Le Parvenue

Time Lords

2012-01-28T13:13:00.006-05:00

One of the things I like most about the Swiss watch industry is the passion it has for its history and heritage.

Time, as we experience it today, is a relatively modern invention. It was only with the International Meridian Conference of 1884 that the world organized itself around Greenwich Mean Time (GMT) into the familiar time zones that divide the world like the segments of an orange. Now debate rages about whether GMT is to be abandoned in favor of atomic clocks, superintended by the International Bureau for Weights and Measures. It all comes down to missing a second every century or so and in this, apparently, the clocks are more accurate than the orbits of our planet.

These are fairly academic considerations. The fact is that, as the pace of life has quickened during the 20th century, the importance of co-ordinated times across the world became more obvious. The first occasion many of us would have experienced this was in the early 1950s, with the arrival of the Rolex GMT-Master. Ostensibly, this was to enable Pan Am pilots to keep an eye on departure-point and destination time. In reality, it was a vital part of the jet-set life that marked one out as a man of the world--and all its time zones.

Since then, the GMT watch has dominated the watchscape. There are fine but important distinctions to be made between world-time watches and time-zone watches. The GMT is the ideal watch for a traveller who wants to know the time at home, the latter favored by someone sitting, say, in London, who wants to know the time in Chicago and Tokyo simultaneously.

--How To Spend It

Handsome Haberdashery

2012-01-28T10:02:00.002-05:00

Established in 1910, Budd is the first shirtmaker you see on the walk from Savile Row to Jermyn Street. The label quickly became the one-stop shop for well-heeled gents like Lord Mountbatten, and George Gershwin even wrote a lyric about the store in "The Best of Everything," a song from the 1919 musical "La La Lucille": "My car of choice is a Rolls-Royce. I go to Stetson for my hats and Budd for my cravats."

Nowadays, Budd is one of the last remaining bespoke shirtmakers to have a cutting room above the shop—convenient for customers like the diamond magnate Nicky Oppenheimer, Evelyn de Rothschild and actor John Hurt. Budd specializes not only in made-to-measure cotton button-ups and the oh-so-English washable silk shirt, but also nightshirts, dressing gowns and black-tie trappings. The shop recently supplied the black- and white-tie shirts for Hugh Bonneville's character Robert, Earl of Grantham, in the television series "Downton Abbey."

The firm introduced its distinctive dark-blue stripe in a fine white twill in the '30s. Typically cut with a slightly forward collar, this is just one of hundreds of weaves and fabrics the firm offers in off-the-peg and made-to-measure shirting. "We've got the full shooting match here," said senior shirt cutter Darren Tiernan, using a British expression for "everything." "But in times of austerity people revert to classics," he said. "Blue end-on-end and white shirts...the basics, really."

--WSJ

Thierry Stern, President of Patek Philippe

2012-01-25T22:12:00.007-05:00

Several "High-End" Watch Manufactures Have Built Less Expensive Lines To Bring Younger Buyers Into The Brand. Does Patek Philippe Have Any Plans To Do That?

"We do target younger people, not in price range though, simply because I cannot - a Patek movement has a certain value that I can not go below. But with only 45,000 watches per year, I can not supply watches to everyone so I have to choose what we do. With Patek, we are really at the highest level. I think we do have watches that we target to younger people, but young people than can afford a $30,000, $40,000 or $50,000 dollar watch – that is our range and I’m not willing to make a plastic watch. So yes we want to make younger watches, but in a Patek way.

It’s not a snobbery factor - last night I spoke to a client that said "I knew about Patek when I was 25 but I couldn’t afford it then." And yes, maybe he bought an Audemars back then or a Jaeger-LeCoultre, but he still aspired to get to the Patek level. It’s not that our buyers won’t buy anything else, it just means that they know that Patek is special, they will work for it, and when they can afford it, it will mean even more to them."

What Is About To Change In The Watch Industry?

"Everything is circular. In watches, nothing is new, it’s just moving and coming back. Now maybe, everyone talks about the Chinese customers. You can’t live without them, but you can’t live only with them, which is very important to remember. You have to be global, too many brands today are looking only to the Chinese market. Anything could happen in China. We are lucky, we sell globally. When I started, it was the Middleastern buyers, then the Japanese, then the Russians, and now the Chinese. To be strong in China, you need to be strong in Europe. You have to remember that. They come to Europe to see what is strong then go back to China to buy."

Do You View The High-End Independent Watchmakers As Competition?

"No, I don't. These guys making 100 watches a year are great for the industry and for collectors, but they will never make 10,000 watches per year. If you are still making every watch by hand, you simply will not have the time to make many watches, you need to have machinery and good machinery, which we have.

I have seen some of our collectors buy some great independent pieces, like those from Philippe Dufour, and have trouble because if they break, it is very difficult to get them fixed. Also, resale of independents is very hard. To lose $10,000 is one thing, but to lose $500,000 on a watch is entirely different. At Patek, we will fix any watch we have ever made from the beginning, and our lasting value is very strong."

So Then Who Else Within The Industry Do you Really Respect?

"Rolex is one I respect a lot. The quality of Rolex is fantastic, and to keep that so high making as many watches as they do is incredible. I would love to see the Rolex factory, but they never let me in!

I do think Patek Philippe plays an important role in the industry though, being independent. Imagine if we didn't exist or belonged to a group, imagine the fights then between Richemont, LVMH, and Swatch. Now, with Patek here, they know we exist and we are the challenge to them. Without Patek, there would be no challenge."

--Hodinkee

Quote du Jour

2012-01-23T23:10:00.003-05:00

"The true task of the overman is to overcome himself, not others, and to do so by sculpturing his impulses and thoughts and inheritances into a willed unity that could be called style." Friedrich Nietzsche

A Symphony in Power

2012-01-22T15:16:00.004-05:00

You may scoff upon learning the M5’s price, a prodigious sum expected to fall near $92,000. But you can't scoff at its performance.

And while the new M5 will assuredly be profitable, whether it is spectacular or merely great is the real question. That said, a 4300-pound luxury sedan that can hit 60 mph in 3.7 seconds would put the new M5 firmly in the "spectacular" category.

Compared with an E60 M5 (aka the old M5) equipped with an automated manual transmission, the F10 is a half-second quicker both to 60 mph and through the quarter-mile, and 2.4 seconds quicker to 150 mph. The braking distance is seven feet longer, but then, the F10 is about 200 pounds heavier. Will the larding up of our favorite vehicles ever stop?

Well, with the M5, one must remember that it remains unapologetically a heavyweight. It is an executive express, a velvet-wrapped hammer, a shark in whale’s clothes. It is not a four-door Lotus Elise. BMW figures M5 owners are richer than M3 owners and that they want commensurate levels of luxury and gizmology. Change, of course, has always had its haters. Traditionalists will doubtlessly cry out that M has abandoned them with all this turbo madness.

To paraphrase a recent comment on our website: When the M5 got a V-8 for 1998, people said they missed the inline-six. When it got a V-10 for 2004, people longed for the V-8. That is all true, as is the fact that the new M5 remains a delectably sweet reward for personal financial success.

--Car&Driver

Quote du Jour

2012-01-22T01:06:00.000-05:00

"Without education we are in a horrible and deadly danger of taking educated people seriously." G.K. Chesterton

The Watch Snob

2012-01-18T23:25:00.004-05:00

What's Appropriate For The President Of The United States?

I recently read that President Obama wears a Jorg Gray 6500 Chronograph. Given your disdain for cheap watches, this got me thinking: if you were the Presidential Horologist, what would you advise him to wear? Are there any American brands 'presidential' enough, or do you ditch patriotism and go with a Swiss timepiece?

The state of the American president's wrist has been on steady decline ever since the late 1980s. There was a time when the head of state wore solid dependable timepieces from Omega or Rolex. But in an effort to be more of an everyman in order to curry favor with the masses, we've seen digital sports watches under the sleeves of the so-called "most powerful man in the world." It seems the desire to look frugal and practical has turned into an arms race to the bottom of the heap and now the president just looks cheap and tacky. It is perhaps fitting that the Timex watches of Clinton and Bush Jr. were made in China, a commentary of the over-leveraged outsourced nation that the men ran (and Obama's watch is hardly an improvement).

Other heads of state are hardly setting a better example. Sarkozy and Putin are men of enormous egos who show off their blingy collections at every opportunity while their countries riot around them. So what timepiece should the president of the USA wear you ask? One might argue that an IWC would be fitting, since that company was founded by an American. But the most wearable IWCs that are remotely worthwhile are named "Portuguese," and even the line of dress watches are called, "Portofino," both names that won't fly well in the red states in the next election. I am tempted to recommend a brand that is above reproach, Patek Philippe, given their long history of subdued, classic designs. But the name is hard to pronounce for the unwashed and carries an elitist aura.

No, as predictable as it may be, I would suggest the POTUS go back to Rolex, a watch worn by several past presidents and a brand that represents something aspirational to many without being too ostentatious. Mind you, something steel and uncomplicated would be best and even a sports watch like the simplest Oyster Perpetual will work in the land of cowboys and casual Friday. Of course, this is all purely rhetorical since these days, "austerity" is the watchword. Pun entirely intended.

--AskMen

Stealth Wealth: It’s hidden, massive and lucrative

2012-01-16T19:07:00.002-05:00

A $10 trillion underground street economy that will employ two-thirds of the world’s workers by 2020 has been uncovered.

Robert Neuwirth, in his book “Stealth of Nations: The Global Rise of the Informal Economy,” treks through the developing world and finds small, informal — sometimes illegal — enterprises are changing the shape of the global economy.

I believe him because I have seen it myself. And if you have ever traveled about developing nations, you have too. Those kiosks and small stores selling the basics where you can find pretty much everything and anything from cigarettes to pirated DVDs, employ a large chunk of the world’s population — half at the present time, according to Neuwirth — and outsell Wal-Mart. Indeed, big brands know this.

He cites numerous examples of brands from Procter & Gamble, Colgate-Palmolive, Unilever, among mobile providers and others that distribute their products via this network — sometimes knowingly and sometimes not. Neuwirth calls this network of small enterprises System D (taken and shortened from a French term).

“System D is growing faster than any other part of the economy, and it is an increasing force in world trade. What’s more, after the financial crisis of 2008/2009, System D was revealed to be an important financial coping mechanism.

A study by Deutsche Bank, the huge German commercial lender, suggested that people in the European countries with the largest portions of their economies that were unlicensed and unregulated — in other words, citizens of the countries with the most robust System D — fared better in the economic meltdown of 2008 than folks living in centrally planned and tightly regulated nations,” Neuwirth writes.

Moreover, given that the population of the developing world is growing right along with their economies, it makes sense that the sales outlets people are used to shopping in would grow too. And smart brands, such as those mentioned, should benefit. It’s easy enough to spot big brands even in remote places. U.S. soda producers, snack makers and bathroom product distributors are seemingly omnipresent the world over.

This should give investors pause as to which companies to invest in for the future. Small, growth companies don’t have the distribution systems that big, old-school consumer brands do. To be sure, big brands often don’t want the association with street stalls and the like, especially if these outlets are selling illegal items, which many do. Neuwirth points this out as well and explains that third-party distributors are often involved.

In any event, the power of the street economy should be taken seriously.

The market itself is what Neuwirth describes in “Stealth of Nations.” Alien perhaps to us with items strewn along tables, on the ground, and bartered over, but common enough to the majority of the people in the world. Such commerce is the future. From microloans that support these street vendors to big brands that stock the shelves, such as they are, there are many ways for investors to play System D for profit.

It’s well worth reading about and investigating these shadow markets. They will add up to what Neuwirth alludes to with his title: the wealth of nations to come.

--MarketWatch

Blogging to Make Money

2012-01-11T21:03:00.001-05:00

Benjamin Clymer, founder of Hodinkee.com, is knee-deep in his subject: high-end watches, their history and the world of haute horlogerie. “When I tell most people what I do, they either feign interest or just aren't interested at all,” he said. There is a passionate minority out there, however. Accoring to Clymer, “About one out of ten people I meet is like, 'I'm absolutely obsessed with watches.'” Nevertheless, high-end watchmaking is still pretty niche (and we'd like to keep it that way).

Clymer's success had humble beginnings: “My situation was dumb luck,” he said. “I didn't realize how much money these watch companies spend on advertising, promotions, trips. These marketing budgets for the Richemont group, which owns Cartier and Vacheron, among others, is just astronomical.” Being in a position to benefit from those budgets meant already having a large enough audience to command ad dollars and content partnerships. The revenue model for ads is evolving, but it's generally based on the CMP (cost per mille), a dollar amount paid by advertisers for every 1,000 impressions. Banner ads and sidebar ads will pay out less than one of those maniacal jobs that covers your whole browser window and gives you Information Super Highway road rage.

His blog, which gets about 350,000 unique visitors per month, only sells ads directly to companies -- no ad network negotiating on his behalf. The advantage is that he keeps all the revenue and has total control over what appears on his site. “Part of that,” he said, “is I came with built-in relationships on the brand side. I knew a lot of marketing people, and it was relevant to a lot of companies. People often ask me they can build a site that makes money and I'm like, 'F*ck, good luck.'”

--AskMen

Quote du Jour

2012-01-07T17:20:00.001-05:00

"Anyone who keeps the ability to see beauty never grows old." Franz Kafka

The Watch Snob

2012-01-07T17:15:00.002-05:00

"I've heard that many brands are going to exclusive boutiques instead of selling their watches through dealers. An Omega boutique just opened where I live. What do you think of this move?"

Frankly, I don’t care one bit where a watch is sold, though I do prefer to view timepieces while sipping a glass of champagne in the warm confines of a quiet, dark, wood-paneled room. The theory behind these boutiques is that if a brand controls its selling environment and employs the sales staff, it can better control information being disseminated and the sales experience the customer has. The cynical view is that the company can also keep hungry-eyed, cheap-suit diamond salesmen from slashing prices to make a deal at the end of the month, which can undermine the brand’s prestige.

Some brand boutiques are done right. The Patek Philippe boutique at Tiffany’s in Manhattan is just about the most sublime watch-shopping experience you can have. Go down the street to the Breitling boutique (a mistake I won’t repeat), and you’re confronted by the same marketing schlock Breitling has been trotting out for years, populated by ill-informed sales people, albeit mostly comely young women with big smiles and low-cut dresses, if that’s your thing.

Then there’s poor Omega, trying so desperately to move up-market. Yet there, just past the quartz Constellations and below the giant James Bond poster, is the fragrance counter. Omega cologne? Talk about undermining the brand.

--The Watch Snob

Dollar Vs. Euro

2012-01-06T21:10:00.003-05:00

The dollar has looked good against the stumbling euro in the past year. But it's a different story compared to the yen and other global currencies

The euro and dollar are more currency chumps than champs lately. Sure, the dollar has strengthened against the euro in recent weeks as Europe's debt crisis continues to fester. But there are many reasons to dislike both currencies.

The Federal Reserve has already said that it is likely to keep its key overnight lending rate near zero until mid-2013. Low interest rates are an enemy of a currency as exchange rates tend to rise and fall with them. And it would not be a major surprise if the Fed, which just disclosed Tuesday in minutes from its latest meeting that it intends to start publishing interest rate projections with quarterly economic forecasts, extends the zero rate pledge until 2014 sometime soon.

For one, the U.S. economy remains in a low and slow "recovery". What's more, several of the more hawkish (i.e. inflation fighters generally in favor of less stimulus) members of the Fed's policy committee are out this year and will be replaced by Fed regional presidents with more dovish leanings.

That adds up to a weaker dollar, especially if the Fed announces a third round of bond purchases, or quantitative easing, to keep long-term rates low. QE3 is far from certain since some market experts and politicians have warned about an eventual inflation spike if the Fed keeps printing money to buy debt.

While the U.S. has a looming debt problem, Europe is already in a full-blown crisis. And it may be impossible for the different nations in the eurozone to come up with a quick and neat solution. That's why the euro, which Wednesday morning slipped back toward the 17-month low of $1.28 that it just hit last week, may continue to fall in the next few months.

"Europe is a mess. They still don't know what they want to be. A political union? A monetary union? They need to make a decision," said Michael Woolfolk, senior currency strategist with Bank of New York Mellon.

Nonetheless, investors should not mistake any more gains that the greenback may make on the euro as a sign that the dollar is almighty once again.

--CNNMoney

The Cantino

2012-01-05T22:37:00.003-05:00

There's nothing quite like a Salvatore Ferragamo loafer. This understated—but utterly distinctive—shoe is the result of careful craftsmanship, precise attention to detail, and an unerring sense of style. Its sleek design will stand out for all the right reasons.

Roman Magnificence

2012-01-05T22:26:00.002-05:00

"A razor-sharp jet fighter on wheels..."

Quote du Jour

2012-01-02T15:02:00.000-05:00

"The sole substitute for an experience we have not ourselves lived through is art and literature." Alexandr Solzhenitsyn

Rolex vs. The Dollar

2012-01-02T00:20:00.004-05:00

If you had bough a stainless steel Rolex Submariner Ref. 1680 back in 1973, it would have cost you a mere $385 (the equivalent of $1,985 today). By 1988, however, a Submariner Date would cost you $1,975, or the equivalent of $3,751 today.

Likewise, by 2004, the Submariner Date would cost you $4,250, or the equivalent of $5,054 today. Today, the current incarnation of the stainless steel Rolex Submariner Date is listed at a staggering $8,000. In other words, the Rolex Submariner has doubled in price since 2004.

Since then, the price increases which used to be intermittently made every few years is now a yearly affair. The cost of entry into the Rolex world is thus made more difficult every year as it climbs higher and higher in in the luxury watch food chain. But for the owner of a Rolex watch, the value of what you purchased is maintained by the policy of steady price increased.

But remember, between 2004 to now, the number of new dollars in existence has grown considerably. Just look at the price of commodities, gold, oil, etc. Another important factor to remember is the impressive appreciation in the Swiss Franc over the same time period, especially between 2004 and today. If you look at it on that basis, in CHF the price increase from 2004 to 2011 was only a 33.4% increase vs. 88.2% increase in the USD price over the same time period.

--Precision Timepieces

Heterodox Economics?

2012-01-01T19:06:00.006-05:00

The “Austrian” school of economics, which traces its roots to 19th-century Vienna, is sternly pre-Freudian: more inhibition, not less, is its prescription. Its adherents believe that part of the economy’s suffering is necessary, an inevitable consequence of past excesses. They do not think the Federal Reserve can rescue the economy. They seek instead to rescue the economy from the Fed.

The Austrians see the bogeyman as inflationary bubbles, and for good reason. Indeed, the Austrian school has thrived on the back of massive disillusion with mainstream economics, which held that the economy would grow steadily if central banks kept inflation low and stable, and that there were no great gains in the offing from fiscal expansion, nor any great cause for concern over financial instability. And they have benefited hugely from blogging.

Economics, perhaps more than any other discipline, has taken to blogs with gusto. Mainstream figures such as Paul Krugman and Tyler Cowen have commanded large online audiences for years, audiences which include many of their peers. But the crisis has made the academic establishment fractious and vulnerable. Highly credentialed economists now publicly mock each other’s ignorance and foolishness. That has created an opening for the less decorated members of the guild, and the truly peripheral. In the blogosphere anywhere can be “The Center of the Universe”. And that center now pivots on Tyler Cowen, a professor at George Mason University whose “Marginal Revolution” blog has drawn wide acclaim.

Tyler Cowen is a proponent of Austrian economics—a resurgent school of thought that, unlike market monetarism, has not been doing much to change the minds of most mainstream economists but, unlike neo-chartalism, has built up a broad constituency on and through the web. Its adherents differ a lot in their preoccupations and prescriptions. But they agree that interest rates should reflect the fundamental forces of thrift rather than the whims of central bankers.

The Austrian school’s thinking centres on the way “malinvestment” orchestrated by central banks distorts the business cycle. By keeping interest rates artificially low, central banks trick entrepreneurs into believing that society is more abstemious than it really is. The entrepreneurs then embark on ambitious, long-gestation investment projects, only to discover that the men and materials they require are otherwise engaged in the production of more immediate gratifications. Once this realisation dawns, the entrepreneurs abandon their follies, firing their workers. If wages are flexible and workers mobile, this bust need not be too bad. But misguided attempts by the government or the Fed to prevent unemployment will delay the necessary reshuffling of labour from industries too tied up in the future to those catering to the needs of the present.

Scholars such as Lawrence White of George Mason University see in this the grounds for replacing central banks with “free banking” in which private institutions take deposits and issue their own banknotes without government permission or protection. To make these liabilities credible, free banks would probably have to make them redeemable into something else, such as gold. As a consequence, banks will hesitate before expanding too quickly, lest their gold reserves come under threat. This, Mr White argues, would impose a natural check on overexpansions of credit.

The resurgence of Austrian analysis is not merely a web-based phenomenon. In 1981 Margit von Mises approved the establishment of an institute in the name of her late husband, Ludwig von Mises, one of the giants of the Austrian tradition of economic thinking. The Mises Institute set up shop at Auburn University in Alabama, attracted by a couple of “Austrian-friendly" faculty members and a timber owner willing to donate money to the cause. From early days in the shadow of the football stands, the institute now boasts its own amphitheatre, conservatory, recording studio and library. At one of the institute’s soirées, accompanied by a recital on its Bösendorfer piano, Vienna may not seem so very far away. Yet the institute’s impressive web presence, with ever more signing up for its online classes, makes its ideas, if not its ambience, available to all.

Austrians still struggle, however, to get published in the principal economics journals. Most economists do not share their admiration for the gold standard, and their theory of the business cycle has won few mainstream converts. According to Leland Yeager, a fellow-traveller of the Austrian school who once held the Mises chair at Auburn, it is “an embarrassing excrescence” that detracts from the Austrians’ other ideas. While it provides insights into booms and their ending, it fails to explain why things must end quite so badly, or how to escape when they do. Low interest rates no doubt helped to inflate America’s housing bubble. But this malinvestment cannot explain everything.

As for the Austrians, Brad DeLong, a Keynesian Berkeley professor who also blogs, has called an acquaintance with their ideas a useful part of a diversified intellectual portfolio. But his frequent comrade in arms, Mr Krugman, does not seem to have revised his view that their business-cycle theory is “as worthy of serious study as the phlogiston theory of fire”.

His analogy implies that economics, like chemistry and physics, makes enough intellectual progress to allow economists to ignore some old thinkers. But is economics that kind of science? Its practitioners cannot run controlled experiments on whole economies, contrary to Krugman's pseudo-scientific claims.

--The Economist

Layered Up

2011-12-27T20:13:00.002-05:00

I’m not quite sure what the allure of a three-piece suit is.

I think part of it is simply practical: A vest frees you from having to worry about whether your shirt is tucked in properly and can make even an untailored shirt look good, as long as your collar’s the right size and your sleeves are the right length. We here in the USA who want a slim-fitting dress shirt have always been at a disadvantage since men’s dress shirts always seem to be made for the biggest guy in the room. So wearing a vest makes it both stress-free and fun to take off your jacket, even if you haven’t been able to get your shirts darted. All the poor saps in two-piece suits who take off their jackets have to continue to worry if their shirts are ballooning out at the waist while you sit there looking extra dapper in your waist coat, like a riverboat gambler or a guy about to have a duel.

Another part is the way it feels. Simply put, you feel more held together in a three-piece. The vest gives you an added layer of confidence, an extra piece of armor to keep the world from taking you down. I feel different when I’m wearing a three-piece than I do in a two-piece. When I’ve got the jacket of my two-piece buttoned, I feel dressy and together, but when I leave the jacket unbuttoned, there’s a weird unintended casualness to it. It’s a good look but it’s definitely a bit devil may care.

--AskMen

A Watch For the Ages

2011-12-22T21:47:00.008-05:00

An entry level Patek will set you back about twenty grand, but that's just the beginning. Indeed, Patek's price tags take a steep climb once complications get involved.

The Ref. 5159 perpetual calendar and Ref. 5960P annual calendar chronograph, for instance, are in the $70-80K range. Likewise, the Ref. 5970J perpetual calendar chronograph retails at $128,000. Despite the high sticker prices, these are actually "mid-level" watches in terms of cost. More complicated Patek's (think Grand Complications) go as high as seven figures.

At this "mid-level", the watches are as follows: the basic chronograph, the dual time, and the annual calendar. If you're looking at Pateks under $40,000, the most interesting of these complications is the annual calendar. Generally speaking, chronographs and dual time watches are fairly common; but there aren't many annual calendars out there--they're rare.

Now, The Patek Philippe Ref. 5396 is an annual calendar, which means it's superior to your run-of-the-mill date complication. A lot of watches display the date on their dial, but because some months have only 30, 29 or 28 days, you need to adjust the date at least five time per year (a real hassle, let me tell you).

An annual calendar, on the other hand, is a mechanism that automatically takes into account the varying number of days in each month so that the watch always displays the correct date. There's almost no need for adjustment. In fact, an annual calendar watch will only need correction in the month of February during leap years.

Another highlight is the moon phase and day-night indicator. It really sets this watch apart from the crowd. And for those in-the-know, not much can beat the subtle sophistication of a moon-phase indicator (or a Patek Philippe, for that matter). The beautiful movement is an added bonus: it produces 28,800 vibrations per hour and is clearly visible through a clear crystal case back.

--The Watch Snob

No Longer Bullish?

2011-12-22T21:36:00.003-05:00

Gold prices are nearing bear market territory, and yet the global economic fear that drove many investors to the metal remains. What gives?

For the 11th year in a row, gold prices have rallied, making this one of the longest winning streaks for the yellow metal. And for most of 2011, it seemed like nothing could stop prices from climbing -- gold prices peaked in September at more than $1,900 an ounce.

But in recent months, many high-profile investors have sold their positions, suggesting that gold's glory days could be coming to an end.

When gold falls below the 200-day moving average, investors typically take notice. Last week, for the first time in two years, the precious metal fell below the average of $1,615 an ounce and is currently trading at $1,613 an ounce. Though this hasn't led analysts to call a bear market, Boston University finance lecturer Mark Williams says investors should take the development as a "wake-up call."

And then there's platinum, a precious metal that also has industrial uses. Historically, platinum trades at a premium of $100 or more over gold. But that shifted in August when gold neared its most recent peak. Williams points out that this is another indicator that gold prices are inflated. At current platinum prices of $1,400 an ounce, gold could fall to $1,300 or lower, he says.

--Fortune

Quote du Jour

2011-12-21T20:25:00.000-05:00

“Excellence is lost sight of in the hunger for sudden performance and praise: a few years will show the advantage of the real master over the short popularity of the showman.” Ralph Waldo Emerson

The Bill Gross Breakdown

2011-12-19T21:22:00.004-05:00

Gresham’s law needs a corollary. Not only does “bad money drive out good,” but “cheap” money may as well.

Ultra low, zero-bounded central bank policy rates might in fact de-lever instead of relever the financial system, creating contraction instead of expansion in the real economy. Just as Newtonian physics breaks down and Einsteinian concepts prevail at the speed of light, so too might easy money policies fail to stimulate at the zero bound.

Historically, central banks have comfortably relied on a model which dictates that lower and lower yields will stimulate aggregate demand and, in the case of financial markets, drive asset purchases outward on the risk spectrum as investors seek to maintain higher returns. Near zero policy rates and a series of “quantitative easings” have temporarily succeeded in keeping asset markets and real economies afloat in the US, Europe, and even Japan. Now, with policy rates at or approaching zero yields and QE facing political limits in almost all developed economies, it is appropriate to question not only the effectiveness of historical conceptual models but entertain the possibility that they may, counterintuitively, be hazardous to an
economy’s health.

Will Rogers once fondly said in the Depression that he was more concerned about the return of his money than the return on his money. But from a system wide perspective, when the return on money becomes close to zero in nominal terms and substantially negative in real terms, then normal functionality may breakdown.

In the case of low yielding Treasuries the Gresham’s corollary at first blush seems illogical. If a bank can borrow at near 0 per cent then theoretically it should have no problem making a profit. What is important, however, is the flatness of the yield curve and its effect on lending across all credit markets. Capitalism would not work well if Fed funds and 30-year Treasuries co-existed at the same yield, nor if commercial paper and 30-year corporates did as well. It is not only excessive debt levels, insolvency and liquidity trap considerations that delever both financial and real economic growth; it is the zero-bound nominal yield, the assumption that it will stay there for an “extended period of time” and the resultant flatness of yield
curves which are the culprits.

Historical examples and central bank staff models will likely not validate this new Gresham’s corollary. Fed chairman Ben Bernanke blames policy rate increases in the midst of the 1930s for an economic relapse, and a lack of credit expansion for Japan’s lost decades 60 years later. But all central banks should commonsensically question whether ultra-cheap money continually creates expansions as opposed to destroying liquidity, delevering and obstructing recovery. Gresham as opposed to Keynes may become the applicable economist of this new day.

--Financial Times

Vintage 2000 Rosé: Tasting Notes

2011-12-17T16:50:00.001-05:00

by Richard Geoffroy, Dom Pérignon
Chef de Cave

The 2000 Harvest:
The year 2000 was warm, with cooler-than-average temperatures in the month of July and frequent storms that brought significant amounts of rain and hail. The initial tastings revealed that the Chardonnay grapes harvested last were supple, ample and complex; they give Dom Pérignon Vintage 2000 its suave character. The Pinot Noir harvest was structured and offered great length. In contrast to prior vintages, a qualitative homogeneity was found in the two grape varieties harvested, conferring on Dom Pérignon Rosé Vintage 2000 its well-defined classical balance.

The eyes:
The wine’s surprising color is deep and strong, glinting with amber and copper. The amazing paradox is that this rosé wine is never really pink. It owes the depths of its almost Oriental highlights to its unique hues. Life is not rosy, but thrilling.

On the nose:
The first floral notes immediately give way to black cherry and candied citrus peel, complemented by cocoa and a few smoky accents.

On the palate:
The flawless construction achieves a perfect classicism on the palate, dominated by a sensation of balance, consistency and integration. The wine has a surprisingly brilliant and fleshy fruitiness. Its initial solidity becomes more tactile and finally sappy, with a subtly bittersweet note.

--Dom Perignon

A. Caraceni

2011-12-16T21:52:00.003-05:00

Should you be in search of the ultimate Italian suit, a unique fusion of superhero empowering sartorial armor characterized by veritably lascivious levels of comfort, you need look no further than A. Caraceni.

The only hurdle to membership is the considerable waiting list to have a suit made by them, though the resulting exercise in patience abounds with considerable riches at journey's end.

Their unique ability was the preservation of their artisan craft while simultaneously soaking up the heady influences of Roman culture. According to lore, so skilled was Domenico that he would dismiss new clients without measuring them. When asked about this apparent oversight, his response was, "I've seen you."

Domenico's early career was spectacular. Throughout the Roaring Twenties, characterized by its hedonistic pursuit of aesthetics, the Caraceni firm boomed, becoming the requisite destination of any philosopher, industrialist, film star or socialite of substance.

The style of their suits is structuralism in extreme, with a profound empowering and slimming effect, a narrow chest and an imperious shoulder, yet benefiting from wonderfully soft construction, providing them unparalleled comfort. Visually, A. Caraceni's rapier-sharp Milanese suits are a world apart from Neopolitan offerings that espouse a joyous if somewhat eccentric sense of shabby chic.

In a Roman Caraceni suit, you look nonchalant and at ease in a nicely styled, decidedly comfortable-looking clothes. In an A. Caraceni, you look like a boulevard-cruising, heat-seeking missile. If an A. Caraceni suit was a person, it would look like Errol Flynn and talk like Sean Connery, tutting endearing admonishments at the various women handing their underpants over and offering to buy it drinks.

--The Rake

The Watch Snob

2011-12-15T21:44:00.002-05:00

Beware of watch companies that have so-called “ambassadors”

What is more important to you: the watch or which flavor-of-the-month actor is wearing it? When the marketers elbow out the watchmakers, it’s time to look elsewhere. I’d rather have a watch brand spend more money on creating innovative works of mechanical art than buying ad space for George Clooney’s smug smile.

It is no coincidence that the two brands I speak most highly of, Patek Philippe and A. Lange & Söhne, don’t have Scientologists and philandering golfers flaunting their timepieces. They’re busy building fusee-and-chain perpetual chronographs. Sure, the vaunted Audemars Piguet has its rap stars, disgraced governors and basketball players, but its watches are also getting bigger and uglier every year. Coincidence? I think not.

--AskMen

Quote du Jour

2011-12-14T23:12:00.000-05:00

“Style must be perceivable: there is no such thing as hidden style.” Roger Scruton

The M5

2011-12-14T23:07:00.000-05:00

An Interview with Victor "Trader Vic" Sperandeo

2011-12-12T22:48:00.003-05:00

As a trader, how are you positioning yourself with respect to Europe? In other words, how concerned are you about contagion risk or any potential market fallout?

This is a sucker bet of the highest order. The Euro is dead, and like Keynes it should be buried.

Being long Gold and short the Euro are core positions. Long the Canadian Dollar and Australian Dollar, while short the British Pound and Japanese Yen, are also core positions but with lower weights.

What's your take on gold prices right now? Is there any chance gold breaks through its inflation-adjusted high in the next year or two?

Gold is a primary hedge to "future" inflation and chaos. At zero interest rates there is no opportunity loss owning it. Gold wins in the environment and will go beyond $2000/oz. at a minimum, unless things change on a political level. Gold does not act as well with real GDP growth of 3% and/or the rising nominal interest rates that reflect growth. From 1982-1999 Gold went up at a 22 bps rate (or less than 1/4 of 1% compounded). So if Nancy Pelosi and Harry Reid suddenly want a zero capital gains tax, sell gold!

What about commodities in general? A year or two ago, Jim Rogers made headlines with his remarks that, "The farmers are going to have the Lamborghinis in the future, not the brokers on Wall Street." Do you subscribe to this school of thought? Are commodities the place to be in the years ahead?

Yes, Jimmy is on the mark.

Commodities - in the long run - will move higher as the only way out of world debt is inflation. In the short run commodities will reflect the forthcoming recession, as the political power is in the hands of people that hate capitalism and success. What you want for growth is Reagan and Thatcher. The worldwide debt is so high that we are headed for hyperinflation.

The real debt in the U.S. is not the $15 trillion normally reported. You need to add state debt of $3 trillion, another $3 trillion from Fannie and Freddie Mac, and about $1 trillion in student loans. So a better estimate is $21 trillion. If the government was a company it would have to use GAAP accounting, not cash based accounting. In that case, you would take the deficit of $1.3 trillion and add about $6 trillion more for a GAAP accrual accounting of what has to be paid. So own some gold; 10% is a fair amount, plus 10% in Managed Futures.

--RealClearMarkets

A Reverent Recreation

2011-12-11T23:43:00.005-05:00

Good news: The Porsche 911 hasn’t lost its soul.

To those of us who love cars, that’s neither an academic nor a hippy-dippy consideration. Around for almost a half century, the 911 Carrera is the uber sports car, a distillation of all a Germanic screamer should be. An all-new generation of the 911 comes around very infrequently, so it is with little wonder that fans hold their breath. It’s like hearing that Scotland’s Old Course at St. Andrews is being redesigned. You don’t want a classic to get ruined.

I was among the first to actually drive the new generation Carrera S and -- collective exhale -- it is still a great car.

Digital cars don’t grab me. I want interesting, over cold and flawless. And the original 1960s-era 911 design was a deeply flawed car -- part of the reason it is so revered. The engine has always been in the rear, which makes little engineering sense. The balance is all wrong. Yet in Porsche’s lovable, profoundly obstinate way, they didn’t shuck the whole thing decades ago. They just kept on improving it.

The company internally refers to this generation as the 991. Previous iterations included the 993, 996 and 997, which began production in 2005. The reason for the number reversal? There isn’t one, executives admit. Remember -- profound obstinacy.

With every new generation, you can count on two things: The car will be faster and it will be more expensive. The new Carrera S will bullet to 60 mph in 4.1 seconds. The privilege will set you back $97,350. Even the base 911 will cost $83,050, and expect many cars on the lot to carry $15,000 in options.

The exterior is re-sculpted, but gently. The interior is far better.

The final difference is the speed. The 911 is starting to get supercar fast. In many ways, the experience reminded me of the latest mid-engine Ferrari, the 458 Italia. When in motion you might glance down and find yourself perilously close to triple-digit speeds.

So, insane price be damned, I want one. Porsche wins again.

--Bloomberg

A Proper Panerai

2011-12-10T18:05:00.003-05:00

The PAM337 is a watch that is well suited for those who are looking for a base Panerai model and who might not want to wear their more common 44-47mm models. It's also for owners who can appreciate the bonus feature of having a movement that is completely manufactured by Panerai.

Admittedly, there is not a significant practical difference between the old ETA movement and the new in-house one. There is, however, a significant philosophical difference.

Metaphorically speaking, it is the difference between a store bought suit versus one that is custom-made. An in-house watch, much like a custom suit, carries with it a purebred sentiment; a sentiment of something rare and refined that is not marketed to the masses.

Likewise, Panerai has always been a confident Italian (is there any other kind?) brand with bold watches. Indeed, Panerai is a brand that should be worn with confidence—and the PAM337 is an ideal piece with which to start. (See the original review here)

--WatchProSite

Thomas Pink? Knot a Problem

2011-12-10T18:02:00.000-05:00

Misbehaving Models

2011-12-09T09:40:00.004-05:00

Disturbed, disillusioned and ashamed: Those aren’t emotions you expect a Wall Street quant to express when asked why taxpayers were obliged to bail out wealthy bankers.

Unless, of course, the quant is Emanuel Derman, a particle physicist and former head of quantitative finance at Goldman Sachs. “I am ashamed at the hypocrisies of the system,” Derman writes in “Models.Behaving.Badly,” an erudite yet pleasantly readable exploration of why financial models failed during the U.S. mortgage meltdown and why modelers must learn to use them more wisely.

“We were told not to expect reward without risk, gain without the possibility of loss,” he says in disgust. “Now we have been forced to accept crony capitalism, private profits and socialized losses, and corporate welfare.”

Unlike many quants, Derman says he wasn’t surprised that models failed in 2007, as events predicted to happen “once in 10,000 years happened every day for three days,” as one strategist at Lehman Brothers put it. The breakdown, Derman argues, flows from a misunderstanding of the difference between models and theories.

Theories are attempts to uncover the hidden principles underpinning the world around us, as Albert Einstein did with his theory of relativity. Models, says Derman, are metaphors -- analogies that describe one thing relative to another. You can’t have a grand unified theory of securities, he says, because markets are driven by ephemeral human opinions.

Cinderella’s Slipper

As the coy punctuation in the book’s title suggests, Derman is interested in three things: models, models that behave, and models that behave badly. Designing a model based on fickle human behavior is like “trying to force the ugly stepsister’s foot into Cinderella’s pretty glass slipper,” he says. “It doesn’t fit without cutting off some essential parts.”

That doesn’t mean models are a waste of time, he says. It just means that we must use them with humility and common sense. Derman, a professor at Columbia University, is known for his memoir, “My Life as a Quant.” In “Models.Behaving.Badly,” he takes us on an intellectual journey that compares the glories of theoretical physics to the messiness of economics.

This material isn’t always easy to digest, especially if your facility with algebra has faded. Yet Derman tugs the reader along with limpid writing. For instance, Derman discusses the development of the efficient-market hypothesis in revealing detail. Indeed, he neatly summarizes the efficient-market hypothesis as “a model of a hypothetical world rather than a correct hypothesis about the one we inhabit.”

The Efficient Market Model, as he dubs it, is based on the notion that stock prices move like pollen particles drifting through the air. Call it a random walk, diffusion or Brownian motion; it amounts to a metaphor, not a fact.

Economists concocted the model, Derman says, because of a simple reality: You can’t consistently predict what the market will do tomorrow based on what you know today. So they asserted that it’s impossible to beat the market because current prices already reflect all available information. “Converting their failed attempts at systematic stock price prediction into a fundamental postulate of their field was a fiendishly clever jujitsu response on the part of economists,” he writes.

In sum, Derman has distilled a lifetime of reading, research and thinking into these pages, and I read the book twice to see how he pulled the threads together without losing the reader. Equally appealing is Derman’s empathy for his fellow human beings: “One has to treat people as responsible for their actions,” he says, “and yet also recognize that they can’t help what they do.”

One wonders if he was thinking about his old friends at Goldman as he wrote that.

--Bloomberg

Only the Best

2011-12-06T22:09:00.002-05:00

No cigar from Cuba—or from anywhere else for that matter—impressed our tasting panel as much as the Cohiba Behike BHK 52.

This is a classic cigar. The shortish, fat smoke, made with an artful pigtail and clad in gorgeous Colorado wrapper of reddish brown, is a phenomenally rich, delicious smoke that more than lives up to the reputation of cigars with the name Cohiba. It is the finest cigar to come out of Cuba in a long time, and Cigar Aficionado’s top cigar of 2011.

The original Cohiba Behike from 2006 was unavailable to nearly all smokers—only 4,000 cigars were released at a price of $400 or more per cigar. The Cohiba Siglo VI Grand Reserva debuted in 2009 at a price of about £85 ($130), with only 75,000 cigars produced. The Behike BHK 52 combines the excitement of those rare Cohibas with a much larger production goal—150,000 this year alone.

Cohiba Behike BHK cigars are made with a portion of filler tobacco known as medio tiempo, a type of sun-grown tobacco leaf that grows at the top of some, but not all tobacco plants. The cigars show great balance even in youth, with a medium to full body, creamy coffee flavors and some earthiness. They show elements of Cuban cigars of old, and should get even better with age—if you can be patient.

--Cigar Aficionado

The Mighty Dollar

2011-12-05T20:29:00.003-05:00

A wealth of worthless observations about money

Dr. James Roberts, professor of marketing at Baylor University in Waco, Texas, exhorts us to curtail our consumer spending in his book Shiny Objects. Well, here's a good place to start: don't buy his book

Let's be charitable and presume that Roberts's aversion to what's named in his title is the result of living in Waco where, in the local shops, one is rarely tempted by gleaming Patek Philippe wristwatches, glossy custom-made Lobb shoes, lustrous Hermes neckties, and baubles from Cartier for the significant other.

Or let's not be charitable and call the dim tome what it is: partly a left-wing screed, partly a self-help manual for compulsive shoppers, and mostly an idiocy.

It was, as you can well imagine, with glad relief that I turned to Against Thrift by James Livingston. Unfortunately, Against Thrift is ladled out of the same reeking pot of leftover, reheated socialist bean stew as Shiny Objects, though better written. Not that you'd want to read it: Begin with a glance and a groan at the phrase "alienated labor" on page xi of the introduction and go straight to the spectacularly predictable conclusion on page 210: "If we want to prevent another economic disaster, and to promise balanced, sustainable growth, we must create...a more equal, more democratic America--by redistributing income and socializing investment." You'll miss a lot of erudition in between, but it only raises the question of why so much study of Hegel, Nietzche, Freud, Marx and Keynes is needed to be just plain wrong.

--P.J. O'Rourke

Obituary: George Daniels

2011-12-04T21:22:00.002-05:00

George Daniels, master watchmaker, died on October 21st, aged 85

A hard, poor childhood in north London had given him a nose for a deal and a sharp sense of the value of everything. But his pieces were private experiments, not commissions. He wanted to build watches that kept better time than any in the 500 years before. The general public was happy, from the late 1960s, with quartz models that lost, on average, two or three seconds a month. But Mr Daniels was determined to show that a mechanical watch could beat them. In the mid-1970s he made a double-escapement watchwhich, over 32 days, lost less than a second.

Now he had to improve on the lever escapement, which had been invented in 1754 by the English horologist Thomas Mudge and used in most watches since. It worked by friction, as the teeth of the gears slid over the pallet; but this arrangement needed lubrication, and as the oil degraded the watch lost time. Mr Daniels became obsessed with the problem. His solution, invented in 1976, was the co-axial escapement, an arrangement in which two wheels, placed one above the other, transmitted to the pallet a radial impulse that needed no lubrication and so (if wound) would never stop.

That achievement earned him many honours for services to horology, but it was only the beginning of a long slog to get his idea accepted. The world of watches was (and is) a closed one.

So it was no surprise to him, though keenly disappointing, that the Swiss watchmaking industry was neither eager to look at the co-axial escapement, nor able to understand it. He did the rounds of the factories for more than 20 years. After four years with Patek Philippe, he could not persuade them to make it. Omega began to produce it in limited editions in 2006, after seven years of “development” that Mr Daniels dismissed as unnecessary. Large-scale production would have been too expensive. But Mr Daniels also suspected sheer dislike of outsiders.

While restoring the timepieces made by his idol Breguet in the 19th century, he had made two clocks in the same style, just to prove he could beat the master. They were so fine that the company insisted on putting the Breguet secret signatures on them. Mr Daniels went along with it. He had a secret cipher of his own, though, a dove with an olive branch. It meant peace to his rivals, French or Swiss; but if the most ingenious invention in watchmaking for 250 years was too tricky for them, why, he would just pick it up, snap it shut and put it back in his pocket.

--The Economist

Quote du Jour

2011-12-04T14:55:00.000-05:00

"What nature requires is obtainable, and within easy reach. It is for the superfluous we sweat." Seneca

The Fabled T&A Shirt

2011-12-04T14:31:00.005-05:00

In the dress shirt department, Turnbull & Asser has long been considered one of the finest shirt makers in history.

The esteem for the shirt brand is well known, even in fiction. This was illustrated in The Great Gatsby when social heroin Daisy Buchanan falls into tears upon seeing the Turnbell & Asser shirt collection of Jay Gatsby, so taken was she with their beauty and perfection! Once your master pattern is on file and you can order new shirts on demand, you might just feel the same way, slipping into your flawless clothing each morning.

Turnbull & Asser has a distinguished client list and is one of the bespoke tailors that enjoyed the privilege of dressing Sir Winston Churchill, Prince Charles, President Ronald Reagan, and President George H.W. Bush. In fact, until the shift to Brioni suits more than twenty years ago, Turnbull & Asser had been responsible for designing the suits worn by Sean Connery when he played his famous James Bond role.

Turnbull & Asser is literally known throughout the globe as one of the highest quality and most respected bespoke shirt makers in history. In fact, if excellence is known by the company one keeps, it is informative to realize that a Turnbull & Asser shirt is often compared to the King of all bespoke shirts, those made by Charvet in Paris.

Forbes magazine has even included the price of “a dozen Turnbull & Asser bespoke shirts” in its Cost of Living Extremely Well index. Although the specific price will vary based upon the fabric and choices one selects, Forbes currently estimates a dozen bespoke shirts would retail for $4,200, or $350 each before tax.

Although a Turnbull & Asser shirt isn’t cheap, countless satisfied clients have been willing to support the company for more than a century, including members of the Royal Family, Presidents and Prime Ministers. Every passing year, they continue to vote with their pocketbook that the satisfaction offered by the storied shirt maker is worth every penny.

--GildedLife

Nominal Nonsense

2011-12-03T19:32:00.004-05:00

Rather than being the innovation its champions claim, targeting nominal GDP simply extends dubious policies further into uncharted territory.

If we scrape away the econo-speak, we find that nominal GDP targeting is simply code for “let’s stop worrying about inflation and crank up the printing press, baby.” While its proponents are coy about exactly what they’re suggesting the Fed do after targeting nominal GDP growth of, say, 5 percent per year, the basic idea is to flood the economy with even more low-interest money.

The hidden assumption here is insidious: once inflation kicks up—and at 3.9 percent it is already well above the Fed’s “comfort zone” of 3 percent—then Americans will stop trying to save or pay down debt and will instead go back to borrowing and spending freely.

In other words, instead of Americans acting prudently to lower their unprecedented levels of debt and build some capital, the advocates of targeting GDP want us to go back to the go-go days of the housing bubble and borrow and spend more, more, more, all because they believe the key problem is lack of consumer demand.

Rather than explore why demand has declined, GDP targeters want to bulldoze American consumers back into taking on more debt. Their plan is twofold: one, keep interest rates so low that savers are punished, and two, crank up inflation so that households are forced to spend money before it loses value.

To say this is perverse is an understatement. If we consider the fundamentals of capitalism—something few financial pundits and Wall Street types seem to bother with—we start with capital, i.e., cash savings that can be invested in productive enterprises. No capital, no capitalism. Those promoting GDP targeting are thus profoundly anti-capitalist, as their basic idea is to punish capital formation and reward unproductive debt that fuels consumption, not investment.

This flies in the face of both common sense and various studies that find long-term prosperity flows not from debt-fueled consumption but from investment and the resulting rise in productivity.

The GDP-targeting model is coy about what happens after the Fed succeeds in stoking inflation. It’s important to note that its advocates are talking about nominal GDP, not real GDP. The first is the headline number—how much the economy grew last year—while real GDP is the nominal GDP minus inflation.

A 5 percent nominal GDP with an inflation rate of 4.5 percent yields real GDP growth of only 0.5 percent. It’s entirely possible to get inflation really fired up and have a 6 percent nominal GDP and a 7 percent inflation rate—in other words, a negative growth rate that is masked by the positive nominal GDP.

In short, the entire notion that incentivizing more borrowing will lead to growth is suspect. We already have the proper context, and it’s called capitalism—something few in the halls of power seem to know about. Capitalism works by rewarding capital formation and productive investments. That requires a healthy rate of interest, not a zero rate that only encourages malinvestment and unproductive speculation.

Rather than continuing to advocate policies that have demonstrably failed on a grand scale, GDP targeters would be better served by studying the forgotten basics of a system that does work: Capitalism with a capital C.

--Charles Hugh Smith

Time Piece - Switzerland

2011-12-01T21:28:00.001-05:00

It is, quite simply, the most beautiful film on watchmaking

Time Piece - Switzerland from HODINKEE on Vimeo.

Fiscal Fecklessness

2011-12-01T20:44:00.003-05:00

Europe has not solved its fiscal problems. Europe shows no sign of being on the verge of solving its fiscal problems, or even that it wants to solve its fiscal problems. If Ben Bernanke is having “in for a penny, in for a pound” thoughts, he needs to think again: The United States does not have the resources to bail out Europe--and nobody has the resources to bail out the United States.

In a poor country like China, a little inflation can cause civil unrest. But rich countries aren’t really any different, they're just richer. Years of low interest rates and loose money haven’t solved our fundamental economic problems, but they have created the potential for seriously disruptive inflation, and you’ll notice that gold prices and oil futures have been going up, too. That isn’t a sign of confidence in the dollar or the euro.

One of the big problems at MF Global was off-balance-sheet accounting, using various bookkeeping shenanigans to hide the fact that liabilities were dwarfing assets. The United States government does that both in the obvious sense — pretending that future entitlement liabilities don’t really exist — but in a more subtle sense, too: Wealth isn’t abstract numbers. Wealth is real stuff: food, oil, steel, houses, people performing useful services, etc. You can flood the world’s financial systems with liquidity and create the impression of economic activity, but that does not create one automobile, pair of shoes, or bag of coconuts. You can finesse the economic metrics, but that doesn’t make you any richer.

--Exchequer

Quote du Jour

2011-11-29T00:03:00.000-05:00

"Do not pursue what is illusory--property and position: all that is gained at the expense of your nerves decade after decade and can be confiscated in one fell night. Live with a steady superiority over life - don't be afraid of misfortune, and do not yearn after happiness; it is after all, all the same: the bitter doesn't last forever, and the sweet never fills the cup to overflowing." Alexandr Solzhenitsyn

Made-to-Measure Marvels

2011-11-28T23:53:00.002-05:00

Custom suits are on the rise

Fashionable designer brands are beginning to offer more than just basic suits. Now they're expanding into made-to-measure. Tailored to your specific measurements from an existing pattern and requiring about six to eight weeks from start to finish, this abbreviated version of custom suiting allows for a better cut and fit than buying off the rack.

Giorgio Armani, for instance, is producing all made-to-measure jackets with a full canvas construction—the canvas relies on layers of horsehair and camel hair to provide structure—as well as introducing two new styles: The Naturale, with relaxed shoulders, lower armholes and fuller legs, and the Costruita, with constructed shoulders, higher armholes and a slimmer cut in the leg. Plan accordingly.

--WSJ

Austerity vs. Profligacy

2011-11-28T23:40:00.003-05:00

Into this malaise and debate comes James Livingston, a Rutgers University historian, whose new book, Against Thrift, argues that the magic bullet for the nation’s problems is for consumers to spend more—a lot more—and rub out the phrase “saving for a rainy day” from the American lexicon. Today, he says, is that rainy day.

Livingston is a lively, argumentative writer. He assails the “pathetic” thinking of economists, philosophers, and journalists while sounding like the guy with a stubborn will to prove himself. Livingston reserves his harshest abuse for the “new Puritans” among economists, government leaders, and commentators who regularly admonish us to stop being slaves to consumerism and recommend practicing austerity on an individual level.

But advertising, on the other hand, counters repression: “It sells freedom.” Buying forges our identities in ways that saving represses, Livingston argues. He seems hopeful readers will heed his advice: “I’m urging them to see that saving for a rainy day—treating this life as austere probation for another—is a soul-crushing emotional trap as well as an economic dead end.”

--BusinessWeek

Tax Haven or Hell?

2011-11-27T23:48:00.002-05:00

Under intense international pressure to lift banking secrecy, the first and biggest of the world’s “tax havens”—places that charge low or no taxes to foreigners—is ceding some ground. In a deal signed on October 6th, Switzerland agreed to tax money held in its banks by British residents (it had already done a similar deal with Germany). These customers face a levy of up to 34% as well as, from 2013, a withholding tax.

That could bring the British treasury around £5 billion ($7.8 billion). But Nicholas Shaxson, author of “Treasure Islands”, a book on offshore finance (and a former contributor to this paper), calls it a “Swiss tax swizz”: the country will in effect pay a fat fee to avoid revealing clients’ names. That undermines efforts at the Organisation for Economic Co-operation and Development, a Paris-based club of mostly rich countries, to set international standards on tax evasion.

The fact that Switzerland did a deal at all reflects a changing climate for offshore finance, which has flourished for 50 years. Its defenders still have strong arguments to muster. The most controversial is the Swiss stance, which sees tax as a morally neutral battle of wits against the fiscal authorities: quite different from money-laundering or fraud. From that viewpoint, banking secrecy is a human right and states that try to overturn it are overreaching their powers.

Other less idealistic arguments abound. Some say that companies’ legal duty to shareholders necessitates using offshore finance to reduce and simplify taxes; it is all the more important when regimes and rates differ wildly in the onshore world. Offshore jurisdictions also provide the tax and regulatory competition that keeps grasping governments and officials in check. Even if a company’s profits are higher as a result of using a tax haven, that money will flow out and eventually be taxed, for example as dividends when it reaches shareholders. Offshore financial centres compete by being well run and regulated—with tougher standards (for example on knowing your customer) than some supposedly respectable countries. Rather than cracking down offshore, the need is for simpler, clearer tax regimes onshore, where companies do their real business.

Overall, however, resistance to change remains strong, not least in big Western financial centres such as Wall Street and in the City of London, which see the flexibility offered by tax havens as an essential part of their business model. Public discontent may be filling the campaigners’ sails, but political support for reforms is still patchy.

--The Economist

Quote du Jour

2011-11-24T16:47:00.000-05:00

"Thanksgiving is a typically American holiday...The lavish meal is a symbol of the fact that abundant consumption is the result and reward of production." Ayn Rand

Occupation Unknown

2011-11-23T17:01:00.003-05:00

Tour around any expensive parts of any town--the Upper East Side of Manhattan, Brentwood in Los Angeles, Pacific Heights in San Francisco, those sort of places--and notice the high-end cars and expensive real estate and ask yourself: What do all of these people do?

When the grandees who live in those parts of town glide into work every day, what, exactly, do they do? What--to use a term of art--is their work product?

The answer, mostly, is: They participate in financial transactions, and earn a fee based on those transactions. They smooth the way--legally, financially--for what used to be called "real work" to take place. The posh parts of town are where the mandarins live--just as they used to live in the posh parts of Istanbul under the sultans, or Peking under the emperors. The Mandarins of today--as distinctively dressed in their Kiton suits and Hermes neckties as they were centuries ago, eke out a living based on percentages and fees and special access to supposedly "unobtainable" goods and services.

No wonder everyone hates investment bankers.

--Rob Long

The Limits of Science Pt. 2

2011-11-21T23:03:00.002-05:00

Economic forecasting is fraught with peril

The roots of the problem can be traced right back to Aristotle, the father of modern science, who around 400 B.C. laid down the first formal conception of cause and effect. While there have been numerous advances to his thinking methodology, his fingerprints all still on everything a modern scientist does.

But as much as Aristotle was a proponent of his scientific logic, he established clear boundary conditions for his theory. It was for the part of the world in which things could not be other than they are. In other words, A is A. For this world, Aristotle laid out the seminal scientific method and argued that it was the optimal way for understanding that part of the world.

As he laid out his scientific method for the part of the world that cannot be other than it is, he also cautioned that there is another part of the world that can be other than it is, and there was another method that needed to be used to understand it. Here the scientific method would be wholly inappropriate.

That part of the world consists of people – of relationships, of interactions, of exchanges. In this part of the world, relationships can be good, bad or indifferent; close, distant or sporadic. They change – they can be other than they currently are. For this part of the world, Aristotle said that the method used to develop our understanding and to shape this world is rhetoric; dialogue between parties that builds understanding that actually shapes and alters this part of the world.

Ever since the modern scientific world has embraced Aristotle’s science, it has utterly ignored his boundary condition. As such, it routinely pushes the scientific method far past the limits for which it was designed. Ironically, we have adopted Aristotle’s tool but ignored its user manual.

In this respect, the economist’s behavior is completely unsurprising. In what he imagines to be proper Aristotelian fashion, he treats the economy as if it cannot be other than it is and predicts a future that is based on the past. And when it is anything but, he returns to the same tools to do it again, believing that in doing so he is being meritoriously scientific. Indeed, this is illustrative of a fundamental blind spot in modern science. It has ventured far afield of its natural limits and is both creating problems and inhibiting progress.

Science undoubtedly advances our knowledge of the world in which things cannot be other than they are. But the modern practice of applying science to the vast tract of the world where things can be other than they are is unhelpful, as demonstrated by the unreflective economist. Extrapolating the future to be a straight-line projection of the past is neither accurate, nor is it helpful in creating better understanding and newer ideas.

Instead, it is far better to create novel new hypotheses for things that can be other than they are – like economic growth, for instance. To do so, though, we have to break the iron grip of science on the part of our world that for which mere extrapolation of the past is ineffectual. We must embrace rhetoric instead of faux science.

--Reuters

Patek Philippe's Newest Classic

2011-11-20T12:15:00.007-05:00

It takes audacity to call a new watch a classic, but in the case of the Patek Philippe chronograph Ref. 5170J, the attribute is justified.

All good things take time. And if it has to be perfect, it might take some more time. After all, the ambition with the new chronograph caliber for the Ref. 5170J was not just to present a classic manually wound chronograph movement with a column wheel and a horizontal clutch built entirely in-house. The objective was also to outperform its predecessor, which was based on a Lémania movement blank extensively reengineered and modified by Patek Philippe to create one of the most beautiful chronograph calibers ever made.

Patek Philippe, of course, spared nothing in order to exceed all expectations. Indeed, the development of the new movement took more than five years. The movement features a large chronograph hand, a seconds subdial, and an instantaneously jumping 30-minute counter. Its prominent four-arm Gyromax balance wheel breathes with a frequency of 4 hertz (28,800 semi-oscillations/hour). The power reserve of the watch is 65 hours (over 58 hours when the chronograph is running), and a stopseconds mechanism simplifies the exact synchronization of the watch with a time signal.

As befits the heritage of Patek Philippe, this caliber is not only extremely precise and reliable, it is also a masterpiece of aesthetics and supreme workmanship. It has strikingly elegant form parts and old-style bridges that are painstakingly chamfered, polished, and decorated with Geneva striping. Every surface, no matter how small, is finished in numerous consecutive steps, in most cases by hand. In compliance with the Patek Philippe Seal criteria, these movement decorations in no way impair the caliber’s functional integrity.

Indeed, from its underlying concept to the artistic finissage, the new caliber is a perfect reflection of the quality stipulated by the Patek Philippe Seal. The philosophy behind it focuses on convenience, functionality, and long-term reliability.

Every movement part was examined by the Comité de surveillance (Supervisory Authority) of the Patek Philippe Seal to make sure it complies with the manufacture’s strict technical and aesthetic directives. As proof of conformity, the movement exhibits the gold-filled, engraved Patek Philippe Seal: a coat-of-arms silhouette with the intertwined PP initials that stand for Patek Philippe.

A movement with so many ancestral features of haute horlogerie deserves the regalia reserved for classic traditions. With Patek Philippe’s new Ref. 5170J chronograph, this begins with the 39-mm round case in 18K yellow gold. Its sleek shape follows the same principle of gestalt that the manufacture adopted in 1932 when it created the legendary Calatrava design--practically inventing the modern round men’s wristwatch.

Its physique is devoted entirely to functionality, endowing it with tangible elegance. With a gentle flourish, the lugs extend from the caseband, imbuing the watch with dynamic poise. The chronograph is operated with pushers at 2 and 4 o’clock. Their rectangular shape has been a typical attribute of Patek Philippe wrist chronographs for seventy years.

The Ref. 5170J chronograph is a consummate statement of timeless elegance. The silvery white dial has slender applied hour markers as well as yellow-gold applied Roman numerals at 12 and 6 o’clock and black transfer-printed scales. The logarithmic pulsimeter scale on the outermost perimeter is calibrated to 15 heartbeats, revisiting the traditional doctor’s watch. The railway track minute scale features slightly compressed Breguet numerals. The seconds subdial at 9 o'clock and the 30-minute counter at 3 o'clock are recessed in the main dial and arranged somewhat below the horizontal center axis to balance the maker’s signature and the pulsimeter scale inscription in the upper half of the face.

In sum, the Patek Philippe Ref. 5170J is unquestionably the world's finest chronograph.

--TrustedWatch

The Paper Chase

2011-11-20T10:21:00.004-05:00

A few weeks ago, I stumbled on a Soviet 10-rouble note, tucked into an old notebook. Gazing at the crumpled piece of paper, with the iconic face of Lenin, invoked a frisson – particularly given all that is now happening in the eurozone.

Back in the late 1980s, I lived in the former Soviet Union as a PhD student, where I received a (pretty generous) monthly stipend of Rbs430. As I collected notes each month, I never questioned whether that paper would always be “money”; to me it seemed self-evident that this money had value and could be spent anywhere across the USSR. The Soviet Union – and its monetary union – seemed to be permanent.

But in 1991, my assumptions were brutally turned upside down – along with those of millions of other Soviet bloc inhabitants – when the old Soviet system ceased to exist, and surrounding republics declared independence. For the first few months, many republics continued to use the old Soviet rouble. After all, the task of printing and distributing new banknotes is a complex one, particularly amid political turmoil. But nobody really knew who was “in charge” of that rouble; the political union had collapsed. Unsurprisingly, prices went haywire.

Then the new republics started to launch their own currencies (which, confusingly, were sometimes also called the rouble), and the disorientation grew. Some of these new currencies were pegged to the old rouble or each other. But confidence in them was low, so people hunted for alternatives. Even before 1991, back during glasnost and perestroika, shops and factories had used barter to conduct some of their affairs since the Soviet financial system was so crude. But after 1991, barter became almost the norm in many regions.

And I adapted too. I used tins of caviar to buy hotel rooms in Latvia and Estonia and I bought – or bribed – my way on to a plane in Baku with a cassette player. The only currency that was accepted everywhere was a grubby dollar bill (closely followed by the Deutsche mark or Swedish krona in the Baltics). But the exchange rate was a lottery. And since dollars could not be used for small transactions, I used Marlboro cigarettes as “currency” too; these were light and could be divided into small denominations (i.e. single cigarettes) more readily than dollars.

Are there any lessons here for the tumultuous eurozone? I fervently hope not. The eurozone officials are still insisting that it would be impossible for the euro to ever break apart. And even if that “unimaginable” scenario did occur, I assume – or pray – that a break-up would be less messy than in the USSR. Since the eurozone only emerged a decade ago and never pretended to be a single political structure, the separate countries have functioning central banks and finance ministries, staffed by clever technocrats who could get new banknotes printed and distributed in a hurry. Europe also has savvy companies and consumers with a global perspective; if a country such as Greece, say, suddenly left, it would probably continue to use the euro, Swiss franc or dollar as a mental reference point. I don’t expect anyone to start bartering with olives.

But, then again, it is worth remembering that the eurozone’s monetary links are exponentially more complex than they were in the USSR; that could create a different type of chaos. And today’s eurozone population seems psychologically ill-prepared for any shock. Anyone who is old enough to remember the hyperinflation of the Weimar Republic already knows just how flimsy fiat currency can be; so does anyone who saw Argentina in the 1980s (or who, like me, had their assumptions overturned in the Soviet bloc).

But there are millions of Americans and western Europeans under the age of 50 who have never lost their trust. How they will respond to a eurozone break – or seeing part of their savings wiped out – remains an open question. Hopefully we will never need to find out. But that old rouble note on my desk is a potent warning that sometimes the tectonic plates of the political economy can shift with stunning speed – even when politicians insist they cannot.

--Gillian Tett

Quote du Jour

2011-11-20T10:04:00.001-05:00

"Newspapers are the second hand of history. This hand, however, is usually not only of inferior metal to the other hands, it also seldom works properly." Arthur Schopenhauer

What to Wear That Says 'Buy This Porsche'

2011-11-19T18:51:00.004-05:00

When the Los Angeles Auto Show opens to the public tomorrow, car makers will be revealing more than their latest vehicular models. Prominently displayed will be their fashion taste, as worn by their spokesmodels.

You say Porsche; they say black Alexander Wang dress.

Auto-show models are no longer the stereotypical "car babes" who once draped themselves across auto bodies. Wearing carefully calibrated clothes from brands such Theory, Max Mara and Hugo Boss, the women—and men as well—are dressed to embody the demographics of the buyers the car makers want to attract.

The new wardrobes reflect a shift in the job of the auto-show model. While old-time car models were often instructed to follow a script—or even to remain mute—today's "product specialists" are often actors, hired for their ability to speak in public and entertain. They know the cars, from paint jobs to exhaust systems.

"We can answer questions about the hydraulics of the four-wheel drive," says Joyce Brew, a 38-year-old Toyota product specialist. "Good luck getting me to drape myself across anything."

As their role has changed, their wardrobes have shifted from skimpy costumes to professional clothes. "We hear comments all the time: 'Wow, the Porsche girls look really classy,' " says Michelle Juzeszyn, Porsche's manager of event marketing and sponsorships. That's far better for the brand than hearing that they're just beautiful, she says.

--WSJ

Ferrari: A Topless Treasure

2011-11-19T11:30:00.005-05:00

News of Ferrari's new $300,000, 562-horsepower convertible might seem a trifle irrelevant to the moment. Never mind the 1%; buyers of this car are the 0.001%, and some of them are pretty unsympathetic characters: Russian kleptocrats in track suits that match their mobile phones; Brazilian soccer stars with microwave-size wristwatches.

If Silvio Berlusconi doesn't have one on order, maybe he should have.

And at least a few of the new cliente have galaxy-class bad taste. As I was touring the factory's new "Tailor Made" customization atelier in Maranello, Italy, I confronted a customer's electric-lime-and-black 599 GTO, with chartreuse hides and monogrammed seats, destined for the Middle East. Had you requested such a car from Enzo Ferrari himself, he would have swatted you with a tire iron and had you dumped onto the Via Abetone. Ah, the good old days.

Ferrari continues to walk the iciest tightrope: It's a legend, a motorsports mythology, the Camelot of fast cars. It's also a business, the most profitable unit for parent company Fiat (pretax profits were up 23% in 2010, to about $274 million), and an ultra-luxury trophy worth billions if Fiat should decide to sell. As much as it might like to require some sort of literacy test from its clients—Who was Phil Hill? What was the company's first midengine V8 Berlinetta?—the fact is, all you need is a checkbook.

Why does it matter? Because all cars are tribal, and no tribe is more self-regarding than the Ferraristi.

Make no mistake: In the 458 Italia Spider, you will be seen. This is Ferrari's first midengine retractable-hardtop convertible, combining the brilliant operability of the Ferrari California's disappearing hardtop with the Tantric sports-car ecstasy of the 458 Italia. Fascinating design, exquisite handling, raw power like Samson on Rogaine, the Italia is absolutely one of the best sports cars in the world. Cutting the top off doesn't make it any subtler, however. In the Spider, you are wayyyy out there, brother. You are representing. Be sure to wear your good track suit.

It all adds up to a supercar with the most comfortable, accessible and aurally compelling open-air experience on the market. I mean, really, short of something Biblical—locusts or a torrent of frogs or something—why wouldn't you have the top down? Don't want to get wet? Go faster.

There are certainly a lot of fast, capable cars out there, including the new Porsche 911 and McLaren MP4-12C. Around a road course, the Chevrolet Corvette ZR1 can keep pace with the Italia, and might be a tick faster—astonishing, when you consider the Ferrari is several multiples more in price.

But no car delivers the holistic, pilot-focused experience, the synaptic download that the Ferrari does. From the seating position and cockpit ergonomics—the vibratory timbre, position and hand-fit of the steering wheel, for instance—the Italia just speaks to you.

--WSJ

Keynes vs. Hayek

2011-11-17T23:31:00.005-05:00

The Eternal Struggle

So what's all the fuss about? Nicholas Wapshott's new book, Keynes Hayek, does an excellent job of setting out the broader history behind this revival of the old debates. Wapshott brings the personalities to life, provides more useful information on the debates than any other source, and miraculously manages to write for both the lay reader and the expert at the same time. Virtually every page is gripping, and yet even the professional economist will glean some insight (e.g., in Wapshott's discussion of Hayek's now obscure essay "The 'Paradox' of Saving").

As the story progresses, the reader is treated to a remarkable amount of research, but almost always with a light hand. We learn how Hayek's thick Viennese accent held him back as a lecturer and pundit, how the other British economists started to mock and disrespect Hayek, and how Ayn Rand later dismissed Hayek as a "compromiser" and--in the margins of The Road to Serfdom--scribbled that he was a "total, complete, vicious bastard."

Nevertheless, the deepest question raised by this book is why we look back to old economists to the degree we do. Is it that contemporary economists are, for the most part, so hyperspecialized that they no longer become iconic? Or does studying and discussing old economists give us a comforting impression that "our side" has a continuity of thought and values in a way that anchors world history in an easy-to-grasp "us vs. them" narrative? Maybe it's a bit of both. In any case, Hayek and Keynes remain the touchstones for current economic debates, and if you wish to learn about them, this book is a very good place to begin.

-- By Tyler Cowen, America's Hottest Economist, in National Review

Luxury: Understated or Ubiquitous?

2011-11-15T23:35:00.005-05:00

At the depths of the recession in 2008, stealth luxury became the buzzword. It was about consumption of goods that were expensive but discreet and very in-the-know, the opposite of ostentatious.

These last three down-market years have created a dramatic shift in the definition of what luxury is. This recession has affected even the rich. No longer is luxury defined by excess and conspicuous consumption. Now luxury means products with higher perceived value and increased practicality.

Demonstrating this is the near-disappearance of the ‘logo-covered product’ in the marketplace. The face of luxury is becoming much more subtle, understated and less ostentatious. As a result, a lot of luxury brands have also been upping their luxury quotient by introducing limited-edition and bespoke items.

The truly rich have always been the consumers of the “bespoke luxury” product, the ultimate in luxury. When your product is one of a kind, hand-made or customized to (or for) you, you create instant exclusivity—no one else can have what you have. Companies that trade in customized bespoke luxury, such as Brioni for men’s suits, are seeing huge successes by tapping into the psyche of true luxury.

--Forbes

Quote du Jour

2011-11-14T23:12:00.000-05:00

“Literature ought to be the thing reserved, the grand luxury of life, the inward blossom of the soul.” Jean Jacques Rousseau

Unpacking My Library

2011-11-14T22:54:00.003-05:00

I feel that my tendency to acquire books is rather like someone smoking two packs a day

It’s a terrible vice that I wish I could shuck. I love my books, and with all their dog-ears and under-linings they are irreplaceable, but I sometimes wish they’d just vanish. To be weighed down by things – books, furniture – seems somehow terrible to me.

In my library, the books that mean most to me are the ones that made a decisive impact on my development, the ones I can remember reading in a certain time and place, with joy and discovery. The affection one has for these books has, in my case, nothing to do with the quality of the books as objects. Often, they are the cheapest, and most beaten-up paperbacks: the old Penguin editions of Nietzsche, for instance

On The Bookshelf:

Anna Karenina by Leo Tolstoy; Essays and Aphorisms by Arthur Schopenhauer; Notes From Underground by Fyodor Dostoyevsky; The Portrait of a Lady by Henry James; The Letters, 1830-1857 of Gustave Flaubert; Swann’s Way by Marcel Proust; Seize the Day by Saul Bellow; Stories by Anton Chekhov; Pnin by Vladimir Nabokov

--Financial Times

The Limits of Science

2011-11-13T14:10:00.002-05:00

As the power of the scientific method has encroached further than its applicability warrants into fields such as economics and business, its predictions of the future become ever more erroneous.

In this list, we can include virtually every economic prognostication from the first half of 2008, and countless market research studies that misjudge consumer interest in the new product concepts that they test.

Were he alive today, Charles Sanders Peirce, a turn-of-the-20th-century American pragmatist philosopher, would be unsurprised at the shoddy results of these analyses. A brilliant thinker, Peirce is less famous than his peers William James and John Dewey, mainly because he was an ornery and unpleasant character. However, Peirce had an almost entirely overlooked yet extremely insightful theory applicable to modern scientific work. He concluded that no new idea was ever derived from the analysis of the past using inductive and deductive logic – the two forms of logic our modern scientific method utilize.

These forms of logic can only prove things in the past, so whether business people, economists and scientists realize it or not, the only thing about the future that the application of deductive or inductive logical analysis can predict is a simple extrapolation of the past. That is very useful for studies of things in the Aristotelian camp of cannot be other than they are. If we find some property of granite by studying existing hunks of granite, we can safely extrapolate that in the future, hunks of granite will have those properties.

"We have a hunger for rules because we need to reduce the dimension of matters so they can get in our heads."

However, deductive and inductive logical analyses aren’t so hot for things that can be other than they are – like economy for example. These things change constantly due to the interactions of the people and organizations. The fall of 2008 wasn’t an extrapolation of the past – it was discontinuous with the past.

If economists were being Peircian, when they saw an anomalous situation of the unprecedented economic meltdown of fall 2008, they would have taken all of our disparate knowledge and mingled it together creatively to ask: what on earth could be going on here? Rather than forgetting entirely that their theories were demonstrated to be totally lacking, and then going on to analyze some more and predict more based on those theories, they would have created a new hypothesis to explain what just happened. This would be what Peirce evocatively called ‘a logical leap of the mind’ and ‘an inference to the best explanation.’

That is the merger of science and innovation. It is what Peirce called ‘abductive logic’. It is the formation of a new hypothesis. Deductive and inductive logic can’t make the future anything but the logical extension of the past and what occurred in the fall of 2008 simply wasn’t a logical extension of the past. Peircian abductive logic could have created a new hypothesis that could be analyzed going forward, as the data streamed in.

This is certainly not the universal or even the majority instinct in our modern world. Rather, there is misplaced trust in the analysis of data to reveal some truth. Analysis certainly can: if you torture the data enough, it will give some answer, if only to make the pain go away. The problem is with the low information content of the answer. To Peirce, if an existing deductive rule is applied to the analysis of historical data, it may confirm that the rule is operative, in which case nothing new has been learned. If instead the rule is dis-confirmed (for example that in the back half of 2008, the U.S. economy didn’t perform the way we would have expected it to do), then we have learned that our deductive rule is not operative – a good thing but not a clue to the future. If inductive logic is applied using a large and sufficiently homogenous sample size, we will wait a heck of a long time to get a sample size that will enable us to confidently make an assertion that what we see is true.

"There is this sterile and obscurantist quality that is often associated with classroom knowledge that may get in the way of what is going on in real life."

Aristotle would argue that the Peircian logical leap is a product of rhetoric: the dialogue between inquiring minds that attempts to create a future that does not now exist, rather than mindlessly crunching the numbers that do exist. Rather than ask whether the new idea can be proven in advance analytically, these inquiring minds would ask how this novel idea could be tested going forward. If we listened to all of Aristotle (rather than just half of him) and mixed it with a little Peirce, we would accept the limitations of science to shape that which can be other than it is, and would spend more time and energy engaging in the sort of dialogue that creates new models that can be tested going forward. Remember Locke's definition of a madman: someone "reasoning correctly from erroneous premises."

Of course, I am not arguing that all science is devoid of novel hypotheses or that all natural and social scientists eschew abductive logic entirely. Rather, I am arguing that we need to reign in faux science, which is appropriate only for understanding things that cannot be other than they are, using the tools of deductive and inductive logic. And we need to release the energy of a broader conception of science and innovation that helps us to shape those aspects of our world that can be other than they are, using abductive logic. It won’t always be clear in advance which is which, but it is important that we not default reflexively to analysis rather than innovation. Restoring that balance is the modern – or perhaps more appropriately – post-modern challenge of our world.

--Reuters

A Blue Blood Battle

2011-11-12T15:34:00.004-05:00

Who's the king of luxury dive watches? Rolex or Patek?

The Nautilus commands attention. This is not to say that it is gaudy, however. Like any Patek Philippe, this is a visually restrained watch. Features include classic elements such as a slim case and intricate design details like a signed crown and a horizontally embossed dial.

The watch commands attention, though, because these features make the watch easily identifiable from a distance. However, it is not so much the sight at a distance as the feel on the wrist that matters. The quality of the watch can be seen and felt, as it sits very comfortably on the wrist. Indeed, the strongest impression given is how slim and comfortable the watch feels.

Likewise, the 18k white gold Submariner, with its shiny bracelet and bright blue dial, has an unmistakable presence. It is a “loud” watch that instantly grabs your attention with its striking features. Take, for instance, the beautifully polished center links on the bracelet. Not only do they give the Submariner some dress appeal, they also perfectly set off the watch's bright blue dial.

The movement is no slouch, either. Inside this new Submariner beats the tried-and-true 31 jewel Rolex caliber 3135 (designed and manufactured entirely "in-house" by Rolex). Rolex has implemented several, truly notable features into the 3135 over the years, such as Microstella adjustment screws, Kif shock absorption, and the new Parachrom Bleu hairspring. The high-beat movement oscillates at 28,800 beats per hour (BPH). As to be expected, every Rolex caliber 3135 is COSC tested and certified for accuracy.

Nonetheless, it will likely take a very special buyer to purchase an all-gold dive watch like the Rolex Submariner 116619--particularly given that the suggested retail price of the Rolex Oyster Perpetual Submariner is $29,850.

Which takes us back to the Patek Philippe Nautilus. With a suggested retail price of $26,700, the Nautilus is a relative bargain. More importantly, though, its movement leaves the Submariner in the dust. The self-winding caliber 324 S C runs at a frequency of 4Hertz (28,800 semi-oscillations per hour), which assures a high rate accuracy and an extremely constant amplitude. As an added bonus, the movement is powered by an extra-heavy 21K gold central rotor—which can be seen through the display case back (another feature the Submariner lacks).

In sum, the Nautilus is the clear winner. The Rolex Submariner is a solid and dependable timepiece, but it cannot hold a candle to the Patek Philippe Nautilus.

Europe: Staring Into The Abyss

2011-11-12T13:37:00.003-05:00

In December of 2000, FP Comment orchestrated Nobel Money Duel, an extended debate between Robert Mundell and Milton Friedman, two Nobel laureate economists who held different views on currencies and the global monetary system. Robert Mundell, sometimes called the father of the euro, saw it as a great leap forward. Milton Friedman foresaw conflict.

Milton Friedman: "My difference with Bob reflects what [I see as a major problem]. Namely, the political consequences of a monetary area that is not conterminous with a political entity. This exemplifies my pessimism and his optimism about the euro. We agree that the euro has no historical precedent. I believe we also agree that its attainment was driven by political, not economic, considerations, by the belief that it would contribute to greater political integration — the much-heralded United States of Europe — that would in turn render impossible the kind of wars which Europe has suffered so much. If achieved, political integration would render the monetary and political areas coterminous, the historical norm.

Will the euro contribute to political unity? Only, I believe, if it is economically successful; otherwise, it is more likely to engender political strife than political unity. And here, I believe, is where Bob and I differ most. Ireland requires at the moment a very different monetary policy than, say, Spain or Portugal. A flexible exchange rate would enable each of them to have the appropriate monetary policy. With a unified currency, they cannot. The alternative adjustment mechanisms are changes in internal prices and wages, movement of people and of capital. These are severely limited by differences in culture and by extensive government regulations, differing from country to country. READ: Friedman's Euro Smackdown

If the residual flexibility is enough, or if the existence of the euro induces a major increase in flexibility, the euro will prosper. If not, as I fear is likely to be the case, over time, as the members of the euro experience a flow of asynchronous shocks, economic difficulties will emerge. Different governments will be subject to very different political pressures and these are bound to create political conflict, from which the European Central Bank cannot escape."

--Financial Post

Quote du Jour

2011-11-11T22:06:00.000-05:00

“You must not forget that a monster is only a variation, and that to a monster the norm is monstrous.” John Steinbeck

Thomas Pink Tailoring

2011-11-11T21:20:00.002-05:00

The Renowned London-based shirt-maker Thomas Pink has added a collection of suits to its offerings this season. After nearly 30 years of specializing in shirts, the retailer decided it was time to offer its clients a full head-to-toe wardrobe. The collection comprises three ready-to-wear looks: a slim-fitted, solid black suit; a classic-fit, gray herringbone suit; and a classic-fit navy pinstripe suit with an optional waistcoat ($1,100 for suits, $300 for waistcoat).

Each suit is crafted from superfine 100s wool and incorporates the brand’s signature pink details in the lining and in parts of the stitching. Other details include piping on the internal pockets, handmade pocket closures, and side adjusters on the trousers.

--RobbReport

Manhattan Money

2011-11-11T17:18:00.002-05:00

According to a new study from Wealth-X, the wealth research firm, the New York metro area leads the nation in its population of people a net worth of $30 million or more (net worth measures all assets, including homes). The report says New York has 7,720 people worth at least $30 million. In second place is Los Angeles, with 4,350, followed by San Francisco (4,230) and Chicago (2,550).

The data shows that even among super-rich cities there is a wide disparity between the haves and have-mores. It also shows the continually huge role that finance plays in today’s wealth creation, since New York is essentially a wealth cluster of bankers, hedge fund managers and private-equity chiefs.

“Different seasons of history reward different skill sets,” said David Friedman of Wealth-X. “Right now we’re in a season of financial services. If you’re quant and good at math and also a little bit of the nature of a gambler, which helps for trading, our framework today rewards those people.”

--WSJ

The AP Diver

2011-11-10T20:34:00.001-05:00

Bastiat's Basics

2011-11-10T20:06:00.003-05:00

What is money, and from where does it draw its value?

We are not the first to wonder. The 19th century French economist Frédéric Bastiat asked and answered that question in 1849, stating that money was a promise to “Pay the bearer a service equivalent to what he has rendered to society.” Note the past tense — a product or service must be rendered before money can properly come into existence.

Just as importantly, Bastiat recognized that equivalence was not fixed or even defined. Instead, it is up to the knowledge and judgment of each individual every time he or she engages in voluntary exchange. This freedom creates the information content that is known as a “price.” It is also how economies learn to effectively allocate resources and promote growth. Adam Smith dubbed it the “Invisible Hand.”

Wealth, or capital, is simply deferred consumption that is put to work. When done wisely, wealth multiplies, leaving more to consume tomorrow. READ: The Bastiat Collection

Money’s unredeemed promise might be tokenized by a paper note, a gold coin, or a few bits in a computer database. Every form of tokenization has its strengths and weaknesses. History demonstrates that the soundness of the token is directly proportional to the difficulty of its creation, as this helps ensure stability of the money supply.

The moral claim real money places on society on behalf of its bearer comes not from the intrinsic value of the token but from the fact that the bearer had previously produced some good or service deemed valuable by others. This is what gives money its moral legitimacy.

Western Civilization has forgotten this, and we are all paying the price.

Just look at government fiat currency, which has largely displaced real money. Manufactured on the whim of unaccountable officials and rooted in government debt rather than private assets, fiat money is circulated, pyramid-like, through a fractional reserve banking system until its connection to reality is entirely severed.

Modern fiat currency fuels the growth of both government and the financial sector because it is not a promise to repay that which has been produced. Rather, it is a threat to squeeze the taxpayers of the future, including the yet unborn. And because the tokens can be manufactured at will, governments can harness the power of inflation to pay off their debts in coin that is worth less than the currency in which those debts were incurred.

Those near the source of modern money creation are expert at its manipulation, weaving it into complex financial instruments that function more like casino chips than real money. Wealth accumulated under this system is not capital at all, but rather a pile of IOUs, the sum total of which can never be redeemed.

When too many customers try to redeem these IOUs at the same time, financial institutions fail—unless these institutions are bailed out by governments, propped up with more IOUs. This can cascade until too many people try to redeem those IOUs, at which point governments begin to fail.

--Forbes

Quote du Jour

2011-11-06T12:15:00.001-05:00

"The charm of history and its enigmatic lesson consist in the fact that, from age to age, nothing changes and yet everything is completely different." Aldous Huxley

Fast & Furious

2011-11-06T12:11:00.002-05:00

The archetypal US sports car, the Chevrolet Corvette from General Motors.

With an unbroken lineage that can be traced to the first example in 1953, the Corvette is a rarity in keeping not only its name but also its layout, construction and soul over six generations of the model. It was also the first US sports car that the smug European manufacturers had to take seriously – although the early iterations were still more skilled on the straight lines that characterize wide, valley-crossing highways than on the contour-hugging roads of Europe.

But the range-topping ZR1, the most powerful Corvette yet, is said to combine enough horses to haul a small town of covered wagons with the agility to match the best of sports cars around tight racing circuits.

The verdict is in, and this is a car for the purist. There is no flashy paddle-shift semi-automatic option, just a six-speed manual – with a healthily heavy clutch action – and the whine of a racing box. Indeed, long, highway straights allow for just a small percentage of the 205mph capability to be explored. So, what exactly is this car, then? An exotic? A track-only car? A middle-aged man's dream?

The Corvette, of course, is not in the cloud of mechanical exotica that casually conveys the show-goers – Rolls-Royces, Bentleys, Lamborghinis and Ferraris. But it does cement its status as the accessible American supercar. The ZR1 starts at $109,800, and the not-outrageous options on our example put it up to $124,345. But less highly specified examples are cheaper, making it an object of aspiration as well as a car regular people might buy.

--Financial Times

Mr. Old School

2011-11-05T11:29:00.003-04:00

When the designers behind edgy menswear labels such as Rag & Bone and Band of Outsiders want to produce a hand-tailored suit made in New York, they rely on an octogenarian tailor who has been cutting clothes in the same East Williamsburg factory for more than 60 years.

Mr. Greenfield is something of a vintage guy himself—he does not keep a computer on his desk and eschews e-mail, choosing to do business over the phone or in person. At any given time, the factory may be making wool suits for one designer, houndstooth sport jackets for another and still another jacket in another fabric for a different brand.

That flexibility, as well as the company's old-fashioned craftsmanship and New York location, has attracted young designers for whom a garment's provenance is nearly as important as its look. The company also makes a point of working with fashion up-and-comers. "We never know who will become successful," said Jay Greenfield. "We want them to become successful."

In return, designers have made Martin Greenfield part of their brands. Meeting the Greenfields years ago, Band of Outsiders' Mr. Sternberg said he was "romanticized and seduced" by the carefully sewn garments and the story of the family-owned firm's survival.

Band of Outsiders suits, sold at Barneys and Bergdorf Goodman, have hang tags displaying Mr. Greenfield's name—right next to price tags that run into the low four figures. Rag & Bone, another company that touts American-made garments, also sells the Greenfield story to customers.

"There is an enormous amount of integrity in what he does and the quality of what he makes, which is in large part why we chose to work with him," said David Neville, the label's managing partner and designer, in a statement. "There aren't many people like him around." Capitalizing on Mr. Greenfield's late-in-life cachet, the company has recently embarked on a new venture, producing suiting under its own label to be sold online at Gilt Groupe, a designer clothing retailer.

"I think we make the best clothing in the world, because what we make in America lasts for a long time," Mr. Greenfield said. "It is the greatest feeling to see a customer look at himself in the mirror and be so pleased with what he is seeing."

--WSJ

The Physics of Wealth

2011-11-01T19:56:00.003-04:00

How do you explain the gap between rich and poor? The social scientists and Wall Street occupiers have taken their crack at the question. Now it’s the physicists’ turn.

An engineering professor at Duke University (Adrian Bejan) and a physics professor at Boston University (Eugene Stanley) are independently leading researchers to answer questions about income inequality. And their answers are fascinating. The “gap,” they argue, is natural — much like gravity or running water.

Adrian Bejan has labeled this phenomenon “constructal law,” and it is the view “that the generation of designedness in nature is a phenomenon of all physics.” So what is it?

The short version is that systems evolve according to their ability to handle flow. And Bejan has demonstrated the constructal law at work time and again, in wildly diverse contexts.

So what does this have to do with the rich-poor gap?

Bejan and collaborator Sylvie Lorente say these designs exhibit a property they call “few large and many small.” That means flow systems normally organize like river basins or veins in the body: big currents are connected to ever-smaller streams. If the law stands up across multiple areas — college rankings, well-paid jobs or wealth — all will exhibit a similar pattern.

More concretely, that’s why we have a few people with large net worth and many people with small net worth. Wealth distributes itself naturally this way — like a power law. But the distribution has a function. And function gives rise to form.

Form, according to Bejan, is about how things flow.

Wealth is physics,” says Bejan. “Because wealth is in some sense flow and movement. And that is measurable. Wealth is not abstract.” Because wealth is connected to the physical world, Bejan thinks it underpins the evolved design of flowing economies.

--Source

Acidic Wit

2011-10-30T10:02:00.003-04:00

Through his Vanity Fair essays, his books and his television appearances, Christopher Hitchens has become one of our leading provocateurs, saying what many of us might be thinking (though he's more articulate) but are afraid to utter. Public intellectual, pundit, whatever, he is frequently thought-provoking and almost always entertaining, if occasionally offensive.

This isn't a collection of his essays and other works but rather a book of quotations, many of them brief, and it makes for easy reading or perusing. Hitchens devotees will be most rewarded. But others, particularly curious types who haven't paid Hitchens much attention, can treat the book as a tip sheet (it kindly includes citations to the original essays and such) and track down an article or a relevant book.

Hitchens, depending on where one stands, is often either mean or brutally honest, as in these ten outstanding examples:

10."The desire—or the need—for the death of better men is probably the special property of two groups—the chronically inferior and the incurably insecure." —London Review of Books, 1992

9. "Right though I so very often am, it always makes me feel distinctly queasy to find myself in the majority." —Slate, 2009

8. "You may think you can give up politics, but you can't. Politics will come and find you."— World Magazine,2006

7. "There's nothing quite like reading about your own death …I recommend it." —C-SPAN2, 2010

6. On Wit: “There is a revenge that the bores and the bullies and the bigots exact on those who are too witty.”

5. On Sports Metaphors: “…Any use of sporting metaphors to describe politics is an infallible sign of an exhausted hack.”

4. "I have often thought that when I do die it will be of sheer boredom..." —Vanity Fair, 2008

3. "Irony is for losers." —Vanity Fair, 1998

2. "I am, I hope, never offensive by accident."—The Nation, 1995

1. And finally, from a criticism of Richard Nixon, comes this gem of wordplay: "The unlived life is not worth examining."

--LA Times

2011-10-29T21:16:00.000-04:00

“Culture is to know the best that has been said and thought in the world.” Matthew Arnold

Sinister Sartorial Style

2011-10-29T20:55:00.003-04:00

“Today he’d gone with the Patek Philippe, in gold, muted, with a black face and Roman numerals ... It set off his blue, pin-striped Savile Row suit, immaculately tailored, his crisp white Anderson & Sheppard shirt with Van Cleef & Arpels cuff links in tasteful onyx, and his black bespoke Oxfords from J. Cobb.”

This sort of description puts Bret Easton Ellis’s brand porn to shame. It also telegraphs, quite clearly, that anyone so obsessed with clothes is suspect. This is something of a fictional trope: in many films and books the person of low moral fibre is denoted by his high sartorial taste.

It’s no accident that James Bond constantly faces his evil target over the craps table in a tuxedo – the worst evil villains in Ian Fleming’s world hang out at casinos and wear black tie – and it’s true in the teenage version of the same, the Alex Rider books, the latest version of which starts with the words “The man in the black cashmere coat” and then reveals said man is “wanted by the police in 17 different countries.” Essentially, whatever your age, if you want to dress evil, dress up.

I think the roots of this are fairly obvious, especially in the current economic environment: spending so much money on clothes instead of charity is bad; ergo, the person who does so is bad. And though you might think I would find this offensive – it’s not exactly a positive portrayal of fashion and the people who love it – and perhaps even attempt to get some tailors to picket the office of, say, Hunter’s publisher, Simon & Schuster, actually, I think, in a roundabout way, it’s good for the industry. Such books demonstrate, viscerally and effectively, how important clothes are to identity.

--Financial Times

The Singer 911

2011-10-14T11:00:00.005-04:00

Rob Dickinson is in love with the Porsche 911—the car driven by Steve McQueen in the 1971 film "Le Mans." Porsche doesn't make it anymore, so Mr. Dickinson does.

His Los Angeles company, Singer Vehicle Design, takes the body of a Porsche car built before 1994, strips it down, then rebuilds it with carbon-fiber body parts, modern suspension and brakes, and an air-cooled engine supplied by Cosworth LLC, best known as a maker of Formula One race car motors.

"It's a Porsche. It's restored, done with authenticity, updated with as much new wisdom as we can have access to," says Mr. Dickinson. The price to buy a Singer 911: From $190,000 to $300,000, depending on specifications and materials.

Singer Vehicle Design is one of scores of companies turning out ultra-customized cars for wealthy aficionados. Indeed, these small companies that offer custom-designed cars and full-scale replicas are optimistic that affluent connoisseurs will propel sales in coming year

--WSJ

Tuck Takes The Top Spot

2011-10-13T13:45:00.003-04:00

Dartmouth College’s Tuck School of Business takes first place in The Economist’s ninth annual ranking of full-time MBA programs, up from second position last year. Virtually all of its students found work within three months of graduating. Its MBAs could expect a basic salary of $107,000, a 65% increase on their pre-degree earnings. Tuck students also graded the quality of their alumni the best in the world—an important consideration given the often-repeated claim that who you meet is just as important as what you learn.

Chicago drops to second, having come top last year, while the world’s most famous school, Harvard, also drops a place to fifth. Europe’s top programme is IMD, a Swiss school, which ranks third. Though INSEAD has campuses in both France and Singapore, no purely Asian school makes our top 20. Hong Kong University, at 36th, is the highest-placed.

Anderson & Sheppard

2011-10-11T12:34:00.002-04:00

Fred Astaire’s elegance wasn’t solely a matter of grace. It was a matter of good tailoring too—the way his jacket collar never separated from his neck as he jeté’d across a room; the way his trousers broke perfectly, just so, over his shoes. Astaire was a client of Anderson & Sheppard, the venerable Savile Row bespoke men’s-wear firm that has historically been as secretive as the Vatican.

But all that’s changed with Anderson & Sheppard: A Style Is Born, out in October from Quercus, a sumptuous coffee-table book that the London firm has produced in conjunction with V.F. editors Graydon Carter, a longtime customer, and Cullen Murphy. The book offers archival images of such figures as Astaire, Gary Cooper, and Cecil Beaton in their A&S best; new portraits of such current clients as Liam Neeson and Bryan Ferry; and loads of lore, anecdotes, and behind-the-scenes glimpses into a delightfully old-fashioned milieu of snipping shears, spools of thread, and bolts of chalk-striped fabric.

For the style hound, it’s an almost tactile immersion in the best little tailor’s shop in the world.

--VanityFair

Quote du Jour

2011-10-11T12:27:00.001-04:00

"No great man ever complains of want of opportunity." Ralph Waldo Emerson

Be Smart About Art

2011-10-09T16:37:00.003-04:00

Pierre Valentin, partner and art specialist at Withers, the international law firm

I would rather put my money into art than into the stock market. What is the best way to create a collection?

There is no easy solution: it depends on who you are and what you like. In my experience, collectors tend to be driven by the chase of getting the “prized” work that everyone else wants, the excitement of bidding for it and then the pleasure of owning it. Of course, on top of all this is the financial aspect – even those who say they are not driven by value will still worry about whether their art will increase in price over time. As a general rule, collectors who focus on the best pieces of a given artist, period or genre are more likely to see the value of their pieces go up. But remember, there are no guarantees.

Where should I keep my art? I have homes in cities around the world, so I could move my collection to make it more tax efficient.

It is not as simple as that. Like most assets, art is subject to tax, but the treatment of a collection will depend on whether the collector owns it outright in his or her own name, or through a structure. After that, it will depend on the tax status of the individual or of the structure into which the art has been placed. It is vital to get this right at the beginning, because if collectors buy in their own name and then try to move their art into a structure, they are likely to be caught with a tax bill.

Is it better to hold the physical works of art or to buy into an art fund?

These are two totally different propositions that are difficult to compare. With an art fund, the fund managers will do the hard work while the investor sits back hoping that they do a good job by returning more than the investor has paid into the fund. But if collectors build up their own collections from scratch, the hard work is theirs. Searching, selecting, conducting due diligence, shipping, framing, restoring, insuring and storing can be time consuming and expensive. But, on the whole, the collection is likely to be more rewarding.

--Financial Times

The Recession Never Ended

2011-10-09T16:13:00.002-04:00

Eight Facts Prove There Was No "Recovery"

1) For the recession of 2008 to have ended would have required the GDP to grow back to its former 2007 peak, which it has not been able to do.

2) For the recession of 2008 to have ended would have required the main stock market indexes to have advanced past their old peak levels. The Dow Jones Industrial Average is still 3000 points or more than 20% below its peak of 14,100.

3) For the recession of 2008 to have ended, the number of unemployed workers should be far reduced from today’s 9.1% or 15 million.

4) For the recession of 2008 to be over, the level of public and private debt should have been reduced. And it hasn’t except for individuals paying off their credit card debt in an attempt to prepare for the possibility of another downturn.

5) For the recession of 2008 to be over, the key interest rates should be higher than they are to reflect the recovery. Instead, they are lower, with the prospect of the rate by which banks borrow remaining near zero until the end of 2012 at least.

6) For the recession of 2008 to be over, there wouldn’t be 45 million Americans on food stamps and 45 million earning less than $22,000, the cutoff for poverty.

7) For the recession of 2008 to be over, there would still not be 11 million homes facing foreclosure, and housing prices would not be continuing to decline.

8) For the recession of 2008 to be over, there wouldn’t be such a sharp decline in manufacturing activity and a drop off in exports.

--Forbes

The Book of Illusion

2011-10-05T14:50:00.001-04:00

First published in 1925, The Great Gatsby has never lost its allure.

The lasting power and beauty of “Gatsby” is rooted in the story’s mix of illusions and self-delusion. Jay Gatsby lives in fabulous wealth in a magnificent mansion on Long Island. He throws glamorous, exclusive parties and excites admiration and envy. Yet his wealth is the product of some shady bootlegging. Gatsby swans about in a stainless white suit, yet his glow is tarnished by his foolish obsession with Daisy, the shallow, callous wife of brutish Tom Buchanan.

His rise to riches would seem to illustrate the chimerical proportions of the American dream, yet he dies—brutally, senselessly—at the hands of a garage mechanic, who mistakes Gatsby for his wife’s murderer and so shoots him in his swimming pool. Such mercurial luck and weird violence is the unexpected underside of the American promise.

The poles of dreamy ideal and grimy real are represented in the novel by the colours gold and yellow, threaded through the book like a Schubertian leitmotif. “Behind every great fortune is a great crime,” Balzac once shrewdly observed, and this was not lost on Fitzgerald. Gatsby is ultimately an exemplary American, driven by a hunger for more.

He keeps his illusions till the end, even as they blind him to the way his futile pursuit of Daisy is eroding his life. Fitzgerald’s worldliness was European, but his wistfulness was uniquely American. “Can’t repeat the past?” Gatsby cries incredulously at one point in the novel. “Why of course you can!”

--IntelligentLife

Lug Life

2011-10-04T22:20:00.004-04:00

In the early years of the 20th century, when men started adapting their pocket watches so that they could be worn on the wrist, they did so by having wire lugs welded to the originally circular cases and then attaching wristbands to said lugs.

By nature these were adventurous men — fliers, adventurers, soldiers, and explorers — who had neither the time nor the inclination to fiddle with fobs and dabble with double Albert chains. It was a watershed moment for the noble timepiece. Most wristwatches quickly grew their own integral lugs, but a few modern examples still hark back to those romantic early days.

--Esquire

Hayek's Heir?

2011-10-04T22:14:00.002-04:00

Matt Ridley’s book, The Rational Optimist: How Prosperity Evolves, won the Hayek Prize from the Manhattan Institute for Policy Research.

Friedrich Hayek was, of course, the Nobel economist who pioneered work in what Ridley, in his acceptance lecture, called “bottom-up” economic and social development. (The $50,000 prize is given annually to a book author who best incorporates the late Austrian’s insights.) Hayekian thinking challenges central planning, based on isolated or centralized knowledge, as a fatal conceit.

As a British Ph.D., Ridley has brought a new spin to the free-market gospel, and it's a spin with a with a distinctly scientific bent. Eschewing identification with “right-wing” beliefs, Ridley in fact characterized innovation from trade and chosen association (in infotech metaphor, the Cloud) as a “collective” rather than an “individualist” model, not the way that libertarians customarily would put it.

His recurrent theme in the talk at New York’s Union League Club was that dictators and other malefactors through human history had assumed special wisdom unto themselves, often in the guise of central planning. Their societies regressed. It should come as no surprise, then, that societies must embrace decentralized control in order to advance. Indeed, this bold thesis lies at the heart of Rational Optimist. Read the full review here.

--Forbes

Quote du Jour

2011-10-04T22:07:00.000-04:00

“There are two types of people: those who try to win and those who try to win arguments. They are never the same.” Nassim Taleb

A Toast to Prohibition

2011-10-04T12:48:00.003-04:00

Picture 2,000 cases of 1920 Chateau Haut-Brion claret, Ballantine’s scotch and Hine cognac hidden behind two-and-a-half-tons of brick door.

That was just part of the stash at New York’s ’21’ Club, Manhattan’s most prominent Prohibition-era speakeasy still in operation.

“As a child, it was a fun escapade to unlock the ‘magic door,’” said Karen Kriendler Nelson, the niece of ‘21’ co- founder Jack Kriendler and daughter of Robert Kriendler, who ran the restaurant for 27 years. “We all knew how to jiggle the hook and we knew what was behind the door.”

The restaurant -- insiders called it “The Numbers” -- was too upscale for bathtub gin or white lightning. The basement repository included Montrachet 1889, Romanee Conti 1880 and top- shelf liquor for a proper Bronx cocktail -- still available today for $15.

Looking down the 55-foot long original mahogany bar, you’re likely to see patrons who call Old Town their local, among them fashion photographer Christian Di Lalla, a regular since 1994. The bar reminds him of a Viennese watering hole during the time of Gustav Klimt and Egon Schiele. “It’s like walking into a Picasso painting,” Di Lalla added, sipping straight gin on the rocks. Dating from 1892, the barroom has beautiful orange and green tulip-shaped lamps, original tile floors and a tin ceiling turned brown from decades of cigarette smoke.

At the height of Prohibition, which lasted from 1920 to 1933, New York City had as many as 5,000 speakeasies. Nevertheless, the no-booze era stymied cocktail culture for seven decades. It's high time, then, for a revival.

--Bloomberg

The New M5

2011-10-03T16:11:00.001-04:00

An Unworthy Asset?

2011-10-02T21:21:00.004-04:00

"Gold Is A Most Volatile, Unstable, Fickle And Risky Asset"

So blows the constant trumpet of NYU economist Nouriel Roubini, who is trying to recapture his crown as prognosticator-in-chief that he held back in 2008 for his extraordinarily accurate scenario of the financial meltdown cum crisis. You might wonder why Roubini didn’t sound off at gold’s recent peak of $1920 an ounce, prior to its inglorious retreat below $1600.

The gold crowd, who have been licking their wounds lately, won’t be happy either with CNN’s GPS host Fareed Zakaria, who came down hard on all that glitters. Zakaria, a newsman who knows more about Pakistani politics than precious metals, chastised gold for being a “symbol that can fall out of favor...It’s not a share, not a bond, not oil,” the CNN anchor went on. Someday, he suggested, tongue in cheek, you might find that a can of baked beans will be worth more than a bar of gold.”

A sorry bit of journalism that, since many serious investors, including the central banks of China, India, Russia, Thailand, Korea etc. have been amassing large gold reserves to bolster their paper currency. And other professional investors, not speculators, have purchased positions equal to 5-10% of their portfolios as a hedge against the loss of value in the dollar.

More to the point gold may have sold off its highs, but its still up 15% this year, and has compounded at even a higher rate of return over the past 11 years. You’d get indigestion from the equivalent hoard of baked beans.

--Forbes

La Bella Vita

2011-10-02T15:05:00.005-04:00

Meet the uncrowned king of Italy, Luca Cordero di Montezemolo, chairman of Ferrari, multimillionaire entrepreneur and champion of Italian culture.

It is not easy to resist the full-on charm of Luca Cordero di Montezemolo, Marchese di Montezemolo (which makes him a marquis, a title he doesn't use). With his wavy but not too-long hair, aquiline nose, understated double-breasted gray suit and razor-edged pocket square, Montezemolo represents an impeccable vision of Italy. He is a veritable Style Icon.

The Montezemolo story everyone adores could have come straight from the studios of Cinecittà, whose classic films showed the world the hearty pleasures of Italian life. Montezemolo particularly admired the way his mentor Gianni Agnelli, the ultimate cosmopolitan, never lost his "almost provincial passion" for the things every Italian enjoys. Montezemolo is very much the same way.

Unsurprisingly, Montezemolo doesn't have to fish too hard for compliments. When he rejoined Ferrari in 1991, several years after the death of legendary founder Enzo Ferrari, the company was floundering: deeply in debt with spotty sales and even spottier quality. "All the cars had engines in the back, and were very difficult to get into and out of—very uncomfortable and a bit old-fashioned," Montezemolo recalls.

Today, Ferrari sells around 7,000 cars a year and could undoubtedly sell a lot more if Montezemolo wanted it to. Sales dipped during the 2008 financial crisis, but Ferrari has never had a money-losing quarter. Last year, sales rose 8 percent to $1.9 billion euros (US$2.76 billion at current exchange rates) while profits rose 27 percent to $302.7 million euros (US$439 million).

Montezemolo's deepest imprint, however, is on the cars themselves. He is very much of the "car-she-is-like-a-woman" school of automotive poetry, embellishing the old metaphor with loving detail (the first date is when you turn the key in the ignition). When he received an honorary degree in industrial design from Milan's Politecnico, he delivered a discourse on the difference between "hot" and "cold" technology. Basically, Porsche: cold; Ferrari: hot. "There's an old Paolo Conte song where he sings, 'A sports car must smell of girls, paint and speed.' That's our mentality," says his friend Borgomanero.

Montezemolo already anticipates boosting Ferrari's annual production to 10,000 cars within the next five to 10 years, but only because he's moving aggressively into China and India, he says, not because Fiat demands more cash. "I have a very good relationship with Marchionne, and our view about the future of Ferrari is exactly the same—to maintain exclusivity, increase the numbers in new markets and not sell too many cars in the United States or Europe," says Montezemolo.

The rumor that surfaces repeatedly has Fiat raising cash by selling some or all of Ferrari to the public. How much could Fiat get? Most analysts put a value of around 3 billion euros on Ferrari, which Montezemolo calls laughably low. Ferrari is known for being infuriatingly opaque, however. It rarely discloses more than the most rudimentary information about its finances and asks outsiders to treat it more like an elusive dream than a going concern.

"I have no idea where their money comes from," says Erich Hauser, an analyst at Credit Suisse. "There is an element to the business that clearly has nothing to do with building cars, but when you ask, they say 'We can't tell you.'

--WSJ

Bespoke Basics

2011-09-28T14:07:00.006-04:00

A custom-made suit costs thousands of dollars — many times more than one that’s ready-made. But that’s OK, because it will fit you perfectly.

1) When, where and how often you plan to wear your suit should be considered when choosing a fabric, says Anderson & Sheppard’s Mr. Hitchcock. “For frequent use or travel, certain cloth types, weight and finishes are not suitable.”

Suits made from Super 150’s wool look “amazing,” for instance, but they are not suitable for hard wearing, he says. And while linen jackets are popular with many dapper travelers, he notes that it “may not be right for someone in a very conservative workplace.”

2) Time. Be patient. At Anderson & Sheppard, a bespoke suit takes about a month to complete; at Huntsman nearby, it’s at least eight weeks. Mr. Hitchcock says depending on the ability of customers to see their tailor regularly, “Some may wait a year for their garments.”

But the stylish will wait. Mr. Boyer says he requires at least “three or four fittings for the first several garments” and even after the suit is finished, “If there’s something I think can be corrected, I go back.”

--WSJ

Quote du Jour

2011-09-28T12:47:00.000-04:00

“When dealing with people, remember you are not dealing with creatures of logic, but with creatures of emotion, creatures bristling with prejudice and motivated by pride and vanity.” Dale Carnegie

A Twisted Fed

2011-09-28T12:33:00.004-04:00

Ben Bernanke's Operation Twist has flopped in spectacular fashion, with U.S. stocks plunging over 3% in a culmination of global rout of stocks and commodities.

Bulls thought the Federal Open Market Committee (FOMC) would conjure something that would have the effect of its quantitative easings, QE1 in 2009 and QE2 in 2010, which sparked big gains in stocks, doubling the Standard & Poor's 500 from its bear-market lows.

Instead of more quantitative easing, the FOMC essentially produced a qualitative easing in the Fed's announced intention to lower long-term interest rates by shifting its assets to lengthier securities from shorter ones. The aim also was "to help make broader financial conditions more accommodative," which the U.S. central bank missed by a mile.

More accommodative financial conditions translate into higher prices for risk assets, such as stocks, which in theory ought to result in greater investment spending. That was the aim of the original Operation Twist in the early 1960s, which may have lowered long-term interest rates marginally but that's about it.

Whatever the ambiguous effects of the Fed's moves of five decades ago, the financial impacts of this Operation Twist have been negative. Sharply lower long-term interest rates are assumed by economists to stimulate economic activity. But the financial effects can be deleterious, which seems to be the unintended consequences of the Fed's new policy.

Unfortunately, academic economists dominate the debate over monetary policy. As the Fed proposal shows, it also pays to consider the financial market impact.

--BARRON'S

A Tribute to The Transocean

2011-09-27T22:36:00.007-04:00

"Exciting" might be a strange way to describe the Breitling Transocean Chronograph. After all, it doesn't have any bright splashes of color, it harbors no astonishing complications, and it doesn't announce itself with an attention-grabbing gleam of gold.

Ultimately, though, it's the Transocean's simplicity that sets it apart. It's a watch and nothing else. No frills. No distractions. Indeed, the Transocean is authentic simplicity at its best.

The Transocean chronograph is clearly inspired by vintage designs such as the round-cased Top Time chronographs but has the same spirit of pure utility and physical robustness that inspired the original Transocean line.

Among all the chronographs Breitling makes, the Transocean is the most pure from a design standpoint--there are no concessions to purely decorative impulses at all. The black dial with high contrast white markers, and mirror polished hands are clearly designed to do their job, not entertain a bored eye looking for aesthetic distraction.

Strapping on the Transocean really does feel like putting on an instrument built for a purpose; you'll be looking around for your goggles and flight suit. And thanks to the supple steel link bracelet, you'll be extremely comfortable. In fact, the steel mesh bracelet one of the nicest features (and on a watch like this that's saying something).

Inside the Transocean is one of my favorite chronograph movements, the Breitling automatic chronograph calibre 01. The calbre 01 is a perfect match for Breitling's instrument watch chronographs, running at a high precision 28,800 vph (the maximum beat rate for modern mechanical watches) and is chronometer certified by COSC.

All in all, this is a tremendous effort by Breitling. Mechanically speaking, the Transocean is a tempting alternative to the reigning champions of sport chronographs: the Rolex Daytona and the Omega Speedmaster. Add in the cachet of its limited edition status, though, and you have an unbeatable combination.

--REVOLUTION MAGAZINE

Economic Puppetmaster: George Soros

2011-09-27T11:54:00.002-04:00

The Value of Information

"Many investors in the United States feel that if they read the Wall Street Journal, they're up on events. A more rarefied group also reads the Financial Times. Few read Corriere della Sera, Le Figaro, and the Asahi Shimbun or have people who report to them who do.

The efficient market hypothesis, particularly in its extreme form, holds that all information about the future is "in" the market at any given time. Supposedly, rational actors take the available information and price assets accordingly. Skeptics like Soros wonder how any supposedly rational process could produce the kinds of price volatility that we have seen recently.

It is more than a little ironic that this master of markets is himself a market skeptic. Soros's view as to why the central banks and finance ministries "didn't see it coming" is that they are predisposed to view markets as self-correcting and rational. Economists and economic policymakers tend to rely on economic theories in which systems move toward equilibrium.

Soros, by contrast, is always looking to exploit instability profitably because he believes that instability is the inherent condition of markets. Certainly, most economic analysis focuses on the point at which markets reach equilibrium. But the process of getting to equilibrium may be very unsettling one for markets and thus a potentially profitable one for Soros."

--Economic Puppetmasters

Massive, but Not for the Masses

2011-09-27T11:36:00.002-04:00

The first thing you must understand about the Mulsanne (figure $285,000 to $380,000, depending on customized fittings) is that it isn't a car. Yes, it has a twin-turbo pushrod V8, eight-speed transmission, a steering wheel, a windshield, tires. Whatever. In fact, it is what psychiatrists call a reaction formation: a wildly exaggerated response to an anxiety. And in this case, the anxiety has to do with the current state of hyper-luxury.

Simply put, something in the luxury world has given way, and that something is rarity, and scarcity.

The problem for the very rich, poor dears, is finding objects to buy that are truly exclusive, so that owning them, possessing them, ratifies their wealth. Enter the Mulsanne. Bentley has gone to great, and slightly batty, lengths to build this car by hand.

From the engine intakes to the pewter ashtrays, everything about this car is wretchedly dense and heavy. The whole thing feels like it was built by Steinway. Fittingly, Bentley's tag line for the Mulsanne is quite pointed: "The opposite of mass production."

In sum, I've been keeping a running tab of reactions to the Mulsanne since I first saw it at Pebble Beach two years ago and to date, no one has said the car is beautiful. Alas, it just doesn't have the massive, feral arrogance of a Rolls-Royce Phantom. It does, however, have the haughty self assertion of a Bentley. And that's a good thing.

--WSJ

Quote du Jour

2011-09-26T01:06:00.001-04:00

“There are really only two ways of acquiring knowledge about human affairs: through the perception of the particular, or through abstraction; the latter is the method of philosophy, the former of history.” Leopold Von Ranke

Grand Pursuit: Revisited

2011-09-26T00:55:00.005-04:00

It’s a dubious hour to proclaim the triumph (much less the genius) of the “dismal science.”

Western economies are a wreck, the U.S. is suffering 9.1 percent unemployment, and Europe is teetering on the abyss of default. The economics profession bears no small measure of blame—first for inventing or adopting modern risk management, which failed so spectacularly during the financial crisis, and second for believing that central bankers had unlocked the key to managing growth. In short, whatever economics we may have learned, we seem determined to forget.

Nevertheless, the question is whether Nasar’s subjects truly deserve her laudatory subtitle, The Story of Economic Genius. To Nasar, economic history is a story of intellectual progress, albeit with some fairly nasty bumps: “Economic calamities”—she specifies the Great Depression—“have always triggered crisis of confidence but they have not come close to wiping out the cumulative gains in average living standards.”

Extending her gaze to India, China, and other developing nations, she observes, “Since World War II, history has been dominated by the escape of more and more of the world’s population from abject poverty.” Such arguments seem to conflate economic progress with economic thinking. To put it bluntly, railroads weren’t developed by economists, and it is unclear whether Marshall et al. enabled such progress or merely explained it.

--BusinessWeek

Why Gold?

2011-09-26T00:26:00.004-04:00

Holding gold makes less sense when the U.S. economy is doing well and confidence in the rule of law ensures that investors will get solid returns on portfolio investments. After all, gold is costly to hold, and it pays no dividends or interest.

A little perspective is useful: In 2000, the U.S. federal budget surplus was $236 billion, the S&P 500 index hit its inflation adjusted peak at 1520, and gold sold for $280 an ounce. Unfortunately, "King" Dollar has since been shattered. Today, thanks to big deficits, the world is now awash in dollars and Treasury securities (which function much the same as cash in international finance and commerce).

All that money and U.S. bonds, which function much like money, will eventually drive up inflation. With bonds paying little interest and stocks going no place in the current atmosphere of fear, many investors go where fear always takes them--into Gold.

--RCM

Quote du Jour

2011-09-20T13:07:00.003-04:00

“Money's easy to make if it's money you want. But with a few exceptions people don't want money. They want luxury and they want love and they want admiration.” John Steinbeck

The Danger of Inflation

2011-09-20T13:00:00.003-04:00

A Little Inflation Goes A Long Way, Says Former Fed Chairman Paul A. Volcker

In all the commentary about Ben S. Bernanke’s recent speech in Jackson Hole, Wyo., little attention has been paid to six crucial words: “in a context of price stability.” Those words concluded a discussion by Mr. Bernanke, the Federal Reserve chairman, of what tools the central bank could consider appropriate to promote a stronger economic recovery.

Ordinarily, a central banker’s affirming the importance of price stability is not headline news. But consider the setting. There is great and understandable disappointment about high unemployment and the absence of a robust economy, and even concern about the possibility of a renewed downturn. There is also a sense of desperation that both monetary and fiscal policy have almost exhausted their potential, given the size of the fiscal deficits and the already extremely low level of interest rates.

So now we are beginning to hear murmurings about the possible invigorating effects of “just a little inflation.” Perhaps 4 or 5 percent a year would be just the thing to deal with the overhang of debt and encourage the “animal spirits” of business, or so the argument goes.

It’s not yet a full-throated chorus. But remarkably, at least one member of the Fed’s policy making committee recently departed from the price-stability script.

The siren song is both alluring and predictable. Economic circumstances and the limitations on orthodox policies are indeed frustrating. After all, if 1 or 2 percent inflation is O.K. and has not raised inflationary expectations — as the Fed and most central banks believe — why not 3 or 4 or even more? Let’s try to get business to jump the gun and invest now in the expectation of higher prices later, and raise housing prices (presumably commodities and gold, too) and maybe wages will follow. If the dollar is weakened, that’s a good thing; it might even help close the trade deficit. And of course, as soon as the economy expands sufficiently, we will promptly return to price stability.

Well, good luck.

Some mathematical models spawned in academic seminars might support this scenario...but all of our economic history says it won’t work that way. I thought we learned that lesson in the 1970s. That’s when the word stagflation was invented to describe a truly ugly combination of rising inflation and stunted growth.

the danger is that if, in desperation, we turn to deliberately seeking inflation to solve real problems — our economic imbalances, sluggish productivity, and excessive leverage — we would soon find that a little inflation doesn’t work. Then the instinct will be to do a little more — a seemingly temporary and “reasonable” 4 percent becomes 5, and then 6 and so on.

What we know, or should know, from the past is that once inflation becomes anticipated and ingrained — as it eventually would — then the stimulating effects are lost. Once an independent central bank does not simply tolerate a low level of inflation as consistent with “stability,” but invokes inflation as a policy, it becomes very difficult to eliminate.

It is precisely the common experience with this inflation dynamic that has led central banks around the world to place prime importance on price stability. They do so not at the expense of a strong productive economy. They do it because experience confirms that price stability — and the expectation of that stability — is a key element in keeping interest rates low and sustaining a strong, expanding, fully employed economy.

At a time when foreign countries own trillions of our dollars, when we are dependent on borrowing still more abroad, and when the whole world counts on the dollar’s maintaining its purchasing power, taking on the risks of deliberately promoting inflation would be simply irresponsible.

It is that conviction that underlies Mr. Bernanke’s six words. Let’s not forget them.

--NYT

The New 911

2011-09-18T23:24:00.001-04:00

Power Dressing? Try Occasionless Outfits

2011-09-18T23:12:00.005-04:00

Suit by Armani

For my outfits I keep two things in mind: formality and understatement. One moment I could be talking to a chief executive in a business environment and the next a creative director in a creative environment, so my outfit needs to be occasionless. I treat work clothes like a uniform – three identical Armani suits, and I mostly wear shades of black or blue. I rarely wear a tie because it feels constricted and I think you can still be smart without one.

Shirt by Thomas Pink
If I’m feeling adventurous I’ll wear a pink shirt, but mostly it’s white or light blue. There has to be some starchiness about it, and it’s always a single cuff in a slim fit. I have about eight versions of the same shirt in the same size. Now when I go into the shop the sales assistant just hands me the shirt. I’m not a great shopper, but I have a sort of uniform so I can concentrate on other things.

--Financial Times

Quote du Jour

2011-09-17T15:14:00.002-04:00

“Many of the clothes we wear have the character of uniforms, designed to express and confirm our inoffensive membership of the community (e.g. the suit, a tuxedo)...Fashion is integral to our nature as social beings: it arises from, and also amplifies, the aesthetic signals with which we make our social identity apparent to the world.” Roger Scruton

A Super Rich Struggle

2011-09-17T13:42:00.005-04:00

These are the times that try rich men's souls. Even under normal circumstances, the average millionaire fears that his fortune could be in danger. And, unfortunately, these aren't normal circumstances.

First there was the financial crisis of 2008 and the subsequent recession. Now there's the European debt debacle, which threatens to cascade through global banks and the world economy. The U.S. already is facing the real possibility of a new recession; economists put the odds at about 1 in 3. In other words, preserving a fortune is getting harder than ever.

Consequently, the hysteria among the super-rich is palpable. The good news is that despite all the hand-wringing, there's little evidence yet that family fortunes are taking big hits. Last year, the richest people in the world -- the segment of the population with $30 million or more -- saw their wealth increase by 11.5%, according to the latest annual World Wealth Report from Capgemini and Merrill Lynch.

--Barron's