Jack’s Links

Two weeks worth of links because I was gone at conferences last week — XYPN and FinCon. Summary posts to come.

  • NYT Article on Chilean Pensions: Spoiler: they are very small. Disclaimer: I know very little about the political/financial history of Chile. This is a perfect example of a totally worthless article, not because it is poorly written, but because there is absolutely no clue given as to the root cause of the problem. Yes, I get it, the pensions are low, but is that because contributions were low? fees were high? returns were low? payouts are below market? The article paints Chileans in a terrible light, it reads to me as if they are asking for more money because what they saved isn’t enough, and that the retirees are demanding the government take from the young to give to the old. A poor country isn’t going to magically be able to let citizens retire at the standard of living of a rich country because it’s a nice thing to do.

“The A.F.P.s have never lost money, stolen money or gone bankrupt,” Mr. Pérez said. “Does that mean that pensions are good? No, they are not. The system needs important changes. But the A.F.P.s administer the funds of those who save, and they’ve done that very well.”

  • NatGeo on BASE jumpers dying in record numbers: Super interesting article on a pretty glamorous sport. To answer the titular question, it’s pretty obvious that more people are dying because more people are doing it, it doesn’t seem like BASE jumping (sans wingsuit) has gotten much more dangerous.

Clif Bar’s official statement read that it was no longer comfortable “benefitting from the amount of risk certain athletes are taking in areas of the sport where there is no margin for error; where there is no safety net.”

At the opposite end of the spectrum are companies like Red Bull, GoPro, and, most recently, Stride Gum—which backed a skydiving stunt this summer in which Luke Aikens jumped out of a plane without a parachuteand landed in a large net.

If foreigners buy more bonds, then Americans buy fewer bonds and invest in those “risky, innovative enterprises.” So it’s hard to see why foreigners buying bonds means that there’s less investment in those enterprises.

Now it’s quite possible that the higher U.S. federal budget deficit crowds out investment in those enterprises. But then it’s the U.S. budget deficit doing that, not the foreigners’ choice of U.S. assets to invest in.

For those who are offended by surge pricing at a time of crisis, please tell me your preferred method for getting some people (drivers) to head toward danger when everyone else prefers to head in the other direction. And then tell me how you are going to get people who are heading out to the grocery or are thinking of going out for a drink to postpone or cancel their plans.

But at least you are in the MFTE program, so five of your apartments will offer a discounted rent of $1,020 per month to people whose incomes qualify. (You facepalm in disbelief, however, that whereas your original plan offered 40 units, unsubsidized, at $900 a month, your new version has just five units, subsidized, at $1,020.)

For the dopest links straight at your inbox, sign up below:

Jack’s Links

Short links this week, China and monetary policy are two areas that almost anyone who considers themselves financially savvy probably has an opinion in which they are too confident by a factor of 10.

I for one still believe that low rates (and/or QE) don’t mean easy money, that monetary policy is still highly effective at zero rates, that fiscal policy is mostly ineffective, even at zero rates, that level targeting is especially beneficial at the zero bound, that central banks should target the market forecast, that markets are efficient…

Sign up for more links below:

Jack’s Links

  • Scott Sumner on monetary offset: Understanding the implications of monetary offset is one of the prerequisites for intelligent conversation of economics.

There are so many fallacies here one hardly knows where to begin. The central banks have not done any “heavy lifting”. They can print money at virtually zero cost and their massive portfolio of bonds is generating enormous profits, more than twice as large as before the recession.

Henry Farber, a Princeton economist and author of several studiesaffirming the traditional view, echoed this sentiment, saying even his papers suggest that beginners frequently do not drive enough when business is brisk. “New drivers who can’t figure it out leave the business,” he said. “The ones who stay tend to learn.”

  • WCI on investing a lump sum in your 80s: good analysis and one of the classic examples of the potential usefulness of immediate annuities. Though of course the point is well made that he could simply live off of the cash for 17 years. The common mistake people make in this spot that I see is trying to protect the principal, stretching for excess dividend/interest yield to meet their 6% need.

While the income need/portfolio size ratio (6%) might not seem large to a 60 year old, it is quite good for an 83 year old.

But now an attempt to replicate this modern classic of psychology research, involving 17 labs around the world and a collective subject pool of 1894 students, has failed. “Overall, the results were inconsistent with the original result,” the researchers said.

Sign up for links straight to your inbox below: