As Stocks Keep Going up, HBD is the Future

Six years later and with no end in sight, the biological determinism bull market rages on:

With the S&P 500 at another historic high, it’s time to give thanks to the people and things that helped make it possible, as well as thanks to the greatest contributors of the economy.

But before I get to the list (and people who have read the blog can probably guess what I’m going to list), it’s time for the stupidest comment of the day, and it comes from Senator Elizabeth Warren’s Q&A at a September 17, 2014 Banking Subcommittee on Economic Policy hearing entitled, “Who is the Economy Working For? The Impact of Rising Inequality on the American Economy.” This is so insipid, I’m going to just link to the video. I’m not even going to bother imbedding this crap:

https://www.youtube.com/watch?v=Xr45zZkwLfc

At two minutes in, she states CEOs have no incentive to give profits back to workers.

Ummm..has she ever heard of something called wages? Companies that are unprofitable tend to shut down, and hence no wages and no employees.

Obviously, she is opposed to the system of capitalism we have now and would prefer if companies run on razor thin margins and forcibly relinquish all their profits to the government, with nothing for management and shareholders. This is a situation similar to Freddie Mac and Fannie May, except she wants it for all companies.

Capitalism means companies , in a free market, can decide how to appropriate their capital.

She also mentions middle class living standards have declined over the last fifteen years, completely ignoring all the new technologies that have improved our lives such as the World Wide Web, mobile phones, better treatments for diseases, cheaper energy and food relative to income, and so on. Matt Ridley, the rational optimist, is right about the world being a better place thanks to technology and free markets.

The Dow keeps making new highs because the economy is fundamentally sound, and companies flush with profits are buying back record amounts of stocks, in addition to blowout earnings, huge exports, and other examples of strong fundamentals.

Biological determinism means the best and the brightest are being reward with rising asset prices for the economic value they create, who in turn help make the market go up for being so economically invaluable. It’s a symbiotic relationship. Smart people create economic value, which makes stocks and high-end real estate go up, which makes smart people richer.

HBD is the future. It’s not just a way of life; it is life. The Silicon Valley, along with Manhattan and other insular colonies of intellectualism and capitalism, are the epicenters of America’s hyper-meritocracy. A low IQ score is a scarlet letter that dooms whoever bears it to a lifetime of mediocrity. With the world becoming more transparent and aptitude/cognitive testing playing an increasingly important role in the hiring process as companies rely less on GPAs, don’t think you will have anywhere to hide or that you will be able to BS your way to a good job with inflated, useless credentials. The low-paying service sector, such as Wallmart door greeter, cashier, and bed pan changer, are 21st century growth industries for the low-IQ population and college graduates of useless degrees – assuming such jobs don’t get fully automated.

We can only pray Warren wins the democratic nomination. It would give the GOP the easiest victory since Mondale.

No, Krugman, Economics Didn’t Fail. You Failed.

Krugman the bearded wimp decries the “enormous intellectual failure” of modern economics

Actually, economics and economists did a pretty good job, especially post-2008. As we explain earlier, economists and policy makers don’t necessarily need to be able to predict crisis; they only need to have the tools to keep crisis as brief and contained as possible, as was demonstrated in 1987 (Black Monday), 1998 (Long Term Capital Management implosion), 2001 (911 attacks), 2008 (financial crisis), and in 2011 (Greece + European crisis). Few predicted these events, but policy makers, using tried and true economic policy of infusing liquidity and bailouts, acted deftly and stemmed the problems before they metastasized, allowing the healthier portions of the economy to run with little interruption.

Krugman, let’s not forget, made all sorts of bad predictions in recent years, including but not limited to:

Europe crisis spreading
a country leaving the Eurozone
the Eurozone failing

He also predicted, incorrectly, that the sequester and alleged ‘GOP obstruction’ would hurt economic growth and job creation. Wrong again. Stocks keep making new highs, economic data keeps being blowout, and unemployment is just a 2% higher than 2006 – the lowest level in six years.

Another Bang-Up Prediction From Krugman, On Employment and the Sequester

They don’t call him the Nobel nitwit for nothing.

Economists can’t fix wealth inequality; they can only try to prescribe policy to create ‘economics environments’ that are conducive to the creation of wealth, so that hopefully there will be less poverty and more wealth, overall.

We need policy that creates wealth, not spreads it around. Inflation-adjusted entitlement spending is at record highs. The left blames ‘banksters’ for supposedly bringing down the middle class, but at some point, the individual bears responsibility, too. But, instead, we’re becoming a nation of whiners looking for anyone to blame but ourselves. Silicon Valley VCs are right about the global economy changing and the ‘losers’ being left behind as the rich getting richer. We need more financial technologies, more payday loans, and more consumer spending. The top 10 percent income earners pay 68% of the federal income taxes, in addition to creating jobs and technological innovation that improve living standards. The liberals think you can grow an economy by punishing those create the most value, while spreading their wealth to the least useful.

Immigration and Politics

Economically, nothing has changed between 2009 and now. Five years later, we still have the headlines of ‘slow growth’ and ‘fed uncertainties’, the same libs complaining about wealth inequality and the soft labor market, unending quarters of blowout profits & earnings, economic data that keeps being better than expected, huge consumer spending, falling treasury yields, stocks always going up, a Goldilocks economy, and interest rates never going up. Five years from now, things will still be the same, except much higher stock prices.

iSteve opposes open borders

The disagreement lies in the fact most economists, including Bryan, don’t believe in closed borders because it’s pareto inefficient to restrict labor options. It goes against the teachings of economics.

Second, ‘open borders’ and ‘jobs’ are not mutually inclusive. Many conflate open borders as a job issue, when it’s possible to have border control with job openings for immigrants. That’s what some republicans advocate – a meritocracy that allows talented foreigners entry while keeping others out. It’s not literal open borders. In a meritocracy, the best and the brightest should get the job, regardless of national origin. Restricting labor options makes American companies less competitive and is bad for the economy, too. If the foreign programmers are of poor quality (a common concern), then in a free market, tech companies will choose to stop hiring them or pay them less until an equilibrium between quality and price is achieved. To quote Jim Manzi from National Review:

There is always a shortage of smart, creative hardworking people, because on average they create vastly more value than they consume. They help themselves, but also make the society around them richer. The higher you climb this ladder of ability (broadly defined), the more value that will be created in and for America.

The funny thing is, with his views on parenting and education, Bryan, like Larry Summers and a few other liberals, does have some HBD cred.

This list about what every high schooler should now before going to college, which is laced with subtle themes of biological determinism , is a good example.

Suppose your 150-pound friend dreams of being a professional football player. Would a true friend urge him on? No, he’d warn his mid-weight friend that he is astronomically unlikely to succeed in football, and needs to consider more realistic careers. I’m trying to play the same role for mediocre and poor students who expect to succeed in college.

He’s implying that like the 150-pound aspiring football player, some people are not ‘physically’ cut out for higher education, which is analogous to them not being smart enough.

The left believes that the government should create a level playing field where anyone, regardless of intellect, can succeed. This is unrealistic, because even with the best intentions, people of low/average IQ usually don’t achieve much, so instead the government should focus on creating pro-growth economic environments that allow the best and the brightest to thrive, while reducing entitlement spending for everyone else. Some ideas for pro-growth polices include, but are not limited to: tax cuts, raising the h1b immigration cap (a plan endorsed by Romney), restricting voting and or giving wealthier people more representation, more QE, an iron-clad pledge by the fed to never raise interest rates, and less regulation. These are mostly republican ideas, and if Liz Warren* gains traction in the polls and dems lose the senate, stocks will surge. GOP control of all three branches with super-majorities would be euphoric for stocks. Expect the biggest rally in years on top of the already huge post-2008 gains. We could easily see S&P 500 going as high as 3,000 by 2017. Oh, and let’s not forget the GSE’s: Freddie (FMCC) and Fannie (FNMA). These are always a good buy on the dips. There is no plan to wind these down anytime soon and GOP control of all three branches significantly increases the odds shareholders will be saved. That’s why I’m buying & holding, because I have faith in America, free markets, the intellectual revolution, and the smart people who comprise it.

* Warren has no hope of winning a general election, which is why Hillary will most likely be the nominee. The best scenario for the stock market would be for Warren to somehow get the nomination, which would guarantee a victory for her republican challenger. Hillary winning wouldn’t be so bad, either, since a Hillary presidency would adopt many of the successful pro-growth policies of G. W. Bush.

The Last Question, Part 2

In the six years that have followed the bank bailouts, fed doubters have egg on their faces as the US dollar and treasuries post huge gains. To quote Joe, policy hasn’t been perfect, but we’re seeing how smart the U.S. was to ease aggressively early and hard.

That’s just one of many reasons why you don’t want to bet against America and the best and the brightest who run the fed and the treasury and who are employed at America’s most innovative companies like Snapchat, Uber, Dropbox, Google and Facebook. Silicon Valley, MIT, Caltech, Wall St. as well as private equity, VC and hedge funds…these are institutions that reward talent and IQ. And its rubbing off on the rest of America, making the country collectively smarter and more conservative.

The smarties are winning and the wealth spreaders are losing as retail sales grow at fastest pace in four months in August.

In August, growth in retail sales increased 0.6% over the previous month, in nominal terms. The print came in above the 0.3% expansion recorded in July (previously reported: +0.0% month-on-month) and matched market expectations. It marked the strongest result since April. The increase was mainly driven by higher sales at miscellaneous stores, motor vehicle and parts dealers, and sporting goods stores. Sales at gasoline stations registered the only notable decline.

The consumer is not maxed out, as much the left wishes it were. If the consumer were ‘maxed out’, it would fit perfectly into their narrative that wealth inequality is bad for the economy, but instead the libs are wrong as they always are, and their shrill cries for crisis are still being ignored.

Biological determinism is inescapable and unstoppable. The left is waging an unwinnable war on reality – a reality that the post-2008 economic environment is one that heavily favors high-IQ, and that no amount of good intentions and spending will close the widening achievement and wealth gap. Murmurings of biological determinism are all over the internet on sites like Reddit and 4chan. In time, it will be deafening. The left will be dragged to this ‘new era’ kicking and screaming while clutching dearly to their cherished beliefs until those too are are pried from their hands and stomped to smithereens. America über alles. One nation under technology, surveillance, and a free market. That’s why it’s time to buy stocks. It’s why IQ is important and the singularity is near. Tuning, which is the ability to alter physical reality in a way that is consistent with the laws of the universe, will be available to type 3 civilizations.

A San Fransisco tech billionaire oversees Google workers, with the Transamerica building in the background.

Still no recession in the Bay Area. There’s a story of someone who bought a home in San Francisco in 2010 for $550k, recently put it for sale at $850k, and is still getting offers everyday. He could sell it for as much as a million. But Shiller, a liberal economist, says there’s a bubble. Or did it ever occur to these perts on the left that home prices in the Bay Area are surging not because of irrational exuberance, but because of strong regional economic fundamentals, techies rich from the web 2.0 boom, private equity, and rich foreigners? That’s the reason, not because of a bubble, and prices will keep going up for many, many years to come.

And to end with a question to ponder, ‘If genes control our fate, do we want the fate our nation to be in the hands of the least evolved?’

The Last Question

Part of what makes the WSJ interesting yet infuriating to liberals is how they treat billionaires as experts at everything, besides their fields of business, and, without hesitation, will publish whatever crosses a billionaire’s mind in the op-ed, in addition to the usual columnists.

The NYT, on the other hand, likes conventional, safe ideas by vetted experts, while the WSJ is open to more controversial, panglossian ideas by smart people who may not be lettered experts in the fields they are writing about.

Th WSJ frequently praises Netflix and file sharing as liberators of content from the leaky silos and DRM fortresses of the antiquated and decaying liberal entertainment establishments.

The Wall St. Journal is always on the cutting edge of economic and technological trends. Through their editorials, the overarching theme is that profits, supply-side, and productivity are more important to the economic recovery than job creation.

In a highly praised Nov 18, 2010 editorial, Warren Buffett was right to thank Bush, Paulson, Geithner and Bernanke for engineering the enormously successful bank bailout, while deservedly snubbing Obama – the wealth spreader in chief whose useless stimulus did nothing to help the economy.

On Oct 12, 2013, Scott Adams, a really smart and successful person, wrote a Wall St. Journal editorial on how to be successful.

The left is opposed to creative destruction because it may destroy useless, overpaid jobs; the GOP, including the Wall St. Journal, embraces it.

Unlike the welfare liberals, GOP and mixed-libertarians don’t live in fear of the fed, rich people, Facebook, and financial instruments.

The neoconservatives, the smartest and most pragmatic faction of the GOP, understand that there is a trade-off between security and innovation, that in a free market no one can guarantee the job security of every room temperature IQ person who hasn’t been fired yet.

Bank bailouts can coexist with a free market, because mixed-libertarians understand that in a crisis government should be endowed with the ability to allocate overwhelming force to stem the crisis that independent, smaller entities under capitalism are unable to do.

In 2008, only the government could have bailed out Wall St; otherwise things would have gotten significantly worse.

The government also exists to create pro-growth economic environments that exclusively benefit the smart and rich – people who create the most economic value.

America has become a hyper-meritocracy, and the left left futilely seeks economic crisis to make it go away.

Snapchat, Uber, Dropbox, and Facebook can thank the fed and congress for their huge valuations, along with the strong global economy and a combination of profit potential, marketshare domination and user growth.

A rising tide lifts all yachts. So what? They, the rich, deserve it. The question we need to ask ourselves is, ‘Do we want a country that rewards talent or a country that is equally poor?’

Some Thoughts on Healthcare

The American family makes $200 more a year than it did in 1989

From Josh Brown:

The naysayers have a point when talking about the unfairness (or incompleteness) of the economic recovery. For many people, there really hasn’t been one yet. For the bottom 80 percent of income earners (almost the whole country) or those without financial assets, it can easily feel like the Recovery Fairy has simply skipped their house.

When adjusting for living standards it’s not so bad. $100 today goes a lot further than 20 years ago. A computer was $3000 in 1995 vs. a smart phone that costs $300 and does much more. There are no good answers to the ongoing wealth inequality debate that will please everyone. We, the people who study wealth inequality, need to come to terms with the fact that in the hyper-meritocracy that defines the post-2008 American winner-takes-all economic environment , some will have more than others. Not everyone can participate in the wealth creation boom.

Although real costs have increased, the quality of health care in terms of new treatments has improved, but real prices for things like education, airline travel, cable TV, etc have gone also up, as discussed in earlier posts. However, this could be offset by more generous subsidies so while prices have gone up, people aren’t actually paying more out of pocket.

Adjusted for grants, the inflation-adjusted cost of two-year college has actually declined over the last 20 years.

There’s no question that for-profit colleges are a scam, but there’s no law that prohibits profiting off the endless resource that is human stupidity.

And finally, out of pocket health care expenses are in a steady downtrend:

While real prices are going up, Americans are paying less out of pocket as a percentage of GDP

even as health care costs have been rising, public and private health care insurance has been expanding so that Americans have been paying a lower share of those costs out of pocket.

On the other hand, out of the total income of medicare beneficiaries, out of pocket expenses are rising:

This seems to contradict the earlier findings. A possible explanation is that GDP doesn’t always grow as quickly as income. If GDP doubles, healthcare costs rise slightly and incomes remain flat, out pocket pocket healthcare spending may be a smaller percentage of GDP but a greater percentage of individual income.

Another interesting finding is that % of the population accounts for 20% of healthcare spending and 5% accounts for half:

This is where the argument for Eugenics comes into play as a possible solution to reduce healthcare spending.

Pro Growth Policy Ideas

US Dollar heads for best run of gains in 17 years

If anything, this huge rally in dollars and plunge in treasury yields means we need things that will increase liquidity and risk taking such as more QE and tax cuts . There is so much demand for the safe haven of US dollars that for the fed and politicians to no be taking advantage of this is a wasted opportunity . The US economy, although it’s very strong, isn’t running at its full potential. By ‘full potential’ we don’t mean in the liberal sense of more GDP growth and employment; instead, we mean pro-growth policy in the spirit of supply side economics. Here are some pro-growth ideas:

1. Undoing the 2013 tax hike and lowing income taxes for the highest of income earners

2. Increase deductions. Allow losses from stock and real esate transactions to offset income taxes.

3. Elliminate long-term capital gains taxes and reduce short-term gains to the long-term rate.

4. Increase the mortgage interest deduction.

5. Dividend taxes are a form of double taxation. Elliminate them.

6. Instead of welfare, a basic income for individuals with a college degree in subjects deemed useful (STEM, history, English, economics, finance, accounting) and or a verifiable IQ above a certain threshold.

7. A national genome database. Everyone on welfare or under dissability must have thier genome sequenced; individuals with genes linked to low-IQ, crime and other undeseriable traits are prohibited from reproducing unless their income rises above a certain threshold.

8. To help create the next Tesla or SpaceX, more government subsidies to fund innovative companies.

9. End tapering and replace it with a new QE program.

10. A pledge by the fed to not raise interest rates. All rate hikes off the table.

11. Lower the corperate income tax.

The best thing that can happen for the economy and national defense is to have republicans control all three branches of govt. and these is a strong likelihood of happening in 2016, upon which the libertarian faction will merge with the mainstream and that will bring the neocon resurgence with policy similar to that of Bush and Reagan.The good news is when push comes to shove, congress does get its act together such as in 2001 and 2008.

Could Millennials Be More Conservative Than Previously Thought?

Is the smartest generation, the millennials, when matched by age, more conservative than most generations in history, including the babyboomers? The problem with studies that purport baby boomers to be more conservative than millennials is that they are not matching by age. Yes, baby boomers are more conservative, but that’s possibly because they are older, and maybe people become more conservative as they age (although this is heavily disputed). Another problem is the definition of conservative and liberal. A neo-liberal is technically a liberal, but holds views congruent to conservatives on things like support of free market economics, foreign interventionism, and harsher sentencing laws.

A better study would be to match the political views of baby boomers when they were in their 20′s with millennials. My hypothesis is that a typical 20+ year-old baby boomer from the 60′s or 70′s was more liberal than a millennial today, both economically and on some social issues. Perhaps, young baby boomers were more open to wealth redistribution and higher taxes. Not only that, but compared to millennials, baby boomers were are also less educated and less competitive. You can observe this today. Many millennials, particularity the smarter ones, are so curious about the world and seek empirical explanations for everything, refusing to accept things on faith alone and rejecting platitudinous ‘soundbite solutions’ to complicated problems. They believe absolute right and wrongs (moral absolutism) whereas earlier generations, even among self-reported conservatives, leave more room for ambiguity. In the 60′s, the only 20-30 year-olds that cared about economics were those who were studying it to get their degree. Since 2008, with the rise of internet libertarianism and the culture of student loan victimization, everyone is talking about economics in much the same way young people talked about sports a couple generation ago. When the millennials get older, perhaps they’ll be even more conservative than the boomers.

As we mentioned in the smartest generation series, by virtue of being highly educated and empirically minded, not only are millennials more receptive to HBD and other controversial ideas, but they are more pro-business than earlier generations. For example, from an extensive study of millennials, yes, they are more liberal on social issues, but hold business in a more favorable light than respondents aged 30 to 59.

In agreement with the hypothesis, the study mentions:

Millennials’ response puts them about in the middle of previous generations’ opinion of business. When they were young, baby boomers had the lowest view of big business in the history of the survey, giving business a mean ranking of 42 in 1976.

So young babyboomers were actually more critical of big business than millennials.

The survey also found that millennials are more supportive of free trade than other age groups. Not surprisingly, millennials are more distrustful of the federal government and politicians than earlier generations:

Millennials are less trusting of the federal government than other young adults have been on average during the 50 years this question has been asked (46 percent), and far less trusting than young adults in the 1950s and 1960s, when more than 70 percent of young people thought they could trust the federal government to do what is right most or all of the time.

This aversion to ‘politics as usual’ is a good sign because it leaves the window open to 3rd parties or alternative republican candidates that will promote better policy.

The next step is eugenics becoming mainstream, which many people can get behind if correctly marketed as a solution to reducing he wealth gap, poverty, crime, and entitlement spending.

College Bashing and Skills Transference

College bashing is popular among the crisis-seeking, anti-establishment left. The best argument they have is anecdotal evidence, that they know someone who is wildly successful despite not obtaining a degree, and thus their single example overrides all empirical evidence from hundreds of studies that show otherwise. The left, like a Malcom Gladwell book, can only offer anecdotal evidence, wishful thinking and protestations. They tell each other the narratives they want to hear, ignoring all evidence that shows they are wrong. Arguing with a welfare liberal is more for entertainment value than educational value.

These college bashers remind me of Amazon self-publishers who insist their ‘literary masterpiece’ is better than traditionally published work, or that they will be the next Hugh Howdy or E.L. James.

Research suggests college degree in the United States will earn the recipient an extra $500K+ in lifetime earnings vs. a high school diploma in today’s dollars. It pays to be smart. Graduating from a “good” school with an in-demand job (e.g. STEM or healthcare instead of the arts), will result in an extra $1M+ in lifetime earnings.

Only 70% of college students graduate with student loans, and of those that do, the average amount of debt is a bit under $30k, or about the same as a new car. I don’t know about you, but taking out $30K in loans to earn $500K-$1M+ seems like a good deal.

A common retort is that ‘blue collar’ workers can earn as much as degree holders. From a debate on Reddit, someone posted:

“Welders, plumbers, electricians can make $60k almost anywhere. Maybe not at 18, more like 20 to 22. But no everyone wants a four year liberal arts degree.”

Those figures are exaggerated. It’s more like $40-50k and that’s after lots of certification and other requirements, and typically only the most experienced tradesmen can command high figures. Contrary to popular myth, many ‘blue collar’ workers do have degrees, so all else being equal, an employer is more inclined to chose someone with a degree than someone without. An engineer for a high-tech company can make six figures easily with lots of other perks like options, plenty of vacation, generous insurance and a comfortable, safe work environment. Many blue collar workers are independent contractors and have to pay for everything out of pocket. Not such a good deal. Even amongst the skilled trades, $60K at the age of 18 is damn near unheard of outside of very high risk jobs in remote locations — and there aren’t many of those, either. $120K at all is very rare as well.

Some else shared their anecdotal evidence:

” My brother skipped University and started a business. He’s got more cash than me. Plumbers, gas fitters etc make more money than software consultants. Of course it will go down like a lead balloon here since Reddit is full of people who’ve just left Uni and have no money.”

Not true. A Google search shows that software consultants can make $60-90k, while plumbers make around $53k. Second, the stats also show that most small businesses fail, so for every dropout that is successful, the majority fail to do well. According to the U.S. Small Business Administration, 70 percent of new businesses survive at least two years, but that drops to 50 percent by the five-year mark. After ten years, only 30 percent are still alive. These statistics tell you nothing about how much profit these business generate for their founders. It’s not implausible to assume many surviving small businesses operate at a loss. A diploma (especially from a prestigious school and or a high-paying major) has a lot of extrinsic value while a failed small business leaves you with nothing but debt and frustration.

Someone suggested you could bankrupt and ‘start over’

“But it’s business debt, just bankrupt it, liquidate and start again. Try escaping your student loans.”

Except your credit score will be shot and you won’t get another loan. (Assuming you are able to get the first one. Good luck getting enough money to start a business when you have no income, which again, brings us back to the college degree – the first step to getting a job that pays a decent income, which in turn can be used as collateral for a business loan.) You really think lenders are motivated by altruism than the ability to turn a profit. What he is suggesting, which won’t even work, is immoral and was a contributing factor to the 2008 financial problem.

On the other hand, the problem is graduating from college only shows you have an above average IQ and or work ethic to complete the required work; that says nothing about the marketplace demand for your skills. This is where skills transference comes into play. College graduates, even in less lucrative majors, should take comfort knowing that not only will having a diploma give them an edge when applying for a job, but after graduating college they can apply their above average IQ and study habits to acquiring in-demand skills. Due to skills transference, being a history, English or other liberal arts major does not preclude success in a high-paying STEM field. Getting a master’s degree, even for a low paying field, already means you’re smarter than most people and can make the jump to learning coding and other skills. Those who major in STEM have a heard-start, but with the necessary hard work, many non-STEM majors can acquire STEM skills with relative ease compared to the general population.

For example, an English major probably has a good command of grammar, which is in many ways similar to programing. One can argue that grammar is harder than coding because with programming you know when you’ve made a mistake when the script errors or doesn’t output the intended results; however, in writing, just because something ‘sounds’ correct, even if the intent of the author is obvious to the reader, doesn’t mean it is correct.

Consider this example:

The man that lifts weights…

The man who lifts weights…

The second is correct, but to most English speakers the first doesn’t sound jarringly wrong, and the intent of the writer is obvious in either case. There’s hundreds of rules like this and they are packed in large writing handbooks for reference, similar to that of coding books. With php or Javascript, if you’re unsure, you can do trial and error until the program stops giving errors, and then you know you have the correct solution. With writing, unless someone finds the errors, no such luck.

America’s Intellectual Renaissance

A defining charcteristic of the post-2008 intellectual Renaissance is that America is stronger and more influential than ever. The left predicted in 2008, incorrectly, that the over-hyped financial problem would usher in a post-America era. The exact opposite happened. As evidenced by historically low treasury yields, an always rising stock market that has vastly outperformed its global peers, an effective federal reserve and congress, the indefatigable consumer, quarter after quarter of blowout profits & earnings for multinationals, low inflation, surging Bay Area real estate, tech companies and Ivy League institutions being inundated with foreign applicants, America and its institutions, more than ever, have become the center of the universe and the envy of the world all over. As much as the left wants a post-America era, it refuses to happen.

But many on the left insist America is dumbing down, especially compared to other nations, but the empirical evidence contradicts this.

If America is ‘dumbed-down’, then many other countries are even worse. In the global IQ ranking, America ranks pretty high (#18). Because of its high population and high-IQ, America has more intellectuals than any country. And this is with a sizable Hispanic and African American population, two groups that to tend to perform poorly on SAT and IQ tests. Canada and Norway, both predominately white countries, differ from America by only a single IQ point. There are two possible explanations: thanks to rigorous public schooling and the growing socioeconomic premium on high intelligence, American whites are smarter than whites anywhere else; or secondly, due to the growing population of high-scoring Asian Americans. However you choose to interpret it, this is promising for America’s future as an economic and intellectual superpower.

As more evidence America is one of the most intellectual nations in the world with the most rigorous public schooling, here’s a passage from an article in The Atlantic documenting a father’s struggle to do her 13-year-old daughter’s homework for a week:

I have found, at both schools, that whenever I bring up the homework issue with teachers or administrators, their response is that they are required by the state to cover a certain amount of material. There are standardized tests, and everyone—students, teachers, schools—is being evaluated on those tests.

It takes him 3-5 hours each night to complete the assignments. So much for America dumbing down, as much as the liberals wish for it to happen or fear it happening.

As we’ve covered in our earlier series of articles on the smartest generation, more testing and a more rigorous curriculum means smarter and better informed students that later in life are less inclined to default to liberalism.

From Josh Brown of The Reformed Broker Crowdsourced Terror, Hyper-Competition and the Acceleration of Acceleration

Market share matters more than money in an environment where the only thing that counts is the valuation at which you can sell stock. Stock seems to sell quicker based on total addressable market (TAM) and your size within that market these days. The town car landgrab is old school – something from a time before time. The tactics and savagery are a throwback but the motivation behind it is thoroughly modern, an artifact of now. Uber is worth $20 billion dollars and it’s nowhere near any kind of public offering. How can this be, the company was only founded in 2009? They’re in 200 cities across more than 40 countries. They claim the ability to offer a ride to 43 percent of Americans within 8 seconds. That’s how this can be. Overnight.

Agree. It’s amazing, but completely rational how Uber is such a valuable company. As we’re said before, in today’s hyper-meritocracy, anyone with a good idea and some coding can be a billionaire in a couple years. When people say capitalism is dead or American is in decline, I tell them about the overnight web 2.0 success stories or about the stock market, private equity and real estate. It’s not that capitalism is dead, you’re either not smart enough to participate or stuck in a rut. Stop blaming outside forces; blame yourself. People want to believe in things that confirm their biases while ignoring countervailing data. They want to believe the economy is weak because wages are not going up fast enough and too many people are out of work, that the market is rigged because of QE, or that they cannot conceive how America is doing so well when the doom and gloom media is blaring bad news 24-7.

The QE argument is refuted by the fact:

Small & medium size lending is well-off the pre-2008 highs. QE was intended to increase such activity, so QE is not overheating the economy as many feared it would.

The fed is tapering and will likely finish the purchasing program by the end of 2014. Stocks have posted strong gains since May 2013, when tapering was first announced; treasuries are mostly unchanged.

The recent falling yields is due to trouble in Europe and the flight to safety trade, not the fed. Europe is having a QE effect on America.

A major reason why stocks are rising is because of improving economic fundamentals as measured by record profits & earnings, consumer spending, exports and consumer credit as well as stock buyback programs and mergers.

Uber will be worth up to $140 billion before the IPO. I’ll add, as we’re written before, the future of America is much like today but to the extreme. So whatever trend is existing now, such as rising healthcare, textbooks and tuition costs, will be amplified. Wealth inequality will keep widening. The wage premium on high-IQ and college degrees will keep increasing. The labor market will become more competitive. Web 2.0 valuations, along with Bay Area real estate and treasuries, will keep going up. Stocks will keep rising with no bear market. We’re in a greater-moderation of no downturns and monotonically increasing growth, which will continue for what will seem like forever. Policy makers have conquered the business cycle; they have conquered the rate hike; and they have conquered the bear market. Next comes the type 1 civilization transition, the singularity, a theory of everything, mind uploading, a halo ring that will encircle the earth, space colonies, a matrix, and much more. But back the present, don’t get your hopes up, liberals, that there will be some sort of 2008-like crisis to reset the new world order to a more egalitarian state. Not going to happen.

2-year stock targets: Dow: 20,000; S&P 500: 2,600; Facebook: $140; Google: $800 (combined $1600); Tesla: $600; Amazon: $400.

Predicting foreign matters is harder. Just assume if things get out of hand in the Middle East there will be boots on the ground, especially under Clinton or, hopefully, if the republicans can control all three branches of government with a super-majority. The later would be the best for the economy and national security, and Wall Street would rejoice under such circumstances, sending stocks much higher.

In the post-2008 world, there hasn’t been a better time in history to be smart and or rich. Whether it’s in stocks, real estate, web 2.0, finance, and coding, smart people are making all the gains in this protracted economic and wealth creation boom. This trend will continue for decades to come, of smart people rising to the top and less intelligent people being pushed to the margins.

A dissenting view from iSteve:

Chinese students also seem rather adept at cheating. Boo hoo hoo the Chinese are stigmatized. We don’t need more multiculturalism or HBD nerdery that supposes ethnicity and background are meaningless as long as the group in question is well-represented at LAN parties and anime conventions.

This is an example of favoritism and no different than liberals using quotas against whites except it’s quotas against well-qualified foreigners. Part of HBD, in contrast to politics, is about celebrating innate talent, exceptionalism and skill of the individual in contrast to the forces of collective leveling.

To quote Mortimer Zuckerman of U.S. News and World Report (emphasis mine), “God is not necessarily an American. National success in the international marketplace today turns more and more on human creative power, highly educated and motivated workers, organizational talent and capital investment – and these we have been neglecting.”

In the context of post-2008 American exceptionalism and pro-growth policy, the lesson of the 2008 financial problem is we need to have systems in place to stem crisis as soon as it arises instead of letting key institutions fail, and secondly, let’s stop instigating class warfare against bankers, traders and other economically valuable people. These financial instruments, while hard to understand and occasionally prone to blowing up, are important in ways that are hard to describe, but take my word on it. It’s like what Steven Pinker would say: the left would rather have society regress than risk creative destruction. Let’s stop attacking the wealth creators and instead find ways to control entitlement spending. In the events leading up to the financial problem of 2008, mistakes were made and things got out of control, but mistakes and bad luck are not fraud, which is the crux of Megan McArdle’s argument and others. In attacking the bailouts and crony capitalism, the libs think they are defending the tax payer, but many tax payers such as myself supported the bank bailouts because they created economic value. Second, income taxes went up in 2013 due to Obama’s inability to compromise, not out of economic necessity.

From web 2.0, Tesla, and Uber to breakthroughs in physics – all in just the past few years – we’re witnessing a flouring of knowledge and wealth creation like never seen before. As a rational optimist, there’s a lot to be optimistic about.