Stock proxy season continues, so it's still worth pointing out: if you own stock, you should receive requests to vote your shares on topics that comes before the annual meeting of shareholders for each company.

If you're angry about executive pay, proxy votes can be a way to let the boards know. Consider voting against any CEO who is also chairperson of the board of the company. Why should the CEO get to be his/her own boss? Or, you can vote against the members of the board committee for compensation. Or, if you're lucky, there's an advisory vote on executive compensation. Even if it isn't perfectly worded, consider voting for it. It's only advisory, it probably will lose, but a meaningful increase in votes should send a message to the board.

Finally, don't forget: if you own shares, you have the right to submit a shareholder proposal. Better if you get a lawyer to help draft it, but even a basic advisory measure requesting shareholder approval of executive compensation will show the board that shareholders are actually watching. Remember, if you own shares of stock, you own part of that business. Are you watching what you own?

Here's the problem. The banks are lending. If you look at bank lending numbers, there is growth. The banks, per se, are not the real problem with the lack of lending. The real problem is that we vaporized an entire Shadow Banking System that bought securitized debt in a wide variety of forms: autos, homes, student loans, credit cards, etc. That industry exists no more.

...

In essence, we are asking the banking system, with greatly reduced capital, to do the heavy lifting that all the buyers of securitized debt did a few years ago. And if Roubini is remotely right, they simply do not have the capital to do it. Further, the banks are in a bind. The regulators, properly so, are making sure that banks have adequate capitalization and are marking assets to real market prices. But they simply have less capital to make loans, even with TARP.

- John Mauldin

Early 2007, The Economist ran an article on the logic of privacy--researcher efforts to formalize the logic and instincts most people have for the privacy of their personal information. This seems a commendable approach to bring all companies to a decent level of respect for privacy. However, such efforts seem unlikely to formalize the unpredictable emotional responses people may have in unusual circumstances. As such, privacy modeling software probably will never do a great job of predicting customer responses to new privacy situations.

But the article brings up the interesting discipline of Linear Temporal Logic which uses temporal words like "previously" and "always" as operators. Software, such as Spin has been written or adapted to process LTL. An NYU researcher even developed the Templar language to specify LTL directly, though it appears no compiler exists for this language. The Economist mentions professor John Mitchell at Stanford especially, for his research on privacy and contextual integrity. Mitchell notes at the end of one paper, however, that his work lacks a means for expressings violations of the logic. Legislation usually requires customer notification in this case: obviously, automating such notifications would be of considerable value to a company.

This all seems like fascinating, yet utterly practical work, that awaits a useful software implementation in a web server language such as PHP or JSP.

When you look for evidence that your ideas are working, start by looking for tests that would indicate they're failing.

A simple example of the tendency to seek confirmatory evidence is the so called "2, 4, 6" problem. In this classic experiment, subjects are asked to figure out the rule being used to classify sequences of three integers as correct or incorrect. Subjects were given an example of a correct sequence: 2, 4, 6. The subjects were then asked to discover the rule for evaluating a number sequence as correct or incorrect by trying various three-number sequences. The subjects would be informed whether the number sequences they proposed were correct or incorrect based on the rule. In other words were the stated number sequences consistent with the undisclosed number generating rule. The actual number generating rule was "any three numbers in ascending order". However, by starting with the sequence "2, 4, 6" most subjects assumed the rule "ascending order with equal intervals" and then set about confirming that this rule was correct. If the subjects only look for confirming evidence, they will always be told that their sequence is correct.

- Mark T. Finn and Jonathan Finn, CFA

Lately, I have been looking back at all the stocks I didn't buy in the last year. It's tempting to congratulate oneself, since almost surely, these stocks have dropped so far this year. More useful would be to look for stocks that went up or at least beat the market or an existing portfolio. What tests do you use to test your investing decisions?

Those issued reprieves had been found guilty of mostly garden-variety offenses; one recipient, Leslie O. Collier, was issued a pardon for a 1996 conviction for the unauthorized use of a pesticide in killing bald eagles

Dubya, supporting patriots while hard at work on the financial crisis (NYT)

The interregnum of 1932-1933, the long stretch between the election and the actual transfer of power, was disastrous for the U.S. economy, at least in part because the outgoing administration had no credibility, the incoming administration had no authority and the ideological chasm between the two sides was too great to allow concerted action. And the same thing is happening now.

- Paul Krugman, NYT

Well written, well noted.

Things we should see if our leaders really expect to improve our financial system:

• a regulated CDS/CDO market
• mechanism to hold credit ratings agencies responsible for their ratings--no more blind acceptance of models from investment banks
• substantial re-enactment of the Glass-Steagal law, including major reduction in leverage allowed.

It blows my mind that investment banks geared up 30:1 and still only managed fairly normal profit margins. Or losses. Really, how much leverage should be allowed? If I have $10,000 saved, make $50,000 a year and have even $10,000/year in disposable income, would you loan me $250,000 so I could invest it in the markets? Because someone basically said "yes" to Lehman on that proposition.