Daily Archives: April 3, 2009

Diversion–Highway Fatalities and Lemons

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Derek Lowe of Corante’s ‘In the Pipeline’ (a drug-discovery blog) points to this graph in an article by Bristol-Myers Squibb’s Stephen Johnson, titled, The Trouble with QSAR (OR How I Stopped Worrying and Embrace Fallacy).

Lowe writes, ‘The most arresting part of the article is the graph found in its abstract. No mention is made of it in the text, but none has to be. It’s a plot of the US highway fatality rate versus the tonnage of fresh lemons imported from Mexico, and I have to say, it’s a pretty darn straight line. I’ve seen a lot shakier plots used to justify some sweeping conclusions, and if those were justified, well, then I’m forced to conclude that Mexican lemons have improved highway safety a great deal. The vitamin C, maybe? The fragrance? Bioflavanoids?

‘None of the above, of course. Correlation, tiresomely, once again refuses to imply causation, even when you ask it nicely.’

I’m sure the readers of Steve’s Politics Blog know the difference between correlation and causality but it is always nice to have an amusing refresher.

BTW, In The Pipeline is one of the many blogs in the Corante family. Check them out; you may find a few that interest you. [I stumbled upon Corante years ago and then met the founder, Hylton Jolliffe, at the tennis courts where, to my surprise, I learned he is the son of one of my tennis buddies.]

I now return you to your hard-core politics and economics.

-RichardH

Bailed-out banks eye toxic asset buys

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In a 25 March 2009 post (Karl Denninger’s ‘Open Letter to the Ombudsman’ on the PPIP), I mentioned the possibility of troubled banks buying each other’s troubled assets at inflated prices and gaming the system.

On 2 April 2009 in the Financial Times, Bailed-out banks eye toxic asset buys indicates Citigroup, Goldman Sachs, Morgan Stanley, and JP Morgan Chase, are indeed thinking of buying toxic assets of their competitors.

The FT said, ‘The plans proved controversial, with critics charging that the government’s public-private partnership – which provide generous loans to investors – are intended to help banks sell, rather than acquire, troubled securities and loans.

‘Spencer Bachus, the top Republican on the House financial services committee, vowed after being told of the plans by the FT to introduce legislation to stop financial institutions ”gaming the system to reap taxpayer-subsidised windfalls”.

‘Mr Bachus added it would mark ”a new level of absurdity” if financial institutions were ”colluding to swap assets at inflated prices using taxpayers’ dollars.” ‘

Read the whole article.