This was post-2001 Hitchens. The over-riding directive of his life was to make money by pleasing American right-wingers by dressing up their idiotic nationalism, chauvinism, and jingoism with Big Words and an English accent. It was a highly rewarding career, because he sold to morons who watch Sean Hannity the illusion that they are not complete cretins, and they pay top dime for that sort of intellectual deceit.

Okay then.

Fans of The Years of Lyndon Johnson, Robert A. Caro’s magisterial biography of LBJ, will be happy to learn that the fourth installment, The Passage of Power (1958–1964), will be published on May 1, 2012. The fifth, and most likely final, volume will take another two to three years.

Caro has conducted countless interviews, but now he seeks survivors. So many have passed away. Just since “Master of the Senate,” such family members and top officials as Valenti, Sen. Edward Kennedy, Arthur M. Schlesinger Jr. and Theodore Sorensen have died.

“Every time I walk home at night, that hits me in the face. My apartment is on Central Park West and my office is in Columbus Circle, so on my way home I pass Ted Sorensen’s house,” Caro says. “I used to be able to pick up the phone and call (LBJ aide) Horace Busby and ask him, ‘Where was Johnson sitting? On the sofa or the rocking chair?’ So often I reach for the phone these days and there’s nobody to call.”

In other Caro news, The Path to Power and Means of Ascent will be available as e-books tomorrow and Audible now has an unabridged audiobook of The Power Broker.

Americans have known for decades it is both immoral and ineffective to meet nonviolence with violence. UC Berkeley and its Chancellor, Robert Birgeneau, provided us a reminder of this lesson last week. But we forget nothing and learn nothing. Ronald Reagan, after all, met UC protesters with tear gas. Which can help you get attention so you can run for higher office. But it is no way to run a campus.

If people think the ECB won’t rescue a country from panics and bank runs, then Finland and Austria and the Netherlands are just as vulnerable as Spain and Portugal and Italy.

Article 43 of the Danish constitution states that

Ingen skat kan pålægges, forandres eller ophæves uden ved lov; ej heller kan noget mandskab udskrives eller noget statslån optages uden ifølge lov.

No taxes shall be imposed, altered, or repealed except by statute; nor shall any man be conscripted or any public loan be raised except by statute.

The current borrowing authority is very simple:

§ 1. Finansministeren kan optage lån inden for et samlet gældsmaksimum på 2.000 mia. kr.

The Minister of Finance may borrow within a combined maximum debt of 2,000 billion kroner.

2,000 billion kr. is about 115% of GDP in 2010. Total government debt (gross of the government’s deposit at Danmarks Nationalbank, which is how the debt ceiling is applied) is currently 762.6 billion kr., so 38% of the debt ceiling has been used. The highest it’s been in modern times was 808.3 billion kr. at the end of June 1997. (Net debt is currently 22% of GDP and was 53% of GDP in 1997.)

The debt ceiling was last raised in October 2010. Before that it stood at 950 billion kr. since 1993. When the bill was introduced, the Minister of Finance estimated that if the debt ceiling were not raised, we would reach 83% utilization by 2011.

The debt ceiling was first introduced in 1993 as a way of simplifying and combining all the laws authorizing public debt, instead of the previous method of passing laws that authorized new debt issue. It was also the first time that authority for domestic and foreign borrowing was combined. When the bill was passed in December 1993, 76.6% of the debt ceiling was used.

Before 1993, the Minister of Finance would regularly receive authority to borrow certain amounts of money, without an overall debt ceiling. The earliest such authorization I could find is from 1984, when he was authorized to issue 75 billion kr. in domestic bonds. At the same time, previous domestic borrowing authority from 1982 was cancelled. This law from 1993 allows him to borrow 50 billion kr. abroad.

I have about 215 GB of data on Backblaze. For sizes up to 400 GB, they offer to mail you a USB hard drive for $199, but I didn’t want to pay that much when downloading a Zip file is much cheaper. They recommend splitting your restores up into chunks of about 20 GB, but that’s a big hassle because you can only have 2 active restores at a time, and I didn’t want to risk missing anything in my manual splitting procedure. This means actually downloading a 215 GB file from them.

Backblaze cannot reliably serve you files larger than 60 GB or so. I’ve tried it: the connection is always dropped after a few hours. So you will need the Backblaze Downloader, a truly shitty Windows program that is able to resume downloads. (I wasn’t able to resume in any other way, they don’t seem to accept HTTP byte ranges.) Which means downloading on a Windows machine.

I don’t happen to have a Windows box on a fast internet connection with enough disk space, so I set up an Amazon EC2 instance for this. After much experimenting with multiple regions and settings, here is my advice:

1. Start a large instance with the ami-67095822 image (Windows Server 2003, instance storage), in the US West region. Your instance will be closer to Backblaze in the Bay Area and the instances there offer gigabit connections. Large instances are expensive but will download your files much faster.
2. In your security group, allow all ICMP.
3. Install Backblaze Downloader and start downloading into either the D: or E: drive. Monitor the download frequently, it’s not smart enough to resume after a disconnection. Backblaze Downloader is too slow. Just download in a regular browser like Chrome Firefox, and pray. You should be able to get speeds of at least 4 MB/s. If not, terminate your instance and start a new large instance.
4. Optional: Install VNC (remember to open up port 5900 in the firewall settings, preferably limited to your IP address). You will want to log in frequently and monitor the download, and VNC usually connects faster than RDP.
5. Inbound traffic to EC2 is free, but outbound is expensive. Test the archive with 7-Zip before you transfer, it will go through all the checksums. This shouldn’t take too long on a large instance.

The most foolproof way is to use the prcc_f and csho fields in Compustat Fundamentals Annual file (or their counterparts prccq and cshoq), which are the closing stock price and the number of shares outstanding (in millions of shares) on the balance sheet date.

For example, here are the values and corresponding market value of equity for Apple, Berkshire Hathaway and the New York Times Company on the latest datadate in my local copy of Compustat:

[nohang width="550"]

[/nohang]

I can tell you that these numbers are, at least in my opinion, correct. This method is fine if you happen to need MVE on the annual balance sheet date, or the quarterly balance sheet date for firms that are in the Fundamentals Quarterly file, but what if you need MVE at the end of a different month or some arbitrary date? For example, you may want to construct portfolios sorted by book-to-market, and since accounting information is not released on datadate, you want to make sure you are not using information that is not available to outsider investors.

The simplest way is, of course, to look in the CRSP Monthly (or Daily) Stock File. The PERMNO for Apple common stock is 14593, so we could multiply abs(prc) (because bid/ask midpoint prices are reported as negative numbers in CRSP, don’t forget that!) and shrout, shares outstanding in thousands. For Apple on 2010-09-30, this gives us 283.75×915,970=$259.9 billion, the same result as Compustat.

What about Berkshire Hathaway? Remember that Berkshire Hathaway has two share classes traded on the New York Stock Exchange, A shares (PERMNO 17778) and B shares (PERMNO 83443). We simply have to multiply price and shares outstanding for each class and sum them. The generic way to do this is to start with a PERMCO, get every security that has share code 10 or 11 (common stock), and multiply price with shares outstanding. Here’s sample SAS code for this, in this case hard coded for Berkshire, but you can figure out how to merge with a separate list of PERMCOs and dates (and properly use group by):

proc sql;
select
    sum(abs(prc)*shrout/1000) as mve
from
    crsp.msf m,
    crsp.msenames n
where
    '31DEC2009'd ge namedt and '31DEC2009'd le nameendt
and shrcd in (10, 11)
and n.permno = m.permno
and n.permco = 540
and m.date = '31DEC2009'd;
quit;

How come we had to use 4 different figures to calculate Berkshire’s market value using CRSP data, and only two figures with Compustat data? This is because csho and prcc_f are stated in terms of only a single class of stock. Berkshire Hathaway had 1.552 million class A equivalent shares outstanding, weighted by the relative economic interest of the different share classes, a number that the poorly paid S&P research assistants probably found in Item 6, “Class A equivalent common shares outstanding, in thousands” in the Berkshire 10-K. (Some companies make this a lot harder to find, especially on the balance sheet date rather than reporting date.)

Now if you do this for the Times Company on 2009-12-31, you would find only one share class on CRSP, PERMNO 47466, and a market value of 12.36×143,715=$1,776 million. This is almost $10 million less than what Compustat has. What happened?

If you looked very closely at the CRSP names file, you would notice that PERMNO 47466 represents class A common stock. Some companies have only a single class of common stock that is still designated class A, but the Times Company has a separate class B that is not traded on any exchange and is not on the CRSP tape.

So how do we estimate MVE for the Times Company at the end of January 2010, which is not in Compustat? My solution is to multiply the CRSP market value with the last known ratio of Compustat to CRSP market value. This ratio was 1,786/1,776=1.0056. CRSP market value on 2010-01-29 was 12.92×143,715=$1,858 million. Multiplied with our ratio, this gives an estimate of total market value of equity of $1,867 million. This estimate doesn’t account for the special voting rights of class B stock, but it is probably the best practical value we can assign to Times Company equity at market prices.

My adjustment may not be such a huge deal for the Times Company, but I can tell you that at the end of 2002, Ascent Media Group (PERMNO 88354, GVKEY 006948) had a total market value of equity, as implied by issues on CRSP, that was 11.7 times the market value of issues on the CRSP tape.

Medieval Latin is a much simpler form of Latin than classical, Roman Latin because it was everyone’s second language. Over centuries, Irish, Italians, and Norwegians all speaking to one another in the same language simplified and streamlined it, to make it easier for everyone to understand. It was a working language, the language of the church and professional elites everywhere. One aspect of understanding what Renaissance was and why it happened was that Petrarch and others like him noticed how much more complex, sophisticated, and, to their ears, beautiful, the classical Latin of Cicero and Ovid was. They then tried to recreate that flowery, rhetorical style in their own day and time, in large part because they thought that the beauty and sophistication of the language also helped it convey beautiful and sophisticated ideas.

Emphasis added.

1. All your files are available on different platforms (desktop, web, iPhone) without much hassle or delay.
2. While the various clients (desktop, iPhone, etc) could probably do per-user encryption, the web interface doesn’t spend a lot of time decrypting files in JavaScript (or Java or Flash or some other way of doing it).
3. Even large files can be instantly moved to “Public”.
4. The fact that it’s possible to instantly share an entire folder with someone else.

There’s probably some way to do each of these with proper encryption. For the last point, they could perhaps have a separate key for each folder, then give others access to that key when a folder is shared. And with some creativity there are probably ways to implement every Dropbox feature in a fully secure way. But my guess was always that it would be a huge hassle to have that level of security with a service like Dropbox.

All in all, Dropbox just “feels” like a service where they have access to everything (with proper access controls of course). Kind of like I always knew that authorized Google employees could read my email even though I never read the terms of use.

Different kinds of cloud services will always have different security tradeoffs. I won’t encrypt everything in my Dropbox because I want easy web and phone access to the kinds of documents I use Dropbox for. My 1Password files are in Dropbox, but they have their own iPhone app that can decrypt them, and I can live without web access to my passwords.

I encourage everyone to be careful about their Dropbox use and there are certainly things I wouldn’t include in my Dropbox, but that I would include in my Backblaze backups. And I don’t even trust Backblaze fully.

GF describes a different kind of balance:

SpiderOak, by contrast, cannot disclose its customers’ files, even if it wanted to. That is because it lacks tools to tap any of the data it stores on behalf of users. However, this “zero knowledge” means that if a user loses his key, he can never again access those data.

This is more secure and somewhat less practical than CrashPlan’s tradeoff, also described in GF’s post, but you are still reliant on SpiderOak’s application. They could easily be compelled by a court to introduce a back door that sends your encryption keys back to the bad guys. What, I’m paranoid? It happened.

I believe there are ways to use the cloud in a fully secure way, but you can’t rely on the cloud vendor’s software. If you use open source software to encrypt your files and then upload them to Amazon S3, it would be very difficult for baddies to read your files. Duplicity is an open source backup program that can use this security model.

(This is based on some of my comments on Hacker News.)

This sounds quite reasonable, but it makes me wonder about the governance of nonprofits. Fama and Jensen (1983), the definitive work on separation of ownership and control, stress the importance of residual claims. Owners of residual claims on the firm—shareholders in the case of a corporation—are in the best position to monitor the firm because as residual claimants they stand to benefit, in most cases, from improved governance.

Nonprofits don’t have residual claimants. This is a more fundamental definition of “nonprofits” since many nonprofits actually have profits, but almost all nonprofits are subject to a non-distribution requirement, meaning that profits cannot be distributed to members or anyone else. There are no residual claims on nonprofits by design.

In nonprofits that are primarily funded by endowments, especially those with self-perpetuating boards as is common in the United States, governance is more or less hopeless because there is no external governance mechanisms. Governance will be good if the board members happen to behave well. Fama and Jensen point out that some nonprofits have very extreme bonding mechanisms, such as the poverty and celibacy vows in the Catholic Church, as additional governance mechanisms.

In the case of nonprofits without large endowments that are mostly funded by current donations, you might expect monitoring to be done by donors. If the nonprofit doesn’t behave well, donors will stop donating and the managers will lose their jobs (“private benefits” in the governance jargon), so managers will tend to behave well.

It seems to me that this model of governance would work best if donors actually earmark and target their donations quite narrowly. Maybe your favorite charity should spend more money in Haiti than Japan, or perhaps move resources away from Haiti to more worthy countries. You could trust that the charity’s managers will do this, but why not force their hand by earmarking your donations to the most worthy country (not Japan)? Donors, acting through the market for donations, will then have maximum control over how charity is directed and delivered.

What, then, is the agency theory of nonprofits that is consistent with Felix’s (and others’) recommendation that you give unrestricted donations to large, well-known charities? How can unrestricted donations be good for governance, and how can it be good simply to give to the most reputable large charity?

I think that first of all you need relatively large information acquisition costs at the individual donor level, so it’s costly to judge whether Haiti or Darfur or some third country is most worthy. Second, there has to be some mechanism (and enough information) for choosing the “best” charity, which right now seems to be MSF. I know that outfits such as Guidestar claim to do this. So the assumption is that Guidestar is able to tell you “give to MSF but not Yéle,” but not how to earmark your donation. Is this plausible? Is there a better theory out there?