Monthly Archives: June 2014

The Smartist Era of Unlimited Prosperity

We’re in an era of unlimited prosperity and wealth creation for some, but to millions of Americans it still feels like a recession. America’s dominance as a global economic superpower has only been solidified since 2008. The post-America era that the left predicted never came. As more evidence of America’s exceptionalism, as of 2009, U.S. industrial production has exceeded the E.U. by 20%:

The economy has been in recovery mode since 2009, but to certain factions of the media, they want to spread lies that we’re still in a crisis for ratings, misleading the public into believing the economy is weak when it isn’t.

People, especially smart people, are getting richer than ever. Being smart is the most important thing in the world. Treasury yields keep going down and gas prices keep going up. Since 2009, never before has so much wealth been created.

Sill no bubble in the Bay Area real estate as prices keep going up. For example, the 94705 zip code is 20% above the August 2007 highs:

Real estate is about location, not price. The most expensive regions before the crash were also the quickest to recover, with many such regions now above the old highs. Smart people are being rewarded for their economic contributions with rising stocks and real estate and the left hates this.

As much as the left wanted America fall off the cliff in 2008, to their disappointment, it didn’t happen. Thank globalization for the recovery, thank the fortune 500 CEOs that made the painful decision to layoff the the redundant and or overpaid workforce, thank the Bush tax cuts, thank Wall St. that withstood withering criticism from the left with indomitable resolve, thank the speculators for buying the dips in 2009 when everyone else was running to the hills, thank STEM majors for being smart, thank Bay Area real estate, thank the fed for doing a good job, thank Bush, Bernanke and Paulson, thank Web 2.0. They (we) built this – this great American economy – not Obama.

Much more is expected of people than, say, just six years ago before the 2009 bull market. Individuals that fail to meet the high, yet somewhat ambiguous standards set forth by the intelligentsia and the makers of economic progress, are typically met with scorn and eventual exile. There is little patience or forgiveness for being wrong. To misspeak is punishable by being banished to the lowest rung of the social ladder in a permanent state purgatory. Poseurs – individuals who exhibit the Dunning Kruger Effect of being too stupid to know how stupid they are – tend to get the most grief of all. The economic, stock market, and real estate boom combined with the fed never raising rates again, the celebration of science and reason in popular culture and society, and the triumph of the immovable meritocracy has had the effect of inflating the confidence of its beneficiaries. Those with a high IQ also are used to having their egos stoked and their skills valued. This has the side effect of occasionally making such individuals less humble and more prone to pomp and brusqueness.

Among the neckbeard generation – a subset of the smartest generation – the list of cognitive fallacies/biases has become like an atheist’s version of the Ten Commandments. On sites frequented by smart people such as Reddit or 4chan, to cite the logical fallacy of your opponent’s argument is tantamount to winning the argument, but on the other hand, the NYT, whose readership consists primarily of dull welfare liberals of an earlier generation, won’t care if you point out logical fallacies of their arguments.

Fed policy is making people rich. The difference between 2 and 4 percent GDP growth is not a big deal. Rising taxes is not possible because it’s politically unpopular , so the debt will keep going up However, treasury yields will keep falling. The debt binge, like it or not, is here to stay. As quoted by Aaron Clarey, the U.S. is less sucky than every other country, and globalization allows the government to run-up debt with impunity. The economic models created smart people, that the US will not default, are correct. Interest rates will remain low, even as stocks, oil, gas prices, healthcare and pretty much every essential service keep going up.

The World As It Is: Post-2008 Economic Reality Part 2

Part 1

In the five years that have elapsed since the market bottom of March 2009, never before in the history of human civilization has so much wealth been created in any prior five year interval, including the final five years of the dotcom boom from 1995-2000. The good or bad news – depending on where you lie on the bell curve – is that for individuals of superior intelligence, good work ethic, and possessing high-paying skills such as computer programming, upward mobility has never been easier. The free market has beaten you a path to riches. More than ever, IQ has become the new caste system in our hyper-meritocracy, so while we have all this wealth being created, most of it is going into the hands of the cognitive elite. At the same time, we have millions of unemployed or low-paid liberal arts graduates saddled with a lifetime of debt, because they chose a major that generate as much economic value as selling ice to Eskimos, or they graduated from no-name college. Instead of conceding to the deterministic reality that not everyone is smart or mature enough to benefit from college, the left would rather blame loan companies, the rich, employers, the government, and the colleges themselves for failing to guarantee a good job for every graduate.

Economic value is created through apps, the stock market, monetary policy, job loss, STEM, creative destruction, and so on. Labor – people going to work – is occupying a smaller piece of this pie. Downward economic mobility is the new normal, but perhaps this is the optimal configuration for an economy, to have a few with everything and most with little. The good news is that while income inequality has never been higher, it’s never been easier to get rich through the three pillars of wealth creation; investing in Bay Area real estate, creating viral apps, and buying stocks. Whether it’s Facebook, Snapchat or Uber, most people who have gotten filthy rich in the past five years have done so through the acquisition of capital, not by traditional labor and wages.

According to Tyler, average is over, so being mediocre is almost no better than being bad. Just ‘getting by’ won’t work anymore. Despite record profits and earnings, employers are still in 2008-style cost cutting mode. To get hired means you have to be overqualified. A lot of Google workers report feeling bored because the work isn’t commensurate with the hiring requirements. Even to serve food at a movie theater, you have to prove to the interviewer that you will be the best food-server in the world, even though anyone with a room temperature IQ can do the job reasonably well. To work as an intern at an online media publication, you have to be more knowledgeable of your field than even most of the paid employees.

A weak GDP number and low labor force participation isn’t going to derail the the global asset inflation boom. Winners, as opposed to the doom and gloom losers, understand that these are mere blemishes on an otherwise rosy economic picture, or what we call a Goldilocks economy and greater moderation. So while the bulk of the unemployed residing on the left half of the bell curve cannot find jobs, the stock market keeps going up and profits & earning keep being blowout, which is the free market’s way of saying that those unemployed people don’t matter too much. What matters to Wall St. is not labor or GDP, but profits & earnings, exports, and consumer spending. Those keep being better than ever, despite the left’s endless incantations of doom and gloom and insistence that the consumer is supposed to be ‘maxed out’.

Due to a combination of Middle East tensions, speculation, forever low interest rates, and strong global economic growth, by 2015, we predict Dow 20,000, Facebook stock at $150, and oil at $135/barrel and gasoline at $5/gallon. Every unspent penny will be forced into circulation as living expenses keep going up, but it won’t counted as ‘official’ inflation. The cognitive elite tend to be impervious to this because they have tenure and or are beneficiaries of the asset inflation through equity and real estate. The easiest way for ordinary people to participate is to buy stocks, which is why I’ve been telling people to buy since the S&P 500 was at 1200 back in 2011 – now it’s at 1950. For $5,000, you can open a futures trading account to trade $100,000 of the S&P 500. If the market surges another 50% – which I know it will – you will make $45,000 in profit. In the smartist era of biological determinism, this is how you join the ‘new rich’. You won’t get into the top .01%, but an extra $50k or more just sitting on your butt, reaping the benefits of the fed and consumer spending sounds like a good deal to me.

Social media is changing the world, if it hasn’t already done so. The meaning of ‘economic recovery’ needs to be redefined to include activity most people wouldn’t normally associate with economics, such as posting pictures on Facebook, using Snapchat, and tweeting. These activities create as much – if not more- value than going to work, and should be included in the recovery statistics. Taking pictures or as some call ‘selfies’ does create economic value in ways that may not be obvious, but is as every bit as important as labor.

In the smartist era, being rich and or smart makes you a more valuable person. From oracles of the meritocracy; Steven Pinker – The Blank Slate, Gregory Cochran and Henry Harpending – The 10,000 Year Explosion, Richard J. Herrnstein and Charles Murray – The Bell Curve, Nicholas Wade – A Troublesome Inheritance: Genes, Race and Human History – these books, held in sacrosanct by the smartest generation, most accurately describe reality, versus the doomed alternate reality the left resides in, holding close to their heart the fading hope of liberalism and equality. Eventually the liberals will be forced, as the walls of their delusions cave in, in facing these immutable truths; that there will be winners and lots of losers, and that no amount of social policy will be able to change this, because this is the world as it is.

America – The Center of the Universe

We’re moving towards a jobless society. But the definition of labor is changing to include ‘gigs’ like on Task Rabbit that may not be included in the official labor statistics. The problem is too many people, especially liberal arts grads from no-name colleges, don’t have the skills employers are seeking, combined with cost-cutting measures implemented since 2008 where employers are realizing they have been paying too many people too much to perform redundant, obsolete or useless jobs that could otherwise be outsourced or eliminated. Before the financial problem there was a labor glut, a financial services glut, a housing glut, a liberal arts degree glut, and now market forces are creating a new equilibrium.

Learn to code apps, learn technical writing, learn math and physics, learn networking, open a trading account and buy and hold the S&P 500 – that’s where the money is. But there’s also millions of unfilled job openings https://www.google.com/search?q=jobs+unfilled The economy is changing but many people are stuck in a mindset that things should remain the way they were decades ago, blaming immigrants, rich people, college, and multinationals for trends that are not only outside of the control of individuals, but economically beneficial.

Unsurprisingly, STEM jobs require a high IQ and also pay more. This is more evidence IQ has become the most important determinant of success or failure in today’s economy. The left wishes this weren’t so, which is why they want economic crisis, because the cognitive elite would lose a lot of money from falling asset prices, making everyone more equal at the expense of the rich. Also, here’s more evidence Larry Summers was right all along about women lacking aptitude at the high end to excel at math and science.

We’re in a day and age where there is greater economic prosperity and wealth creation than ever and yet so much uncertainty from getting fired, to getting sick and not having insurance or being underinsured.

America, especially since 2008, has become a hyper-meritocracy in overdrive. If you like coding, have a prestigious degree and a high IQ, now couldn’t be a better time to be alive, although having the first two qualities pretty much guarantees the third. We’re in a high-IQ, STEM, wealth creation feeding frenzy on a biblical scale. The Rockefellers, Vanderbilt and Carnegies actually had to build something to get wealthy, which took decades and thousands of people. Now start-ups less than three years old are making instant billionaires out of their youthful founders and early investors. Even in the 90′s – what many consider to be the epitome of a bubble – a typical tech start-up was seldom valued at over $60-100 million. Now that is just the Series A round. The Bay Area housing market is going nuts in all-cash bidding wars above the asking price due to endless fed money, rich foreigners, web 2.0 founders and investors flush with cash, and private equity. There is so much wealth being created in relatively few hands. Outside of the Bay Area tech scene and Wall St., there’s an abundance of low tech opportunities catering to the new rich, such as nannys, butlers, trendy restaurants, landscaping, and home restoration. America, more specifically its elite institutions such as Harvard, Stanford, and MIT as well as its tech giants like Google and Facebook and the Bay Area have become epicenters of innovation and wealth creation. 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, a perpetually rising stock market that has vastly outperformed its peers, a strong dollar, surging Bay Area real estate, tech companies and Ivy League institutions being inundated with foreign applicants, America has, more than ever before, become the center of the universe and envy of the world all over.

What happened to the China boogeyman? To the disappointment of the paranoid left, it looks like China would rather trade than make war. How about Putin taking over the world? Looks like that was a dud, too. To quote Steven Pinker, the world is becoming less violent, but the left would rather have crisis and upheaval, because they loathe any progress that doesn’t benefit everyone equally. To the left, crisis is an opportunity to reset the system to a more egalitarian state, with less emphasis on individual merit and more redistribution at the expense of the most productive individuals of society.

Time to Not Raise the Minimum Wage

From Nick Hanauer, guest contributor of Politico: The Pitchforks Are Coming… For Us Plutocrats

Its like he’s telling the elite to reform or else face the improbable consequences. Not too convincing, with no actual data of how a concentration of wealth at the top is bad for the economy. Just leftist idealism, historical anecdotes, and hunches that inequality is bad, but again, no specifics or rigor. But this is not because of laziness by the author; there’s simply scant empirical evidence that shows wealth inequality is bad for the economy.

The lower classes aren’t going to revolt. They have to get to work or they are watching TV.

Furthermore, raising the minimum wage effects employees all the way up chain of command. If you pay the lowest ranking employee more, you probably have to give raises to the other employees as well, or else they may quit. This vastly compounds the expense.

Raising the minimum wage can cause inflation. If wages go up without any increase in productivity, then there are no more goods supplied. How do supply and demand get back in equilibrium? As workers with more wages compete for the same number of goods, they compete by paying more. So prices go up until supply and demand are in equilibrium again. And chances are demand for # of goods is the same as before the wage increase, just at a higher price.

Hanauer alludes to the Marxist fallacy that capitalism is self-limiting, because if too much wealth is concentrated at the top, who is going to buy the stuff, “The most ironic thing about rising inequality is how completely unnecessary and self-defeating it is”

But is it really self-defeating? In a free market, if employers or the elite believe this is true, they would adjust accordingly, because their models would show that paying employees more would lead to more profits. The economy progresses through stochastic evolution, not because someone is whining that wages are not high enough.

As discussed earlier:

The push towards lower wages isn’t motivated by greed. It’s looking after the best interest of shareholders and consumers to keep costs as low as possible. The benefits of cheap labor outweigh the potential externalities. Apple can hire overseas labor because those people will never have enough money to buy an iPhone anyway. The Americans that could have hypothetically been hired by Apple will look elsewhere for work. The savings from outsourcing far exceeds what Apple could earn from the increased purchasing power from US apple employees if some of those employees had slightly more money in their pocket to buy apple products. Boeing, for example, knows that average Americans won’t be buying its planes, so they can outsource with impunity knowing that it won’t hurt demand for their planes. The added profit means Boeing can sell its planes for less money, and this eventually translates into cheaper airline tickets for everyone else or lower freight shipping cots, etc.

Again, the the Marxist fallacy is debunkedin response to an earlier article by Business Insider about how rising consumer spending cannot coexist with falling real income. We show that it can coexist due to globalization and the Pareto principle.

A commenter concurs with Nick Hanauer, writing:

It is still astonishing to me that those on the top of the wealth pyramid don’t see that they are killing their golden goose that generates wealth. If they squeeze their employees until they are dead, they also have no customers. It is in the best interests of the wealthy to keep the working class stable.

Maybe he should email Apple and Microsoft his findings because apparently – despite spending untold sums on accountants, statisticians, and economists – they are leaving billions of dollars of profits on the table. Maybe paying employees $10,000 an hour would boost sales. Cost/benefit analysis be damned!

We discuss in further detail here of why the the ‘increased consumption’ argument doesn’t sway companies to raise wages:

Does raising wages make everyone better off? It could make individuals better off in terms of more purchasing power (assuming they don’t get fired), but from a game theory standpoint, no individual company stands to benefit. Since consumption is spread out, the odds that a specific company will reap the consumption benefits of a wage hike is very small, depending on the business. Mass consumer companies like McDonalds, Starbucks, and Walmart may benefit a little, but others like Boeing won’t. Let’s assume the Burger King employee is paid $10 instead of $8. Even if he takes that $2 and buys a Burger King menu item, it will still cost Burger King more money than if they didn’t give a raise. The only way Burger King can recoup the costs of higher wages without raising prices or cutting back is to hope the purchasing power from other people is enough to offset the costs. Unless other companies give a wage hike this is impossible, but even if others increase wages it may not be enough, because the odds are low due to spending being spread out. This is why the argument that increasing wages benefits consumption is unconvincing to corporations or anyone with common sense. Maybe boosting wages will increase total consumption, but not enough on the firm level to justify the wage hike.

Any student of history knows that’s not the way it happens. Revolutions, like bankruptcies, come gradually, and then suddenly. One day, somebody sets himself on fire, then thousands of people are in the streets, and before you know it, the country is burning

The left seeks crisis to punish the successful and bring the world down to their level. Rather than revolution, the most likely event is that the economy enters a recession and the business cycle ends, but with the fed committed to never raising rates again and economic data such as consumer spending, exports, and profits & earnings keep being blowout, a recession is a remote possibility.

If I had a dollar for every time a doom & gloomer draws an analogy between Nero fiddling as Rome burns and America being in decline…Or every time the left invokes the French Revolution, in an ineffectual act of wishful thinking of how the masses will overtake the political and economic elite, but otherwise are too lazy to change the TV without a remote. But complacency is a feature of America and not a bug.

The Quadrantsphere and Biological Determinism

The ‘quadrantsphere’ is a collection of blogs whose subject matters encompass the quadrant of IQ, economics, race/gender and education, with bloggers ranging from Ross Douthat, to Thomas Friedman, to iSteve, and even this website. Additionally, topics that encompass the quadrantsphere are popular on Reddit and other sites that cater to a predominately educated, technologically literate, young adult audience. Topics in the quadrant typically involve people and their interactions with their environment and each other, with the potential to create controversy than more benign subject matters that involve things instead of people, like gardening or cars. A recurring theme of the quadrantsphere is that individuals – through their biology and or environment – have less control or free will than they want to believe, a view that many find controversial because determinism conflicts with the appealing and common notion of free will. This video by Gregory Clark starting at 20:00 explains how hereditary factors contribute to economic success, a view that is an anathema to many on the mainstream left and even the right. The right wants to believe that people can be reformed though hard work and lessening the influence of the government; the left believes individuals can achieve an egalitarian utopia with the help of the government; however, we’re of the opinion that any view that subscribes to individual malleability is probably wrong. We believe that the failure of so many people to thrive in this economic expansion and huge bull market is evidence of social Darwinism, the unfit falling between the cracks, and it’s a waste of resources to pull them out.

The left is comfortable with the idea that biology plays a role in physical ability such as jumping or running to name a few examples, and that some individuals are biologically endowed with more athleticism than others, but to intimate that some individuals, at biological level, are better predisposed to success at cognitive tasks, and that this ability is closely tied to socioeconomic status, is still taboo. The left tries to explain this away by arguing, unfortunately with much success, that the government doesn’t spend enough on social programs to close the achievement and wealth gap.

Ralph Nader’s Predictable Denial of the Importance of IQ

From Tyler Cowen’s Ralph Nader interview, the question that most stood out was on the Flynn Effect (bottom of page 4 on the PDF), because Nader’s response encapsulates the modern liberal’s denial of biological determinism, denial of the importance of IQ, and illustrates the general liberal aversion to technology, or tendency to blame society’s problems on technology.

It’s little surprise the anti-technology left, including Nader, denies the Flynn Efect and that Americans are getting smarter. His answer devolves into an incoherent rant about China and missiles. That’s what happens when you raise the question of IQ to the left, they become discombobulated.

In response to Tyler’s question, Nader replies, “So maybe they can fill out various kinds of standardized tests and do puzzles and react very quickly to these video games, but quo vadis? To what end?”

How about higher income? The kids that do well on tests tend to be smarter and earn more money as adults. The left wishes this weren’t so – that anyone, regardless of IQ – has an equal shot of success when this is just not true.

While most liberals like technology as much as everyone else when it comes to entertainment like TVs and iPods or medical treatments, they resist technology when it displaces obsolete industries and jobs. But structural employment is how the economy and society advances, through the trade-off of unemployment for better technologies. This ties into IQ because as society advances, individuals with a higher IQ will be able to acquire skills that are technical and pay more, resulting in wealth disparity between the cognitive elite and everyone else. By denying IQ or redefining IQ to mean something unimportant or irrelevant, the left can justify wasteful social programs to try to close the wealth and achievement gap.

Contrary to the stereotype of the ‘knuckle dragging’ conservative, it’s actually the left that tends to be anti-intellectual and anti-technology, not the right. The major leftist ideologies of the of the last century – communism and socialism – are predicated on society regressing to a more egalitarian, primitive and agrarian state, where everyone equal but worse off. The labor movements of the 20th century oppose technology and globalization, because of its potential to displace jobs, lower wages, and lessen the political clout of the unions. Leftist ideologies such as anarcho primitivism, anarcho-socialism, anarcho-syndicalism and deep ecology tend to be anti-technology. Off the top of my head, a right-wing ideology that could be deemed anti-technology is paleoconservatism, which has made a resurgence in much the same way the anti-technology left made a resurgence following the Clinton years, especially after 2008, likely in response to the technocratic and statist policies of the Bush administration.

Prior approval replies:

I guess either the social democrats aren’t leftist enough for you, or the reality that Germany’s SPD was founded in the 19th century and have been in power (alone or in coalition with the Christian Democrats and the Christian Socialists) in Germany in the 21st century means that they get a pass due to that qualifying ‘last century.’ Well, except for the years they also were in power in the 20th century, that is.

Communism and its variants is perhaps the most anti-technology. Typically, the further left you go on the spectrum, the greater the opposition to technology. Larry Summers and Thomas Friedman – hardly ‘far-left’ by any stretch of the imagination – embrace technology and innovation in their writings.

As a counterexample, someone mentions the Christian right’s denial of evolution; however, a denial of evolution isn’t necessarily anti-technology or anti-intellectual. George W. Bush is an example of someone that supports technology and free markets, but is also a religious conservative. Another example is Mozilla’s former CEO and programmer, Brendan Eich. Let’s not forget liberals believe in some pretty unscientific stuff as well, such as astrology and new age.

Zman counters, showing how liberals are the real ‘creationists’ in denying biology and IQ, “That would most likely be the Liberal Democrats. You know, the same guys who dismiss Nick Wade and throw tantrums about “gender bias.”

Agree. Liberals become creationists in denying the science that disagrees with their worldview.

The comments take a turn for the worse with name calling.

Another commenter agrees with Nader’s opposition to defense spending:

His ‘incoherent rant’ is that we spend massive amounts funding defense contractors at a time when there is no existential threat to the United States. This results in us throwing $2 billion dollars a week away in places like Iraq instead of investing in things like universal college education.

However, this defense spending could be viewed as precautionary and to suspend it would invoke the precautionary principle; the burden of prove would fall on the left to show how eliminating defense spending will not make America more vulnerable to attack.

13 Ways the Economy is Getting Better

We call the events of 2008 a ‘financial problem’ instead of a ‘crisis’, because it didn’t become a crisis until the liberal media such has the NYT called it one. It was a banking problem contained to some institutions that became a global crisis by the media’s own doing to get Obama elected.

1. Healthcare, tuition, gas and oil prices through the roof, but this won’t hurt the economy. Pain at the pump helps the economy by increasing consumer spending.

A one penny increase in U.S. gas prices generally leads to a $1 billion increase in American household energy consumption. Analysts predict gas prices could rise 10 cents this summer if the turmoil in Iraq continues. Hopefully it does.

2. IQ and STEM more important than ever. Rich, smart people rule the world. Your genes will play a bigger role in your success or failure at life than ever before.
3. Soaring wealth inequality and record high profit margins
4. Decreasing labor force participation as millions of otherwise able-bodied people leave the labor market due to skills mismatch and a lack of hiring.

According to the graph below, the employment/population ratio declined sharply during the downturn, and only a small portion of that decrease has been recovered since that time. This is good news because it means more QE and fatter profit margins, but consumer spending keeps going up, despite the low labor force participation. The rising real incomes of the top 5% of earners is enough to compensate for falling real wages for the bottom 95%. Furthermore, rising home prices and record high consumer credit is expanding consumer purchasing power.

5. Facebook and Google become trillion dollar companies; Snapchat is worth $100 billion.
6. Record web 2.0 valuations. Uber becomes a $200 billion dollar company along with Tesla. Not a bubble.
7. Dow 22,000. Not a bubble.
8. People are getting richer and smarter than ever
9. The world is awash with liquidity, resulting in low treasury yields and buoying a wide variety of asset classes from stocks to bonds to real estate.
10. Bay Area real estate keeps going up. Not a bubble.
11. Major losses for dems in midterm elections
12. Dems lose Whitehouse in 2016
13. Rise of the ‘gig’ economy and low-paid service sector

In the future, people will be working longer hours for less pay, or even no pay at all through dead-end internships. This is good for the economy by increasing profit margins. From FT.com: “Tyler Cowen, economics professor at George Mason University, guards against demanding that every piece of work is paid. It can be ‘corrupting if you get into the mindset that you only do things for money,’ he says.”

When you consider ongoing social and economic progress and all of the coming innovations in science and technology, there’s plenty of room for optimism. Now couldn’t be a better time to be above average, to be smart, to be an economist and to be rich. According to Charles Murray, we’re coming apart and I look forward to this. From Louis C.K.: “Everything is amazing, and nobody is happy.”

Immigration and The GOP Does Not Need to Reform

Taki and Marginal Revolution recently posted articles about immigration. Predictably, they hold diametrically opposing views: Alex supports open borders and Steve opposes, with no equivocation. We take a middle ground, supporting high tech immigration to make U.S. companies more competitive and cutting entitlement spending to encourage Americans to work, thus eliminating the most or all of the need for immigrants to do the work ‘Americans don’t want to do’. By virtue of incentives, cut the benefits, and Americans will get off their lazy asses and get to work. Pretty much any job done by an unskilled immigrant can be performed by a welfare recipient. However, these are short-term fixes that don’t solve the underlying problem of poverty begetting more poverty. A eugenics program would offer the best long-term solution; however, the obvious ethical hurdles make it a long-shot, unless policy makers decide once and for all they really want to stop the growing entitlement spending problem. The problem is both sides – republicans and democrats – think that well-intentioned social policy can supersede genetics; it never does, so we keep going in circles, declaring war on poverty, war on welfare, and after few years of the false appearance of progress, we’re back to square one…

Steve writes:

Piketty doesn’t seem to be aware that American plutocrats, both in the robber baron era and today, have overwhelmingly put their money on the side of more immigration. Billionaires who have donated toward more immigration include Gates, Zuckerberg, Charles and David Koch, Michael Bloomberg, Sheldon Adelson, George Soros, and Rupert Murdoch.

But in a free market and a meritocracy, why should we limit our labor options? That seems like a bad idea, by hurting competitiveness. We agree with the posts about IQ and racial differences, but not this – because it seems to contradict the part about IQ and achievement. If an immigrant is smarter, doesn’t he or she deserve the job? As for low skilled immigration employment, Captain Capitalism’s Aaron Clarey says in a YouTube video that these are jobs that Americans won’t do, and no one would ever call him a liberal. Later he mentions foreign IT workers are better.

There seems to be this belief among some ‘right-leaning’ (we use this term because many don’t openly identify as ‘conservative’ but still seem to hold conservative beliefs) pundits such has TAC’s (Why Can’t Conservatives Crack the Leadership?) that the GOP needs to reform by eschewing its close ties to big money and corporations. Many attribute Romney’s loss to corporatism, but Bush was as every bit as entrenched in big money as Romney and he won twice.

We are of the minority opinion that between the pro-growth tax cuts that helped the economy during the recessions of 2008 and in 2001, the swift post-911 response that kept America safe, the effective bank bailouts that ended the banking problem, the appointment of Bernanke and his counsel, and strengthening diplomatic and trade relations with countries such as the UK, UAE and Mexico – G.W. Bush is an underrated president, who did good job given the challenges he faced and that the GOP should try to emulate his policies rather than renounce them. As for the invasion of Iraq, it’s too soon to judge its success or failure. He, not Obama, deserves credit for killing OBL. The banking problem occurred under Clinton’s policies and due to general market fluctuations and panic; Bush and Greenspan don’t deserve blame.

With the help of the media, Obama won using his charisma and oratory skills to appeal to low information voters’ desires for sort term gains and class warfare by promising grandiose reform, however unrealistic. The left wanted heads to roll on Wall St., unconditional student & housing loan bailouts, and good-paying jobs – and Obama would provide it. Fortunately, he failed on all counts. But better yet, his failure will discourage a generation of democrats, which should help republicans. We’ve argued that we need more money in politics, not less, because people with money have a vested interest in promoting pragmatic, pro-growth policy. The left, unlike the right, wants crisis because as shown by the election of FDR and Obama, that’s how they get power. America was never intended to be a liberal democracy; instead, it’s a constitutional republic controlled by rich stakeholders, going back as far as the founding fathers. The 15th, 19th, 23rd, 24th, and 26th amendments were intended to try to change this, and then that’s how you get unqualified idiots like Obama in power. It’s a weird world when ‘liberals’ like Larry Summers and Thomas Friedman sound more ‘conservative’ – as in preserving the status quo, promoting pro-growth economic policy, and espousing race and gender realism – than many conservatives writers today that want less money in politics, attack the fed, and deny HBD.

Low Congressional Ratings, A Bullish Indicator

Today’s good news: Confidence in Congress drops to seven percent, an all-time low.

Let’s give a round of applause to the do-nothing congress for not doing too much. As we wrote before, gridlock and low congressional approval ratings are bullish for stocks and the economy. High approval tends to portend to poor returns. In the graph above, you can see congressional approval made a peak in the early 70′s – just before the oil embargo, a nasty bear market, and nearly a decade of high hyperinflation; it made another peak in the mid 80′s, right before the Black Monday stock market crash; and lastly, it bottomed in the early 90′s recession before the huge bull market that followed. The 90′s were characterized by optimism and we all know how that ended: 911, a nasty stock market crash and recession. Compare that today and we have record high profits & earnings, low valuations, the second strongest bull market in the past fifty years, super-high valuations for tech start-ups that make the 90′s valuations look like a joke, a strong housing market in the Bay Area, and record consumer spending. But to most people, it feels like we’re still in a recession, and they want to blame congress or the rich for falling between the cracks. Congress should do as little as possible, letting the free market run on its own – only to intervene during crisis such as after 911 and in 2008, to undo unnecessary regulation such as Glass–Steagall’s 1999 repeal, to lower taxes, to raise the debt ceiling, and to control entitlement spending such as Clinton’s 1996 welfare reform.

Sometimes, the most enduring recoveries are the ones where the fewest can participate, because once the masses get in the game, it’s soon game over. We saw this in the 90′s when the masses entered tech stocks and again in 2002-2006 when they felt artificially rich with real estate; in both instances, big bad bear markets of over 50% followed. Now that the chumps – those who speculated in homes in the late 2000′s and are still underwater and others that sold their stocks in panic in 2008 – are out of the picture, we can have a protracted bull market built on the most solid foundation of all – one of pessimism and negativity.

In the tailwinds of endless fed money, Ivy League alumni are creating multi-billion dollar tech companies and becoming instantly wealthy in the process. Anyone with some coding and a viral idea can become a millionaire overnight and a billionaire in a couple years. If you cannot code, buy the S&P 500 and buy Bay Area real estate. That’s how you get rich. Silicon Valley VC aficionados are doubling their money every six months in investments like Uber, Snapchat, and Air BnB. A high-IQ wealth orgy that makes the roaring 20′s quaint by comparison. A get-rich-quick frenzy like 1929 or 1999, but this time around there won’t be a bear market or a recession, or at least not for a very long time. Unlike earlier booms, this wealth is not ephemeral and these valuations are sticky and permanently rising. The ownership society Bush spoke about is doing better than ever. This time it’s really different. The new gilded age rages on with no end in sight.

The Daily View: Wealth Creation and Inequality

Today’s good news: Obama’s approval rating keeps falling. This is good for stocks.

More good news: Oil prices are surging, benefiting the energy sector and increasing overall consumer spending through the resulting inflation.

The world is awash with so much liquidity as long term yields for major developed countries are at record lows:

In this huge post-2008 economic boom, the cognitive elite are becoming obscenely wealthy with little time and effort, forming insular enclaves of prosperity that still generate strong national influence. At the same time, this is juxtaposed with lots of people falling between the cracks. For example, this flash in the pan company just got bought out for half a billion dollars:

Google and Nest Acquire Dropcam For $555 Million

Silicon Valley, Manhattan, Sanford, MIT, Washington, Harvard – to name a few. These people of these institutions are shaping the world of tomorrow, writing the rules to the game according to their whims and desires that everyone else has to go along with.

The celebration of wealth, intelligence, expert status, and authenticity has become the new religion of post-2008 America. Like religion, it’s also a subject that generates considerable debate – in particular, pertaining to the study of wealth inequality and IQ and how they tie together. With few exceptions, all major social issues in post-2008 America boil down to race, IQ, education, and economics.

In agreement with this trend of people getting smarter, from the Washington Post: young workers hate their jobs.

This is not surprising because of how overqualified and smart so many millenials are. As recently as the 90′s, many young people were content to holding boring, un-fullfilling jobs – but now they increasingly want jobs that are more complicated with a ‘higher’ meaning; others are completing college or returning to their parents. This is a good idea because why make your landlord rich when you can move back in with your parents until you’ve paid off your loans and or saved up enough to buy a house?

S&P 500 closes at another historic high; so much wealth in relativity few hands. In an interconnected world, we live in a panopticon of the state, our employers, and our indelible online record. As we’ve been saying since 2011, the easiest way to get rich to just buy stocks on the dips. Let the left complain about the economy being weak, like the pathetic whiners that they are. In the inexorable progression to a type one civilization, do do you want to be left out; or do you want own a piece? Companies like Facebook, Google, and Amazon the are the architects of the Matrix in real life – buy their stock and make money.

The future of America is lots of people – many whom unable to find traditional employment- making breadcrumbs in the ‘gig economy’; a second tier of workers in the low paid service sector; third, a sizable upper-middle class consisting of bureaucrats, middle management, those who have modest wealth tied in stocks and real estate; and finally, a small cognitive elite that comprise the wealthiest <.01% of the population. The gig workers will consist mainly of liberal arts majors and those without a college degree and will barely earn above the poverty line. The low paid service sector workers will fare better than the gig workers and be slightly more educated. The professionals will have degrees; examples include: lawyers, engineers, doctors, managers, CPAs, brokers, etc. Manufacturing will be gone along with most of the unions, with the exception of niche manufacturing and the entrenched teachers' union.

Pundits such as Jon Evans suggest a universal basic income to remedy poverty in an era where so much abundance is going into so few hands. From Techchrunch, he writes:

Indeed. But if more and more people become unemployed — by which I really mean, fighting to get by in Extremistan — then only one safety-net option will work: a universal basic income. Marc Andreessen is exactly right when he says technology can kindle the kind of economic growth we need; from my perspective, we need it to make a basic income a viable option. I just hope that happens before too many lives are ruined because our politics evolve orders of magnitude slower than our economies, much less our technologies.

We are of the opinion a basic income will only increase entitlement spending while failing to fix the underlying problems, hence we oppose it. While income inequality and the disparity between the haves and have-nots will keep widening, we don’t view this as a threat to the economy. Wealth inequality is a byproduct of an economy running optimally, by rewarding those who create value with more wealth. As measured by things such as profits & earnings, consumer spending, exports, technological progress, M&A activity, and productivity – there’s not a shred of evidence record wealth inequality is hurting the economy, nor is it possible to elicit any compelling evidence that it will in the future. Perhaps, it’s better to have more people performing low paid gigs and service sector work than enlarging the welfare state with a basic income. We’ve also explored other options of paying people to engage in passive consumption such as posting pictures to Facebook and tweeting, which may create more economic value than going to an overpaid job. In the years following the 2008 banking problem, many of the jobs lost were ones that didn’t create much value; many can agree the economy is better off without them.

The underlying problem is that too many people are unable to thrive in this economic boom without some form of federal aid. Due to the heritability of poverty and low IQs, we propose eugenics as the most effective long term solution for controlling entitlement spending.