ahab, Holger Meins was Starbuck, and she herself was the cook. [...] Horst Mahler, their lawyer and later, as Brody writes, a neo-Nazi, was Captain Bildad. Stefan Aust, who wrote the book the movie was based on, told an interviewer that “to understand the R.A.F., you have to read Moby Dick.”

Aust explains further: "The whale is Leviathan, and Leviathan is a symbol for the state, a state whose papier mâché mask of deceptive appearances the RAF was committed to smashing."  This closely echoes Osama bin Laden's published views of the decadent West3, which makes it no surprise that blame-America-first liberals like Matt think impressionable children should all be forced to read Melville's seditious maritime propaganda4.  Nor should anybody be surprised on Tuesday if Barack Obama exhorts our kids to "work hard and read American classics like Moby Dick."  Today it's a white whale in the classroom, tomorrow it's sharia in the White House.

1I believe this is the correct term of art in conspiratorial circles to imply a Jewish conspiracy without actually saying so.  Right?

2Whale = United States, of course.  It's all about the imagery in Moby Dick.

3I'll look up the page number later.  But I'm pretty sure about this.

4Note similarity of box cutters used by 9/11 hijackers to harpoons used by Ahab's murderous crew.6

5This isn't actually a footnote.  I just want to mention that I created the bin-Ladenized version of the Fail Whale myself.  A new career in graphic design surely beckons.

6In comments, John Sully provides a better and more erudite extended metaphor.  Or simile.  Or something: "I think you meant flensing knives, which are used to cut the blubber from the whale for rendering. Flensing knives are similar to box-cutters, the implements with which bin Laden's minions symbolically cut the fat from the corpse of Amerika so that the county was rendered impotent against the power of Islam."

Real Tyranny

| Fri Sep. 4, 2009 10:25 PM PDT

One of my least favorite abuses of power is the government's use of material witness warrants as all-purpose excuses for detaining people when they have no actual evidence of any wrongdoing.  So I'm very pleased to hear that the 9th Circuit Court has not only ruled that such behavior is reprehensible and obviously unconstitutional, but that former Attorney General John Ashcroft can be held personally responsible for it:

Members of the panel, all appointees of Republican presidents, characterized Ashcroft's detention policy as "repugnant to the Constitution, and a painful reminder of some of the most ignominious chapters of our national history."

....[Abdullah] Kidd, a former University of Idaho running back...was handcuffed, strip-searched and shuttled among interrogations in Virginia, Oklahoma and Idaho before being released 16 days later and ordered to surrender his passport and live with his wife and in-laws in Nevada.  The arrest led to Kidd being denied a security clearance and losing his job with a government contractor.

....Georgetown Law professor David Cole said that Ashcroft adopted an aggressive "preventive paradigm" after Sept. 11 designed "to incapacitate people who government officials thought suspicious but lacked evidence of any wrongdoing. They were locked up and then investigated, rather than the other way around." Virtually all of the targets had nothing to do with terrorism, Cole said.

....The judges, alluding to the George W. Bush administration, said that although "some confidently assert that the government has the power to arrest and detain" suspects without evidence of wrongdoing, the panel considered such preemptive detentions "an engine of political tyranny."

Yep, boys and girls, that's what the seeds of real political tyranny look like.  Somebody please tell Glenn Beck and the rest of the fever swamp crowd.

Kabul Krazytown and Obama's Kid Speech

| Fri Sep. 4, 2009 5:08 PM PDT

It's Laura, back with the newest week-in-review podcast with Kevin and David. Kevin's clanging around in the kitchen a bit this week while discussing Obama's forthcoming socialist indoctrination of children everywhere —not sure what he was cooking. Next time maybe he'll give Inkblot a meow cameo instead? I kid. Sort of. Worth a listen.

Laura McClure hosts weekly podcasts and is an editor for Mother Jones. Read her recent investigative feature on lifehacking gurus here.