Month: July 2014

Thou Shalt Not Commit Logical Fallacies

I’ve been doing some studying, and through exploring some links, I came across a website: Thou Shalt Not Commit Logical Fallacies. Just in case you weren’t sure, logical fallacies are flaws in reasoning.

The folks over at the website have organized some common logical fallacies in a fun way — they have symbols dedicated to each fallacy.  It seems as if the site organizers are trying to start a movement, as they invite people to send applicable links to those who commit logical fallacies.  For those who commit too many logical fallacies to count (come on, you know a few I’m sure, and if not, think:  local politician, corporation or annoying family member), you are welcome to download the Logical Fallacies Poster or purchase it from the website to give as a ‘gift’.

I think it would be fun if each fallacy came with a recording of a booming, god-like voice shouting:  “THE LOGICAL FALLACY YOU HAVE COMMITTED IS….” or tightwad Tuvoc’s voice from Star Trek:  “You are not logical”.

None of us are perfect, but rational thinking is cool.  Let’s all jump on the rational bandwagon together.  Everyone is doing it. Pourquoi?  Parce que.

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Creativity with Tax Loopholes

I just read an article on Zero Hedge about how a hedge fund company called RenTec made billions using an elaborate scheme involving basket options to avoid payment of federal tax via a tax loophole.  Most of the information in the article admittedly uses jargon and flow diagrams I don’t completely understand, so I’ve tried to make sense of the general idea it is trying to convey here, like I am a six-year-old.

A basket option, according to Investopedia, is basically the same as other options that get traded, except that with a basket option, a holder is able to buy or sell underlying assets, which might be things like commodities, securities or currencies, together as a group.  The way I am interpreting this is, instead of just having apples in one’s basket, there are lots of other fruits like bananas, pineapples, pomegranates and kiwis that can be traded along with the apples.  The price of the whole basket is based on the average prices of all the fruit.  This is good for hedging because if the price of kiwis drops, there are still other valuable fruit to sell in one’s basket.  But I digress.

If I understand properly without knowing all of the details, RenTec was able to use basket options to its advantage by involving large banks like Deutsche Bank and Barclays Bank, both of which had the infrastructure to sell the options, ahem, fruit baskets.  In effect, the banks leased their “buildings” to RenTec so it could package the “fruit” into baskets.  The banks loaned out their “delivery trucks” to RenTec too, so it could deliver the fruit baskets.  The banks just said, “as long as you’re paying us, here are our buildings and trucks, but we don’t want to know what you’re doing with them, even though we actually know what you’re doing with them, but we’ll pretend we don’t, ‘nome sayin’?”. RenTec in turn gave these banks part of its very good profits to lease the buildings and the trucks.

Whatever profits RenTec made from selling baskets to its customers were given to another RenTec dummy “advising” company. After the dummy company took its share, it gave “investment advice” and some control back to the banks (kind of like drug dealers hiding money with “managers”  in offshore bank accounts, but we all know that the drug dealers ultimately control the drug trade…).

Then the basket “packaging/delivery” cycle happens all over again.  Except that in this case, the delivery step happened really fast, like on the order of seconds, so RenTec could sell a lot of baskets really, really fast, because lots of people liked their fruit baskets and wanted to buy a lot of them quickly.   There is nothing wrong with this scheme, except that RenTec was calling the profits it made long-term capital gains when it fact these gains were made in the short-term.  The tax rates on short-term gains are substantially higher.  RenTec instead generally paid the lower tax rate.

This scheme had been in operation since 1998 until 2013.  While the Great Recession happened, these guys were literally laughing all the way to the bank.   I am not quite sure why the scheme stopped functioning in 2013, but I am guessing the heat was on them, so they stopped (kind of like the cops wiretapping the drug dealers in “The Wire”; the dealers have to come up with increasingly more sophisticated ways to deliver their goods…).  So, today there is a U.S. Senate Subcommittee hearing regarding the RenTec issue, but, unlike drug dealers, what RenTec did is in a legal grey area, apparently.

What is laughable is that the U.S. National debt continues to increase like crazy.  The only time the U.S. federal debt has been higher as a % of Gross Domestic Product, was during WWII.  The guy who created RenTec, Jim Simons, happens to be one of the richest people in the world.  I have to give him credit for his tax-avoiding creativity; in developing a scheme which provides absolutely nothing of value to the advancement of the human race.  While his bank account grows, so does income inequality for the rest of us. I also have to congratulate all the lawmakers who can’t seem to keep this stuff under control.  Good job all, and good luck with the hearing!

Cleverly found the loophole, but didn't get any marks for the incorrect answer.

Cleverly found the loophole, but didn’t get any marks for the incorrect answer.

 

Quitting with Creativity (and Impunity)

“I quit”:

http://www.departurememo.com/

The above memo reminds me of one Monday morning when my boss proudly announced to me that  he “worked all weekend”.  I replied, “Good for you.  I made cheese soufflé“.  I don’t think he understood what I meant; although, I think work-life balance was more acceptable where I was in comparison to this woman’s former workplace.  It can’t be easy paying back those United States law school loans, though…

The Looming Crisis in Higher Education

The excellent article below was posted on the American Association of University Professors’ blog and was written by Martin Kich at Wright State University.  I agree with all of what he writes, except that we have a ‘looming’ crisis; we’ve had a crisis for quite some time now.

ACADEME BLOG

The “real problem” behind the exploitation of adjunct faculty is quite obvious: universities have continued to produce a reasonable number of Ph.D.’s but no longer are willing to hire a reasonable number of them into full-time, never mind tenure-track, positions.

This situation will change when enrollment in graduate programs starts to contract, and even to crater, because students confront the reality that they have significantly less than a fifty percent chance of finding full-time employment after completing their doctorates—when they confront the reality that the majority of them are spending up to a decade or more in graduate school, and in the process accumulating far more debt on average than undergraduates accumulate, all in order to earn a wage comparable to what they could earn as an “associate” at WalMart.

Because the current pool of adjunct faculty has been built up over several decades but is continually eroded by the…

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American Airlines Part 2

So it’s been one week since I contacted American Airlines via e-mail to complain about the fact that their staff told me to sleep at O’Hare Airport when my flight was cancelled.

Today I attempted to call a 1-800 customer relations number to speak to a real person.  I looked online to find out that one can only make reservations with a real person, but cannot complain to one (this can only be done in writing – this fact was confirmed by the reservation agent I spoke to over the phone).

I asked the agent how long I might expect to wait to receive a response to my complaint from American Airlines, and was told that the response time when submitting electronically is typically 3 days or so, assuming that the situation wasn’t too ‘complex’.  The complex complaints apparently can take up to 2 months.  As I said, I’ve now been waiting 7 days and I would argue that my case is not complex.

This is a scary trend it appears – some airlines, including Air Canada for example, will accept customer complaints only in writing. On one hand, I can see how receiving complaints in writing could help the airlines to deal with complaints more efficiently, and would eliminate staff having to be on the receiving end of verbal abuse from angry customers.

On the other hand, this writing/e-mail only system really helps the airline staff to get away with providing lousy service as I imagine that many people would find it easier to speak over the phone to complain.  If it’s more difficult to complain, less people will do it.  Not to mention the fact that this type of system is about as faceless and kafkaesque as it can get.  How exactly can I negotiate a settlement if I can’t speak to a person?  Not very easily of course.  This way, the airline can ultimately decide when and how it wants to settle, because I doubt that someone would really want to go to the trouble of replying to the airline’s settlement offer via e-mail a second, third or fourth time.

If the airline provided generally good service in the first place, then it should see fewer complaints, right?

In the meantime I’ll keep posting about this – let’s see when and how American Airlines responds to what I would consider a reasonable request for a refund for the hotel and transportation to and from the airport.

Apparently I'm not the only one who thinks airlines act in a kafkaesque manner! (from www.andysinger.com)

Apparently I’m not the only one who thinks airlines act in a kafkaesque manner!
(from http://www.andysinger.com)