Tuesday, April 24, 2018

Late April Links

  • When I owned a 2009 BWW 335i a a year and a half ago, it didn't create any problems for me. However, I did only own the car for three months before I sold it. Then one day, I was sitting in a coffee shop, wondering why I just paid $4 for a five-cent coffee, when I ran into the person to whom I sold my 335i. He looked at me, trying to appear pleasant, but couldn't hide the intense resentment bubbling inside him. He somberly mentioned that he had to take the car in for some expensive repairs right after he bought it from me. That's the game, player. [Jalopnik]
  • Without any hint of sarcasm or hyperbole, I can tell you that every single time I started any engine with a BMW badge on it, there was the same sense of concerned dread that the stereotypical bomb squad guys got in '80s action flicks. Starting and running a high-strung BMW engine that's destined for daily driver duty without incident is like finding a briefcase with a big red LCD display with five seconds left, with the choice of cutting the red wire or the blue wire, as a sweating Danny Glover somewhere in the background tells you that he's too old for this shit. It's a literal time bomb. [Jalopnik]
  • The next phase of public pension reform will likely be touched off by a stock market decline that creates the real possibility of at least one state fund running out of cash within a couple of years. The math says that tax increases and spending cuts cannot do much. For one thing, as we learned from Detroit, at a certain point high taxes and poor services force people and businesses out. The numbers are just too big in some states to come out of the budgets. For another, voters won't stand for it. The voters in these states have refused for decades to pay the full costs of the services they were already enjoying; they're not going to have sudden conversions to paying full costs, plus the accumulated costs from the past. State constitutions will be amended if necessary and big legal battles will be fought. I cannot see any plausible scenario in which full promised benefits are paid. [BB]
  • A close friend recently decided to learn to do a perfect free-standing handstand. No leaning against a wall. Not for just a few seconds. Instagram good. She decided to start her journey by taking a handstand workshop at her yoga studio. She then practiced for a while but wasn't getting the results she wanted. So, she hired a handstand coach. Yes, I know what you're thinking, but evidently this is an actual thing that exists. In the very first lesson, the coach gave her some wonderful advice. "Most people," he said, "think that if they work hard, they should be able to master a handstand in about two weeks. The reality is that it takes about six months of daily practice. If you think you should be able to do it in two weeks, you're just going to end up quitting." [EDGAR]
  • This Silver Lake Craftsman holds two bedrooms, one bathroom, and an incredible amount of built-in shelving. Hardwood floors run throughout the house, from the rustic kitchen to the bedrooms. The bathroom has a tile floor and a clawfoot bathtub. A patio and small yard can be found behind the house. It rents for $3,450. [Curbed]
  • I don't think a person in Ashland, WI would have felt like he was missing much that could be had in Minneapolis in 1900. But that has changed, and in the winner take all contest in the midwest, the northern Wisconsin towns lost and Minneapolis won. A house in northern Wisconsin goes for only $60k now! Very poor 100-year return compared to Minneapolis or even Duluth. How do you know if your local industry is going to dry up and blow away, crushing your real estate value and personal earning prospects? (Also devaluing your social capital because two-thirds of your town is forced to move away.) [CBS]
  • For the pilots of this airplane it was like a normal day in the simulator. Essentially all airliner or bizjet sim training is single-engine operation following a failure because flying a working jet with a three-pilot crew (bulletproof autopilot, left-seat captain, right-seat first officer) is actually easier than a lot of single-pilot operations in light aircraft (hence the higher accident rate for these operations). Thus the "engine failure then land single-engine" is something that a mid-career airline pilot would have done 500 times or more in a sim that is so realistic it can be logged as time in the actual aircraft. [Phil G]
  • A man is a member of a tribe. You may believe that it does not matter how you dress, but it does. You may think that people should not judge by appearances, but they do. You might well consider yourself to be special and above the hierarchies of social status, but you are not. [Pushing Rubber]
  • I visited Italy a couple of years ago and was surprised by the level of poverty there. Rome is very carefully kept together, but once you go outside of the center you see a lot of homeless. Genoa at night reminded me of NYC in the 80s. Not great. [MR]
  • One of the poorest-kept secrets in Silicon Valley has been the huge salaries and bonuses that experts in artificial intelligence can command. Now, a little-noticed tax filing by a research lab called OpenAI has made some of those eye-popping figures public. OpenAI paid its top researcher, Ilya Sutskever, more than $1.9 million in 2016. It paid another leading researcher, Ian Goodfellow, more than $800,000 — even though he was not hired until March of that year. Both were recruited from Google. [NY Times]
  • This is the only new car I've ever purchased so I don't know what's acceptable in terms of manufacturing defects, but this seems excessive. Since delivery in August 2017, my car has had its windshield replaced (odd residue), a door panel repainted (they missed a swath of clear coat), replaced window regulators (twice), and a replaced door handle. It's been in the shop for 20% of the time I've owned it, and now kinda feels like some weird hackjob rather than an expensive new-ish car. [Reddit]
  • I ran Trump's assertions to the ground, and for many years I was proud of the fact that Forbes had called him on his distortions and based his net worth on what I thought was solid research. But it took decades to unwind the elaborate farce Trump had built to project an image as one of the richest people in America. Nearly every assertion supporting that claim was untrue. Trump wasn't just poorer than he said he was. Over time I have learned that he should not have been on the first three Forbes 400 lists at all. In our first-ever list, in 1982, we included him at $100 million, but Trump was actually worth roughly $5 million — a paltry sum by the standards of his super-monied peers — as a spate of government reports and books showed only much later. [WaPo]
  • Greater Portugal, also known as Portugalicia, is a proposed union of the Portuguese-speaking territories including the autonomous region of Galicia, the Eonavian region, the territory of Oliven├ža, and many villages along the Portugal-Spain border that speak any kind of Portuguese-Galician dialect, such as the Fala language. [Wiki]
  • The Bernie Bros and Mr. Trump's Twitter trolls had called me a donkey-faced whore and a Hillary shill, but nothing hurt worse than my own colleagues calling me a de facto instrument of Russian intelligence. The worst part was, they were right. [NY Times]
  • All the public expenditure to prevent vice has the same effect. Vice is its own curse. If we let nature alone, she cures vice by the most frightful penalties. It may shock you to hear me say it, but when you get over the shock, it will do you good to think of it: a drunkard in the gutter is just where he ought to be. Nature is working away at him to get him out of the way, just as she sets up her processes of dissolution to remove whatever is a failure in its line. Gambling and less mentionable vices all cure themselves by the ruin and dissolution of their victims. Nine-tenths of our measures for preventing vice are really protective towards it, because they ward off the penalty. "Ward off," I say, and that is the usual way of looking at it; but is the penalty really annihilated? By no means. It is turned into police and court expenses and spread over those who have resisted vice. [Sumner]
  • Edward S. Lampert and Kunal S. Kamlani will not participate on behalf of Sears (as officer or director) in any discussions, deliberations, negotiations or decisions with respect to a potential transaction in which ESL participates as a buyer, except to the extent specifically requested by the committee referred to below. ESL will not participate in any such transaction as a buyer unless such transaction is both (i) recommended by the related party transaction committee (or another committee of independent directors) of the Sears Board of Directors, which is fully empowered to consider such transaction, and (ii) approved by the holders of a majority of the shares of Sears held by disinterested stockholders. ESL would accept that any transaction in which ESL participates as a buyer would be subject to a "go shop" process on reasonable terms. [EDGAR]
  • Insurance companies are, however, different from ordinary commercial corporations in that they must set aside and maintain significant levels of special reserves which they need to pay insurance policy benefits. A life insurance company sells insurance and annuity contracts (policies) which, in consideration of premiums received from its policyholders, obligate the company to pay benefits if certain future contingent events occur. These contingent events (called risks) include death, survival, disability, accidental injury and sickness. The financial impact of an insurance contract cannot be known exactly until the insured risks occur or the contract otherwise terminates. This may occur soon after a policy is issued, or many years later. For an extremely large number of issued and outstanding insurance policies, however, these risks can be predicted with reasonable accuracy based on the laws of statistical averages. In order to systematically build assets to support their future obligations, a life insurance company must set aside a considerable portion of the premiums it collects, but which it has not yet used to pay benefits, as a reserve fund. These reserve funds, combined with premiums it will receive in the future plus investment earnings, will accumulate over the years and be available to pay benefit obligations. [IRS]
  • In this case, for the second time this Term, we are required to construe the complex portion of the Internal Revenue Code concerning life insurance companies. The issue in this case is the extent to which deferred and uncollected life insurance premiums are includable in "reserves," "assets," and "gross premium income," as those concepts are used in the Life Insurance Company Income Tax Act of 1959. Premiums on respondent's policies are often payable in installments. If an installment is not paid when due, the policy will lapse, generally after a grace period. However, there is no legally enforceable duty to pay the premiums. An installment falling due between the end of the tax year and the policy's anniversary date is called a "deferred premium." In 1961, the most recent year in issue, respondent had $1,572,763 of deferred premiums. An installment which is overdue at the end of the tax year is called an "uncollected premium" if the policy has not yet lapsed. In 1961, respondent had $231,969 of uncollected premiums. For convenience, we shall refer to both deferred and uncollected premiums simply as "unpaid premiums." The amount charged a policyholder - the "gross premium" - includes two components. Under state law, the company must add part of the premium to its reserves to ensure that it will have sufficient funds to pay death benefits. This amount, the "net valuation premium," is determined under mortality and interest assumptions. The rest of the gross premium is called "loading," and covers profits and expenses such as salesmen's commissions, state taxes, and overhead. [Findlaw]
  • History shows that, on average, just two stocks from the global market-cap top 10 list remain on the list a decade later. The two survivors almost always include the number-one stock. But the number-one stock has never been top dog a decade later, ultimately underperforming and moving lower in the list. The second surviving stock has 50/50 odds of beating the market. If this history repeats, nine of the top 10 market-cap stocks will underperform the market over the next 10 years, and just one has a 50% chance of underperforming. We don’t particularly like those 95% odds. Can all of the seven tech highfliers collectively succeed to sufficiently justify their $4.3 trillion combined market capitalization at yearend 2017? Nothing is impossible, but this outcome is implausible. Sure, some of the new tech giants are at valuation multiples that are not extravagant, but several sport startling multiples—and all trade at levels that require robust continued growth. These companies are at war—in some cases directly with one another—for market share, competing for the same eyeballs, and are facing a growing risk of regulatory constraints. If history is a useful guide, Apple may still be in the top 10 list (but no longer number one) in 2028, and perhaps one of the others will still be on the list. History would suggest that, of the seven, at least six will underperform the market over the next 10 years. Beyond the top-tier tech favorites, a host of companies such as Snap, Hubspot, Overstock, and now Shopify each have negative earnings and lofty price-to-sales ratios. [Arnott]


Anonymous said...

CBS, the link lists you've been more regularly publishing count as the most useful aggregation on my entire blogroll. Please continue this noble and refreshing work.

CP said...

Excellent - glad you have been enjoying!

League of Women Voters said...

I've been told by a couple of friends that they read the links but won't forward or tweet them because of political incorrectness. It's like the USSR or China!

A glorious band, the chosen few, who read the Credit Bubble Stocks links.

High Plateau Drifter said...

Moi?? Politically incorrect??

Where on earth would you get that Idea??