Investment

I am less concerned about who will succeed outgoing OMB Director Peter Orszag than what the new budget director will do.  We face an unusually high unemployment rate of 9.7 percent and ridiculously low interest rates, even out to 30 years.  Cheap credit and idle resources present a great opportunity to borrow and spend, particularly for things we know we need.

I have long been a fan of countercyclical government investment.  In January 2008, I proposed a better way to deal with downturns and a budget that plans for the future as a means of substantially increasing our infrastructure investment at the most opportune times in the business cycle.  At the time, I was trying to push back against calls for "timely, targeted, and temporary" measures that would widen the deficit without building anything of lasting value.  While that phrase has fallen out of fashion, the sorts of policies being discussed -- like the patchwork of relief programs that died in the Senate last week -- are the same old stuff.  It is a sign of how poorly our system of governance works that we cannot even plan for something that we have been enduring for two and a half years.

Wall Street analyst Ken Posner has written a must-read about analyzing data and decisionmaking -- Stalking the Black Swan. The Black Swans are "the seemingly improbably but highly consequential surprises that turn our familiar ways of thinking upside down." It's rare to find a book that combines this much real world investment experience with hard earned lessons on the limits of computer modeling, information overload, cognitive dissonance, information asymmetry, Monte Carlo methods, and good judgment. I worked for Ken and his colleagues for years and developed great respect for his analytical abilities, particularly his willingness to weigh new data and alternative theories. Keeping an open mind in this field is no mean feat. If you're an investor or a decision-maker of any kind, you will be rewarded by your investment in this book.