Thursday, November 17, 2022

Thursday Night Links

  • The release this morning of October Producer Price indices brings yet more evidence that the inflationary pressures sparked by multi-trillion dollar Covid "stimulus" checks in 2020 and 2021 peaked earlier this year, as I have been pointing out for months. Many factors have contributed to this: growth in the M2 money supply has been essentially zero since late last year; the stimulus checks have ceased; the dollar has been very strong; commodity prices have been very weak; and soaring interest rates have brought the housing market to its knees. All of these developments mean that the supply of money and the demand to hold it have come back to some semblance of balance, and that is of course essential if inflation is to return to a low and steady rate of, say, 2%. This all but guarantees that the Fed soon will be scaling back on its tightening agenda. For my money, the FOMC's November 2 rate hike (from 3.25% to 4.0%) should be the last, but a hike next month of 50 bps (to 4.5%) is likely to be the Fed's last move for the foreseeable future. The Fed simply can't react as fast as the market does to changing realities—unfortunately, the Fed is usually "behind the curve." In any event, a 4.5% funds rate by year end is fully priced into the market and thus it should not be very impactful. What will change though is the market's expectation for where rates will be a year from now: lower than currently expected, and that is what is driving equity prices higher. [Scott Grannis]
  • But avoiding scams, frauds, and mass hysterias is an invaluable skill. You will earn tremendous returns over your lifetime making 10-12%/year compounded let alone 15% as long as you avoid huge downside risk. As long as you keep losers small, the gains add up without too much trouble. 12%/year doubles your money in six years. That's five doubles over a 30-year span. $300,000 invested turns into $9.6 million. The path to a very wealthy retirement is actually fairly simple; invest a decent sum every year and avoid big losses. Compounding solves the rest. [Ian Bezek]
  • LET ME REPEAT THIS FOR EVERYONE AGAIN: Shitcoins are bad, and you should feel bad if you trade them. Get the fuck out of the shitcoin casino you dumb ass gamblers! Solana is garbage. TRON is garbage. Exchanged-based coins like FTT are garbage. Coins with fucking dogs faces are garbage. Bitcoin is the only cryptocurrency you should hold. Maybe ETH. Hedge your bets there. You need to CONTROL YOUR OWN KEYS. Don't lend your coins out to charlatans promising you 5%, 8%, 15%, or 20% "risk free" returns. They are all scam Ponzis. There is no such thing as risk free 20% returns. It doesn't exist. Stop chasing it. If you don't control your private keys, it's not your crypto. If you trust an exchange based in the Bahamas ran by a jabroni who thinks he needs SIX MONITORS, you are in for a bad time. I've been in cryptocurrency since 2010 when BTC was 81 cents. I lived through the MT GOX implosion. I have had more crypto stolen from me in hacks and exit scams than you probably have ever even seen. Learn from my experience. Listen to what I am saying. TWELVE YEARS now I have been in crypto. This too shall pass. Fuck all these frauds stealing everyone's shit. We will all be better off with them out of the industry. However, you all have to learn from this shit. CONTROL YOUR OWN KEYS! Stop gambling on shitcoins. You are being used as exit liquidity for idiots. [MisterYouAreSoDumb]
  • We mentioned FTX in our recent batch of Links, but not previously. Once you know that cryptocurrency is bogus, who cares about each individual fraud or Ponzi? But it turns out that this story really has everything: polygamous nerd freaks, regulatory capture, Democrat party and Ukraine money funnels, institutional investors who got suckered. [CBS
  • Tyler has a tendency to seriously overrate tech and tech lords. I've been checking out MR since the early days. Over the years, TC has been hyper-enthusiastic about autonomous vehicles, Siri / PDAs, delivery drones, and crypto. All are failing to live up to the hype. Ford just shut down the autonomous vehicle company it co-owned. PDAs have been boring for years and Amazon is apparently ready to lay off 10,000 particularly including people in the group responsible for Alexa (Amazon has realized people are interested in only Alexa's most basic features). Amazon is also slashing it's robotics divisions. Drone delivery isn't happening. And now Crypto. Definitely don't make investments based on what TC identifies as 'the next big thing'. [MR]
  • The Romanians are descended from the Dacians and Wallachians and like to consider themselves “an island of Latins in a sea of Slavs”, with the exception of their long-time nemesis, the Magyars of Hungary. They speak a Romance language, but, given their geographical isolation for centuries, it barely resembles Spanish or Italian. They like to say they’re the descendants of the Roman Emperor Trajan and his V Legion, thus the popularity of the male name Troian. They manufacture a car called the Dacia, which is now owned by Renault and quite popular in Southern Europe. [Curated Carlos]
  • I have a theory about this election. It's based on nothing but my gut & some common sense, no matter how unpleasant it may be to consider. Why was Biden so confident? How do you explain so much fraud all across the country, happening down to district level? I think it's possible MAGA or candidates linked closely linked to Trump have been declared "enemies of the state" by the federal government. I think it's possible Biden has already such an order. This obviously would be classified and a matter of "national security." These "Trump candidates" are simply not allowed to win. Prevented from doing so by our own intel community. The definition of "Trump linked candidate" is probably spelled out, but has some wiggle room. For example, JD Vance. Vance began as a National Review linked NeverTrumper, but he played along and got Trump's endorsement. At his election night victory party, JD Vance did NOT mention Trump at all. It's likely JD doesn't make "the list" of banned candidates. Other who are "exempt" would be SITTING elected officials. This would explain strong MAGA people like Boebert & Greene winning their races. They key word is "candidate." People running for re-election get a pass. But anyone trying to get in, & aligned with Trump, nope. Mitch McConnell would know about this. He has to. Pelosi knows. Schumer. The biggies would all be in the know. Katie Hobbs, who has been very smug, could know because Kari Lake is probably "enemy #1." It would change the context for Mitch McConnell being so dismissive of Trump candidates. Mitch knows they CAN'T win, so it's a waste of money. This is why "GOP Inc" is so determined to get past Trump and on to DeSantis. It's not (just) that they hate Trump and his ideas, even though they do. It's because Trump is a waste of time: the natsec state will NOT let Trump gain power, regardless of any "votes." J6 is probably considered an actual insurrection by the feds and treated as such on a classified level. It's their justification to cancel any Trump sponsored candidates. Mitch & the GOP can't say this to the public, so they're doing their best to push Trump aside any way they can. Including by coordinating a narrative to go along with the natsec state denying Trump's candidates. It would explain the massive presence of the feds in specific areas during the election, from the DOJ "observers" to the Nat Guard. This would've been a massive op. Is Biden immoral enough to do this? -YES Is our government lawless enough to do something like this? -YES It's the only thing that makes sense. The GOP winning the House popular vote by 6 million & only having (maybe) a 4 seat majority is the tell. The GOP isn't an urban party. Winning the popular vote by 6 million is nuts, by itself. Barely winning the House is CRAZY. [link]
  • While this may initially seem like a frivolous observation, it is actually shocking that SBF was unable to rank higher than the Bronze or Silver league after years of regular play across hundreds if not thousands of individual games. It is reflective of an incredibly impaired level of cognition, much like someone who was unable to learn how to ride a bicycle after an entire month of practice or someone who never progresses past the level of an average elementary school student after five years’ of daily piano practice. To me, this is one of the strongest indications possible that SBF is, to be blunt, “not entirely there.” [milkyeggs2]
  • Remember kiddies, Michael Lewis last attempt at financial journalism  was a love letter to IEX. When I took that  marketing submarine to the wood shed, I noticed it was a company spun up by friends of his from one of his previous books (Jim Clark of “New New Thing” fame). This is of course, speculation on my part, but knowing how the sausage gets made, and noticing his Flash boys book does no actual investigative journalism or technical explanation of what IEX does or even what HFT is, it seemed worth mentioning. If it’s not completely obvious by now, most “journalism” -especially high profile entertaining journalism such as that of Michael Lewis is just somebody’s marketing baloney. I’ve seen this happen; at this point I’ve even seen stacks of money change hands for this sort of thing. Anyone who isn’t aware that this is happening and represents the majority of what you see in news media is a credulous ninnyhammer. [Scott Locklin]
  • The Company is still evaluating the actual level of losses due to the recent decline in the cryptocurrency mining industry, and such losses may exceed this estimate. The net loss resulted from a provision for loan losses for the quarter ended September 30, 2022.  During the third quarter of 2022, the volatility in Bitcoin and rising energy costs called into question the financial stability of the Company’s borrowers who hold digital asset mining loans, the collectability of all principal and interest related to these loans, as well as the value of the cryptocurrency mining rigs that serve as the underlying collateral.  These considerations, in conjunction with a partial write down on cryptocurrency mining rigs that were repossessed in exchange for the forgiveness of a $27.4 million loan relationship, triggered a detailed review of the portfolio of similarly collateralized loans. After the $27.4 million loan forgiveness, the digital asset mining loan portfolio totaled $76.5 million at September 30, 2022, of which, upon review, the Company estimates a majority to be impaired and placed on non-accrual status with significant related specific reserves. [PVBC]
  • What’s the blue-green bottle to the left of the red circle? Here the heroic detectives on r/NootropicsDepot recognized it as their company’s old brand of adrafinil. Adrafinil is a prodrug of modafinil, an unusual stimulant-like drug. That is, your body metabolizes adrafinil and turns it into modafinil after you take it. So was SBF effectively on modafinil? Seems likely - many traders are. I won’t lie - modafinil is a good stimulant, during medical residency some doctors (including me) would use it to stay alert through the night shift. It’s not any better than Adderall or anything, just a bit different and easier to get. Does it affect attitudes to risk? Hopefully you can already predict my answer to that question: all dopaminergics affect attitude to risk in complicated ways we don’t really understand, but for most people these effects will be too small to notice. There’s one case report of modafinil causing pathological gambling, and various contrived studies where neuroscientists investigate how modafinil shifts some technical parameter in a risk curve; these kinds of studies often don’t replicate. I think you can really just stick to your prior of “all dopaminergics affect risk curves in ways we don’t understand, but it’s usually fine when your job doesn’t require perfectly-tuned risk awareness”. Except - was he taking the selegiline and adrafinil at the same time? Selegiline prevents the body from breaking down dopamine. Modafinil works by preventing cells from reabsorbing dopamine. If you can’t break it down, and you can’t reabsorb it, what happens? Does it just build up forever until it explodes and you die? This is what happens with serotonin. If you take a drug that prevents serotonin breakdown (like a traditional MAOI) and a drug that prevents serotonin reuptake (like an SSRI) at the same time, you definitely die. Lots of doctors have noticed that the MAOI + stimulant situation is pretty similar and decided you shouldn’t take these at the same time either. So some people following the FTX situation have wondered whether this combo might have been very dangerous - either to Sam’s health or to his risk-management ability. [Scott Alexander]

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