Downside Risk for the "New" GM

The new post-bailout, post-bankrupt GM has been generating some buzz on Wall Street this week. Yesterday, its stock jumped 2.8% in premarket trading after investment groups initiated coverage on the new stock. Credit Suisse gave the new GM an "Outperform" rating and a $43 per share price target (the stock was at 36.0 at the end of trading, see above). JP Morgan gave it an "Overweight" and a $44 price target while RBC Capital Markets set an "Outperform" rating. What should we think about this enthusiasm for "Government Motors." Is it just more "Irrational Exuberance"?
Let' s look at what history can tell us. In the time series above I've spliced together the old GM stock price history (MTLQQ.PK) with the new stock (GM) after the IPO in November. The red dotted line displays the one-step ahead predictions for the best fit model [1] to the stock trend. The best-fit model is a random walk, that is, today is like tomorrow except for random shocks! A "Random Walk Down Wall Street," indeed!
That's a surprise result for the world's largest multinational automaker, the engine of growth for the post-War U.S. economy [2]. The graph above shows a plot of the GM random walk model without the random shocks. Until mid-2005 (the beginning of the end?), the stock price did not stray far from it's initial value in the 1960s. What should we expect for the future?
"More of the same" would be a good guess. The graph above shows the random-walk forecast for 2011 with confidence intervals. What this shows is that any stock price between 10 and 50 is probable (within the 98% confidence interval for a random walk). The price targets from the investment groups seem a little more conservative. What's also interesting is that the investment houses don't talk about the downside risk.

My opinion: stocks that are random walks without even some observable drift are best left to the investment houses. Supposedly, the "smart money" can anticipate shocks and trigger events in ways that the average investor cannot. But, what do I know. I'm not even the 800-pound gorilla in the room!

[1] To find the best fit model, I used some statistical techniques to search among various candidate models ranging from business-as-usual models to models based on a broad index of secular and cyclical performance in the U.S. economy. None of these models fit any better than a random walk. The result doesn't mean that at some time in the future I won't find a model that outperforms the random walk.

[2] Some of the choppiness is due to stock splits. GM has had three stock splits since 1950, including a 2-for-1 split in October 1950, a 3-for-1 split in September 1955 and a 2-for-1 split in March 1989. The company has also adjusted its stock after spinning off subsidies such as Hughes and Delphi.

The Wizard of Oz Was A Fraud

The was a great Op-Ed piece in a recent NY Times by one of Bernie Madoff's investors (not many of them have, understandably, said much). Michael Kubin gives his hard-won lessons for investors:

Make sure the accountants are reputable, the results transparent, insist on meeting the managers in person. Keep in mind that risk and reward always travel together, that if something sounds too good to be true it usually is, that the law of gravity cannot be repealed, that you’re seldom warned the floor has just been waxed. Remember the Wizard of Oz was a phony.

Lesson learned! Unfortunately, the lessons were draw from the well-known words of Lord Polonius in the Tragedy of Hamlet:

And these few precepts in thy memory
See thou character. Give thy thoughts no tongue,
Nor any unproportioned thought his act.
Be thou familiar, but by no means vulgar.
Those friends thou hast, and their adoption tried,
Grapple them to thy soul with hoops of steel;
But do not dull thy palm with entertainment
Of each new-hatch'd, unfledged comrade. Beware
Of entrance to a quarrel, but being in,
Bear't that the opposed may beware of thee.
Give every man thy ear, but few thy voice;
Take each man's censure, but reserve thy judgment.
Costly thy habit as thy purse can buy,
But not express'd in fancy; rich, not gaudy;
For the apparel oft proclaims the man,
And they in France of the best rank and station
Are of a most select and generous chief in that.
Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine ownself be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
Farewell: my blessing season this in thee!

The 1939 movie The Wizard of Oz was, of course, made during the Great Depression.

Global Warming: Why Are The Winters Getting Colder?

In today's NY Times, seasonal weather forecaster Judah Cohen explains (here) how the Earth system can warm at the same time that winters in the Northern Hemisphere (NH) become cooler. Cohen also points out some problems in long-term weather forecasts and the Global Circulation Models (GCMs) used to predict climate change.

Here's the causal explanation (see the directed graph on the right): Global warming increases Arctic sea ice melt. As the sea ice melts, more moisture is released into the atmosphere. More moisture means that there will be more snow in Siberia. As snow cover increases, more energy is reflected back to space (the Earth's albedo or "whiteness" increases and white objects reflect more energy).

As more energy is reflected back to space, an Arctic cold air dome forms over Siberia. The large dome of cold air shifts the jet stream from its normal West-to-East direction to a more North-South oscillation. As the Jet stream moves from North to South it acquires Southern moisture and pulls down Northern Canadian cold air (in the US).

The predictions from Cohen's model for the U.S. (displayed at right) show that the Northeastern U.S. was predicted to be colder than usual while the Southern U.S. was predicted to be warmer. The actual trends (lower graphic) were very close to the model's predictions.

Long-term weather forecasts are largely based on the El Nino/La Nina-Southern Oscillation (ENSO). Warming or cooling of the tropical Pacific Ocean on a five-year cycle cause weather disturbances for the entire planet. Since the oscillation is quasi-deterministic and since the effects of the oscillation on weather are known from historical data, long-term weather prediction is possible. The current long-term forecasts do not take into account Siberian snow fall and neither do the GCMs that are used to predict global warming. We can expect some improvements in forecasting and climate change predictions as ENSO and the Arctic snow cycle are better understood.

Expansion of Government: Federal Employment

In today's NY Times (here) Paul Krugman points out that Republican presidential candidates have made a campaign theme out of expansion of the Federal government and particularly the expansion of the federal workforce. The data [1] [2] and a naive forecast are displayed above (read a fact check of outgoing Minnesota governor Tim Pawlenty's numbers here).

Federal employment has actually been decreasing since the Vietnam War. The small expansion during 2010 was purely a result of the temporary employment of census workers. Unfortunately, the naive forecast above is not very realistic.
Federal employment is probably too low right now as shown by the forecast confidence intervals above. Given world military events, increasing threats to homeland security and increasing need for financial regulation based on the global financial crisis, there is nowhere to go but up for Federal employment. The expansion will be a continuing source of campaign rhetoric during the next presidential cycle.

[1] The data can be found here.

[2] Data comes from agency 113 monthly submissions and covers total end-of-year civilian employment of full-time permanent, temporary, part-time, and intermittent employees. Executive branch includes the Postal Service, and, beginning in 1970, includes various disadvantaged youth and worker-trainee programs. Uniformed Military Personnel data comes from the Department of Defense.

EIA Projects Climate Catastrophe?

The US Energy Information Agency (EIA) published an early release of the 2011 Annual Energy Outlook (here). In the report, the EIA projects that energy-related CO2 emissions will grow by 16% from 2009 to 2035 to a level of 6.3 billion metric tons of carbon dioxide equivalent (1.7 GtC0). The non-skeptic climate blogs (here and here) are calling the projections a "catastrophe," except that the EIA projections are usually wrong (the EIA's own evaluations of their forecasts are here): (1) they assume the future will be like the past, (2) they don't model policy changes, (3) they underestimate the role of technology (reductions in emission intensity), and (4) have ignored the possible effects of peak oil.

To this list, I would add that the EIA published no confidence intervals with the projection (see my forecast with confidence intervals here). In a well-constructed model, the confidence intervals account for the probabilistic effects of unanticipated changes in the future. The factors that might avert catastrophe and can be anticipated, should be built into models (a brief and completely inadequate discussion of the IEO2010 models can be found here).

Even with anticipated future changes that might reduce carbon emissions, solutions based on policy wedges (here) require a "...staggering amount of effort by both private and public sectors" if we are to keep the economy growing while at the same time reducing carbon emissions. Reducing economic growth rates, which clearly in both the EIA and my own projections did happen as a result of the global financial crisis, would provide the breathing room to implement policy wedges.

Unfortunately, our only thought right now is to get out of the global financial crisis and return to a level of "robust economic growth" and, as a result, robust CO2 emissions.

Controlling Carbon Emissions

On November 10, 2010 Nature published an article updating CO2 emissions for the world. The article noted that "global CO2 emissions from fossil fuel burning decreased by 1.3% in 2009 owing to the global financial and economic crisis that started in 2008; this is half the decrease anticipated a year ago." In other words, if there is any doubt about the link between CO2 emissions and economic growth, the global financial crisis provided a natural experiment proving the link. It's very difficult (OK, impossible) to run experiments on the world system, so the result is an important finding.

The study goes on to note that once the global financial crisis is over, the economy is expected to resume growing (the IMF, here, expects the global economy to grow by 4.8% in 2010) and emitting at the same pace. The only hope for reducing carbon emissions then is to reduce the carbon intensity of the global economy, that is, quickly shift to low-carbon forms of energy (solar, wind, nuclear, etc.). To me, the shift seems unlikely (cars, buses, trucks and trains are unlikely to run on low-carbon fuel any time in the near future--even all-electric cars will run on energy from coal-fired power plants).

But, the global financial crisis may have been a blessing in disguise, at least for climate change. The time series graph above (the y-axis is CO2 emissions in PgC per year for fossil fuel burning and cement manufacturing) takes the new emission data from the Nature study and forecasts it out to 2020 assuming that the world economy grows by 4%. Although the financial bubble and collapse are clear from the data (and are predicted quite well by the model), the future growth of emission is relatively flat. Small reductions in economic growth would go a long way to stabilizing CO2 emissions. Experience with the financial bubble just might lead to more modest growth than the IMF anticipates. And, slower growth would provide some breathing room to reduce the carbon intensity of the global economy.

The Nature article also has updated analysis of the global carbon cycle. I'll analyze some of that in future posts.

GM and Executive Compensation

GM CEO Dan Akerson in a speech to the Economic Club of Washington, D.C. complained that GM needed to increase it's level of executive compensation to retain top talent. This is at the same time that the Obama-McConnell compromise is promising tax cuts for wealthy Americans and Federal employees are being subjected to a compensation freeze.

Aside from demonstrating that Dan Akerson is not politically very adept, maybe he should wait until the current GM executive team (him included, who is making $9M/year) can demonstrate some results before bellying up to the compensation trough. My forecast for GM stock (above) does not predict a very bright future, at least through 2020.

What's Up With CNN?

CNN is having trouble filling their prime time spots. Retiring Larry King will be replaced by Piers Morgan and Campbell Brown was replaced by Parker-Spitzer, the later of which is reported to have stagnant ratings. At the same time, CNN has tried to inject some humor in their line up with "What The Week" (pictured above) hosted by stand-up comedian Pete Dominik and "Punchline" which features cuts from the late-night comedians (for example, here).

I'm not sure about CNN's commitment to comedy since neither of the comedy features are listed on the CNN web site. CNN might think about taking it's cues from the Daily Show and Colbert Nation. At the same time, they could skip all the cat-up-a-tree YouTube clips and other human-interest pieces that are neither news, funny nor interesting. Comedy has proved it can do all these things and get an audience.

The Drunkard's Walk and the Moment of Truth

The National Commission on Fiscal Responsibility and Reform has finally issued their report on the U.S. Deficit, "The Moment of Truth". They are not the only ones trying to seize the moment. The Economic Policy Institute has issued its report "Investing in America's Economy: A Budget Blueprint for Economic Recovery and Fiscal Responsibility." And, the Bipartisan Policy Center has released its report "Restoring America's Future." There are enough recommendations in and questions raised by these reports to keep many policy analysts busy blogging for many years in the future. Before jumping into the issues, I'd like to put a stake in the ground.

What do we expect to see when we look at a historical time plot of the U.S. Deficit? If the deficit hawks are right, we should see the deficit increasing uncontrollably over time when, in fact, the deficit should always be zero. The Keynesian viewpoint is that we should see periods of deficits during recessions followed by periods of surplus during recoveries. In other words the deficit should be a drunkard's walk, randomly moving from surplus to deficit based on shocks to the economy. The only issue is the range of movement: conservatives think there should be very little, if not zero movement and liberals say it depends on economic conditions.

The first figure above, using data from the CBO, fits a random walk model to the U.S. deficit. Although the fit is not bad, it looks like the model is always "catching up" and missing the turning points. What is striking about the graphic is that the deficit "excursions" are increasing in amplitude: economic shocks getting worse, spending responses ("bailouts") and attempts to "stabilize an unstable economy" getting more desperate.

Both the conservative and Keynesian views miss seeing that the U.S. deficit is part of a system. During an economic downturn, there is a flight to quality. Investors want to unload their higher-risk investments for the safety of U.S. debt which is covered by the "full faith and credit" of the U.S. government. During normal times, purchasing U.S. debt allows country's with trade imbalances (e.g. China) to do something safe with their dollars.

When we add debt held by the public into the random walk model, the predicted fit is much better (second graphic above). For the U.S. deficit to exist, there has to be a counter-cyclical market for U.S. debt. The market is somewhat self-correcting. If investors don't want to purchase U.S. debt, the only other way to create a deficit (as is the case in many "debt crisis" countries) is to print money.

What does this all have to do with the common explanations for the U.S. deficit being repeated in the policy echo chamber? Is it those mandatory entitlement expenditures such as Social Security, Medicare and Medicaid that must be eliminated to eliminate the deficit? Is this a reasonable conclusion from the graphics and discussion above? Is it the entitlement programs or the shocks to an "unstable economy" that are driving the deficit? It all depends on the time path of the entitlement programs compared to the time path of the deficit, a topic I'l talk about in future posts.

A Scientific Basis for Policy?

Wisconsin's newly elected Republican governor, Scott Walker, recently commented that

“We must restore trust in the Department of Natural Resources by requiring more transparency and accountability while ensuring decisions are based on objective science and the best interests of the taxpayers and license buyers."

The phrase that caught my eye was "...ensuring decisions are based on objective science..." I wonder what that means? Walker, along with a lot of other Republican Governors, refers to the IPCC's attempt to present the scientific consensus on global warming as the work of "discredited scientists." Really? Walker wants to ban stem cell research conducted by, guess who, scientists. Walker vows to cancel a high-speed rail project between Milwaukee and Minneapolis, even though political scientists think cancellation will obviously take jobs out of the Wisconsin economy (Walker ran on a pro-growth platform claiming that he will create 10,000 business and 250,000 jobs over the next four years, really).

Up to this point, our governor-elect has proved himself a master of Orwellian doublethink. He has also promised to reorganize Wisconsin government. I wonder whether this will involve creating a Ministry of Truth?

WikiLeaks, Private Manning and Information Sharing

Yesterday on CNN's Situation Room, Jeff Toobin commented that the release of 250,000 US Embassy Diplomatic Cables by WikiLeaks shows how information sharing (connecting the dots) has gone too far since 911.

Private Bradley Manning, whether he did or did not leak the documents, should never have had access to State Department diplomatic cables. Routine access to diplomatic cables is not needed by a low-level intelligence analyst stationed in Iraq. Secretary of Defense Gates said that "What this illustrates is the incredible amount of trust we place in even our most junior men and women in uniform." To quote one wag, "Trust But Verify".

Hopefully, Secretary Gates understands that the problem goes deeper than the platitudes. The US government's entire concept of "information sharing" is based on the bureaucratic mentality that everyone has to have access to all information for anyone to connect the dots. The idea, as I've discussed in prior posts, is faulty.

The first thing anyone needs to know is that there is information on a person or an event in some government system. That can be handled by a searchable index (see the use case graphic above, click to enlarge). Whether someone gets beyond the index to actual State Department cables, for example, should (1) depend on need to know, (2) be controlled by the agency that owns the data and (3) be carefully tracked and analyzed. Private Manning and every other junior man and women in uniform does not have a blanket need to know. Secretary Gates can' t seriously believe that they do.

Unfortunately and obviously, the information sharing systems in place today (such as DOD's and State Department's SIPR-net) cannot enforce need to know while allowing available information in all government systems to be connected. The systems are faulty because the underlying information sharing concept is flawed. Prosecuting Julian Assange and Bradley Manning, the preferred bureaucratic response, will not solve this problem.

Unemployment Insurance and Employment

Yesterday, the U.S. Senate rejected the Unemployment Insurance Stabilization Act of 2010 that would have continued unemployment benefits until January 2012. Evidently, Republicans first want the Bush era tax cuts extended for their wealthy constituents.

Aside from the naked class-based motivation for not also extending unemployment insurance (UI), what are the likely consequences of the Senate's action?

The graphic on the right summarizes the arguments (read more here, here, here, here, here, and here). The Great Recession created our current unemployment problem by reducing GDP growth. UI, enacted during the Great Depression, is one of the built-in stabilizers in the economy that allows employees to ride out brief economic downturns. UI also provides an immediate boost to consumption since the unemployed immediately spend what they receive in benefits.

The right-wing criticism of UI is that it reduces job search. Granting that there might be some small reduction in search activity due to UI (the data, however, show that UI actually increases job search), if the jobs are not there, it doesn't matter how hard one searches. Until the Great Recession is over, employment will continue to be depressed. And, the failure by the Senate to extend UI will only serve to prolong the Great Recession through a reduction in consumption.

TSA, Probability and Profiling

US airport security is enough of a mess to generate a great SNL parody (above and here). My question, as a statistician, is how many underwear and shoe bombs have been detected with enhanced screening procedures? If the answer is "zero" or can be written in scientific notation, a lot of innocent people are being subjected to unresonable search and seizures.

Asra Nomani, a Muslim reporter with the Daily Beast, has proposed (here) that we rethink profiling. From a statistical standpoint, profiling on every relevant observable factor increases the probability of identifying terrorists. On the other side of the debate (hosted by Intelligence Squared US, here) was Michael Chertoff, former director of Homeland Security. Chertoff argues that "...racial and religious profiling would be not only ineffective, but counterproductive from a security standpoint." My comment to Mr. Chertoff would be (1) "Prove It" and (2) who said "racial and religious profiling" was the only way to profile.

TSA and Health Care Reform

Recent enhanced screening measures (body scanners and more invasive pat-downs) are starting to upset airline passengers in the US. At the same time, Republicans in Congress are calling for the repeal of health reform.

Although the Republicans have, so far, been quiet on rolling back TSA security measures, here's an idea that will allow the US to have strongly invasive airport screening while at the same time shifting the cost of some routine health care procedures to the private sector (something Republicans should like).

Combine routine proctological and gynecological exams with air travel. We can screen for enlarged prostates, positive pap smears, and underwear bombs all at the same time. Yes, people will have to get to the airport a little early but when was your primary care provider ever on time? And, for those who travel a lot, on-line medical records will allow TSA to determine that someone is good to go.

I suppose it would be simpler to have people pre-screened for air travel (much like the military and some law enforcement agencies award security clearances after an investigation), but that doesn't solve our health care problem. There just aren't enough primary care physicians.

Stack & Tilt: My Finish

After not having very good numbers in the hitting area, surprisingly my swing ends up in a pretty good place (good enough to look OK at the finish but not produce very good shot results). My shoulders are rotated 108 open to the target (Tour average is 138) and my hip turn is 98 degrees open to the target (Tour average is 106). There is more potential here that would result from more body rotation during the swing. Thirty degrees more rotation at impact would put me right where I need to be on the follow through.

The changes needed in the start of my swing are (1) better posture at address, (2) more weight shift on the backswing, and (3) better arm position at the top--as can been seen from the after video (here). I've been playing with the new (old) swing for the last two months. The results have actually been very good. In future posts, I'll show a video of the new swing and we can see if the follow through looks any better.

In retrospect, I don't regret the Stack & Tilt Journey. It helped me understand my golf swing better and also understand my bad shots and their causes. From the sequence of still images and analysis (here) it should be clear that I never got to the S&T model swing. If you plan on trying the swing, video taping is essential. It would also be useful to have an S&T instructor although they seem hard to find. The availability of good instruction and high-quality video analysis at GolfTec (here) or at Golf Galaxy (here) is one good reason to stick with the traditional golf swing.

Stack & Tilt: My Follow Through

Here, the result of casting (releasing the club in the downswing) and not rotating my body enough toward the target clearly generates a poor follow through. Notice how Ernie Els (left frame) has rotated his body and released his right arm more fully toward the target.

This a point in the S&T instruction that I never really understood. Plummer and Bennet talk about extending the arms but not shaking hands with the target as Ernie Else is doing. Ernie is fully releasing the right hand directly toward the target. I'm not sure what the S&T instruction is driving at. The result for me was probably not what S&T instruction intended.

Stack & Tilt: My Swing At Impact

Here is my swing at impact. Particularly notice the right two images (me against Tiger) and the associated numbers. All these numbers (shoulder turn, shoulder tilt and hip turn) should be in the 40-degree range at this point. My shoulder turn is at 18 degrees open (Tour average is 48 degrees open to the target), my shoulder tilt is 26 degrees right (Tour average is 43 degrees) and my hip turn is 30 degrees open (Tour average is 42 degrees open). I'm basically in the same position I was at address. At impact, I'm not bent over enough so that my body can clear out of the way and turn more toward the target and my shoulder tilt is not enough to maintain my wrist angle (the flying wedge) to prevent casting. Notice how Tiger is bent over more at impact with his hands further away from his body, his body turned much further toward the target with his right shoulder working down and under the chin.

Notice in the image above that I'm adding loft to the club (there should be a straight line from my left shoulder to the club head at impact as in the Ernie Els image). In other words, I'm hitting the 7-iron in this image as if it was an eight or nine iron, thus the predicable loss of distance and inability to control ball flight. Notice that my shoulder turn (18 degrees) is in the red numbers, that is, not enough shoulder turn toward the target.

Stack & Tilt: My Downswing

Here's where my problems with consistency of contact and power loss start happening (I thought it was because I'm getting old).

Notice that both Ernie Els and Tiger have maintained their wrist angle (the flying wedge) late into the downswing. In my case I have released that wrist angle (cast the club) early loosing leverage and power. My body is in my way (not rotated enough toward the target) forcing the casting motion. Maintaining the flying wedge is not something that you can think about (a negative swing thought). It's the body rotation that maintains the flying wedge (something I wasn't doing and didn't understand fully from the S&T instruction books and DVD).

The biggest thing for the tour player on the downswing is body drive, right elbow moving out in front of the body, club on the swing-plane line, lots of right leg drive, right foot off the ground, left pocket and left leg visible, and the left side of upper body visible. Body rotation gets you from the top to this point, the arms and the club are along for the ride.

In my swing, the club is underneath the swing-plane line (I'm force to adjust two extreme angles to square the club up), right elbow jammed up against the body, body position is static and in the way of my arms, not turned toward the target, no right knee drive, and not clearing the left side out at all.

Here's the reason I'm hitting fat shots. It's not body sway but rather releasing the wrist angle early. This issue is discussed a lot in S&T instruction, I just didn't get it and didn't know how to maintain the flying wedge with the S&T swing.

Unintended Consequences: Afghan War Strategy

The NY Time reports today (here) that the current strategy of killing mid-level Taliban leaders in Afghanistan may have unintended consequences. If mid-level fighters are replaced by people with no allegiance to the current Taliban leaders, the possibility of a peaceful settlement diminishes. The leadership simply might not be able to deliver (for some background on the Afghan War strategy read Bob Woodward's book Obama's Wars).

Supply Side vs. Demand Side

This Sunday on CNN's Fareed Zakaria GPS, Fareed interviewed Paul Krugman (Princeton University Department of Economics) and Raghuram Rajan (University of Chicago School of Business). It was as clear an exposition as I've heard of supply-side vs. demand-side economics and worth watching (here and for more Rajan, here, more Krugman, here, and more Zakaria on this topic, here).

Rajan argued for supply-side measures to return US competitiveness (increased business confidence, improved labor force skill levels, tax cuts to stimulate investment, etc.) while Krugman made the Keynesian argument (the subprime mortgage crisis has reduced consumer demand, business have excess capacity and won't invest or expand until there is more demand, and therefore government has to step in with economic stimulus).

It's hard not to agree with both positions since each is right, in theory. As a practical matter, however, the supply-side solutions only work in the long-term (how long will it take to retrain the US workforce?) and the demand-side solutions may not work at all (the US political system is unable to act quickly enough and with enough unity of purpose to enact a stimulus that would be large enough to have any impact).

Eventually, the economy will heal itself or at least find a new equilibrium. There's just no guarantee that the new equilibrium will be at a high level of either growth or employment.

Stack & Tilt: My Swing At The Top

Continuing with the GolfTec Analysis of my swing, here's me stacked up against Ernie Els (left) and the Stack & Tilt (S&T) model swing (from Six Steps to Stack & Tilt). Here's where the fun starts. First, the GolfTec analysis.

Let's look at Ernie Els (left frame) first. At the top, Ernie is very stable, loaded on his right side, left leg bent a little with left foot on the ground, his head moved back from center about one-half cap width, back leaning away from the target in the "power-V" position, left arm fully extended, ninety-degree angle between the left arm and the golf club, lots of width between the hands and the head.

My S&T swing is leaning toward the target, right leg straightening, head move six inches toward the target, good extension, good wrist hinge, but my right elbow is jammed up against my body (stuck), shoulder turn is 75 degrees (tour average is 89), hip turn is 33 degrees (tour average is 48) which is 42 degrees of X-factor (shoulder turn minus hip turn, for me 75 - 33, tour average is 41 degrees, 89 - 48).

I'm trying to turn on top of myself. Surprise: flexibility is not my problem (I have one more degree of X-factor than the tour player--isn't lack of flexibility why I started S&T?). My rotation is low because I didn't turn into the right space. My top swing position forces me to cast (an early release of the club as you'll see in later stills). In order to hit from the inside, I have to release my wrist angles (the flying wedge) early. My body is in the way for me to make an on-plane downswing.

Compared to the S&T model swing (right image), my swing is way too flat and way too tilted. But, this is where I ended up trying to do S&T from the book. A S&T instructor, I'm guessing, would have pushed my hands a little higher in the air at the top of the backswing and not had me lean as much toward the target. For whatever reason, I never got to that position by myself.

Stack & Tilt: My Backswing (cont.)

Continuing the GolfTEC analysis of my backswing, here I am going up against Tiger Woods (do I have to point out which image is me on the right). Compared to Tiger, I haven't maintained the triangle between my arms (my right arm has started to bend too early to maintain the distance between my elbows) and, as a result, my club head has gone under the swing plane line.

The ideal position, from the GolfTEC perspective, would be to (1) stay on the swing plane line as much as possible, at least during the first half of the backswing and the last half of the downswing and (2) maintain the distance between my elbows as much as possible. Stack & Tilt (S&T), on the other hand, wants the hands to move inward and the arms to stay attached to the body on the backswing. For me, performing the S&T move led me to get "stuck" on the backswing (as you'll see in future posts).

The Tiger takeaway feels very much like my old width swing where my hands moved as far away from my body as possible. What's different is that I'm in a more athletic posture and I feel more room between my hands and body. What the video also helped me to see is that I need to keep my hands and the club head on the swing plane line in addition to pushing my hands back in the width dimension. The reason for this move is to give your hands enough room (distance from the body) to swing freely.

What's somewhat interesting is that in Tiger's swing changes under Hank Haney, the hands moved further inside than under the old Butch Harmon swing. What's also interesting is that I was unable to find S&T still images to match the ones above. The S&T video, however, shows the club head and the hands going inside the swing plane line.

Choking (continued)

One of my US readers pointed me to a Wall Street Journal book review (here) "What Happens Under Pressure: Two books investigate the not-so-fine art of choking." Greg Norman's choke in the 1966 Masters (from comfortable lead to a five stroke loss) is nominated for Choke-of-the-Century. The two books reviewed, Clutch by Paul Sullivan and Choke by Sian Beilock come to conclusions that are similar to Johnah Leher in How We Decide (reviewed in a prior post).

There are a few new insights: (1) The younger you learn your skills, the less you are likely to over-think the situation and choke, (2) People who are basically analytical (anal retentives) have a tendency to over-think and choke, and (3) arrogance ("Pride goeth before the fall").

The recommendations to prevent a choke (at least for sports): (1) distract yourself so you don't over-think the mechanics, (2) keep a steady rhythm, (3) change your technique every so often to avoid going stale, (4) know your abilities (sometimes choking is just not being good enough--more practice, more discipline) and (5) put yourself into competitive situations to learn how to handle the stress.

Choking, Swing Analysis and Swing Thoughts

Jonah Lehrer in a fascinating book titled How We Decide (recommended to me by one of my South African readers) asks us, on page 136 to "Consider one of the most famous chokes in sports history: the collapse of Jean Van de Velde on the last hole of the 1999 British Open". Lehrer argues that choking is the result of the rational brain taking over and creating doubt just at the point we should be relying on trained muscle memory.

If choking is the inevitable result of rational swing analysis, how do we go from analyzing our swings (rational mind) to actually playing golf (automatic muscle memory)? I suspect this isn't as easy as forgetting about our swing analysis when we're under pressure. Choking is an issue at the end of almost every professional golf tournament and today was no exception watching Jim Furyk win both the Tour Championship and the Fed-Ex Cup, the later for a $10 million bonus!

Furyk didn't play that well in the last few holes but got the win with a great bunker shot and solid short put. His thought process on the 17th hole was interesting. He didn't hit a great drive although it was in the middle of the fairway. He had over 200 yards left to the green and was afraid of hitting a jumper (it was raining) with his utility club. He explained in an interview that if he hit over the green he could loose the tournament. The shot he did hit was fat but ended up in the fairway short of the green (a safe miss) from where he bogeyed to be leading the tournament by only one stroke. He had to par the 18th and he did.

Whether or not Furyk choked a little or not, his "rational" play was very different from Van de Velde's play on the 18th hole at Carnoustie. Van de Velde made some miserable decisions after a poor drive that only put him in more trouble and saw his three shot lead evaporate while playing down the 18th hole. All he had to do was play safe, get a bogey or even double bogey to win.

Jonah Lehrer thinks that Van de Velde was "...suddenly focusing on the mechanics of his stroke, making sure that he didn't torque his wrist or open his hips." I'm not sure what he was thinking about but, at the time, it seemed to me that he just wasn't thinking.

Maybe it's fair to say that Van de Velde's swing wasn't solid enough to go on auto pilot when he needed it. It's probably also fair to say that swing analysis is not enough to produce a solid swing that won't crack under pressure. I recall Curtis Strange commenting that when under pressure he had only one swing thought: "Complete the backswing." After all the analysis and experience playing under pressure, it probably boils down to finding that one swing thought!

Stack & Tilt: My Backswing

Continuing the GolfTEC analysis of my swing, here is the start of the backswing with Ernie Els on the left, me in the middle and Stack & Tilt (S&T) on the right. Starting the backswing, what GolfTEC is looking for is weight shift and a stable lower body. The weight shift results from the upper body turning behind the ball. Notice the lines against Ernie Els' back leg and head. The right leg stays within the line but Ernie's head has moved back from the original position. The lower body can rotate to get a full shoulder turn but without swaying (moving the right leg backwards). Contrary to S&T, GolfTEC wants the head to move backward in the backswing and move back a lot (12 inches in my case).

My swing was described as a "reverse pivot" with the weight moving forward to the left foot and my head moving substantially forward of the ball. I could not find an exact S&T model for this point in the swing but if you roll the frame on the right back a bit in your mind, it looks pretty much like what I am doing. About the only thing that GolfTEC liked about this position was that my arms and hands have good extension and good wrist hinge.

From my perspective, I didn't realize that my head was moving that far forward. I thought I was keeping my head steady. Now that I see it on the video, I don't like the way the swing is starting.

P.S. Today I played a round of golf going back to my old width swing with possibly some elements of the Hogan-missing-piece swing. I didn't score that well (it was a cold day with swirling winds) but I hit some nice shots letting my weight shift back on my right foot. My playing partners commented that my swing looked more fluid. It seemed a little easier to play but I had to continually concentrate on taking a full shoulder turn and making sure my hips cleared on the downswing (at least I had only one swing thought through the round). And, as you'll see later, I wasn't getting a full shoulder turn with S&T.

Stack & Tilt: My Setup

In a prior post, I showed video clips of my current S&T swing compared to the one suggested by a GolfTEC PGA pro during a swing evaluation session (you should see a number of other GolfTEC videos when you look at either of my videos, here or here--very interesting). Now I'll get into the details starting with the setup.

Considering just the top three frames (starting in frame 1, it's me, Tiger and Stack & Tilt). GolfTEC wanted me : (1) in a more athletic posture (I was standing taller to avoid fat shots), (2) standing further away to get more space between hands and body, and (3) with more bend from waist (like Tiger). About all that's good about my current setup is the knee flex. Notice that the S&T setup (frame 3, top) is halfway between me and Tiger.

On the bottom three frames (Ernie Els, me and S&T), GolfTEC wanted: (1) the ball played a little more forward in the stance (I'm hitting a seven iron here), (2) feet less flared (this was, from the LAWs of Golf Width swing, designed to get more turn), (3) good forward shaft lean, (4) upper body and head behind the golf ball (the diagonal green arrow is there to suggest moving the body and head behind the ball). Compared to the S&T setup (frame 3 on the bottom), my weight is not as far on my left side as they would suggest (that never felt comfortable to me). Compare the head positions in the bottom three frames: Ernie is behind the ball, I am right over the ball and S&T is actually ahead of the ball.

I like the more athletic setup. Interestingly, I can't do S&T from that setup! What I can do is V. J. Trolio's "Hogan's Missing Piece" swing (more about that later). The green numbers on the middle frame, bottom show that my setup is on the OK but marginal side (the number backgrounds would be yellow or red for poor positions--you'll see more of those later).

Stack & Tilt: My Swing

Yesterday I went to GolfTEC and had a complementary swing analysis. One of the GolfTEC PGA pros took me through their G-swing system: (1) putting me into an electronic harness (from the front, it looks like the strap for a backpack in frame 2 above), (2) video recording and digitizing my swing, (3) analyzing my swing against Ernie Els and Tiger Woods, (4) making some initial suggestions for improvement and (5) suggesting a number of lesson packages. Here is the video of my current swing (the S&T Swing) vs. the suggested new swing (the Width Swing). What's funny about this is that the "new" swing was basically my old swing before I went to Stack & Tilt (S&T)!

Whether I go back to the future or not is an open question, but the video analysis did point out some obvious flaws in my S&T swing. The flaws are clearly covered in the S&T video, but somehow I wasn't able to translate what I knew into a solid golf swing. The S&T book suggests video recording of your swing but I doubt that I would have caught all the problems without an objective analysis. GolfTEC is clearly adding value.

Maybe you can find the problems in my swing by comparing the S&T Swing to the Width Swing. In the next few posts I'll take you through the GolfTEC analysis with some of my own commentary. There were a number of interesting and, for me unexpected, conclusions from the analysis.

Stent vs. Bypass: The Gold Standard Study?

The New England Journal of Medicine recently published the results of the SYNTAX trial (here), a multi-center, multi-country randomized clinical trial comparing percutaneous coronary intervention (PCI) with drug-eluting stents vs. coronary-artery bypass grafting (CABG). The study seems to suggest that more patients should be undergoing CABG since there was more revascularization in the PCI group (death rates at 12 months were the same, although stroke in the CABG group was higher). Let's take a closer look using the causal model of heart attacks discussed in an earlier post (here).

Consider first the problems of designing a true randomized clinical trial comparing a procedure (PCI) with an invasive surgery (CABG). You simply cannot randomly assign patients to either treatment condition. Many patients would prefer to avoid a seriously invasive procedure such as CABG and a few more patients would prefer to avoid any procedure at all. And, that's exactly what happened. From the hierarchy diagram above (click on the diagram to see an enlarged view) 1262 patients were found ineligible, the majority because they had a treatment preference (probably PCI). Another 1275 were eligible only to be placed in a parallel, nested registry where 1077 enrolled in CABG and 198 enrolled in PCI. In other words 2537 patients were not randomized compared to 1800 that were randomized.

As a practical matter, self-selection cannot be avoided. As a consequence, study results really are only applicable to people that meet criteria (three-vessel or left main coronary artery disease) and had no treatment preference. It would be nice to know the rates of revascularization, mortality and stroke in the groups that were not randomized.

The study has a number of other limitations reported by the authors but no mention is made of the 12-month histories of cardiac rehabilitation in any of the groups. If there was no cardiac rehabilitation (e.g., substantially increased aerobic exercise), the rate of revascularization might be explained by that alone. If, for example, all 1800 patients were sedentary in the first 12 months, CABG may produce better outcomes. What cardiac rehabilitation, weight control or smoking cessation programs the PCI group went on (if any) is unclear. The issue isn't discussed in either the paper or the supplementary material, although my guess is that the standards of cardiac rehabilitation are very different in the countries that participated in the study.

On the basis of this study (and the other existing clinical trials reviewed in the paper), should treatment protocols change?

Russia is Burning

Shown above is a prediction for the year 2065 from the NOAA/GFDL CM2.1 Climate Model. Most of the World's land masses are predicted to be well above average temperatures for 1971-2000. What might be the consequences of global temperature change at this level?

Consider what is happening right now in Russia: This year, Russia recorded the hottest day (100 degrees) since record-keeping began in 1880. Wild fires continue to burn out of control. Smoke from the fires has substantially increased air pollution in Moscow. Russia's state environmental agency concluded in 2008 that Russia was warming twice as fast as the rest of the world. As a result of the heat and drought, Russia has banned the export of wheat while US wheat exports are booming.

Here's the causal model:

Positive signs on arrows are implied while two negative signs in a row (drought reducing the Russian wheat harvest which is negatively related to the US wheat harvest) are read as a positive impact (as discussed last week in Global Change). For good measure, throw in the floods in Pakistan (more energy in the atmosphere generating stronger monsoons).

Right now, the environment (especially climate change) seems to no longer be an issue in Washington yet, Russia is burning. In 2065, the NOAA model predictions for the US are not reassuring, but that's 55 years from now and elections are in less than two months.

The Russian ban on wheat exports is also creating the potential for a world-wide food crisis. The NY Times, in an editorial, asks that Russia learn from the last food crisis caused in part by demand for biofuels (another environmental issue) and not pursue "misguided polices". Imagine the rationality of policy making if world temperature increases by a few more degrees by 2065.

The Stimulus and Globalization

A recent editorial in the NY Times from the US Business and Industry Council argued that the government expenditure contained in the US economic stimulus package leaked away as consumers purchased imports from foreign countries. The council's suggestions: (1) buy American and (2) impose Tariffs. Each of these policy interventions can be analyzed using the causal model presented in an earlier post. Part of the causal model is displayed above (click on the graphic to see a larger image).

Government expenditure with a "Buy American" requirement would stimulate domestic sales, increase production, create jobs and create more demand (some of which would go to imports). Tariffs (taxes) on imports would make them more expensive and reduce demand.

Beggar-my-neighbor trade policies have been tried before. The Smoot-Hawley Tariff didn't work during the Great Depression and may have made things worse. But, the Business and Industry Council argues that tariffs worked during the Nixon Administration when, in 1971, Nixon imposed tariffs on Japan, Germany and other countries that refused to let their currencies rise. The tariffs were part of the Nixon Economic Shock (to include wage and price controls) in response to inflation generated by the Vietnam War.

Neoclassical economists argue that tariffs are a bad idea because they raise the price of domestic goods and damage the world economy. We would need a causal model of the world economy to discuss the later point (maybe in a future post). However, the effect of tariffs depends on what is being taxed. If we impose tariffs on countries with substandard environmental controls (green- or eco-tariffs), we benefit our own economy and benefit world environmental systems.

What do you think are the chances that the US Congress would impose tariffs? How about the chances that the US Congress would impose eco-tariffs?

The President's New Plan

It's getting close to the mid-term elections in the US and President Obama has a new plan for business tax breaks. Robert Reich gave a great commentary on NPR's Market Place and the commentary seemed to be based (with some embellishment) on the causal model above (click on the graphic for an enlarged view).

The president is proposing corporate tax cuts for R&D. Tax cuts will lead to the development of labor-saving technology that reduces jobs. Profits might also generate some investment (if there is demand). Otherwise, profits will be expended on CEO pay and Shareholder dividends which fuel the Stock Market casino (didn't that all start the Great Recession in the first place, that is, too much easy money sloshing around).

The problem we're having right now is inadequate demand created by the Great Recession (you can see the vicious circle in the graph: lack of demand leads to lack of sales leads to lack of production which leads to unemployment which decreases demand, etc.). Interest rates could be lowered by the Federal Reserve but they are almost at zero (the zero-bound) right now. Exports could be increased but the rest of the world is also in recession. Imports could be reduced (e.g., automobiles) but that requires demand for US products.

What remains is the Keynesian economic prescription: government spending. There is only one problem with increased government spending: it is being blocked by deficit hawks, fiscal conservatives, sound money evangelists, and bond vigilantes. The same dynamic played out during the Great Depression until WWII intervened.

So, the President's New Plan will be counterproductive (R&D tax cuts could decrease jobs), the Fed is at the zero-bound, and government expenditure will not increase unless we have another World War. What's going to happen?

Eventually, the markets will have their way and, in the words of Andrew Mellon (Herbert Hoover's Treasury Secretary), the markets will:

...liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.

For people that believe in markets and for people that do not, Mellon makes an important point. All markets will eventually adjust to bubbles created in other markets (e.g., housing and the stock market). The adjustments are brutal and painful if not necessarily swift. Subdivided ghost towns will be bulldozed or left to decay, jobs will be shipped to low-wage countries, companies will fail, people will drop out of the work force or take jobs below their skill level, and eventually there will be a new equilibrium.

The politics of all this are a little infantile: The US father figure (the president) is expected to fix the mess yet, at the same time that he is expected get out of the economy by reducing expenditure and regulation. I just heard another great Catch-22 in NPR Marketplace tonight: all the stimulus funds have not been spent because there are not enough federal workers to manage the contracts.