Blog neglect, political shellshock

As is apparent, over the last several months, I have been negligent with my blog. That should soon change, as my shellshock of Bush's seeping infection of the country's psyche with fear and moral righteousness, and ultimately garnering a slight majority 51% of red votes has finally begun to wear off. And with January 2005 almost upon us, there will be a lot to talk about. At least that's the plan right now.

What goes for [cable] news these days...

Jon Stewart lays it good on "CrossFire".

And by popular request, here is the media link (may be slow).

January 8th: CrossFire has been cancelled. A service for all Americans and the world.

Do we save or spend our way out of a stagnant economy?

Why Bush's Tax Cuts Don't Work as Intended
If you apply a Keynesian view to this question, it is spending that you want to drive up aggregate demand. Savings are funds that are channeled through the banking system and equity markets for businesses to invest in capital goods and equipment as well as labor in anticipation of demand. With insufficient demand, inventories build up and there is ultimately a slack in the labor and factory utilization rates.

The logic of the tax cuts was to afford people monies so they will spend to stimulate domestic demand. However, historically low interest rates and inflation, increasing productivity rates, coupled with high GDP growth and output means we have plenty (even a glut) of investment capital that is churning out goods and services against a shrinking labor force. In addition, a large number of workers have left the job market or have given up searching for jobs, poor and middle-class households (HH's) are heavily in debt over leveraged with their home equity lines, who collectively cannot afford to continue bearing the brunt of sustaining aggregate demand.

In other words, a supply glut of goods and capital coupled with insufficient new jobs created to even keep pace with population growth ultimately leads to stagnant demand (plus existing HH’s are clearly overextended more than they’ve ever been). To stimulate job growth via tax cuts, a majority percentage of each tax cut dollar should be spent versus saved, which if saved in this day and age of free capital flows, is essentially a domestic sieve that in part redirects those dollars to global, especially emerging, markets (particularly China) in seek of higher returns with little immediate benefit to the U.S. – with my Far East ETFs blazing hot in the last 7 months to prove it.

Why It Disproportioanately Benefits Those Who Need It Least
Providing the rich who make more than 200K a year with tax cuts - which probably includes a few reading this (whether one feels rich or not), and if one can put aside pure self interest and few thousand dollars refund checks for a minute - is not a wise policy criteria since folks in the top 2/5 income quintiles have a much greater tendency to save a higher percentage of each tax cut dollar received.

Since more consumption driving up aggregate demand is what’s desired, not savings, the poor and middle-class would do more with each tax cut dollar they receive since a significantly greater percentage of it would be spent. Take the Japanese as a case and point – huge savings and capital pool, low interest rate coupled to gluttonous and undisciplined lending, and extremely weak consumer demand, all have led to a deflationary economy for more than a decade of stagnant growth. Like it or not, we are all Keynesians now; supply-side economics doesn’t work in theory or in practice.

The Numbers Behind It All
According to the Bureau of Labor Statistics' Consumer Expenditure Survey, or CEX, and Federal Reserve data, the top 2/5 quintile, folks who make more than an average of $85K/yr, to the top 1/5 who on average make $203K/yr, have an average 30-40% savings rate. The top 1% make on average $1.5 million/yr and save more than half their income. This is in contrast to the bottom 3/5 quintile of income-holders who make on average $56K/yr and less who have a dissavings rate between -5% to -120% (dissavings rate is the degree by which a HH consumes more than they earn and/or save).

And these tax cuts aren’t free. Foreign investors finance it via our treasuries and bond issues that have significant interest costs. In addition, a noticeable portion of it flows to equities markets for domestic and increasingly overseas investment, which is doubly negative for the economy. The trend is readily apparent: In 2001 we had a surplus of $100,000,000,000 whereas now in 2004 we’re have a $400,000,000,000 deficit, with tax cuts making up a 1/3 of the red, and Iraq is at $200,000,000,000 with no end in sight.

And fully one-third of President Bush's tax cuts in the last three years have gone to people with the top 1 percent of income, who have earned an average of $1.2 million/yr. Since they will also receive an average tax cut of $78,460 this year, with a saving rate on average of 45% and more, it means unfortunately, at least half of that almost $80K refund will not be spent, and so will fail to stimulate sufficient aggregate demand and not contribute directly to economic growth.

All this and more is why Bush’s massive tax cuts haven’t worked to stimulate significant demand and employment (last month’s anemic 32K new jobs vs. the expected 300K new jobs being a case and point), yet has done a great job for business growth and GDP.

Postscript
Instead of the 1/3 of tax cuts going to the top 1% income earners who need it the least, it can be shifted to a middle class one and/or become transfer payments to the 40 million poor and lower middle-class Americans who need and do not have access to health care (totalling almost 20% of all Americans; I can't think of another G-7 nation with 20% of its population that have no health care rights).

This would not be investing dollars subsidizing big pharma and HMOs to do as they wish to fatten their income statement or increase margins. Rather, it provides a direct economic mechanism to pool and increase the levarage afforded to disenfranchised citizens who can then vote with their feet for those providers that deliver the best health care competitively in the marketplace.

This will take tax cut monies away from those top 1% of HH's making over $1 million who forfeit an 80K refund to those who do need it (though, according to the Daily Press, consider what President Bush said on August 9th: "The really rich people figure out how to dodge taxes anyway", on why high taxes on the rich don't work). It will also reduce the health care cost burdens for the majority of Americans who now have to pay for those that cannot.


Clarification: The most recent CEX data shows the bottom 1/5 to bottom 2/5 have a dissavings rate of -30 and -120%, respectively. The middle 20 have a -5% dissavings rate. The top 2/5 saves 35% and the top 1/5 saves 45%.

Do the rich save more?

From Buffett: Bush Tax Cuts Favor Corporations, Wealthy:

..."If class warfare is being waged in America, my class is clearly winning," Buffett said in Berkshire Hathaway Inc.'s annual report.

Except for 1983, the percentage of federal tax receipts from corporate income taxes last year was the lowest since data was first published in 1934, Buffett said.

"Tax breaks for corporations (and their investors, particularly large ones) were a major part of the administration's 2002 and 2003 initiatives," Buffett said....

to Report Finds Tax Cuts Heavily Favor the Wealthy:

...The report calculated that households with incomes in that top 1 percent were receiving an average tax cut of $78,460 this year, while households in the middle 20 percent of earnings - averaging about $57,000 a year - were getting an average cut of only $1,090.

...Mr. Kerry has argued that the cuts were tilted so much in favor of the wealthy that they provided relatively little stimulus to the economy and set the stage for record budget deficits. Since 2001, the federal budget has deteriorated from a surplus of more than $100 billion to a deficit expected to exceed $400 billion in 2004.
Mr. Bush's top economic priority has been to make his tax cuts permanent, rather than letting them expire at the end of this decade as they would under current law. Mr. Kerry would seek to roll back the tax cuts for households with incomes above $200,000 a year, a move his campaign estimates would save $860 billion over 10 years, and use that money in large part to pay for a vast new national health care plan...
...According to the new report from the Congressional Budget Office, about two-thirds of the benefits from the tax cuts, enacted in 2001 and 2003, went to households in the top fifth of earnings, with an average income of $203,740....

All this begs the larger question: Do the rich mostly spend or save?

If they save more, as a policy criteria, should the rich get the bulk of the tax cuts - especially in an anemic economy that presently requires direct stimulation of domestic demand (vs. a now oversupply of investment) to produce concommittant growth?

A detailed technical paper with extensive economic analysis and discussion on the topic by economists at the Federal Reserve, Dartmouth, and Columbia provides some answers on how much the rich save. As it turns out, a whole lot.

"Do the Rich Save More" provides a stylized analysis of data from the University of Michigan's Panel Study of Income Dynamics (PSID), the Federal Reserve's Survey of Consumer Finances (SCF), and the Bureau of Labor Statistics' Consumer Expenditure Survey (CEX).

A salient set of results are diagrammed on pp 34-35 showing a clear trend slope measuring the much greater degree (2-3 times or more) by which the rich save over those of lower- and middle-income.

Their conclusion, in part, states:

...For households aged 30-59, we consistently find that higher lifetime income households save a larger fraction of their income than lower income households. Also, there is no evidence that high lifetime income households dissave more at post-retirement ages...

Whereas for the middle-class, the savings (including retirement) picture is the reverse and bleak - a University College of London and University of Chicago professor state in "Do IRAs Increase National Saving?":

...households financed their IRA contributions not from a reduction in consumption, but rather from existing saving or from planned saving. Their findings indicate that only a small fraction of IRA contributions actually represented net additions to national saving. These results should lead policymakers and researchers to reexamine tax-favored saving accounts and to determine whether the additions to household saving that are induced by tax incentives are substantial enough to justify the loss in tax revenue from the program.

...While participation in the IRA program may have increased household saving (through reduced tax liabilities), results indicate that there was little or no increase in national saving between 1982-1986. Attanasio and DeLeire also examine changes in the non-IRA financial assets of IRA contributors. They find that on average, new contributors reduced their non-IRA assets by over $1,400 compared with old contributors.

...Researchers estimate that at most 9% to 20% of the IRA contributions of new contributors represent new national saving. These figures are lower than the results found by studies that compared IRA contributors with non-IRA contributors, only using data on assets. The key policy question remaining is whether a 9% or 20% increase is a large enough percentage to justify the IRA program....

Living beyond means

Numbers speak for themselves, over & over again...

U.S. Trade Deficit Increased 19% in June: Analysts Worry That Burgeoning Gap Will Lead to Higher Interest Rates, Lower Dollar

...By the end of June, imports exceeded exports by $55.8 billion, another record U.S. trade deficit, the Commerce Department reported yesterday. The size of the gap forced many economists to trash their forecasts and pencil in lower estimates of the economy's strength in coming months.

..."The U.S. as a nation is just living way beyond its means," said Nigel Gault, U.S. economist for Global Insight, an conomic research firm, noting that household debt has soared in recent years and that the federal budget deficit is ballooning to a record size. "There is a worry that at some point, U.S. spending growth will have to slow sharply to get this under control."The size of the trade gap surprised many analysts because it showed the U.S. economy had slowed more significantly than thought in the spring.

...Several analysts said they also expect weaker U.S. economic growth in coming months as trade provides an additional drag on a recovery that may be faltering under the weight of high energy prices, stalling job creation and tepid consumer spending. "Unless there is significant improvement in coming months, the deficit's trajectory poses serious questions about the growth outlook in the second half," Joseph Abate, of Lehman Brothers Global Economics, wrote in a note to clients, calling the trade figures "shockingly dismal."...

Why Bush's top-heavy tax cuts don't work

This entry is in response to a blog posting, where a comment was made a while back objecting to my assertion stating that the rich save more than the poor, and as a result the Bush tax cuts is not an effective stimulus for a slow-growing economy.

The Economic Irrationality of Supply Side-driven Tax Cuts
Setting aside the fact that jobs growth has been slowing down tremendously (as evidenced by the latest monthly jobs report of an anemic 32,000 new jobs) despite *record* monies spent on tax cuts, I think tax cuts are perceived in fundamentally different ways, one of which does not jive well with the economic data. I believe too many go through a certain thought process or experiment where one analyzes things at the margin and make assumptions leading to the belief that the rich are actually more likely to spend than the poor, thereby justifying the top-heavy tax cut approach.

Here is an alternative view. For a point of reference most of us can agree to, here is a set of time-series data from the Bureau of Labor Statistic's Consumer Expenditure Survey:

[Column #'s]
[1] Income quintiles (fifth)
[2] Share of total income
[3] Fraction of income saved
[4] Contributions to overall savings rate

1981 TO 1983 AVERAGE
lowest 3.9% -108.2% -4.2%
second 10.1% -15.4% -1.6%
third 16.7% 6.3% 1.1%
fourth 24.8% 18.4% 4.6%
highest 44.4% 31.3% 13.9%
Overall savings rate (1981-83) 13.7%

1987 TO 1991 AVERAGE
lowest 3.8% -122.6% -4.7%
second 9.3% -28.1% -2.6%
third 15.8% -0.9% -0.1%
fourth 24.3% 12.2% 3.0%
highest 46.9% 30.6% 14.4%
Overall savings rate (1987-91) 9.9%

Source. Consumer Expenditure Surveys, Bureau of Labor Statistics,U.S. Department of Labor.

Besides the obvious fact that the rich do save significantly more then the poor, here's some context behind this trend that should leave little room for doubt.

A Little Economic History
Beginning in the mid-1970s the share of their incomes which U.S. households save steadily declined, and this drop accelerated in the 1980s. According to household surveys, the savings rate averaged 13.8% of income during 1981 to 1983, but fell sharply to 10% during 1987 to 1991.

Most economists, and many policymakers, believe this decline is a critical economic problem. Why? First, since they view saving as the source of capital for business investment, lower savings will mean higher interest rates, resulting in less investment and slower economic growth. Second, higher interest rates will harm consumers by making it more difficult to finance home mortgages, car loans and other purchases. Third, the current generation, by not saving enough, will face greater hardships in retirement.

While economists and policymakers of many political stripes agree that we should be deeply troubled about this situation, they don't agree on why the rate fell, or what to do about it. One political viewpoint, that of "supply side" economics, became prominent in part due to concerns during the 1980s about the falling savings rate. Among other things, supply-siders argue for redistributing income toward corporations and the wealthy, on the theory that these sectors save at higher rates. But while such a redistribution has taken place during the past 15 years, overall savings have continued to fall.

Evidence from recent decades shows that while the rich are saving more, this increase has been outweighed by dramatically lower savings from all other income groups. And the reason is that widening inequality has so harmed the incomes of moderate- and low-income households that they are unable to save, and in fact are living on borrowed money (dissaving).

Flaws in Standard Economic Assumptions
One problem with standard models (and every day folks as matter of fact) is that they assume all households, regardless of their income or wealth, make consumption decisions in similar ways. All families, the models assume, balance their current consumption needs versus the need to save for retirement, and all have reliable estimates of their future income.

These assumptions are suspect for several reasons. First, only households that have relatively stable sources of income can make long-term decisions concerning future consumption in retirement. But a large and growing number of households face great uncertainty concerning their jobs and income. Second, many households, even if they would like to save for retirement, cannot do so, because they don't have enough income to cover their current consumption needs.

Standard models also fail by assuming that households adjust their behavior similarly whether incomes rise or fall - when they rise, households consume more, and when they fall, households consume proportionally less. But the "Relative Income Hypothesis" (RIH), suggested in 1949 by economist James Duesenberry - reminiscent of eclectic economist Thorstein Veblen's earlier work dissecting the [ir]rationalities of the leisurely class (in his best known book, the Theory of the Leisurely Class, chapter 4 is on Conspicuous Consumption - a term he originated) - argues that when incomes decline (such as in a recession) households resist giving up the consumption patterns they have become accustomed to.

To maintain their previous living standards, households will either reduce their savings rates, consume out of previous savings, increase their use of debt, or raise household income by having another household member enter the labor market. This all can be summed up by what someone said to me recently: "It's amazing to see how customer care representatives at my company are driving BMWs and Lexus on a 30K a year salary." I make a bit more yet I bought a Nissan Altima in 2002, albeit souped up a bit with a V6 and spoiler but at least 10K cheaper than the former two.

In other words, the more wealthy you are on the economic continuum, the more likely you are in making more rational economic decisions that involve heightened consideration of future and present values of costs and returns of goods and assets (many with help of fine accountants everywhere), which lead in the end to a much higher rate of savings to play a large part. This trend persists through times of growth and recession over the long-run (note how static the results held over the decade-long time series). If one had time to dig the more recent '01, '02, and '03 survey data, it would show the same trend.

It would be instructive to understand given the shift in income toward the wealthy during the 1980s, what caused the decline in savings rates from 1981-83 to 1987-91? It was not a lack of savings by the richest Americans, but rather by everyone else.

The dissavings rates of the lowest two fifths rose, while the savings rates for the third and fourth fifths (perhaps approximating the middle class) fell greatly. In 1981-83 the lowest two fifths dissaved at rates of-108% and - 15% respectively, while in 1987-91 their negative saving rates grew to -122% and -28%. In addition, the third fifth went from net savers to dissavers, while the savings of the fourth fifth fell from 18% to 12% of their incomes. The savings rate of the wealthiest fifth of households also worsened slightly. But this was more than offset by their increased share of national income. As a result, this was the only income group that increased its total savings (from a 13.9 to a 14.4 percentage point contribution toward the overall savings rate, as shown in column three of the table).

...And Why Bush's Tax Cuts Don't Add Up
As such, the Bush tax cuts are not very effective given such economic realities. The problem is only worsened considering that the tax cuts are funded on borrowed money that is costly, debt-financed by our very willing co-optitors of the Far East and Europe.

Many analysts expected the overall U.S. savings rate to rise as wealthier households, with higher savings propensities, gained a greater share of the total income. And supply-side theorists continue to recommend shifting income toward the wealthy as a means of raising total savings in the United States. But the evidence demonstrates the opposite - higher savings by the rich did not make up for the severely reduced savings of the remaining 80% of households.

As some economists have argued, the bottom three fifths found it necessary to increase their dissaving in order to maintain living standards in the face of stagnating real incomes and rising costs of living, especially for housing, since the early 1970s, and now rising commodities, oil, and food prices.

In the end, the tax cuts are needed much more by the middle- and lower-income class (by middle, I mean most of you and I making less than $200,000 a year), more to buttress up the savings rate *and* to increase the consumption rate since the rich (BillG and his closest 1,000 friends) are not consuming but investing for the rest of us to consume thus completing, ideally speaking, a virtuous cycle of economic growth.

However, Bush's belief in discredited "trickle-down" supply-side economics of the 80's (whereby people making >$200K a year receive bulk of the billions in aggregate benefits of the tax cuts and save much of it, vs. just marginally speaking viewed by impact as % of their income, which fails to provide a weighted measure of the economic impact of tax cut dollars spent that stimulate aggregate demand) is a disaster for this day and age of free capital flows, debt-driven foreign-funded demand, coupled with oil and basic materials volality and price increases, political instability, and a wholesale lack of investment in education, technology and research vis-a-vis the G-8 and *China*.

The real behind-the-scenes Mideast story

An impressive piece of journalism that I read a few weeks back. A gripping blow-by-blow of the Iraqi situation, how Iran poses the real threat in the region capitalizing on the current tie-down and distraction of the US, and how the Israeli’s are doing all they can to stop them a la real politick.

Kumar and Harold go to Whitecastle

Chani and I went to see the flick last night - what a hilarious blast! It's the funniest movie I've seen this year. A tinge of Better Luck Tomorrow. It's doubled up with an Asian and Indian mixed together who play off each other really well. Great writing and acting; it exceeded my expectations by far.

The political economist

BillMon dispels the myths and confusion behind the employment rate and the influence of the household v. payroll surveys. It is very disappointing to see someone of Mankiw’s qualifications turn into a political hack. He is one of the nation’s leading macroeconomists, and like Larry Summers (treasury secretary under Rubin/Clinton), both are bright stars and were one of the youngest tenured professors at Harvard.

Brad DeLong is also a noted economic historian at UC Berkeley who specializes in macroeconomic growth, also a leader in the field. And since we’re on topic, Paul Krugman, before he became a vocal NY Times columnist, was a professor of international trade at Stanford, then MIT, now Princeton, and won the Bates medal, an honor bestowed to the best economist under 40.

Note that while Bush has a legion of supply-side think tanks full of mediocre economists backing him, you have over 50 Nobel prize scientists and economists (not counting the 4 exceptional ones above), a dozen 3- and 4-star generals and admirals (including the 2 most recent retired chiefs of the Joint Chiefs of Staff), as well as over 200 business leaders of the Fortune 1000 that have signed on to the Kerry bandwagon.

The reasons behind this support is not ideology - it simply lies in the fact that the numbers just haven’t added up using Bush’s arithmetic – whether one is speaking about the president’s war or peace policies. And when numbers don’t add up, it doesn’t matter what you say as president or if people think he’s a great, straight-shooter from Texas. However, it does matter whether a president deliver on what he says most (or for 3rd rate presidents, half?) of the time.

If you do the political math yourself, you’ll see that Bush has a big deficit in this area – big on rhetoric, small on tangible, measurable results. So it’s no surprise that he has an increasing credibility gap with the American people, which I doubt will change regardless of how Bush spins, smears, and pontificates in November….

We're on autopilot

After reading this article, it occurred to me…is our national and foreign policy running on auto-pilot? Do we hear of phone calls from Bush to Putin demanding that he address the Yukos issue to ensure oil price stability? No. Yeah sure, behind the scenes via back channels etc., but how about public posturing/political pressure and the face-to-face style that all modern US presidents have embraced, thereby utilzing every tool in the political toobox?

The president has visited the mid-East twice in the entire time he’s been in office, both times to make speeches, spending no more than 3 days each. His engagement with NATO is nil. Powell is not the president yet he’s acting like one in front of foreign leaders on Bush’s behalf, not to mention Bush’s record days in office on vacation, in this day and age.

I remember a time once when presidents traveled around the world to assert US leadership that the world respected and was, indeed, guided by. Now, we only know how to flex our military muscle (a blunt instrument of power, recognized since Sun Tzu to modern guerilla war strategist Ho Chi Minh) and apparently have lost the ability to practice the lost arts of diplomacy and international politics.

Results of this presidency and Republican-controlled Congress are irrefutable. What’s more damning, as history will show, the Democrats had nothing to do with it as Republicans have full sway (as possible in a representative demcracy short of a single-party system) to do whatever they want to for 4 years now. And what’s tangible to show for? Something to really think over in the next few months.

The nature of the job deficit

Supply-side, debt driven economics does not work. After the latest US jobs reports states that only 32,000 jobs (vs. the 250,000-300,000 expected) were created last month, The Economist states it head on:

It is becoming increasingly apparent that the gains from America’s productivity-led recovery have been unevenly distributed. Corporate profits are strong, and business investment leapt by almost 9% in the spring. But pay has lagged behind, and the wages of production workers have stagnated. Of course, through its tax cuts, the White House has done its best to provide what employers will not—a substantial boost to take-home pay. But the effects of those tax cuts are beginning to fade, just as prices at American petrol pumps rise.

What consumers do not earn, or receive back from their government, they must borrow. Household debts grew by more than 10% in the first quarter, and now add up to more than 115% of disposable income. HSBC, a bank, says that the recovery is built on “marshlands of debt”. With interest rates now rising, this ready source of spending power may be about to dry up. Indeed, the beige book reports that borrowing by homebuyers declined in San Francisco and New York, two of the hottest property markets in the country.

Food for thought

Contrary to perception, the single-most important reason developing African countries are underdeveloped is a gross lack of nutritious, affordable foods. The why's vary: Geography, political turmoil, meddling by the British empire...the list goes on.

Lest we forget the basics of economic development, satiating hunger should also be a priority alongside the massive US' AIDS/HIV initiative (which now prescribes use of expensive Western cocktail drugs vs. generics w/ vitamin supplements). More investment and attention is required in smart nutrition as well as developing and planting more productive crop strains, which doesn't require big programs to administer or much money to start-up.

There is an overwhelming amount of data available (outlined below) that draws a clear picture of the best ways to tackle this problem. For next tax season, you might consider a donation to a relief organization today.

There are 800,000,000 people at stake.

Quoted from The Economist - Food for thought:

....Western experts tend to tiptoe around the issue of how malnourishment makes people less intelligent, but local experts sometimes do not. "If your brain is stunted when you are young, that affects the decisions you make in later life. If you can't do simple arithmetic, you won't invest wisely. The cost of that will be very high," says Tomaida Msisika, a consultant on food security in Malawi. Sam Chimwaza, an analyst for Malawi's Famine Early Warning Systems Network, says that the reasoning ability of people in rural areas has been affected by malnutrition and it is hard for them to execute simple instructions. "They can work as servants in the city for two or three years and still not figure out how to adjust the temperature on an iron," he says.

Several pieces of research have shown the broader economic effects of these problems. A study on Zimbabwe found that children exposed to a drought completed on average nearly five months less schooling (and were 2.3cm shorter than expected). It estimated that this resulted in a loss of 7-12% of lifetime earnings. At a somewhat larger scale, the World Bank estimates that in low-income countries, the net present value of causing children to be born of normal rather than low weight would be about $580 per child. That is more than a year's average income in a typical sub-Saharan African country...

Going up

A reason to be happy. MSFT will announce earnings this Thursday, hopefully there's strong growth for nearly all 7 businesses.

Commentary back in a week

I will be sporadically blogging since I will be out of the office attending Microsoft's Global Briefing in Hotlanta until July 21st. I'll try gathering some interesting non-confidential tidbits to share on some cool MS technologies when I get back.

Spotlight on Spotlight

Mighty interesting read on Apple's new search engine and its management of metadata, a traditionally difficult but interesting computer science problem.
------------------------
Daring Fireball says Apple's Spotlight will be a real and a well-thought-out product:
Daring Fireball: Spotlight on Spotlight: ...two years ago... Apple hired Dominic Giampaolo, renowned file system design expert and creator of the highly-regarded, metadata-rich Be File System.... [W]hat then has Giampaolo been working on?... Spotlight — which is, in the words of one WWDC attendee, Giampaolo’s “baby”.... [T]he aforementioned source who attended the Spotlight session at WWDC sent me the following report:

Spotlight is completely, relentlessly focused on files and files’ metadata. Files are the only object returned to Spotlight queries. Two aspects of Jobs’ keynote were thus misleading: The “spotlight” effect on System Preferences was wholly unrelated to Spotlight. Spotlight’s ability to show results from Apple Mail archives on Jobs’ machine was tantamount to a sham. Believe it or not, Tiger Mail has switched to an “exploded” Maildir-like storage format with a single message per file.

One implication of Spotlight’s file-centricity is that its ability to search “email” might not apply to clients other than Apple Mail — it’s the fact that the new Tiger version of Mail stores each message as a separate file that allows Spotlight to effectively return individual mail messages as search results. No other major mail client uses a one-message-per-file storage format.

Spotlight’s full-text search is outsourced to SearchKit, which will be considerably faster in Tiger (“3x indexing, 20x incremental search” over Panther). So, Spotlight has three places to look for information about files: its own hand-tuned substring-matching metadata store (built by Giampaolo, not part of Core Data or anything else), Carbon’s HFS+ catalog calls (so Spotlight will respond to searches for type and creator), and SearchKit’s full-text index.

Both metadata collection and full-text indexing depend on cooperating per-file-format Importers, either written by Apple or by third parties. Like Google, no matter how much text an Importer provides, Spotlight only cares about the first 100K of raw text. Importers are fired on every file the moment it is created, saved, changed, or moved, including when files are made available through a newly mounted drive. Performance is said to be excellent in every case except network-mounted home directories, which are bedeviling on several levels and on which they’re still working.

It’s through the default set of Importers that Spotlight is able to index and search format-specific metadata, such as the ID3 tags in MP3 files. What’s cool about this architecture is that Spotlight’s indexes will thus stay up-to-date automatically. All you need to do is save, move, or copy a file, and Spotlight’s metadata and content indexes will note the changes on-the-fly. Compare and contrast to the full-content file searching previously provided via Sherlock, which required periodic monolithic re-indexing of the content of your drives.

Reading code is hard

Eric Lippert doles out good advice sharing some of his coding and debugging best practices.

Something cool from Microsoft

...about Potential and Passion.

Something funny from Sun

...found Inside Jack.

Slowly encircling

Israel’s illegal but unstoppable barrier

Economics of two Americas

Class warfare is being waged in the current elections, again.

Wal-Mart vs. Neiman Marcus illuminates with more analysis showing how economic growth is benefiting the wealthy and fast disappearing for the poor.

...the University of Michigan and the Conference Board both publish monthly gauges of consumer confidence...Both measures—produced by nonpartisan economists—find that Americans, on the whole, are confident—more optimistic, in fact, than they have been in two years. But they also found that while those with incomes above $50,000 have become more confident and optimistic, those with incomes below $50,000 have become less so.

The Conference Board shows the same split. In its most recent month, May, the index for over-$50,000 demographic was 112.1, the highest it's been since June 2002. But for those making under $50,000, confidence not only remains below its levels of July 2002, it has been falling in 2004. (Since January 2004, the confidence for the under $15,000 subset has fallen from 69.1 to 65.6; for the $15,000-$24,999 subset, from 85.2 to 69.3; for the $25,000-$34,999 subset, from 92.9 to 82.9; and for the $35,000 to $49,999 subset, from 95.2 to 93.6.)

...If the economy were undergoing a broad-based expansion, if a rising tide were lifting all boats equally, you might expect that trend to continue. But the views of the rich and poor are moving in opposite directions. The split results—the growing pessimism of the poor and the growing optimism of the rich—suggest the economy's improvement isn't helping everyone. That is bad news for a lot of Americans, but it may be good news for the Kerry-Edwards ticket.

Take CMU courses online

Carnegie Mellon is offering free courses through its Open Learning Initiative. Unlike MIT's OpenCourseWare which has 700 courses available, Carnegie Mellon currently only has five courses available but is fully interactive. Learn microeconomics here.

On political accountablity

...where I also add my 2 cents.

The closing of the American book

Read a forceful piece, apparently the #1 most emailed article for the New York Times right now, speaking to the consequnces of Americans choosing not to read. Cable networks are no doubt happy about this trend as long as more eyeballs stay glued to the tube. I wouldn't be surprised if this impacts our productivity, innovativeness, and work ethic over the long-run, in turn engendering not so attractive demographics that is less educated and well-off. What goes will come around.

If it wasn't for lawyers

Daniel Gross argues that lawyers—derided by the business-friendly and secrecy-obsessed White House “as enemies of free enterprise and the state”—are emerging as the true heroes of the Enron debacle. “Bush's MBA administration proved itself singularly unequipped to deal with the cascade of bankruptcies, accounting scandals, and Wall Street conflicts that exploded in 2001,” Gross writes. In this responsibility vacuum, lawyers “have proved to be the most effective tools—perhaps the only effective tool—for making the Bush government work.”

Bush, and many of his surrogates, can't make political hay out of this great coup. Every development in the Enron saga becomes an occasion to rehash the many links between Bush, the Bush administration, and Enron—and inconveniently close to the elections. (Salon conveniently dusts them off here.) And it's difficult to criticize trial lawyers for destroying Americans' businesses when Enron stands as an example of how a bunch of greedy MBAs from Texas sunk a giant American corporation all by themselves—or to bash lawyers when, as the Enron Task Force shows, they're the only potent weapon the government has against corporate corruption.

Also, an excellent piece at BillMon (solid piece of writing, as usual) laying out the history between Enron, Lay, the GOP, and the Bushes (I & II). The Whitewater "scandal" is quaint by comparison.

Nice, quiet evening

Started off Friday night working out for an hour at the gym down the street from the office. Soon after, I picked up Chani from her work, where we had a nice Thai dinner nearby, and managed to catch a showing of Spiderman 2.

Spidey the hype does indeed match the performance. I thought the acting was superb, with a very well-written script, nicely assembled scenes (threaded with romance) and story line. And did I mention the killer (very realistic) special effects?

Afterwards, we got home and even caught up on a couple shows we Tivo'd.

SG-1: New season arrives

I'm a big fan of a Sci-Fi channel cable show, SG-1, because: 1) it's not a Star Trek rehash, 2) has quite a few great and original story lines, 3) with rich subplots and more (e.g. Richard Dean Anderson of MacGyver fame does a great job as one of the main characters). It has garnered a loyal fan base, and is now on its 8th, and last, season.

My fiance and I saw the 1st episode of the new season last night - it totally rocked, that is, if you're a fan of [good] sci-fi. :)

The price of empire

A friend sent me this interesting piece found in May's Atlantic Monthly on the price of America's empire building; a lot of informative comparisons are made to the British experience. Seems the Brits master the craft a little better than we do.

Putting money in perspective

Think you have money problems?

Look at the celebrities -- child stars to Donald Trump -- who've burned through hundreds of millions of dollars and then filed bankruptcy.

To comment or not to comment

Laura's Apt 11D makes an interesting case for both turning on and off blog commenting. To keep the Commentary somewhat rational if not a controlled chaos, mine's off for now.

Microsoft's upcoming goodies for Web services

Microsoftie's Yasser, Elliot, and Matt have posted New Features for Web Service Developers in Beta 1 of the .NET Framework 2.0. Interesting read if you're interested in where Microsoft is going next with Web services.

Starr defends, Moore begins, and then some

Kenneth Starr offers his rebuttal to Clinton's memoirs, Michael Moore starts blogging on Independence Day, as well as Bloggers Suffer Burnout (no surprise there) and the open question, Where Are the Real Republicans?.

Anti-string

String theory. You may have heard of it - many a times on Star Trek no doubt. In physics, quite a few consider it The Theory of Everything. String theory has been hot for a while, almost a decade now. PBS has a popular multi-episode special on it, quite a few best sellers are shilling it.

Yet, what if it turns out to be unprovable New Age-tinged psuedo science, which has no predictative value and fails to explain new phenomenon any better than existing theories?

That's the critical view proffered by anti-string theorists.

Report Shows Big Drop in Reading in U.S.

Astounding - seems like some things we just can't take for granted anymore.

Only 47 percent of American adults read "literature" (poems, plays, narrative fiction) in 2002, a drop of 7 points from a decade earlier. Those reading any book at all in 2002 fell to 57 percent, down from 61 percent.

NEA chairman Dana Gioia, himself a poet, called the findings shocking and a reason for grave concern.

"We have a lot of functionally literate people who are no longer engaged readers," Gioia said in an interview with The Associated Press. "This isn't a case of `Johnny Can't Read,' but `Johnny Won't Read.'"

The likely culprits, according to the report: television, movies and the Internet.

Success and Motivation P4

More insights by Mark Cuban. He has it nailed down, nothing fancy or MBA-esque. Focus on the basics: knowledge is power (e.g. spending 3 hours a day reading), learn from the best, understand how your biggest competitors might respond before they do. Good stuff.

The great Chinese century - are they ready?...Part 2

Does freedom and liberal democracy really have nothing to do with the Chinese phenom? I take another stab at it here.

Man-made yellow diamonds - absolutely fascinating

My fiance clued me to this intriguing tale that leads down some dark corridors shedding light on a battle between old diamond interests (De Beers) and a few gutsy, bleeding-edge scientists and entrepeneurs. May very well change the face of technology as we know it today.

And De Beers Agrees to Guilty Plea to Re-enter the U.S. Market.

The great Chinese century - are they ready?

New York Times Magazine has a thought-provoking piece on China.

When we're not the biggest dog on the block anymore, it has to be innovate or die (like Great Britain of last century).

Regardless of the current hype, China will lack freedom and a liberal democracy that we take for granted for a long time to come, which is fundamental to forming a marketplace of ideas and innovation that lead to sustained, non-export led growth. Plus, even bigger question for them will be the 1 billion inland population that don't and won't benefit from this economic growth spurt for the forseeable future.

Sarah McLachlan

My fiance and I blazed our way over Vancouver July 4th, managed to grab some delicious - and just as important authentic - Chinese eatings complete with a boatload of take-outs, and also did some shopping on Robson. Then last night, we went to Vancouver-native Sarah McLachlan's first North American concert at the Key Arena in Seattle, and it was aweseome. Her voice was amazing to behold live (almost goes w/o saying), the instrumentals, stage work, and the rest topped off an already nice holiday weekend. Though she's been out of the scene for 6 years, her performance Monday night shows that she indeed remains an extremely talented artist.

The capitalism of soccer + Mark Cuban

Learned a lot about sports as a serious business concern from two articles I picked up this week.

Interesting comparison of the soccer vs. baseball business.

And Mark Cuban of Maverick's fame writes a nice well-thought out piece on a key decision affecting his franchise Steve Nash, Part 1

He also does a nice job with Rules of Success. #1: Sweat Equity is the best equity!

It was great reading, even for someone who's neither into soccer or baseball, nor a Maverick's fan.

Try out Visual Studio 2005 Express Edition for FREE

Are you already a .NET developer? Would like to be one? Why not try out the latest from Microsoft; after all, it's FREE.

At TechEd Europe keynote the new Express products were officially announced that are available for download right now:
Visual Basic 2005 Express Edition
Visual C# 2005 Express Edition
Visual C++ 2005 Express Edition
Visual J# 2005 Express Edition
Visual Web Developer 2005 Express Edition
SQL Server 2005 Express Edition – Note, SQL Express is included as an optional component in the installers of the other Express products.

Takes 15-20 minutes to download (the install is only 54MB vs. the normal 3GB VS install). It’s a great way to get your hands on some bits and start coding some .NET apps in no time. After installation, I bet you'd be surprised how much you can accomplish in 15-30 minutes.

SG-1 rocks

I've noticed over the years my tastes in entertainment (among other things) has changed quite a bit. Less "must see TV", more storied shows on cable like The Shield, SG-1, The Wire, Sopranos, etc. Reality TV prompts me to have heaving spells (though the Apprentice was an exception).

That's just me. It always seems my tastes are always opposite what's popular. I'm someone who proudly picks out fine clothing from Costco when possible, and rarely frequents malls, so one can suppose my tastes can't be all that.

My tangential view on game theory and Google's IPO

http://weblogs.asp.net/johnmont/archive/2004/05/28/143871.aspx
The original blog entry is here.

Sign of the times

A piece in the NYT Magazine (Friends, Friends With Benefits and the Benefits of the Local Mall) and one in NYT online (What Adolescents Miss When We Let Them Grow Up in Cyberspace) hint at signs of the times - I was quite surprised reading this, and what media/cultural slippery slope has led to.

Time to get serious?

Frankly, I've always thought of blogging as a semi-waste of time. Especially after reading a NYT article about people pretty obsessed with it. Don't want it to be me. Still, I'll give it another shot and try to post regularly (once a week or two?) and see where it takes me.

My more serious interests are pretty much around politics, economics, technology/computing and the sciences. Wrt not so serious interests, I like to spend quality time with my fiance, basketball, biking (especially on a sunny day, which in Seattle can be asking for a lot), reading, long trips on the road, and working out. Looking to expand that list since there's so much outdoor stuff here in the country that can be had though I'm originally from LA so a city boy at heart. But I'm trying, really...

Political sppppewwings

http://www.msnbc.msn.com/id/3905142/
"It's mind-boggling that in the midst of economic recovery with 9 million people jobless, President Bush would propose this…It's going to have a dire effect on wages for American families. It will cause huge displacement of American workers. We will witness how American jobs are given away right before our eyes."

http://www.msnbc.msn.com/id/3887721/
President Bush called for a major overhaul of America’s immigration system Wednesday to grant legal status to millions of undocumented workers in the United States, saying the current program was not working.

http://www.infoworld.com/article/04/01/07/HNcetoshire_1.html
"There is no job that is America's god given right anymore."-- Carly Fiorina the CEO of HP, part of the consortia that is supporting the Computer Systems Policy Project

Akin to legalizing drugs, the administration’s efforts legalizes illegal immigration. Not to be confused with legal immigrants who respect the law of the land, this is going against the main beliefs of this country: to abide by the law, not reward illegal behavior of colossal proportions, not to mention observing the sovereignty and borders of the United States especially post 9/11, all the while minding the well-being and interest of law-abiding Americans. And as if prolific outsourcing isn’t enough, this administration now proposes to sanction massive insourcing of American labor at the behest of the hospitality, restaurant, and farming industries.

The central overriding concern here as one of principle: rewarding illegal behavior, which seem to rely on a policy litmus test implying that America is no more than an economic bazaar – what does it mean to be American anymore? We’ve become a mercenary nation where economics trumps all, taking the place of [now withering] deliberate domestic and foreign policymaking which all comes at the expense of long-term prosperity and the traditional nurturing of middle class families – and undermining the backbone of this country.

It’s unfashionable these days of political correctness to be so outspoken. Yet to be able to do so is what makes this country great and what it use to mean to be American. We've become somewhat too engrossed in maintaining, and fearful of endangering, the economic well-being of self and our families which has rendered many rather mute, rendered mere cogs running broken machinery, leaving alone what is “not too terribly broken”.

Over the long-run, this mentality has eroded what has made America so exceptional, standing a league above the rest – unwavering respect for the rule of law, freedom, trust, and respect of fellow countrymen, coupled with open and vigorous discourse, fostering a liberal democracy that engender ideas, ideals and astounding innovations which steadily improve the well-being of not just a few, but all, Americans.

"Born in other countries, yet believing you could be happy in this, our laws acknowledge, as they should do, your right to join us in society, conforming, as I doubt not you will do, to our established rules."
- Thomas Jefferson

"In all business, there is a factor which cannot be compensated for in dollars and cents or computed by any measure. It has no relation or connection with the mercenary and is represented only by the spirit of love which the true craftsman holds for his job and the things he is trying to accomplish."
- Frederick Louis Maytag