Tag Archives: larry summers

The Financial Media: It’s Still Useless

I respect Larry Summers as a maverick intellect – someone who exits the beaten path to express his occasionally politically incorrect views, but he seems to have fallen into the trap of ‘vague alarmist punditry’ that so commonly afflicts online financial journalism (and is why I long since stopped reading many news websites. I don’t actually read economic forecasts (because 99.9% of forecasts are useless and wrong) when making investment decisions, rather I develop models using data and risk management, and then test them under a variety of conditions).

From Washington Post, by Larry Summers: The global economy has entered unexplored, dangerous territory

Every year, pundits say the economy is ‘entering unexplored and dangerous territory’, and every year (save for 2008 or 2011) nothing happens. And then the cycle repeats, of more incorrect predictions and intimations of ‘impending crisis’ and ‘recession’ that never come.

there was no imminent crisis. Instead, the pervasive concern was that traditional ideas and leaders are losing their grip and the global economy is entering unexplored and dangerous territory.

Every year it’s a ‘paradigm change’, ‘the election of the century/decade’, ‘losing grip’, ‘uncharted/dangerous territory’ etc…and every year the world doesn’t come to an end, and we get through it. Brexit was supposed to doom the economy, but US stocks still near 52-week highs. So much for that. Someone phone Google and Facebook and tell them to take a break from counting their money be worried about ‘economic uncertainty’ – the media said so. lol.

Speaking of Facebook, recall in 2012 , after Facebook’s weak IPO in which the stock closed at $38 and then a few weeks later fell as low as the $29, the financial media became very pessimistic about Facebook, calling it a bubble and that it would be unable to monetize mobile. Now it’s at $132, having fully monetized mobile. Media wrong again.

The International Monetary Fund’s growth forecast released just before the meeting was once again revised downward.

Yaawn they have been ‘revising growth downward’ since 2008, yet the S&P 500 is up 200% since then. So much for that. We’re talking rounding errors here…the difference between 2.2% GDP growth vs. 2.3% – imperceptible.

Wasn’t the US consumer supposed to be ‘dead’ and ‘maxed out’ in 2007…yet they keep spending. Media wrong again.

The economy is never growing fast enough, but so what. Slow GDP growth isn’t stopping Tesla from inventing the future. It’s not stopping Uber, Facebook, or Snapchat. And compared to the rest to the world, America is still doing pretty well.

Unless the economy is growing at like 10% a year, the media will always complain about ‘slow growth’. What matters more is real growth. The media only focuses on nominal figures. High nominal GPD figures often come with equally high inflation. America has among the highest real GDP growth of much of the developed world. Countries like Brazil and Russia have higher nominal figures, but they are burning cash to prop up their economies and have poor credit rantings, meaning they have to borrow at very unfavorable rates to keep their nominal growth up. America doesn’t have that problem, being able to borrow at very favorable rates.

Recessions come intermittently and unpredictably. Containing them generally requires 5 percentage points of rate cuts. Nowhere in the industrial world do central banks have anything like this kind of room, even allowing for the effects of unconventional policies such as quantitative easing. Market expectations suggest that it is unlikely they will gain much room for years.

There are other options: negative interest rates, more bond purchases, and tax cuts. The economy can still recover on its own even after the ‘zero lower bound’ has been hit. Japan has had rates at zero for almost two decades, yet they have successfully navigated many boom-bust cycles:

After seven years of consistent over-optimism about economic prospects, there is a growing awareness that growth challenges are not so much a matter of the lingering effects of the crisis as they are of structural changes in the global economy that contributed to the crisis and the problems in its aftermath. There is increasing reason to doubt that the industrial world can simultaneously enjoy interest rates that support savers, financial stability and adequate growth. Saving has become overabundant, new investment insufficient and stagnation secular rather than transient.

Every year there is the same ‘doubt’, ‘growth challenges’, and ‘awareness’ and every year (save for a few exceptions like 2008) nothing happens.

It can hardly come as a great surprise that when economic growth falls short year after year, and when its beneficiaries are a small subset of the population, electorates turn surly.

This has more to do with the imprecise science of estimating GDP growth. Often there is a huge range and if one chooses the ‘high end’ of the range as the estimate, the actual will almost always fall below it.

In the same way — with Brexit, the rise of Donald Trump and Bernie Sanders, the strength of right-wing nationalists in Europe, Vladi­mir Putin’s strength in Russia, and the return of Mao worship in China — it’s hard to escape the conclusion that the world is seeing a renaissance of populist authoritarianism.

Every year it’s something different, a ‘new paradigm’, and more turmoil and civil war in the same hotbed regions that have been at other’s throats for generations. Now it’s Trump, Isis, Syria, and Brexit. A couple decades ago it was Milosevic (Serbia vs. Bosnia). And then also Palestine vs. Israel. Pakistan vs. Bangladesh. Lebanese Civil War. Iraq invading Kuwait. Remember Jean-Marie Le Pen? Then there was Ross Perot and Pat Buchanan. It’s always going to be something. People have such short memories, I suppose. But maybe it’s also a backlash against a paternalistic elite, that perhaps looks down upon commoners, with condescension – ‘pity the poor, stupid people for not understanding the irrationality of their anger’.

And from Dissenting SociologistWeaving the Basket of Deplorables: On the Effort to reduce the White Working Class to an Untouchable Caste in America:

Hence the eruption amongst the ranks of the workers, joined by rebellious students and some disaffected intellectuals, of the arch-iconoclastic and antinomian alt-Right, which has set out to break every taboo in the book, to mock every piety, defile every sanctity, desecrate all that is “sacred”, speak incorrectly and with intentional grotesque poor form, to the extent humanly possible, and reject democratic and Modernist orthodoxy altogether and revive heretical and long-condemned doctrines such as Reaction. The revolt against the new ritualism soon found a public figurehead in Donald Trump, who quickly won legions of supporters precisely by dispensing with rote ritualistic platitudes read from teleprompters in conventional political address and talking to the people in a spontaneous free-form manner.

The US economy is driven primarily by three things: consumption, production, and innovation, all of which tend to remain constant regardless of whatever the latest media generated crisis is. And most economic data is very volatile. Sometimes durable goods may be up 1% and a quarter later it’s down. Same for consumer spending. This sort of stuff happens all the time, due to the imprecise science of calculating this data, yet the financial and general media will latch onto the negative data as evidence the economy is doomed or in recession, without putting it into the larger context.

From Why the News Is Still Mostly Pointless:

6. Following the news can be perilous to your financial health. Had you sold your stocks in 2008, at the depths of the crisis when the media had nearly everyone convinced capitalism and America was doomed, you would have not only sold at the bottom but missed out on the 2nd-greatest bull market ever – a bull market which continues to this day. The S&P 500 is up 80% (including dividends) since 2005, despite the crisis. Had you sold your stocks following the Brexit vote, you would have sold at the bottom and missed the 4% rally that immediately followed. Had you listened to the media and sold stocks in 2013 on fears of QE ending, you would have missed out an additional 25% gains in the S&P 500. Other examples include numerous predictions since 2008 of hyperinflation and dollar collapse, neither of which happened.

As many have noted, most financial commentary is advertising disguised as content, and much of it is wrong.

The Daily View: Privacy, Silicon Valley Housing, The Failure of Democracy, Gender Achievement Gap in the Sciences

This is being passed around like an STD: What Happens Next Will Amaze You

The infamous dating site for married people Ashley Madison was hacked, revealing personal information and and easily-cracked passwords for millions of users. Some of these users are already the subject of active extortion.

Australia passed an incoherent and sweeping data retention law, while the UK is racing to pass a law of its own.

The horrible Hacking Team got hacked, giving us a window into a sordid market for vulnerabilities and surveillance technology.

The 2014 Sony Pictures hack exposed highly sensitive (and amusing) emails and employee data.

According to the left’s logic, the hacking of Sony emails is amusing, but the hacking of Ashley Madison is a crisis and a crime against humanity. Passwords don’t matter if the database is compromised. The liberal ‘sanctity of privacy’ in regard to infidelity, cookies, and celebrity nudes apparently doesn’t apply to the NSA or corporations like Sony. And people who are on Ashley Madison, just like celebrities who post salacious photos on their phones and cloud storage devices, deserve to be exposed for living immoral, depraved lives. If you care about privacy, stop using cloud storage and buy a thumb drive. Very simple solutions.

The left tries to present privacy as an all-or-nothing issue; either you have full privacy or totalitarianism. I’ll sacrifice a little freedom and privacy if it means not being blown into smithereens when flying. I support free markets, but am not one of those nutty civil libertarian types.

The same liberals who pretend to care about the troops oppose technology (drones) that would result in fewer deaths of servicemen.

Soon the web was infested with all manner of trackers, beacons, pixels, tracking cookies and bugs. Companies learned to pool their data so they could follow customers across many sites. They created user profiles of everyone using the web. They could predict when a potential customer was going to do something expensive, like have a baby or get married, and tailor ads specifically to them.

They learned to notice when people put things in a shopping cart and then failed to buy them, so they could entice them back with special offers. They got better at charging different prices to people based on what they could afford—the dream of every dead-eyed economist since the dawn of the profession.

Heaven forbid corporations try to make a profit, and – gasp – make our user experience easier?

If at the height of boom times we can look around and not address the human crisis of our city, then when are we ever going to do it? And if we’re not going to contribute to our own neighborhoods, to making the places we live in and move through every day convenient and comfortable, then what are we going to do for the places we don’t ever see?

The San Francisco housing affordability situation is a supply and demand problem, not due to ‘greedy’ tech capitalists. There is a scarcity of home in this sought-after region, and second, as I explain in an earlier article, zoning and other costs make it difficult to establish new housing. The slideshow also fails to mention efforts by Google to make housing more affordable:

Google Offers Affordable Housing
Google offers free Fiber internet in public housing
Google invests $28 million in affordable housing

Up to 400 housing units, targeted toward low-income and median-income households, could be built in the area, depending on how much building allotment Google is granted. (The location would be 4.5 acres of land that Google purchased last year for $98.1 million, and is outside of North Bayshore, bordering Sunnyvale.)

But of course, we can’t let counter-evidence get in the way of the left’s anti-technology narrative. The author also fails to mention that most of San Francisco often doesn’t allow residential building rise higher than four or six stories, making it hard to accommodate a lot of people at low cost. Instead, thanks to policy enacted by liberals, workers who cannot afford to live in the city are forced to commute for hours. Whether it’s bank bailouts, high tuition, or the lack of affordable housing, the left is often responsible for the problems they complain about.

I went to school with Bill. He’s a nice guy. But making him immortal is not going to make life better for anyone in my city. It will just exacerbate the rent crisis.

The left also fails to understand that capitalists want to make technology accessible, provided they can turn a profit – and sometimes they still do so at a loss. Making Bill immortal, which I’m highly skeptical is possible, will open the door to making more people immortal.

Here’s Elon Musk.

In a television interview this week, Musk said: “I’m trying to do useful things.” Then he outlined his plan to detonate nuclear weapons on Mars.

These people are the face of our industry.

Another shot by the left at great capitalist Elon Musk. Some on the right say that the left loves Elon Musk…hardly; the left whines constantlyalleged crony capitalism, as well as attacks on Mr. Musk himself. In 2013, with an intentionally botched ‘review’ of the Tesla roadster, the NYT tried, and ultimately failed, to defame Tesla:

Recall in 2013 the increasingly irrelevant liberal rag The New York Times tried, with much desperation and futility, to defame Tesla and Elon Musk in an editorial where avowed liberal auto reviewer John M Broder deliberately ran his test Tesla out of electricity in order to write a bad review. Tesla stock was trading at $40 at the time; it’s now at $210, to the chagrin of the liberals who wanted to see Tesla fail, and another defeat for the wealth spreading left in their war on success and capitalism.

But, also, let’s face it: It’s a great time to be rich and smart, especially in the Silicon Valley. This is the new ‘enlightenment’ or ‘renaissance’ before our eyes, on our phones, at Caltech and MIT, online, and at the molecular level with the second biotechnology boom.

Peter Thiel has publicly complained that giving women the vote back in 1920 has made democratic capitalism impossible.

He asserts that “the fate of our world may depend on the effort of a single person who builds or propagates the machinery of freedom that makes the world safe for capitalism.”

I’m so tired of this shit. Aren’t you tired of this shit?

I’m not tired of this ‘shit’; we need more people to speak up against the failure of democracy, suffrage, and political correctness. Peter Thiel is right. Look at how Obama got the majority of the female vote and what a disaster that has been. The problem with democracy is people voting to expand the welfare state and, second, people voting on charisma, not policy, both of which helped Obama get into office against the more experienced and competent Hillary, Romney, or McCain.

Let’s look at the data. In 2005, Larry Summers was infamously forced to resign from his post as president of Harvard for merely stating what many suspect to be true but are afraid to say: women tend to be underrepresented in STEM due to cognitive differences at the ‘high end’, or according to his full statement:

“It does appear that on many, many different human attributes — height, weight, propensity for criminality, overall IQ, mathematical ability, scientific ability — there is relatively clear evidence that whatever the difference in means — which can be debated — there is a difference in the standard deviation, and variability of a male and a female population. And that is true with respect to attributes that are and are not plausibly, culturally determined. If one supposes, as I think is reasonable, that if one is talking about physicists at a top 25 research university, one is not talking about people who are two standard deviations above the mean. And perhaps it’s not even talking about somebody who is three standard deviations above the mean. But it’s talking about people who are three and a half, four standard deviations above the mean in the one in 5,000, one in 10,000 class. Even small differences in the standard deviation will translate into very large differences in the available pool substantially out.”

Although men and women have roughly the same mean IQ (around 100), they differ in variance, in that women have a smaller variance than men, and hence there are fewer ‘genius’ IQ scores among women, which can explain the gender gap in the sciences.

From Brietbart: SCIENTIFIC PROOF THAT PUBLIC DEBATE IS DOMINATED BY STUPID PEOPLE

The funny thing is this is from Britbart London…Americans, who are too brainwashed by political correctness, including even the right, won’t touch the subject of HBD, but the Brits will. The Enlightenment, which brought evolutionary science to the forefront, originated from Western Europe, not America. Boris Johnson, the mayor of London, said what American politicians are too spineless to admit, and predictably the left was outraged that someone would make an inference between IQ and socioeconomic outcomes. That would mean that some people are born ‘better’ than others, in refutation to the left’s belief in the ‘blank slate’, limiting the effectiveness of wasteful taxpayer-funded liberal social policy to create equal socioeconomic outcomes.

As shown below, women tend to dominate low-IQ majors, in agreement with Summers’ statement:

And women have less variance of IQ scores:

The same liberals who insist that sexuality is biological or that humans are causing global warming refuse to accept the science of gender as it pertains to cognitive ability. Again and again, the ‘pro science’ left picks and chooses the science they want to believe in, rejecting all the science that doesn’t agree with their egalitarian, ‘blame the rich’, blank-slate worldview. Putting people of average of below average IQ in positions of power, or giving such individuals power over high-stake outcomes, is why there is a ‘war on boys’ in the public schools, why there was a financial crisis, and why Obama was elected – twice.

The fate of the world may not depend on a single person, but maybe a handful of smart people who create the technologies that advance civilization, which from the caveman who tamed fire to the scientists who are harnessing hydrogen fusion, is the same as it ever was.