Thursday, August 22, 2019

August 22nd Links

  • Jeff Roe, Ted Cruz's former campaign manager, called Trump's son-in-law, Jared Kushner, and reminded him of Trump's fury at Pompeo's Kansas caucus speech. As Tim Alberta recounts in his book, "American Carnage," Kushner put the call on speaker, so that Trump could hear. "No! That was him? We've got to take it back," the President-elect roared. "This is what I get for letting Pence pick everyone." [New Yorker]
  • Pay the market no attention. Enjoy the beach, the pool, the tennis court or the mountains. President Trump will not let us fall into recession. He has tools. His latest idea is cutting payroll taxes. And he can always tie up a "deal" with the Chinese. Just announce a deal and drop some irksome tariffs. He has tools to get re-elected. [Technology Investor]
  • Much of AMZN's current FCF is due to its negative working capital. That means as it grows sales, payables rise faster than receivables & working capital, generating cash. However, this is NOT sustainable FCF, because another name for payables is short term, non-interest-bearing debt. As soon as they stop growing, this cash flow will disappear, and if sales ever fall, this source of cash flow will quickly turn into a huge FCF drain. [LT 3000]
  • Dopamine is mildly toxic. The body is usually pretty good at protecting itself, but the mechanism fails under stress; this is why too much methamphetamine rots your brain. Why would you use a toxic chemical as a neurotransmitter? For the same reason you would use antiparasitic drugs – because you want to kill anything smaller than you that tries to synthesize it. [SSC]
  • It remains to be seen how long the music will keep playing. However, as the amount of aggregate upstart losses grows (which must happen if all this VC funding is to be absorbed), at some point the equilibrium point will be reached where the pace of fund-raising falls short of these aggregate losses. This could occur, for e.g., if Softbank is less successful with its Vision Fund 2 fund raising than it hopes, and/or more high-profile IPO failures such as Lyft/Uber sour the market's appetite for Unicorn IPOs to the point where meaningful negative marks need to be taken by VC funds when they monetise their investments via IPO (notable also is that the listing of Uber et al will now expose a growing share of the Vision Fund's investments to potentially significant mark-to-market losses, impairing its ability to manufacturing paper gains by funding - sometimes as the sole bidder - up-rounds in its investees). At this point, capital will become scarce and Unicorn valuations will start to fall, as loss-making enterprises compete for scarce funding to keep the lights on. This will result in negative valuation marks being taken by VC funds/the Vision Fund, which will then in turn sharply dampen the appetite for investors to tip more more money to these funds (high apparent returns and 'low volatility' have been their chief attractions, particularly as pension funds, insurance companies, etc, try to replace lost income from falling bond yields with the illusory high returns/low volatility provided by private equity/VC vehicles - another disaster in the funded status of these investors' long-tailed obligations that is waiting to happen). The whole ecosystem will then start to quickly unravel, and an epic bust likely awaits the sector (my prediction is that investors in the Vision Fund(s) will ultimately lose the majority of their investment, and Masayoshi Son will no longer be seen as a visionary, but instead as a poster-child for this cycle's utterly irrational excesses). [LT 3000]
  • I'd calculate how much management is benefitting from its ownership (could be done by taking HNSFA's NI % vs. a "normal" NI % (4% maybe?)and assuming mgmt is getting the "missing" income). Compare that to the passive income mgmt could make on their proceeds of the sale of the company. That could give you some idea of the likelihood of a sale. [CBS]
  • Regulars are a different breed. Often, they haven't settled down, or don't have kids, or have come through the crucible of child-rearing with an impulse to be out again. Some have drinking problems. Many others enjoy a drink but are not afflicted. Some nurse pain, but others are simply looking for human connection. For decades, sociologists have agreed that three conditions are essential to making friends: proximity; repeated, unplanned interactions; and a setting that encourages people to let their guard down and confide in others. College presents these conditions, but as people get older, pair off, change jobs, move, and race through days, it can be difficult to maintain a life in which all three conditions are present. The interactions regulars have—unpredictable in date and duration, but not in place, and with a splash to ease away their guard—allow for connections to bloom. [link]
  • Former Federal prosecutor and Labor Secretary R. Alexander Acosta said he was told to lay off Epstein, as he "belongs to intelligence" -- why no media followup on this? (Still don't believe in a Deep State?) Clinton said he only flew on Epstein's plane 4 times (but 26 is also commonly reported) and never visited the island (despite many eyewitness claims to the contrary). No investigative reporting on this by mainstream media? Epstein's partner Ghislaine Maxwell is the daughter of Robert Maxwell, a billionaire with possible Mossad connections. What were Epstein's links to Israeli intelligence and national interests? (Robert Maxwell's death is at least as mysterious as Epstein's ...) Why did it take the FBI so long to get to Epstein's island? What have they found in Epstein's house and on his island? How much blackmail material is there and who is implicated? Were it not for the possibility that the Epstein scandal might be damaging to Trump, would there be anything close to this level of mainstream media interest? Why was there almost zero interest in Epstein in the previous 15-20 years? Someone was protecting Epstein (someone with influence on the DOJ, FBI, perhaps US intelligence) long before Donald Trump had political power of any kind. Why? What other obvious scandals are hidden in plain sight? Iraq WMD? Spygate? Compromised politicians and national leaders? Blackmail by national intelligence services? Ideology-driven Social Media and Search filtering of information? Ivy League discrimination against Asian Americans? [Steve Hsu]
  • I tried to go phoneless, and replace my phone with an Apple Watch, but unfortunately I still wanted to use some utility apps like Uber and Venmo. The solution I've settled on is that I've turned my phone to greyscale (to reduce its addictiveness; go to Color Filters in Settings), deleted email, Slack, and all entertainment apps (YouTube, Twitch, Instagram, and even the browser), deleted the app store (locking it with a passcode that I don't have access to). My phone is now only useful for reading, music, texting; I find myself using it much, much less, at basically no cost to my quality of life. [Justin Kan]

Monday, August 12, 2019

August 12th Links

  • If you want to make big improvements in communication, my advice is – hire physicists, not communications people from normal companies and never believe what advertising companies tell you about 'data' unless you can independently verify it. Physics, mathematics, and computer science are domains in which there are real experts, unlike macro-economic forecasting which satisfies neither of the necessary conditions – 1) enough structure in the information to enable good predictions, 2) conditions for good fast feedback and learning. Physicists and mathematicians regularly invade other fields but other fields do not invade theirs so we can see which fields are hardest for very talented people. It is no surprise that they can successfully invade politics and devise things that rout those who wrongly think they know what they are doing. Vote Leave paid very close attention to real experts. [Cummings]
  • The huge (but poorly understood) impact of quantum mechanics on modern life is an example of the tremendous long term impact of fundamental research. There is every reason to think that increased world research expenditures would enhance productivity and quality of life, with very high ROI. However, there is little careful thinking about the "right" level of research investment as a fraction of GDP. [Hsu]
  • The observation of individuals attaining remarkable ages, and their concentration into geographic sub-regions or 'blue zones', has generated considerable scientific interest. Proposed drivers of remarkable longevity include high vegetable intake, strong social connections, and genetic markers. Here, we reveal new predictors of remarkable longevity and 'supercentenarian' status. In the United States, supercentenarian status is predicted by the absence of vital registration. The state-specific introduction of birth certificates is associated with a 69-82% fall in the number of supercentenarian records. In Italy, which has more uniform vital registration, remarkable longevity is instead predicted by low per capita incomes and a short life expectancy. Finally, the designated 'blue zones' of Sardinia, Okinawa, and Ikaria corresponded to regions with low incomes, low literacy, high crime rate and short life expectancy relative to their national average. As such, relative poverty and short lifespan constitute unexpected predictors of centenarian and supercentenarian status, and support a primary role of fraud and error in generating remarkable human age records. [biorxiv]
  • One job of a central bank is to periodically pull the rug out from under would-be elites by tightening money when their me-too investments are coming online, so that the real elite can buy them at auction. The Canadian housing market is tough to figure without knowing the politics there. Are they going to let the upper class lose their shirts, and have all their banks go under, by allowing housing prices to fall back to "sensible levels"? Or will they bail out / devalue / quantitatively ease? Or will there be a bear market that purges some of the nonsense while setting up the elite to make massive profits? [CBS]
  • I don't love packing; it's inside work and mostly tedious. I do enjoy packing stemware, china, sculpture, and fine art, but that stuff is getting rarer in American households. Books are completely disappearing. (Remember in Fahrenheit 451 where the fireman's wife was addicted to interactive television and they sent fireman crews out to burn books? That mission has been largely accomplished in middle-class America, and they didn't need the firemen. The interactive electronics took care of it without the violence.) [longreads]
  • Nearly every German city is now undergoing accelerating disastrous demographic change -- und München ist keine Ausnahme -- a while ago a short video made the rounds of some guy walking down a pedestrian mall in München, secretly filming people he encountered, and you saw a shockingly large number of Africans and muslims, including women in burkas -- at the end he says: 'Tja, liebe Leute -- das ist München'. [eahilf]
  • Or not? What are the incentives here? Surely not "be careful with your investors' money and work hard to maximize their returns." It's more like, goofiness leads to notoriety, which leads to attention, which leads to user growth, which leads to fundraising at high valuations, which leads to personal wealth and career longevity, something like that. Everyone makes fun of MoviePass constantly, but somehow it has made Spikes famous as a successful founder. If you start a modestly successful company, or a modestly unsuccessful one, you will have a hard time getting meetings with venture capitalists, but if you start a notoriously, nonsensically money-losing one, you will be a celebrity and investors will be happy to meet you. "This guy really knows how to hack user growth," they will think, and they will not be wrong, though it might be even more accurate to say "this guy really knows how to hack VC attention." [Levine]
  • The Po River Valley in Italy is richer. The Loir Valley in France is also richer. The southern Chinese provinces of Hunan, Jiangxi and Fujian are richer – feeds literally a billion people with an area slightly larger than Texas. If we are talking agricultural lands that have been discovered, the Bacia del Plata in Argentina is richer than any land in America. So is the region in Brazil that goes from Goiás to Paraná in the south. You, of course, completely omitted that the same area you mentioned has one of the most horrible climates on Planet Earth, with wet and humid summers where the temperature goes up to 104 F, then to drop to blistering -22 F during winter time. Face it: America's topography and climates sucks. America has like 3% of its territory in good weather: the San Francisco Bay in California, and the northern part of Florida(southern Florida is scorching hot year-round), and small patches of good weather in Alabama, Georgia and South Carolina(most parts of these states still have bad weather with very hot summers. Winters are not too bad, almost as mild as western Europe, although for the most part still colder. [Sailer]
  • The hearing on confirmation of the Plan (the "Confirmation Hearing") is currently scheduled for August 16, 2019—only four days after the current Exclusive Filing Period expires on August 12, 2019. Accordingly, out of an abundance of caution, by this Motion, the Debtors are seeking another modest two-month extension of the Exclusive Periods to complete prosecution of the Plan. [SHLDQ]
  • It turns out that Waitt was right. In fact, subsequent research indicates that 80 or more floods ravaged the scablands near the end of the last ice age. Repeatedly over a two- to three-thousand-year span ending roughly 13,000 years ago, the Cordilleran ice sheet advanced to block the Clark Fork river, a new iteration of Glacial Lake Missoula formed, and then the ice dam broke, each time unleashing such a torrent of water that if it were to happen today, most of Portland's skyline would be submerged by the floodwaters. [National Geographic]

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]

Thursday, August 1, 2019

Distressed Debt Watch - August 2019

  • Approach Resources (AREX, EDGAR) bond due June 2021 traded at 10 cents, ytm of 200%. Market capitalization at 27 cent share price of $25 million. Net debt of $400 million on about $2 million of EBITDA the most recent quarter. They are currently in a forbearance agreement with lenders (that's been extended a couple of times), negotiating a restructuring. The January 2020 $1 put options are 80 cents.
  • Frontier Communications (FTR, EDGAR) bond due April 2020 trading at 78 cents, ytm of 50%. Market capitalization at $1.32 share price of $139 million. Net debt of $17 billion on $1.5 billion of operating income. There are restructuring talks, with some creditors favoring a chapter 11. Shareholder equity is $1.5 billion, but that includes $6.4 billion of goodwill and $1.4 billion of other intangibles. The January 2021 $2 put options are about $1.20.
  • J.C. Penney (JCP, EDGAR) bond due November 2023 trading at 40 cents, ytm of 35%. Market capitalization at 75 cent share price is $238 million. Net debt of $5 billion on $68 million of EBIT last fiscal year. (And EBIT for mrq was negative $93 million.) Book value is $1 billion, but I would subtract $664 million of "other assets" like capitalized software and intangibles, and further the $392 million of capital expenditures in 2018 for things like "investments in our store environment and store facility improvement," leaving an adjusted equity value that may be negative. There is a $50 million debt maturity in 2019 and $110 million in 2020. The January 2021 $1 put options are about 50 cents.
  • Denbury Resources Inc. (DNR, EDGAR) bond due July 2023 trading at 40 for a 33% ytm. Market capitalization at $1 share price of $475 million. Net debt of $2.8 billion on $569 million of operating income. The January 2021 $1 put options are 45 cents.
  • GNC Holdings (GNC, EDGAR) bond due August 2020 trading at 90 for a 12% ytm.

Monday, July 29, 2019

July 29th Links

  • The highest trailhead requires the climber to gain 9,000 feet of elevation to reach the summit, as much as from Everest ABC to its summit. [Summit Post]
  • It's really hard these days for followers of the conventional wisdom to think in terms other than of Good People and Bad People. Good People to do Good Things, so if undocumented workers (definitely some of the Good People) are littering and Tucker Carlson (a very Bad Person) is criticizing them for it, then littering must be good. Or if littering is bad, Carlson must be hallucinating in accusing the Good People of doing a Bad Thing. Or let's not think about it and get Carlson banned from television so we don't have to ever think about it. [Sailer]
  • Porto is everything San Francisco wants to be: scenic, colorful buildings, flowing water, but no homeless problem or feces or syringes littering the streets. If you're out of shape, Porto is not for you. going anywhere requires walking straight up or down a huge hill. [Rickshaw]
  • If you synthesize the best parts of Falkenstein and Redleaf, you predict that the next crisis is going to come in the investment that is currently perceived as riskless enough for highly leveraged institutions like banks to buy. In the 2000s that was mortgages, at other times it has been other investments like railroads. Right now, government bonds are accorded zero risk in calculating bank capital ratios. The idea that government bonds are riskless when governments are planning to flood the market and when the expenditures are consumed (building no collateral) may prove to be the latest delusion. [CBS]
  • Trying to keep marble countertops pristine seems to be a very American mindset. In France and Italy where they are common it's my understanding that wear, stains and other imperfections are considered "character" and indicative of an owner who cooks well and often. [Granola Shotgun]
  • Produce not conforming to what the market requires is a long-standing problem. Amazing pear varieties — I'm looking at you, Comice, but Anjou also suffers — go unappreciated because people don't know they're supposed to wait until a pear is ripe, or they wait too long, expecting a green variety to turn yellow. (The pear industry is doing active outreach, trying to teach consumers how to eat pears.) [link]
  • Examine past bull market peaks, and you'll invariably find that the initial decline was steep enough, usually within the first 15-30 trading sessions, to paralyze investors and keep them hoping and holding through the entire bear market that followed. Once the March 2000 peak was registered, the S&P 500 fell -11.2% over the next 15 trading sessions. Though the S&P 500 nearly recovered its peak at the beginning of September 2000, it gave back -12.6% over the next 28 sessions. Similarly rapid losses followed the 1987, 1990, and 2007 market peaks. Those initial losses are precisely what lock investors into paralysis. [Hussman]
  • Open a commodity fund at the beginning of a cyclic upturn, and you're a hero. As is the 'dumb' money, that happened to do the right thing, at the right time (luck). But as word spreads - and the longer the cycle goes; your 'investment space' becomes swamped with 'dumb' money, and increasingly 'unstable'. Hence to do well, you must ultimately close the fund before the market crashes ... it's a limited term engagement. However, if your timing was off, & the fund crashes, you're a bum ..... also a limited term engagement. [CoBF]
  • The airline industry discovered ages ago that autopilot technology isn't all upside: Pilots' flying skills get rusty when they use the autopilot. And they have trouble regaining situational awareness when the autopilot disconnects unexpectedly. [link]
  • Why do the same old, safe, boring thing when you could buy a round-trip Norwegian Airlines flight from New York to Paris right now for $280, get an AirBnb and sit along the Seine drinking rosé? [NY Post]
  • I've looked at fixed annuities and they do not seem to be fairly priced, based on an expected present value calculation using current interest rates. I can think of at least two reasons why not. First, companies offering them need to make a profit. Second, there is an asymmetric information issue. Annuities would be most attractive to people with longer expected lifespans, that is, those in good health and with long-lived family histories. So returns have to be reduced accordingly. George Akerlof would probably have something to say about this. [Arnold Kling]
  • My disagreement with the established opinion about Shakespeare is not the result of an accidental frame of mind, nor of a light-minded attitude toward the matter, but is the outcome of many years' repeated and insistent endeavors to harmonize my own views of Shakespeare with those established amongst all civilized men of the Christian world. I remember the astonishment I felt when I first read Shakespeare. I expected to receive a powerful esthetic pleasure, but having read, one after the other, works regarded as his best: "King Lear," "Romeo and Juliet," "Hamlet" and "Macbeth," not only did I feel no delight, but I felt an irresistible repulsion and tedium, and doubted as to whether I was senseless in feeling works regarded as the summit of perfection by the whole of the civilized world to be trivial and positively bad, or whether the significance which this civilized world attributes to the works of Shakespeare was itself senseless. My consternation was increased by the fact that I always keenly felt the beauties[5] of poetry in every form; then why should artistic works recognized by the whole world as those of a genius,—the works of Shakespeare,—not only fail to please me, but be disagreeable to me? For a long time I could not believe in myself, and during fifty years, in order to test myself, I several times recommenced reading Shakespeare in every possible form, in Russian, in English, in German and in Schlegel's translation, as I was advised. Several times I read the dramas and the comedies and historical plays, and I invariably underwent the same feelings: repulsion, weariness, and bewilderment. At the present time, before writing this preface, being desirous once more to test myself, I have, as an old man of seventy-five, again read the whole of Shakespeare, including the historical plays, the "Henrys," "Troilus and Cressida," the "Tempest," "Cymbeline," and I have felt, with even greater force, the same feelings,—this time, however, not of bewilderment, but of firm, indubitable conviction that the unquestionable glory of a great genius which Shakespeare enjoys, and which compels writers of our time to imitate him and readers and spectators to[6] discover in him non-existent merits,—thereby distorting their esthetic and ethical understanding,—is a great evil, as is every untruth. [Tolstoy]

Thursday, July 18, 2019

July 18th Links

  • The 2018 Monocle Survey determined the world's most livable city was Munich, followed by Tokyo, Vienna and Zurich. A total of four German cities were on the list of the 25 most livable cities, 15 out of the 25 were European, 3 each from Japan and Australia, and one from North America (Vancouver). No cities from South America, South Asia, or Africa made it into the list. [Wiki]
  • To the owner, he/she has taken great car of this vehicle. It's in perfect shape, drives perfect, looks great, etc. To get a similar vehicle that is just as nice inside, outside, and driving.. he/she would likely need to spend $10k or more. So, cut the price to $8k to account for miles and call it good. However, for the rest of humanity, it is a vehicle with a ton of miles. Sure it looks great, drives great, etc. but we don't know what hidden thing might be wrong with it. We can get a lower mileage example for the same price that is nearly in as good a condition. So to account for miles... $5k. Maybe $6k because the condition is so good. The owner isn't hitting the Crack pipe... he/she, um, just doesn't know what he has. [Jalopnik]
  • As a friend of mine says, what business gets $1.95 million of your money and won't even assign you an account manager? Now Amazon will, but they'll charge $1600 + 0.3% of your previous months sales for it. For us, we would need to pay about $2625/month on average, just to be heard. Without an account manager, you can regularly expect to wait months for Amazon to address problems with your account. Amazon's power over online merchants is not just in sales, but also in the way that sellers are treated. [Hart]
  • If I may be so humble as to suggest that a contest of mechanical hubris be more heavily weighted towards cam content, or perhaps even include the number of superchargers or turbochargers in one's domain. A simple equation such as (Ca x Cy) + 10T + 20S = Mhf, Where: Ca = number of cams, Cy = number of cylinders, T = number of turbos, S = number of superchargers, Mhf = total mechanical hubris factor. The equation only works if the score of each engine is calculated separately and their total is summed. The above equation yields the following results: a pushrod V8 gets a score of 8, a quad cam V8 Maserati engine gets a score of 32, a straight eight, supercharged, double overhead cam Alfa engine gets a score of 36. Perhaps this is all a bit elitist of me in my mechanical ivory tower, but in my mind an engine with two cams should have twice the score as an engine with one cam and you will notice that an engine with no cams gets no score. This eliminates all two stroke engines (on purpose), hell, I've got about a dozen chainsaws but these can not possibly equal the Mhf of a Ferrari V12. As an unintended side effect this also eliminates some very cool two stroke motorcycles and some wonderful old Saabs. If one wanted to get fancier with the equation you could start weighting other mechanical complexities more heavily... such as number of valves over two per cylinder, or engines with more than eight cylinders, or Wankel engines, or heaven forbid – engines with air cooled horizontally opposed cylinders! [BaT]
  • Keeping the REV-1 to low speeds and out of the way of cars should help Refraction move to market. It's now working with two Ann Arbor restaurants, making deliveries to the startup's employees and hoping to expand to the general public in the coming months. To make that happen, Johnson-Roberson and Vasudevan have a teleoperation setup that lets them control the vehicle remotely, using a system designed for a racing videogame. When one of their five REV-1s encounters an unprotected left turn, someone at the office will take over and handle it manually (the vehicle can also make three right turns to avoid the left). [Wired]
  • There are more cells in our bodies than stars in our galaxy, and they are far more tightly coupled in their interactions compared to point-like sources of gravity. Computing the true effect of any given drug on a human body is apparently expensive enough that our simulation uses heuristic shortcuts to determine the outcome. [Marginal Revolution]
  • Overall, Spain was richer and more functional than I expected. The grocery stores are very well-stocked; the worst grocery store I saw in Spain offered higher quality, more variety, and lower prices than the best grocery store I saw in Denmark, Sweden, or Norway. Restaurants are cheap, even in the tourist areas. Almost all workers I encountered did their jobs with a friendly and professional attitude. There is near-zero violent crime, though many locals warned us about pickpockets. [Caplan]

Monday, July 15, 2019

July 15th Links

  • We are often asked, "what protection does cash give investors against inflation?" Most people assume the question relates to consumer price inflation (CPI), for which the year-over-year average over the last five years has been 1.3%. The answer is, barely. The average yield on the 5-year U.S. Treasury note has been 1.4%, before taxes. The irony is that the well-to-do investor's well-being would not be threatened by consumer price inflation rates two or three times the current level. Compared to most of the population, he or she spends only a modest portion of income or wealth on consumables, while expending a far greater portion on asset purchases, the prices of which have inflated dramatically in recent years. Nothing will destroy the wealth of the wealthy as fast as deflation in financial and real assets. Only cash protects against that risk. Interestingly, we rarely get the question, "how do I protect my portfolio against asset price deflation?" Ironically, CPI deflation will precipitate or accompany asset price deflation. Cash, the all-purpose hedge, ends up being the perfect asset in both scenarios. Of course, most investors think they are not getting their money's worth when they see their investment manager holding large amounts of cash. Some "enterprising" investors may gradually realize instead that they are paying someone who has demonstrated the necessary expertise to buy cash as a call option when it is utterly out-of-favor and thus compellingly cheap, despite the agonizing wait for bargains to appear. Such careful thought and deliberate inaction may chip away at the foundation of the institutional imperative that only sees value creation where there is activity. Enlightened passivity is expected of philosophers, not investment managers. [Frank K. Martin]
  • The main thing to comprehend about China is scale. There are easily ~350M (i.e., population of US) people here living roughly first world lives: with access to education, good jobs, climate controlled apartment in major city, good public transportation, fast internet access, etc. Probably the number is twice as large depending on how one defines the category. For one thing, this means that the supply of engineers, technologists, lab scientists, project managers, entrepreneurs, etc. is very large. There are certainly poor people who lack opportunity, but the size of the population for which the education and economic system are working reasonably well is very large. Possibly a billion people out of ~1.4B. [Hsu]
  • The news that a globalized cabal of billionaires and politicians and journalists and Hollywood bigwigs might be flying around the world raping teenaged girls will not surprise them in the least because it is what they have long suspected. For the rest of us it is like finding out that the Jersey Devil is real or turning on cable news and finding Anderson Cooper and his panel engaged in a matter-of-fact discussion of Elvis's residence among the Zixls on the 19th moon of Dazotera. [The Week]
  • Of course, once too many illegal immigrants' children show up in an urban school district, the white people tend to up and move. But a lot of minority parents don't want to send their kids to those schools, either, so they try to follow the whites to the 'burbs, which then turn into slums, too. Much of the Housing Bubble / Crash that set off the Great Recession, for example, was a result of minorities fleeing California's old barrios for new inland exurbs, whose home prices deflated once they turned into new barrios. There's no stable resting point in this system. It leads to a constant churning of the population across the landscape. (Needless to say, real estate developers, real estate agents, and mortgage brokers consider that a feature, not a bug.) [Sailer]
  • I favor the Texas Sailermander, not because I think it will solve anything, but because if we want an autonomous national homeland at some point it will be necessary for Red America to demonstrate an ability to impose on Blue America as much as the opposite has been demonstrated. [Blair Nathan]
  • It turns out that the previous Boeing CEO who made the decision to just "upgrade" the 737 was an MBA with no experience in aviation. (He has never had any type of pilot certificate!) He did have a career at GE, including in jet engines, but his first job was in "brand management" at Procter & Gamble. So what are the common elements at Boeing and the U.K. firms, which you would not find at German or Japanese owned firms? There seem to be two: company managers with no technical or scientific knowledge and weak, ignorant shareholders who also lack technical knowledge. [CBS]
  • My impression is that whatever woke craziness happens, expensive law firms like Baker McKenzie will still come out on top. If tomorrow there were a Khmer Rouge coup in Washington and the government began executing people who wear glasses, the big time law firms would just add free laser eye surgery to the employee benefit list and carry on unimpeded. [Sailer]
  • Everything happens faster these days. It took Christianity three hundred years to go from Christ to Constantine. It only took fifty for gay pride to go from the Stonewall riots to rainbow-colored gay bracelets urging you to support your local sheriff deparment. [SSC]
  • I had a friend whose father had 1,800 acres of tung-nut oils down in the Gulf, in Mississippi. You put tung-nut oil into the paint, it was the best marine paint in the world. And therefore the U.S. Navy specifications, for decades, required this big percentage of paint in all the Navy vessels to have to come from the tung nut. And so this family, with this very productive supply of tung-nut trees, and this absolute requirement that the Navy use tung-nut oil, the paint with the tung-nut oil in it, they flew back and forth in a private plane between the Cypress Point Country Club and their home, and they minted money. And then, suddenly, two things happened: No. 1, advanced chemistry got so they could make better artificial oil than the tung-nut tree could, and 2, all the trees died. I watched this family go from enormous prosperity to nothing. It is dangerous. Who would think of that? It wasn't just one thing that happened, it was two. They couldn't replant or anything, even if they were prepared to wait, because their whole advantage from having tung-nut oil, which was better, went away. [Munger]
  • The fact that an age-related clinical event developed in approximately 1 out of 3 healthy individuals in the upper tertile of insulin resistance at baseline, followed for an average of 6 yr, whereas no clinical events were observed in the most insulin-sensitive tertile, should serve as a strong stimulus to further efforts to define the role of insulin resistance in the genesis of age-related diseases. [NLM]