Sunday, December 11, 2022

Sunday Night Links

  • My best friend predicts that after widespread disillusionment with living under a human gerontocracy, Americans will demand an entirely new leadership class, thus opening up a spot in the not too distant future for a canine president, perhaps to be named President Doggington Bark. The ideal candidate is likely to be either a Lab or a Golden Retriever. [Curated Carlos]
  • Thirty-year old Bankman-Fried initially favoured the deal, in part because he’s “a fan of Tay Tay”, one employee said, using Swift’s nickname. Claire Watanabe, a senior executive in FTX’s business development team, was seen by former employees as a driving force behind the pursuit of Swift and was also a fan of her music. Watanabe could not be reached for comment. [FT]
  • We find that short sale costs eliminate the abnormal profits generated by asset pricing anomalies. While many anomalies persist out-of-sample, they cannot be profitably exploited due to stock borrow fees. Using a comprehensive sample of 162 anomalies, we show that the average of these long-short anomalies earns a significant 0.15% per month before costs. However, this average is -0.02% once portfolio returns are adjusted for stock borrow fees. Moreover, the anomalies are not profitable before accounting for borrow fees if the stocks with high borrow fees, 12% of all stocks, are excluded from the analysis. Thus, short sale costs explain why these anomalies exist despite arbitrageurs’ best efforts to exploit them. [SSRN]
  • It's hard for someone alive today to have a beginner's mind about economic arrangements. We're so used to the idea of markets, the concept of supply and demand, and the idea of compound interest that we can't easily relate to a world where those concepts didn't really exist. This book is a good look at what economies were like a few millennia before there was anything approaching the study of economics. And it's fascinating! For example, while there were many instances of moneylending in the ancient world, the author is not able to track down a single case where someone borrowed money in order to make a productive investment.2 Ancient authors didn't have an explicit concept of elasticity, but Xenophon did notice that when lots of people got into the business of making shoes, shoemakers didn't earn much on average, whereas when lots of people got into the business of mining silver, prices didn't adjust. So in many cases the ancient world was aware of specific instances of broader abstractions, but didn't have the mental models at hand to generalize from them. [The Diff]
  • Remember, back in August the Biden administration claimed that this summer's refined fuel demand was lower than it had been in July 2020. (When fuel prices spiked in June, the EIA did not publish their data for two weeks because of a "voltage irregularity," then claimed that demand had fallen to below pandemic levels.) We knew that the data was wrong because midstream companies and refiners, like Magellan and Valero, were contradicting it in their Q2 2022 results. Then in Q3, we saw refiners reporting that demand for gasoline and diesel was surpassing 2019 levels. Anyone who leaves his house can see that the EIA is wrong and the refiners and pipeline companies are right about demand. It is higher than 2020 and 2021, and it could plausibly be higher than 2019 (as Valero reports.) [CBS]
  • There are 20 amino acids that make up proteins and all have the same basic structure, differing only in the R-group or side chain they have. The simplest, and smallest, amino acid is glycine for which the R-group is a hydrogen (H). They can be subdivided according to their properties, dictated by the functional groups they possess. Broadly they are divided by charge, hydrophobicity and polarity. These properties influence the way they interact with surrounding amino acids in polypeptides and proteins, and consequently impact protein 3D structure and properties. [link
  • Yes, it's that William T Sherman, the Civil War general, who was a banker in San Francisco during the gold rush. In 1848 he was the adjutant to Colonel Mason, the military governor of California, and so was one of the first people in the world to learn that gold had been discovered at Sutter's fort. Despite learning one of the most valuable freely exploitable bits of information of all time, he remained in the military until 1853 when a St. Louis bank hired him to open and run a branch in San Francisco. He was obviously chosen for his political connections and extensive knowledge of California gained in the military, though he never reflects on this in the letters. Sherman established the San Francisco branch of Lucas, Turner & Co. in 1853 and moved into a purpose-built building on the northeast corner of Jackson and Montgomery Streets in the spring of 1854, which still stands today, a block from the Transamerica Pyramid building. [CBS]
  • While everyone else is using ChatGPT to do their computer science homework or cheat on high school exams, HWFO Slack has been stress testing it against wokeisms to see what sort of rails it’s been put on. As is often the case in modern tech, whenever someone forms a committee to determine rightthink verses wrongthink, the wokes flock to the role and use their power behind the curtain to move the Overton Window in the favor of their ideology. This is very apparent with the most recent release of ChatGPT, and you can test it out yourself. We’ve been doing this today in HWFO Slack, and have determined the following behaviors. ChatGPT presents most but not all indoctrinated woke shibboleths as fact, even when they are provably scientifically false. ChatGPT does have some notable exceptions, such as its very even handed response to the “healthy at any size” question at the bottom. These rails appear to be hardcoded, and not organically developed, because ChatGPT can be tricked into giving answers outside of the woke Overton Window by clever prompting. [HWFO]
  • I thought about developments in Iran while reading an article titled “Why Conservatism Failed” by Jon Askonas. The author argues that traditions and morality are shaped by economic progress and technology. You can’t expect to maintain the values of a rural community in a country where no one farms anymore. Conservatism has failed to recognize this, and so of course lost the culture war. While all of this makes sense, Askonas then goes on to close with a call to arms for a new kind of traditionalist movement. [Richard Hanania]
  • I highly recommend a trip down the GAP and the C&O Canal, a ride that takes the rider through spectacularly wild and beautiful SW Pennsylvania and Western Maryland mountains and countryside and prominent historical sites often difficult to reach by car. I’d love to do it again with a small group, perhaps going all the way to Washington DC. [Curated Carlos]
  • The $50 billion commitment is a massive increase over Exxon's last buyback program, due to end in 2023, which allocated just $30 billion to shareholders -- and highlight's the firm's disinterest in splurging on new oil drilling campaigns and other business endeavors. Exxon says it is projecting an annual spending range of just $20 to $25 billion over the next half-decade, a steep dropoff from the $30 to $35 billion it said it would annually reinvest in its business in 2019, before the universe threw a pandemic-sized wrench in its operations. [XOM]

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