Monthly Archives: August 2015

China’s investors find safe haven in American real estate

From Yahoo finance: China’s investors find safe haven in American real estate

Commercial real estate isn’t the only type of property seeing large inflows of Chinese money. The country’s investors have also been active in the residential realty. They bought $28.6 billion in American residences, accounting for 28% of all foreign purchases by dollar volume, according to data from the National Association of Realtors. The homes they acquired tended to be on the luxury side; the average house in the U.S. sold for $255,600 but Chinese buyers spent on average $831,800 for their American homes.

What happened to the post-America era the left predicted in 2008 and 2009 would happen? So much for that.

As emerging markets suffer from low inflation-adjusted growth, high inflation, falling currencies, corruption, and divestment, and the left whines about wealth inequality and capitalism being dead – rich, high-IQ foreign investors cannot get enough of America and its most valuable real estate. Foreign applicants are inundating America’s fastest growing tech companies as well as Americas most prestigious institutions of higher learning. The left constantly criticizes America, but the rest of the world apparently cant get enough of America, and this probably makes the left irritated that the rest of the world isn’t sharing their post-America vision.

Related: Wealthy foreigners bought $100 billion in US real estate

Buy Stocks or Real Estate Instead of Paying Down Student Loan Debt

From Mike ‘the lawyer’ Cernovich:

I currently have a relatively large mount of unpaid student loans. My student loan interest rate on the outstanding balance of the two loans is at 2.2% and 3.65%, respectively. I pay the interest only, as the difference between my student loan interest rate and market returns are substantial. (Why pay a 3% loan off when market returns have been crazy high? Every dollar you use to pay off a student loan is a dollar you can’t invest in the market.)

This is brilliant advice. All these talking heads say, ‘pay down your student loans first!’ without even thinking of the alternatives. Put the money in the stock market and make 10-30% a year, which is much higher than the 3-6% interest on student loans. Even the dividends on the S&P 500, which are 3% a year, is good enough. Or put the money in Bay Area real estate and make 15-20% a year doing nothing on a 4% 30-yr mortgage. The obvious downside is if the market crashes and does not recover, but the odds are that won’t happen. The left has been predicting a crash since 2009, and they keep being wrong. Interest rates will remain low, which is good for borrowers, and real estate and stock prices.

This is the mindset or strategy that separates the rich from the poor; smart people use debt to their advantage to build wealth through leverage; the poor and middle class are scared of debt and will do anything to avoid it, even if it means being poorer as a result. The more leverage you can control, the more you can skim off the top. If you control a $1,500,000 home in the Bay Area, you can skim off $20,000 a month just from the appreciation alone using a home equity line of credit. If the mortgage is $6,000 a month, you are keeping $14,000 every month doing nothing.

Anita Sarkeesian Supports Classroom Segregation

From Michael Cernovich’s Twitter (and from his blog, Crime and Federalism):

I’m amazed she hasn’t deleted her tweet suggesting that segregating classrooms by race and gender could improve learning. HBD-based solutions are never allowed by the ‘pro science’ ‘tolerant’ ‘open minded’ left if the results could be interpreted to mean that protected minorities are inferior at cognitive tasks compared to whites and non-protected minorities. This is why the left is so adamant about doing away with the SAT and IQ tests, which originally were created to help the economically disadvantaged to get into elite schools, because certain minorities don’t score as high as others. The left wants to do away with these tests because forcing equal outcomes is more important creating than equal opportunities. Liberals like Larry Summers, or even feminists like Tim Hunt, aren’t immune from public shaming by the left for expressing views that run affront of the ‘blank slate’ leftist orthodoxy, as yet further examples of the ‘pro science’ left picking and choosing the science they want to believe in.

And, yes, although Anita Sarkeesian is the scourge of Gamergate and ‘the right’, that doesn’t change the fact that maybe there is some truth to her statement. Although black academic achievement has proved markedly since Brown vs Board of Evacuation, achievement for whites has also improved, so the black-white gap remains as wide as ever, according to http://www.epi.org/:

Black student achievement, nationwide, and in every state, has improved at a spectacular rate since Brown. Although we don’t have a reliable measure of achievement going back very far in time, we have good data for the last few decades, from the federal sampled test of math and reading, the National Assessment of Educational Progress (NAEP). It shows, for example, that black fourth-graders now have average math scores that are better than average white math scores only a generation ago. Yet because average white achievement has also improved, the gap between black and white achievement remains. The average black student still performs better than only about 25 percent of white students, making the goal of equal qualification for the labor market a distant and daunting goal.7

The black-white achievement gap has remained persistent since the availability of data going as far back as the 60′s, with blacks consistently lagging whites at standardized test results, educational attainment, and income. If Brown was supposed to close this gap, it has obviously failed.

Related:

The Left’s Problem With Science

The Liberal War On Science

So Much For That China Economic Crisis

Looks like I was right again about the China ‘crisis’ being a media generated crisis rather than an actual economic crisis. Tim Cook confirms that Apple’s iPhone business in China has been unscathed. This reminds me of 2011 and 2012 when the left said that Greece would cause a global economic contagion…so much for that. Again, we’re talking a one percent decline in China GDP. Pretty much meaningless. Maybe one of these days the left will predict something correctly, but we’ll probably all be dead before we can bear witness to it.

While Many Panicked, Japanese Day Trader Made $34 Million

While Many Panicked, Japanese Day Trader Made $34 Million

But the left insists that the markets are rigged, a bubble, a scam….this is not supposed to be happening. Yet again, empirical reality keeps slapping the left across the face. The left says the market is a zero-sum game, yet people (such as the example above) keep proving the left wrong, and these professional traders do so with much more consistency than suggestive of mere luck. The left wants to deny the biological reality that some people are smarter and therefore intrinsically better and more successful than others. Smart people see opportunities that 99% of people, who are of lesser intelligence, are oblivious to and proceed to exploit these tiny opportunities for huge profits, repeating this over and over.

Related: How High-IQ People Make Money In The Stock Market

College Degree: Status, Drop-outs, IQ, and Success

The Pros and Cons of Going To College

Does a college degree give you status? Maybe 50 years ago, when a college degree was more scarce, but nowadays a PHD in a STEM field confers much more social status and earning power than, say, a 4-year degree in something less intellectually rigorous like child development or gender studies. Intellectualism, wealth, and status are becoming increasingly intertwined, especially in the post-2008 economy. This is because people who are smarter are more ‘fit’ for survival in the post-2008 economy, as part of Social Darwinism 2.0. Those who aren’t fit, obviously don’t die physically from a predator, but they tend to die inside, emotionally, from economic hardship and low social status.

The problem is when students take out a lot of debt for a degree that may not have a high ROI. At least with STEM (especially computer science and engineering) you have a better shot of repaying the debt than, for example, with comparative literature. You can learn the humanities for free by going to the library or reading Wikipedia. While you can self-learn abstract physics and math concepts, often in STEM you need labs and other equipment that necessitates some sort of classroom setting.

From the comments, someone gives examples of famous and successful people who either did not go to college or dropped out:

The following people did not graduate college (and many never even attended): Ansel Adams, Winston Churchill, Walt Disney, Bob Dylan, Thomas Edison, Bobby Fischer, Henry Ford, Bill Gates, J. Paul Getty, John Glenn, Barry Goldwater, William Randolph Hearst, Steve Jobs, John D. Rockefeller, J.D. Salinger, Taylor Swift, Ted Turner, Mark Twain, Walt Whitman and Mark Zuckerberg.

As I explain in an earlier article, Much Needed IQ Realism in the Anti and Pro College Movements, innate talent and IQ plays a bigger role in success than whether or not someone graduates from college. All he did was cherry pick examples of high-IQ/talented people who were successful without college, passing it off as being representative of the general population of dropouts. People with below-average IQs who drop out of college tend to accomplish little in life, often going on welfare or doing low-paying jobs for the remainder of their lives. They very seldom (or at a rate much lower than high-IQ dropouts) become successful. They’re not gonna become the next Disney or Gates, that’s for sure.

Also, times have changed. Barriers of entry to entrepreneurship are higher, as are the failure rates. UP until 2008, housing, mining, construction offered good pay for college drop-outs, but the housing construction market imploded in 2006 and never recovered, as well as the the mining and energy markets in 2011 and 2014, respectively. Oil fell from $100 in 2013 to $40 as of August 2014, causing mass layoffs in the whole energy sector. That includes alternative energy, which is less attractive when oil prices plunge. With the exception of a small blip in 2000-2002, high-tech is much more resilient to macro conditions, but the IQ barriers to entry are higher, with or without a college degree.

Inverse Relationship Between Stock Prices and Volatility

Right now, even I don’t fully understand how markets work. I’m getting better, but still not where I need to be. There are two accounts under my control: a simple one that allocates an equal amount of money into 30-yr treasuries and a retail ETF, which has done well with annual returns of about 50%; and second, a more complicated mixed portfolio, which has not done as well as I had hoped due to the mistake that I explained yesterday. The gap between the better hypothetical portfolio and the my own is around $2,700, up from $2,000 yesterday. A disappointment. I still don’t fully understand how volatility works, and very, very few people – if any – understand the intricacies of volatility futures and mean-reversion delay. If you think volatility is complicated, futures add a new level of complexity. Generally speaking, as the market plunges, volatility rises. Normally, the inverse geometric * relations hold. But when volatility rises too much, like it did on Monday, there is a lag between volatility and stock prices, meaning that stocks can fully recover quickly but volatility may remain very elevated. So not realizing this caused me to misappropriate resources by being short volatility when I should have bought stocks.

* Rather than computing correlation coefficients, it’s easier and more effective to simply analyze the the two charts (the underlying index (S&P 500) and volatility futures) at the extremes:

The lag tends to be much less, or even non-existent, for smaller spikes in volatility. Also the lag tends to come later and not after the initial spike in volatility.

If the market crashes again, I am not going to make this mistake again. I’ll have a better strategy specifically for that situation, and then switch back to something else.

High-IQ Wins Again – Stocks Surge For 2nd Day

Stocks keep going up, the left’s shrill cries for crisis still being ignored. Zerohedge wrong again, another defeat snatched from the jaws of what seemed like a certain victory. So close and yet so far. The Nasdaq is up a mind-blowing 7% in the past 2 days alone – staggering. The S&P 500 up 6%. The left wants to live in a world where IQ is not important, where stocks stop going up, where wealth inequality is bad for the economy, where Bay Area homes prices & web 2.0 valuations fall – and it’s never gonna happen, sorry liberal perts. We’re still in the greatest wealth creation boom ever.

The NRx movement should embrace Silicon Valley and Wall St. as being places that reward merit, individualism, and wealth creation over egalitarianism and collectivism. HBD is still more relevant than ever. IQ, STEM, coding… all important. High-IQ stocks like Amazon, Facebook, Google, and Netflix are rocketing higher day after day. You have to understand that America, more so than any other place in the world, rewards creativity, IQ, capitalism, and competence – and that’s why stocks always come roaring back, no matter how hard the liberal media tries to make things get worse. The left wants Silicon Valley to become another Ferguson, Baltimore, or Detroit. The only black lives that matter to the left are those who vote for liberal candidates.

I am aware of the moral decay problem, but even Moldbug said in his manifesto that decay is not the biggest problem, it’s violence, and I agree.

Especially organized violence. Next to organized human-on-human violence, a good formalist believes, all other problems – Poverty, Global Warming, Moral Decay, etc, etc, etc – are basically insignificant. Perhaps once we get rid of violence we can worry a little about Moral Decay, but given that organized violence killed a couple of hundred million people in the last century, whereas Moral Decay gave us “American Idol,” I think the priorities are pretty clear.

He’s right. The confiscation of private property by force and decree is worse than decay. Moral decay does suck, but you can always try to opt out of it. You can turn off the TV & radio, stop reading the trashy ad-filled newspapers that are trying to scare you. That’s what I have done. No TV and no radio and no newspapers. It’s crap. I don’t need to read the headlines to figure out that the supposed China crisis was mostly hot air or that stocks would rebound – I came to those realizations myself based on my years of knowledge about how the economy and stocks work. About china, there is hysteria is that GDP growth is slowing from 8% to 7%. I am not kidding…everyone is freaking out over a single percent, and there’s no evidence this weakness has spread to America. 99% of opinions & news is worthless. You need to find that 1%.

Buy The Dip

As everyone is freaking out about stocks falling, a buying opportunity has presented itself:

The pattern now is reminiscent of the selling in late 2011 which, in retrospect, was a good buying opportunity as the market proceeded to rally another 70%.

The big concern right now is over supposed economic weakness in China. But aside from that, there aren’t any new developments in the US economy to justify another bear market, or at least nothing in the data has meaningfully changed between today and a month ago when the market was 12% higher. 99% of what’s said by the financial media is just rumors and fear intended to boost advertising dollars and ratings. The doom and gloom media is trying to create narratives when, in fact, most of this selling has no underlying structural cause and is just noise. Capitalism is not dying. Economically, China is still doing better than the vast majority of emerging markets. Stock prices of high-IQ companies like Amazon, Google , Facebook, and Tesla will keep rising. Consumers will keep consuming. Valuations for Uber and Snapchat will not fall. Bay Area homes will keep being expensive , including my neighborhood where prices keep going up.

As for myself, my stock account is negative for the year, so it’s not like I can pretend to be unharmed in all of this, although I only keep some of my money in stocks. Deeply regretting not buying TQQQ on the dip at $75 couple days ago, and it’s now at $91. Had I done some things differently, I would have about $2,000 more dollars now on the account, and while it isn’t that much money, it’s still a personal failure on my part in not choosing the better trade. Yeah, they say the grass is always greener ….blah blah, but I want to get to the point where every decision is an optimal one.

If you have a sizable sum of money, Bay Area real estate may be better than stocks. You get a much smoother rate of return. But that’s not an option for the vast majority of people, since the homes in that region are expensive and scarce. That’s the ‘depressing’ reality about investing: the easier it is to invest in something, typically the worse the returns for the average person. A lot of people who buy stocks lose money; there are too many stocks and sectors to choose from, and most of them are bad. To bypass this inherent difficulty of choosing stocks, it’s recommended buying index fund ETFs or sector ETFs, which are described below.

As mentioned before, my favorite sectors:

Retail (XLY,RETL,RTH)

Healthcare (XLV)

Large-cap technology (QQQ)

Payment processing (Mastercard, Visa, Paypal; there is no ETF for these)

Least favorite sectors:

Energy (XLE)

Commodities (GLD,USO)

Emerging markets (EEM)

Miners, oil shippers, and drillers (Misc.)

Emerging market currencies & bond funds (Misc.)

Junk bonds (JNK)

High yield misc. funds (MORL)

These sectors to to be macro-sensitive, meaning that they are susceptible to changes in the US dollar or emerging market GDP growth. These sectors also have too much volatility and poor returns. A junk bond can pay 7%a year, but the volatility is too high for a small return that can be erased in a few weeks of bad trading.

30-yr Treasury bonds (TLT)

Treasury bonds are also pretty good, since the weakness in China and the overall stock market malaise will delay any rake hike until 2016. A lot of people, who don’t how bonds work, don’t know the difference between a treasury bond and a junk bond. A high yield or risky bond* is a ‘risk-off’ asset, meaning it generally does badly during periods of economic weakness or fear. This is due to the flight to safety, which causes people to move money out of riskier assets into safer ones such as short-term government debt. A treasury bond is the opposite : they tend to do well during periods of panic, so if you plan on diversifying or hedging by buying bonds, make sure you are buying the right kind. When there is a flight to safety, money goes out of riskier junk bonds and into the safest ones of all: treasury bonds.

* this includes junk bonds, leveraged bond funds, emerging market bonds, REITs,

Wired For Success: Brain Scans Predict Mathematical Ability

This is a huge story on Reddit right now, getting a staggering 4000+ up-votes in less than eight hours: Brain scans better forecast math learning in kids than do skill tests, study finds: Gray matter volume and connections between several brain regions better forecast 8-year-olds’ acquisition of math skills than their performance on standard math tests.

The viral response on Reddit is evidence that the large millennial demographic has an interest in HBD-related matters, whereas with older generations you don’t see as much enthusiasm. Millions of Young people are willing to give HBD the benefit of the doubt instead of dismissing it a racist, sexist, or whatever. Maybe this is because millennials, many of whom are well-educated and have superior critical thinking skills, are realizing that the left’s environment-based explanations (not enough public school funding, rich people, poverty, etc) for education and socioeconomic under-achievement among certain groups has fallen short, and that biology, not environment, is the primary cause of underachievement. That means people are falling behind because of low IQs or ‘poor brain wiring’ in an economy where intellect is increasingly important. People who are wired for math success are also wired for socioeconomic success, as IQ and income are highly correlated, and in the post-2008 economy this trend has accelerated. The hyper-competitive economy has magnified the economic consequences of individual cognitive differences, such that a person with an IQ 120, for example, is at a much greater advantage than, say, 100 years ago. Until the 2000′s, people who were bad at math still had a lot of good career options, but nowadays with manufacturing jobs going away and everything being outsourced and automated, math, and intellect, and wealth are becoming increasingly intertwined and inseparable. That article hits close to home – maybe those kids who were whizzes at math in elementary school and are now making six-figures in STEM jobs didn’t just make better life-decisions, but are actually biologically better than everyone else, too. That means you have much less free will than you want to believe, and that biology preordains some to success but all too many to mediocrity or failure, and there’s little that anyone can do about it.

As shown below, the income disparity between advanced degree holders and everyone else has widened markedly since 2010. Getting an advanced degree typically requires an IQ of at least 115, hence being smart has never been so important for socioeconomic advancement as it is today. If you don’t have an IQ that is at least one standard deviation above average, you life may suck.

The research tracked 43 children longitudinally for six years, starting at age 8, and showed that while brain characteristics strongly indicated which children would be the best math learners over the following six years, the children’s performance on math, reading, IQ and memory tests at age 8 did not.

Hmmm….but I also wonder among the sample how many poor test performers had unfavorable brain scans, versus good test takers? It could be a small faction of poor test takers have good scans , whereas a larger percentage of good test takers do. The study does not explain why the relationship holds in the future but not at the time of the initial test.

This was the most up-voted comment on Reddit:

There is a difference between aptitude and achievement. Psychometric (standardized) tests are most often tests of achievement, not aptitude. The measure of connectivity and cortical thickness is a measure of aptitude, not achievement.
The brain scans will not tell you if a child understands complex fractions. An achievement test will tell you this. An achievement test will not tell you if the same child could one day master tensor calculus. The article suggests this may be possible.
Neuroimaging will not replace achievement tests, and achievement tests are not good measures of aptitude.
Note that the researchers used neuroimaging to measure aptitude, and then psychometric tests to assess achievement later on.

However, although millennials show a keen interest in IQ and HBD related topics, confusions still remain. A psychometric test is not always the same as a standardized test. A psychometric test doesn’t even have to be an IQ test. Some psychometric tests test for personality or mental disorders, etc. A well-constructed IQ test should not be an achievement test, meaning that it’s possible for someone who gets low grades or is even illiterate to perform well on an IQ test. IQ tests or the pre-1995 SAT are good aptitude tests, and the later is also effective as a achievement test. As for cortical thickness being a proxy for aptitude and IQ, the relationship isn’t actually so clear. Counterintuitively, according to a study, high-IQ individuals early in life have less cortical thickness than average-IQ subjects:

Later in life, cortical thickness tends to be the same for all IQ levels.