Friday (January 12th) Links

• Since @ezraklein knows that the Constitution assigns black students the right to attend majority white schools, but we're running out of white children, maybe the federal government should start a White Child Conservation and Breeding Program, like with condors and whooping cranes? [Sailer]
• Not only was the numerical presence of women celebrated at Google solely due to their gender, but the presence of Caucasians and males was mocked with "boos" during company-wide weekly meetings. This unacceptable behavior occurred at the hands of high-level managers at Google who were responsible for hundreds, if not thousands,of hiring and firing decisions during the Class Periods. [Sailer]
• It’s 1964, and a group of Canadian scientists had sailed across the Pacific to Easter Island in order to study the health of the isolated local population. Working below the gaze of the island’s famous statues, they collected a variety of soil samples and other biological material, unaware that one of these would yield an unexpected treasure. It contained a bacterium that secreted a new antibiotic, one that proved to be a potent anti-fungal chemical. The compound was named rapamycin after the traditional name of its island source – Rapa Nui. [link]
• 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. [link]
• In Britain, Thatcher is a fairly downscale surname. In general, if your namesake had a downscale job like thatching roofs when surnames were chosen around 1300, you're probably a little downscale today. If you had a literate upscale job like clerk (Clark or Palmer), you are likely to be a little upscale today. [Sailer]
• Maybe it's a bad idea to invest in public companies with 9+ figure enterprise values that don't yet have a product that they can sell for more than it costs to make. [CBS]
• We found some more of the genes which cause people to use marijuana, by looking at a lot of people's genes. Combining all the genes we know, we can now make lousy (but better than guessing) predictions of how much marijuana a person will smoke just from their genes. These genes are interesting because they turn out to cause regular smoking, boozing, and mental illness as well as marijuana use. But maybe that's because the genes make one smoke marijuana and marijuana makes you crazy, which everyone has been claiming for half a century? Nope, a complicated statistical method indicates they aren't connected either way, it's just that the same genes make you both crazy and more likely to smoke weed, and this is why people who smoke weed often are crazy. [Gwern]
• This filing is a nice illustration of how 'HR is not your friend but your enemy' - for example, going to HR does nothing useful other than alert them how they are screwing up, like when an employee asked for someone to be removed from the blacklist and HR simply made the blacklist secret (he should've just started making regular copies of it and kept quiet), or HR informs the managers of things. It's like government whistleblower programs: they aren't there to actually help whistleblowers, they're there to allow leakers to be fired as quickly as possible and maintain the coverup, and to slime successful whistleblowers like Snowden by insinuating 'why didn't they use the whistleblower programs'. [Gwern]
• El Paso has been famous for its calm citizenry for generations. A 1971 article in Time, "The Texas Tranquilizer," attributed the low murder rate in El Paso to the high levels of lithium in its well water. [Sailer]
• Conventional wisdom holds that credit markets are "smart institutional money" that sees problems faster than equity markets that are full of less sophisticated retail investors. I question whether that is still empirically true. Retail investors now own large portions of the credit market, including high yield. Credit markets appear to be distorted by a combination of indexation and a reach for yield. Its possible that bonds trading at par can be a false comfort signal for an equity investor looking at a highly leveraged company, because in many recent cases equity markets have been faster to react to bad news. [link]
• The solution gaining the most traction and mention by officials and academics is called "price-level targeting," and at least three Fed officials in recent weeks have talked about it, though with varying levels of support. Currently, Fed policy calls for the Fed to hit a 2 percent inflation target over time. It continues to shoot for that inflation rate even while it continuously misses that goal. Price-level targeting would ratchet up the seriousness of the effort. It would account for those past misses and prompt the Fed to aim for a higher target in the future to make up for its prior shortcomings. The belief is that this would convince markets and consumers of the Fed's commitment, running a higher inflation rate to account for prior gaps. [link]
• Automobile production is a decidedly unsexy industry, with massive capital outlays, high fixed costs, huge cyclicality and low returns on invested capital throughout the cycle—the technical definition of an awful business. The leading players produce millions of vehicles a year, yet trade at mid-single digit cash flow multiples, due to how awful the industry is. Why is Tesla valued like a high-tech growth stock, where investors ignore accelerating operating losses; if the best-case outcome is that it becomes a cyclical auto manufacturer with depressing returns on capital? A new technology like electronic vehicles (EV) sounds cutting edge, but so was automatic transmission, air conditioning, power steering, fuel injection, etc. All the other auto makers copied these technologies and caught up within a few years—much like what is now happening in EV. [AiC]
• While, I suspect that TSLA's share price is much lower by January 2019, by January 2020, it will have blown through over $10 billion in additional operating losses, working capital needs and worthless cap-ex, and the shares are almost CERTAINLY much lower, though the migration from TSLA to TSLAQ probably takes another year or three. In any case, I've been adding to my position using the Jan 2020 200/100 bear put spread and this has now become a pretty large position for me (as far as options positions go). At a ~15 debit, I can't help it. Every time I come back from grabbing a coffee or a sandwich, I add a few more. Nothing on my screen at today's prices seems as attractive. [AiC]
• In the end, Brookfield paid about $2 per share (including their warrants). TOO is now trading 15% higher than what Brookfield paid in a recap at the bottom of the cycle and it's been six months since the deal was announced. Additionally, their warrants only vest if the shares trade for over $4.00 a share. I suspect that since they were the only ones willing to bail out TOO, they only agreed to these terms because they believed that $4.00 a share was pretty certain. Why wouldn't it be, as that’s only ten times the low-end of my DCF range. [AiC]
• To my mind, the fact that binge-drinking as few as 3.5 drinks promotes leaky gut and increases in LPS in the blood stream provides a clear mechanism as to why alcohol leads to anxiety. It's completely related to well-founded observations in biological psychiatry that bacterial LPS is elevated in people with depression and anxiety, and that fixing leaky gut can help overcome these conditions. Same in chronic fatigue syndrome. [Mangan]
• Before New Yorker discovered a surefire path to profitability in continuously reminding readers how much smarter they are than Republicans, the magazine had space for some interesting articles. Back in 1988, for example, they published a series of long articles by John McPhee titled "The Control of Nature". Given the latest fires then flooding/mudslides in California, a good place to start is "Los Angeles against the Mountains-I". [Greenspun]
• Today Medellin feels new-born. It helps that the setting is gorgeous. The city lies in a long valley between two Andean mountain ridges. Capital of Antioquia province, a fertile region famous for its coffee plantations and its flower farms, for its orchids and butterflies, it is known as the City of Eternal Spring for its idyllic climate. [link]
• A Trump presidency would inevitably be followed by economic crisis, and this would be facilitated by the Federal Reserve pulling the plug on fiat life support measures which kept the illusion of recovery going for the past several years. It is important to note that the mainstream media is consistently referring to Jerome Powell as "Trump's candidate" for the Fed, or "Trump's pick" (as if the president really has much of a choice in the roster of candidates for the Fed chair). The public is being subtly conditioned to view Powell as if he is an extension of the Trump administration. [ZH]
• During the checkout process for those paying by bitcoin, Overstock.com provides the customer a bitcoin wallet address that can be used to pay the invoice and complete the transaction. But Snyder discovered that Overstock's site just as happily accepted bitcoin cash as payment, even though bitcoin cash is currently worth only about 15 percent of the value of bitcoin. [link]
• The President asked a vulgarly-phrased question about the quality of most of the countries sending the masses of immigrants, thus setting off a firestorm of indignation because: It's racist to demean sending countries. But it's also racist to send anyone back or even not let people in because these sending countries are so awful. This may sound paradoxical, but the Establishment's logic is simple: White Guys Bad. [Sailer]
• The only known homeostatic regulator of fat mass is the leptin system. We hypothesized that there is a second homeostat regulating body weight with an impact on fat mass. In this study we have added and removed weight loads from experimental animals and measured the effects on the biological body weight. The results demonstrate that there is a body weight homeostat that regulates fat mass independently of leptin. As the body weight-reducing effect of increased loading was dependent on osteocytes, we propose that there is a sensor for body weight in the long bones of the lower extremities acting as "body scales." This is part of a body weight homeostat, "gravitostat," that keeps body weight and body fat mass constant. [PNAS]
• Google now resembles an adult daycare center where mentally disturbed women terrorize the few people doing real work. Google has not don't much of anything, in terms of tech, once it gained a near monopoly of on-line advertising. The reason Susan Wojcicki can wage endless jihad at a money losing division like YouTube is it is owned by an oligopolist given a special right to skim from every internet user on earth. Google is now a tax farmer, not a tech company. [Zman]
• A candidate running for Illinois attorney general was robbed at gunpoint while he was taking promotional photos for his campaign Thursday afternoon in the Northwest Side ward where he's also the Democratic committeeman, according to his campaign manager and authorities. Aaron Goldstein, 42, and several members of his campaign team were in the middle of taking publicity shots when the robbery happened, according to Goldstein's campaign manager. The robbery took place about 3:25 p.m. in the 4600 block of North Albany Avenue in Albany Park [link]
• I'll never forget the day my wife and I were riding bikes and I noticed a realtor escorting buyers into a new luxury condo. Suddenly and unexpectedly, I yelled, "Don't do it, it's a bubble!" The look the realtor gave me was priceless! And my poor wife was so embarrassed, but not me. I laughed and laughed all the way back to our rental. [Cinnamon]
• My favorite McLaren F1 story is from Ralph. About the year 2000. One of his three F1s. The car wasn’t running right, so he plugs it into the wall. The car dials McLaren. Two guys in tweed jackets come over from England, they show up at his house. They go, "Okay, give us the keys." They come back and go, "You're not shifting high enough," and fly back to England. That was it, the whole problem. That's what owning a McLaren F1 is like. [link]