Monday, August 5, 2019

August 5th Links

  • In the old days, when companies built hardware, they were all examples of high technical risk and low market risk. If they really could build what they said they could, then you knew that people would buy the product. There were instances of, "I want to offer 10 times the performance, or 10 times the storage, or 10 times the bandwidth, or 1/10 the latency," and if you could actually deliver on that in the timeframe proposed, you could feel pretty confident that you would build a big business. As we transitioned to a software-driven world, we moved from high technical risk, low market risk, to the opposite: low technical risk, high market risk. You knew you could build what you set out to build. The question was, did anyone want it? How would you know that someone wants a ride-hailing service? How would you know that someone wants to rent a room in your apartment? How would you know that someone wants to buy a Beanie Baby from you? It's literally impossible. [link]
  • Perhaps the election of Trump will be end up being totally inconsequential as a historical event, except to inaugurate a new bear market in bonds? [CBS]
  • One of the Cochran commenters notes that this may be a case of "calling a deer a horse". This relates to a story, well known to all Chinese, of a court eunuch who presented a deer to the Emperor and said it was a horse. He took note of everyone who protested or even remained silent in the face of this obvious falsehood and had them executed. In other words, reasonable people might differ as to whether intelligence is heritable but it's obvious that athletic traits are. The test of a true follower is whether he will remain loyal EVEN in the face of obvious falsehood. Saini is just trying to find out who the true followers are. The followers in turn know that if they fail to go along, they may be outed as less than true believers ("racists"). As Darymple said, remaining silent also humiliates you and sets you up for further humiliation – your overlords in effect DARE you to call them on their BS, knowing that you're afraid to do so. Accept your cuckhood! In other words, it's a power play. It's an ancient totalitarian move that Stalin used a lot. Americans don't recognize it because we don't have totalitarian traditions but any Chinese schoolchild would get it. Maybe we'll also get to know about calling a deer a horse sooner than we'd like. [Unz]
  • All else being held equal, those companies who are producing intellectual property worth patenting are likely more efficient at translating R&D to economic value than those that are not. This explains the significant future EPS growth underperformance and the 3.5% annualized relative outperformance of companies with recent patent activity over those without. [OSAM]
  • Having by now grown used to that convenience and other, even more convenient conveniences besides, I got to wondering whether they've collectively made it impossible for me to live outside Seoul, let alone in any of the comparatively ramshackle cities of the West, ever again. Right there at my bus stop, I began a thread of "things Seoul has that give me serious reservations about ever living in any other city." [LARB]
  • It turns out that eighty percent of 1924-1963 books never had their copyright renewed. More importantly, with a couple caveats about foreign publication and such, we now know which 80%. This was announced back in May, but I don't think it got the attention it deserved. This is a really big deal, so I had no choice but to create a bot. Here's Secretly Public Domain, which highlights unrenewed works that have already been scanned for Hathi Trust. This only represents 10% of the 80%, but it's the ten percent most likely to be interesting, and these books have the easiest path towards being available online. [link]
  • If you look up the production of almost any product, the Chinese just DWARF us nowadays. Vehicles – we make 11 million, the Chinese make almost 30 million. Steel – we make less than 100 million tons, they make 900 million. Even trivial things like apples – we grow 4 million tons, the Chinese grow 44 million. We are just not in the big leagues anymore. We are like a rounding error in Chinese production. [Sailer]
  • During the Q2 reporting season as an example Concho Resources, a well respected Permian player, reported parent-child issues at their Dominator Pad resulting in less production with the same level of capex... CXO fell 23% on the news. Cracks have been forming for some time with companies walking back both fantastical IRR/Break-evens (in 2016 many companies were flaunting sub $40/bbl break-evens even though today at $50+ many struggle to generate free cash flow) and ultra tight spacing which combined would suggest many, many decades of vey low cost inventory. This perverted the oil market's view of the future role of OPEC, marginal supply costs, US energy independence, and even if there was a need for exploration given US supply growth could sustain the world until demand started to peak due to electric cars and the widespread adoption of clean technologies. From Q1 and Q2 company reports we can now see that spacing was likely exaggerated and that the difference between drilling Tier 1 and Tier 2 acreage quality can be immense. [Ninepoint]
  • After spending years building something that's no longer yours, especially if as in my case you have nothing (at least economically) to show for it, it can raise questions about whether it was worth building at all. I spent 5.5 years, from early 2012 to mid 2018, on the Referly/Mattermark/FullContact rollercoaster with an average annual salary of $120K and net negative personal savings rate. In the sale of Mattermark, the purchase price did not clear the amount invested by preferred shareholders and common stock (including all the founders and employees) was wiped out. There was no success fee for completing the deal, just my honor and self esteem + a job offer at the acquirer with a relocation bonus. [Danielle Morrill]
  • The authors emphasize five reasons (besides improved public health) why this is happening: 1) naturally gifted people have a tendency to trade mating and parenting opportunities for the opportunity to develop their abilities, e. g., through higher education; 2) being forward-thinking, such people are likelier to use contraception; 3) the modern welfare state taxes the more successful in order to support single mothers, who can often increase their benefits by having more children; 4) the modern movement for sexual "equality" has encouraged the brightest women to pursue careers and postpone marriage, often until it is too late; 5) finally, and most unforgivably, Western elites are now deliberately sponsoring the colonization of our nations by vast numbers of low-IQ persons from Africa, Asia and Latin America. [link]


eahilf said...

"Saini is just trying to find out who the true followers are."

Sailer used to have -- and maybe still does -- a tag for his posts: "Political correctness makes you stupid" -- that seems to fit Saini better than any other more complicated explanation.

As I said in one of my comments: she seems to be in a competition with Saira Rao to be seen as the most obnoxious Indian woman on the internet.

eahilf said...

Thanks for mentioning the Ninepoint site; I was not familiar with it.

"To even the most casual market observer, it should be blatantly obvious that the energy sector is broken. Oil stocks no longer seem to correlate with the daily move in oil and have greatly lagged the 25% year-to-date rally in the oil price."

Yes -- seems like you ought to be able, without a lot of trouble, to find value in that beaten down sector -- but it is still very tough -- no bid at all really or only a very weak one -- I recall another blog commenting about "generational low" prices in energy stocks back in Jan 2016 -- more than 3 years later many are still mired/hovering around down there.

CP said...

I haven't been able to find the value in E&P yet.

It seems like the firms are worth less than the debt - sometimes far less.

For years, E&P firms have bought land and drilled wells that produce less than $1 of eventual output for $1 total investment.

Remember GMXR?

and "Modelling an Unprofitable Oil Well"

If you can only drill unprofitable wells on your acreage, it has some value as an option, but not much compared to good acreage that may have seemed similar due to "closeology".

CP said...

classic Sailer:

"Afghanistan is the sort of quagmire that ideally, you’d lure your greatest enemies to attempt to occupy. 'Oh no, stay out of Afghanistan! It’s the strategic center of Asia, controlling all of the mountain passes. It’s a veritable Gibralter or Constantinople of strategic world locations.'"

eahilf said...

Seems like the kind of story you might like -- genuine entrepreneurship:

FBI: Amazon Drivers Involved In Multi-Million Dollar Theft Ring Involving Pawn Shops

One of the perps mentioned:

eahilf said...

"Remember GMXR?"

Remember CHK? -- that used to a CBS favorite as well -- practically a penny stock now.