What Dungeons and Dragons taught me about economics and the free market

Yeah I’m a geek. Okay that said, I noticed something skewed about the economics inherent in Dungeons & Dragons (that is the original AD&D or what you young whipper snappers might call version 1.0). Our party of adventurers, by about 11th or 12th level, were hauling back tens of thousands of gold pieces per adventure. My character, like all the characters in our party, had amassed hundreds of thousands of pieces of gold.

Gambling America’s Future

Numeroligists should be very excited today.  The Dow fell 777.68 points today and 777 is definitely an interesting number.  It couldn’t be just a coincidence right?  In fact, if you just round off that last digit, you get four 7′s.  A client joked with me today “isn’t 7 lucky in craps?”  It couldn’t have been a better set up since seven is both lucky and unlucky in craps depending on the situation.  Today, the U.S. House of Representatives voted against the Paulson Plan we have discussed here which sent stocks tumbling by that interesting number.  Incidentally, that fall represented 7% of the market’s value- a cool $1 Trillion.  Since I did not intend to waste electronic ink espousing why numerology is bunk, I’ll go with the gambling analogy. 

Finally, a plan

Each of the past few days I sat down to write about the bailout plan, the details of the plan changed. We can chalk that up to politics, but in this instance, I think the end result was better than the original framework. Details are still sketchy, but reports are that the plan limits compensation and gives the government rights to buy stock in participating firms. These features help contain the moral hazard problem. By limiting pay,

The Sorry Story of the SoftRAM Scam

I got a frantic phone call the other night from my friend Roseanne. Her computer had a virus and her virus scanner kept popping up a warning dialog but wasn’t fixing it. That Roseanne was even running a virus scanner came as a surprise to me. I had long ago put her on ignore on MSN Messenger because she had some virus that caused her Messenger to automatically fire me spam URLs. Anyway, since we both live in the same apartment building, I trudged over there and took a look. Sure enough after playing around with her wheezing eight year old computer I got her virus scanner to pop up the warning message about some nasty Trojan that was probably, as we speak, sending all of Roseanne’s credit card information to Romanian hackers. The warning message struck me as odd for a couple reasons. One, the scanner software wasn’t one I recognized like McAfee’s, Norton, or even Avast. Two, the dialog box urged me to click on a link and subscribe to their service and if I clicked now I could be fully protected from this nasty Trojan and others for the biweekly discount rate of $12.99. Of course I quickly realized what it was. It was one of those fake virus scanners that claims you’re loaded up with all kinds of viruses and you can make them all go away by simply paying for the software.

Ugg.

Buffett and Bailouts

I always pay attention when Warren Buffett makes a move.  The “Oracle of Omaha” is the world’s greatest investor and a stand up guy to boot.  He has been sitting on the sidelines during this crisis, refusing to have any part of AIG even though parts of it would mesh perfectly with Berkshire’s insurance operations.  I suspect he is waiting to buy pieces in the fire sale.  Even more interesting to me, is last night’s news.

What does it take to get a credit card in America?

When I was living in Seattle (well, technically a suburb called Kirkland) I used to get a lot of pre-approved credit card offers. I don’t mind junk mail as long as it is easy to visually sort. I had a wood-burning fireplace and junk mail provided a few extra BTUs of free heat in winter. Most credit card offers came in gaudy envelopes. Whoosh right in the fireplace. Discover Card, however, put their offers in plain white envelopes without anything on the outside of the envelope to identify the mail was coming from Discover Card. The only thing printed on the envelope (besides my address and a nondescript, generic return address) was a small warning that time sensitive information was in the envelope and it should be opened right away. It appeared, for all intents and purposes, like an important notice from the government. Being a foreigner in America post-9/11 and with a green card application in process that appeared to have been shelved following 9/11, I was rather sensitive to making sure I didn’t miss anything coming from the government about staying in compliance with my H1B visa or things I might have to do for my green card.

Crisis Update: What We Are Waiting For

So the Treasury announced it’s plan last week and Congress must approve it, so why are the markets so volatile?  Shouldn’t we be celebrating that the crisis is over and stimulus is coming?  As I mentioned before, the Treasury’s plan is amazingly devoid of details and since the announcement little additional detail has come out.  Markets don’t like uncertainty and so are volatile while we wait.  But what exactly would be good for the market and the crisis?

Is dumping a bad thing?

Many times Asian nations are accused of “dumping”, that is, selling a product in North America for below what it actually costs to produce the product. Dumping seems terribly unfair. Although when you think a moment, this goes on all the time. Microsoft gives away many useful software tools other companies used to charge money for. Outside of the subway station I use every day there are two free daily papers competing with paid dailies. Stores use the “loss leader” strategy to bring in people. In our role as consumers, someone thrusting something into our hands for free that we used to pay for does not offend us.

Las Vegas and Those Evil Short Sellers

It appears one of great villians of last week was the evil doer called the “short seller”.  Never a crowd favorite, regulators banned shorting some 799 stocks of financial firms last week.  But what is a “short” and why are they so evil?  Or are they evil at all?

Crisis Averted, For Now

The U.S. Treasury started leaking plans of a game changing solution yesterday.  In essence, the government will buy many of mortgage securities which are depleting the system’s capital.  As we have discussed, the writedowns of debt everywhere from community banks to large national banks to investment banks has greatly impaired capital, which reduces lending and starves the economy of funds.