August 13th Links

• A bubble forms in our model after a sequence of large positive cash-flow shocks. The bubble evolves in three stages. In the first stage, the cash-flow news pushes up the price of the risky asset; extrapolators sharply increase their demand for the asset, buying from fundamental traders. In the second stage, the asset becomes sufficiently overvalued that the fundamental traders exit the market, leaving the asset in the hands of the exuberant extrapolators who trade with each other because of wavering. Once the good cash-flow news subsides, prices stop rising as rapidly, extrapolator enthusiasm abates, and the bubble begins its collapse. In the third stage, prices fall far enough that fundamental traders re-enter the market, buying from extrapolators. [Shleifer]
• This low-income labour pool barely exists in Australia - and of consequence I suspect the average small business is smaller and there are many more of them. Australia, not America is a land of thriving small businesses (at least by number) [Bronte]
• Supercentenarians displayed an exceptionally healthy aging phenotype where clinically apparent major chronic diseases and disabilities were markedly delayed, often beyond age 100. They had little clinical history of cardiovascular disease and reported no history of cancer or diabetes. This phenotype is consistent with a more elite phenotype than has been observed in prior studies of centenarians. [link]
• We arrive in London and go to dinner with a friend from law school and her fiancé — she's British and her fiancé is American, but has been in London for a decade. Dinner is actually really good and fun! S voted for Brexit so I was praying that didn't come up in conversation. He's not a racist or nationalist or anti-immigrant at all, but my friends are very liberal and may have been aggressive about it. Feeling very relieved. [link]
• This permeability of the managerial minority to those of talent from below means it constantly co-opts the potential leaders of the proles. Just take your potential revolutionary leaders and offer them glittering careers in the existing system. You're unlikely to ever have a successful revolution, since those left in the prole ranks are more or less by definition not capable of leading an effective revolt. [...] The Nation of Immigrants is from cultures of the class division envisioned as likely by the author. However, the Nation of Settlers is congenitally ill-adapted to becoming the kind of functionally-docile underclasses of Brazil and Mexico. Moreover, The Nation of Immigrants is concentrated in the urban areas with life-support infrastructure that is optimized for economic and political efficiency rather than resilience. If a deal isn't cut with The Nation of Settlers still living in the "hinterlands", they will attack the life support of urban areas and there will be on the order of 100 million deaths concentrated in the urban areas of the US. At that point, the "managerial elite" will either be dead or be living somewhere else. [Sailer]
• This preposterous quackery flourishes lushly in the back reaches of the Republic, and begins to conquer the less civilized folk of the big cities. As the old-time family doctor dies out in the country towns, with no competent successor willing to take over his dismal business, he is followed by some hearty blacksmith or ice-wagon driver, turned into a chiropractor in six months, often by correspondence. In Los Angeles the Damned, there are probably more chiropractors than actual physicians, and they are far more generally esteemed. [Mencken]
• Treatment of cancers with the cytotoxic agent cisplatin frequently evokes resistance, accompanied by rewiring of metabolic pathways, limiting its clinical use. Recent research by Obrist et al (2018) shows that cisplatin‐resistant growth of lung adenocarcinoma is particularly vulnerable to periodic fasting cycles and starvation‐induced cell death, due to its dependency on glutamine, required for nucleoside biosynthesis, suggesting an opportunity for nutritional anti‐cancer interventions. [link]
• In Geography class at Northampton School for Boys ca. 1956 we were taught to divide Britain into quadrants by two straight lines, one N-S, the other E-W. West of the vertical line is wet, east is dry. North of the horizontal line is cool, south is warm. So the SE (e.g. London) is warm and dry. [Sailer]
• It is axiomatic that democracy must be short-term oriented. This is not due to greedy voter, as much as the nature of democracy. The people holding office are temporary office holders with not investment in their position. Therefore, their goal is to squeeze every drop from their position as quickly as possible, Hillary Clinton is the ideal politicians in a democracy, because she wants to auction off every asset of the office she holds, as quickly as possible. This shortsightedness makes expanding the franchise attractive. [Zman]
• Unlike their US counterparts, Russian weapons are designed to kill, not to make money and, second, Russians understand warfare because they understand what war really is. This latest argument might look circular, but it is not: Russians are all acutely aware of what war really means and, crucially, they are actually willing to make personal sacrifices to either avoid or, at least, win wars. In contrast, Americans have no experience of real warfare (that is warfare in defense of their own land, family and friends) at all. For Americans warfare is killing the other guy in his own country, preferably from afar or above, while making a ton of money in the process. For Russians, warfare is simply about surviving at any and all cost. [Saker]
• What if, instead of screening for IQ, parents want to select for, say, a son who would want to run the family business and could run it well? Or perhaps a government wants to make sure it has a strong military, so it pays, or requires, a certain number of parents to select for children likely to be good soldiers and sailors and airmen as they get older? Would that be possible? Because if it will be, I can see scenarios like that happening. [Hsu]
• Genomic selection has revolutionized dairy cattle breeding. Since 2000, assays have been developed to genotype large numbers of single-nucleotide polymorphisms (SNPs) at relatively low cost. The first commercial SNP genotyping chip was released with a set of 54,001 SNPs in December 2007. Over 15,000 genotypes were used to determine which SNPs should be used in genomic evaluation of US dairy cattle. Official USDA genomic evaluations were first released in January 2009 for Holsteins and Jerseys, in August 2009 for Brown Swiss, in April 2013 for Ayrshires, and in April 2016 for Guernseys. Producers have accepted genomic evaluations as accurate indications of a bull's eventual daughter-based evaluation. The integration of DNA marker technology and genomics into the traditional evaluation system has doubled the rate of genetic progress for traits of economic importance, decreased generation interval, increased selection accuracy, reduced previous costs of progeny testing, and allowed identification of recessive lethals. [link]
• Three of Intellectual Ventures' four founders, Greg Gorder, Peter Detkin, and Ed Jung, have either left Intellectual Ventures or significantly diminished their roles at the firm. That has left Myhrvold as the only founder with a day-to-day role. But Myhrvold often seems to spend a lot of his time on his own passions, like writing a 2,400-page cookbook, a 2,600-page guide to baking bread and picking fights with asteroid-hunting scientists. [Forbes]
• We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a 'location asset.' This asset has a cost equal to the location's rent, and a payoff through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the present by going to cheap locations that offer few other advantages. [NBER]
• 15 years of experience interviewing programmers has convinced me that the best programmers all have an easy aptitude for dealing with multiple levels of abstraction simultaneously. In programming, that means specifically that they have no problem with recursion (which involves holding in your head multiple levels of the call stack at the same time) or complex pointer-based algorithms (where the address of an object is sort of like an abstract representation of the object itself). I've come to realize that understanding pointers in C is not a skill, it's an aptitude. In first year computer science classes, there are always about 200 kids at the beginning of the semester, all of whom wrote complex adventure games in BASIC for their PCs when they were 4 years old. They are having a good ol' time learning C or Pascal in college, until one day the professor introduces pointers, and suddenly, they don't get it. [Joel]
• Money has the capacity to amplify. It can amplify the good and virtuous in people, and it can also amplify the bad and malevolent. If somebody is psychologically healthy, money is likely to do nothing but add value to their life. But if someone is psychologically unstable, it is likely to do little more than hasten their spiral into the abyss. Rich drug addicts have the power to kill themselves faster than poor ones, as they can afford to indulge their vice to a much greater extent than the fiscally constrained can. Rich people can also afford to be obnoxious or arrogant as they do not need to defer to others (e.g. a boss) to secure their financial wellbeing. However, this sort of attitude can lead to them alienating themselves from people, and meaningful relationships with others are an important part of happiness. Someone who is an unpleasant person but who is rich, is likely to become even more unpleasant and distasteful to others, and become unhappier as a result. [LT3000]
• Presently, Apple is valued at 5.1% of GDP, Amazon at 4.8%, Alphabet (Google) at 4.6%, Facebook at 3.3%, and Netflix at 0.8% of GDP. That's a total market capitalization of nearly 20% of GDP across 5 stocks. It's worth remembering that historically, the pre-bubble norm for market capitalization to GDP, adding up every nonfinancial company in the stock market, was only about 60%. At secular lows like 1974 and 1982, the ratio fell to 30% of GDP – for the entire market. [Hussman]
• Ask Mariano Rajoy. At the end of May, as it became clear that he was going to be turfed out of office in a no-confidence vote, the then-prime minister did something very Spanish: he and his close circle retreated to a private room in a smart Madrid restaurant. Lunch was followed by a seven-hour sobremesa, and, reportedly, a couple of bottles of whisky. [Guardian]
• This has been terribly disappointing and really makes me feel sick. The SC has been great and we are hoping Tesla will make this right for us. But we are really kicking ourselves and think we should have rejected the delivery (and would have had we seen the paint chips). Part of me thinks this is terrible of Tesla and that I'd prefer "good" over "fast" and the other part of me acknowledges that this is what happens when you buy something as new and revolutionary as the M3 and we knew that risk when we signed up. We want to support Telsa and what they are trying to do, but we really wish they'd realize that sending out cars with flaws like this might hurt them more in the long run than selling lots of cars fast will help them in the short run. [Tesla]
• Current property values suggest that investors are not pricing fiscal risk into deals today, the report says. Investors are buying apartments in the Chicago area, Northern New Jersey and Fairfield County—three markets in "critical condition"—at an average capitalization rate, or first-year return, of 5.4 percent, not much higher than the 5.0 percent national average, according to the Green Street report. The rate should be higher to account for the added fiscal risk, Green Street argues. [Chicago Business]
• Corsair Triple Smoke was inspired by a trip to a part of the world where tradition, rather than innovation, drives most whiskey production. "I was in Scotland at the Bruichladdich distilling academy trying all these amazing peat smoked single malts. I wondered why there are no American smoked whiskies when there is such a great tradition of smoking meat with the generous hardwoods we have here." [Whiskey Wash]
• On the ground, the Yen feels modestly cheap. In my view, the easiest way to tell if a currency is cheap or expensive is to intuit it from visiting the country. Are you more frequently surprised on the upside or the downside when the bill arrives? (Incidentally, the Malaysian Ringgit is a standout buy on this basis at present in my view). The Yen struck me as moderately - although not egregiously - cheap on this basis, confirming what one may have assumed from an examination of the country's external accounts & inflation-adjusted historical trading ranges. [LT3000]
• One of the keys to good stock is simply to not dilute it too much. When I started my tests, I was limited by pot size and dimension, and had to use one pound of chicken per two quarts of water (any more, and I'd overflow my smaller pots). But that produced stocks that were a little too weak. In subsequent batches, I bumped the chicken up, and found that you want at least two pounds of chicken per two quarts of water, a 1:2 ratio by weight. Ideally, though, you'll add even more chicken: In a large stockpot, I was able to get a full eight pounds of chicken submerged in a gallon (four quarts) of water, which yielded the richest, most flavorful results. For every two quarts of water, I also added at least one large diced onion, two large diced carrots, two ribs of celery, and about four crushed cloves of garlic. A nice tuft of parsley completes it, though fresh thyme and bay leaves are also good to include. [Serious Eats]