Monthly Archives: April 2014

The Day That Died: The Worst of Business Journalism

It’s a sad statement about business journalism that in just a single day we found five articles that were too idiotic to ignore. Here they are:

1. Inc Magazine: The Only Way to Get Really, Really Rich

Yet your downside is always unlimited because getting fired or laid off can make your income disappear overnight–and with it the considerable investments you’ve made in time, effort, dedication, and sacrifice.

Extremely limited upside. Unlimited downside.

That’s a terrible investment.

This is the worst article I have ever read. When you get fired you KEEP all the money you made until then plus whatever exit package you may get (and this can be huge for some positions because companies will sometimes pay inordinate amounts of money to force ppl to leave). Unlimited downside means you lose what money you put in. Technically an employee puts only his time and effort, not money.

2. vox.com: Inequality doesn’t help the economy grow

Matthew Yglesias is confusing cause and effect. Inequality is a byproduct of any advanced, growing economy. We discuss this in more detail here. He says “the present highly inegalitarian distribution of economic resources is highly inefficient and makes it inordinately difficult to solve serious problems”, but be never offers any actual empirical evidence that it’s actually inefficient or defines efficiency. He just assumes the reader will take his word on it. He mentions “misallocation” but ignores surging entitlement spending. If anything, we’re allocating too many resources, not too few.

3. Do They Owe Us A Living? 7 Reasons The Universal Basic Income Is Worth Fighting For

This analysis of the universal basic icome (UBI) ignores the obvious pitfalls.

  1. what about the millions of people that go to work? Are they all failing? How does replacing wages with a UBI fix wages if the UBI provides less income than wages?

    Maybe the UBI could supplement wages is what he meant.

  2. Agree, but that isn’t necessarily an endorsement for a UBI. It’s just an economic truism.
  3. Tautological. That’s why it’s called a UBI.
  4. Depends on how big it is. Entitlements are at historic highs adjusted for inflation. A UBI combined with existing entitlements would balloon the deficit.
  5. No it isn’t. No country has enacted it, but the surge in entitlement is almost like having a UBI
  6. Until existing entitlements are addressed, a UBI isn’t remotely feasible. We discuss in further detail.

4. Confronting the U.S. economic slump

Mohamed El-Erian a.k.a. Jar-Jar Binks, upon being fired from Pimco, is now writing for Bloomberg. What slump? Has Jar-Jar actually checked the numbers or is he just making shit up again? Let’s see… record high profits and earnings for five years and a row. Record high consumer spending and exports. GDP growth that has returned to pre-2008 levels. Is it any surprise he got fired for writing garbage like his? Back to Naboo for you.

5. Silicon Valley firms accused of hiring conspiracy

This is not so much as an indictment on the article, but on allegations of collusion. The hiring conspiracy has no merit in court. How do you define a ‘talented employee’ versus an employee like, say, the janitor and how do you prove his income opportunities were limited by collusion? You cannot.

A Nation of Crybabies

When the left is not predicting doom, they are pointing fingers – common targets being the fed, the rich, Washington and ‘greedy’ employers that refuse to pay their employees a ‘livable wage’ for the job of inquiring patrons about wanting fries to go with their burger. They hate success and America’s exceptionalism, so anything
that makes the rich lose money – crisis, recession, taxes, regulation, and raising interest rates – they anticipate and instigate with glee. We’re becoming a nation of crybabies, deriving enjoyment from failure instead of success, spreading wealth instead of creating it.

The left is always predicting doom and gloom because they have little faith in humanity. Without their maternal welfare state and our fealty, the world is doomed. Their belief in the stock market being a bubble and rigged, that humanity has become more violent, that IQ and SAT scores are meaningless, or that the U.S. economy is weak or still in a recession is a reflection of their own biases and divorced of the reality they willingly choose to deny.

We recommend voting for Jeb Bush because he supports the the trio of conservatism: free markets, low taxes, and defense spending. While Mitt Romney won over independents with his moving story of being unemployed and his private sector experience, we look forward to hearing Jeb’s own narrative throughout the campaign- that is assuming he runs. His stance on immigration is controversial, but he understands a free market shouldn’t limit its labor options. The left wants protectionism and all the welfare program to themselves, and although we do need better border control, we should increase the h-1b visa cap to skilled immigrants. Maybe Facebook stock would be higher if tech wages were lower. According to Milton Friedman, “The Social Responsibility of Business is to Increase its Profits”. Everyone benefits when wages aren’t too high. Low wages benefits Walmart shareholders with bigger profit margins and cheaper goods benefit consumers.

From http://www.commondreams.org/headline/2014/04/18-8?

As we go forward, according to Krugman, Piketty’s thesis says that even though inequality is already a huge problem, it’s going to get even worse. “Unless something gets better,” he explains, “we’re going to look back nostalgically on the early 21st century when you could still at least have the pretense that the wealthy actually earned their wealth. And, you know, by the year 2030, it’ll all be inherited.”

Sounds like cry me a river. Just more blaming the 1% for everything. That is the best argument they can muster. No facts, just vague threats of upheaval and crisis if wealth doesn’t become more equal.

Again let’s turn to actual data. From http://www.chicagobooth.edu/capideas/magazine/summer-2013/billionaires-self-made

Most individuals on the Forbes 400 list did not inherit the family business but rather made their own fortune. Kaplan and Rauh found that 69 percent of those on the list in 2011 started their own business, compared with only 40 percent in 1982. In other words, there are fewer people on the Forbes 400 list who came from an affluent background and eventually took over the family business, such as brothers David and Charles Koch (Koch Industries) and the Walton siblings (Wal-Mart), and more self-made people such as Bill Gates (Microsoft), Warren Buffet (Berkshire Hathaway), Philip Knight (Nike), and Stephen Schwarzman (Blackstone Group), who had an upper middle-class upbringing and eventually built their own successful companies.

We can also add all those newly minted tech billionaires to the list of non-inherited wealth.

If the left wants to beleive America is in decline becase the wealth isn’t being distributed sufficiently fairly, so be it.

The Daily View: Inflation, Peter Schiff, and QE

Peter Schiff and Josh Barrow are right to varying degrees as to the cause of rising prices, but Peter Schiff is wrong about the solutions or the economic implications. Rising prices, including pain at the pump, helps the economy by increasing consumer spending which goes into GDP.

We have bifurcated inflation of greater than CPI inflation for inelastic goods like air travel, gasoline, heating energy, and the cable bill and less than CPI inflation for stuff where there are a lot of substitutes like electronics and apparel. The bond market alludes to nonexistent inflation, but some essentials have had huge real gains in prices like education and healthcare. Inflation for inelastic goods & services is due to a combination of speculation, fed policy, inelastic arbitrage, collusion, and booming economic growth. Business and tourism depends on travel, especially overseas travel where distances exceed thousands of miles. The alternatives to long distance flying are impractical, so the airlines know they have the consumers and businesses over a barrel and raise fares accordingly. Being a cartel, once one raises fares or fees, the rest will follow. That’s why airlines have been such good investment and why the some of the major carriers got bailed out after 911.

We predict this trend of bifurcated inflation to continue with no foreseeable end. We predict $4.5/gallon gas, $130 oil, nosebleed healthcare and tuition, $200/month internet & cable bills, etc. Everything that you use and rely on is going to get much more expensive relative to wages and the official inflation rate. Laptops, appliances and TVs will be cheap but the internet, water, electricity, and cable will be super expensive and poor quality. We predict more summer brownouts due to steadily growing U.S. population and strained, aging infrastructure.

From Scientific American

The grid’s shortcomings have been well-documented, but efforts to modernize it haven’t kept up with demand. Many electrical transmission lines are outdated, and parts of the grid date back to the time of Thomas Edison.

You know you’re a liberal if you underestimate the U.S. consumer, if you think everything is a crisis or a bubble, if you want the economy to ‘reset’ to a more ‘equitable’ state and if you would choose a bear market and massive wealth destruction over a painless bailout funded by free money. Peter Schiff is a liberal for all the aforementioned reasons, and because he doesn’t like the fed. He wants your assets to be destroyed in a big bear market and depression, so that living expenses for main street will fall. This is another form of ‘spreading the wealth around’, but not through taxation and regulation, but through wealth destruction. The outcome is classic Marxism: the richest individuals, especially those with assets like stocks and real estate, get poorer. For example, lets assume I have $1 million in stocks and real estate and Peter Schiff somehow forces the fed raises rates to 5%. The economy falls into a deep recession and my home and stocks lose 30% of their value. While I didn’t lose money due to taxes, the outcome is still bad: I’m $300,000 poorer. In the era of dyseconomics, we can have perpetually low interest rates and low taxes; there’s no need to raise either. The debt binge is sustainable and we don’t need to get our fiscal house in order. The problem with some republicans attacking the fed and deficits is that they are promoting policy that will destroy wealth.

Even though I’m a libertarian republican, I’ll concede fed policy, including quantitative easing (QE), has been a resounding success. People get rich because they create value (though creating a business for example) or by taking risk (buying a home, buying stocks). What’s wrong with economic policy like QE that helps people become rich? In keeping with the principles of supply side economics, the motivation behind fed policy is to create macro environments conducive to wealth creation.

QE is not money printing. It’s a transfer between fed reserves and the banks. This increases the fed reserves, but not the money supply. The idea is to push long term rates lower because short term rates are already at zero. QE creates incentives to invest & spend, instead of hording money, as well as sending a signal that the fed will not allow deflation, which helps boost confidence. This caricature of a poor elderly person living off his or her savings doesn’t exist; if such a person were poor he would have no savings to begin with, and secondly, those who do have a lot of money don’t just keep it in a savings account. They put it in bonds, stocks, and other higher yielding assets.

Paul Krugman Still An Idiot

Krugman on Bill Moyers

Sigh, another ‘us vs. them’ article to incite class warfare. Let’s look at the facts. While some CEOs do make 100x the average worker, these are extreme outliers; the average CEO pay for a small business is only $200-400k, or about 5-10% of the most extreme pay.

From http://chiefexecutive.net/how-much-does-the-average-ceo-really-earn

In 2011, the median private company CEO in our survey earned a total compensation package of $362,900. That is just 3.8 percent of the number reported as “typical” in the Associated Press study. For private companies with at least $1 billion in revenue, the median CEO compensation package totaled just under $1.7 million, which is still less than 18 percent of the AP figure.

No one is denying inequality exists. But there is no consensus among economists that inequality must lead to crisis.

From the NBER http://www.nber.org/papers/w17896

Data from 14 advanced countries between 1920 and 2000 suggest these are not general relationships. Credit booms heighten the probability of a banking crisis, but we find no evidence that a rise in top income shares leads to credit booms. Instead, low interest rates and economic expansions are the only two robust determinants of credit booms in our data set. Anecdotal evidence from US experience in the 1920s and in the years up to 2007 and from other countries does not support the inequality, credit, crisis nexus. Rather, it points back to a familiar boom-bust pattern of declines in interest rates, strong growth, rising credit, asset price booms and crises.

Krugman mentions that only old people on the Forbes 400 created their wealth. I suppose that includes the the founders of Facebook, Amazon, Whatsapp, Instagram, Google, Oracle, Microsoft, Cisco…a lot of octogenarians there. Same for those Russian oligarchs that made their wealth under Stalin’s capitalist friendly regime lol. Kugman got a his Nobel on something called ‘new trade theory’. It’s probably the only subject he can discuss at any length without sounding like an idiot.

Also rate of growth of capital isn’t homogeneous. A booming business like Walmart in the 70′s or Microsoft in the 80′s will have a high growth rate of capital but eventually it slows down to the overall growth of the economy, by virtue of the law of large numbers and diminishing returns to scale. Some businesses become stagnant, like home builders in the late 2000′s. So while the Walton family will get richer, they cannot become richer at a rate much faster than the economy unless Walmart expands its business by opening more stores or branching out into different areas of commerce, or Walmart gets more business attributable to a change in consumer preferences.

Robot Jobs For The Future

Noah Writes:

But if robots are to blame, then Piketty is right, and labor’s share will never bounce back…leaving some kind of radical redistribution as the only option for preventing mass human misery. That is not an outcome that conservatives would favor.

Is it really that bleak? Or are we just falling for the latest iteration of the Luddite and Lump of Labor fallacies?

We envision new human jobs involving:

1. building/assembling the robots
2. marketing the robots to prospective businesses
3. maintaining the robots/robot tech support
4. building the factory that will build the robots
5. building the materials/components that will comprise the robot
6. programming & designing the AI
7. robot educational courses, robot consulting, robot experts
8. robot insurance/litigation

Some of these jobs already exist but there will be more as robots continue to replace existing jobs. The point is, in a dynamic economy, the loss of one type of job doesn’t mean total employment has to fall. Technologies that supplant existing jobs can spawn new jobs related to the new technology. The benefit for society is higher economic growth, more productivity, and a higher standard of living. Twenty years ago, if you wanted to find a formula you had to go to a library and thumb through a bunch of books; now you can find it in a couple minutes with a Google search.

The solution is not to attack technology, but be patient for the new jobs to be created. For example, 30 years ago there were very few computer jobs and no internet jobs; now millions of people are employed in the information technology sector.

We’re Still In a Goldiocks Economy

We’re still in a Goldilocks economy of modest economic growth, no deflation and low inflation. Macro economic conditions are more conducive for stock market gains than any time in recent history. Unlike in any prior decade, we have a confluence of low valuations, high profit margins, new markets from booming foreign economies, and permanently low interest rates.

Our economy is nothing like it was in the 1970s. In the late ’70s, the misery index, measured by adding the inflation and unemployment rates together, was at sixteen percent. The last years of the 1970s saw inflation rates of 10 percent, with high interest rates as well. The Federal Reserve responded by raising interest rates in order to lower inflation. This backfired by plunging the economy into a recession in the early 80′s.

Today the economy is growing briskly, especially compared to Europe. Between the end of World War II and the beginning of the last recession, in 2007, economic growth in the U.S. averaged nearly 3 percent per year. Most of this was due to average labor productivity, which expanded at about 2 percent per year. In addition, the total number of hours worked also grew by one percent per year, in line with the overall growth in population. GDP growth is expected to settle at around two percent per year, or about the same as it was before 2008. The level of private debt, an indicator of business activity, is rising:

Interest rates and inflation are at some of their lowest rates in decades, due to the huge liquidity from governments and private institutions that is keeping rates lower than they would otherwise be. Despite unending criticism and predictions of hyper-inflationary doom & gloom, fed policy, in fact, has been very effective and isn’t making the mistake it made in the 80′s, 90′s or 2000′s of raising rates. It’s lowered interest rates because macro-economic conditions afford it the luxury of doing so, while dispelling any possibility of rates going up.

Instead of weak or collapsing corporate profits, as happened in the ’70s, corporate profits today are at all-time highs. Fortunately, real wage gains have stagnated since the late 1970s, providing a tailwind to economic growth. We’re becoming more productive, but the benefits of this productivity aren’t going back to the bulk of the population.

In the 1970s there was a bipartisan effort to deregulate markets ranging from transportation to finance to energy that was continued by Reagan, Clinton and Bush. Looking back, too big to fail policy has worked. Instead of growth sucking regulation, the solution is to have systems in place to nip crisis in bud, as was demonstrated with the overwhelming success of TARP or the bailout of Long Term Capital Management. When used to promote pro-growth policy, corporate welfare is better than regular welfare. Look at the success of TARP, tesla, and defense spending, for example. Liberalism is the problem, not crony capitalism.

In what has been called the web 2.0 stimulus, billions of dollars are flowing into high-end real estate and other luxuries. Unlike the failed Obama stimulus, this was borne out of the private sector. Industries that a decade ago didn’t exist are being created to serve the New Rich. Everything is wonderful – a cornucopia of wealth creation, prosperity, innovation, and being smart. The left said in 2008 there would be a permanent economic downshift – well, maybe in their own little world of negativity, but certainly not in Silicon Valley or the broader economy.

The Daily View 4/16/2014

The SF Housing Crisis

It’s only a housing crisis because the left says it is, just like we’re still supposed to be an economic crisis even though that ended five years ago. The left is drawn to crisis like moths to light. If no actual crisis exists, they’ll fabricate one. Rents keep going up due to huge demand and finite supply; it’s that simple.

Banks fiddled while Rome burned: how to predict the next global financial crisis

Anyone that rushes out to bet against America upon reading this article will be taken to the cleaners. There have only been two U.S. banking crisis in the past 100 years (1929, 2008). The odds are heavily stacked against another crisis. Major financial institutions have record high reserves, revenues, profits and much tighter lending standards. Stocks keep going up. Stocks are still inexpensive, with the S&P 500 PE ratio still just fifteen versus the high thirties at the turn of the millennium.

US retail sales rose 1.1% in March vs. 0.8% estimate

But isn’t the consumer supposed to be maxed out, says the left? How is this possible? Where is the double dip recession the left promised? lol Here is the chart that destroys the liberal thesis that rising inequality is bad for the economy:

In their war against the consumer, the left is trying to fan the flames of class warfare and spread lies about the economy being weak, to scare consumers into staying home and not spending.

The American Oligarchy

If America were more democratic and our politicians were more receptive to the interests of the people, the economy would be weaker and we wouldn’t have had such a strong post-2008 recovery, while more egalitarian countries like the EU have had slower recoveries and civil uprisings. As Carlin said, imagine your average person and think half are dumber than him. The wants of the majority isn’t always what’s best for the economy/country. The one percent contribute more to the economy in terms of consumer spending, job creation and innovation than everyone else, so perhaps it’s only fair that the are first in line in the economic recovery and that their interests are represented in Washington over everyone else.

Changing Your Password Won’t Fix The Heart Bleed Bug

The fact stocks keep going up means that the economic impact is insignificant, despite all the hype. Every week the left takes a problem and blows it up into a crisis. While millions of sites may be affected, only a tiny percent of them use the Open SSL for sensitive data. The majority of sites use SSL when it’s not needed.

Government suspends controversial program to recover money from adult children of dead taxpayers

If Biden says paying taxes is patriotic does that mean half the country isn’t patriotic?

Stocks keep going up

Five years later and we’re still in a bull market and an economic boom. The economy is still fundamentally sound as measured by important indicators such as consumer spending, retail sales, exports, private sector job creation, and S&P 500 profits and earnings. People are making more money than ever with little work. Never more in human history have the economic and social benefits of being smart been so great, or the consequences of not being smart been so grave and intractable. This will not end badly. America has problems, but we’re not in decline. We’re not Rome, Greece or the Weimar Republic, as much as the left wishes we were.

Gender Pay Gap Much Ado About Nothing

The gender pay gap just another made-up crisis by the left. If women were as valuable as men in the workplace it would be reflected in the pay. The free market as indicated by the pay gap shows otherwise. Women are less productive, take longer to train, take more time off, come to work later, leave earlier, etc. If women want to be treated equal to men make them pay child support, for starters.

Kathleen Sebelius to Resign as Health Secretary

Cant blame her for leaving. Obama’s cabinet has the highest attrition rate of any president in history. He pretty much uses these pawns as scapegoats for his failure. Nixon fired his cabinet, but the difference here is that Obama’s cabinet is choosing to leave, because it’s so awful working for him. Out of the 7.1 million signups, how many will actually get insurance?

Out of Control Entitlement Spending

Losing Benefits Isn’t Prodding Unemployed Back to Work

No kidding

Where is the incentive to work when you have:

1. rising welfare benefits
2. social security
3. medicare
4. free emergency room healthcare

Entitlement spending is out of control

and

Entitlement spending per capita has increased as the percentage of not filing income taxes has risen

Does left secretly want another recession to extend unemployment benefits? Probably. A good bi-partisan compromise would be to raise the sales tax and enact some sort of entitlement reform, like delayed social security, increased means testing for welfare or chained-CPI benefits.

A Solution in Need of a Problem

Robert Shiller Actually Has A Solution Exploding US Inequality

He’s contriving a solution for a non-existent problem.

If we wait until income inequality is much more severe, we will have a whole class of new superrich who will probably feel entitled to their wealth and will have the means to defend their interest. That’s already gone far enough. We shouldn’t let it become more extreme.

They are entitled to their wealth in the same way you’re entitled to your vapid opinion. Does having a nobel prize make you the arbiter of how much wealth is fair, or how it should be appropriated? Good intentions is the alibi of evil. Wealth inequality is here to stay, but there’s nothing we can or should do about it, nor does it pose a threat to the economy. The left wishes it did but, again, there is no empirical evidence it does. Shiller’s opinions reflect his own wishful thinking about how the economy should run in his warped leftist world versus how it actually does. The yearning for crisis and an overseer that will mitigate the crisis by spreading wealth is a fantasy of the left.

Liberal Denial of Genetic Determinism

On sites like iSteve there recently seems to be a dearth of subjects pertaining to HBD matters. Chateau Heartiste writes:

Drum deserves credit for at least broaching the subject of genetic predilection, which still gives the majority of liberals the high holy hives. Try dropping a “genes n’ IQ” bomb on a Jon Stewart audience member and you will witness a shrill sanctimony unmatched by the most religious fundamentalists. Drum is right about one thing: plain and simple, genetic dumb luck accounts for a lot of who we are and how successful our lives are. And it goes beyond just IQ and nose shape, too. There is evidence that genes influence everything from political leanings to conscientiousness to ambition to impulsiveness.

Agree. Genetic determinism makes liberals uncomfortable because it renders their paternalist ideology moot. If some people are inherently superior to others at cognitive tasks, no amount of costly social or redistribution programs will level the playing the field. Also agree with this comment:

It’s not taboo to profess that genetics play a role in the variance of athletic ability but not intelligence, probably because the later is superseding the former in terms of important things like employment, income, reverence, etc. There are increasingly few jobs where physical ability plays a role in the hiring process, and the jobs that do typically don’t pay well. In the smartist era, people are looking up to scientists and other intellectual professions more than athletes or actors. Educated young adults on sites like Reddit are renouncing the propaganda of false hope and inflated self-esteem driven in by their liberal baby boomer politicians, parents, and teachers that was intended to mollify the harsh realities of the real world. Scientists and economists, on the other hand, are untethered by political correctness and freely speak their minds on a wide variety of issues, proposing solutions and theories that many on the left take umbrage to, but inquisitive young minds consume voraciously. A recent ‘ask me anything’ (AMA) by astrophysicist Neil Degrasse Tyson got a staggering 4,000 comments in just a single hour. The typical AMA by an actor or athlete seldom exceeds this number. Economist Bryan Caplan got over 1,100 comments and I didn’t even know who he was until I came across this thread, by accident. The highest rated TV show has a Cal Tech string theorist as the main protagonist.

Bryan Caplan has propossed that parenting style has very little impact on the adult outcomes of children. That would mean genetics plays an important role. From cracked.com:

Just as with money, there is evidence that genes have an effect on grades. In 2013, British researchers studied the academic performance of more than 11,000 identical and non-identical 16-year-old twins. They found that genes contributed more to students’ grades than teachers, schools, or family environments. These findings have been repeated in other studies, as well as on the 1980s television program Diff’rent Strokes, where Willis sometimes struggled with his grades even though he and his brother Arnold had been adopted by a wealthy Manhattan industrialist.

An analysis of Korean-American adoptees found that being raised by a college-educated mother increased an adoptee’s probability of graduating from college by 7 percent. By comparison, a child with a college-educated biological mother had a 26 percent increase in the probability of graduating from college. It didn’t matter if the adoptive parents were rich or educated.

Shhh…don’t tell Wendy Davis lol

Pseudo/junk science like the 10,000 hour rule gives the masses hope that they too can covet enviable skills that are otherwise intellectually out of reach -if only one deliberately practices enough on an unrealistically level playing field. There many exceptions to the 10,000 hour rule, as well as other liberal aphorisms intended to have a leveling effect on individual exceptionalism.