Jack’s Links

This week, a few links about Trump that won’t cause you to claw your eyes out because of the terrible journalism.

  • Scott Sumner on Trump the mailman: Scott’s main points that Trump doesn’t drive the economy or the stock market, and that he shouldn’t get credit or blame for either, and that a person can be good-neutral for the market and a terrible person are all well made.

The vast majority of my commenters do not know how to read for content; they indulge in mood affiliation.  “Sumner said Trump was horrible, so if Trump does something good, or if stocks rise, then Sumner was wrong.”

In the social media age, observers tend to equate silence with approval, or at least disinterest.  At least in my case, you shouldn’t.  By default, please assume I think all of Trump’s immigration policies are terrible.

Another reason for promoting lying is what economists sometimes call loyalty filters. If you want to ascertain if someone is truly loyal to you, ask them to do something outrageous or stupid. If they balk, then you know right away they aren’t fully with you. That too is a sign of incipient mistrust within the ruling clique, and it is part of the same worldview that leads Trump to rely so heavily on family members.

Trump specializes in lower-status lies, typically more of the bald-faced sort, namely stating “x” when obviously “not x” is the case. They are proclamations of power, and signals that the opinions of mainstream media and political opponents will be disregarded.

Jack’s Links

  • Brazil’s Austerity Experiment: Scott Sumner walks us through some of the problems with ascribing any of the future economic success/failure of Brazil to the coming austerity. Very useful to learn how to think about economics. Also, Vox still sucks.

Might austerity hurt the supply-side of Brazil’s economy?  I suppose anything is possible, but it’s hard to see how.  Unlike China, Brazil’s high government spending goes to things like public pensions, not infrastructure.

Jelinek interrupted, according to people who were briefed by Chenault about the call, and told him that as far as he was concerned, Amex was another vendor, just like the one that sold Costco ketchup. “If I can get cheaper ketchup somewhere else, I will,” he said.

  • Health Care Reform: With a h/t to David Henderson for the link to this Bryan Caplan piece from 2012. More relevant than ever.

Gruber mentions people who “think they don’t need insurance because they are healthy” – then condescendingly adds, “They don’t realize that if they do get sick, they won’t be able to afford the care they need.”  Yes, or maybe they’ve weighed the risks and reasonably decided to take their chances.


Jack’s Links

Links from the last quarter of 2016:

The US has been running large current account deficits for many decades. Commenters often suggest that this means we are becoming a debtor nation, living beyond our means. This is not true.

  • The economics of France: France’s problems seem to be a lot more about inability to fire people than government spending per se (though I bet they are related).

As a result, France’s higher productivity is in part because a substantial share of those who would tend be the lower-productivity workers (like young workers, for example) just aren’t working at all.


  • White supremacists make up effectively none of Trump’s supporters: “The left” has been handling itself extremely poorly throughout this entire election cycle, and things haven’t changed post-election. Trump might be a pathological narcissist with no qualifications, but if you cry “Hitler” enough times, don’t be surprised when nobody hears you.

7. What about the border wall? Doesn’t that mean Trump must hate Mexicans?

As multiplesources point out, both Hillary and Obama voted for the Secure Fence Act of 2006, which put up a 700 mile fence along the US-Mexican border. Politifact says that Hillary and Obama wanted a 700 mile fence but Trump wants a 1000 mile wall, so these are totally different. But really? Support a 700 mile fence, and you’re the champion of diversity and all that is right in the world; support a 1000 mile wall and there’s no possible explanation besides white nationalism?

The AI vastly outperformed a professional lip-reader who attempted to decipher 200 randomly selected clips from the data set.

The professional annotated just 12.4 per cent of words without any error. But the AI annotated 46.8 per cent of all words in the March to September data set without any error. And many of its mistakes were small slips, like missing an ‘s’ at the end of a word. With these results, the system also outperforms all other automatic lip-reading systems.

  • Xenophobia vs. Racism: I didn’t think of it until now, but it’s obvious that acceptable xenophobia is often spun into unacceptable racism depending on what a journalist or pitchfork carrier is going for.

But aren’t people in every country – Canada included – similarly unreasonable and unfair?  Sure.  Xenophobia – not racism – is the unrepentant bigotry that rules the world.  People in every country on Earth take it for granted.  But as we teach our children, “Everyone else is doing it” is no excuse for bad behavior.  Almost everyone is is extremely xenophobic.  And everyone should stop.  Starting with you.

  • School Vouchers: This is one of those areas where pretty much everybody who I think is smart agrees that giving people choice in where to send their kids will have more good outcomes than bad, but the US is such a huge country that it is overwhelming to think about where to start. The link here is a rebuttal to one of the most common arguments against vouchers, which is that the profit motive would naturally cause shareholders to gain at the expense of the yutes.

The third theory is Wilde’s Law: “The bureaucracy is expanding to meet the needs of the expanding bureaucracy.”

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Jack’s Links

Back at it again with the fresh links:

A twenty punch card investment portfolio is – by its nature – a concentrated investment portfolio. If I had run my portfolio like that I would have come out of the crisis with maybe six stocks, turfed one or two by now and added a single stock in 2012.

1.   The Fed raised rates last December, and just a week ago indicated that it is likely to raise rates again later this year.  Is that doing your best to inflate?

2.  The ECB and the BOJ have mostly disappointed markets this year, offering up one announcement after another that was less expansionary than markets expected.

So no, they are not doing their best.  If at some point they do in fact do their best, and still come up short, then by all means given them help.

I continue to be a reviewer on failed replications and re-analyses of the data — signing my reviews as I did in the Ranehill et al. (2015) case — almost always in favor of publication (I was strongly in favor in the Ranehill case). More failed replications are making their way through the publication process. We will see them soon. The evidence against the existence of power poses is undeniable.

A poster child for this problem is China and its narrowly pegged currency. In a world of freely floating currencies, the US dollar would weaken and the Chinese yuan would strengthen because the US runs a large trade deficit with China and the rest of the world.

Where does one start? No, China is not intervening to lower the value of the yuan; they are intervening to raise its value. And no, textbook theory does not say that exchange rates should adjust in the long run to balance trade in goods and services, unless long run means 1,000,000,000 years, in present value terms. But in that case the current US deficit presents no puzzle; it hasn’t lasted for a billion years.

Notice the schoolmarmy “And Trump still has not apologized to the president of the United States for an effort that many African-Americans saw as an effort to delegitimize the first black president.” As if that is relevant to a fact check.

Our findings provide empirical evidence that ride-sharing services such as Uber significantly decrease the traffic congestion after entering an urban area.


In other words, she would prefer to purposely make some other people worse off with higher taxes on what they buy (sales taxes) or earn (income taxes) than to raise the same amount of revenue by raising no taxes but instead legalizing a good so that the revenues are taken from people who are better off paying the revenues than buying in an illegal world.

That’s either ignorant or cruel, or both.

Books: I read a bunch of these little time sinks recently:

Get A Grip: One of a seemingly endless stream of fable-centric business management books. This one is about the “Entrepreneurial Operating System” that comes from an eponymous consulting group. Seems to be in the zeitgeist. More concrete than most other fabley books, and interesting take on the really popular notion of getting the right people on the bus then finding their seat later — basically defines seats on the bus first and then goes to fill them.

Get A Grip: An Entrepreneurial Fable . . . Your Journey to Get Real, Get Simple, and Get Results by [Wickman, Gino, Paton, Mike]

Antifragile:  Classic Taleb book, I’m thinking of doing a new kind of post on this one.

Antifragile: Things That Gain from Disorder (Incerto) by [Taleb, Nassim Nicholas]

The Ideal Team Player: Another business fable, this one from the Table Group, all about their three ‘virtues’, being humble, hungry, and smart. It may be because I haven’t read any of the other books in the series for a while, but I was more impressed than I thought I would be with their definitions of the virtues.

Humble is about not being arrogant, but also not being over-modest. Subtle distinction that I was surprised they made.

Hungry is pretty straight forward, and I liked that they mentioned that a candidate mentioning ‘work-life balance’ too many times is a red flag. All businesses want to think they let their employees find balance, but hiring someone who is focused on how much they won’t have to work is questionable.

Smart is focused on being people-smart, and people who can’t take social cues are undesirable as teammates.

As per usual for Lencioni, there were about a dozen awkward references to prayer, completely unrelated to the story, which I could have done without.

The Ideal Team Player: How to Recognize and Cultivate The Three Essential Virtues by [Lencioni, Patrick M.]

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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.)

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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…

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  • 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.

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Jack’s Links

  • Joseph Belth on Long Term Care Insurance: Whether Long Term Care Insurance (LTCI) is necessary or wise is a common question when people are nearing retirement. The topic deserves a more thorough treatment than a links blurb, but the article gives a taste of why many savvy people choose to self-insure (i.e. not buy insurance) rather than shell out for LTCI coverage.

Your premiums will never increase because of your age or any changes in your health.” I wrote to the company expressing concern that the sentence, although technically correct, was deceptive. I said the letter should make clear that the company has the right to increase premiums on a class basis.

  • Low Interest Rates: Not Easy Money: For years I’ve been cautioning very smart people that I don’t know of a reason why interest rates are bound to return to ‘normal levels’, whatever that means.

Of course if that were true, then the Fed tightening of last December would have led to higher interest rates. Instead, bond yields have fallen sharply over the past 8 months.

  • How Long Do 65 Year Olds Live?: Having a basic understanding of the current landscape for people entering retirement is a prerequisite if one wants to discuss the finances and economics that accompany them. Great primer from Wade Pfau here.


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Jack’s Links

Short links this week, not much caught my eye as particularly good. These three are the exception, and I think they are exceptionally good.

  • CuriousGnu post on the profitability of day traders: Admittedly, this post is based off of what I would call extremely anecdotal data, but is compelling nonetheless. You’ll see in the data from the graph below — about 80% of people lost money over 12 months. There are a million follow-up questions, but this confirms about what one might expect this distribution should look like. Lots of people who lost everything on presumably high leverage or highly concentrated bets, a lot of people who were burned down by transaction costs, and then a general grouping around 0% for people who had decent bankroll management, but for whom investing is essentially a zero-sum game. More than anything, this post (and the others on the website) are great encouragement to learn the basic programming needed to scrape data.

eToro 12M Gains

  • This discussion between Gene Fama and Richard Thaler is about 45 days old, but I just found it (h/t David Henderson), and is well worth the watch/read: The competing schools of thought — taking essentially opposite views of whether ‘bubbles’ exist as generally defined. Both players are involved in the crossover between economics and finance, i.e., their works are directly applicable to investing.

Fama: I’m an economist. Economics is behavioral, no doubt about it. The difference is your concern is irrational behavior; mine is just behavior.

  • Another David Henderson h/t, this video on the economics of sweatshops is a great watch. Being able to simultaneously hope for better future outcomes for developing countries and recognizing that ‘sweatshops’ are part of those better outcomes is a skill worth developing.

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Jack’s Links

Back with the best links of the week, don’t engage in public discourse without reading them, or you’ll make us all dumber.

  • Ramit Sethi on young people ‘investing’ in a home: I don’t know if I’ve written about this before, or just said it a million times, but I’m consistently amazed by how pervasive the ideas that rent is ‘throwing away money’ and that real estate is the best investment you can make have become in the thinking of people in their 20s and 30s. This is amplified by the total obliviousness to the risks inherent with what is usually an extremely levered investment.

“I don’t want to waste money paying rent.” I’m convinced this awful phrase was invented by Realtors BECAUSE IT’S SIMPLY NOT TRUE FOR EVERYONE. YOU ARE NOT WASTING RENT IF YOU LIVE IN AN EXPENSIVE AREA.

  • Alex Nowrasteh from the Cato Institute on Common Arguments against Immigration: h/t to David Henderson on this link, great breakdown of the common arguments that get thrown around and what we know about the actual economic effects of immigration (especially low-skill immigrants).

6.  “Immigrants are especially crime prone.”

This myth has been around for over a century.  It wasn’t true in 1896, 1909, 1931, 1994, and more recently.

  • Jacob Falkovich on the wage gap: Similar to immigration, the wage gap has a bunch of facts that everyone knows the headlines for, but nobody has bothered to think critically about. I recommend the whole post. If the below quote doesn’t convince you to read it, hope is lost.

Economics tells us that if a wage gap existed, smart companies would profit by hiring women, driving the sexist companies out of business.

  • Sabine Hossenfelder on being a consultant for amateur physicists (the title of the article uses the word autodidact): Fascinating both from the implications of the success of the business, but also for the insight into how (extremely invested) amateurs approach problems, take things out of context, and are generally unfamiliar with the required pre-requisites for engaging in the industry in a productive way.

My clients read way too much into pictures, measuring every angle, scrutinising every colour, counting every dash.

7. “I always give the most difficult and complicated assignment I have to the most overworked person in the company. There’s a reason they don’t have time — work is a marketplace, and it’s telling you this person is good.”

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