RATING AGENCIES SHOULD USE PROBABILITIES. I posted here that intelligence estimates by the CIA should be expressed in terms of probabilities just as weather forecasts are. More information is conveyed and people can compare and discuss opinions. Charles Calomiris makes a number of suggestions for reforming financial markets in this article and one of them is that rating agencies should express their ratings in terms of the probability of default and the loss given a default. The rating agencies have used letter rankings which have no direct meaning. This wikipedia article gives examples: “The Standard & Poor’s rating scale is as follows, from excellent to poor: AAA, AA, A, BBB, BB, B, CCC, CC, C, D. Anything lower than a BBB rating is considered a speculative or junk bond…. The Moody’s rating system is similar in concept but the naming is a little different. It is as follows, from excellent to poor: AAA, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C.” These ratings have no intuitive meaning. Ratings in terms of probabilities of default would make the agencies more accountable by providing a yardstick to measure their performance. Saying that a rating agency incorrectly rated bonds as Baa1 when they should have been rated Ba1 or Caa1 is not the same as saying that their default rate was much higher than predicted. People are comfortable with probabilities and numbers and they should be used.
Archive for April, 2009
RATING AGENCIES SHOULD USE PROBABILITIES.
Thursday, April 30th, 2009REWRITING AFTERWARD–A TEST FROM HENRY JAMES.
Wednesday, April 29th, 2009REWRITING AFTERWARD–A TEST FROM HENRY JAMES. Terry Teachout gives an example of rewriting after publication by Henry James.
Here is a sentence from the 1881 version of THE PORTRAIT OF A LADY: “”His kiss was like a flash of lightning; when it was dark again she was free.”
Here is the sentence as James changed it some 25 years later: “His kiss was like white lightning, a flash that spread, and spread again, and stayed; and it was extraordinarily as if, while she took it, she felt each thing in his hard manhood that had least pleased her, each aggressive fact of his face, his figure, his presence, justified of its intense identity and made one with this act of possession. So had she heard of those wrecked and under water following a train of images before they sink. But when darkness returned she was free.”
I read the sentences to Mary Jane. THE PORTRAIT OF A LADY is one of her favorite books. She commented that many people think that when James turned to dictating his work late in his career, it was bad for his writing. Teachout says, “I… prefer the richer textures of the second version of “The Portrait of a Lady,” which hints at a wider realm of experience that was inaccessible to the younger James.” For myself, I much prefer the first version, partly because I don’t think that the lengthy analysis of the revised sentence fits with my understanding of the character, partly because the lengthy analysis is inconsistent with the experience of an emotion, and partly because the last century of romance writing casts a shadow over the prose.
REWRITING AFTER IT’S DONE.
Wednesday, April 29th, 2009REWRITING AFTER IT’S DONE. Finishing a book can be hard. Terry Teachout writes here about authors who have second thoughts after a book is published (the essay is inspired by Arthur Laurents’s rewriting of the book of West Side Story over 50 years after it was first performed). Teachout cites the famous example of Auden’s rewriting the line “We must love one another or die.” to “We must love one another and die.” long after “September 1, 1939″ was published. I agree with what, I think, is the majority that the Auden’s first version was better–if only because Auden’s poem derives some of its power from being written to preserve the thoughts of a particular day. Afterthoughts just don’t seem right.
A KEY SYMPTOM: “I DON’T FEEL WELL.”
Tuesday, April 28th, 2009A KEY SYMPTOM: “I DON’T FEEL WELL.” One of J.R. Richard’s symptoms was simply that he wasn’t feeling right. Richard says in the interview: “I told the Astros, ‘Something is wrong, something is wrong.’” I read years ago about a study that concluded that a physical should include general questions of the form: “Are you feeling well?” And one of the possible symptoms of a heart attack is: “I’ve never felt this way before.”
ACTS OF KINDNESS—J. R. RICHARD.
Monday, April 27th, 2009ACTS OF KINDNESS—J. R. RICHARD. Here is a recent interview with J.R. Richard (link via Baseball Musings). I have posted before on an act of kindness that rescued a life. How did J.R. Richard rescue his life when he found himself living under a bridge after his stroke? J. R. Richard explains how it was due to the help of one man, Chris Clark: “who helped me was a friend of mine that I’ve known for quite some time, named Chris Clark. He was passing by one night, he thought it was me, but he wasn’t sure so he made a circle, and he picked me up and he said “Come on, man, you can come stay with me till you get on your feet.” So I started living with him, and things just started happening in a positive manner, and I’m where I’m at today because somebody helped.”
THE HARDEST THROWER IN THE MAJORS.
Monday, April 27th, 2009THE HARDEST THROWER IN THE MAJORS. A 95 mile an hour fastball is considered a dominating fastball. Few major leaguers can sustain that kind of velocity throughout a game. When Bobby Jenks or Joel Zumaya reaches 100 miles per hour on the radar gun these days, there is justifiable excitement. I remember watching J.R. Richard in the 1980 All Star Game dominating the American League All Stars with a fastball that was consistently 108 miles an hour and a slider that was 98 to 99 miles an hour. I consulted this wikipedia article to check which year this happened. It had to be 1980 because, despite a career ERA of 3.15 and his leading the league twice in strike outs (over 300 in 1979), !980 was the only year Richard made the All Star team. Richard was always underappreciated. When he complained of arm problems during 1980, his complaints were often dismissed, and he was criticized as being unable to deal with pain. Richard pitched only one game after that performance in the All Star game. He had a stroke less than a month later, and never pitched in the majors again. By 1994, he was destitute and living under a bridge in Houston. He came back from that. Today he is a valued member of the community.
VERONESE’S BIG IDEA.
Sunday, April 26th, 2009VERONESE’S BIG IDEA. I think Veronese did have a big idea, and it’s right there in his testimony to the Inquisition: “Q. Does it seem suitable to you, in the Last Supper of our Lord, to represent buffoons, drunken Germans, dwarfs, and other such absurdities?
A. Certainly not.
Q. Then why have you done it?
A. I did it on the supposition that those people were outside the room in which the Supper was taking place.” Veronese’s painting shows that human life was going on in the usual way at the time when the Last Supper was going on. It’s an idea that Auden said all the Old Masters knew:
“About suffering they were never wrong,
The Old Masters; how well, they understood
Its human position; how it takes place
While someone else is eating or opening a window or just walking dully along;
How, when the aged are reverently, passionately waiting
For the miraculous birth, there always must be
Children who did not specially want it to happen, skating
On a pond at the edge of the wood….”
IDEAS IN MEDIEVAL ART.
Saturday, April 25th, 2009IDEAS IN MEDIEVAL ART. I posted here about how contemporary critics like Peter Schjeldahl look for art to express ideas, just as Baudelaire did. The belief that art should express ideas goes back a lot farther. Medieval art was expected to express the religious beliefs of the Catholic church. The questions asked of Veronese by the Inquisition were searching out whether the painting might be expressing Protestant ideas rather than Catholic ones. It was taken for granted that what was in a painting must signify ideas. The questioners asked: “[W]hat signifies the figure of him whose nose is bleeding?” and ” What signify those armed men dressed in the fashion of Germany, with halberds in their hands?” Veronese attempted to parry the questions by asserting an artist’s view that not everything in a painting is there to express an idea.
“THE SAME LICENSE AS POETS AND MADMEN.”
Friday, April 24th, 2009“THE SAME LICENSE AS POETS AND MADMEN.” Veronese in defending himself before the Inquisition in effect denied that ideas lay behind parts of his painting. He is simply filling up spaces in his picture: “when I have some space left over in a picture I adorn it with figures of my own invention.” A man with a nosebleed was just a man with a nosebleed. At one point when he seems hard-pressed he begins his response: “We painters use the same license as poets and madmen.” And in response to another question he says that painters do things for ornamental reasons:
“Q. And the one who is dressed as a jester with a parrot on his wrist, why did you put him into the picture?
A. He is there as an ornament, as it is usual to insert such figures.”
VERONESE AND THE INQUISITION.
Thursday, April 23rd, 2009VERONESE AND THE INQUISITION. In 1573 Paolo Veronese was called before the Inquisition for questioning about his painting which came to be called The Feast in the House of Levi. This article (which shows the painting) points out that in the highly-charged atmosphere, the Inquisition “knew that its every judgement and act were jealously watched by the [Venetian] Senate, who were only too eager to bring a charge against it of usurpation of the liberty of a Venetian subject.” Nevertheless, “Paolo, in a sad state of dread, appeared before the Inquisition sitting in the Chapel of S. Teodoro on the 8th of the July of 1573, anxious to mollify the deadly Inquisitors, and knowing that his friends and admirers were in a feverish state of fear that his great career was at an end.” This excerpt from the transcript shows, I think, the fear on the part of the artist as he skirmishes with his questioners.
