Friday, April 30, 2010

GDP, M2, Inflation for Q1 2010

The Government has just released the GDP estimate for Q1 2010. The growth is reasonable. We show the results below. As the BEA states:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.2 percent in the first quarter of 2010, (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 5.6 percent.

We also show below the elements for inflation based upon velocity changes, M2 changes and GDP changes. Our concern here is the increase in the inflation estimate based upon V, M2 and the GDP numbers. It is again rising, albeit at not to great a number yet.

The BEA summarizes some of the details as follows:

Real personal consumption expenditures increased 3.6 percent in the first quarter, compared with an increase of 1.6 percent in the fourth. Durable goods increased 11.3 percent, compared with an increase of 0.4 percent. Nondurable goods increased 3.9 percent, compared with an increase of 4.0 percent. Services increased 2.4 percent, compared with an increase of 1.0 percent.

Real nonresidential fixed investment increased 4.1 percent in the first quarter, compared with an increase of 5.3 percent in the fourth. Nonresidential structures decreased 14.0 percent, compared with a decrease of 18.0 percent. Equipment and software increased 13.4 percent, compared with an increase of 19.0 percent. Real residential fixed investment decreased 10.9 percent, in contrast to an increase of 3.8 percent.

Real exports of goods and services increased 5.8 percent in the first quarter, compared with an increase of 22.8 percent in the fourth. Real imports of goods and services increased 8.9 percent, compared with an increase of 15.8 percent.

The PIIGS and the Economy

Cinzia and Gros in in VOX have written an interesting set of posts regarding the PIIGS in the EU mess.

We start with the overall current economic data. Clearly Greece and Italy are in a Mess and Greece and Ireland saw the greatest swings in their economies. We show this below.

The debt to GDP numbers are shown below.

The total gross external debt is shown below. This just re-intensifies the issue as shown above.

Then we have total debt as a % of exports. This we show below. Greece is way out of bounds. It is fundamentally a non exporting country, with some limited agricultural goods. It does have a strong tourist trade and the Greeks for the most part have never created any internal core businesses. They are in my experience brokers in the regional markets, reselling others exports and with little if any Greek products.

The most telling slide is the following which id debt as a percent of taxes. Greece stands out as the worst offender in this category. In my experience having started and run a Greek company the situation in Greece is unstable. There are few who pay taxes and those who do are harassed to the extreme. Greece has never established a rational taxing regime. The irony is that it is worse than Italy!

Finally the authors compare prior recoveries and look at the primary balances and the changes from bottom to top, recovery, and this is presented below.

The authors contend that recovery is possible, I question that a bit. Greece has created its own mess and only a clearing of the market by default can remedy the issue.

As the authors state:

Our analysis shows, however, that these countries are quite heterogeneous. Portugal and Greece share a key feature, namely an extremely low rate of national savings, which implies that they have to rely continuously on large inflows of capital to finance consumption (see Gros 2010). By contrast, Spain and Ireland have substantially higher savings rates, but are more exposed to financial markets because their construction booms went hand in hand with a huge expansion of financial activity. In short, for Greece and Portugal the problem is insolvency; for Spain and Ireland illiquidity. Italy seems different from both these subgroups in that its savings rate is higher than even in Spain and Ireland and its foreign imbalances are much smaller.

The above is the most telling and spot on observation. Ireland and Spain have a cash problem, a current problem, they have a lack of liquidity. One could feel safe lending to them. Greece and also Portugal are insolvent....and Greece is the worst of the lot.

Wednesday, April 28, 2010

Nationalism: Now and the Future

There is a debate amongst academics as to the meaning of nationalism and its evolution in our societies. Nations have been evolving for many years, for centuries in fact, and if one looks at the literature at the time of the Revolution, the Federalists as well as Thomas Paine amongst many, one sees a clear trend to create a nation, a separate and distinct nation, which culminated in the Constitution. It had become clear in short order that the Confederation, a loose "fishing, drinking and smoking" club was not sustainable. Thus in just a few years a true nation evolved, with limited philosophers to drive it, just the men who created its underlying law, the Constitution.

One may then ask as we go through one of our countries soul searching quests regarding the question, whither goest the country, we see a nation asking the question of just what a nation is and what type of nation we should become, if perchance we do not care for what we are. It appears that the current administration, the change agents of our nation as they had self proclaimed it, want such a change, and change is what we are getting. Yet we have seen all of this before, the Adams to Jefferson change, the Jackson revolution, Lincoln, Teddy Roosevelt and then Wilson, FDR, and to some degree even Reagan. It has been a continuing struggle to "change" while looking back in the principles which were at the foundation of the country.

To understand some of these issue I am reminded of how Will and Ariel Durant described James Joyce and his environs, the Irish nation, yet not allowed to be a nation under the captivity and heavy hand of the British. From the Durants' book on a grand collection of literary luminaries they open on the section on Joyce with the following:

"I have sometimes thought how high Ireland would stand in the world of letters if all her literary sons had stayed on her soil; Swift, Burke, Goldsmith, Wilde, Shaw, Joyce…The land was fertile, the moist cold air put blushing roses in the cheeks of the girls, and lust sons were eager to plant new life in willing wombs. But the spiritual atmosphere was deadly: a government Irish in name but foreign in humiliating fact; an Anglican Church more intolerant in Ireland than in England; a Catholic Church that loyal Irishman could not criticize or reform since she had suffered in fighting for Irish liberty. And just across the water was a Britain with a larger and more literate public, a freer press, a taste for Irish eloquence and wit. So Erin's genius crossed the Irish ea, and left a lovely island to destitute peasants and Joyce's Dubliners."

In a recent book by a Northern Irish academic, McGarry ( in his book The Rising ), he states:

"Where does the history of the struggle for Irish independence begin? For traditional republicans, like nineteenth century revolutionary John O'Leary, the story of Irish freedom stretches back over eight hundred years to Strongbow's invasion of Ireland in 1169; "If the English had not come to Ireland, and if they had not stayed there and done all the evil so many of them now allow they have been doing all along, then there would be no Fenianism." Although the English Crown's formal authority within Ireland can be dated to Henry II's expedition in 1171-1172…few historians would take such claims seriously, both because the Anglo-Norman invasion formed part of a much larger and more complex history of mutual interactions and colonization between hybrid peoples of the two islands, and continental Europe…..For many nationalists, the formative era in the struggle for Irish freedom was the sixteenth and seventeenth century period of Reformation…."

McGarry denies the nationalism which was part of Ireland, denies that it ever existed until the 19th century when the nationalists, by definition those seeking separatism, were brought to the fore. McGarry in good northern Irish form beknghts the good English caretakers and implies that the struggle was at worst a religious struggle, and that nationalism did not arise until much later.

I would strongly disagree for Ireland was a nation as early as the late sixth century. The writing of Columbanus to Gregory I clearly demonstrate that the Irish saw themselves as a cohesive group, separate from the Gauls and Merovingians and the Angles and Saxons. It was in fact the choice that Gregory made in sending Augustine as Bishop of Canterbury in 598 that started the split between Ireland and Britain. Gregory was battling with Columbanus since Columbanus and the Irish hierarchy has favored Greek church rules and regulations and Gregory was commencing the separation of the Bishop of Rome from Byzantium, he was not yet a Pope, still just the Bishop of Rome.

Thus one can argue that a true Irish nationalism was in place in 600 AD. What basis can one use for that statement, I will use Stalin's words from his study on nationalism, a study which he subsequently put into action when he established the USSR.

As Joseph Stalin wrote:

"What is a nation? A nation is primarily a community, a definite community or people…Thus a nation is not a racial or tribal, but a historically constituted community or people…a common language is one of the characteristic features of a nation…a common territory is one of the characteristic features of a nation…a common economic life, economic cohesion, is one of the characteristic features of a nation…a common psychological makeup which manifests itself in a common culture is one of the characteristic features of a nation…a nation is a historically constituted community of people formed on the basis of a common language territory economic life and psychological makeup manifested in a common culture."

This Ireland satisfied all of Stalin's demands as of 600, a common language, actually two, Irish and Latin, used intermingled, common land, the Island, common psychological makeup, common economic life. Thus one can argue Ireland was indeed a nation.

But to the present, the US is one nation, we struggled through the darkest hours defining that during the Civil War. Yet we are again facing a similar struggle, one where we on the one hand have the political divergence between progressives and constitutionalists, those who believe we can change anything we want whenever we so desire if it is in the best interests of the "people" versus the group who believes there is something sacred in the documents and philosophy upon which the country was founded. Secondly we have the change which could occur as we introduce new immigrants who may not have accepted the "rules" of the game and vary from "common language territory economic life and psychological makeup manifested in a common culture".

This will be the double challenge we will face as a country over the next decades. A good leader or set of leaders can make this a smooth transition, a less than good set of leaders can turn it into chaos. I default to what happened in Ireland.

An Interesting Statistic

The Vatican released a set of statistics on the growth of Catholics in the world over the past decade. They have seen almost 11% increase over this nine year period with most coming from Africa and Asia.

The Vatican states:

Over these nine years, the Catholic presence in the world has grown from 1,045 million in 2000 to 1,166 million in 2008, an increase of 11.54 percent. Considering the statistics in detail, numbers in Africa grew by 33 percent, in Europe they remained generally stable (an increase of 1.17 percent), while in Asia they increased by 15.61 percent, in Oceania by 11.39 percent and in America by 10.93 percent. As a percentage of the total population, European Catholics represented 26.8 percent in 2000 and 24.31 percent in 2008. In America and Oceania they have remained stable, and increased slightly in Asia.

The number of bishops in the world went up from 4541 in 2000 to 5002 in 2008, an increase of 10.15 percent.

The report further states:

Female religious are almost double the number of priests, and 14 times that of non-ordained male religious, but their numbers are falling, from 800,000 in 2000 to 740,000 in 2008. As for their geographical distribution, 41 percent reside in Europe, 27.47 percent in America, 21.77 percent in Asia and 1.28 percent in Oceania. The number of female religious has increased in the most dynamic continents: Africa (up by 21 percent) and Asia (up by 16 percent).

Thus it is an interesting question to ask:

Will the next Pope be African? Clearly the choice of a German has had its problems. A Polish Pope was a strong and seasoned man who had survived the Germans and Russians and had a well tempered stand. Will that be the next Pope.

Secondly, with the growth of women in religious orders, will this also have an influence on the Church.

30 Year Rates: FED vs Mortgage

The above chart is the plot of the 30 tear Treasury and Mortgage rates. What is surprising is that the Treasury rates are being held low and the mortgage rates seem stable to slightly increasing.

However if we look at the spread we see the result below:

What this tells us is that the FED is truly keeping the rates down at an abnormally low rate. This is most likely the position needed to justify the Budget long term deficit numbers but with the slow but increasing expansion of the economy we will see these explode.

The drivers for the upward pressure are seen in the PPI and the CPI. We show these below.

Note the continuing increases and they show a potential for a 7-8% inflation which will place dramatic pressure on the Fed Rates and thus on mortgage rates as well. It may even be possible to see an inverted yield curve for some period. That bodes poorly for many who have fixed incomes and long term investments.

The next look is the housing starts and the credit in consumer hands. We show that below:

Note that single family starts are slowly increasing and that consumer credit continues to decline. We anticipate a significant increase in home sales and this will be reflected first in sales of pre-owned homes but soon in new single family construction. Given the current Administration demands for funding this combination will surely drive up interest rates dramatically in the coming year.

Epigenetics: New or Just A Logical Understanding of Dynamic Systems

In a recent paper at the ASBMB conferences the authors state:

The new field of “epigenetics” is rapidly revealing how people, plants and animals do start with a certain genetic code at conception. But, the choice of which genes are “expressed,” or activated, is strongly affected by environmental influences. The expression of genes can change quite rapidly over time, they can be influenced by external factors, those changes can be passed along to offspring, and they can literally hold the key to life and death.

According to Rod Dashwood, a professor of environmental and molecular toxicology at the Linus Pauling Institute at Oregon State University, epigenetics is a unifying theory in which many health problems, ranging from cancer to cardiovascular disease and neurological disorders, can all be caused at least in part by altered “histone modifications,” and their effects on the reading of DNA in cells.

“We believe that many diseases which have aberrant gene expression at their root can be linked to how DNA is packaged, and the actions of enzymes such as histone deacetylases, or HDACs,” Dashwood said. “As recently as 10 years ago we knew almost nothing about HDAC dysregulation in cancer or other diseases, but it’s now one of the most promising areas of health-related research.”

Epigenetics is merely the extension of our understanding of genes. The understanding has progressed as follows:

1. Watson and Crick: DNA yields RNA yields Proteins. This prevailed for almost 20 years. It was a one way path that led to the ultimate protein yields result paradigm.

2. Reverse Transcriptase: This was the first step in understanding that we can have some feedback in the system.

3. Micro RNAs and the emergence of "noise" on the system.

4. Pathways: The understanding that there were complex pathways and that some of the resultant proteins could feed back and influence transcription.

5. Random hits on genes that changed base pairs or even split off sections. A good example is the Philadelphia chromosome in CML.

Now we must look at genes as a complex noisy multidimensional random process system. Genes are turned on and off by the results of other genes as well as the result of what receptors on the cell surface see in the environment. At the same time genes are changing if they get "hit" by exogenous factors such as radiation. Also as cells reproduce from generation to generation that process itself is subject to errors.

The result is that the cell is a random dynamic process of the form:

dx(t)/dt = f(x,t) + g(t) + w(t)

where f is the epigenetic factor, g some extracellular effects and w just noise, real uncertainty or just stuff we do not know.

What we observe is:

y(t) = h(x,t) + u(t)

where the ys may be the genes, RNA, proteins, all driven by what is the total underlying structure and u is again noise or uncertainty. This is epigenetics.

Our ability to do two things will be essential. First we must be able to determine this functions, namely observe and identify the system. Second we must learn how to control it. That leads to cures. Looking at the world in an epigenetic system manner is essential. That I see is often a challenge for scientists who are often still trying to understand the basic science.

And You Think Washington Has Sticky Fingers

Vodafone has entered the arena of trying to get more from its customers by charging Google for each time a customer seeks a result on the Google network. You see the customer already paid Vodafone for its service but now the greedy folks across the pond want to ply more for nothing.

In a recent post in Rethink Wireless they state:

(Vodafone) wanted to charge internet players like Google for their usage of his firm's networks. Now Vodafone has got behind that call too, and is to petition the European Union to take action to "facilitate bilateral agreements between telecom operators and online content providers like Google"...This amounts to a 'Google tax', enabling mobile and fixed carriers to charge online content providers variable fees according to the network quality they receive, and/or the amount of bandwidth they consume.

This is the fear of Internet Neutrality folks, the "taxing" of the user via the taxing of the provider of the service.

We have argued for years that the user may enter into agreements with the providers and the provider may charge whatever they want yet they cannot interfere with the relationships with the user and providers that the user chooses to deal with. In fact there should be some form of privacy related with who I a user desire to communicate with. And this is Europe. Just another glimpse of the anti Americanism at play.

Sunday, April 25, 2010

GM, Our Money and the Facts

The Chairman of GM, the man who when he was the CEO of ATT called it "my network" when customers were downloading data beyond the level he thought was enough, has again turned a phrase on the facts.

Specifically Ed Whitacre, the CEO of SBC, now AT&T, is quoted as stating (see DSL Reports and Business Week):

"Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it," says Whitacre. "So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?".......“The Internet can't be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!”.... Whitacre leans forward in his chair and raises his voice. "They don't have any fiber out there. They don't have any wires. They don't have anything," he argues. "They use my lines for free -- and that's bull. For a Google (GOOG ) or a Yahoo! (YHOO ) or a Vonage or anybody to expect to use these pipes for free is nuts!"

You see ATT was not his, the lines were not HIS. they belong to the shareholders, and now the same person alleges he paid us the taxpayers all our money back. Again a twist of the facts and an attitude which belies the truth in a self serving manner. In the case of GM the shareholders are the taxpayers and the Unions of course, always the Unions.

As Forbes has superbly stated:

Uncle Sam gave GM $49.5 billion last summer in aid to finance its bankruptcy. (If it hadn't, the company, which couldn't raise this kind of money from private lenders, would have been forced into liquidation, its assets sold for scrap.) So when Mr. Whitacre publishes a column with the headline, "The GM Bailout: Paid Back in Full," most ordinary mortals unfamiliar with bailout minutia would assume that he is alluding to the entire $49.5 billion. That, however, is far from the case.

Because a loan of such a huge amount would have been politically controversial, the Obama administration handed GM only $6.7 billion as a pure loan. (It asked for only a 7% interest rate--a very sweet deal considering that GM bonds at that time were trading below junk level.) The vast bulk of the bailout money was transferred to GM through the purchase of 60.8% equity stake in the company--arguably an even worse deal for taxpayers than the loan, given that the equity position requires them to bear the risk of the investment without any guaranteed return. (The Canadian government likewise gave GM $1.4 billion as a pure loan, and another $8.1 billion for an 11.7% equity stake. The U.S. and Canadian government together own 72.5% of the company.)

But when Mr. Whitacre says GM has paid back the bailout money in full, he means not the entire $49.5 billion--the loan and the equity. In fact, he avoids all mention of that figure in his column. He means only the $6.7 billion loan amount.

In fact it was not Uncle Sam, it was the taxpayers and our children, grand children and great grand children. Facts seem to be something this man has problems with. Where is all of our money? Forbes details it quite well. Are we all fools? No we just have another Administration appointee who seems to twist the facts to his aggrandizement, but fortunately we have that :fact" and then the truth from Forbes.

One wonders why he needed to make this statement at all. Why not just tell the truth, they borrowed more money to pay back the old money. Anyone looking at GM would have seen that they lost money the past quarter as they had stated but if that were the case any logical person would have asked where the got the money to pay back the loan. And we think we have problems with Wall Street!

The Brits Never Change

The Times of London today revealed that the UK Government which invited the Pope to the UK, a first for the Government, had its Foreign Office draw up a briefing package to discuss what would be accomplished in the visit.

The Times states:

The document also suggested that the National Anthem be changed, from God Save the Queen to God Save the World.

As the Foreign and Commonwealth Office was forced into a rapid damage-limitation exercise with an official apology for an "unacceptable" document, sources told The Times that the entire visit could now be in jeopardy.

The document was drawn up by the Foreign Office as part of a briefing pack and sent to officials across Whitehall.

It also suggested that Benedict XVI could demonstrate a hard line on child abuse by "sacking dodgy bishops" and launching a helpline for abused children.

The Government’s papal visit team document also recommended that he sing a song with the Queen for charity and apologise for the Spanish Armada.

The Times continued:

A Foreign Office spokesman said that David Miliband, the Foreign Secretary, was aware of the document and "appalled" by it.

The ideas in the paper, entitled The Ideal Visit We Would Like to See, were drawn up by what the Foreign Office described as "a group of three or four junior staff in a team working on the papal visit".

It was attached as one of three "background documents" to an e-mail headed Policy Planning Ahead of the Pope’s Visit, dated March 5, which invited officials to attend a meeting.

The author of the e-mail, said to be an Oxbridge-educated junior civil servant in his twenties, admitted that some of the ideas were "far-fetched". Recipients included Nicola Ware, a senior Foreign Office official, as well as Downing Street, the Department for International Development and the Northern Ireland Office.

One suggested that Pope Benedict should be persuaded to spend a night in a council flat in Bradford and "do forward rolls with children to promote healthy living".

The memo also featured a list of "positive" people who could be associated with the trip, including Tony Blair and Susan Boyle, the Britain’s Got Talent singing star. Wayne Rooney, the footballer, and Richard Dawkins, the atheist, are considered "negative".

You see, Dawkins has already called for the immediate arrest and imprisonment of the Pope.

Is this some aberrant civil servant or is this the true reflection of the UK Government? I believe that it is the latter. After all it is the same Government which starved to death half the Irish population and still occupies one third of Ireland.

Would the Pope ever get an apology from the Queen, one whose own family travails often place papal foibles to shame, doubtful. My suggestion, Pope, stay out of the UK, besides the food is not that good anyway.

It gets even better in the Guardian. It states:

An internal Foreign Office memo about this September's papal visit to Britain which started as a Friday afternoon joke, today has resulted in a formal government apology to the Vatican.

The memorandum, apparently written following a brainstorming session by a group of junior civil servants planning events for the four-day visit by Pope Benedict XVI, suggested among other ideas that he might like to start a helpline for abused children, sack "dodgy" bishops, open an abortion ward, launch his own brand of condoms, preside at a civil partnership, perform forward rolls with children, apologise for the Spanish armada and sing a song with the Queen.

It was circulated across Whitehall, including to Downing Street with a covering note suggesting it should not be shown externally and adding, unnecessarily perhaps, that its ideas were far-fetched.

The joke fell very flat indeed after the memo was leaked to the Sunday Telegraph, with David Miliband, the foreign secretary, said to be appalled, a grovelling apology from his department and a formal expression of regret offered to the Vatican by the British ambassador Francis Campbell.

The Guardian continues:

The civil servant responsible, said to be in his 20s, appears to have written the document on a Friday in early March, some weeks before the latest waves of child abuse accusations engulfed the Catholic church, which has indeed resulted in the departure of several bishops, including two this weekend, in Ireland and Belgium....The ludicrous nature of the suggestions did not prevent some within the Catholic church reacting to what they claimed was a disrespectful slur, demanding apologies that many senior Vatican officials have in recent weeks declined to offer children abused in church care.

Ludicrous is a bit light handed a characterization indeed. Perhaps one should demand the absolution for the Government. That was the way it worked in the past, that is before Henry VIII used the chopping block so effectively.

But wait, it is not over yet. Just look at the comments to the article in the Independent. The readers in the UK make such suggestions as:

"The Pope Must Die"...Why are we apologising for one of the best, most hilarious things the government has produced. The pope is a supporter of paedophiles, advocates encouragement of the spread of HIV in Africa to the point of genocide, discriminates against gay people, thinks women do not have the right to choose whether they have a baby or not, and thinks women do not even deserve to have the same rights as men. This man and his entire catholic organisation have stolen mass wealth from the world for centuries. This is NOT a good man. He is disgusting and despicable and should be put on a par with people like Pinochet, Slobberdan Milosevic, and the like.

Perhaps God sent the volcano over the Brits as a warning! Perhaps also the Pope should truly reconsider this visit. Clearly the Brits do not want him and the Government is messing this up even further. That volcano may just erupt again, and keep all travel to a standstill.

Friday, April 23, 2010

A Bayesian Approach to Cancer

In a recent Science article they discuss the great deal of knowledge available about genes and cancer yet they ability to align them in some sensible fabric which allows both assessment and prediction is still wanting.

The problem discussed in the article is that after thousands of sample and genes being analyzed the information regarding cause and effect is still lacking. Pathways are understood but what causes what is not. The approaches are to this point ones which are basically inferential and correlative. Bert Vogelstein is quoted as:

The skeptic is Bert Vogelstein, who spoke at a Monday plenary session on cancer genomes at the annual meeting of the American Association for Cancer Research in Washington, D.C. Vogelstein looked across all the studies published since 2007 that have sequenced the 21,000 or so protein-coding genes involved in cancer, known as the cancer "exome." The analysis covered 78 tumor samples and eight cancer types (the majority of the studies were done by Vogelstein's group). Vogelstein also threw in data for 22 medulloblastomas (a type of brain tumor) that his team has not yet published.

The article goes on to state:

Even at this early stage of the planned survey--with data on just 100 tumor samples—"we can already answer many of the fundamental questions about the cancer genome," Vogelstein said. For example, tumors typically have from 30 to 80 single-base mutations, except for types that take less time to develop such as leukemia (about 10 mutations). Melanoma and lung cancer round out the high end (100 to 200 mutations) because they are caused by environmental carcinogens that cause lots of mutations. (Deletions and amplifications add a few more genetic glitches.) To Vogelstein this looked like the outline of a basic pattern that won't change much. But he gathered some more details.

Vogelstein searched databases for all mutations in genes found in solid cancers in the past 2 decades; for 353 cancer subtypes, he came up with 130,072 mutations in 3142 genes. But not all contribute to cancer. The challenge is to figure out which mutations are "drivers" and which are "passengers." To pick out the drivers, Vogelstein assumed that mutations in suppressor genes had to truncate the gene's protein; for oncogenes he included only mutations seen in at least two tumors. That distilled the gene count to just 319 potential driver genes, 286 of them tumor suppressors and 33 oncogenes.

Nearly all these genes fall into 12 "core" signaling pathways, Vogelstein said. And that picture—about 320 genes in 12 pathways--is unlikely to change much even when thousands more tumor samples are sequenced, he argued. So far, the cancer exome projects have found only two new driver genes ( IDH1/2 in glioma and FOXL1 in granulosa tumors). Vogelstein predicts that most new driver mutations will be rare; and nearly all will be part of same 12 pathways.

The problem is that there is no clearly underlying model for the temporal behavior of cancer. In addition there are many genes and many small segments yielding micro RNA as well, almost 1000 micro RNA elements generated by gene segments of about 20-40 base pairs. The question is how does one integrate this into a model.

Vogelstein then says:

Vogelstein summed up by saying that cancer has gone from "a complete black box" to something that "we really kind of understand." The "sobering" part, he said, is that he doesn't expect there will be many new genes or genetic breakthroughs. He has pinned his own hopes for preventing cancer deaths on using genetics to diagnose cancers early, when they're more treatable.

But the problem is that most cancer researchers are discovering facts and not models. We know that genes yield RNA which yields proteins. Proteins are facilitators of various pathways either blocking or accelerating them as on or off switches or speeding them up or slowing them down in a catalytic manner. We may not know the specifics but with the data we can generate dynamic system models and using Bayesian approaches applied to system identification we can then determine the details of the models.

Any good systems analyst knows then that we can ascertain if the systems are observable and/or controllable. That is we can ascertain if we can observe the states, namely the genes and proteins, and if we can then via controllability we can readily drive the system, namely the cell to a desired state, namely non-malignant.

It will likely take a new generation of cancer researchers to get from the determination of genes and their effects to being able to model the "system". It is akin to the world of electronics and control going from handbook designs to fully computerized optimal designs. This is a cultural phenomenon and it just requires time.

Not Quite So

The New York Times reported the following:

The Catholic archbishop of Los Angeles called the authorities’ ability to demand documents Nazism. While police demands of documents are common on subways, highways and in public places in some countries, including France, Arizona is the first state to demand that immigrants meet federal requirements to carry identity documents legitimizing their presence on American soil.

Let me make two observations. First where was Pius XII when there were real Nazis, not to mention the Cardinals when the child abuse was destroying the Church. Second, California had a law until the early 1980s which required providing identification to Police whenever they desired to find out who you were. It was a remnant of the laws during WW II restricting the Japanese before they were interred. That was an FDR period law.

Not that I am a major supporter of random stops, in fact I am a Warren and Brandeis fan who believes in the right to be left alone, a right that seems to have all but abandoned.

As Warren and Brandeis said:

"Recent inventions and business methods call attention to the next step which must be taken for the protection of the person, and for securing to the individual what Judge Cooley calls the right "to be let alone." Instantaneous photographs and newspaper enterprise have invaded the sacred precincts of private and domestic life; and numerous mechanical devices threaten to make good the prediction that "what is whispered in the closet shall be proclaimed from the house-tops." For years there has been a feeling that the law must afford some remedy for the unauthorized circulation of portraits of private persons; and the evil of the invasion of privacy by the newspapers, long keenly felt, has been but recently discussed by an able writer. The alleged facts of a somewhat notorious case brought before an inferior tribunal in New York a few months ago, directly involved the consideration of the right of circulating portraits; and the question whether our law will recognize and protect the right to privacy in this and in other respects must soon come before our courts for consideration.

There must be a balance in law and rhetoric. The Cardinal clearly has stepped over the bounds. Perhaps one should clean one's own house before throwing stones. It may be my sixteen years of Catholic education and two years in a Franciscan seminary that does it, but when Cardinal bespeak like this they must do so from the high ground. Clearly they are still in the swamps. As for the law, it has gone back and forth on this use, but alas we have never truly have the right to be let alone. Where is Justice Brandeis when we truly need him!

The FCC, the Cable Card, and the Internet

The FCC issued an NPRM today regarding the cable card issue. We have discussed this issue before. Simply the cable companies have a monopoly on the interface box or boxes in your residence. They lease you a cable modem and a TV interface at what I consider extortionary prices. Typically it is about $9 per month per box. You pay that per box forever. There is no alternative. They get tons of money from this process.

Now the FCC in its wisdom is trying to get a better solution. Yet one must remember this is the FCC and most likely whatever it rules it will mess it up and get the Federal District Appeals Court to rule it illegal. But let us hope there can be some progress.

The FCC states:

1. In this Notice of Inquiry, the Commission seeks comment on specific steps we can take to unleash competition in the retail market for smart, set-top video devices (“smart video devices”) that are compatible with all multichannel video programming distributor (“MVPD”) services. Our goal in this proceeding is to better effectuate the intent of Congress as set forth in Section 629 of the Communications Act of 1934, as amended.1 In particular, we wish to explore the potential for allowing any electronics manufacturer to offer smart video devices at retail that can be used with the services of any MVPD and without the need to coordinate or negotiate with MVPDs. We believe that this could foster a competitive retail market in smart video devices to spur investment and innovation, increase consumer choice, allow unfettered innovation in MVPD delivery platforms, and encourage wider broadband use and adoption.

2. More specifically, we introduce the concept of an adapter that could act either as a small “setback” device for connection to a single smart video device or as a gateway allowing all consumer electronics devices in the home to access multichannel video programming services. Unlike the existing cable-centric CableCARD technology, this adapter could make possible the development and marketing of smart video devices that attach to any MVPD service anywhere in the United States, which could greatly enhance the incentives for manufacturers to enter the retail market. As conceived, the adapter would communicate with the MVPD service, performing the tuning and security decryption functions that may be specific to a particular MVPD; the smart video device would perform navigation functions, including presentation of programming guides and search functionality. The Commission seeks comment on this concept. We also invite any alternative proposals that would achieve the same objective of eliminating barriers to entry in the retail market for smart video devices that are compatible with all MVPD services.

The FCC continues:

17. Ideally, the Commission’s all video (“AllVid”) solution would work for all MVPDs and lead
to a nationwide interoperability standard, much as Ethernet and the IEEE 802.11 standards have led to nationwide interoperability for customer data networks while allowing broadband service providers to deploy differing proprietary network technologies. The AllVid solution would be designed to accommodate any delivery technology that an MVPD chooses to use and allow MVPDs to continue unfettered innovation in video delivery, because the MVPD-provided AllVid adapter, rather than the consumer-owned smart video device, would be responsible for all communication with the MVPD. At the same time, it would allow consumer electronics manufacturers to design to a stable interface and to integrate multiple functions within a retail device. This approach would provide the necessary flexibility for consumer electronics manufacturers to develop new technologies, including combining MVPD content with over-the-top video services (such as videos offered from, for example, Amazon, Hulu, iTunes, or NetFlix), manipulating the channel guide, providing more advanced parental controls, providing new user interfaces, and integrating with mobile devices.

18. Two previous standardization approaches help to illustrate how this solution could unleash
competition and innovation in equipment used with MVPD services, while allowing unfettered innovation in the services themselves: (i) The Carterfone and Computer Inquiry decisions required that the telephone network be terminated in a standardized RJ-11 interface; and (ii) broadband services developed using divergent and rapidly developing network technologies terminated in an adapter that presents a standardized Ethernet interface.

19. The RJ-11 interface requirement allowed the development of a vibrant retail market for
answering machines, cordless phones, fax machines, modems, and other customer-premises equipment used with the telephone network.42 The requirement that the network terminate in a standardized interface with no carrier-supplied terminating device was implemented in the context of a single telephone network that used a single, stable delivery technology. It was a workable and successful solution in that context because our telephone network was based on a nationwide standard.

20. Broadband services differ from telephone service in two key respects that have led to a
significantly different approach. Multiple broadband operators provide services using divergent network technologies; and those technologies are not static but are rapidly developing. Numerous broadband delivery technologies exist – among them cable, digital subscriber line (“DSL”), satellite, wireless broadband, and optical fiber to the home. In each system, the operator provides a customer with an interface device such as a cable modem that performs all of the network-specific functions and connects via an Ethernet port to a multitude of competitively provided customer-premises devices including computers, printers, game consoles, digital media devices, wireless routers, and network storage devices. This approach has promoted an innovative and highly competitive retail market for devices used with broadband services. At the same time, because each operator terminates its service in an interface device that it can swap out as needed to accommodate innovations in delivery technologies, this approach has freed service providers to innovate in their networks without changing the Ethernet connection to which customers attach their devices. For example, a DSL provider can introduce a new, faster technology in its network and, if necessary, swap in a new DSL modem that incorporates the new technology, without changing the customer interface or requiring customers to replace devices they use with the service. This allows consumers to benefit from new and improved services without incurring the cost of replacing devices they have purchased at retail – replacing a single modem is more cost-effective than replacing each device that accesses broadband services.

The problem is why can't we have a device like an 802.11 device or an Ethernet router or the like. Because the cable companies "bundle" their services. Frankly that is utter nonsense. With cable ready TVs of two decades ago there was no bundling. The cable companies have just heavy handedly moved in and set prices with no reasonable market controls. They have a stronger monopoly than AT&T ever did. The FCC may have an opportunity here and it should be interesting to watch.

Wilson, Teddy Roosevelt and the Progressives

The book by Milkis on Teddy Roosevelt and the Progressives is in many ways a tale of the present. The 1912 election was a turning point for American politics. It brought in Wilson and sent Teddy packing, but in many ways left the baggage that Teddy brought with him around for what seems a permanent stay.

Milkis tells a wonderful tale based on extensive research about this election. It is a historically well written piece albeit filled with consecutive facts but lacking in the interpretation and historical glue to make it a superb work, it is masterful notwithstanding.

The path of the book works back and forth on the New Freedoms of Wilson and the New Nationalism of TR. Milkis discusses these in Chapter 1 and the discussion is a somewhat back and forth discussion of the principles and the time which evoked them. The New Nationalism is best described in the TR speech of the same name in 1910. The New Freedoms is best described by the author on page 205 in a memo from Brandeis to Wilson. There is the ever presence of Brandeis in this book which is a powerful description of the great mind evolving his thoughts through the somewhat academic mind of Wilson. Brandeis states:

"The two parties (Wilson and the Democrats versus TR and the Progressives) differ fundamentally regarding economic policy....The Democratic Party insists that competition can and should be maintained in every branch of private industry...if at any future time if monopoly should appear to be desirable in any branch of industry, the monopoly should be a public one.....the New Party (Progressives) ...insists that private monopoly may be desirable..."

This is a powerful statement which reflected the beginning in many ways of the power of the executive and the dominance of the central Government over the entire economy. Wilson agreed with this statement and what is most telling in the Milkis book is that the 1912 election was truly and election on principles, principle articulated directly by the players in that election. They were direct and forthright and presented their views of how the Government and the country should be run. Lacking was as reflected by Milkis any discussion of what the Constitution and Founders had ever intended. There appeared to be a unanimous agreement that change, as articulated by either Wilson/Brandeis or TR and the Progressives, was well within their purview and powers, independent of the Constitution.

The Socialists agenda under Debs is somewhat articulated by Milkis and he states on p 23 that Debs viewed the Progressives as "a reactionary protest of the middle classes, built largely upon the personality of one man and not destined for permanence." Ironically it would be Wilson who imprisoned Debs for his ideas, as well as my grandmother who headed the Socialist Party in New York. Wilson would leave Debs to rot for years until the Republican Harding pardoned him.

TR is quoted in his New Nationalism speech on p 40 as saying:

"The New Nationalism puts national need before sectional or personal advantage...Nationalism regards the executive as the steward of the public welfare. It demands of the judiciary that it shall be interested primarily in human welfare rather than property...."

It was this denial of the Lockeian property construct which was at the heart of the Constitution. Milkis on the same page reinforces the TR stance of "human rights" trumping "property rights". There does seem to be the conflict, perhaps of the time, that humans have property and that in many ways it was property via Locke that defines the individual as compared to a vassal of the King. TR and the Progressives seem to be driven by the Trusts and their "property" and the general hatred for these same Trusts.

On p 44 Milkis discusses the conflicts of TR and the Constitution. I would have liked to see this better presented, it is discussed but it is in itself a key element of importance who relation to the present is key. This returns again on p 91 where Milkis states:

"In the end, TR and his political allies proposed to emancipate public opinion from the restraining influence of the Declaration (of Independence) and the Constitution..."

TR was clearly a man who had his own ideas and the facts and history of the country be damned. The Wilson plan of the New Freedoms was in contradistinction to TR. On p 202 the author compares and contrasts them but in many ways they had much in common. Monopolies seem to dominate the discussion. TR was advocating for the referendum, recall and the like, pushing the power down to the people, and even to the extent of having recall of the President (see p 219). In contrast Wilson was defending natural rights but stopped way short of recalls as TR had done (p 226)

Overall the book is a superb introduction to these many issues. The growth of the larger electorate, the conflict between large industries and labor, the expansion of the middle class, and even the conflicts on racial issues. TR had become an idealists with a platform designed to attract the largest group of common voters. He had developed his own ideas as how the country should be run and his New Nationalism was in a sense a new Constitution, drafted by a single man who then set out to sell it. Wilson was driven by the intent to concentrate mow power in both the executive as well as in Washington.

The book by Woodrow Wilson: A Biography by Cooper is a wonderful companion to this book. As a final note, the discussions on pp 274-275 places Wilson is the poorest of light as he deals with the civil rights of the blacks. Milkis details the occasion when Trotter, a black leader and editor of the Boston Guardian, was thrown out of Wilson's office abruptly because he disagreed with the President's refusal to even discuss the separate but equal position of the Democrats. Wilson as a Virginian had strong ties to the south and the south was the core to his ongoing efforts. This truly was a sad day.

Milkis has prepared a superb book worthy of reading today. It tells the tale of how many of the changes we see again coming up today are in many ways a replay of a century ago. The only critique that I have is that it should have been longer and included some greater detail. But it stands quite well as it is.

There is No Surprise Here

The Actuary for Medicare and Medicaid, Mr R Foster, is quoted in the Hill today about the impact of the new health care bill on both programs.

He states:

The CMS analysis, provided to The Hill on Thursday, concludes that the healthcare overhaul will reduce the number of the nation's uninsured from 57 million to 23 million.

However, the report raises several warnings about the impact of healthcare reform.

Foster states, "The additional demand for health services could be difficult to meet initially with existing health resources and could lead to price increases, cost shifting, and/or changes in providers' willingness to treat patients with low-reimbursement health coverage."

The demand will be local, and the greatest impact will most likely be in lower middle class communities where the bulk of the new "customers" will come from. This will most likely not be a uniform impact. In addition it is not at all clear how this demand will be managed. If local then the peak could be quite excessive. In addition physicians still have the right to not accept new patients. Thus if you are in the system now you most likely are safe but getting in will be difficult.

The report continues:

The report also suggests that some employers will stop offering their employees healthcare coverage benefits: "A number of workers who currently have employer coverage would likely become enrolled in the expanded Medicaid program or receive subsidized coverage through the [Health] Exchanges. For example, some smaller employers would be inclined to terminate their existing coverage, and companies with low average salaries might find it to their -- and their employees' -- advantage to end their plans..."

This may or may not become a problem depending on the plans offered. If the new plans are PPO type plans, or worse HM plans, then there will be a drastic reduction in service quality for those on the plans.

Missed That Bullet

Yesterday I gather was the second day of a disaster for those with XP SP2 and McAfee. I was on the road when this disaster hit with my Windows 7 machine and no connectivity.

In a ZD Net blog the author explains what McAfee saw as the problem:

The document, entitled “McAfee FAQ on bad DAT issue,” is written in Q&A format and includes the following exchange:

How did this DAT file get through McAfee’s Quality Assurance process?

There are two primary causes for why this DAT file got through our quality processes:

– Some specific steps of the existing Quality Assurance processes were not followed: Standard Peer Review of the driver was not done, and the Risk Assessment of the driver in question was inadequate. Had it been adequate it would have triggered additional Quality Assurance steps.

– there was inadequate coverage of Product and Operating System combinations in the test systems used. Specifically, XP SP3 with VSE 8.7 was not included in the test configuration at the time of release.

This is amazing. There were most likely millions of systems brought down. The press details some from the US, UK, Australia and all around the world. The response from McAfee was minimal to say the least. The problem is that there will most likely be a set of class action suits and this will destroy the company. Sloppy.....and deadly.

Tuesday, April 20, 2010

Telecom Innovation

In a recent posting by some person from the Telecom Council of Silicon Valley they state:

Historically, telecom innovation happened in distributed labs around the world. And despite some phenomenal inventions, the overall pace was languid. In just the past 15 years though, increasing competition has put the spurs to this sector and meshed it with the swifter high-tech industry. In that time, the telecom industry has become a fast-moving, energetic market, with explosive growth that attracts some of the best entrepreneurs and investors in the world. In an accelerating industry, innovations rule. And the innovations that link telecom investors and entrepreneurs worldwide find their nexus in the Silicon Valley.

I find this an amazingly false statement for anyone who has been in the industry for a while. Just think of the following:

1. Tymenet, a data communications network which preceded the Internet in the late 70s and early 80s.

2. The VSAT business which sprung up from the early 80s and which became the basis of a great deal of distributed wireless networks.

3. Linkabit and the development which it produced for the telecom business ranging from satellites thru CATV.

4. Qualcomm the follow on to Linkabit needs no discussion.

and the list goes on.

In my opinion, have spent a few years there, the biggest drag on telecom was Bell Labs. It was under the ATT Chairman Kittel in the 70s that he had to get Bell Canada and BNR to develop the digital switch, it became Norther Telecom, while the US Bell Labs refused to go digital.

The author continues:

These garage-stage startups tend to exist below the radar of the industry and telecom investors -- you really need to be in Silicon Valley to see them. And you need to be networked in the Valley as well; they don't advertise in trade journals. Telecom innovation is happening across the Valley – from the moonlighting mobile application developer to a founder team working on fiber-to-the-home services. The Telecom Council of Silicon Valley, the organization that connects telecom companies with innovation, actually saw more startups in 2009 than 2008.

Again many telecom start up were in Dallas, Boston, and Reston VA and the I 270 corridor in Maryland. They were the builders of what we see today in telecom. Yes Silicon Valley made many contributions but they were always driven by people in a widely distributed geographical area and not just Silicon Valley and in addition they existed and prospered before the explosion of the VC markets.

Thus I find this piece a bit self serving and lacking in facts. Entrepreneurs will find ways to get things done with or without VCs. However they need capital and the current Financial Control Bill in the Senate may hinder that effort by lumping entrepreneurial investments into a par with Goldman Sachs and others. If that happens that would just add another layer of complexity but the entrepreneur always finds a way to the other side of the mountain, even outside of Silicon Valley.

Earth Day 2010

These are some of my 4000 Hemerocallis seedlings planted this Spring from crosses I made last year. My species plants from China, Russia, Japan and Korea are budding out. We now have over 500 registered hybrids, most of the world's species, and thousands of hybrids that I have created over the years. In addition I have planted 120 trees in the last three years on the edge of the land to keep the nasty deer out, squirrels are fine as are chipmunks. But deer, pure rodents.

I remember the first Earth Day in 1970 on the MIT campus. Hundreds of city kids gathering for a song fest, and perhaps some meeting dates for the day, and bemoaning the fate of the planet. Now forty years later there are some of us who actually do something to get plants and a few animals back into the eco system. We have planted tens of thousands of these hybrids in New Hampshire on the mountain side behind our home and it is the same latitude as their homes in China and the other parts of Asia. Hopefully they find it a fine new home.

So for my many plants. Happy Earth Day and I hope your pollen finds a friendly partner!

Monday, April 19, 2010

Books, Authors, Readers and Disintermediation

I first met Ken Auletta at a reception on the Intrepid in New York in 1992. He is a brilliant and articulate observer of American culture and one should read his musings as they tend to reflect the changes that we as a society are going through. He may not be a great prognosticator of the future but he is superb in telling us how we got to where we are now.

In a current article in the New Yorker on the future of publishing he writes of the battle brewing between Apple and Amazon, a battle which may very well leave the publishers behind. You see Apple is trying to compete with Amazon with its iPad whereas Amazon has a business model which works.

Auletta states:

A close associate of Bezos puts it more starkly: “What Amazon really wanted to do was make the price of e-books so low that people would no longer buy hardcover books. Then the next shoe to drop would be to cut publishers out and go right to authors.” Last year, according to several literary agents, a senior Amazon executive asked for suggestions about whom Amazon might hire as an acquisitions editor. Its Encore program has begun to publish books by self-published authors whose work attracts good reviews on And in January it offered authors who sold electronic rights directly to Amazon a royalty of seventy per cent, provided they agreed to prices of between $2.99 and $9.99. The offer, one irate publisher said, was meant “to pit authors against publishers.”

Getrting the Numbers Right

The projections for 2010 Medicaid spending are $412 B and are estimated to grow to $513 B by 2013 and that is before the expansion of the Medicaid coverage under the new plan.

In a recent DeLong rant against the Republicans he states:

Yet Another Reason the Country Would Be Better if We Shut the Republican Party Down Today...

Total Medicaid spending this year is currently pegged at $280 billion. How Coburn can think that all $280 billion that will be spent this year on Medicaid is waste--plus an extra $20 billion in waste even though we do not spend it--is beyond me.

I don't have a good feeling about this fiscal commission--not at all.

Well unfortunately for the good Professor, it is $412 B not his $280 B.

The statistics are readily available and the alluded to Coburn suggestion about reducing fraud is truly a major concern about Medicaid.

Housing and the Recession

The Census has just released the most recent stats on housing and they appear to demonstrate a continual growth in the positive direction.

The above is a summary of new housing; starts by class from start through completion. Note that starts are growing and completions is declining. That is a good sign since the decline is a lagging indicator and the starts are a leading indicator. The growth in starts is continuing at a good rate from the low of last year but is still lagging from a few years ago, which frankly is not at all surprising.

As for the regional characteristics we show the single family starts by region below.

The regional differences are clear in the above. The south has a dramatic growth in starts while the northeast is lagging. This is quite common. What is quite positive is the growth in western starts.

Thus we believe that the leading indicator of starts demonstrates a slow but progressing recovery.