Christmas Eve Links

• After getting more deeply involved in the hobby I discovered that all my favorite albums had a high dynamic range. This was interesting to me because I had formed my opinion on my favorite albums long before I'd learned about album dynamic range. Only after looking at the dynamic range of my favorite albums did I realize that almost always the common element was a high dynamic range. The corollary also held true. The albums I bought that were disappointing once I got them home and had a few listens had a low dynamic range. This gave me an idea for an objective comparison. Christmas songs are standards and everyone sings the same ones, albeit with differences in instrumentation and musical style. In a way, Christmas albums are like one-design sailboat racing. It’s not about the songs themselves, it's about the performance of the songs. Our enjoyment comes directly from the vocalist and musicians (obviously) and the producer (not so obviously). I am pleased to share my list of Christmas favorites. I've found them to be well-produced and objectively of a better-than-typical dynamic range. [AF]
• As the boom roles on and liquidity mushrooms, a wave of second-tier IPOs emerge, greeted by rampant investor enthusiasm, as investors seek to catch the 'next' secular winner (like the 'next Microsoft' in 1990s, or the 'next Amazon' in our times). Investors will justify paying virtually any price for companies like (for e.g. Sea Ltd), ignoring competition and operating losses, 'because Amazon lost money in the early years too'. At this point, it doesn't matter that the huge gains these stocks are enjoying represent pure speculation and hope about future prosperity, despite the comparative lack of it today or any realistic assurances it will actually materialise in the future. Risk aversion dissipates because such a long period of rising prices and rapidly growing top lines make the risk of loss seem remote. [LT 3000]
• The fundamental issue is that the ultimate owners of capital, or their immediate representatives (advisors and asset allocators), often make their asset allocation decisions on the basis of backward-looking return and volatility realisations, as without direct knowledge of the underlying securities, that is all they have to go on. And the important thing is that this process is inherently self-sustaining, not self-correcting, such that inefficiencies tend to get larger over time, not smaller (until an inflection point is reached, following which very dramatic reversals can happen), and the ability of investors to arbitrage these inefficiencies is largely absent. Liquidity flywheels are one of the most important forces in markets, and one of the most under-appreciated. They are also the fundamental reason why momentum strategies work (until they don't) - something that the EMH also declared to be impossible, and yet which quantitative analysis of past market action clearly refutes. So long as there are liquidity flywheels in markets, momentum will be a strategy that works, provided one has a reliable means by which to determine when momentum has turned, because when momentum reversals happen, they happen big and fast. [LT 3000]
• The Personal Computer, Internet email, Java, Linux, the Web, Cloud computing, in pretty well every case these things were loaded in the back door by geeks and line-of-business people because they got shit done, while IT was considering spinning up a task force to evaluate possible relevance. Rhyming quip among senior geeks: "The CIO is the last to know." It's a pretty infallible predictor, so you can use that logic the other way. I've been pretty confident that blockchain is bullshit even though it's cool technology because that scenario is *not* happening: Not being loaded in the back door to get shit done." [Matt Stoller]
• This study of 30,000 male British doctors, which minimized the risk of reverse causality by having very prolonged follow-up, demonstrated an inverse association of current tobacco smoking with the risk of PD. Compared with never smoking, current tobacco smoking was associated with a 30% lower risk of PD using smoking habits at baseline and with a 40% lower risk using smoking habits that were updated at sequential surveys. The risk of PD was inversely related to the amount smoked, and the protective effect of smoking on the risk of PD was attenuated with increasing duration of time since quitting smoking. [Neurology]
• There is now enough passive money in products lined up with these indices that 4 times a year, we can expect 20, 30 or even 50 little banks will take a ride on the Goliath rollercoaster, as State Street, Vanguard and Blackrock do their best to adjust allocations due to companies coming in and out of indices. [Colarion]
• AWS is a money machine, basically. Today, retail is something like 70 percent of Amazon's revenue. But AWS is 70 percent of the company’s operating profits. One of the reasons why the antitrust people are looking at Amazon is because Amazon is using highly profitable businesses where it has a really durable advantage in order to subsidize losses in other divisions that it uses to capture market share. Without an organ similar to AWS, a competitor like Walmart has to lower prices below the level of profitability to remain competitive. And they can only sustain those losses for so long. What’s an example of a division that AWS subsidizes particularly heavily? Prime Video, for one. Jeff loves Prime Video because it gives him access to the social scene in LA and New York. He’s newly divorced and the richest man in the world. Prime Video is a loss leader for Jeff’s sex life. [link]