Tuesday Links

• The influence of speculative stocks on value stocks is examined through a set of economics experiments. The speculative asset is designed to model a company involved in a rapidly growing market that will be saturated at some unknown point. Using a control experiment where both assets are similar value stocks, we find statistical support for the assertion that the presence of a speculative stock increases the volatility and diminishes the price of the value stock. In addition, the temporal minimum price of the value stock during the last phase of the experiment is lower in the presence of the speculative stock (when the trading price of the speculative asset is declining sharply). These results indicate that an overreaction in the speculative stock tends to divert investment capital away from other assets. An examination of the relative magnitude of monthly closing price changes confirm strong correlations between the Dow Jones Average and the more speculative Nasdaq index during the time period in 1990 to 2001 and particularly during the two years prior to the peak in March 2000 (0.72 correlation) and the March 2000 to August 2001 decline (0.79 correlation). Supplementary experiments using independent (or legally separate) markets trading the same asset show that a higher price in one market does not lead to a higher one in the other. [SSRN]
• In my opinion, the essence of genuine and effective contrarianism lies in a deeply-rooted belief/understanding that the world is not black and white, but instead shades of grey, and is filled with infinite nuance and complexity, and as a result, future outcomes will routinely surprise mainstream popular opinion informed by overly-simplistic generalisations and thinking in absolutes. Human beings are generally time staved, and also incline lazy. It's an evolved trait to not waste energy and work any harder than one needs to (which is why it can sometimes feel challenging to get oneself to the gym). We therefore vastly prefer simplifying heuristics that distill the world down into binary assessments of good and bad and right and wrong, that facilitate easy decision making. The problem is that although these heuristics result in easier decisions, they often result in poorer decisions as well. [...] We see the same sort of simplistic, binary thinking manifesting in the investment world all the time, and it is generally characterised by the excessive use of generalisations and absolutes. Examples include 'bricks and mortar retail is dead'; 'EVs are displacing ICEs'; 'ride hailing will put an end to private vehicle ownership'; 'Millennials don't buy stuff anymore, they buy experiences'; 'coal is dead'; 'Europe's banks are all insolvent'; 'banks are all black boxes and are hence uninvestable'; 'Greece is bankrupt'; 'China is nothing more than a giant leveraged bubble that will explode'; 'Russia is bad'; 'Africa is the hopeless continent'; 'Trump is stupid and everything he says is by definition wrong'; 'free trade is always best in all circumstances'; 'you're either for immigration or against immigration'; 'China is evil'; 'shopping mall REITs are all going broke', or 'malls in tier 1 cities will be immune from online threats; malls in tier 2 cities will go bankrupt', etc. What all of these types of claims have in common is that they are all absolute, black and white assertions, and are hence easy beliefs to not only hold and act upon, but also communicate/sell (which results in the memes spreading far and wide and self-replicating into consensus opinion - the water in which investors swim). But they are also all generalisations that lack any sort of nuance, or leave any room for complexity or uncertainty. As a contrarian, one should be instinctively skeptical of overly generalized claims such as these, because the world is almost never as simple and clear cut as these statements proclaim. Even if they are right in direction, they are seldom right to such an extreme degree, or with such a high degree of certitude about future outcomes (EVs might in fact eventually displace ICEs, but as I have discussed in past blog entries, people are likely too confident this is inevitable). From an investment perspective, you should always be alert to such mainstream views, because they very often signal where attractive investment opportunities may reside - on the other side of these narratives, where popular beliefs have been overly discounted; nuance ignored; and other potential outcomes discarded. [LT 3000]
  
• I like to refer to myself as a neo-positivist scientific realist. This is essentially the view that evolution favors organisms that have some level of accuracy of their perception of the real world, which come equipped with a bunch of mostly adaptive cognitive biases (“tinted glasses”), and that through rigorous application of the scientific process, we can better see reality as it really is. Unfortunately, I don’t think that social science is close to this scientific ideal, being staffed by the wrong people, with the wrong incentives. Social science would do better if we fired everybody who works there, and hired some random physicists to figure things out. This is essentially what Dominic Cummings did in order to win the 2016 Brexit vote, his blog has a bunch of stuff on this. [The Postil]
  
• So, when I couldn’t get a response from an email I had sent to my urologist requesting a prescription for finasteride, I wrote her a letter and delivered it by hand to her office. I still did not hear from her and then decided to go to a clinic called Man Alive in Vancouver, Washington. They put me on the low dose finasteride. You want to start off like that to see if you have any negative reactions to it. I didn’t. So, after several weeks I got a new prescription with the 4 mg of finasteride. The good news is that when I took my PSA test again my PSA had been reduced to 2.37. Remarkably enough, this is below the 2.4 after which your incidence of cancer rises measurably. I would like to get to the level that the president of LEF.org has (less than 1.5 last time I read). Now, when I say that this blog, this website, is a product of an experience of something bigger than a straw breaking my camel’s back, I mean this was the last incident in a series of incidents which have caused me to really question the actual objectivity of the scientific community and especially, especially, the medical community. We see all this in regard to the wars over what drugs are the good drugs to prevent and treat coronavirus infections. I will tell you that this is the way it has always been, by the way. [contrary warrior]
• [W]e revisit the evidence that the 1977 epidemic was not natural and examine three potential origins: a laboratory accident, a live-vaccine trial escape, or deliberate release as a biological weapon. Based on available evidence, the 1977 strain was indeed too closely matched to decades-old strains to likely be a natural occurrence. [NLM]
• Until I pointed the cardinal out to her, she was blind to them. They could have been perched right on her window, singing their hearts out, but she could not see or hear them. It took someone else to show her the cardinal, and now she can’t stop seeing them. She hasn’t taken bird watching to the level that I have, but something was unlocked in her heart through my basic teaching and now I can say that her life has a little more beauty in it than before. [Roosh]
• That is one of the many ironies of the Trump years: under the self-glorifying and unhinged banner of #Resisting fascism, American liberals marched behind and empowered war criminals, CIA and FBI goons, neocon sociopaths, the scummiest of the Bush/Cheney operatives who easily scammed them under the name “Lincoln Project,” and the long-discarded and disgraced McCarthyite script that everyone who opposes you is a Kremlin agent and a traitor. Even worse, they relied upon a union of state authority in the form of the Democratic Party and Silicon Valley monopolies, fearful of what Democrats would do when they ascended to power to systematically silence their critics and disappear them from the internet. As I’ve said before, this is the first #Resistance movement in human history that venerates secret security agencies and oligarchical power. [Niccolo]