Thursday, May 6, 2021

Thursday Links

  • I decided to do some research on pickups. Hmmm. My local Ford dealer has precisely three new F150s in stock. Odd. They usually have 40-50 on the lot. I bet it’s that damn chip shortage again. The Toyota Tundra is nice. My local Toyota dealer had a few more of those. Interestingly, they had some used Tundras in stock as well. Maybe I’d get a better deal buying used. Huh. A brand-new Tundra for $50k. Pricey, but in this market, I’m just glad they had some stock to choose from. Oddly, a similarly-equipped 2018 Tundra with 20,000 miles on it is listed for $44k – something is up in the used car market. At that price, why wouldn’t I just buy new? I guess if there’s not much new to choose from… feels like new car prices are likely to go up, and soon. [Doomberg]
  • In the first Doomberg essay, Reflections from the Lake, I emphasized how the convergence of easy fiscal and monetary policy with supply chain disruptions was potentially made more dangerous by the toxic weaponization of social media by apps like Twitter, TikTok, Instagram and Facebook. I argued that viral videos and memes threatened to shorten the path from elevated to hyperinflation in a way our leaders almost certainly don’t understand. The Dogecoin phenomenon offers strong evidence for this hypothesis. A group of highly influential social media titans accumulated a healthy helping of Dogecoins for themselves, then used their online power to amplify Doge memes and converted Dogecoin into the phenomenon we observe today. Egged on by the seductive powers of Robinhood, hordes of retail traders are piling in, happily risking US dollars for the latest speculative mania. At a minimum, the signal I am hearing loud and clear is that if and when inflation memes replace Doge memes, and certain bad actors wish to accelerate the downfall of the US dollar, the infrastructure exists to take things to levels unthinkable by most people today... and quickly. Not even the sky is the limit. Not for this doge. [Doomberg]
  • Stable prices provide a sense of security. They help define a reliable social and political order. They are like safe streets, clean drinking water and dependable electricity. Their importance is noticed only when they go missing. When they did in the 1970s, Americans were horrified. During most of these years, large price increases were the norm, like a rain that never stopped. Sometimes it was a pitter-patter, sometimes a downpour. But it was almost always raining. From week to week, people couldn’t know the cost of their groceries, utility bills, appliances, dry cleaning, toothpaste and pizza. People couldn’t predict whether their wages and salaries would keep pace. People couldn’t plan; their savings were at risk. And no one seemed capable of controlling inflation. The inflationary episode was a deeply disturbing and disillusioning experience that eroded Americans’ confidence in their future and their leaders. [The Great Inflation and Its Aftermath]
  • The money supply has increased by 4.85 times since the end of 1979 and prices have only increased by 2.32 times, which means that there’s a latent inflation of about 109%, by these calculations. That inflated money, I would say, is mainly in the debt markets because you find that even Federal debt securities are pretty close to zero percent interest, which is very contrasting to the situation you had in the past when outbreaks of inflation were occurring. Interest rates when higher than 10% for instance. So, that’s where I think the money is that’s been pumped out and the question is, when does that money start to come back from debt securities into goods. [Dying of Money
  • The Fed has adopted a new, softer target of average inflation of 2%, meaning it can overshoot for years to make up for the past decade’s misses. Furthermore, it has shifted from focusing on trying to act in advance of inflation based on its forecasts, to waiting until inflation actually arrives. With monetary policy’s effect on the economy famously having long and variable lags behind, as Milton Friedman emphasized, this raises the probability that the Fed acts too late to rein in rising inflation. Under both Janet Yellen, now Treasury secretary, and current Chairman Jerome Powell, the Fed has also emphasized what it had previously treated as a secondary target of full employment. In particular, it is focused on the benefits for marginalized workers. [WSJ]
  • I think if you were an early career researcher in public health and sceptical about the prevailing beliefs, there basically isn’t much of a way for you to speak your mind at all and even if you did, if global pandemics happen every 100 years, you could have lived your whole life before being proved correct. The experts can stay wrong longer than you can stay alive. The scary lesson in all this is that for unusual risks like pandemics, where the real-life test of expert theories occurs very rarely, we should expect many expert consensus views to be completely back-to-front wrong, because the in-group incentives will drown out any real-world test of their theories and beliefs. This is obviously an argument against planning, or at least an argument for making those plans as flexible as possible, because early planning will just entrench the weird and wrong political views of the relevant expert class (see the UK pandemic flu plan above). If we know that they were this wrong about something as important as a global pandemic, what other horrors are hiding in the expert consensus on every other rare event? [Lessons From The Crisis]
  • My neighborhood is fussy, but reports from colleagues and friends living elsewhere in the city — in Park Slope, Crown Heights, Harlem and Morningside Heights — suggested a continued high compliance despite the relaxation of mandates. In this way, it is easy to see the mask evolving as an expression of cosmopolitanism long past its necessity. If defiance was the style of one kind of culture warrior, mask commitment, regardless of the science, would be the ritual of another. New York is not Daytona Beach. [NY Times]
  • Liberals who aren’t quite ready to let go of pandemic restrictions. For this subset, diligence against COVID-19 remains an expression of political identity—even when that means overestimating the disease’s risks or setting limits far more strict than what public-health guidelines permit. [The Atlantic]
  • My mental model of cryptocurrency competition is still the one Jerry Brito and I developed for our 2014 article on cryptocurrency in the New Palgrave Dictionary of Economics (here’s an ungated version, related blog post). One question this model addresses is whether you can simply clone a cryptocurrency and expect it to have much value. Our answer was generally not, because the cloned cryptocurrency will have the same technical feature set as the original currency but with inferior network effects and likely inferior governance. More generally, you can think of each cryptocurrency as being characterized by a multi-dimensional set of attributes: security, transaction cost, network size, governance quality, robustness of scripting languages, and several others. My mental model is that when one coin is better than another on some attributes and no worse in any other, then it dominates the other coin. A dominated coin can have no value in equilibrium. The market is roughly winner-take-all between dominating and dominated coins (roughly because equilibrium isn’t achieved instantaneously). This doesn’t necessarily imply the market will be winner-take-all generally. There may be coins that neither dominate nor are dominated by certain other coins. This can happen if cryptocurrency characteristics reflect tradeoffs between the set of attributes. It can also occur if certain characteristics are not unambiguously good. For example, more of one characteristic may be considered better for one application and less of that characteristic may be considered better for another. These complications imply that single-chain maximalism is not a necessary outcome. But winner-take-all-ness between dominating and dominated coins used for the same application is a sure thing unless you want to bite the bullet and say that the value of all coins should fall to the marginal cost of creating them, i.e., zero. [Eli Dourado]
  • When you fund a company in its early stages, you might want a founder who will microdose LSD at work, because that’s just the sort of imaginative, aggressive, independent thinking that might change the world or whatever. (“Narrative violation: This CEO drops acid,” etc.) But when you are looking to take that company public, you want a CEO who would never microdose LSD at work, because that’s the sort of thing that stodgy institutional investors and regulators will find unsettling. If the founder-CEO has been microdosing acid all along, and you have been encouraging him to do so, there will be an awkward transition when you tell him to stop. [Matt Levine]
  • This is by far the largest population‐based study investigating the association between smoking status and total and free testosterone levels. Smoking men had significantly higher levels of total and free testosterone compared with men who never smoked. In previous smokers, total and free testosterone levels were almost the same as in men who never smoked. Furthermore, both total and free testosterone levels increased gradually with increasing number of cigarettes smoked daily. [link]
  • Just how did "certain key executives and directors" acquire the grotesque sum of $18 million that sits on PFBX's balance sheet as a liability?  Since the Company disclosures are so spotty, it would be great for the insiders to spell out just what they've been doing.  Nevertheless, working with the little information made public, here's our educated guess as to how the insiders got that $18 million from our Company. Page 22 of the Company's proxy states that the Directors' Deferred Income Plan pays the insiders 10% ANNUALLY on fees they defer.  If that's how they all got so much of the Company's money, they should hang their heads in shame and not show their faces in Biloxi ever again.  To extract 10% annually, when you are supposedly a fiduciary, is repugnant. [Joe Stilwell]
  • It may sound like the plot to some absurdist “Brave New World” knockoff, but in some corners of the Chinese internet, radical, self-proclaimed feminists are serious about what they call zigong daode — “uterine morality” — and they’re not willing to accept anything but the very best genetic material. The earliest use of uterine morality I’ve found was in a 2013 thread on the Baidu Feminism Tieba forum titled, “Women Should Establish ‘Morals of the Uterus.’” In it, the author makes a modest proposal: “The uterus is a holy site of human evolution, not a toxic factory for churning out garbage or petulant kids. Because women bear this huge responsibility, they should establish a system of uterine morals. For instance, births should be ‘neither random nor rampant,’ and (women should) ‘bear and rear better children.’” [link]
  • From an investment perspective, I think it is clear that even with a compelling EV alternative (which we don't have yet), the installed base of gasoline engine vehicles is going to be with us for some time. One thing Murphy does not really address but that I find captivating is the effect of increasing populations and development in the exporting countries: the Export Land Model. We see this right now with Nigeria, for example. Nigeria exports ~2MM bbl/d and is the 4th most important source of U.S. imports. Nigeria has a very young population and a total fertility rate of close to 6, with the result that their population is doubling roughly every 20 years. Combine that with increasing development (only 30 cars per 1000; even Cuba and Iraq have more) and you will see a ferocious increase in oil consumption. During our lifetimes, Nigeria will transition from oil exporter to oil importer. Back to energy return on energy invested (EROEI). When EROEI falls from 100:1 to 10:1, as the energy requirements of oil production roughly have over the past century, it means that producing 100 barrels requires 10 times as much capital expenditure. Deeper wells, more days spent drilling, more materials. [CBS]


CrocodileChuck said...

Mitteldorf is a non

CrocodileChuck said...

auto correct forbids me to enter N-O-N-G.

Anonymous said...