Friday, 12 August 2011

08:56 – Colin turns 6 months old today. He’s a huge puppy, already as large as most adult male Border Collies. Duncan was a big boy, at 75 pounds (34 kilos) and about 4″ (10 cm) taller than other male BCs, but I think Colin will be bigger still.

The US Postal Service is losing $8 billion a year and is now in what amounts to Chapter 11 bankruptcy, or would be if it weren’t a pseudo-government agency. It’s due to make a $5.5 billion payment to its retirement fund next month which it doesn’t have the money to make. The USPS has announced plans to cut 220,000 jobs, or 30% of its workforce, between now and 2015. About 100,000 of those will be by attrition, but the remaining 120,000 will be actual people losing their jobs. It also plans to close thousands of post offices.

That’s actually much too little, much too late, and doing the wrong thing anyway. Service levels will be badly impacted by those cuts, which will in turn further reduce mail volume as mailers shift even more quickly to alternatives. What the USPS needs to do is:

1. Eliminate rural free delivery, which is extremely costly. Establish population-density metrics to determine whether any particular home or business is eligible for free delivery or must pick up its mail at the nearest post office.

2. Negotiate “last mile” delivery agreements with UPS and FedEx, whereby UPS and FedEx deliver packages to USPS distribution centers, and the USPS makes the local deliveries to the recipients. Eventually, eliminate most local deliveries by USPS personnel and negotiate contracts with local businesses for last mile deliveries. That is, the USPS should be making one delivery per neighborhood to a local contractor who actually delivers the mail and packages to homes.

3. Crush the postal unions and reduce pay and benefits to no more than a third of what they are now, for both current employees and retirees. Right now, post office employees are paid at least two to three times more than they’d earn for doing the same job in private industry. Retirement and medical benefits are ridiculously high. All of that needs to stop if the USPS is to have any chance of surviving.

Despite the protests of the Big Three credit-rating agencies and the French government, the market believes that France doesn’t deserve a AAA rating. And they’re absolutely correct. If the USA is only AA+, France should be at least two or three levels below that. Forget S&P and Moody’s and Fitch. If you want a real credit rating, all you need to do is look at what the free market says the credit ratings really are. That’s what the basis points on credit default swaps provide, and it’s instructive to look at CDS prices for the various countries.

Greece ~ 1,800
Portugal ~ 900
Ireland ~ 800
Italy ~ 400
Spain ~ 400
France ~ 150
Austria ~ 140
Germany ~ 90
UK ~ 85
US ~ 55

A basis point is 0.01%. These CDS prices vary constantly, but they represent the actual free-market cost to insure a bond against default. So, for example, the one-year premium to insure $1,000 of Greek bonds against default is $180, while at the other end of the risk spectrum, it costs only $5.50 to insure $1,000 of US debt for one year. That’s why it’s ridiculous for ratings agencies to assign AAA ratings to the UK, Germany, Austria, and France while assigning the US a lower rating. The free market gives the real ratings, and they’re completely out of line with what the ratings agencies are saying. I know which I trust more.

11:22 – This has been a stunning week for medical discoveries that are potentially huge breakthroughs. Earlier in the week, a PLoS paper reported incredible results with a process called DRACO, in which cells that have been infected by a virus (and only those infected cells) can be forced to undergo apoptosis, which kills the infected cells, leaving the viruses without host cells. The really significant thing about DRACO is that it is not virus-specific, like nearly all current antiviral treatments. Any cell that has been infected with any virus (presumably; DRACO was shown to be effective against 17 widely different viruses) is detected and eliminated. And here, Derek Lowe reports on a potential breakthrough that does pretty much the same thing against leukemia, and presumably eventually other cancers.