Sunday, January 19, 2020

"Frontier Tells Creditors It Seeks a March Bankruptcy"

Frontier Communications Corp., the provider of telecom services in 29 states, is asking creditors to help craft a turnaround deal that includes filing for bankruptcy by the middle of March, according to people with knowledge of the matter.

Company executives including Bernie Han, Frontier’s new chief executive officer, met with creditors and advisers Thursday and told them the company wants to negotiate a pre-packaged agreement before $356 million of debt payments come due March 15, the people said. They asked not to be identified because the meeting was private.

Certain Frontier creditors signed confidentiality documents that restrict their ability to trade in preparation for the negotiations, the people said.

Thursday, January 16, 2020

"New Tesla registrations in California nearly halved in the fourth quarter"

From CNBC:

The report released on Wednesday showed registrations in California, a bellwether market for the electric-car maker, plummeted 46.5% to 13,584 in the quarter ended December 2019, from 25,402 in the same period a year earlier.

Model 3 registrations, which accounted for about three-fourth of the total, halved to 10,694.

Tesla did not immediately respond to a Reuters request for comment.

"One can assume that Tesla has hit peak performance in the U.S. because they have not exceeded their 2018 results for five months now," said Shane Marcum, vice-president of Cross-Sell.
Tesla is priced like a disruptive company, but it's sales figures look like a niche/fad product. The most economical vehicles are what taxi/Uber drivers use: Japanese hybrids.

Wednesday, January 15, 2020

2020 Prediction Contest - Predictions Are In!

Here are the predictions sorted from highest standard deviation to lowest - most contentious to least.

Prediction SD
* TSLA share price goes below $200 at any point. 27%
* Frontier Communications pays its unsecured bond maturing in April 2020. 24%
* Boeing 737 MAX aircraft resume service in the U.S., the E.U., or Canada. 23%
* 2020 US vehicle sales (autos and light trucks/SUVs) are lower than 2019 vehicle sales. 23%
* Twitter is taken private or acquired. 22%
* The 13-week T-bill yield ($IRX) goes below 1% at any time during the year. 21%
* The 20+ year Treasury ETF (TLT) has a positive price return (not including dividends) for the year. 21%
* A 2 year treasury yields more than 10 year Treasury at any time during the year. 20%
* Federal Reserve lowers target rate any times (in 25bps equivalents) in 2020. 20%
* A terrorist attack using commercial drones kills someone in US or Europe. 20%
* The S&P goes above 3,750 at any time during the year. 20%
* Trump pardons anyone involved with the Mueller inquiry, Martin Shkreli, OR Rod Blagojevich. 19%
* The Vanguard Balanced Index Fund (VBINX, 60/40) has a positive return for the year. 19%
* Federal Reserve bank balance sheet total assets (FRED:WALCL) increase to above $4.75 trillion at any point.. 18%
* The S&P Retail ETF (XRT) outperforms Amazon for the year. 18%
* At least 4 of HOSS, CRC, CHK, FTR, MNK, JCP file for BK or propose a restructuring where existing equity will receive less than 10%. 18%
* A tropical cyclone makes the list of 10 wettest on the U.S. Mainland (for the fourth year in a row). 18%
* China wins more medals than the US in the 2020 Olympics 18%
* Buying equal dollar basket of FB/AAPL/NFLX/GOOGL returns below 0% for the year (including dividends). 17%
* Hussman's fund (HSGFX) is up for the entire year including dividends. 17%
* A Category 3 hurricane makes landfall in the continental U.S. 17%
* Any country's sovereign debt that is currently current goes into default at any point during the year. 17%
* The Senate holds a Trump impeachment trial and two or more GOP Senators vote to convict. 16%
* US life expectancy declines for a fourth consecutive year (based on most recent data) 16%
* BYND ends the year below its IPO day closing price of $65.75 AND PTON ends the year below its IPO day closing price of $25.76. 16%
* The 13-week T-bill yield ($IRX) exceeds 2% at any time during the year. 16%
* BREXIT is finalized and the UK officially leaves the E.U. 16%
* Global negative yielding debt goes under $1 trillion at any time during the year. 16%
* Gold trades above $2000/oz at any time during the year. 15%
* Either Rep. AOC (D-NY) or Rep. Ilhan Omar (D-MN) lose reelection. 15%
* Cannabis is removed from the federal list of Schedule 1 drugs. 15%
* Any of the following countries' 10-year government bonds yield more than US at end of year: Germany, Italy, Canada. 14%
* Any two or more Epstein associates are charged with Epstein-related offenses by any government 14%
* The S&P has a one day percentage decline greater than 5%. 14%
* Crude (WTIC) trades above the 2018 high of $76.90 at any time during the year. 14%
* Pelosi is no longer the Speaker of House as of 12/31/20. 13%
* One or more of Kim/Merkel/Saudis loses power (dies, resigns, or is deposed). 13%
* A referendum on leaving the EU is held (win or lose) in another EU country. 13%
* Federal Reserve raises target rate any times (in 25bps equivalents) in 2020. 13%
* Total return of 1 year T-bill outperforms all of S&P 500, Nasdaq, and bitcoin for the year. 13%
* One or more of Macron, Trudeau, or Erdogan loses power (dies, resigns, or is deposed). 12%
* The BBB yield closes above 5% at any time during the year. 12%
* The most current 13F as of 12/31/19 of the Swiss National Bank shows a balance below $45 billion of equities. 12%
* The CBOE Volatility Index ($VIX) exceeds 40 at any time during the year. 11%
* The 10 year Treasury yield rises above the 2018 high yield of 3.24% at any time during the year. 11%
* The S&P goes below 2,750 at any time during the year. 10%
* The 10 year Treasury yield falls below the July 6, 2016 low of 1.336% at any time during the year. 10%
* The S&P has a one day percentage increase greater than 5%. 10%
* TSLA share price goes above $800 at any point. 10%
* Either Buffett or Munger dies. 10%
* Donald Trump is re-elected (election not in dispute or too close to call) by the end of the year. 9%
* A Euro hits $1 US. (EURUSD parity) at any time during the year. 9%
* Musk leaves Tesla for any reason (e.g. resigns or is fired). 9%
* USDJPY below 100 at any point during the year. 8%
* USDJPY above 130 at any point during the year. 7%
* Gold trades below $1000/oz at any time during the year. 7%
* Crude (WTIC) falls below the “modern” low of $26.05 at any time during the year. 7%
* A players' strike occurs in any of the four major US sports leagues (NBA, NFL, MLB, NHL). 7%
* US ends daylight savings time. 6%
* Cryptocurrency combined market cap on Coinmarketcap.com exceeds $1 trillion at any time during the year. 6%
* Social Security benefits are unfavorably modified (e.g. by means testing or a change to the COLA computation). 6%
* Any country leaves the Euro currency. 6%
* Another Supreme Court seat opens. 5%
* The Flippening: Etherium market cap is greater than Bitcoin (core/classic) at any time during the year. 5%
* The CBOE Volatility Index ($VIX) exceeds its 2008 record of 89.53 at any time during the year. 5%
* Anow Dow 30 component files for BK or propose a restructuring where existing equity will receive less than 10%. 5%
* The S&P has its largest one day percentage decline in history (bigger than 10/19/87 of 20.5%). 4%
* A nuclear weapon is used in anger. 2%

Another way to look at them is from most likely to least likely:

Prediction Average
* Donald Trump is re-elected (election not in dispute or too close to call) by the end of the year. 64%
* BREXIT is finalized and the UK officially leaves the E.U. 56%
* 2020 US vehicle sales (autos and light trucks/SUVs) are lower than 2019 vehicle sales. 55%
* US life expectancy declines for a fourth consecutive year (based on most recent data) 55%
* BYND ends the year below its IPO day closing price of $65.75 AND PTON ends the year below its IPO day closing price of $25.76. 55%
* The Vanguard Balanced Index Fund (VBINX, 60/40) has a positive return for the year. 54%
* Federal Reserve lowers target rate any times (in 25bps equivalents) in 2020. 54%
* A Category 3 hurricane makes landfall in the continental U.S. 51%
* The 20+ year Treasury ETF (TLT) has a positive price return (not including dividends) for the year. 47%
* The S&P Retail ETF (XRT) outperforms Amazon for the year. 47%
* Federal Reserve bank balance sheet total assets (FRED:WALCL) increase to above $4.75 trillion at any point.. 46%
* Buying equal dollar basket of FB/AAPL/NFLX/GOOGL returns below 0% for the year (including dividends). 45%
* Crude (WTIC) trades above the 2018 high of $76.90 at any time during the year. 43%
* Boeing 737 MAX aircraft resume service in the U.S., the E.U., or Canada. 41%
* Frontier Communications pays its unsecured bond maturing in April 2020. 40%
* A tropical cyclone makes the list of 10 wettest on the U.S. Mainland (for the fourth year in a row). 39%
* Hussman's fund (HSGFX) is up for the entire year including dividends. 39%
* TSLA share price goes below $200 at any point. 39%
* The S&P goes above 3,750 at any time during the year. 37%
* The S&P goes below 2,750 at any time during the year. 37%
* A 2 year treasury yields more than 10 year Treasury at any time during the year. 36%
* Either Buffett or Munger dies. 36%
* The CBOE Volatility Index ($VIX) exceeds 40 at any time during the year. 35%
* The 13-week T-bill yield ($IRX) goes below 1% at any time during the year. 34%
* Trump pardons anyone involved with the Mueller inquiry, Martin Shkreli, OR Rod Blagojevich. 34%
* Pelosi is no longer the Speaker of House as of 12/31/20. 33%
* Total return of 1 year T-bill outperforms all of S&P 500, Nasdaq, and bitcoin for the year. 33%
* Any country's sovereign debt that is currently current goes into default at any point during the year. 31%
* Any of the following countries' 10-year government bonds yield more than US at end of year: Germany, Italy, Canada. 31%
* Either Rep. AOC (D-NY) or Rep. Ilhan Omar (D-MN) lose reelection. 28%
* Gold trades above $2000/oz at any time during the year. 28%
* Another Supreme Court seat opens. 28%
* At least 4 of HOSS, CRC, CHK, FTR, MNK, JCP file for BK or propose a restructuring where existing equity will receive less than 10%. 26%
* USDJPY below 100 at any point during the year. 26%
* China wins more medals than the US in the 2020 Olympics 24%
* Any two or more Epstein associates are charged with Epstein-related offenses by any government 24%
* One or more of Kim/Merkel/Saudis loses power (dies, resigns, or is deposed). 24%
* Cannabis is removed from the federal list of Schedule 1 drugs. 23%
* The S&P has a one day percentage decline greater than 5%. 23%
* Federal Reserve raises target rate any times (in 25bps equivalents) in 2020. 23%
* The Senate holds a Trump impeachment trial and two or more GOP Senators vote to convict. 23%
* One or more of Macron, Trudeau, or Erdogan loses power (dies, resigns, or is deposed). 22%
* The 10 year Treasury yield falls below the July 6, 2016 low of 1.336% at any time during the year. 22%
* The 13-week T-bill yield ($IRX) exceeds 2% at any time during the year. 21%
* The BBB yield closes above 5% at any time during the year. 21%
* Twitter is taken private or acquired. 20%
* The 10 year Treasury yield rises above the 2018 high yield of 3.24% at any time during the year. 20%
* A Euro hits $1 US. (EURUSD parity) at any time during the year. 19%
* Global negative yielding debt goes under $1 trillion at any time during the year. 19%
* TSLA share price goes above $800 at any point. 19%
* A referendum on leaving the EU is held (win or lose) in another EU country. 18%
* Musk leaves Tesla for any reason (e.g. resigns or is fired). 16%
* A terrorist attack using commercial drones kills someone in US or Europe. 13%
* USDJPY above 130 at any point during the year. 13%
* The most current 13F as of 12/31/19 of the Swiss National Bank shows a balance below $45 billion of equities. 12%
* The S&P has a one day percentage increase greater than 5%. 12%
* A players' strike occurs in any of the four major US sports leagues (NBA, NFL, MLB, NHL). 10%
* Crude (WTIC) falls below the “modern” low of $26.05 at any time during the year. 10%
* Gold trades below $1000/oz at any time during the year. 10%
* Social Security benefits are unfavorably modified (e.g. by means testing or a change to the COLA computation). 9%
* Any country leaves the Euro currency. 8%
* Cryptocurrency combined market cap on Coinmarketcap.com exceeds $1 trillion at any time during the year. 8%
* The Flippening: Etherium market cap is greater than Bitcoin (core/classic) at any time during the year. 6%
* The CBOE Volatility Index ($VIX) exceeds its 2008 record of 89.53 at any time during the year. 6%
* Anow Dow 30 component files for BK or propose a restructuring where existing equity will receive less than 10%. 6%
* US ends daylight savings time. 6%
* The S&P has its largest one day percentage decline in history (bigger than 10/19/87 of 20.5%). 3%
* A nuclear weapon is used in anger. 1%

Monday, January 13, 2020

January 13th Links

  • If you buy a property at a 2% cap rate, you're effectively saying that it will take 50 years for you to recoup your capital outside of appreciation or financial engineering. Obviously, 50 years is a damn long time to wait. Do you know what the world looks like in 50 years? I sure don't. What about a property in a random city on this globe? Coimbra went from capital of Portugal to a backwater. Along the way, Portugal suffered through revolution, civil war, invasion, coup, change of government and all sorts of other political crises that forced property ownership changes. If your property gets expropriated in year 40, you've actually lost money despite tying up capital for four decades. Think about that for a second. [AiC]
  • Satoshi Nakamoto's paper and Bitcoin launch happened in 2008... over 10 years ago. The iPhone was launched in 2007. If blockchain really is a platform that will change everything, it's a real sleeper success story. Typically you see killer apps on a new platform a lot quicker. Web 1.0 launched Amazon and Netflix within the first couple of years. Where are all the blockchain apps? The only industries that have really been impacted are ransomware, money laundering, and facilities for exchanging and speculating on tokens. There are unloved monopoly ledger companies like OpenTable and Ticketmaster. Where has any centralized application actually been disrupted? If distributed ledger technology can't disrupt OpenTable, what use is it? My best guess is that blockchain and Bitcoin adoption will remain a curiosity and a niche phenomenon linked to black markets, illicit activities, weak states with unreliable payments and money. [link]
  • I conceded that it's possible that things could continue along these lines forever, although it seems unlikely to me that a bubble this obvious and severe could persist. Then I asked her a different question. What if she's right? What if things do double again? What if a decade from now the average $1.8M condo hits $3.6M? What if the economy performs as expected? What would the side effects be? She made a pained expression. It's difficult to imagine how society would hold itself together. [Granola Shotgun]
  • The rise of heart disease DOES parallel the rise of the heart disease death rate in the first half of the 20th century. But the fall in heart disease rates actually precedes the fall in smoking by a decade or so. You can make the argument that high heart disease death rates caused a fall in smoking rates because of public education campaigns about the risk of smoking rather than the other way around. [link]
  • Gerald Reitlinger, in his 1963 book, "The Economics of Taste," wrote that back in 1937, when 18th-century French furniture was all the rage with the ultrawealthy, a desk by Carlin sold for 8,000 pounds, or about $700,000 in today's money. That same year, a Cubist still life by Picasso failed to sell at auction for £105, according to Reitlinger. [NY Times]
  • The book that etched the deepest grooves in my mind last year was Against the Grain by James C. Scott. It explores how the unique characteristics of grain-based agriculture shaped the early history of states. While I did learn many interesting historical facts and trends from the book, what stood out to me most was Scott's emphasis on epistemics. When he pointed to the archaeological record, he wouldn't simply cherrypick a basket of facts that supported his arguments. Instead he explained how archaeological evidence is gathered, and where that leaves systematic holes in our knowledge. For example, he pointed out that what we envision when we think of archaeology is really just the archaeology of states, cities, and monuments, rather than of nomadic or indigenous peoples, because those are the sites that are lowest-hanging fruit for archaeologists to find. [Devon Z]
  • No matter what your priorities are in an active vacation, Japan can accommodate them. There are epic thru-hikes that trace ancient pilgrimage routes, like the 559-mile Michinoku Coastal Trail in the northeast; stunning rock formations along the north-central coast that can be explored by kayak, such as those found in San'in Kaigan National Geopark; and an abundance of public hot springs you can access for less than $15 (including one inside the Sapporo airport). An increase in international routes from Asian carriers has driven down ticket prices: Scott's Cheap Flights and Dollar Flight Club find fares as low as $300 to $400 round-trip from the West Coast and even cities such as New York—which is $1,000 below average. Once you're there, stay in pod hostels, where beds are tucked away into cubbies to offer more privacy than a standard bunk room, or camp at one of 3,000 sites in more than 30 national parks. Fill up for cheap by sticking to $5 bowls of ramen and udon, conveyor-belt sushi, or street foods. If you plan to travel between cities, invest in a Japan Rail pass, which starts at $271 for seven days of unlimited travel. [Outside]
  • What Intellectual Progress Did I Make In The 2010s? One of the best parts of writing a blog is being able to answer questions like this. Whenever I felt like I understood new and important, I wrote a post about it. This makes it easy to track what I learned. I think the single most important thing I discovered this decade (due to a random comment in the SSC subreddit!) was the predictive coding theory of the brain. [SSC]
  • This article really points out that Chipotle has a SERIOUS issue with order size and frankly they aren't close a lot of the time. While I don't eat at McDonald's often I do know that when I order a Quarter Pounder it cooks down to roughly .3 pounds EVERY SINGLE TIME! It's even advertised as such. Chipotle seems to be straddling the line between pre-cooked and cooked and while it doesn't need to be exact, it should at least be close, and as the pictures above show, that's not the case. Also, as I am sure people will see from the comments on this post, I AM NOT ALONE. That's why this issue resonates with people. [link]
  • I was hoping that Iran would outmaneuver Trump diplomatically and make him look like the stupid Zionist thug he is, but unfortunately the large number of deaths because of a stampede at the funeral procession and the downing of the Ukrainian airliner has just made Iran look like a stupid third world country and made it very difficult to defend them. I initially thought that this latest act of aggression from the US might be the beginning of the unraveling of their empire, but unfortunately it appears not. Unfortunately Trump now looks even stronger than he did as far as the majority are concerned and Iran looks even more backward and contemptible than it did before. [Unz]
  • In many countries project expenses and payroll for the local crew need to be carried in cash. Whether you're managing a team of thirty working for months at the edge of the grid, or on a solo trip to negotiate a significant cash transaction, the 1M Hauly is designed for discreet, safe carry of up to $1 Million USD in strapped, new or used $100 USD banknotes. Designed to address the six main issues with carrying significant volume banknotes in field: risk of discovery; risk of damage (especially in high-humidity, monsoon environments); container robustness; carryability; glide; and in-field accounting. [SDR Traveler]
  • Every soldier in Vietnam used one ton of copper per year, I think that it's as if they were fighting each other with ingots of copper. So I was forecasting copper prices by looking at the troop build-up, one ton of copper per army person, and forecasting that the price of copper would go up. So I was known for a while as Mr. Copper. As I said, Anaconda was Chase's main client, and Kennecott was the client of Citibank, and they're a group of commodity people in Wall Street that just love copper. I love copper and when one head of the group said, "Aluminum is a shit metal," I felt the same way that copper is nice. [Michael Hudson]
  • The same mountebanks who get to Washington by promising to augment his [the farmer's] gains and make good his losses devote whatever time is left over from that enterprise to saddling the rest of us with oppressive and idiotic laws, all hatched on the farm. There, where the cows low through the still night, and the jug of Peruna stands behind the stove, and bathing begins, as at Biarritz, with the vernal equinox—there is the reservoir of all the non-sensical legislation which makes the United States a buffoon among the great nations. It was among country Methodists, practitioners of a theology degraded almost to the level of voodooism, that Prohibition was invented, and it was by country Methodists...that it was fastened upon the rest of us, to the damage of our bank accounts, our dignity and our viscera. What lay under it, and under all the other crazy enactments of its category, was no more and no less than the yokel's congenital and incurable hatred of the city man—his simian rage against everyone who, as he sees it, is having a better time than he is. [Mencken]
  • This preposterous quackery flourishes lushIy in the back reaches of the Republic, and begins to conquer the less civilized folk of the big cities. As the old-time family doctor dies out in the country towns, with no competent successor willing to take over his dismal business, he is followed by some hearty blacksmith or ice-wagon driver, turned into a chiropractor in six months, often by correspondence. In Los Angeles the Damned, there are probably more chiropractors than actual physicians, and they are far more generally esteemed. Proceeding from the Ambassador Hotel to the heart of the town, along Wilshire boulevard, one passes scores of their gaudy signs; there are even chiropractic "hospitals." The Mormons who pour in from the prairies and deserts, most of them ailing, patronize these "hospitals" copiously, and give to the chiropractic pathology the same high respect that they accord to the theology of the town sorcerers. That pathology is grounded upon the doctrine that all human ills are caused by pressure of misplaced vertebrae upon the nerves which come out of the spinal cord -- in other words, that every disease is the result of a pinch. This, plainly enough, is buncombe. The chiropractic therapeutics rest upon the doctrine that the way to get rid of such pinches is to climb upon a table and submit to a heroic pummeling by a retired piano-mover. This, obviously, is buncombe doubly damned. [Mencken]
  • Promotion guys, sales guys... they are what they are. When they're not working they're either eating/drinking/smoking (junk food/hard liquor), or they're watching TV, playing golf, whoring. What they don't do is anything remotely scholarly or intellectual. Studying is for dweebs unless you mean studying sales techniques, golf techniques or whoring techniques. Trump's dream career was running his casino in Atlantic City. Think about it. [Sailer]
  • The problem is that here the central banks, though nominally independent, are in fact subject to the whims of the political apparatus, and NIRP/cheap debt solves a lot of short term political problems. Not only does it juice the economy (longest bull run in history!) but it prevents governments from needing to make what Habermas identified in Legitimation Crisis as their most fundamental choice in resource allocation – between the demand for welfare by the populace and a low tax burden by enterprise – and putting that risk off for the future in the form of debt, which accumulates as and is quantified by the annual budget deficit and accumulated debt balance. Habermas understood that this is a very dangerous game. States are, when they do this, creating expectations of satisfaction of what he termed "programmatic demands." i.e. "stuff the population expects will get done, otherwise they'll revolt." The title of the book, Legitimation Crisis, refers to Habermas' description of what happens when a state is 'no longer able to satisfy the programmatic demands it has set for itself.' The risk breaks out into the open, leading to the untethering of institutions and political expectations, upheaval, and revolutionary change. Accumulating debt is the process of deferring making hard choices between certain programmatic demands. When a state does this it reduces political risk in the present by increasing political risk in the future. [Preston Byrne]
  • This means it's really easy to get stuck. Stuck in your current way of seeing and thinking about things. Frames are made out of the details that seem important to you. The important details you haven't noticed are invisible to you, and the details you have noticed seem completely obvious and you see right through them. This all makes makes it difficult to imagine how you could be missing something important. [link]

Wednesday, January 8, 2020

2020 Prediction Contest

The 2019 prediction contest is over with the prize winner announced - it is time for the 2020 version!

In our quest to continually improve the contest, we have a larger number of questions this year than in earlier years. Please do not let that discourage you. The larger sample size should increase the likelihood that the winner is the best calibrated predictor.

All probabilities are due by this Sunday, January the 12th at noon Pacific time. Post your probabilities in the comments section below. Either leave an email address, a twitter handle, or post using an account so that we can verify the winner's identity next year. (You could also leave a link to a Google Doc, etc.) Please leave a Twitter handle in any case as we will try to give some periodic updates "@" people throughout the year.

Finally, remember the logarithmic scoring system. As Wikipedia explains, "a prediction of 80% that correctly proved true would receive a score of ln(0.8) = -0.22. This same prediction also assigns 20% likelihood to the opposite case, and so if the prediction proves false, it would receive a score based on the 20%: ln(0.2) = -1.6. The goal of a forecaster is to maximize the score and for the score to be as large as possible, and -0.22 is indeed larger than -1.6."

Here are the questions (total of 68):

* A Category 3 hurricane makes landfall in the continental U.S.
* A tropical cyclone makes the list of 10 wettest on the U.S. Mainland (for the fourth year in a row).
* Musk leaves Tesla for any reason (e.g. resigns or is fired).
* TSLA share price goes below $200 at any point.
* TSLA share price goes above $800 at any point.
* Anow Dow 30 component files for BK or propose a restructuring where existing equity will receive less than 10%.
* At least 4 of HOSS, CRC, CHK, FTR, MNK, JCP file for BK or propose a restructuring where existing equity will receive less than 10%.
* Frontier Communications pays its unsecured bond maturing in April 2020.
* 2020 US vehicle sales (autos and light trucks/SUVs) are lower than 2019 vehicle sales.
* A players' strike occurs in any of the four major US sports leagues (NBA, NFL, MLB, NHL).
* Twitter is taken private or acquired.
* Boeing 737 MAX aircraft resume service in the U.S., the E.U., or Canada.
* China wins more medals than the US in the 2020 Olympics
* A terrorist attack using commercial drones kills someone in US or Europe.
* US life expectancy declines for a fourth consecutive year (based on most recent data)
* Cannabis is removed from the federal list of Schedule 1 drugs.
* Donald Trump is re-elected (election not in dispute or too close to call) by the end of the year.
* The Senate holds a Trump impeachment trial and two or more GOP Senators vote to convict.
* US ends daylight savings time.
* One or more of Kim/Merkel/Saudis loses power (dies, resigns, or is deposed).
* One or more of Macron, Trudeau, or Erdogan loses power (dies, resigns, or is deposed).
* A nuclear weapon is used in anger.
* BREXIT is finalized and the UK officially leaves the E.U.
* Any two or more Epstein associates are charged with Epstein-related offenses by any government
* A referendum on leaving the EU is held (win or lose) in another EU country.
* Either Rep. AOC (D-NY) or Rep. Ilhan Omar (D-MN) lose reelection.
* Trump pardons anyone involved with the Mueller inquiry, Martin Shkreli, OR Rod Blagojevich.
* Either Buffett or Munger dies.
* Another Supreme Court seat opens.
* Pelosi is no longer the Speaker of House as of 12/31/20.
* Social Security benefits are unfavorably modified (e.g. by means testing or a change to the COLA computation).
* Cryptocurrency combined market cap on Coinmarketcap.com exceeds $1 trillion at any time during the year.
* The Flippening: Etherium market cap is greater than Bitcoin (core/classic) at any time during the year.
* Any country leaves the Euro currency.
* A Euro hits $1 US. (EURUSD parity) at any time during the year.
* Crude (WTIC) trades above the 2018 high of $76.90 at any time during the year.
* Crude (WTIC) falls below the “modern” low of $26.05 at any time during the year.
* USDJPY below 100 at any point during the year.
* USDJPY above 130 at any point during the year.
* Federal Reserve bank balance sheet total assets (FRED:WALCL) increase to above $4.75 trillion at any point..
* Federal Reserve raises target rate any times (in 25bps equivalents) in 2020.
* Federal Reserve lowers target rate any times (in 25bps equivalents) in 2020.
* The 13-week T-bill yield ($IRX) exceeds 2% at any time during the year.
* The 13-week T-bill yield ($IRX) goes below 1% at any time during the year.
* Global negative yielding debt goes under $1 trillion at any time during the year.
* The 10 year Treasury yield falls below the July 6, 2016 low of 1.336% at any time during the year.
* The 10 year Treasury yield rises above the 2018 high yield of 3.24% at any time during the year.
* Any of the following countries' 10-year government bonds yield more than US at end of year: Germany, Italy, Canada.
* The 20+ year Treasury ETF (TLT) has a positive price return (not including dividends) for the year.
* Any country's sovereign debt that is currently current goes into default at any point during the year.
* Total return of 1 year T-bill outperforms all of S&P 500, Nasdaq, and bitcoin for the year.
* The S&P goes below 2,750 at any time during the year.
* The S&P goes above 3,750 at any time during the year.
* The BBB yield closes above 5% at any time during the year.
* A 2 year treasury yields more than 10 year Treasury at any time during the year.
* The S&P Retail ETF (XRT) outperforms Amazon for the year.
* Gold trades below $1000/oz at any time during the year.
* Gold trades above $2000/oz at any time during the year.
* Buying equal dollar basket of FB/AAPL/NFLX/GOOGL returns below 0% for the year (including dividends).
* The CBOE Volatility Index ($VIX) exceeds 40 at any time during the year.
* The CBOE Volatility Index ($VIX) exceeds its 2008 record of 89.53 at any time during the year.
* The most current 13F as of 12/31/19 of the Swiss National Bank shows a balance below $45 billion of equities.
* The S&P has its largest one day percentage decline in history (bigger than 10/19/87 of 20.5%).
* The S&P has a one day percentage decline greater than 5%.
* The S&P has a one day percentage increase greater than 5%.
* The Vanguard Balanced Index Fund (VBINX, 60/40) has a positive return for the year.
* Hussman's fund (HSGFX) is up for the entire year including dividends.
* BYND ends the year below its IPO day closing price of $65.75 AND PTON ends the year below its IPO day closing price of $25.76.

Tuesday, January 7, 2020

Guest Review of Real Food On Trial: How the diet dictators tried to destroy a top scientist by Dr Tim Noakes

Reviewer's note: ”Real Food on Trial” is a self-published re-release of the book “Lore of Nutrition.” RFoT has approximately 40 additional pages compared to LoN. I purchased LoN when it was first published in January 2018 and recommended it to friends often. I was very surprised one day when I went to Amazon to get the URL to email to a friend and saw that the e-book was no longer available. The paperback version was still listed for sale, however. A few months after that, again when getting the URL to send to a friend, I saw that the paperback version was no longer available either. After a little bit of digging I found RFoT. I do not know the reason LoN was dropped by its publisher, Penguin Random House of South Africa. It could be any of a number of mundane reasons, but after reading the book one cannot rule out threat of lawsuits by very deep-pocketed corporate interests. If anyone happens to know the back-story, please share. This review is actually based on LoR. I have not purchased the re-released edition. [CBS - This is the same guest reviewer who reviewed Bottle of Lies; @PdxSag.]

If I had to summarize Real Food on Trial in two sentences it would be:

“You can’t outrun a bad diet. Carbohydrates make a bad diet.”

The author tells his story of trying to literally out-run his bad diet, failing to out-run it, telling the world, and getting professionally crucified for it. As such, the book is at the nexus of many of the latest health topics and controversies:

  • Like many other low-carb converts, the co-authors each decided to try a low-carb diet almost by happenstance in response to chronic problems in their own health.
  • The co-authors are vilified and attacked professionally for the temerity to espouse a position at odds with the mainstream message. (Moreso, the financial interests that benefit from the mainstream – but don't call it a conspiracy.)
  • Bureaucratic mediocrities whose only authority is the flimsy credentials they bestow on themselves going on a witch-hunt against their clear intellectual superior using a bunch of administrative procedural technicalities.
  • Twitter as ground zero for a conflagration of lawsuits and controversy.
  • A stacked deck of grossly biased, if not outrightly fraudulent, research in support of mainstream health advice
I came to hear of Professor Tim Noakes and his trial by the South African licensing board for MD's via Twitter. At the time I started following the lawsuit a verdict had not been rendered, though the controversy and trial had been on-going for a couple years. After the trial and verdict, “Lore of Nutrition” was published, which I purchased wanting to get the whole story of the trial and what led up to it. What I got was not only the story on the trial and the events leading up to it, but also the story of an incredibly accomplished and highly respected scientist being subjected to an organized campaign to silence his message and trash his reputation.

The trial itself was over a seemingly innocuous tweet from Professor Noakes. In February 2014, a person on Twitter asks him:

“Is LCHF eating ok for breastfeeding mums? Worried about all the dairy + cauliflower = wind for babies??”

Noakes replies:

“Baby doesn't eat the dairy and cauliflower. Just the very healthy high fat breast milk. Key is to ween [sic] baby onto LCHF.”

Within 24 hours a dietician had lodged a complaint with South Africa's sanctioning body for practicing physicians for giving “incorrect,” “dangerous,” and “potentially life-threatening” advice.

First, however, it is probably necessary to introduce who Professor Tim Noakes is. He might not be known to many Americans, but in South Africa and in certain athletic circles such as professional rugby and ultra-endurance sports, he is one of the most preeminent experts. In South Africa he may be as big a celebrity as Dr. Oz here in the US. He has both an MD and PhD, though has spent the majority of his career in academia doing research and hasn't been in clinical practice in nearly 20 years. He is one of South Africa's highest rated scientists. He has written multiple bestselling books, the most successful of which was “Lore of Running” which publishers rated 9th ever, globally, in its category. He has also published 750 scientific articles, and has over 16,000 journal citations. He has been a tenured professor at the University of Cape Town for over 35 years. In 1995 he co-founded the Sports Science Institute of South Africa. He was awarded the South African Presidential Order, and a National Research Foundation Lifetime Achievement Award.

Professionally, his research is noteworthy for challenging orthodoxy and redefining what is regarded as generally-accepted knowledge in the realm of athletic performance. In 1991 he showed the industry-driven fallacy that individuals should hydrate as much as tolerable when exercising, especially in the heat, was without scientific basis. In fact, over-hydration was leading to an entirely preventable fatal medical condition among scores of athletes and military service personnel. In 1996 he disproved the “Hill Theory” of exercise performance, which had been the reigning dogma since it's introduction by Nobel laureate Archibald Hill in 1923, and replaced it with the “Central Governor Model.” In 2004, he wrote an editorial in the New England Journal of Medicine challenging Lance Armstrong as “the most doped athlete in the history of the sport.” This, at a time when Armstrong was still the darling of professional cycling, and American sports enthusiasts generally.

In short, Noakes was not shy to controversy. Rather, as any great scientist, he followed where the data and his research results lead him.

Neither was Noakes an iconoclast seeing conspiracy theories at every turn. Ironically, Noakes, himself, followed the conventional health advice with a carbohydrate rich diet and ever more exercise in a – largely futile – battle to keep his weight down and his fitness up. Finally, in 2010 he had what he called his “Damascene experience” where almost unable to complete a 5k for his morning exercise routine – for over 40 years he had been an avid ultra-distance runner – decided he should give the benefit of the doubt to a new book title he'd received an email advertising: “The New Atkins for a New You.” Despite his misgivings about what he felt was a “thoroughly debunked Atkins,” he was familiar with all of the three co-authors, and decided as a scientist – and nearly at the end of his rope health-wise – he should at least investigate their claims.

Marika Sboros' journey to a low-carb diet was not much different. She was a journalist on the health beat that had known Noakes prior to his conversion to prominent low-carb diet proponent. A struggling vegetarian herself, she wrote an article giving Noakes' side of the controversy he had touched-off in South Africa, largely out of a feeling that he was being unfairly attacked in the press at the time. (This was prior to the Twitter complaint and trial.) Immediately she began receiving attacks with the same ferocity as Noakes had been receiving. Among the charges was that she was a closeted “Banter” – the South African term for low-carb dieting. Having her own struggles with diet and weight, and now being charged as one anyway, she decided she should give the diet a try and see first-hand what it was all about.

Living in Portland, Oregon, I cannot tell you how many friends and acquaintances have the countenance and attitude of an endurance athlete, vegetarian, or vegetarian endurance athlete. Noakes and his co-author, Sboro, are virtually the everyman in this city. What I especially liked about this book is that I can recommend it knowing that the reader is going to personally identify with the authors in a way they wouldn't with a jacked-up P.D. Mangan and other high-agency meat and barbells practitioners.

With regard to the personal attacks, they were swift and suffered no quarter. Noakes started his personal low-carb diet experiment in December 2010. By winter 2011 he had decided he must come clean with the world and share his discovery. He wrote a regular column for Discovery magazine, which was also a large financial backer of his research at the Sports Science Institute. He titled his column against “Against the Grain,” and laid out the scientific case for a low-carb diet. He concluded his column thusly:

“There is a saying that to find the root cause, follow the money trail. If a low-carbohydrate intake is more healthy than we expect, then why is that fact hidden? The answer is that some very large industries, including the soft drink, sugar and confectionery industries (all of which produce high-carbohydrate products with minimal nutritional value) do not want us to know this.”

Soon after that was published, Noakes' column in Discovery magazine was cancelled. Despite that, throughout 2012 Noakes continued to advocate to the public the benefits of a low-carb diet for treatment of insulin resistance, obesity, and T2DM. In September 2012, on the day following his receiving a Lifetime Achievement Award from the National Research Foundation, a group of senior cardiologists at the University of Cape Town, where he had been on faculty since 1969 – 43 years – published an open letter criticizing him for putting people's lives at risk. A “high-fat, high-protein” diet for “all persons” is “contrary to the recommendations of all major cardiovascular societies worldwide, is of unproven benefit and may be dangerous for patients with coronary heart disease.” In a ‘tell’ as to who was really calling the shots, the letter further went on to advocate for statin drugs as both cheap and proven for extending life. Finally, in the oldest play in the ivory tower’s playbook, they suggested that Noakes should be expressing his opinions “in the academic forum and the medical literature where it could be critically evaluated and challenged. To present these controversial opinions as fact to a lay public is dangerous and potentially very harmful to good patient care.”

Therein lies the perverse joke of modern medical advice. Anything outside the orthodoxy is dismissed as anecdote. However, the gatekeepers of research funding will not fund anything that could challenge the orthodoxy. It's a Catch-22 that they used for 40 years to keep the public mis-informed and in an increasingly desperate state of ill-health. Of course, the Internet's ease of direct communication between and information sharing among the public has broken the gatekeepers' monopoly on information. They can cluck “the plural of anecdote is not data” all they like. However, the people making a huge improvement in their health by adopting a low-carb, low omega-6 diet and sharing the impact its made with their friends and family, don't care.

If anyone doubts that heterodox research would be squashed, I think the spin applied to the research that does get funded to keep it within the orthodoxy tells the tale. Peter Dobromylskyj's blog (Hyperlipid) was my first exposure to the unabashed spin in academic research.

This aspect comes up in the Noakes' book in an organized public debate prior to the tweet that instigated the lawsuit. Since one of the points of contention was that low-carbing was unproven and may be dangerous, Noakes set out to show research had proven it as both safe and effective. As regards the other side’s compromised research, one of the biggest smoking guns was the $700-million Women's Health Initiative. Buried in the text body was the finding of a 26% increased hazard ratio for women with previous heart attack that then followed the mainstream’s “heart-healthy” low-fat diet. Interestingly, this was the sole statistically significant finding of the entire $700-million study and it was not in the abstract or conclusion, and it was dropped from the table of significant results.

In a study from South Africa, three cities served as test subjects for comparison: one city received an intensive, hands-on, low fat heart-healthy information campaign – some might call it propaganda – for at-risk individuals; one city received a non-intensive low fat heart-healthy campaign; and one city acted as control and received no information campaign beyond what was available in the general media. Ironically – or perhaps not – after an 8 year follow-up the city receiving the most intensive campaign showed the worst results, while the other two were indistinguishable. One suggestive conclusion is that the intensive low fat heart-healthy advice is counter-productive. Instead, the research results were spun to suggest that low fat heart-healthy recommendation is so thoroughly “known” that further intensive information campaigns provide no additional benefit. Such obvious missing the forest for the trees is absolutely willful.

A landmark study was the Naudé Stellenbosch/UCT review which found no weight-loss benefit to low carb diets. It was published in July 2014 and was used as justification for bringing the complaint against Noakes to trial.

Ostensibly the Naudé Review’s goal was to perform a meta-analysis of low-carb diet research and determine whether the claimed benefits of low-carb diets stood up to rigorous scientific scrutiny. Naudé takes the common approach among slanted meta-studies and designs the inclusion criteria to cherry-pick studies that will be supportive of the conclusion the authors wish to provide. With regard to discrediting low carb diets, they include studies in which low carb is in name only -- up to 35% of total calories vs. 5-10% suggested by low carb advocates. They also throw out comparison studies in which the low carb and high carb diets are not iso-caloric. However, the biggest benefit of a low carb diet is the reduced hunger that goes along with reduced carbohydrate intake so that followers naturally eat less and make-up for the energy deficit via their own fat stores.

Noakes, in a brilliant display of Doyle-ian deductive logic noticed that the Naudé Review was 17 months late in being published. This was 17 months that Noakes was in the public eye advocating for low carb diets. Why would they delay publishing 17 months unless the review didn’t originally show what they wanted it to show? Noakes enlisted Dr. Zoe Harcombe a leading health statistician to investigate the Naudé Review. Noakes sent her the 14 studies that the Naudé meta-analysis was based upon. She found 15 material errors including 4 of the 14 studies that did not even fit Naudé’s own criteria for inclusion in the meta-analysis in the first place. Perhaps to no one’s surprise, when Harcombe repeated the meta-analysis using the 10 studies that actually fit the inclusion criteria and correcting for the other material errors “the data confirmed that the lower-[carbohydrate] diet produced significantly greater weight loss than did the balanced diet.”

As far as the trial, to cut to the chase, it was a set-up. If the breastfeeding tweet hadn’t brought about the complaint, some other tweet would have. They had been waiting on the Naudé Review to provide the scientific justification to initiate a complaint. Once Noakes became a vocal proponent of a low-carb diet, his profile in South Africa guaranteed that the reigning medical establishment would come after him.

The primary reason was to maintain the messaging that a low-fat diet and exercise leads to good health outcomes. Lies are delicate things and must be vigilantly guarded and protected. If nothing else, whoever owns the megaphone can be effective with Fear Uncertainty & Doubt. Secondarily, it was an obvious case of 'Pour Encourager Les Autres'. If a scientist of Noakes' eminence could have his reputation attacked and himself placed on a show-trial, younger less established scientists and doctors would certainly take heed.

The trial itself is interesting. It made a fitting climax to an outstanding book – and thanks to an honest judge and review board Noakes handily won – however, with regard to the science, it was anti-climatic. Noakes treated the trial as if the entire legacy of his career was on trial, which, perhaps, it was. However, the other side brought would could best be described as their C-team. It was not a fair fight. Noakes and his team were like men among boys. At first, that was a surprise to me. After reflection on the actual purpose of the trial, it made sense. The health establishment had sent a clear and unambiguous message just by putting Professor Noakes on trial. An actual weighing of the merits with their best scientists proffering their best research would not stand a chance against someone of Noakes' caliber. The other side stood nothing to benefit by a debate on the science. Sending the C-team allowed them the rationalization that Noakes hadn't bested their best.

I give the book 5/5 for being well-written, interesting, and providing a very good amount of science supporting a low-carb diet. I give it bonus points for blowing the lid off the bias and fraud upon the public that's been used to justify the mainstream diet and health advice of the last 40+ years. I give yet more bonus points for being delivered by scientist and doctor of impressive credentials who had been following the mainstream advice in his own life and nearly succumbed to it in the all too typical manner, just before rescuing himself and taking his message to the general public.

Thursday, January 2, 2020

2019 Prediction Contest Results

Yesterday we posted the biggest upsets from the 2019 prediction contest. Everyone seemed to agree with our scoring of whether the events happened or not, so it's time to announce the results:

First Place - score of -25.11 - commenter Ian Bezek
Second Place - score of -25.32 - commenter bjdubbs
Third place - score of -26 - commenter Walter

[Higher (i.e. less negative) scores are better.]

This was a huge comeback for bjdubbs, who was in last place in the 2018 contest. Ian Bezek was new to the contest this year. Last year's winner Tom came in with -35.85 this year. Last year's second place @barbariancap came in with a score of -36.89. Your host CP had a -30.42 score this year.

If you look at the most contentious questions for 2019 these actually were not the ones that cost people the most points. What really hurts (due to the logarithmic scoring method) is not being wrong, but being highly confident and wrong.

Interest rates falling and the S&P rising above 3,000 were the unexpected surprises that pushed many people to the back of the pack. The lowest chance that anyone gave for SPX3K was 5% but Ian Bezek gave it a 50% shot - the highest. Interestingly, though, even if SPX had not gone above 3,000, Ian and bjdubbs would have just switched places for 1st and 2nd.

The Fed lowering rates in 2019 was another costly surprise for many people. One person gave this a 1% chance! The highest anyone gave it was a 70% chance. We shouldn't have differences that big. Interest rates are a highly unpredictable macroeconomic variable - a confidence level implied by the 1% prediction was unjustified. Also, the base rate of the Fed turning the ship around and reversing a rate increase or decrease cycle is a lot higher than 1% over the past century.

I would like to see whether there is a way to have the contest synthesize better predictions (the average of all contestants' entries) by having the contestants learn from the others' predictions - but without inducing groupthink. One idea would be to publish the averages after everyone submits, and strongly encourage everyone to look at the average and consider revising his predictions.

Previously, the 2015, 2016, and 2017 prediction contest results. Stay tuned for the 2020 contest announcement!