Tuesday, September 01, 2009

See you in September

Some random thoughts on today's news stories:

Gold May Break Out to Record, Grabham Says: Technical Analysis (from Bloomberg.com):
This may include the worst analysis of anything I have read lately. The article begins with:
Gold may advance to a record $1,325 an ounce if it first breaks out of a symmetrical, triangular pattern, a move that may occur in the next one or two weeks, Standard Bank Group Ltd. said, citing trading patterns.

A so-called topside breakout would be indicated by a close at more than $980.85 an ounce, Darran Grabham, the bank’s technical analyst, wrote in a note yesterday. That would signal a short-term bull trend to at least $1,100 an ounce, he said.
Unfortunately, the article reports that Grabham goes on to say:
"...gold may tumble if it declines to less than the support trendline at $935 an ounce, Grabham wrote. “The ensuing sell-off is likely to encounter support around the $906.50 level, before a break lower yields a move to a secondary objective of $890,” he added.

“The minimum target of the triangle is highlighted at $850, with potential for the bear trend to test the corrective low recorded in January,” he wrote.
In summary, Grabham said that gold prices may go up, or gold prices may go down. Brilliant!

Fire Near Los Angeles Spreads in Triple-Digit Heat (from the Wall Street Journal):
Don't we do this every year?

The fact that California likes to protect it's wooded areas from development, keeping them off-limits to zoning, doesn't help. Yes, let us save Bambi, and ignore the fact we are putting thousands of homes and lives at risk. Let's not forget the economic costs of all the annual firefighting operations on an already overextended state budget.

Environmental stupidity at it's finest.

Daily Presidential Tracking Poll (from Rasmussen Reports):
So now Obama's approval rating is down to 45%. At this point, is it safe to add health care to Social Security as "third rails of American politics"?

Go ahead Barack. Keep pushing the health care idea...

If you don't follow Greg Mankiw or Paul Krugman, you can skip this item. But for those of you who find econo-political debates fascinating...

The latest round between these two economists (in Krugman's case, I use the label "economist" VERY loosely) started Friday when Mankiw posted the following on his blog: "The Least Surprising Correlation of All Time"

Krugman countered with the standard elitist condescension towards the poor, poor, pitiful poor on his blog: "Heredity, environment, justice"

Mankiw counters twice: "And I thought I was being boring" and "Test Scores and Biological Father's Income"
Mankiw is correct in stating that intelligent people, who tend to be wealthier, tend to have more intelligent offspring. The macro data supports his view. Using SAT data broken out by parent's income (as Mankiw does) is a more objective criteria than using college graduation data broken out by parent's income (as Krugman does), since there are fewer external variables to account for in SAT scores. It takes several hours to take the SAT, versus the roughly four years it takes to graduate from college.

Aside from college graduation containing too many variables to be objective, Krugman's example given also has a significant flaw in it: The scores used to determine objective intelligence are 8th grade math scores. This would be fine if all college degrees were based on mathematical ability, but what about other non-math degrees, such as English or History?

With that said, I will admit that I don't reject Krugman's premise entirely. It is certainly possible, and maybe even probable, that children of low income parents who are less intelligent might be less likely to finish college due to financial reasons. But I would think that is because college is more likely to be quite difficult for them, both intellectually and financially. On the other hand, unintelligent wealthy children would only have to face the intellectual hardship of college (even then, only 30% of them graduate, according to the Economic Policy Institute study referenced by Krugman).

The question Krugman fails to ask: Do we REALLY want stupid people graduating from college?

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