Monthly Archives: February 2017

Why Socialism for the Rich, Capitalism for the Poor?

This article is going viral: Why Socialism for the Rich, Capitalism for the Poor?

A small annoyance is how the word ‘socialism’ has come to mean so many things, usually depending on the underlying political or economic motives of whoever is using it, that it’s become hard to define. Socialism can mean:

1. Partial or total government ownership and influence of otherwise private firms

2. Worker ownership of the means of production

3. A system of government (social democracy) and or policy characterized by a very large social safety net (welfare state); significant presence of unions

4. Used interchangeably with ‘crony capitalism’ in which the government ‘picks and chooses winners and losers’, and or an economic system or policy that favors the wealthy and or large corporations

The article seems to be alluding to the forth definition.

This passage stood out:

Theirs is cutthroat hyper-capitalism—in which wages are shrinking, median household income continues to drop, workers are fired without warning, two-thirds are living paycheck to paycheck and employees are being classified as “independent contractors” without any labor protections at all.

Yes, as discussed before, for those who don’t have above-average IQs, your life may suck, if it doesn’t already. The past half century, but especially the past decade, has hit these people the hardest, who find themselves stuck in the low-paying service sector or unemployed, the high-paying manufacturing jobs of earlier decades that were doable by people of all IQ levels, long gone.

The problem is a lack of stability. Manufacturing jobs provided generational stability for families and children, but with these jobs gone, people have become more itinerant and atomistic. Construction and energy jobs, although they pay well, are very sensitive to both macro and miro economic conditions, making it hard for workers to settle down. Gig jobs don’t pay well, are demanding, and offer no benefits, unlike salaried jobs–but gig jobs create a lot of economic value–there is no waste, because workers, who are dependent on feedback and referrals, are fully accountable for their success or failure, whereas in corporate america, the cost of individual incompetence and sloth is shared by the entire firm (it’s like those group projects in school, where the smart kids do all the work but everyone gets equal credit).

It’s not so much that all jobs will vanish, but rather the quality of many jobs in terms of pay is declining, as part of the ‘hollowing out of the middle’.

But also, many businesses are struggling. By some estimates, this is this harshest environment ever for small business (except web 2.0 and stuff like that, which is immune). Employees are being squeezed but so too is small business, which is another component of capitalism. Multinationals are thriving because of an abundance of cheap capital (due to low interest rates), allowing them to expand and possibly crowd out smaller businesses. But there other factors for why small business is doing so badly: over the past quarter century, the cost of rent, land, insurance, and advertising has vastly exceeded inflation, but credit has become much more tight to all but the largest and safest of borrowers (the old joke being, to get credit you must first prove you don’t need it). This is part of America’s transition to a deterministic economy (similar to a planned economy) and society.

Related:
The Meritocracy We Don’t Understand

The Advantages of Real Estate over Stocks

I’n the past, I’ve defended real estate ownership as a way to create long-term wealth, versus renting, which gradually destroys your wealth (but more specifically, prevents you from ever creating wealth, because you’re constantly bleeding cash every month).

James Altucher staunchly opposes home ownership, in which I disagree. Another critic of home ownership is Robert Shiller, who is often wrong too.

Usually, the same people who advocate the conspiracy that the government is under-reporting inflation are also opposed to home ownership, but if the rate of rent exceeds inflation (which it obviously does), wouldn’t a 30-year fixed rate home mortgage be a good hedge against rent inflation, especially considering that rents are increasing at a faster rate than mortgage interest?

Regarding the stock market vs. real estate debate, a common argument is that stocks outperform real estate, and this is true over the long-run, but there are major advantages of real estate that stocks do not offer:

1. Cheap, significant leverage. A fixed 30-year mortgage on a $200k mortgage with $20k-down and a 740 credit score is 4% (10-1 leverage). Stock brokers will charge clients 6% a year to get maximum 2-1 leverage leverage. So that means, a 1% gain in the $200k home = $2k profit, vs. $400 profit from a 1% gain in your 2-1 stock account. (I’m excluding interest in both instances.)

2. Stability. Stocks are much more volatile than real estate. Only once in the past 100 years did the US housing market make a significant correction (2007-2011), but the S&P 500 has fallen 20% or more during multiple occasions: 1973,1987,1998,1999-2002,2008. On a risk-adjusted basis (returns vs. variance), real estate is better, even if the absolute returns are less than stocks.

3. Tangible value. Stocks can go to zero (which is why indexing is such a good idea). A home can’t just vanish.

4. More negotiating power. If you use leverage in a stock account, you have virtually no negotiating power if the trade goes badly…the broker will simply close your positions, usually at the worst possible time, to protect their own capital (because you’re using the broker’s funds when buying stocks on leverage). With real estate, however, there are is often generous financing and assistance if you are unable to pay. This is because banks lose money when homeowners default, so they generally want to work with the homeowner. Whereas stocks can be sold in seconds, eviction and then resale of the home can take years.

5. Shelter. Rent is very expensive, and it adds up over many years. If you put all your money in stocks, you will still need somewhere to live. $2,000/month in rent adds up to $240,000 after a decade.

Using the example above, if you purchase a home for $240,000 outright instead of renting, after a decade, you will have indirectly ( in terms of opportunity cost) made 2x your money on the home in terms of not paying rent, even if the home didn’t appreciate.

6. Income. Real estate can be rented out, boosting returns, although stocks can pay dividends.

From James Altucher : What are the most useful money investment and saving tricks?

A) Don’t buy a house.

Lets say you buy a $500,000 house.

You put $150,000 down (30%). You pay another $30,000 real estate commissions.

You put another $50,000 into maintenance (I’m making it up but that seems very conservative).

That’s $230,000 GONE.

The down payment is equity…it doesn’t just vanish, as astute readers in the comments noted. The typical maintenance rate is about 1% a year…buying a $450k home that immediately requires $50k in maintenance seems exaggerated. $30,000 in commission is also exaggerated.

In the ownership case, you might gain money if the house gains. But from 1890 – 2004, housing prices gained 0.4% a year over inflation. There are much better investments. And your investment is tied up in an asset that is 100% illiquid (i.e. you can’t get your money out).

This .4% figure is cited a lot, and it’s wrong. Here is Case Shiller home index over the past 40 years, including the housing bubble:

It doubled, representing a compounded return of 1.7% a year, more than triple the .4% figure.

What we have is a failure to do math.

Homes in many regions of California and New York have increased 3-4x since 1996, for an annual compound return of 7%. Unless you bought at a really bad time (2005-2007), almost anyone who holds real estate comes out ahead after a decade, versus renting. Of course, there is no guarantee these gains are sustainable, but there are also a lot of fundamentals behind the enduring resiliency of the Bay Area housing market.

Also, the major purported advantages of renting–inexpensiveness and flexibility–may also be oversold because you very often need a very large deposit and a credit check in order to rent.

What if you wait 20 years and pay off your mortgage? Then good for you. But average house turnover in the United States is four years.

But it doesn’t matter…some people sell their home for a profit before they pay off the entire mortgage…that’s how ‘house flipping’ works.

Does America owe its success to exploitation, genocide and slavery?

Warren Buffett’s annual shareholder letters are scrutinized by investors and enthusiasts hoping to glean insight from one of the most influential and successful people in business and finance, about his insight and projections–not just about Berkshire Hathaway, but about US and global economy as a whole.

On Hacker News, Buffett’s 2016 letter generated significant debate, specifically over whether America’s economic prosperity was created ex nihilo or on a legacy of ‘exploitation, genocide and slavery’:

The empirical evidence suggests otherwise, for three reasons:

1. The South, which utilized slave labor, was economically inferior to the North. Despite slave labor, the economy of the South failed to evolve beyond farming and was surpassed by the North. To this day, the disparity remains, with northern states still being wealthier than southern ones.

From the article No, slavery didn’t build America:

If we are to judge who or what “built” America, we must honestly look at the legacy and the strength of each. The reality is that the slave-holding South lost the Civil War. Why? Why, if slavery built America, was it not able to provide the strength needed to the South to be able to crush the North? And what did the North have that made it so great without the aid of slavery?

“But in a longer struggle the North’s advantages were substantial. With a population of 20 million, the Northern states obviously possessed a much larger military manpower base, but their industrial capacity was far greater as well. In 1860 the North had over 110,000 manufacturing establishments, the South just 18,000. The North produced 94 percent of the country’s iron, 97 percent of is coal and – not incidentally – 97 percent of its firearms. It contained 22,000 miles of railroad to the South’s 8,500. The North outperformed the South agriculturally as well. Northerners held 75 percent of the country’s farm acreage, produced 60 percent of its livestock, 67 percent of its corn, and 81 percent of its wheat. All in all, they held 75 percent of the nation’s total wealth.”

Although slavery may have initially given the South a head start, it later proved detrimental as the South became complacent and failed to industrialize, dependent on cotton and tobacco exports for growth while also heavily dependent on imports from the North. Although the North had a larger population, thanks to industrialization, a worker from the North produced significantly more economic value on a per capita basis than the South. Slavery was legal in the North, but it was deemed not economical.

2. Until only recently, the history of civilization was built on conquest:

Had the British not settled, some other empire would have have fought for control of the east coast of North America–maybe the Spaniards, who were much more ruthless. Or the French, who controlled Louisiana until Napoleon sold it to the United States. Also, indigenous tribes fought against each other too.

3. But what about small pox and biological warfare? As it turns out, the evidence suggests most of the native population died of disease before the Pilgrims arrived, not after:

It begins in the immediate aftermath of a full-blown apocalypse. In the decades between Columbus’ discovery of America and the Mayflower landing at Plymouth Rock, the most devastating plague in human history raced up the East Coast of America. Just two years before the pilgrims started the tape recorder on New England’s written history, the plague wiped out about 96 percent of the Indians in Massachusetts.

Historians estimate that before the plague, America’s population was anywhere between 20 and 100 million (Europe’s at the time was 70 million). The plague would eventually sweep West, killing at least 90 percent of the native population. For comparison’s sake, the Black Plague killed off between 30 and 60 percent of Europe’s population.

Spanish conquest, not British colonization, caused most of the disease-related deaths.

These are the ‘germs’ Jarred Diamond alludes to in Gums, Germs, and Steel, but such infection was accidental, in contrast to genocide, which is intentional. The intentional distribution of blankets laden with small pox is also a myth:

But Chardon’s journal manifestly does not suggest that the U.S. Army distributed infected blankets, instead blaming the epidemic on the inadvertent spread of disease by a ship’s passenger. And as for the”100,000 fatalities,” not only does Thornton fail to allege such obviously absurd numbers, but he too points to infected passengers on the steamboat St. Peter’s as the cause. Another scholar, drawing on newly discovered source material, has also refuted the idea of a conspiracy to harm the Indians.

Similarly at odds with any such idea is the effort of the United States government at this time to vaccinate the native population. Smallpox vaccination, a procedure developed by the English country doctor Edward Jenner in 1796, was first ordered in 1801 by President Jefferson; the program continued in force for three decades, though its implementation was slowed both by the resistance of the Indians, who suspected a trick, and by lack of interest on the part of some officials. Still, as Thornton writes:”Vaccination of American Indians did eventually succeed in reducing mortality from smallpox.”

To sum up, European settlers came to the New World for a variety of reasons, but the thought of infecting the Indians with deadly pathogens was not one of them. As for the charge that the U.S. government should itself be held responsible for the demographic disaster that overtook the American-Indian population, it is unsupported by evidence or legitimate argument. The United States did not wage biological warfare against the Indians; neither can the large number of deaths as a result of disease be considered the result of a genocidal design.

The Decline of ‘Low Information’ Conservatism

This article is going viral Advice to the Alt-Right

Vox Day and Zman represent an insurgency against the ‘low information’ brand of conservatism that is characteristic of NRO, Drudge, Townhall, and elsewhere. Smart conservatives, in particular, are tired of hyper-partisanship and low-information punditry that regurgitates the same old predictable talking points, platitudes, and homilies…We, the ‘alt right’ and reactionaries, seek more evolved discourse. Intelligent conservatism is not about reflexively opposing everything the ‘left’ does, but rather about looking at issues from the context of preserving the greatness and richness of civilization and culture. For example, when Obama in his last days in office ended the ‘wet foot, dry foot’ policy for Cubans, the alt-right conceded that Obama was right, even if by happenstance, but the NRO-conservatives had to drag their feet as to why this was a bad move by Obama, because they are programmed to oppose everything Obama does. Even if they oppose citizenship, because Obama signed the bill, they had to rationalize why it was bad anyway. This fixed mindset of ideological conformity, which is no different than for the SJW-left, is why NRO-brand conservatism is dying, or at least for the 10% of conservatives who have an IQ above 110 and are capable of looking at issues a greater depth than whether said politician has a ‘D’ or an ‘R’ after their name. I’m optimistic the in time this percentage will rise–not due to rising IQ scores–but rather due to increased awareness of how mainstream conservatism has failed.

Another factor is how online journalism has evolved in a post-2013 era, in which emotive partisan articles that ‘push’ the reader have ceded to ‘shared narratives’ and intellectual and introspective long-form content that merely tries to nudge the reader. Vox Day’s articles have many shared narrative themes, such as distrust of elites–a distrust shared by both the ‘left’ and the ‘right’. You don’t need to be alt-right to not like George Soros; many liberals also don’t like him.

Second, many smart conservatives, related to ‘intellectualism culture‘, [1] are weary of reductionist or seductive narratives that are backed more by wishful thinking than science or empirical evidence, such as the belief that the ‘free market can fix everything’, that ‘pulling oneself by one’s bootstraps’ is a panacea for poverty, or that ‘strong families will cure all social ills’, ignoring the role of biology in all of these instances. Telling the large swathes of the unemployed, who don’t have genius-level IQs and who lost their jobs to outsourcing or automation, to ‘learn how to code’ is like telling penguins to ‘flap harder’. Tens of thousands of years ago, height was useful for picking tall stuff off trees. Now brains are more important. Biological determinism is real in our competitive post-2008 economy. IQ is becoming a sorting mechanism for who succeeds or fails.

[1] Intellectualism culture is a social theory I devised that describes how smart people interact with each other and understand the world. One of its tenets is that for smart people, intellectual bonds are stronger than ideological ones.

Why Bitcoin Keeps Going Up: Analysis

The huge 2016-2017 Bitcoin rally is on a lot of people’s minds: Why does it keep going up? Didn’t all the ‘experts’ in 2011-2014 say it was a bubble? Why does it refuse to burst? Is it a bubble? Maybe not.

Correct Predictions, Part 2:

Over and over again I keep being right: Bitcoin keeps going up, now at $630 on its way to $1,200 again, and even higher. Been telling readers to buy since $100 in 2013.

It hit $1,200 last night.

In late 2015, I explained why the US government didn’t make a concerted effort to prohibit Bitcoin, and how many got it wrong:

Since 2011, Bitcoin has defied all predictions of its collapse. If I had to compile all of the failed predictions of Bitcoin’s demise, it would take days and fill dozens of pages. Here are some of them, courtesy of Google. Even Moldbug, as smart as he is, got it wrong.* One could argue it’s too soon to call Bitcoin victorious, but I think three years is long enough. If the US govt. were going to make a concerted effort shutdown Bitcoin, it would have done so already. Unless it’s overtly illegal, what has to be understood is that the government typically doesn’t like to shut things down, preferring instead to regulate and tax. In the wake of the Silkroad debacle, Bitcoin has become heavily regulated,as far as America is concerned, and people who trade bitcoins are subject to capital gains taxes, much like a stock. Same for vendors who use Bitcoin as payment. If the government can’t shutdown cigarette companies, which cause about 500,000 deaths per year in the United States alone, are they really going to make a big effort to shutdown a harmless currency**? Because people occasionally use firearms for nefarious activities, does that make guns illegal? No. But guns are heavily regulated…same for cigarettes and alcohol.

But my explanation was inadequate. There are more factors at play as to why Bitcoin keeps going up–global macroeconomic factors.

Bitcoin is surging because it’s a globally accepted store of value and means of commerce, and the fixed quantity and production prevents devaluation. Unlike gold, all transactions can be done remotely and confidentially, and there are no storage costs, eliminating all the problems that are associated with storing large quantities of gold. My prediction is all dips will continue to be bought and the price will keep rising. $4,000/coin is possible. Been long since 2013, so I am biased in that regard, but there are real fundamentals here too.

Foreign currencies have lost anywhere from 30%to 99% of their value against the US dollar since 2013. Beginning around 2002 and ending around 2011-2013, many foreign governments carelessly amassed substantial infrastructure debts that now they are struggling to pay off (due to economic weakness for these foreign economies and the surging US dollar), creating a cycle of inflation and currency depreciation, making Bitcoin more attractive to own for people and businesses in these countries.

Between 2002-2011, US hedge funds and private equity flooded foreign markets with billions of dollars in capital in the hope such countries would emulate the economic success of America, but these countries amassed large debts, such as to fund construction projects, pensions, and other initiatives. Such hopes dissipated in 2011-2013 when the foreign economy turned south, first during the 2011-2012 Euro crisis, then in 2013 when the Federal Reserve began its ‘taper’ program, and then, finally, two year later when the Fed began its rate hike cycle after an seven-year hiatus. These factors made foreign debt became much less attractive, helping to spur both a US dollar rally and and outflows out of foreign asserts and currencies, and then the commodity crash of 2014-2015 dealt a second blow to these foreign economies, particularly Russia and Brazil, both of which fell into recession. Greece, Spain, Italy, and Portugal, which squandered their 2000′s surpluses on pensions and other projects, fell into recession and needed to be bailed out.

US investments helped propel an emerging market bull market that lasted between 2002-2008, but since 2011 emerging markets have significantly lagged. Hedge funds, having been burned in 2011-2015, are not going to touch that stove again.

Bitcoin is rising because citizens and businesses have lost faith in the competence of their governments, and rightfully so. America is an exception in that it’s well-managed and strong economically and fiscally (especially relative to these foreign economies), which explains the flight to the US dollar, and also Bitcoin.

For example, in 2013, depositors at Cyrus’ largest bank lost 48% of their savings above 100,000 Euros:

NICOSIA, Cyprus (AP) — Depositors at bailed-out Cyprus’ largest bank will lose 47.5% of their savings exceeding 100,000 euros ($132,000), the government said Monday.

The figure comes four months after Cyprus agreed on a 23 billion-euro ($30.5 billion) rescue package with its euro partners and the International Monetary Fund. In exchange for a 10 billion euro loan, deposits worth more than the insured limit of 100,000 euros at the Bank of Cyprus and smaller lender Laiki were raided in a so-called bail-in to prop up the country’s teetering banking sector.

A second factor may be the rise of global authoritarianism, unrest, and unease, reducing confidence in keeping money in banks, and assets that face geopolitical risk…Bitcoin, because it’s decentralized, is immune to geopolitical risk. As long as you have your wallet, you have your wealth.

But what about the US debt clock? Doesn’t America also have a lot of debt?

The absolute debt does not matter. To put the debt in perspective, interest paid on US debt relative to GDP is at multi-decade lows, meaning that the debt burden is not significant:

The US dollar is unique because it’s the world’s benchmark of wealth. The Forbes 400 list is benchmarked in dollars, not Yen or Euros. The US dollar is not only a reserve currency, but everything (such has oil, gold, etc.) is denominated and traded in US dollars, not Euros, Francs, Pounds, or Yen. This allows the US to persistently run trade deficits without hurting its ‘wealth’, unlike other countries that would lose wealth in the form of high inflation and currency depreciation if they did the same. This makes the debt clock almost meaningless, and had someone in 2000 sold short US treasuries in anticipation of high inflation, they would have lost their shirt despite the national debt surging since then. Foreigners are buying Bitcoin to preserve their wealth against recession, currency depreciation, inflation, and crisis.

Related: Collapse Can Wait, Part 2

Peter Schiff was technically right…but he got the country and the currency wrong. The debt crisis is not in America…the evidence suggests it’s everywhere else (except Germany, Japan, and China). So the same ‘debt crisis’ argument that is often ascribed to America applies to the rest off the world instead, and that helps Bitcoin.

Grey Notes: No Trump Impeachment

If Trump is Impeached, it Might Be the End of America:

It could become a sort of reverse Cambodian Year Zero. In 1975, Pol Pot and the Khmer Rouge took control of Cambodia, declared all money valueless and forced the “New People”—urban artists and intellectuals—out into the countryside to work the fields. The idea was social fairness and mass production of food, but the results were the exact opposite. Over 3 million people starved to death and the society collapsed. Tyranny reigned in the extreme. It wasn’t until the Vietnamese stepped in to re-assert order that the country stopped its free fall into the Stone Age.

If Trump is impeached, the United States could face an opposite, yet potentially similar scenario. If rural people begin what’s effectively a mass general strike, urbanites won’t be forced out of the city by the government, they’ll be forced out by necessity. The price of food will skyrocket to the point of being unaffordable for anyone but the very richest of city-dwellers. Lines of production and transport will break down from lack of labor and self-sabotage, and the economy will begin folding in on itself.

No, unlike anarchists and SJWs, ‘the right’ doesn’t throw temper tantrums when they don’t get their way.

Donald Trump’s presidency ‘likely to be second shortest in history’, says presidential historian

Trump impeached? You can bet on it

And

Paddy Power currently has the odds of a first-term Trump impeachment at 2/1. Ladbrokes is much more pessimistic about Trump’s prospects and currently lists the odds that Trump will “leave office via impeachment or resignation before end of first term” at even. In addition, Ladbrokes lists the odds that Trump with “serve full term” in office at 4/5.

These odds are absurdly high given that only two presidents have been impeached in the history of the United States. Given the GOP control of the House, the odds of impeachment are even worse.

And ‘Vanity Fair’, the magazine that introduced the world to Caitlin Jenner:

DONALD TRUMP MAY HAVE JUST COMMITTED AN IMPEACHABLE OFFENSE

Nevermind all the times Obama violated the Constitution…

The desperation of the left is manifestly obvious. House Republicans know that impeaching Trump will doom their reelection campaigns. Also, Trump has not actually done anything to warrant impeachment…the left has to create their own alternate reality when facts alone won’t suffice. If Trump’s competence becomes a concern (which is also very unlikely), most likely Congress and the courts will just stonewall him.

Another Correct Prediction: Tesla

For years on this blog I have defended Tesla and Eon Musk against defamation by the SJW-left, as well as being bullish on Tesla stock. Tesla has defied the left yet again, posting yet anther quarter of strong revenue growth. Tesla, like Trump, is an American capitalist success story, and the left hates that. Elon Musk is also a high-IQ success story, and you never bet against high-IQ (GM (which went bankrupt) vs. Google).

Why has Tesla done so well even though it’s losing money? The devil is in the details. People who lose money shorting Tesla are losing their shirts for the same reason as those who shorted Amazon: cash flow + growth matters more than profitability, PE ratios, or EPS. Tesla’s car business is cash flow positive but the quarterly losses are due to infrastructure investments. This is how finance can be more subtle than meets the eye.

Tesla’s car business is very profitable:

Tesla also reported an automotive gross margin excluding SBC and ZEV credit (non-GAAP), of 22.2% in the quarter, up from 19.7% a year ago, but down from 25.0% in Q3…

Huge growth in shipments:

Looking at the future, Tesla said it expects to deliver 47,000 to 50,000 Model S and Model X vehicles combined in the first half of 2017, representing vehicle delivery growth of 61% to 71% compared with the same period last year.

Tesla is reinvesting operating profits into investments, which is why it’s losing money:

The company also expects to invest between $2 billion and $2.5 billion in capex ahead of the start of Model 3 production and continues “to focus on capital efficiency while also investing in battery cell, pack and energy storage production at Gigafactory 1. It also forecast that both Model 3 and solar roof launches are on track for the second half of the year.

There is a common misconception that Tesla is losing money on each car sold, but the car business is profitable. When the left says Tesla is losing money on each car, that is after subtracting capital expenditures. let’s say you buy a McDonald’s franchise for $1 million. That is a huge capital expenditure, but each burger sold is $1 of pure profit. If 10,000 burgers are sold, then technically each burger costs $100, but the burger business itself is profitable.

How To Predict

Most people when they make predictions, predict change. I’m the opposite in that I predict that things will tend to remain unchanged, which has worked well for me since 2011 (and in retrospect best agrees with the subsequent empirical evidence). The S&P 500 keeps making new highs every week. Same for home prices in the Bay Area. Bitcoin, which in late 2015 I predicted would go much much higher, has gone up 120% since then and is now at $1,130/coin. There is no guarantee these trends will continue, but I’m batting nearly 1000, whereas most people, who predict change, fare much worse.

Then the obvious questions is, how do you know which trends will persist. Why is Facebook so successful and Fit Bit and Go Pro are not?

There are three factors:

1st: Understanding markets. Facebook, Amazon, and Google are irreplaceable, in addition to having huge growth in users and advertising dollars. There are no substitutes for these three companies. Meanwhile, there are hundreds of wearable fitness device copying the same technology as Fit Bit. A Go Pro is just an expensive phone camera. Also, Facebook, Amazon, and Google cannot be ‘fads’, because they are such an important, indispensable part of the global economy and society. It’s like trying to create a substitute for indoor lighting. Bitcoin is another irreplaceable technology..although there are other blockchain currencies, Bitcoin by far has the most ubiquity. This is where the ‘Matthew Effect’ kicks in, because existing big and successful companies, such as Facebook, can use their market dominance to keep growing. Facebook becomes more valuable by having more users, because the total number of interactions grows quadratically (Metcalfe’s Law).

2nd: The role of HBD. This blog is the only site to incorporate an HBD into its predictions, which historically have proven to be unfailingly accurate:

High-IQ countries outperform low-IQ ones, on an inflation-adjusted and per-capita basis (Singapore vs. Brazil)

High-IQ industries and sectors (tech) outperform low-IQ ones (energy), and have less volatility. With the exception of the grand finale of the tech bubble (1998-2000) which negativity skewed the 2000-2006 returns for tech, this trend has held for many decades, and especially since 2009.

High-IQ companies outperform low-IQ ones (specifically, companies that have a high valuation relative to the total number of employees, indicating a very selective hiring process and a lot of value created per employee. An example is Whats’s App, which was valued at $18 billion but only had 150 employees. GM, on the other hand, has thousands of medium and low-IQ employees. The latter went bankrupt in 2008. )

The real estate markets and economies of High-IQ neighborhoods and cities outperform low-IQ ones (Detroit vs. Palo Alto)

So with the help of this sorting process, predicting becomes much easier.

3rd: Having an understanding of underlying macroeconomics economics and trends, but more importantly, an ability to put data in context and filter out noise. 90% of my economics prediction were accurate, from predictions about GDP growth, employment, the strength of US dollar, and low inflation. Understanding the fallacy of composition is especially important here. Weakness in one part of the economy (labor market) does not portend to weakness for the entire economy, as well as other misconceptions about the economy. Between 2009-2005, a lot of pundits wrongly predicted another bear market and repeat of the 2008 recession, by erroneously extrapolating a single negative data point and generalizing it for the entire economy and ignoring the healthier data, or a failure to put the negative data in its proper context. This is related to the confirmation bias. In 2013-2014, others said that the end of QE would cause the stock market to crash, because the economy was supposedly dependent on it. Nope.

Here’s an example: in June 2016, the ADP report, which is released every month, showed only 50,000 non-farm jobs created in the prior month, well-short of the estimate of 150,000-200,000 jobs. The usual pundits proclaimed that this was the start of another recession, and so on. I ran a statistical analysis on the numbers and determined that such a large miss was statistically due to happen and that the miss, although large, wasn’t a big deal. In retrospect, a year later, the miss turned out to be just an outlier, not the start of a recession.

Much Ado About Milo

Milo is in the news again for some comments he made..There’s Milo, theideological ally of the right…and then there’s Milo’s private life. I think you have to try to separate the art from the artist.

Some are saying Milo is in deep trouble. IMHO, he’ll be fine.

Losing the book deal was just a one-month setback in terms of pay. A month ago he had no book deal. Now he still, technically, has no book deal, but now he also has much more publicity than a month ago, due to all the media coverage surrounding the book deal and its subsequent cancellation, along with the Berkeley riots, which also generated a lot of news coverage. So now with all this publicity he can sell more books than ever before, either with a new publisher or on his own. He doesn’t seen Simmon & Cuckster to sell books.

Like Trump, Milo is a one-man media platform. He doesn’t need Twitter, Fox News, or Breitbart. No one cares about CPAC…they have been irrelevant for years, full of the same people who a year ago thought Trump would lose. If Milo is banished from all social media and TV platforms, he can just take to the internet to do his own podcasts, like Joe Rogan and others.

Milo is a like a ‘rock star’ to his hundreds of thousands of young fans, who will remain loyal even as the media turns against him. Milo is voice for a generation tired of liberal indoctrination and the hegemony of the liberal media and education system.

As others have noted, the ‘left’ has done far worse…with actual pedophiles and other sex offenders among the ranks of the left (Polanski, Woody Allen, Jeffrey Epstein, etc. ).

Another issue is the age of consent, in which the laws are different. In the UK it’s lower than in the USA, as someone astutely noted in the comments of Danger and Play:

Milo is anti-pedophilia and he’s spent his life taking out pedophiles. Calling him pro-pedophilia is a fucking disgraceful hatchet-job.

Now, the IMPORTANT context of Milo’s comments is that he is “the boy” not “the man” in the relationships in question.

He is referring to himself as a 17 year old when he began a 10 year relationship with a 29 year old (16 is legal age in UK). That is important. They try to spin it like he’s the man who wants underage boys, when he’s the LEGAL age boy in a relationship with older men. Changes context completely.

And separately when Milo speaks of 13 year olds consenting, he’s again speaking about himself. He was raped as a boy repeatedly. This is his way of coping with it. Trying to pretend like he could consent. It’s common amongst rape victims (especially child rape victims) to try and say that they were at fault or they weren’t really raped.

This is the truth.

Milo should bring these points up and use them to re-frame the argument. He’s an anti-pedophile journalist who fought and took down pedophiles. But he was raped as a child and is going through some of the psychological trauma of it.

Yeah this is pretty sad and depressing stuff.

Milo’s mistake would be to show contrition to the media that seeks to destroy him; rather he needs to firmly reiterate his position, yet remain defiant, and then drop the issue, and then maybe get some counseling.

Grey Notes: The Futility of Activism

I’m introducing Grey Notes: Brief blog posts about topics when longer responses are not needed.

Activism is like a cart driver dangling a carrot in front of a mule, where the carrot is whatever news the activist has latched onto and the mule is the activist. Or running on a treadmill, cycling on a stationary bike, etc. In either case, there is the illusion of progress in that there is action and movement, yet futility. Activism is repetitious, beating on the same issues, memes, and stuff over and over to no avail. Activism and wishful thinking are also related, in that it represent a longing or ‘ideal’ that is never realized or fulfilled. Another problem with activism is that it’s focused on short term, day-to-day developments, which at the time seem urgent and demanding of attention, but in retrospect is just noise. Consider the stock market rises 100 points, then falls 100 points the next day, rises 100 points the next day, falls 100 after that, etc. for fifty 2-day pairs (total 100 days). Activism is like celebrating all the ‘up days’ but forgetting or not realizing that over the 100-day period the market did absolutely nothing. Activism enriches people who make money on noise, while people who are looking for direction get nowhere.