Monthly Archives: May 2014

Reclaiming The White House With Pro-Growth Policy

Economist Morici: Obama Destroying Americans’ Faith in the Country

The GOP should return to be being the party of growth and optimism, says expert. “We need to stop obsessing about the fed and deficit and focus our attention to the most successful policies of past victories: defense spending, tax cuts and free market capitalism.” We have a liberalism problem, not a debt problem. With treasury yields at historic lows, the US. is paying less interest on its debt than ever before. Meanwhile, the U.S. dollar continues to rise above its peers, indicating continued demand for our currency. In much the same way the liberals deny American exceptionalism, the GOP must not go down that path by denying the exceptionalisn of our currency or our economy and spreading unnecessary fear about the debt. The national debt did indeed rise under Reagan, but Reaganomics was a resounding success. The deficit also grew under George W. Bush, whose tax cuts provided an economic tailwind as well as helped soften the blow of the 2008 banking problem, the war on terror and dept. of homeland security that has kept us safe, the appointment of Bernanke and Petraeus who both did a good job, and the bank bailout that quickly ended the banking problem.

Bush forged diplomatic and trade relations while at the same time taking a hard stand against terror, whereas Obama is making America look weak and our allies wary through his inaction and appeasement. Bush made a lot of decisions that were initially unpopular, such as the surge and bank bailouts, but in retrospect were overwhelmingly successful.

Foreign leaders know Obama is a feckless pushover as treat him as such, whereas Bush commanded respect, even if he wasn’t as ‘well-liked’. Not surprisingly, Putin was undeterred by Obama’s shrill threats of sanctions. Obama lied about Benghazi, calling it an act of terror instead of what it really was: terrorism by Islamic terrorists.

At just 41%, Obama’s approval rating is at record lows; no doubt, his recent little league traffic jam won’t help either and demonstrates what John Kerry learned the hard way during the 2004 election: if you’re uncool, pretending to be cool and relatable will only backfire. When Bush played golf, rode his bike, and joked, we the American people, could relate because not only was he an effective president, but he wasn’t trying to be someone he wasn’t. Obama, on the other hand, is too cerebral, too pedantic, and worst of all, a terrible president.

We predict within the next two years, a sudden surge in gas prices and oil an an large uptick in unemployment will put the final nail in the coffin for this administration and his successor. The stock market will rally hard in anticipation of major losses for the democrats, with the dow possibly eclipsing 20,000.

Instead of attacking the fed or spreading undue fear about the debt being too high, the GOP should pledge to lower taxes, champion pro-growth economic policy, and go after runaway entitlement spending and abuse of social programs, as evidenced by the swelling disability enrollment.

Some Thoughts on Capital and Risk

From Ashok Rao’s Inequality of Returns and Reinvestment Opportunity:

– the only real source of long-run returns – is far more skewed than that of wealth ownership. The bottom 95% own all of their wealth in two forms:

Explicitly: Home ownership which forces saving over a period of thirty years.
Implicitly: Social security which acts as a claim on America’s future GDP.

Each of these are invested in low-return (real estate and government bonds, respectively) securities. Diminishing marginal returns for the many are real. But if you’re a billionaire, you have access to the stock market, cleverly managed funds and, most importantly, the right information to make the right investments. One can reach the same conclusion as Piketty when wealth accessible to the broad middle-class is consumed and does face diminishing returns whereas that available to a percent reaching escape velocity does not.

The growth of capital tends to be very uneven and volatile whereas economic growth is more smooth. The rich that own stocks and real estate take enormous risk in exchange for more upside. I keep seeing this ‘use it or lose it argument’ to tax the rich more. The super rich don’t consume in terms of trinkets and vacations, but they tend to invest. The later is necessary for functioning of the economy. But this has higher risk in exchange for higher return.

Vince McMahon’s WWE stock fell nearly 50% last week, meaning he’s no longer a billionaire. The left can rejoince – another oligarch thwarted. But wait- isn’t Pickety’s solution a wealth tax?. How is this possible for someone to lose so much money, unless of course, capital isn’t always monotonically growing, but instead is very volatile and subject to market forces, which is why Vince and many former millionaires and billionaires have seen thier fortunes evaporate, in refutation of Pickety’s warnings of an unshakable oligarchy.

The expected value of capital may be higher, but the idiosyncratic or company specific risk is higher, too. Thus, out of 100 capitalists, all but maybe 10 will go bust even though the expected return on capital is higher than growth. Or a winner take all system. This is because there is a lot of variance in returns to capital as opposed to things like wages and money market accounts.

When a company goes bust, who is on the top of the pecking order in terms of being covered: the workers, the bond holders or the shareholders? The worker, of course. He gets paid first in full, without fail. The owners of capital – the shareholders and bondholders- shoulder all of the loss and maybe get pennies on the dollar, if they are lucky. This happens all the time. The point is, capital has huge risks and huge volatility.

Also, about those special funds available only to high net-worth individuals, after fees, they actually underperform the S&P 500 most of the time. Sometimes they fail, too.

Taleb Loses Debate, Blames His Opponent

Nassim Taleb Debated Larry Summers Last Week, And He Is NOT Happy With How Summers Behaved


derr risks..derr risks..derr didn’t know derr risk..derrr..derrr

ROFL cry me a river. Did the liberal Nicolas Nassim Taleb lose his temper once again, in addition to his debate with the redoubtable Larry Summers? Is that why he’s always mad, to compensate for being wrong all the time? lol His only retort is to call ‘bullshit’ when facts, tactfullness, and reason cannot suffice. As some may recall, a couple years ago he notably got his butt handed to him by the intellectually superior Steven Pinker.

“I was fighting with a bully,” Taleb said of Summers’ performance, later adding, “It’s very strange for a Harvard professor to act like a cheap politician.”

No, according to the audience you were losing. And rather than take it like a man, you are a petulant sore loser.

In the debate, he maintained that ‘too big to fail’ is still very much a reality, that bankers were never punished for their recklessness and as such will remain reckless.

Too big to fail policy was a resourding success, lib. By 2011, the treasury reported a profit. Six years later, and financial conditions couldn’t be better in terms of record reserves at major financial institutions, record high stock prices, record profits & earnings, etc. Bush, Paulson, Bernanke, and Geithner are the unsung heroes of this unending economic and stock market boom, all thanks to TARP. TARP indirectly created trillions of dollars in wealth through the 140%+ percent rally in stocks, the web 2.0 boom, the real estate boom, the economic boom, etc. Even Warren Buffet knows TARP was a success. Funny how such a successful program is so unpopular, compared to, say, social security which is projected to be insolvent in a few decades. Also, Taleb never answers how long banks shoud bear the consequences of recieving federal money, even after they have reformed.

From the intro page, we continue:

We believe in policy that creates wealth, which is why we support the federal reserve, quantitative easing, and limited crony capitalism yet oppose entitlement spending. We’re also rapacious capitalists, supporting individual freedom to create wealth under a free market. How do we reconcile support of bank bailouts and free market capitalism? Bank bailouts and defense spending, for example, represent an optimal allocation of wealth. Through the $750 billion TARP bailout, trillions of dollars were indirectly created through gains in stocks market, businesses expansion, and real estate. If the GOP is supposed to be a party of wealth creation, it behooves it to support policy that creates wealth, like the bailouts and quantitative easing. TARP ended the crisis and got things running smoothly again so that the healthier sectors of the economy, like retail and technology and would no longer sustain the collateral damage of the ailing financial sector. The irony is that TARP helped the free market thrive by quickly ending the crisis; just six months after its passage the market marked a bottom and hasn’t looked back since. QE further helped create an environment conductive for growth after traditional monetary policy measures had been used.

However the world isn’t perfect and like it or not governments intervene in crisis. They did in 2008 and will again in the future. We are lucky to have Larry otherwise things would be a lot worse.

quoted for truth

Funny how someone who wrote Antifragile could have such a fragile ego

Extraversion and IQ

In response to Steve Hsu’s article Life impacts of personality and intelligence, Lion responds:

The evidence here is that unless people with top 1% math ability can use that to get a prestigious degree which can then enable them to get hired into a prestigious career track, they won’t make much more money than any average person, and will probably make less than someone with average intelligence but who is extraverted and mean. Although people with high math ability create more value, their value is transferred to extraverted and agressive people who get paid more money as salesmen or as higher-level management.

The world of sales isn’t like that Chris Farley and David Spade comedy. Those days are long gone. Sales people don’t make much money compared to engineers, and commission sales is one of the most grueling, difficult jobs ever, both psychologically and sometimes physically in terms of traveling and having to confront people that want nothing to do with what you’re selling.

The evidence, both anecdotal and statically, suggests Steve Hsu is right.

Let’s look at the data. According to indeed.com, a salesperson makes on average $50k a year. But a high-IQ profession such as a quant makes $130k. A programmer makes $80k. A systems analyst makes $73k. I rest my case.

Extraversion is useful when inquiring patrons about wanting fries with their burger or if they would like to upgrade to a grande coffee instead of the normal size. But in terms of getting rich, having superior cognitive ability is a worthwhile tradeoff for less extroversion. Society thinks so, too, and that’s why as much as the left wants to brand EQ as being more important than IQ, no one outside of the sphere of the cognitive dissident left is buying it. The liberals, the party of ‘science and reason’ as embodied by the ‘stoic coolness’ of John Stewart, become histrionic, hand-waving creationists when confronted with uncomfortable subjects that contradict their distorted worldview, such as race and IQ.

Being smart is better. Look around you – the people making all the money and getting notoriety, whether it’s in business, on Wall St., in technology, in the entertainment business, the people buying stocks and scooping up Bay Area homes, journalists like Ross Douthat, etc – all have at least above average IQs.

But those with only average ability have, in large, seen their real wages stagnate and job prospects shrivel up, while the wages for smarty professions such as programming, physics, and quantitative finance have surged since 2008. The average live on a knife’s edge of being unemployed and or getting a major illness and losing it all, and nothing can really be done about it because policy makers don’t really care and we’re powerless to change these tectonic economic forces that control our lives. Even stranger, this trend is a byproduct of an economy running optimally, which could explain why many politicians and economists appear indifferent, because to interfere with the free market is to meddle with evolution. The left says that if the middle class fails to participate in the recovery the economy could fail, but the data like five years of blowout profits & earnings and record high consumer spending suggests otherwise. This doesn’t make sense to many people, but that’s why this blog exists to help explain it.

Eight Things About The Market That Don’t Worry Me

Much Ado About Nothing

Joshua M. Brown lists eight alleged concerns for the market. Usually he’s right, for example, being bullish in 2012, but he’s wrong here. Most of these items are either not a big deal or paradoxically bullish for equities. When something is supposed to be a big deal, 99% of the time it isn’t. Greece, Crimea, Russia, the debt ceiling, the fiscal cliff, stress tests, the sequester, the S&P debt downgrade, JP Morgan’s trading blunder and Bank of America’s math error were all supposed to be a big deal, but the market quickly brushed them off after the initial panic. No one Wall St. cares about pain at the pump, rising wealth inequality, or student loan debt being to high, either. Banks can’t pay dividends? Not a big deal. They’ll pay em’ later. So let’s go through them.

1. Collapsing home builder stocks and fading real estate data.

Not a big deal because: home builder stocks are a tiny percentage of the overall economy and the S&P 500; second, they have already had a huge rally since 2009 and are overbought. From bipartisanpolicy.org, the housing industry’s share of GDP stands at 2.2 percent, 2.3 percent below its 1980-2007 average of 4.5 percent. ‘Fading real estate data’ is a very vague statement. Most importantly, prices, especially in high income areas, keep going up. So we’re not sure what data he’s looking at. Construction, permits, starts, etc just are not a big deal, despite all the media attention they get. There’s already a huge housing glut from the last boom. The last thing we need are more homes. To say they will bring down the economy is like the tail wagging the dog.

But what about 2008? Didn’t bankers and housing cause the crash?

The markets have always been volatile. It fell 50% in 2000-2002, 50% in the early 70′s and 30% in the late 80′s. The banking problem caused a lot of people to lose money, including the rich, but in the early 2000′s crash it was over-valuation and 911 and then earlier it was for unknown reason. In the equity markets, it pays to hold. Those who held the S&P 500 through the bear market would have 30% more money now than they did in 2007. If you include the dividends it’s more.

The bankers made mistakes but we have no way of knowing how much of the decline was attributable to banking and how much was due to other factors, like panic selling and emerging market weakness. Google stock fell 50% even though the management reported no impact from the banking problem, so it would seem the panic that began in the financial sector spread everywhere. Sometimes there are events that can precipitate a crash, that later metastasizes to the entire market, and then people make the mistake of expecting a repeat of that same initial event to cause another crash when there’s no way of making that inference. Softness in the housing market doesn’t imply we will have a relapse of the 2008 crash.

2. A US dollar on the verge of ripping to the upside.

A surging dollar could hurt multinationals, but since 2009, the dollar has been strong and it hasn’t yet had negative effect on earnings. A rising dollar and falling yields lessens the debt burden and signals global confidence in our government, currency, and economy as a safe haven in a world of strife and uncertainty. Again, just not a big concern.

3. Treasury bonds refusing to back down, nudging their way higher daily.

As we wrote numerous times, the world is awash with liquidity. Yields are falling not because the U.S. economy is weak, but because there’s just so much liquidity that it has to go somewhere, including treasuries. Anytime there is a tiny panic like in Europe or Russia, a so-so job number, or a hiccup in the market, people POUR money into treasuries. They just cannot get enough of our debt, as much as the left wishes we did have a debt crisis. For example, Belgium has purchased $380 billion of US treasuries since the start of the taper. This trend will continue.

4. A deteriorating number of new highs for individual stocks as the indices flirt with record levels.

Crappy companies with shallow moats, weak earnings, excessive valuations are being sold while quality like Visa, Mastercard and Johnson & Johnson keep going up. 2014 has been a year characterized as a flight to quality, and what’s wrong with investors wanting quality over junk? This is part of our bigger is better thesis. Just not a big deal.

5. Influential managers who’ve been bullish for most of the rally starting to turn cautious (Einhorn, Cooperman, Tepper, etc)

Again, not a big deal. There’s a statistic that shows 50% of expert predictions are wrong. Being cautious is not the same as being bearish. What they are doing is trying to hedge their reputation while still not selling stock, so in the very unlikely event the market does fall a lot, they can say ‘we told you so..’

6. Stalling earnings growth.

From minyanville.com, in the most recent quarter, 75% of companies beat earnings estimates, slightly above the four-year average of 73%. 88 companies issued Q2 guidance, with 62 of it negative. The 71% negative ratio is actually a slight improvement from recent quarters when it was north of 80%. Speaking of that 80%, the stock market still posted huge gains. What we can infer is that earnings estimates and stock market performance is weakly or negativity correlated. Typically, stocks do best when expectations are low and poorly when they are too high. Furthermore, stocks can still rise when earnings are weak, simply because some earnings growth, however little, is still better than none.

7. Defensive stock leadership

This is part of the flight to quality. People are realizing bigger is better.

8. Huge divergence between small caps and large caps.

Over five years since the market bottom in 2009, we’re still emphatically optimistic about the prospects of the U.S. economy and the stock market. We predict considerable upside for the market for the foreseeable future with, as expected, small hiccups along the way that should be treated as buying opportunities. The market is cyclical in nature. Sometimes defensive stocks lag, other times they lead. Sometimes bonds are weak, or they rally. Predicting the cycles for individual sectors, individual stocks and components of the economy is harder and less productive than looking at the broader picture.

The data such a consumer spending at a historical high and record high S&P 500 profits & earnings suggests that the economy is anything but weak. Sometimes, the gains in an economic expansion will be uneven, but doesn’t mean we can generalize that the entire economy is weak. The rich generally participate first in the recovery because they own investments like stocks and those tend to rise before the recovery is reflected in other data – also known as hysteresis.

An Indebted Generation

From the WSJ: Congratulations to Class of 2014, Most Indebted Ever

As we wrote yeterday, although a college degree is an important factor for lifetime success, not everyone is suited for higher education. Misguided policy by well-intentioned individuals has encumbered millions of low-aptitude students with debt and little hope of graduating.

The problem developing is that earnings and debt aren’t moving in the same direction. From 2005 to 2012, average student loan debt has jumped 35%, adjusting for inflation, while the median salary has actually dropped by 2.2%. If that continues debt burdens could start to become more unwieldy.

A solution is for more students to major in higher paying STEM fields, to attend a prestigious college, for colleges to raise the SAT score threshold for admittance, and for counselors to give more realistic, pragmatic advice for high school students, such as encouraging to go to a trade school if they are not cut out for college. The problem is the conflict of interest because most non-elite colleges just want tuition, not necessarily the best students. The result is a lot of dull or unmotivated students are admitted, they rack up a lot of debt , and then drop out. Another solution we proposed is to replace costly diplomas with cheaper cognitive testing to screen qualified applicants.

Getting Rich in The Smartist Era

rom Business Insider If You Invested In Apple Stock, Gold, Or A Bay Area Home In 2012, This Would Be Your Return Today

The winner is Bay Area homes followed by the S&P 500

This agrees with our earlier commentary. In the smartist era – an era of unending wealth creation and prosperity – people are getting rich not through getting a traditional job, saving for retirement or small business, but by speculating in high-end real estate, buying stocks, attaining a position of power such as being the CEO of a multinational, and web 2.0. Wealth is created by taking risks, creating apps that go viral, being smart and having good ideas. Cheaper is not better, as already expensive Bay Area homes have gotten MORE expensive at a rate faster than cheaper homes.

The Smartist Era

IQ, race/HBD (human bio-diversity), economics, and education. These ‘four horsemen’ are indispensable, inseparable, inescapable and are more relevant than ever in the 21st century. For example, trying to fix education boils down to understanding that the IQ gap between individuals or different groups is a possible contributing factor to the achievement gap. Education ties in with economics because the individuals most adversely affected by the 2008 recession are those without a college degree. This ties into IQ because individuals with an IQ of less than a certain threshold are less likely to obtain an advanced degree; furthermore, those with an even higher IQ will advance further in their studies, possibly obtaining a master’s or a doctorate, which correlates with an even higher income. Thus, to understand why so many individuals have permanently fallen between the cracks in an otherwise strong economy necessitates a study of biology, in addition to economics and sociology.

Neal Ferguson’s science fiction book Double Helix Fall describes a society where a person’s status is determined by in utero readings taken before their birth. We find ourselves in a similar situation today, especially after the cataclysmic events of 2008, where a person’s status is determined largely by IQ, which most experts agree has a significant biological component.

As shown below, level of educational attainment is positively correlated with income and employment:

Also, SAT scores (a proxy for IQ) is positivity correlated with income:

And IQ and income:

In his controversial but prophetic 1995 book The Bell Curve, Charles Murray attributes wealth inequality to cognitive stratification and the difficulties that the increasing complexities of modern life present to low IQ individuals, resulting in the delamination of society into a cognitive elite (which we call smarties) and everyone else. This couldn’t be more relevant today. Never before have the socioeconomic benefits of being smart and rich have been so great, or the disadvantages of merely being below-average been so grave and intractable. Perhaps we should take heed or at least acknowledge the prescience of Murray’s writings, instead of being so quick to dismiss it as ‘racist’.

The ramifications of the cognitive differences between individuals are magnified by today’s winner-take-all economy. Decades ago, there were enough jobs for everyone at any intellectual or educational level; today not so much. The U.S. economy is growing, especially compared to Europe, but the growth is much more unequal. Smarties, or the top 1% in terms of IQ, are reaping the most of the returns of the economic boom in terms of things like rising real wages, surging stock prices and real estate. Smartism – the preeminence of IQ in all aspects of society, erroneously dismissed in Gladwell’s Outliers, is more important than ever as simple jobs are rapidly being supplanted by more technical jobs, outsourced, or eliminated all together. Smartism is one cause of economic inequality, as Dr. Murray explains:

In 2008, many experts predicted the crisis would be a catalyst to replace the old status quo with a more egalitarian one; instead, we got a more cut-throat one, one that has fed on its success of rewarding merit with obscene windfalls and offering little in return for most. 2008 was a phase transition of a staid, lackadaisical economy to an accelerating, hyper-competitive, over-productive one. The amount of information, technology, wealth, liquidity, and riches created in the past five years alone is greater than any prior five-year period of human history. For example, as evidenced by the multi-billion dollar valuations of overnight successes such as Snapchat, Pinterest, Airbnb and Dropbox, anyone with an idea and some coding can be a millionaire overnight and a multi-billioniare in a couple years. America has become a meritocracy in overdrive – an era of of limitless wealth creation and acclaim, if only for a few.

We’re also becoming a drop-out nation. Adults moving back in with their parents, delaying marriage, leaving the workforce and dropping out of college saddled with debt they have no hope of paying off. Although a college degree is an important factor for lifetime success, not everyone is suited for higher education. Misguided policy by well-intentioned individuals has encumbered millions of low-aptitude students with debt and little hope of graduating.

Nowadays, economic value is created through passive consumption such as streaming Netflix, uploading pictures to Facebook, tweeting, or taking selfies with Instagram and Snapchat. Other are becoming wealthy through real estate, buying stocks, speculation, and web 2.0. If capitalism is defined as an economic system where those who possess capital have precedent over those those who don’t then, without equivocation, capitalism is thriving in America, and capital has obviously triumphed over labor. The chasm between the haves and the have-nots will keep widening, but our prediction is that while record inequality doesn’t improve our national image, it doesn’t pose a threat to the economy. For years, doom and gloomers predicted there would be uprising in the U.S. in retaliation to perceived injustices by the elite, but instead the rioting is overseas in countries that have more redistributive policy and more equitable wealth distributions.

High-salaried tech employees have drastically driven up rents, especially in San Francisco. Gentrification has accelerated in the smartist era. The Bay Area housing market is booming, but it’s not a bubble. Instead, prices are surging due to limited supply and huge demand from newly-rich high-IQ tech workers, high-IQ immigrants and private equity firms run by IQ-high people. Stocks are at near record highs while valuations remain low. Profits and earnings for multinationals keep rising. In just the same way the 1% percent in intelligence are thriving, so are the 1% in terms of size. Large cap corporate yields are also near historic lows and treasuries keep rallying, indicating insatiable demand for safe, U.S. debt and big multinational debt. Meanwhile, yields for smaller economies like Turkey have rallied, such as in the wake of the recent mine disaster. When there’s a disaster in the U.S. the opposite happens: people flock to our debt. In keeping with the bigger is better theme, since the start of the year, U.S. large caps have vastly outperformed the small cap Russell 2000. We anticipate all these trends to continue – a Mathew Effect in overdrive as the big and rich become bigger and richer, forming enclaves of prosperity surrounded by the masses that share the same number of chromosomes, but different values, experiences, and possibly even different genes. Two different worlds on one planet.

Being Early is No Better than Being Wrong

Castlight Health (CSLT) surged from $10.06 to $15.6 in just four days after Seeking Alpha wrote a pretty damning hit piece on it.

Here’s what’s really stupid. I thought I would bet against at what the time was a 43% gain, but I was early. It became a 60% gain and now I have a $300 loss on my P&L -even after it went up 45%, as if that wasn’t enough.

I only bought 9 deep in the money puts and went long 400 shares. I went long shares to cancel out some of the delta from the puts after the trade began to turn against me.

Had I just shorted the common stock the day of the Seeking Alpha article I would have lost all my money after getting a margin call. Had I bought puts I would have lost maybe 20-40% depending on the strike and expiration, but it still would have been pretty bad.

I’m still bearish on Castlight Health because the fundamentals look poor and the price is way over-extended, but timing is everything.

Robert Shiller says bubbles can be predicted; profiting off them is a test of timing and psychology- not being too early and not getting scared and closing the trade too soon.

For this very reason, only a tiny, tiny number of people made money shorting grossly overvalued tech stocks at the turn of the century and the same goes for the crash of 2008.

Everyone else either missed it or got stopped out because they were too early.

But on the other hand, being too late won’t help either.

In the second law of thermodynamics no energy can be extracted from a system with maximum entropy. In the stock market, certainty is analogous to entropy in physics. Once it’s incontrovertible a company is insolvent (i.e. cancellation of the common shares) or acquired (i.e. common shares accreted by suitor) the market as a real-time mechanism for gauging uncertainty ceases to exist and hence no profits can be made. Entropy can also be manifested in the volatility, with higher entropy corresponding to lower volatility. Thus, making money in the stock market boils down to betting on an orderly system becoming disorderly or a disorderly system becoming orderly.

What do you think will make an option trader more money? Betting $1000 on Facebook falling 4% in one day or Walmart falling 4% in one day? The later because it’s a much less expected event. The more stable people think something is, the greater the returns can be realized when it becomes unstable. A failed merger, for example, can net option speculators returns of over 100x overnight because it’s very rare occurrence. Buying put options on Bank of America in 2007 was very profitable because at the time it was inconceivable the bank could fail. So why didn’t people do this? A few did, but most were oblivious. But for more technical reasons, option traders typically lose money if nothing happens; enough bets and you will lose all your money should the stock not fall or rise enough, depending on your strike price and time until expiration.

Profitable strategies will be discussed in later blog posts.

Some Thoughts on IQ and Eugenics

As quoted by Marginal Revolution poster, So Much for Subtlety:

But that is the difference between the old fashioned British-origin American Establishment and its Radical heirs. The Old School believed in their own values, especially things like academic freedom and the importance of public debate. Which is why they did nothing to stop the Hard Left taking over. They are less forgiving. It is now more or less impossible to work in any institution they dominate if you stray too far from the party line.

The troublesome inheritance is an inconvenient truth for the left. The only acceptable view is that race is a social construct and the differences between individuals are only attributable to their environment. This is called liberal creationism, or the willful denial of the endogenous or in-utero origin of individual intelligence, in much the same way conservative creationism is a denial of evolution. If some people fail to thrive in this economic boom, it’s because we’re not doing enough to help them, says the left. That means more wasteful entitlement spending and wealth redistribution in a futile effort to fix a problem that is biological in nature. The achievement gap is a well-documented IQ gap. Similar to the liberal delusion that the economy is still in a recession or that America is not exceptional, they want to believe that IQ is irrelevant or influenced by environment rather than genes.

From iSteve Sailer: “The Strange Evolution of Eugenics”

Usually Steve is on the money. His take-down of Daniel Kahneman was brilliant, but his recent article on eugenics misses the mark.

He writes:

Similarly, more high-tech eugenic techniques such as selective abortion, discarding fertilized loser embryos, and sterilization all strike me as distasteful, at the least.

Sounds like he’s parroting the liberal position on this issue. Even if we haven’t yet identified all the important genetic markers for important phenotypes such as IQ, behavior and criminality, we have a fairly good grasp that such traits tend to have a large hereditary or biological component, or to put it simply: losers typically breed more losers. Because some liberals may have condoned eugenics, some are letting partisanship get in the way of potentially good policy. For those who make the equivocation between eugenics and liberalism, any past support of eugenics from the left has long been disavowed.

An awareness of the advantages of competition in business, nature, or politics is related to John Milton’s and John Stuart Mill’s defenses of free expression as making possible a marketplace of ideas in which the best would win.

If this is true, which I agree it is, then does that mean we have to learn to accept tech worker immigration if the marketplace has decided that’s what it wants? He wants it both ways in that he wants a free market, if only he and like-minded individuals approve of what activities constitute a market. In a free market and meritocracy, if a foreigner can do the job cheaper and the same quality as an American citizen, doesn’t he or she deserve the job? In the spirit of John Stuart Mill, that would maximize economic utility. Republicans can support pragmatic policy that will help maximize resources for the most important and productive individuals of society, instead of frittering away billions of dollars on entitlement spending and incarceration.

Someone commented:

In the absence of an Asimovian world where robots perform all the menial tasks that society requires, it is not desirable to have too many smart (i.e., individually) people around. It’s great to have a lot of high-IQ scientists, but those scientists need someone to cook their food and handle their garbage. So proles are necessary, and the scientists need to give them a fair deal so they lead decent lives. Eugenics may sound attractive, but the consequences seem not to have been considered very carefully.

Selective breeding for high IQ doesn’t imply everyone else has to be eliminated. Second, we’re nowhere near a prole shortage judging by the labor statistics that show that the supply of labor vastly exceeds the demand. For example, McDonald’s only hired 65,000 people during a recent hiring day out of 1 million applicants.