Monthly Archives: November 2015

How Bonds Respond to Rate Hikes

There’s a lot of hand wringing about rising interest rates and how it will affect bonds and other income-based investments. There’s a lot of doom and gloom, too, predictions that the bond market will crash if the fed raises rates.

There’s a few things to keep in mind:

Bond ETFs and futures have mostly priced in a December rate hike, with possibly more hikes down the road. When you buy a bond and rates go up, it makes your existing bonds less valuable (because why would someone want a bond that pays less interest over one that pays more). Short-term bonds are more insulated to rate hikes because they are replaced more frequently. If you have a 30-year bond and rates begin to surge, you may feel regret being locked into an existing low rate for so long, because you will have to wait 30 years until it’s renewed at a higher rate. The ETFs and futures which track bonds in real-time try to account for how the yield curve responds to rates, and new bond replacements. The results are somewhat counterintuitive. So long-term bonds should get bludgeoned when rates rise, right, because you’re stuck with them for so long? Not so fast. The yield curve, unlike the federal funds rate, cannot be directly controlled by the fed. When interest rates rise, the long-dates bonds respond much more slowly because we’re looking 10-30 years ahead and no one really knows what will happen that far out. Just because interest may be at 5% today doesn’t mean they will be at 5% in 30 years, especially if there is deflationary pressure such as impending economic weakness or the ‘flight to safety’. The result may be an inverted yield curve, where the long-term rates are lower than the short-term ones. If rates rise from 0% to 5%, the 30-year rates won’t also rise 5%, since, as mentioned before, long-term bonds are much less sensitive to fed policy.

With this is mind, I’ll test how various income products perform during rate hikes. I’ll use bond ETFs as proxies for the bond market and as the becktesting software. If rate hikes are bad for bonds, we would expect the prices for these ETFs to fall after adjusting for dividends (interest). The period tested is 2004-2006 when the fed raised rates from 1% to 5%:

As you can see below AGG, an ETF of investment-grade 4-5 year bonds, fell in Q2 of 2004, possibly in anticipation of the rate hikes, only to rise 10% as the fed raised rates between 2004-2006. Not bad. Had you sold in early 2004, when it would have made the most ‘sense’ to do so due to all the headlines about rising rates, you would have missed out on a large rally. That’s why you cant base your financial decisions on the news. Everything is priced in, in accordance with the EMH (efficient market hypothesis).

A similar outcome is also observed for LQD, an ETF of 7-8 year duration investment grade corporate bonds.

The 2-year treasury bond (ETF:SHY) also held-up well:

Including interest, holders of 10-year treasury bonds (ETF:IEF) made about 12% from the nadir of the rate cycle in 2004 to the peak in 2006:

30-year treasury bonds (ETF:TLT) performed the best, netting holders over 25% as the fed raised rates:

Based on the performance of these ETFs during the last fed tightening cycle, rising interest rates should not be a concern. After factoring in dividends, all the bond ETFs made gains.

As an addendum, I only recorded nominal returns. The real returns are slightly harder to obtain and requires integrating the yield and then discounting this from the nominal. I think <3 year duration bond may have lagged cash on a real basis, but longer-dated duration bonds still outperformed cash in a bank account. According to data compiled by 7-12, between 2004-2007, bonds lagged cash in 2005 and 2006, but this was by a small margin, and they didn’t make a distinction between different bond types. As interest rates spiked to double-digits between 1977-1981, bonds performed badly relative to cash, but I don’t foresee interest rates rising any higher than they were in 2006. Most people when they access their stock and bond accounts, don’t care so much about real returns. Just not seeing losses on an absolute basis is good enough.

Understanding Comes Before Change

America, it’s economy, and the news cycle is still in auto-pilot mode since early 2014 or so, going nowhere at a 1000 miles an hour. Everyone in the media wants crisis and mayhem, for ratings and clicks and page views, but the few crisis that come (such as the France attack) are short-lived, leaving the media hardly satiated. We have the media rattling their sabers, trying scare people, yet stocks keep going up, with the S&P 500 up 2% this week rebuking the welfare liberals who wanted the economy to succumb to terrorism. If you look at the top of this site it says, ‘enlightenment through understanding’, which means that ‘enlightenment’ isn’t through getting mad, predicting crisis, or trying to change the world, but from merely understanding it and then acting accordingly. Just the ‘understanding’ part is hard for people, because so many have been brainwashed by both the mainstream and alternative media. The whole media complex is about getting people agitated and scared, for clicks and pageviews, or to quote Mike Stathis, the media is about creating the illusion of useful content so they can sell you advertising. I used to follow the news, now I don’t, except for a handful of sites. Most of it is just crap. My advice is to just go Reddit and read the comments, since that is where the truth usually is, anyway. Same for Britbart, which debunked the comments falsely attributed to Trump about an ID program for Muslims:

Trump does not say yes or no. Instead, he dodges the question, and comes back to the question of monitoring mosques (which the U.S. has done in the past): “We’re going to have to–we’re going to have to look at a lot of things very closely,” Trump said when presented with the idea. “We’re going to have to look at the mosques. We’re going to have to look very, very carefully.”

In a nation infested by college cry bullies, this is why the liberal media is losing credibility, when the truth is just a couple mouse clicks away.

But if the status quo sucks, shouldn’t we try to change it? First you understand it, but change is too hard. Acceptance is easier. The stock portfolio I manage is up 20% this year because I accepted based on the empirical evidence that there won’t be a crisis and that the market would keep going up, thus, due to my understanding, I ignored the clowns on Zerohedge, for example, who said to sell stocks and short bonds due to imagined hyperinflation that never came. While some parts of the status quo suck (feminists, liberals, etc), other parts are good: technology – clean running water, for example, which some countries don’t even have. Capitalism creates abundance, but it also brings change – structural unemployment and wealth inequality. It creates winners and losers, with the losers being the ‘takers’ or those who can’t keep up. That’s why cheap, abundant entertainment is important, to placate the masses. It sounds cynical that we have a nation of people ‘plugged in’ and not really contributing or creating, but that’s the point where’s we’re at now. Maybe the definition of ‘contributing’ is also changing, as the American Dream is redefined. In the past, ‘contributing’ maybe meant a 9-5 job, but now perhaps it’s watching Netflix or uploading pictures to Facebook – both of which create economic value for the aforementioned companies, even if to many such activities seem unproductive. Maybe ‘contributing’ is through a ‘gig job’ such as Uber or Taskrabbit…who knows. The world is changing, and, no, you can’t get off this ride.

For those of you who are in the knowledge economy who have high-IQs, you have the ability to become learning machines, to become successful and speed to catch new trends, and to see what other people don’t. If you’re smart, you can read a book or an article and get insight your friends cannot see. For example: a 17-year old starts an app company, Summly, which he sells to Yahoo for $40 million. Two twenty-somethings start Snapchat and are worth billions, on their way to being as rich as Bill Gates. Opportunities are seen with minds, not eyes. Leftist delusions serve no good in becoming successful. On a scale of 1-10, ’10′ means you are a genius and can read a book in a single day with full comprehension, and’1-3′ means you are slow, probably in the special ed class as a kid. Does not read books. ’4-6′ is average. If you are ‘>7′, you’re wealthy cognitively, with the potential to become successful. If you’re at least a ’9′, you probably have significant above average net-worth for your age and probably a high-IQ. Too many people have been brainwashed by liberalism and are delusional, thinking they are smart, victims of Dunning–Kruger. If I ask you IQ questions and you cannot answer most of them, you are probably a ’4-5′. Half the world is a ’5′. All that matters is winning in the end: it’s both a beautiful and shitty part of life. I read about the left blaming the recession for being failures at life, and I din’t want that to be me. I want you to not be delusional.

The Daily View: Never Take Financial Advice From Zerohedge

Why you shouldn’t take financial advice from Zer0hedge:

This is the 3rd-longest bull market in US history, and by my assessment it has much further to go. Zerohedge have been bearish since the bull market began six years ago, and anyone who heeded their warnings to stay out would have missed some incredible gains. Interest rates haven’t budged and valuations are not high. Pretty much all the economic conditions that were in place in 2009 when the bull market began are still here, albeit with much higher prices & earnings. All the important data (consumer spending, exports, profits & earnings) remains strong. Although interest rates are low, this is still a rally driven by fundamentals. Multinational companies like Google and Disney keep reporting blowout numbers every quarter. The M2 money velocity is still stuck, indicating that all the fed intervention hasn’t created inflation despite all the predictions on zer0hedge and elsewhere that it would. Deflation is still a bigger concern than inflation – however- I will note that this is monetary/employment-based deflation, which is separate from the trend of inflation for services like tuition, healthcare, daycare, cable bill, and insurance, for example. We’re in a sweet spot where the data that influences fed policy is deflationary, even if there is inflation elsewhere.

HBD also plays a role in my bullish thesis, knowing that social Darwinism means that the smart will continue to be rewarded with more, including higher stock and home prices. The market is rising because of the economic contributions of the cognitive and financial elite, as much the left wishes that the useless ‘black lives matter’ did matter. More like ‘smart/economically productive lives matter’. Creative people creating economic value.

The Silicon Valley Suicides

In these days of assumed meritocracy, where children can be turned into anything, we admire them as displays of remarkable engineering, to be tweaked and fine-tuned into bilingual perfection. What we’ve lost, perhaps, is a sense that there may be things about them we can’t know or understand, and that that mysterious quality, separate from us, is what we should marvel at.

For better or worse, that’s not true. The growing importance of IQ in the 21st century economy means some some people may have more potential to succeed than others, and the problem is when these children become older they come to the shocking realization that their parents and teachers who coddled them were wrong and that the meritocracy, even if we don’t fully understand it, rules. That means smarter people, who tend to produce more ‘merit’, get further ahead in life.

The ramifications of individual cognitive differences have become magnified in that the difference between a 100 vs. 120 IQ is much more important today than , say, a couple generations ago when the economy was less automated.

Some also blame misandry and the feminist school environment for the suicides. Hard to point point the cause.

Finances are an important factor:

$34,000 is the misery line. If earning $75,000 annually is the benchmark for financial happiness –– earnings over that amount haven’t been shown to increase happiness in the long-term –– then consider $34,000 the new tipping point for financial misery. People who earned less than $34,000 were 50 percent more likely to commit suicide, researchers found. People who earned between $34,000 and $102,000 increased their risk for suicide by only 10 percent.

iSteve lists the latest list of the names of all the National Merit Scholars in California by high school:

Gunn H.S. in Palo Alto, the subject of the article, has 46 putting in the top few in California.

These are the people who are the most likely to succeed in our increasingly technological, winner-take-all economy.

Abortion & Healthcare Policy

From Evolutionist-X” In Defense of Planned Parenthood

On numerous occasions, this blog has argued that Republicans could support abortion as a way of reducing entitlement spending and crime, which I discuss further here.

The usual rebuttal is that this is the policy of Margaret Sanger and other liberals. Maybe fifty years ago, but nowadays if a liberal like Hillary tried to frame abortion in the context of reducing entitlement spending and crime, her campaign would be over because of the left. When William Bennett made a comment about abortion and crime, it was the left who attacked him. Same for Steven Levitt in Freakanomics in which the chapter on how abortion can reduce crime received much criticism from civil rights groups, but also some criticism from the right. The welfare left supports abortion not to potentially make the world a better place, but due to a lack of impulse control, as a form of ‘empowerment’ for women. And just because a liberal supported something a couple generations ago, doesn’t prove it’s necessarily bad today or that Republicans should totally disregard any merit of it, and today’s welfare SJW liberals are much further to the ‘left’ than the classical/pragmatic liberals of generations ago.

From From Jonathan Gruber’s 1998 study:

…for the marginal child not born due to increased abortion access, the odds of living in a single parent family would have been roughly 70 percent higher, the odds of living in poverty nearly 40 percent higher, the odds of welfare receipt 50 percent higher.”… “From these results, we estimate that the legalization of abortion saved the federal government over $14 billion in welfare payments through 1994.”

Abortion is disgusting, but so is cleaning up crime scenes. I think rather than immediately dismissing it is ‘bad’ we need to consider the possible good that can come out of it, at least from a utilitarian/pragmatist perspective.

Some people find the idea of utilitarianism, as well as thought experiments such as the Trolley Car, to be an affront to their moral sensibilities, since sometimes the most optimal allocation of a resource often comes at a cost to something someone else holds dear. Some are unsettled by the idea that the value of a human can be reduced to a number, but if you have insurance (health, auto, home) – that is exactly what it is, an attempt to assign a monetary value to a human life in order to price a policy, yet when the argument is framed differently (trolley car or abortion), these very people become mortified at the premise that human life does indeed have a finite value, or that some lives may be more valuable than others. ‘Pro life’ taken to its extreme would be mean no war and no death penalty – both positions many Republicans, who identify as ‘pro life’, support. So why does this contradiction exist? I suppose because they rationalize from a utilitarian standpoint that the possible loss of some innocent lives (the occasionally wrongly executed individual, soldiers dying, or collateral damage) indirectly serves a greater good (preventing more deaths both directly and indirectly), justifying this utilitarian risk/reward trade-off.

But economics, which studies the allocation of scarce resources among people, is an inescapable part of our everyday lives, at both the individual and national level. The discussion or debate of how a finite amount of a public good (tax payer dollars, for example) will not simply ‘go away’ just because some people get offended; we need to learn to accept economic reality even if we occasionally get offended by the outcome. This is where some pro-lifers fail by holding all life, viable or not, to be sacred, which runs afoul of rules of economics.

My stance on it is, if you need round the clock care to perform everyday tasks, like going to the bathroom and eating, and you have to have someone make all your decisions till the day you die, because you’re physically in capable of doing so, you’re more of a burden than anything.

The Unpopular Puffin may have a point, and considering that it went viral on Reddit, many people apparently agree. In the recesses of our minds, we know that certain individuals are a drain on society, but we fear the consequences (loss of friends, employment) of voicing this unpleasant truth. And from Wikipedia:

In the United States, the average lifetime cost of a person with an intellectual disability amounts to $1,014,000 per person, in 2003 US dollars.[52] This is slightly more than the costs associated with cerebral palsy, and double that associated with serious vision or hearing impairments. About 14% is due to increased medical expenses (not including what is normally incurred by the typical person), 10% is due to direct non-medical expenses, such as the excess cost of special education compared to standard schooling, and 76% is indirect costs accounting for reduced productivity and shortened lifespans. Some expenses, such as costs associated with being a family caregiver or living in a group home, were excluded from this calculation.[52]

Let’s consider the case of an expectant middle-income mother whose ultrasound uncovers that her fetus has Trisomy 13 or 18, a highly lethal genetic anomaly; in the event it’s not a stillborn, it will cost about a million dollars a year to keep it alive. Economically, that is a poor use of a public good (tax payer dollars), especially since the baby, profoundly disabled, will never contribute in any meaningful way to society in its short existence. To the mother, the baby could be priceless, but to society it’s not. Even Trisomy 21, which is less lethal, is still very expensive. Sure, if the mother has millions of dollars she can use her own money to keep it alive – and that should be within her right – but when a public good is involved, the question of rationing inevitably comes up, as to be expected. That million dollars can be better spent helping babies that are much less disabled. The plan of prenatal screening, with required abortions for severe abnormalities, could make the process less painful for parents, since the pregnancy would be ended before it gets to the second trimester or beyond.

Rapid advances in biotechnology means we can use screening and genetic engineering to create a better society by choosing who we want in and which traits we wish to leave behind. Before dismissing this as ‘Nazi science’, there are many practical applications. Consider the Dylan Roof spree killing, as well as other tragedies such as Sandy Hook massacre and the 2012 Aurora shooting. As it turns out, there may be a genetic malfunction to blame, and some people may in fact be programmed to kill.

Related: Steven Levitt is Right, Not All Life is Sacred

Thomas Sowell on The Bell Curve

In his book Black Rednecks and White Liberals, Sowell blames ‘redneck’ culture for black dysfunction, arguing that white culture made blacks dysfunctional:

What the [white] rednecks or crackers brought with them across the ocean was a whole constellation of attitudes, values, and behavior patterns that might have made sense in the world in which they had lived for centuries, but which would prove to be counterproductive in the world to which they were going — and counterproductive to the blacks who would live in their midst for centuries before emerging into freedom and migrating to the great urban centers of the United States, taking with them similar values.

The cultural values and social patterns prevalent among Southern whites included an aversion to work, proneness to violence, neglect of education, sexual promiscuity, improvidence, drunkenness, lack of entrepreneurship, reckless searches for excitement, a lively music and dance, and a style of religious oratory marked by strident rhetoric, unbridled emotions, and flamboyant imagery. This oratorical style carried over into the political oratory of the region in both the Jim Crow era and the civil rights era, and has continued on into our own times among black politicians, preachers, and activists. Touchy pride, vanity, and boastful self-dramatization were also part of this redneck culture among people from regions of Britain where the civilization was the least developed.[25]

Yeah, redneck inventions like Rap Music keeping blacks down lol. It’s just laughable.

Sowell has voiced criticism of the The Bell Curve, writing:

[Herrnstein and Murray] seem to conclude… that… biological inheritance of IQ… among members of the general society may also explain IQ differences between different racial and ethnic groups…. Such a conclusion goes… much beyond what the facts will support….continued

There are some flaws in his analysis:

1. Little is known about these WW1 military competency tests, and we can’t assume as Sowell does that it’s equivalent to modern IQ tests.

2. According to a multitude of studies, the black-white IQ gap is persistent, even to this day.

3. Studies have also shown IQ tests are not culturally biased.

4. Sowell moves the goalposts, deflecting attention away from blacks and onto Jews, arguing that if Jews saw an IQ rise, then so must blacks and therefore the book is invalid.

Perhaps the most dramatic changes were those in the mental test performances of Jews in the United States. The results of World War I mental tests conducted among American soldiers born in Russia–the great majority of whom were Jews–showed such low scores as to cause Carl Brigham, creator of the Scholastic Aptitude Test, to declare that these results “disprove the popular belief that the Jew is highly intelligent.” Within a decade, however, Jews in the United States were scoring above the national average on mental tests, and the data in The Bell Curve indicate that they are now far above the national average in IQ.

5. The above is an example of the fallacy of composition – that Russian Jews who served in WW1 are the same as all Jews. There could be a selection bias here in that Jews who were less intelligent fought in the war, whereas more intelligent Jews went school or business and would not be included in the WW1 testing sample. Jews ‘in the united states’ may not be the same as those Russian Jews in WW1, yet Sowell lumps them together. There is no distinction between Ashkenazi Jews, who are smarter, versus Sephardi. Hitler supposedly banned IQ tests, presumably because Jews scored too high?

No-one as yet however has found any documentation of a formal ban by the Nazis. It seems that the tests were frowned on by the Nazis rather than banned outright—which is also broadly true of today’s Left of course. And there was certainly some acceptance of the greater intelligence of Jews in prewar Germany.

This was in the late 30′s, just two decades after WW1, so in accordance with Sowell’s thesis those Jews sure got smart fast. Same for the Manhattan Project, in the early 40′s, predominately involved Jewish scientists.

Sowell seems to be subscribing to the ‘magic dirt‘ thesis that Jews suddenly wised up upon stepping foot on America’s ‘magic dirt’.

Even if Jews saw gains in IQ, that doesn’t change the fact that blacks still lag, even after many decades despite billions spent on education and other programs.

Sowell is using Asians and Jews as pawns to advance his leftist views. Had the book not mentioned blacks, he would not have have taken issue with it.

6. Upper-income black children score as poorly on the SAT (a good proxy for IQ) as poor whites, which deals a blow to the left’s thesis that poverty is the cause of black underachievement:

NRx and Christianity

I know there are some people in the NRx-sphere who are practicing Christians, notably Nick B. Steves, as evidenced by the picture of Sancta Maria on his blog, and Vox Day, by his numerous writings – in particular his book The Irrational Atheist, but Vox in 2014 renounced the NRx label, although he’s still lumped in with the ideology.

It occurred to me awhile ago that Christianity (or any of the Abrahamic religions) may not be compatible with my interpretation of RNx (yours may differ), particularly in regard to economics, the concept of salvation and redemption, and HBD.

From my own experience attending Catholic Church, the message preached, with perhaps the exception of some social issues like reproduction and marriage, is a liberal one – particularity, about the concept of the ‘ownership society’, which the Church seems to reject. For example, these passages that implores Jesus’ disciples to forfeit their possessions, from (Matt. 19:16-26):

…And behold, one came to Him and said, “Teacher, what good thing shall I do that I may obtain eternal life?” 17 And He said to him, “Why are you asking Me about what is good? There is only One who is good; but if you wish to enter into life, keep the commandments.” 18 He said to Him, “Which ones?” And Jesus said, “You shall not commit murder; You shall not commit adultery; You shall not steal; You shall not bear false witness; 19 Honor your father and mother; and You shall love your neighbor as yourself.” 20 The young man said to Him, “All these things I have kept; what am I still lacking?” 21 Jesus said to him, “If you wish to be complete, go and sell your possessions and give to the poor, and you shall have treasure in heaven; and come, follow Me.” 22 But when the young man heard this statement, he went away grieved; for he was one who owned much property.

23 And Jesus said to His disciples, “Truly I say to you, it is hard for a rich man to enter the kingdom of heaven. 24 “And again I say to you, it is easier for a camel to go through the eye of a needle, than for a rich man to enter the kingdom of God.” 25 And when the disciples heard this, they were very astonished and said, “Then who can be saved?” 26 And looking upon them Jesus said to them, “With men this is impossible, but with God all things are possible” (Matt. 19:16-26).

So to be ‘saved’ you must, essentially, live in penury. I know there also an abstract interpretation of this, too.

Second, the existence of the Holy Trinity cannot be falsified. As a rationalist who cares about empirical evidence, the belief in an omnipotent deity or spirit may may not be rational. With the exception of certain theoretical physics concepts, modern science does a good enough job explaining all natural phenomena, whereas in ancient times people used religion and creation myths to explain things (that we now take for granted) that they didn’t otherwise understand. But I also understand that many practicing Christians are well-versed in sciences, so the condescending leftist caricature of the ‘ignorant Christian’ is wrong, and, understandably, deeply insulting.

Third – from my own experience going to Church – there is no mention of anyone being intrinsically ‘better’ than anyone else; no mention of HBD-type concepts. Yet as evidenced by growing income inequality and how IQ, which is a biological trait, is becoming becoming more important than ever in influencing socioeconomic outcomes, this inescapable pull of biological and economic reality perhaps renders a lot of the teachings of the Church obsolete, or at least atavistic. I disagree with the ‘low barrier to entry’ version of salvation of modern Christianity, arguing that salvation, especially in our competitive post-2008 world, is not through belief, which is easy, but by quantifiable accomplishments. Although predestination is mentioned in the Bible in that some will be saved, that’s already happening today – in that the people today who are ‘saved’ are those with good genes, while those with genes unpropitious to success fall between the cracks, often dependent on charity, like the welfare state, paid for by productive people. That’s why I’m a Darwinian Conservative, because social interpretation of Darwinism is more perhaps more applicable to modern society than the Bible, which ties into my ‘reality-based’ approach as mentioned above, with the ‘hierarchy’ and ‘social order’ aspect of Conservatism being a biological and economic one.

Thoughts on France

Sigh…more terrorism by Muslims in France…not the first time, and probably won’t be the last.

Trump: Paris Attacks ‘Much Different’ If France Had More Guns

Not so sure about this. It’s not like everyone is armed and clairvoyant of an impending attack, especially not attendees of a concert. Terrorists, after all, have the advantage of striking first. If someone parks a car full of explosives and detonates it, how will guns stop that? Or someone wearing a suicide vest? Islamic terrorism can’t be thwarted with the same methods you would use to thwart, say, a burglar or a blank robber.

A commenter on Free Republic shares a similar sentiment:

I have carried for over 20 years and there is no doubt a firearm can be used to minimize a mass shooting or idiot with a knife, but look at the history of Israel. The most effective attacks have generally involved explosives and they are the hardest to stop.

Again, denying jihad Johnny access to the target via immigration is the most foolproof way of preventing this. I don’t take anything away from the 2nd Amendment, but our focus must be on defensive immigration policies.

Another problem is psychology – when ambushed by automatic weapons, I imagine the natural response for most people is to flee, not shoot back. Hypothetically, if some people in the concert were armed and had the bravery to not flee, they could have gotten some shots in, but this makes a lot of generous assumptions.

Terrorists and spree shooters target masses of people, with no respect for their own lives or the lives of others, whereas robbers want loot. In the former, it makes the situation much more deadly and unpredictable. I can’t even begin to conceptualize, beyond fear, what would go through someone’s mind in such an event.

The solution is better security, which includes racial profiling and immigration restrictions. I support the right to carry, but let’s not pretend it’s a panacea for Islamic terrorism.

From Return of Kings: France Allows Large Muslim Population, Rewarded With Most Sophisticated Terrorist Attacks Since 9/11

America has a much smaller Muslim population percentage-wise than France (1% vs. 5-10%), but that didn’t stop 911.

Why didn’t the Islamist terrorist attacks occur in a Muslim-free place like Poland?

Maybe security. France may have been an easier target. I don’t think Muslim terrorists care how many other Muslims live there (after all, Muslims commit terror against other Muslims); they care more about visibility (media coverage after attack) and probability of success.

One reason why France (and much of Europe) is susceptible to Islamic terrorism is because, unlike America, there are no natural geographic barriers with the Middle East. Also because of its culture that goes back many centuries – France is like a global hub that attracts both the good and bad, whereas other countries tend to be more insular and less eclectic. France was the intellectual breeding ground for most despots of the last century, many of whom such as Solath Sar (Pol Pot) studied there and returned to their home countries to apply those teachings with not so nice results.

From The Reformed Broker: The Market’s Response to Crisis

The historical evidence says to Buy the dip after periods of crisis.

Solidarity is Useless. France doesn’t need our solidarity; it needs to get its shit together.

Other examples of stupidity, those who say this is France’s ’911′, what happens if there is a worse attack, which would not shock me given Europe’s emasculated leadership. Does that become the new ’911′?

IQ Roundup

This week, some interesting posts about IQ:

From Pumpkin Person

The SAT is said to correlate about as well with IQ as two different IQ tests correlate with one another. In his book Real Education (pg 69-70), Charles Murray claims that only 17 year olds capable of getting an 1180+ on the post 1995 SAT (Critical Reading + Math) are true college material. Although 35% of American 17 year olds take the SAT, he estimates that only 10% of 17 year would score 1180+ if all of them took it.. In other words, 1180+ is equivalent to an IQ of 120+.

In his book Coming Apart (pg 375) he estimates an SAT score of 1400 is equivalent to an IQ of 135. From these two data points, we can create the following formula for converting SAT into IQ equivalents:

That’s a pretty high threshold according to Murray, but others say college is ‘dumbed down’, so it can’t be both. I suppose the threshold would apply to STEM an not other majors? Maybe Murray was referring to college back in his days, which had more rigorous standards, whereas today college may be easier. Nonetheless, the college dropout rate today is still very high (approx 60-50%), suggesting that even ‘dumbed down’ courses may prove too challenging for many, in agreement with Murray’s findings, although people leave for reasons besides the coursework being too hard.

From Evolutionist-X : Is Genius Fragile?

Environmentally, it is already obvious that genius is fragile–that is, it is much easier to drop someone one their head and subtract 40 IQ points than to find any intervention that will reliably add 40 points, but this does not necessarily preclude a variety of interesting genetic findings.

Entropy. Easier to break an egg than reassemble it.

The best ‘intervention’ we have is positive eugenics, since we know there is a hereditary component to IQ.

From Captain Capitalism: Viewing the Liberal Arts from Another Perspective

I remembered vaguely a rule of thumb you needed an IQ of about 115 to be an engineer, but I checked first before consulting and found I was wrong. It was more like 120, with some of the higher level engineers having an average IQ of around 128 (Economics, ahem, ahem, also came in at 128). Regardless, he had more than the raw potential to become any kind of engineer he wanted.

But as I looked down the list I noticed the dramatic drop in IQ as you went from STEM to the liberal arts. Matter of fact if you took the average of the top STEM fields and compared it to the bottom of the humanities your average roughly dropped form 128 to 106, a full 22 point or 1.5 standard deviation drop.

However, this does not necessarily prove STEM is harder. I imagine to be a competent writer, you at least need an IQ of least one or two standard deviations above average, just as you need to be fairly competent to do advanced math. There is a skill or intelligence in involved in forming cogent sentences, captivating plots, and other aspects that go into quality literature. Given that the college dropout rate is so high, maybe those ‘easy’ humanities courses are not easy as commonly assumed. As I can recall, in college the hardest class I took was composition, not calculus. Definitely not ‘dumbed down’ by any stretch.

In the comments, someone posts:

Ultimately, test scores mean nothing. The real test of intelligence is production: what you’ve produced, what you’ve done, what you’ve created.

It just so happens that people with high IQs tend to produce more economic value than those with lower IQs. They create companies, technologies, research, etc. Funny how that works.

From Robin Hansen Hive Mind:

Over the last few decades, economists and psychologists have quietly documented the many ways in which a person’s IQ matters. But, research suggests that a nation’s IQ matters so much more.

As Garett Jones argues in Hive Mind, modest differences in national IQ can explain most cross-country inequalities. Whereas IQ scores do a moderately good job of predicting individual wages, information processing power, and brain size, a country’s average score is a much stronger bellwether of its overall prosperity.

I haven’t read the book, but it would seem obvious that is makes no difference to the prosperity of America if my or your IQ is 30 or 130, but I imagine if enough people have low IQs it would eventually cause problems. A nation of smart productive people can support some dullards, but a national of dullards will probably fail (or at least suffer stagnation with high inflation). That’s what’s happening to South America, Saudi Arabia, and Turkey right now; low IQs are becoming problematic now that the 2002-2011 commodity boom is over and these low-IQ countries have little to offer economically. Also the cognitive capital flight, as the handful of smart people in these low-IQ countries move to America in search of better opportunities.

Jim Simons: A rare interview with the mathematician who cracked Wall Street

Pretty impressive. His strategy is to sift through immense quantities of data to find patterns and then exploit these patters until they stop working. However, the Renaissance Medallion fund since 1993 has been closed to to the general public and is only available to employees of Renaissance Technologies.

The computer-driven Medallion fund has made an average of 34% a year after fees since its launch over 20 years ago. Since the firm bought out the last investor in the Medallion fund in 2005, there’s no information on the fund’s returns since then. Out of the 148 months that elapsed between January 1993 and April 2005, Medallion only had 17 monthly losses. Out of 49 quarters in the same time period, Medallion only posted three quarterly losses. Medallion has had no loss-making years apart from its only one in 1989 during the 1993 – 2005 period.[23]

The fact his fund was able to make such great returns so consistently defies any statistical ‘luck’.

Here is a list of top-performing funds.

The George Soros quantum fund, also closed to the general public, is perhaps the only fund that comes close to matching the performance of Medallion. Although Quantum amassed slightly more money than Medallion, it had a 10-year head start.

But the left says the market is rigged, a scam, and a bubble. These returns should not be possible, but they are, and I doubt Jim Simon’s story is unique. There are probably hundreds of traders quietly making small fortunes in the markets, applying their intellect to find subtle patterns and inefficiencies in the sea of noise; for example, a Japanese trader that made $34 million, and others:

Using highly leveraged financial instruments such as futures and options, it is possible to turn thousands of dollars into millions in a short period of time. There are thousands of professional traders and fund managers who have achieved consistent, market-crushing returns, although they don’t go around bragging about it. The most famous examples are Warren Buffet and Jesse L. Livermore. Another is Richard Dennis, who in just ten years turned $1,600 into $200 million. Although the methods Dennis employed stopped working in the 80′s and 90′s, he was smart and savvy enough to find and exploit inefficiencies in the market to make an enormous windfall. There are many other stories like this 20-something penny stock trader. Although he cost his firm over $100,000 in a single day due to a botched trade, he turned his personal account of just thousands of dollars into hundreds of thousands of dollars in the span of six or so years. Jim Simons’ quant Renaissance Medallion fund has annual compounded returns of over 35% – turning an initial seed investment of a couple million into over $25 billion in just under three decades. Timothy Sykes, a well-known daytrader, turned his $12,415 Bar Mitzvah gift into $2 million. All of these examples show that, yes, you can get rich quickly trading. Mohammad’s returns were not impossible, as many immediately assumed.

Studies have also found that funds run by managers with high SAT scores tend to have better performance.


#Nationaloffendacollegestudentday is going viral on Imgur and Twitter.

These tweets are great; here are some:

As part of the post-2013 SJW backlash, smart millennials on Reddit, Imgur, 4chan and elsewhere are disabusing the leftist lies told to them by their parents, teachers, and clergy. No, you’re not special. Quantifiable results matter. Some people are better than others. Genes affect socioeconomic outcomes. People are ‘special’ for their accomplishments, not for merely existing. Incentives matter, not ‘good’ intentions (increasing unemployment benefits discourages working, for example). And stop complaining about the student loans that you under your own volition took out, although there is some empathy for those who majored in respectable fields but are unable to find work due to the perpetually anemic labor market. If you majored in, say, gender-queer studies or child development, tough shit.

However, it’s always useful to read the comments:

As a college student, I too hate these mythical college students who believe those things you are bashing. I’ll let you know if I find any

Going to college doesn’t necessarily make one a welfare liberal, and as part of the SJW-backlash I imagine there are many college students who agree with the tweets instead of being offended, so we must not generalize all college students as being brainwashed.

But anyway liberals, you’re losing.