To my readers: I’m having a WordPress issue where I can’t get images to show up in new posts. Here’s my summary for my article.
Summary
The rate of growth of new cases is declining for most nations
And, the absolute number of new cases is falling as well
About half of the countries that I track are now posting new case counts that are below what the models estimate. Sadly, not the USA… American exceptionalism, you know. We’re #1, in total cases of COVID-19.
Most of the developed world hits the 99% mark for cases for the first wave by the end of April. Slower than what I projected earlier, but faster than what most have argued.
Will the cost of the COVID-19 crisis be a financial and/or political crisis?
This is all I am writing on this tonight, as I am worn out from trying to fix the blog images.
PIcture credit: Aleph Blog, and the same for all the graphs and charts in this post. All liability for mistakes here is mine.
Since then I never pay attention to anything by “experts”. I calculate everything myself.
Dr. Richard Feynman, Part 5: “The World of One Physicist”, “The 7 Percent Solution”, p. 255, quoted here.
Outline
Summary
Introduction
On the Limitations of this Model
The Graphs — Second Wave, FInishing the First Wave, Coming to the Turning Point, Problem Children (Turkey, USA, Canada, Iran, UK, Brazil, and France)
Closing
Summary
Though the USA model has lagged considerably, and a some of the other modeled countries have lagged a little, the central thesis still stands. Things are getting better faster than most of the politicians, policymakers and media have been forecasting.
Introduction
To those reading me for the first time, you should read the following articles to get up to speed. Those who have read me for a long time know that natively I am a pessimist, so it is unusual for me to be writing as I am doing now.
Before I go on, I want to explain what the two rightmost columns on the tables above and below mean.
7D Trend — the seven day sum of forecast errors as a ratio of the number of cases at the beginning of the seven days. Positive means the model has been underestimating. Negative, overestimating.
Dir — Direction of the seven days of forecast errors — beta coefficient of the forecast errors versus time as a ratio of the number of cases at the beginning of the seven days.
The idea is to try to point out where the model is persistently missing, how large is it, and is it correcting or getting worse?
On the Limitations of this Model
All models have limitations. This model, being used to extrapolate, definitely has limitations. Extrapolation, as I have said, is dangerous. It’s dangerous because we know the past data with some degree of error, and the future not at all. Extrapolation, even if the underlying functional form used for estimation is right, assumes that all processes generating the values estimated are not shifting. If that is a good approximation to the reality that comes, luck will come marching in as genius.
This is a time series model. There are many structural models out there, and the “experts” estimate and use them. They have more data than I do. Those models suffer many of the same problems that complex economic models do. There are too many parameters to estimate, and they face the same problem I do with the future shifting, and errors in past data, as well as functional form issues. They are also subject to social and economic pressures that I don’t have to the same degree.
Scientists need the approval of their peers in order to publish and for general happiness. They need to be able to make money to survive. It is difficult to get tenure, and most scientists won’t take chances with that process.
It gets worse when science is being used for policy purposes, and gets picked up by the media. Caution is ordinarily a good thing,, but not when it misstates what is going on in order to achieve the ends of third parties. Tell the truth, and then let the politicians, policymakers, lawyers, businessmen, etc. figure out what they will do. The media almost always prefers sensational, sharp, easy-to-tell stories, over the complexity of what is true. The same is true of most average people who would rather not think hard, but just imitate the behavior of others.
Thus I tend to distrust “experts” whose ideas are used for political or policy purposes, and get trumpeted in the media. Their incentives are skewed — once you get close to fame, power, and maybe even money, you’d like to keep it, and that is a snare for many.
Practically, for this model, the difficulty comes around the middle, where the shift is happening — new cases peaking, growth in total cases decelerates. Why is it difficult? Small changes make a big difference to the shape and height of the curve. The prior day’s curve is anticipating a certain amount of deceleration in the growth in total claims. When the data arrives with more new cases than anticipated, the new curve will be taller and longer. VIce-versa if less new cases arrive. That is why for some areas that I modeled, the process seems to stall around 40-60%.
Now, there are raw data errors as well, like China on 2/12 and France on 4/3. There are nations like Iran where the political turmoil may have led to delayed reporting.
But for the most part, the models have worked well, just not so well for the US yet. We’ll get to that later. Before I do, I want to state a few things I have learned as I have gone through the modeling, which has been a learning process for me.
Look at the percentage of population that the model is projecting for reported infections. If it’s not high enough, the model is wrong. Unless a nation jumped on the problem immediately, you won’t get results like South Korea.
The nations that tested more as a percentage of population, particularly early in the epidemic, did a lot better.
Repeated forecast errors in the same direction indicate the process for new claims is changing, and the model is trying to adjust.
In that situation, if we?re only getting better at finding those infected, the upper part of the curve should tail off sharply.? On the other hand, if the if the ratio of new cases to total cases is protractedly rising because more infections are occurring, that?s an increase in the ultimate level of reported cases.
Once a nation gets to the 10% point, getting to the 90% point takes three weeks or so. Getting to the 99% point takes 4-5 weeks.
The markets will anticipate the end, with false starts, and a lot of noise.
As Buffett says (something like): I’d rather be approximately right than precisely wrong… or, Rule 65: “The second-best plan that you can execute is better than the best plan that you can?t execute.” My goal was to get some idea of when the market might turn. In that sense, this has been a success.
The Graphs
As in prior posts, I will run through the graphs now.
Second Wave
Finishing the First Wave
I write this with a little concern that I might be early on Italy and Switzerland, but new cases have been slowly rapidly for the two of them and Austria. Note that all three of them did a lot more testing per capita than most nations. You can see that here. The table sorts itself if you click on the top of the columns.
Coming to the Turning Point
For Belgium, Germany, Netherlands, Portugal and Spain, new cases are declining, though not as rapidly as the model would predict. Even with that, it seems likely to me that all will pass the 90% point within a week.
Problem Children
Turkey
My problem with Turkey is that the expected total population infected is too low. They got to the game late, and the curve looks too sharp. I would expect this to not turn as quickly as the model says.
United States of America with some States and Cities
Yes, the USA has been slower than I expected, and I think I have a good reason for it. I gained the reason while trying to model the world as a whole for the COVID-19 pandemic. Using the logistic equation as my functional form, I could not even in the slightest achieve a positive pseudo-R-squared. Why?
If you add together a bunch of logistic curves with varying timing, height and sharpness, there is no guarantee that you will end up with a logistic curve. The US is a big place, and the population is spread out, with many different large population centers. Much as would have killed me timewise unless I had better software, I think it would have made more sense to model the US as a bunch of logistic curves state-by-state, and add them up.
Here’s a demonstration for the past week: if I take the forecast errors of New York State and New Jersey, they are roughly 65% of the forecast errors for the US as a whole. Together they have 47% of all reported COVID-19 cases.
There have been statements by some politicians that there will be a lot of new “hotspots” across the US, it’s a tempest in a teapot. The dense and large cities like New York City and Boston have a lot harder of a time preventing the spread of an epidemic. Areas that are smaller and less dense won’t have the same impact, not even proportionate to their sizes.
The US has been making progress, just not as fast the model predicted. I would be surprised if the US weren’t at the 90% point by what is normally tax day. It takes three weeks or so to get from 10% to 90% and another week or two to get to 99%. We will likely see the practical end of this in April. It’s just a question of when.
Canada
I place Canada in the same boat as Turkey. Too few ultimate cases. It will likely revise upward. That said, their population is more spread out, so it will likely have fewer cases per capita than the US.
Iran
After several weeks of having claims far higher than the model would predict, the curve for Iran has regained a normal shape. The expected ultimate number of reported cases is on the low side of reasonable, and the model is finally tracking well. This is a watch and see sort of thing because of the instability in Iranian society, particularly amid the epidemic.
United Kingdom
The UK is on the same path as the USA, only 5-11 days behind. Their new case rate is decelerating slowly, but it is decelerating.
Brazil
The expected ultimate number of reported cases is too low, and the model is too new. Conditions in Brazil are less than orderly, so I would expect this model to revise significantly upward.
France
On 4/3 of the French government announced that they had only been counting deaths in hospitals and as such reported 23,000 new cases. Since that time the model for France has been posting negative forecast errors, and is slowly returning to a normal shape. I would expect in a week that the curve will look normal, and that the crisis in France would end about the same time as for the US.
Closing
That’s all for now. For those talking about these posts on Facebook, please note that I don’t interact there much. It’s best to comment at my blog or email me if you want my attention.
PIcture credit: Aleph Blog, and the same for all the graphs and charts in this post. All liability for mistakes here is mine.
Recommendations and Comments
To the National Governments and Central Banks: don’t create a lot of policies that you might need to reverse. This crisis is coming to an end faster than most are reporting/proclaiming. If a policy is easily reversible, get ready. Start planning for dealing with the second wave of the pandemic.
To US State Governments and city/county governments: start figuring out how you will targetedly let up on the restrictions that you have imposed before you realize that you are behind the curve (again). Start planning for dealing with the second wave of the pandemic. It would be better to let younger people go back to work, and shelter those more likely to get a deadly case of COVID-19. (Aside: if this ends early, note the people who told you that it would long and big, and remove them as advisors.)
To the media: please calm down. This is one of those situations where it gets worse before it gets better. We are through most of the worse, but to the average observer, they don’t see the better, even though the point of maximum pessimism has passed.
To individuals: if you don’t have a lot, take heart that this first wave likely won’t be here much longer. Use your money carefully. To those who do have money, as a nation moves from 50% to 75% complete in the first wave of the virus, it might be a good time to own a little more stock. I don’t usually encourage speculation, but it might be warranted here. Remember, don’t invest anything you can’t afford to lose.
Last, my models last week were too optimistic, but not by much. The growth rate of total cases is generally dropping pretty quickly, but you couldn’t tell that from what you are hearing from politicians and the media.
Introduction
Before I start, I want to explain what the tables above and below mean.
The figures underneath the percentages are dates. The dates are estimates of when the country, state or city will have experienced 10%, 50%, 90%, and 99% of the total COVID-19 cases that they will experience in the first wave.
The peak day is the day each has the most new claims.
“Expected Total” is my estimate for the total number of reported COVID-19 claims in the first wave.
“% pop” is the percentage of each population that will be reported as infected with COVID-19.
“% complete” is the ratio of estimated current total cases to estimated final total cases fo the first wave.
Pseudo-R2 is the percentage of the total variation in the total cases explained by my three-parameter nonlinear regression. Because the regression is nonlinear, it is not an F-statistic, and gives us only a spit-in-the-wind sense for how good the regression is. Some have asked if I could add error bands to my models and the answer is no, because the nonlinearity of the equation makes that difficult. I’m only working with Excel, and looking through my old Econometrics texts, they don’t have an answer for this one. Maybe I should start modeling in R.
You’ll note that I added six additional models to this post.
One country: Turkey (I am modeling any country that gets more total cases than S. Korea.)
Three states: Maryland, Massachusetts, and New York. I’m modeling my home state, Maryland, Massachusetts for a friend, and New York because it has the most cases of any state.
Two cities: New York City and the Boston Area, which is the five counties near Boston (Essex, Middlesex, Plymouth, Suffolk and Worcester). New York City, because it has the most cases of any city, and Boston, because of the aforementioned friend.
Data and Resources
Before I go on, I want to point out some useful sites for getting data and resources. If you think you have other useful resources, please post them in the comments.
Courtesy of the New York Times, you can get state and county total cases and deaths on a day-by-day basis. (Main page) (state data) (county data) Data is in a Comma Separated Values [CSV] file format.
Finally, you can look at my models if you like. Here’s the country model. Here is the states and cities model. Now you can look at what I am doing, and play with it yourselves. Note that you will have to activate the Solver application inside of Excel.
Limitations of what I am Writing About
I am forecasting one variable in each geographic area — reported total claims as of a given date. I am forecasting this for several reasons.
It is relatively easy to do. If I tried to estimate medical resource usage or even deaths, I would need more data that I don’t have access to in order to do reasonable models in that area. (Now that said, a hidden assumption of the analyses is that there is some regularity to how cases get reported. If that changes, the models will be less accurate.)
Reported total claims is a leading indicator for other variables of interest. In addition to those mentioned in the first point, total reported claims is a leading indicator for the economy, lifting of government restrictions, and the financial markets.
It’s not as if there aren’t complexities that could mess with an analysis like this. When testing becomes common, you might see total cases go up a lot from all of the asymptomatic or low symptomatic people who are suddenly found and are no longer infected. That sort of shift would give the appearance of COVID-19 taking off, when we realize that that data belongs to the past, even though it is reported in the present.
No one wants to say it, but there are tradeoffs involved in having governments be too ham-fisted in their regulations. Those regulations are impoverishing a lot of people, and many of the restrictions are not needed in order to have the same level of societal safety.
There are also tradeoffs of life and money… and this is not new. Life is precious, no doubt, and money can often be replaced, but where does the money come from? Would it be right to be Robin Hood and push 100 unrelated people out of work in order to save a life? Perhaps it would be better ask for volunteers. It would be more ethical for the government to raise taxes, than to put on restrictions that harm the economy a lot, with few additional lives saved.
This is an economics, investing and finance blog. I focus on those matters. It’s not a healthcare blog. When I think of my average reader, that person is not thinking a lot about the problems from medical resource shortages, except perhaps the lack of ability to test for COVID-19. It’s different if you are in the medical profession or if you are sick. You would care a lot about these issues then, and my heart goes out to you, because you are having a challenging time with short resources.
As an aside, when you think of medical efforts in the US generally, with the emphasis on trying to manage costs, hospitals and inventories of supplies and equipment are light because in normal times, those were easy places to save money. Few would complain much (except closing rural hospitals) because there would be enough resources under 99%+ of all circumstances. This is fine, until you experience the low probability and high severity event. This is common to other disaster scenarios as well — there is often a complaint over lack of redundancy or robustness of some resource. (Not enough policemen, firefighters, ice, electricity, phone connectivity, emergency shelter, etc.)
I am not saying my analysis is the whole enchilada, but it is an important part of it. And with that, on to the graphs:
Past the First Wave, in the Second Wave
China has averaged 55 new cases of the past 10 days, and South Korea that figure is 99. The trend seems to be up, but with a lot of variability. I liken the second wave to what needs to be done after the main battle with a forest fire is done. You still have to put out some minor fires before they turn into something major. Eventually, like say in a month or two, most nations will be dealing with this.
Because of this situation, the models fit less and less well. I could add in a second logistic curve that starts where the first one ends… though it seems like overkill from a modeling standpoint. It wouldn’t be difficult to do.
Approaching the End of the First Wave
Austria, Switzerland and Italy are most likely past the 80% point. By that point reported new cases are declining quickly, and total cases are growing at around a 4% daily rate, and the growth rate is falling quickly.
As an aside, this is a good time to talk of how the media, and sometimes even policy makers who should know better, are practically innumerate in terms of the verbs that they use. They look at the raw increase in cases and say that they are soaring. It varies by geographic area, but the daily percentage growth in total cases and daily percentage growth in new cases is like this:
Percentage Completed
Daily % Growth in Total Cases
Daily % Growth in New Cases
0-10%
18-35% nearly constant daily growth, but absolute numbers are low.
Exceptionally high and erratic, 30-50%/day , but absolute numbers are low.
10-50%
Rate of growth falls into the teens of percentages. If the starting percentage is lower in this interval, so will the ending percentage. Absolute numbers sound large, especially nearing the halfway mark.
Rate of growth falls rapidly to zero by the end of this period
50-90%
Rate of growth continues to fall to the low single digits of percentages, say 2-4%. Absolute numbers sound large but rapidly get smaller toward the end of this interval.
Rate of growth is negative, and gets more negative as the interval gets to the 90% mark.
90-100%
Growth is very low. Absolute numbers are low.
Growth is negative and erratic. Absolute numbers are low.
It’s in the middle two zones where the absolute numbers are high that the rhetoric gets shrill. Compare that to me where at 8PM Eastern Time, I sit down and update my models and comment on how close they came to the modelled estimates. The absolute numbers of total cases, new cases, total deaths and new deaths make great headline fodder, but the real news should be looking at the percentage rates of growth of total cases and new cases. But I suspect that would be a tough thing to see change.
Middle of the Pack
Germany, the Netherlands, Spain, and the US are the next group. New cases are either rising at a low rate or declining. Growth in total cases is in the high single digits of percentage. These countries aren’t out of the woods yet, but are likely past the halfway point.
Some of these had high new case surprises over the last week, but on the whole showed improvement.
Bringing up the Rear
Each of these had significant upward surprises in terms of new cases reported. The growth rate of reported total cases is in the mid-to-high teens.
Too Early to Tell
I did not model Turkey in the last article. It has a really sharp takeoff and deceleration of growth that looks too good to be true. (The US is that way to a lesser extent.) I need more data before I can be definite about this.
Problem Child
Compared to last week, Iran has gone backward. New cases have been growing more rapidly, and the growth in total cases shows no sign of slowing. It will be interesting to see how this develops — it doesn’t fit the model well, unless….
Unless you think of it as several logistic curves in different areas that have taken off and leveled at different points in time. Now that said, from what little I have read, there seems to be a lot of disagreement in Iran over what to do. And to some degree, a populace that doesn’t trust the government much… so it’s not a recipe for constructive collective action.
States and Cities
Massachusetts and Boston Area
New York State and New York CIty
Maryland
The logistic curves for smaller, more homogeneous areas tend to be shorter and sharper than those for broader areas. The data also tends to be more noisy, but that’s what the regression analysis is for — smoothing out the data in a theoretically consistent way, and allowing tracking to be done so that a policymaker could estimate if they are doing better or worse than expected. It would certainly calm some politicians down if they had an idea of how things are likely to develop, and if a deviation happened, they could try to explain why, allowing for the level of uncertainty in analyses like this.
And so at the end, can I offer a happy surprise to New Yorkers, both those in the city, and those that are upstate? There will still be problems for a while, but it really seems like you are getting to the end of the trail. In two weeks, you should be a lot happier. And the same will likely be true in Massachusetts and Boston, and in my adopted home state, Maryland.
But here’s the key question. How ready will the politicians and policymakers be to accept the good news? I fear they will not be happy with it at all, but will remain cautious in the wrong way too long. There is kill, and there is overkill. Kill is enough.
I would encourage the politicians to have us continue to do social distancing, but to reopen businesses, requiring them to follow certain sanitary and distancing procedures. Perhaps those who are infirm, or are over 60, 65, 70, or so should continue remain at home, or only go to necessary places a while longer.
There is a price to everyone staying home. There is a political price to politicians that maintain it too long. Better to modify policy such that it is a sniper rifle, and no longer a blunderbuss.
PIcture credit: Aleph Blog, and the same for all the graphs and charts in this post. All liability for mistakes here is mine.
This post is different than any other I have done at Aleph Blog. I will try to write this in a nice way even though it is a strong and out-of-consensus opinion on a topic that many are edgy about.
I realize I might be wrong here, but I will present to you what I think, along with what I think are the limitations of my analysis. Part of my reason for writing this is that I think that most of the reporting on COVID-19 is subject to a bias common in our culture among politicians, lawyers, bureaucrats, and the media: an extreme bias toward safety because the costs of being wrong on the optimistic side are high than the rewards for being right. (Example: NOAA overpredicts disasters, and so do most hurricane forecasters.)
This post will be structured like this:
Summary of findings and recommendations
Limitations of the analysis
Breaking down the results by groups of countries
A discussion of the “Second Wave,” with policy recommendations
Closing comments
Appendix for math nerds
Summary of findings and recommendations
The First Wave of the crisis will pass more quickly than most expect. Most countries with a large number of COVID-19 cases will have 99% of their First Wave cases reported by mid-April.
Of the 13 countries with the most cases of COVID-19, the least of them has reported 41% of their likely First Wave cases. Of those same nations, none are expected to have more than 0.3% infected with COVID-19.
The real challenge will come in dealing with the Second Wave of the crisis. How do governments deal with a smallish number of new cases, and keep them from growing into a new epidemic?
In the Second Wave, governments should selectively tell some to stay home, while telling most people to get about their normal work.
Quarantine those who are sick with COVID-19 and those who have been with them, until they are tested and have a negative result. Continue to disallow international travel, or insist on a two week quarantine upon returning.
Let healthy people return to their work. All businesses are necessary businesses.
Avoid bizarre stimulus programs that are harmful in the long run. Tell the Fed that monetary policy can’t solve everything, and not to play favorites.
Limitations of the analysis
I am not a public health specialist. I am a statistician with a background in econometrics, which has its similarities with biometrics.
My analysis assumes that processes for finding new cases of COVID-19 are constant, or mostly so. That is not always true — an example is when China announced a large amount of new cases all at once.
I use an inverse logistic curve for my analysis. All functional forms have their limitations, and for the nations analyzed as of this date, the minimum pseudo-R-squared is 79.4%, and the highest is 98.5%. That said, this is a common functional form for epidemics.
The model assumes that there is one wave. That will not prove to be true, as can be seen from China and South Korea.
All sorts of things can go wrong that are not in the data now — mutations, civil disobedience, large bureaucratic errors, large policy errors, etc.
Analysis By Group
Those that are though the First Wave
We have two in this group: South Korea and China. I don’t trust China’s data. In each case, though, you have the First Wave go through their nation and burn out, followed by an excess number of new cases where the public health authorities may not be catching up with what could be the Second Wave. I’ll talk more about the Second wave below.
The unusual case of Iran
Really, I don’t know what is going on in Iran on COVID-19 but it looks like the initial new cases started to slow down, and then they let up on restrictions too soon. New cases hit a new high yesterday, which doesn’t fit the paradigm of a consistent response the the crisis. COVID-19 seem to be out of control in Iran.
Those that are close to done
Italy and Germany are past the halfway mark in the epidemic, and are having lower new cases on average daily.
In general, the policy responses of a nation influence the amount of the population subject to infection, and the ability of the infected to interact with the broader society.
The rest
These are the nations that have not certainly passed the 50% mark as of today as I estimate the infection. As I have watched this develop over the last week, the most difficult aspect of estimation comes when you are near the halfway point. Small changes in actual new cases make a big difference in estimated new cases. An example is the United States, who has had significantly lower new cases than expected for a preponderance of the last week. The US got off to a slow start in its reaction to the crisis, but seemingly has caught up and then some.
WIth these countries, the odds of being wrong is the highest. Thus all conclusions with them must be considered tentative. But with so many of them following nearly the same pattern, despite very different responses to the crisis, gives more certainty to this analysis.
A discussion of the “Second Wave,” with policy recommendations
When you look at the data of CHina and South Korea, you see how the epidemic went through the s-curve, and then has persistently high new cases thereafter. I call this the “Second Wave.” Iran seems to be a case where their society inadequately stops transmission, and so instead of following an s-curve of an exponential, it seems to keep increasing in a way that is almost quadratic — slow but steady.
This will be the grand problem for most countries. How do you eradicate the virus after you have had large success in interrupting its transmission? Looking at the relative success of South Korea in the First Wave I would say that you do the following:
Test and quarantine aggressively.
Of those who test positive for COVID-19, quarantine all of their contacts, and test them. Continue quarantine for those who test positive, and quarantine/test their contacts as well. Repeat as needed.
But don’t quarantine everyone. Let those who are healthy work. Encourage those who are old or have compromised immune systems to stay home for the duration of the crisis, and give some assistance to them.
Don’t assist all of society because that is way too expensive and not needed — get them back to work. Don’t give into the idea of denying people work and then offering meager assistance. It is an inferior idea for those who are healthy.
This applies to the actions of the Federal Reserve as well — don’t harm the value of capital by artificially creating more capital that has no earnings capacity.
Closing comments
This analysis shows the the slowest of the nations written about here is passing the middle of the crisis quite rapidly, and the practical end of the crisis is in mid-April, when 99% of all First Wave new cases will have been realized. The real challenge will come in dealing with the cases after that, which will be sporadic and localized. How do we keep that from becoming a semi-permanent bother to the world, because the cost of putting life on hold is high, as is the cost of losing lives.
Quarantining and testing aggressively is the best solution, together with letting the healthy work. This should be the guiding star for all policymakers, because we need to strike the right balance between breaking the social connections that lead to disease transmission, and allowing people to labor to support themselves. We are not trying to save the financial markets; we are trying to protect people who work.
Appendix for math nerds
The above was how I structured my analysis. It followed a logistic curve, which has the following benefit: infections begin exponentially, but get retarded by two factors: one is that even if people do almost nothing as in 1918, the uninfected population shrinks, which blunts further growth. Second, people act to blunt further growth. They separate themselves from each other, and particularly those who are infected. This is is akin to removing fuel from the fire.
The logistic curve has a number of advantages for estimation. It notices the slowing down of the percentage growth in total cases, while media and politicians continue to panic.
Remember that that the media and politicians selfishly like to maximize their influence, and try to create panics — it is good for them to maximize fear. The same is true for many in public health. Truly, we should spend more on public health, but it is one of those things that governments naturally neglect… because they are short-sighted, and will not spend money on something the lowers risk, but does not bring any present good. (Note to Christians: in the Old Testament public health was a function of their government via the priests. It should be a normal function of government to deal with contagion.)
Final note: I did not write this with Donald Trump in mind. I did not vote for him and will not vote for him. That said, he is on the right track when he says the cure should not be worse than the disease.
It is foolish to warp monetary policy and fiscal policy when healthy people are perfectly capable of working. Don’t destroy ordinary incentives and rack up tons of debt by keeping people idle. Test, quarantine, test, quarantine, etc. , but leave the main body of society alone, particularly for a virus that does not harm the healthy working population much.
To that end, I ask that Republicans be real Republicans, and not expand the deficit further. I ask that the Federal Reserve stop trying to be God, and be content with merely having a currency with a consistent value.
Government is best when it is small. We are not facing the Black Death, nor the Spanish Flu. We will get through this, God willing. We don’t need to panic.
Picture Credit: David Merkel, with an assist from Bing Chat in Creative mode || Twitter bird shops for groceries
Market Dynamics
Transcript: Matt King Sees a $1 Trillion Liquidity Drain Coming to Markets https://t.co/kr9SMaMV9b Monetarism, with bank reserve flows driving the market for risk assets. Mar 31, 2023
Battered banks have been the most lucrative short bet in US stocks this quarter, while surging technology companies delivered the steepest losses https://t.co/2joY6G7xTn It’s tough to make money shorting. Mar 31, 2023
Citi’s Matt King sees a $1 trillion liquidity drain heading for the markets. Here are the charts that help explain why https://t.co/H47MKNQqF7 Some interesting graphs to see. Mar 31, 2023
How wild was Treasury trading this month? https://t.co/LHtJYfmsRU Much wilder than normal, but still, it’s a pretty liquid market. MOVE index is high but off peak levels Mar 30, 2023
If you didn’t rely on the belief that rates would be low forever, you’re probably going to get through this downturn just fine, writes @ConorSen https://t.co/QiTunyQn6H A reasonable statement Mar 30, 2023
Governments want sustained growth, low inflation and financial stability, but they can’t expect to get all three for very long https://t.co/5ceYiH6EEw Not true. Financial crises destroy more growth than monetary looseness creates Mar 29, 2023
On Share Buybacks, Directors Should Stick with Economics, Avoid Politics https://t.co/5DlmyWraM9 I just want the companies I own to deploy capital for the best tax- and risk-adjusted returns. When opportunities are few, send us the excess capital. Mar 27, 2023
Ray Dalio Warns Everybody Is Losing Money: ‘The World Is Leveraged Long’ https://t.co/ZtkcpO5xy4 Main point: Fed is keeping rates high to suppress inflation, while trying to mitigate the effects on bank funding, while the US Govt keeps borrowing. Difficult to do all at once. Mar 27, 2023
A huge pile of hidden leverage that’s been quietly built over the past decade may be the next source of market volatility https://t.co/vOtDBHfkHh Private equity is opaque, but most of its liabilities are longer-term. They may lose money, but it’s unlikely to be a rapid crisis Mar 27, 2023
Double-digit losses suffered by several star traders is a dramatic reminder why investors are rapidly migrating towards bigger hedge funds run by an army of risk takers https://t.co/eztv91fEhD Volatile strategies usually lose more than they win. Mar 27, 2023
â€Bonkers’ Bond Trading May Be Sending a Grim Signal About the Economy https://t.co/x9YVXMhLb7 When future policy is very uncertain, you should expect high volatility in fixed income. Mar 27, 2023
Transcript: Betsy Cohen on SVB and Tech Dealmaking Now https://t.co/KQeACngT5e Time to focus on profitability, then maybe deals come. Mar 27, 2023
Estimating Future Stock Returns, December 2022 Update https://t.co/BadwQJLdDx Are you happy with 3.12%/year returns for the next 10 years? Mar 26, 2023
Banking
The NBA star grew up in Greece, where a sovereign-debt crisis in the early 2010s left citizens worried their cash wasn’t safe https://t.co/fzXzktYfP2 That takes some effort to maintain Mar 31, 2023
US Bank Deposits and Lending Both Dropped Last Week Amid Turmoil https://t.co/PilffVDUph On the bright side, deposits at small banks increased. Mar 31, 2023
Will FedNow Enable Greater Deposit Flight from Troubled Banks? https://t.co/5C8H1ZxzT8 Interesting. I had not heard of this. Instant payments/receipts to almost anywhere once this is fully rolled out. Mar 31, 2023
SVB’s collapse turbocharged the deposit flight from banks. That’s forcing a rethink about what role banks should play in the US financial system – and whether there are too many of them https://t.co/2ToZEoilIk The Fed could lower the rate paid on reverse repos. Mar 31, 2023
The FDIC may pressure the nation’s biggest lenders to pick up a bigger-than-usual portion of the $23 billion bill from recent bank failures https://t.co/a1V9ne9R6Q It’s like the state guaranty funds for life insurers Mar 31, 2023
As the Fed’s interest-rate hikes sent bond prices plunging last year, some of the country’s largest banks used a simple accounting maneuver to help keep billions of dollars of losses from piling up https://t.co/fgvdZViBso Under ordinary conditions this is not allowed. Mar 30, 2023
Though the Federal Reserve and FDIC have stopped contagion from Silicon Valley Bank for now, smaller and regional banks could face pressure for years to come https://t.co/rYDFFk5UGt Slow motion train wreck created by overly loose then tight monetary policy Mar 29, 2023
As the banking turmoil drags on, Schwab investors are starting to unearth risks that have been hiding in plain sight https://t.co/gZb8btFCMw Whistling while walking past the graveyard… $SCHW Mar 29, 2023
Rich Bank Dumb Bank https://t.co/mFZLYudWnt The many problems of Signature Bank Mar 27, 2023
How the banking crisis could ripple through the economy https://t.co/zYG1KxaIn6 Credit from banks will be harder to get as the stickiness of their deposits diminish. Mar 27, 2023
Large US banks gained $120Bn in deposits while their smaller counterparts lost $109Bn https://t.co/MUbvEXHbxU It would be smart for the Fed to make reverse repo facility less attractive, to reduce the flow to money market funds Mar 27, 2023
Marc Lasry, the billionaire co-founder of Avenue, says there’s little benefit for small businesses and other depositors to keep their money with regional banks instead of Wall Street giants https://t.co/2nFcnuA0u4 Disagree. small banks tend to be more risk-averse Mar 27, 2023
Around the US
MLB’s new pitch clock may reduce player workloads by the equivalent of one game per week. Team managers hope players feel less physical and mental fatigue as a result. https://t.co/psKvJtT7Vg Will improve focus and rest Mar 31, 2023
The world’s most important oil price is about to be transformed for good, allowing crude supplies from west Texas to help determine the price of millions of barrels a day of petroleum transactions https://t.co/MP4MmgkLuI A sign of US dominance in producing light sweet crude oil Mar 31, 2023
Americans returned $212 billion worth of merchandise last year. A host of startups are now working with retailers to the process more efficient — and even profitable https://t.co/slzM3eXCBs Looks promising. Mar 30, 2023
In repairing the damage done by highways that divided communities of color, the US risks creating new disasters https://t.co/i2A57bM4hg Baltimore got the “worst of all worlds” on this one. Doing nothing or doing the whole thing would have been better. Mar 30, 2023
Ken Fisher made a serious investment when he moved his money management firm north from California to Washington seeking a friendlier business climate to house its rapid expansion https://t.co/ueUzpzvQ7i Low taxes attracts businesses Mar 29, 2023
Why there may be no return to ‘normal’ for the U.S. used vehicle market https://t.co/xlYWybXETt It is a capital-intensive cyclical business. This will eventually normalize. It may even overshoot on the downside. Mar 26, 2023
Feral Hogs Are the Invasive Menace You’ve Never Thought About https://t.co/oDxSjznZi1 “Wild hogs destroy crops, uproot landscapes, and spread diseases—and not much is stopping them.” Mar 26, 2023
2 high schoolers say they’ve found proof for the Pythagorean theorem, which mathematicians thought was impossible https://t.co/gXRzswTHO5 I disagree. Proof #4 on this page does not rely on the unit circle. https://t.co/mb0cn3KBXx Mar 25, 2023
@guardian Is the paper available anywhere on the Internet? Mar 25, 2023
A new study of nearly 12,000 women finds that getting married brings significant benefits in health and well-being, bolstering the case for marriage as a social good. https://t.co/yIrYcnr4FX Marriage has great potential for happiness & sadness. Unselfish behavior is crucial. Mar 25, 2023
Artificial Intelligence
Several tech executives and top artificial-intelligence researchers, including Elon Musk and AI pioneer Yoshua Bengio, are calling for a pause in the development of powerful new AI tools https://t.co/emJZrXpqiS This will not happen. Mar 29, 2023
Artificial intelligence experts are calling on AI developers to pause training any models more powerful than the latest iteration behind OpenAI’s ChatGPT https://t.co/3euzVgNP2d Foolish. AIs are inexpensive to create. Trying to control AI is like grasping water w/your hand. Mar 29, 2023
A new study finds that AI tools could more quickly handle at least half of the tasks that auditors, interpreters and writers do now https://t.co/hEDpTk2TWV This may be a “use it or lose it” scenario. Mar 29, 2023
Society’s Technical Debt and Software’s Gutenberg Moment https://t.co/5RC0yIdhFO Thought-provoking commentary on the effect that Large Language Models may have on writing software. Mar 28, 2023
The US Federal Trade Commission is paying close attention to developments in AI to make sure it isn’t dominated by major tech players https://t.co/Dp3vicuiV4 Foolish FTC, see “The genie escapes: Stanford copies the ChatGPT AI for less than $600” https://t.co/7VfE1GNtrr Mar 27, 2023
The genie escapes: Stanford copies the ChatGPT AI for less than $600 https://t.co/7VfE1GNtrr It also implies that $MSFT overpaid for OpenAI. Not only can people build their own models, but they could do it quite cheaply. Mar 26, 2023
Companies and Corporate Life
Munich Re has quit the world’s largest climate finance alliance, a step the German company says is necessary to protect itself from legal risks https://t.co/xrnFgjwdii “German insurer cites the risk of antitrust allegations” There is a fiduciary angle to this also Mar 31, 2023
The stock of Charles Schwab is on pace for its worst month in more than 35 years https://t.co/4cvffr5oOx $SCHW cost of capital rising, and shares continue to fall. Mar 31, 2023
Disney is using a Royal Lives Clause to extend its reign over Florida theme parks. https://t.co/rD3Squdbrl How to create perpetual trusts Mar 31, 2023
$AMC rose as much as 18% after the Intersect website reported that Amazon is weighing a possible acquisition of the struggling movie-theater chain https://t.co/CCJNaL2Hx6 Start by buying the $APE units. Mar 29, 2023
This Citigroup Preferred Yields 10%. Is It Too Good to Be True? https://t.co/DtIzLn2GuH There is likely a cheaper way to finance $C. I would not rely on the argument that accounting reasons matter more than economics. Mar 29, 2023
The US Air Force’s test of a hypersonic missile was marred by failure to transmit in-flight performance data, sources say https://t.co/Z1kBgR5FyT $LMT is paid a lot to do this. They should get it right. Mar 29, 2023
In financial services, chief information officers are working more closely than ever with chief risk officers to ensure the right tools for analyzing risk are in place https://t.co/H7ORMMU6u7 Hire an investment actuary to eliminate interest rate risk. Follow his advice. Mar 29, 2023
How The New York Times managed to avoid ruining Wordle https://t.co/bQdCK6QlXT In hindsight, The New York Times was a natural buyer. Mar 25, 2023
Non-US
Sweden’s construction industry may be facing years of drought as investment in housing plummets https://t.co/dYSThCm4pn The effects of higher interest rates hit highly levered sectors first. Mar 31, 2023
Heard on the Street: The European Union just moved an important step closer to turning its climate ambitions into law. The impact will be felt well beyond the energy industry https://t.co/bAnXYcNrQr This will be difficult to achieve. Mar 30, 2023
France’s financial prosecutor is searching 5 banks as part of a probe into tax fraud and money laundering, according to a statement https://t.co/VnIiCQ8Vlp European banks are more opaque than US banks. Mar 29, 2023
South Korea needs to adopt an “emergency mindset” to reverse its fertility rate that ranks as the lowest in the world, its president says https://t.co/LFvd9pcUSs Changing a culture is very difficult. Once women think they are only rewarded by external work, kids are a burden. Mar 29, 2023
A Russian economy that survived 2022 faces a long-term deep freeze. “There will be no money next year.” https://t.co/BpqFON0AA1 Russia is losing economic vitality, and quickly. Autarky is tough to pull off. It killed the USSR. Mar 29, 2023
A significant buying opportunity in Asia—for longer-term investors—could be hiding in plain sight https://t.co/3W02aGynDH Interesting opportunity. FD: + $EWY Mar 28, 2023
@BubbleTIsland When I was young, I was told that Taipei had a lot of air pollution, but indeed, this is beautiful. Perhaps it is the same as America — the 1970s were smoggy. Mar 26, 2023
Commercial Real Estate
Shares in German real estate firm Aroundtown slump to an all-time low https://t.co/wZUvArZzVp Too much debt, and how will the losses get shared with lenders? Mar 31, 2023
A 5% writedown on commercial real estate loans would wipe out almost a quarter of the banks’ profits in the European Union with the Nordic region potentially hit the most, Bloomberg Intelligence estimated this week. https://t.co/lqmcOl9KoF Challenging times. Mar 31, 2023
Everything is looking down for Europe’s worst-hit sector: Real estate https://t.co/Q5YpvaAZJy Too much debt magnifies the effect of changes in property values, rents, etc. Mar 31, 2023
Manhattan’s office-vacancy rate is at a record high as new developments add even more space to the struggling market https://t.co/KeLHbyn00B This will be quite a transition for New York City Mar 31, 2023
Defaults and vacancies are on the rise at high-end office buildings, as remote work and rising interest rates spread pain to more corners of the commercial real-estate market https://t.co/rZHtubWQog This is like the slow-motion pressure in the Great Financial Crisis w/subprime. Mar 29, 2023
US Politics
Trump indictment is going to make US politics even more divisive https://t.co/N28inU5VJE Really, it stinks that this indictment, which has its own issues, makes it more likely that Trump will be the GOP nominee. Apr 01, 2023
Lawyers who have dealt with court-imposed limits on speech, often referred to as gag orders, say Donald Trump should be wary of giving judges cause for concern https://t.co/kcS6YLCZit Inciting violence could be a reason to do so, or harming the ability for jurors to be neutral Mar 31, 2023
Looming changes to Medicare and Medicaid may temper growth at the biggest health insurers. https://t.co/raovXdK9AO Growth in government reimbursement levels falling Mar 31, 2023
The looming failure of the Chips and Science Act shows all that’s wrong with American industrial policy https://t.co/azu23Kk56M Aside from national defense, there is no reason for industrial policy Mar 28, 2023
Rural America Grows Weary of Waiting for Its Mail https://t.co/U3pZWrX5ge Wish we could remove the current postmaster general… Mar 27, 2023
The pandemic split parents over schools. It’s tearing Mentor, Ohio apart https://t.co/ec9PTIVGV5 Schools mirror parenting culture(s). If there are wide differences in parenting cultures, you should expect fractious school board meetings Mar 27, 2023
Employment
Accenture says it will cut 19,000 jobs over the next 18 months https://t.co/hLRF41Pxh4 Interesting to see lack of demand for consultants Mar 28, 2023
The era of remote work has ended for millions of Americans https://t.co/IVuhIuwZNp “Share of businesses with workers on-site most of the time neared prepandemic levels in 2022, Labor Department finds” Mar 28, 2023
McKinsey is embarking on a rare round of major job cuts, with plans to eliminate about 1,400 jobs https://t.co/GV0xwLtg8p Interesting place for job cuts. Perhaps demand for their services have declined Mar 28, 2023
How to explain the covid baby boom https://t.co/vs4lpSRhGj Very small boom, but it highlights a shift where those who are better off are more willing to have more kids, particularly when they can work from home. Mar 27, 2023
It’s a debate playing out at workplaces: Who should be included in a layoff? The behind-the-scenes process is complicated. https://t.co/cUKUgK0KaL Answer: it varies a lot. Mar 27, 2023
Cryptocurrencies
Tether, the largest stablecoin, is continuing to extend its lead in the battle for supremacy among stablecoins https://t.co/fGveF8ZCt6 A money market fund with no accountability Mar 29, 2023
Some banks are rolling out the welcome mat for cryptocurrency firms that found themselves in need of banking services after the downfall of Signature Bank and Silvergate Capital https://t.co/ongomIieAR Surprising that they want that risk. What will the FDIC & SEC say? Mar 29, 2023
US regulator sues top crypto exchange Binance, CEO for ‘willful evasion’ https://t.co/vdXVDZxHR6 KYC AML BSA allegedly violated. Mar 27, 2023
A decent rule of thumb is that all cryptocurrency exchanges are doing crimes, and if you’re lucky your exchange is doing only process crimes. https://t.co/RvXJaSKeuu Maybe peaker plants should be paid a commitment fee like revolving credit agreements @matt_levine Mar 27, 2023
China
Chinese creditors are more hesitant to participate in sovereign debt restructuring because multilateral development banks are not offering debt relief, a senior official at China’s central bank says https://t.co/EdJWfijjBk Chinese lenders want multinationals to eat their losses Mar 27, 2023
Beijing wants to show it’s backing private businesses, but Jack Ma’s decision to spend months overseas suggests otherwise. https://t.co/Ojlf1AHllL A CCP cell inside every significant business. Enterprise free enough to serve the Party. Mar 27, 2023
Market confidence remains shaky for investors looking at China, revealing just how much damage has been done to the country’s credibility abroad. Here’s an explainer https://t.co/DMJmZhjXHH Don’t confuse “rule of law” & “rule by law.” China has the latter: the CCP is not limited Mar 27, 2023
Chinese billionaire Jack Ma’s trip home comes as Beijing eases up on a tech crackdown that has hit confidence among private businesses https://t.co/YpXMcFA2Oa Is the coast clear? Mar 27, 2023
Monetary Policy
Money-market mutual funds are proving an irresistible place for investors to park their cash right now instead of banks https://t.co/vAXF0RaoFH Just lower the rates in the Fed’s reverse repo program. Is the Fed daft? Should have been done a year ago. Apr 01, 2023
The Federal Reserve’s preferred inflation gauge rose less than expected last month, and consumer spending stabilized https://t.co/IIC82Pu9ux Would you rather have a solvency crisis or inflation? Apr 01, 2023
Is Japan’s new central banker the next big threat to global financial stability? https://t.co/1JF62TW9AT Swelling bank balance sheet without economic purpose creates its own problems, as we are learning in the US. QE is not a free lunch Apr 01, 2023
Twitter
Elon Musk is upsetting celebrities by tying Twitter’s blue check mark to platform subscriptions https://t.co/auhdGcfbjx When the service is free, you are the product. Mar 31, 2023
Elon Musk Values Twitter at $20 Billion https://t.co/hXbBPOz2JF Let the banks that lent the $13 billion know that the debt-to-equity ratio went from 42% to 186%. Mar 27, 2023
Why advertisers aren’t coming back to Twitter https://t.co/A5vzydhrIU When Twitter goes broke, the banks will hold an auction. Some entity will buy it for $1B or so, and rebuild it so advertisers will trust Twitter. Or, Musk will re-buy it. Mar 25, 2023
College
A majority of Americans don’t believe a college degree is worth the cost, according to a new Wall Street Journal-NORC poll, a new low in confidence in what has long been a hallmark of the American dream https://t.co/mT3jmg3YfV People are getting more practical about college. Mar 31, 2023
College students are about to put a robot on the moon before NASA https://t.co/rLcHpj3ism Pretty cool, and cost less than $1 million. Mar 30, 2023
Relief is expected for Howard University undergrads who have had to deal with questionable conditions living on-campus at some of the school’s dorms https://t.co/OQg94HLk5N The economics of running a college are difficult. Mar 27, 2023
Space
Russia’s Viasat Hack Exposed Satellite Industry’s Security Flaws https://t.co/Vu5wpDoRqU Scary stuff. Time to start encrypting satellite transmissions Mar 30, 2023
Astronomers Were Not Expecting This https://t.co/jjpzfnsTTQ The universe looks a lot younger than expected. Faraway galaxies look fully formed, as near galaxies do. Mar 25, 2023
Russia’s (Civilian) Space Program Is in Big Trouble https://t.co/Ir1z499qzS Lacks funding. Has increasing numbers of accidents. Even Kazakhstan has foreclosed on Russian space assets in their country for nonpayment on the Baikonur spaceport. Mar 25, 2023
Adani Group
Two months on, Hindenburg’s short seller attack has left the Indian tycoon Gautam Adani’s empire reevaluating its ambitions, reverting his focus to core projects https://t.co/C2fRGWNLsG This is sensible — focus on core businesses & reduce debt Mar 31, 2023
In the aftermath of Adani Group’s woes, another sprawling Indian conglomerate—miner Vedanta Resources—looks vulnerable https://t.co/aYQuATQI7y The bear phase of the credit cycle forces examination of badly-financed assets. Mar 31, 2023
Adani execs meet with US investors from BlackRock , Blackstone and Pimco as part of its plans to market some privately placed bonds https://t.co/O8fkBKEd6k Unless the notes are secured, I don’t see why anyone would buy an 8% yield for 10-20 years from a complex firm like Adani. Mar 29, 2023
Materials Science
Snack companies are experimenting with packaging that uses less plastic without sacrificing taste https://t.co/TkTxU0eNFp The economics of this is challenging Mar 27, 2023
Electrical steel, a crucial material used in EV motors, can be less than a quarter of a millimeter thick for the highest grade. It’s in high demand. https://t.co/CYzVkw3xyn I had never heard of electrical steel before today. Mar 27, 2023
NYC’s biggest-ever office-to-housing conversion is opening in the Financial District at prices ranging from just over $1 million for a studio to $12.75 million for a four-bedroom spread https://t.co/sXCwHGAgC3 Nice, if you can afford it. Feb 24, 2023
Home lenders are looking for ways to make 6% mortgages more appealing https://t.co/fOq3ulMZm0 Don’t do a buydown of the first-year interest rate. If you can’t afford the house on a level rate basis, don’t buy the house. What will you do when the rate rises? Feb 24, 2023
That 3% Mortgage Just Keeps Getting Better https://t.co/mFcum8UPo1 Rather than prepay, invest prepayment money in higher-yielding safe bonds. If rates fall such it doesn’t work anymore, take the appreciated bonds and do a big prepayment Feb 24, 2023
The US housing market lost the most value since 2008 https://t.co/qJYXFrPWp7 Has the FOMC forgotten the lessons of the Great Financial Crisis? Yes! Same errors that Bernanke committed… same certainty Feb 23, 2023
A growing number of big office landlords are defaulting on their loans, reflecting high interest rates and the popularity of remote and hybrid work policies https://t.co/5LJIGtxPrn Slow motion train wreck Feb 22, 2023
Some people buying their first home will see their fees cut by about $800 a year under a new program that aims to address soaring borrowing costs https://t.co/ABVJpJfqj1 Make FHA loans more attractive by reducing the rate charged on mortgage insurance by 0.3% Feb 22, 2023
A couple near Chicago sees investing in real estate as a way to boost their wealth. A financial pro offers advice https://t.co/lVFWXKktkX No. Real estate is a business. Consider the value of your time, as you say you want to start a family. Buy shares in equity REITs instead. Feb 22, 2023
Pyramid’s Crossgates Mall loans lurch toward default https://t.co/Xx2tiOqSR6 “Like most large malls across the U.S., the Crossgates business model has been crushed by the pandemic and changing shopping trends” Feb 21, 2023
A growing number of big office landlords are defaulting on their loans, reflecting high interest rates and the popularity of remote and hybrid work policies https://t.co/5LJIGtxPrn Office properties & lower quality retail will show increasing defaults Feb 21, 2023
Europe’s property sector is springing cash calls and dividend cuts on shareholders. But investors in the financially stronger firms aren’t all smiles @hughes_chris https://t.co/nxWXx4cVWw Effect is highest in Sweden, lowest in the UK Feb 21, 2023
A California-based real-estate agent was arranging a deposit when she realized she was getting scammed. “My guy was ready to wire $70,000 to this escrow. Thank God he didn’t.” https://t.co/IRvY6Ap0fW Bizarre real estate stories where crime was a factor. Feb 20, 2023
Odds & Ends
Starbucks launches a range of olive oil-infused drinks in Italy to boost market share in a country where it’s struggled to gain a foothold https://t.co/qsDrYX3fHr That will work? Feb 23, 2023
Is tort reform in the Sunshine State even possible? https://t.co/xyLdMxeue8 Unlikely. By the state gov’t being too interventionist in market issues and yet allowing for too many tort claims to go to trial, the P&C insurance markets are broken in Florida Feb 23, 2023
@michaelxpettis I said something like this yesterday, but not as well. Thanks. Feb 23, 2023
The Securities and Exchange Commission is investigating whether investor-protection laws were violated as stablecoins were issued https://t.co/PAF7eJnwfF They are akin to deposit accounts in banking, and should be regulated that way. This one doesn’t belong to the SEC. Feb 23, 2023
Social Security Myths That Won’t Die https://t.co/BFGmcGq9GE Mostly correct, though there are some nuances that he misses. Worth a read. Feb 22, 2023
The pandemic wiped out decades of gains by US students. Many parents are in the dark about how far their own kids must go to recover https://t.co/MKkoW2YSuK One big error of the COVID era was not requiring an additional year of school for students, to make up for what they missed Feb 22, 2023
Major brokerages and news media feature technical analysis https://t.co/D6REmikOvx Pictures grab people, because they like patterns, whether intellectually defensible or not. Feb 21, 2023
My tweet “Clouds moving rapidly west, with strong surface winds out of the south” s/b “Clouds moving rapidly east, with strong surface winds out of the south” But what a day, now it is “Clouds moving rapidly east, with strong surface winds out of the north” Feb 21, 2023
The Perfect Retirement Investment Nobody Wants https://t.co/27PPPYbt3k Life insurers have gotten badly burned on LTC. Many annuity companies don’t want to offer LTC. Agents don’t like Immediate Annuities because they never get another commission from the policyholder Feb 21, 2023
Asda is rationing sales of fruit and vegetables after widespread shortages. Here’s what UK shoppers need to know https://t.co/x7ITKaOtuU Effects of a bad growing season in N. Africa Feb 21, 2023
Plains, Ga., has about 550 residents—including Jimmy Carter, who is receiving home hospice care. “When I heard the news my heart hurt to know that he was going through this.” https://t.co/3Q5eSEDV6s Liberal Baptist became a most improbable President of the US Feb 20, 2023
Non-US
Soaring onion prices are forcing governments to protect supplies https://t.co/QpkUL7EyZN If you want to see riots, have poor people unable to afford moderately good food. Feb 25, 2023
New Zealand’s recent cyclone shows “the importance of physical cash still in society today,” RBNZ Assistant Governor Karen Silk says https://t.co/lxfSOZh3Th You can’t have a society without physical currency Feb 25, 2023
How India is shaking off its shackles and emerging as an economic power https://t.co/E7WETLSov6 This is wishful thinking. Cultures change slowly, and the Indian government is still pretty corrupt. Feb 23, 2023
Iraq is planning to pay for private-sector imports from China in yuan, injecting foreign currency into the financial system to help ease pressure on the dinar https://t.co/IIQsGpJNbI Will do little for the Iraq economy Feb 22, 2023
Iran introduces fresh restrictions on foreign currency sales after a rush on euros and dollars weakened the rial to an all-time low of 500,000 against the greenback https://t.co/BCAg4mi3Om Corruption, bad policy and sanctions create this hyperflation Feb 21, 2023
Kazakhstan says local brokerages that snapped up Russian sovereign debt last year did so largely on behalf of clients who were Kazakh and Russian residents https://t.co/he4RkZaErR Own Russian sovereign debt? There is liquidity in Kazakhstan. Feb 21, 2023
Russian exports of discounted crude and fuel oil to China jumped to record levels as the re-opening of the world’s biggest energy importer gathers pace https://t.co/j6iiSMmeFT The discounts to Brent for Urals ($13) and Espo ($8) Crude are smaller than what I have read in the past Feb 21, 2023
Terrorists were blamed when explosives were found in an SUV parked outside the home of Mumbai’s richest man. The truth was far more alarming. https://t.co/ckyNmd6as8 Long article on entrenched police/political corruption. Another reason India will not develop Feb 21, 2023
Japan promises radical spending to boost its birthrate. Will it work? https://t.co/judPpbjI0z It probably won’t, but perhaps governments could reduce old-age social insurance payments to those who don’t raise children, making the systems solvent #thepunishmentfitsthecrime Feb 20, 2023
Portfolio Management
Wagering on the bounce in stocks was always a long shot. Now it’s looking like a sucker’s bet https://t.co/Uy9U89wJBF The problem is greater for growth stocks Feb 25, 2023
“There’s a risk that the macro economy delivers results that markets are still woefully unprepared for,” Billionaire quant investor Cliff Asness warned https://t.co/1yPXSxPr4f “the valuation gap between the priciest and cheapest stocks is still at the 94th percentile” #agree Feb 23, 2023
The fixed-income market has become too bearish, too quickly https://t.co/4CyBDZevFM Hard to say. There seems to be more demand to borrow on the long end of late. They may be wrong, but the long end of the bond market is rarely irrational. Feb 22, 2023
Rajiv Jain is the opposite of Ark CEO Cathie Wood. He’s quietly built a stock-picking juggernaut by investing in old-school, out-of-favor companies https://t.co/JEYvyUM7WD Difficult to get so many decisions right consistently. Feb 22, 2023
The DJIA’s shake-up in the summer of 2020 dumped Exxon Mobil, Pfizer and Raytheon just as it was their turn to thrive https://t.co/QAnLl0umqv The short-run effect of index inclusion/deletion is up/down, but the 2020 DJIA changes had the opposite performance over the next 2.6 yrs Feb 21, 2023
Rising interest rates boosted corporate pensions last year. This year rising rates may boost costs. https://t.co/YctKh06Uxi It doesn’t have to work this way. You can invest to immunize your pension costs against changes in interest rates. It’s not rocket science. Feb 20, 2023
Biden’s SEC is coming for your investment account https://t.co/kTUj8hg9nQ Actually, Gensler’s proposal would level the playing field, and create a fairer market structure for smaller investors. Why we have such a fragmented market system today astounds me. Feb 18, 2023
Economics
“It’s everywhere.” A bird flu outbreak has led to the death of nearly 60 million farm-raised chickens, turkeys and ducks in the U.S. Farmers fear the virus is here to stay. https://t.co/3v2NvG5N5u A greater proportion of laying hens have died vs chickens generally in the US. Feb 23, 2023
Which explains why egg prices have risen so much more than chicken meat prices… https://t.co/eEyGIkUTVG Feb 23, 2023
The world’s largest trial of the four-day work week finds a majority of companies are making the shift https://t.co/hnAky9goEQ Color me dubious Feb 21, 2023
The rise of kitchen table economics https://t.co/Bo6nBxqnZB Yes, contracts are too complex and construe everything in favor of the large corporations, but you don’t have to sign them unless you are getting enough value. Feb 21, 2023
Letter: The economic conditions that make wars more likely https://t.co/NfubUHNC8R “A plan is needed to regulate current account imbalances, which draws on John Maynard Keynes’s project for an international clearing union.” You really want near-fixed exchange rates? Feb 21, 2023
Presidents are tweeting about it, and it’s featuring in election campaigns: Here’s how the world fertilizer crisis became political https://t.co/in7c4UVLgO This is over shortages of potash & phosphate. Also trade issues stemming from a few wars and their related sanctions Feb 21, 2023
US Politics
Illinois Governor J.B. Pritzker said he’s willing to spend what it takes to keep Ron DeSantis & Donald Trump out of the White House https://t.co/V8cFk679HD “Taking your eye off the ball.” I’ve done that. Neglects core responsibilities as governor to criticize national politicians Feb 25, 2023
White House is considering two economists who in the Obama administration—Karen Dynan and Janice Eberly—as candidates to become the Federal Reserve’s vice chair https://t.co/IbgMLjjkiP Please, not an economist. No academics. No former Fed or government lackeys. Feb 23, 2023
The Defense Department and Microsoft are investigating an error that exposed military emails, highlighting the security risk of moving sensitive Pentagon data to the cloud https://t.co/w2YPXK9VCM Happens to the best of us, and the government as well. Feb 23, 2023
The PCAOB says it doesn’t have jurisdiction to monitor audits of privately held crypto firms. Some say there are ways to strengthen the board’s crypto oversight https://t.co/GUoKyWjYY6 Until you can say it is a deposit, commodity, or security, you don’t know how to regulate/audit Feb 21, 2023
Technology
Germ-zapping lasers can help cut down on infections after surgery https://t.co/979qq9KSSu Sounds promising. Feb 25, 2023
How Rust went from a side project to the world’s most-loved programming language https://t.co/YvAvVy4H0K Long read, but fascinating. Memory flaws are one of the biggest reasons for software crashes, and Rust eliminates that problem. Feb 24, 2023
Apple is making major progress on a no-prick blood glucose monitoring system for its smartwatch https://t.co/fzN4nDBa1Q Big stuff, if it works, which has been elusive so far Feb 23, 2023
Ozempic’s popularity among people looking to lose weight has limited supplies for diabetes patients who depend on the drug to control their blood sugar https://t.co/2cFHjgLzjK What is nice for those who want to lose weight is necessary for diabetics Feb 22, 2023
Removing carbon from the air will be a key step in fighting climate change. But it’s plagued by problems https://t.co/IhFxHwvqYV Interesting, if it genuinely does what they say it does Feb 20, 2023
China
Xi Jinping is set to have more control in decisions over the financial system, with the likely revival of a powerful committee and a possible appointment of a key ally in the central bank https://t.co/eu2p8z2dpx What good or bad comes from this is a mystery – ill-minded tinkering Feb 25, 2023
Empty shipping containers pile up at packed Chinese port as orders dwindle https://t.co/3f8GPQ1By3 So much for the Chinese economic recovery Feb 21, 2023
Thousands of Chinese Retirees Protest Government Cuts to Benefits https://t.co/8JmxGfyENx Social Insurance plans fail when the ratio of workers to beneficiaries gets too low. Feb 21, 2023
Any gains China might have anticipated from its embrace of Russia are hard to spot. But the costs are clear & growing https://t.co/F8wNl8ruWU “Xi is trapped in a strategic dilemma, at the mercy of events. His erstwhile masterstroke is looking more and more like a losing bet.” Feb 21, 2023
Pakistan’s creditors are demanding China take as big a haircut as them in any sovereign debt restructuring, perhaps bigger. It should @mihirssharma https://t.co/2wnXDsT4nW If corruption is not ended, debt forgiveness won’t do much Feb 20, 2023
Companies
Carvana’s disappointing quarterly results sent the online used-car dealer’s stock into freefall and triggered a string of warnings from analysts https://t.co/Pe6xrZjMBT So much for showmanship $CVNA Feb 25, 2023
BYD Most Likely Faked Its 2022 Sales Numbers, Real Ones Could Be Much Lower https://t.co/hpjoersddF I have no idea, but if true, wow. Feb 24, 2023
National Public Radio will reduce its staff by 10% after projecting a $30 million revenue shortfall for the coming year https://t.co/shgKfke3Xb In the end, it is just a business, albeit a nonprofit. Good nonprofits care for their people and don’t overexpand during booms https://t.co/Tlzm6Habx1 Feb 23, 2023
The EV question for auto executives is: How quickly should they make the shift to electric vehicles? https://t.co/8MaVClqMLB The danger is in moving too fast on this. Let unsubsidized consumers decide. Feb 22, 2023
Almost a decade ago, Elon Musk envisioned a passenger transit that moved at nearly the speed of sound. Where is it? https://t.co/rhGkIWdDSn Hyperloop: Boring fantasy, not technology Feb 21, 2023
South Africa
Eskom’s chairman says outgoing CEO behaved “reprehensibly” when he made accusations of theft and corruption within the state-owned electricity company https://t.co/dupwUx6T1U Telling the truth is “reprehensible.” Coal thieves also a problem. Get ready for more blackouts. Feb 23, 2023
South Africa’s rand rallies after the budget unveiled details of plans to deal with debt at the ailing state-run power utility Eskom https://t.co/TX3kvaN8PN Unless you deal with corruption and crime surrounding Eskom, this is all for naught Feb 22, 2023
South Africa’s finance minister will probably spend about five minutes of his budget speech Wednesday on Eskom — a tense 300 seconds for bondholders https://t.co/SBswUTR3G4 If you can’t end the corruption & sabotage regarding Eskom, the debt transfer won’t help South Africa Feb 21, 2023
Ukraine War
As NATO’s military commander a decade ago, Admiral @StavridisJ worked productively with Russian generals. But Putin’s obstinance led to his doomed war in Ukraine https://t.co/73lA9K8J0B The Russian military exists to make the French military look good Feb 23, 2023
As Russia’s invasion of Ukraine enters year two & relations with China worsen, concerns persist over whether the US is ready to fight a war https://t.co/w2JbHsZNi0 “Every single person knows that what we’re doing is crazy,” said Ferrari. “But everybody is helpless to change it.” Feb 21, 2023
Vladimir Putin should read the story of King Croesus. In fact, so should we all https://t.co/abmJ06n3qu Almost no expected the current outcome. That said, many wars end in a stalemate. That seems to be what is happening now. Feb 20, 2023
Personal Finance
Why don’t we talk about money? https://t.co/uYnJdKGDFs Other reasons: looking bad by comparison, people may think you are arrogant because you have done well. I think children need to understand how the economics of the family works, so they can do it as well or better Feb 22, 2023
Some parents aren’t waiting for retirement or urgent healthcare needs to move in with adult children https://t.co/EeBAGjFVHu Think hard about this, and all the adults talk it through — who is in charge? How are bills paid? Privacy? There are many ways for this to go wrong. Feb 22, 2023
Markets Weekend: When is a Banc not a bank? https://t.co/QoSdP3yFKx When it offers bonds that function like deposit accounts. How Compound Banc could originate the loans mentioned does not make sense. Avoid. Avoid. AVOID! ht: @felixsalmon Feb 20, 2023
Adani Group
The combined market value of Adani Group’s shares have just fallen below $100 billion https://t.co/qsNPOK1xGh The question is how much liquidity they really have, versus maturing debts and needed working capital. Paying off a few debts w/scarce liquidity could backfire Feb 22, 2023
Almost a month after a bombshell short seller report lopped off $132B in market value from Gautam Adani’s empire, the Indian billionaire has doubled down on his comeback strategy https://t.co/7RybNimFLC Making a virtue of necessity, while capital costs skyrocket Feb 20, 2023
Adani Group stocks have seen more than $132 billion of market value wiped out since the explosive Hindenburg Research report, but none is hit as bad as Adani Total Gas https://t.co/3j9MzDyK5S What a chart https://t.co/nlK8PZNAKZ Feb 20, 2023
Credit
The $1.8 trillion student debt bubble is about to burst https://t.co/LPQAkME8BI Do NOT borrow money to get a degree that will NOT give you the income to repay the debts. And don’t complain unless someone forced you to go to college & take on the debt Feb 25, 2023
An office landlord tied to money manager Pimco has defaulted on $1.7 billion of mortgage notes https://t.co/xUCEuoGkfW Becoming a self-reinforcing cycle of skittish lenders, defaults, sagging prices for offices. Feb 24, 2023
A quirky German debt product is gaining fans around the world. Here’s what it is all about https://t.co/FvUnDBAfLJ Illiquid promissory notes with low disclosure and no secondary market. I can see why borrowers like it, but all the lenders get is extra yield vs a traditional debt Feb 22, 2023
New Zealand Prime Minister Jacinda Ardern’s resignation highlights the complexity of post-Covid economic challenges https://t.co/wYjiYV0MLi People got tired of an overly interventionist leader who did not listen. Jan 20, 2023
Argentina’s plan to repurchase $1 billion of its deeply distressed dollar bonds has emerging-market investors scratching their heads https://t.co/hlu9qSfIrI If you are going to do this, don’t announce it in advance. Just do it quietly. Jan 19, 2023
Entrepreneurs Flee China’s Heavy Hand: â€You Don’t Have to Stay There’ https://t.co/Ijh5EWbg9A China faces a talent and capital drain. Once you experience freedom, no level of economic incentives will get you to return to Communist China. Jan 19, 2023
India may have already surpassed China as the world’s most-populous nation https://t.co/pJiou6pys7 India’s culture would have to change a lot for it to have a fast-growing economy. Cultural change is difficult, so it is not likely Jan 19, 2023
How Rich Are Gulf Countries? Region’s Wealth Funds Have $3 Trillion to Spend https://t.co/KNNvnYr0BT Finding new ways to lose money Jan 18, 2023
China’s population started shrinking in 2022 for the first time in six decades https://t.co/W3S9zvd3Aw This is not news. Anyone paying attention knew this was coming 15 years ago. Jan 18, 2023
The UK is poised to threaten social media bosses with prison if they break new safety rules. That’s sensible, says @parmy https://t.co/uMKTmduBFs Not sensible. We don’t jail corporate leaders for tortious corporate actions. Instead, we fine the companies severely. Jan 18, 2023
Russians became the top foreign buyers of real estate in Turkey last year, helping sustain the world’s hottest housing market by tripling purchases https://t.co/JHIAXw2uHe Also happening in Georgia. Many Russians escaping Russia, and becoming significant in nearby nations. Jan 18, 2023
Western banks struggle to exit Russia after Putin intervention https://t.co/C1tdCYaYzK The wind-down strategy seems the most compelling Jan 17, 2023
Credit Issues
The rapid meltdown of Americanas has left Brazilians with the prospect of losing a ubiquitous company known for its iconic red-and-white logo and holiday sales https://t.co/do9eD4mroq Things like this don’t happen by accident. Management may have corrupted their accountants. Jan 20, 2023
Property markets face a deepening debt crisis as the era of easy money ends, and the fallout is everybody’s problem https://t.co/fFKTSmtiqI Stick to low leverage, quality and only “B” properties that are necessary… Jan 20, 2023
US watchdog cracks down on private equity securitization vehicles https://t.co/rjSGcuzh7i NAIC: 1) always late 2) underfunded 3) lacks smarts 4) states don’t listen to them 5) tries to grab control of credit questions, botches it, & gives it back to the rating agencies Jan 18, 2023
Opinion: More rotting assets are lurking in the shadows of the financial system https://t.co/kn6eaxfGMq Definitely opinion & biased. Many of the things stated here are wrong. That said, if defaults pile up from CLOs, let the entities funding them default, and don’t bail them out Jan 19, 2023
Big banks might need to be broken up if they become too big to manage & are unable to fix significant regulatory lapses, a top federal banking regulator said Tuesday https://t.co/ThWQ1ujBId Regulators most willing to break up the big banks likely have the least ability to do it Jan 18, 2023
Portfolio Management
Baillie Gifford admits â€humbling year’ after $14bn loss on Tesla and Shopify https://t.co/2fA5cLEtwT Evaluate using dollar-weighted returns, like the PE guys do. Jan 20, 2023
Corporate fraud is widespread – and largely undetected, study says https://t.co/GEyfWRziKA Cash flow conquers all. If things were that bad, you would see a lot more insolvencies. There is bending GAAP, and breaking GAAP. The former is common, the latter is not. Jan 20, 2023
Questioning the Illiquidity Premium https://t.co/8Q7lbVMxij Simply put, you shouldn’t buy an illiquid investment unless you will likely get a premium return versus similar illiquid investments. Realizing an illiquidity premium is never guaranteed Jan 17, 2023
Investing When Your Time Horizon Is Short https://t.co/lmLOsMtFwv If your assets need to spent in 3 years or less on average, don’t own stocks. Jan 17, 2023
Science
Propulsion System Could Get Us From Earth to Neptune in 1 Year https://t.co/iIuEIL25yp This isn’t likely. Transferring kinetic energy with extreme accuracy would be tough. Jan 20, 2023
Companies are turning to microbes to alleviate fertilizer’s negative impact on the environment https://t.co/UIqd68kEf2 Milorganite has existed for years, Yara. But other technologies here could be game-changers. Jan 20, 2023
A nuclear-powered copter on Saturn’s moon Titan. Blimps on Venus. Space engineers are planning innovative flying machines to explore far-away worlds. https://t.co/LWiEDPiztg At least unmanned missions are cheap. Pity they won’t find any life out there aside from microbe stowaways Jan 19, 2023
New research finds that global temperatures would be about 0.1°F higher, had it not been for an increase in atmospheric dust https://t.co/LQmqIbtmVv Think of volcanoes. This isn’t news. Jan 19, 2023
Auto Finance
Can You Use a Home Equity Loan to Buy a Car? https://t.co/hg91niTa5L Could be a good idea if you pay it down quickly (<5 years), but not otherwise. Jan 19, 2023
The steep plunge in used car prices – what it means, and what’s ahead https://t.co/cslWrGFhbQ In general, the fall in prices is far greater the older and cheaper the cars are. Once new cars are being bought and sold in volume, recent used car prices may decline more rapidly. Jan 18, 2023
Hangover Time for Used-Vehicle Dealers. For Buyers, Patience Will Pay Off | Wolf Street https://t.co/HP7R7jyREj It’s likely that the prices of used autos will continue to fall. Jan 17, 2023
How Auto Lenders Can Help the Growing Ranks of Troubled Borrowers https://t.co/GA7XI7VDmy The low end is experiencing greater credit stress Jan 17, 2023
Politics
It’s Time to Put a Brake on the Debt-Ceiling Charade https://t.co/XQ4RAnotdG Switzerland has an expenditure cap that requires balanced budgets over time. It would be a lot better than what we have now. Jan 18, 2023
A looming, high-profile fight in New York speaks to a widened interest in state judicial appointments since the U.S. Supreme Court overturned Roe v. Wade https://t.co/uwNJeEeHxz New York, where liberals fight liberals. Jan 18, 2023
Lawsuits across the U.S. are challenging policies aimed at getting homeless people off city streets https://t.co/mIFMoYyamI I’ve known some homeless people over the years. The main common factor: lack of self-control, which is a skill that can be lost or developed. Jan 17, 2023
Private Equity
Private equity’s slowdown in 3 charts https://t.co/GTXKsF1wDD The situation is extended and ugly. What can we say? Watch for writedowns. Jan 20, 2023
Inside The Secretive World Of Shark Tank Deals: Who The Real Winners Are https://t.co/tMyOhmeC4h Interesting article. I’ve never been impressed with “Shark Tank”, because like all investing, acting quickly leads to ruin. This helps prove it. Jan 20, 2023
Crypto
Binance Is Bleeding Assets, $12 Billion Gone In Less Than 60 Days https://t.co/rgdl1GniHM Bye, bye, Binance Jan 20, 2023
Genesis Global Capital is laying the groundwork for a bankruptcy filing as soon as this week https://t.co/0WuMU0SrE9 Which will likely lead to a Gemini bankruptcy… Twin bankruptcies, and it is only the beginning. Jan 18, 2023
Companies
Meme stock Mullen risks drowning its investors by issuing a ton of shares, argues @chrismbryant https://t.co/Vvt5SYVoqG This is a rational response to meme stock investors: stuff them full of stock. Jan 19, 2023
Looming Twitter interest payment leaves Elon Musk with unpalatable options https://t.co/oJmCngeWjC If Twitter is worth no more than $15B at best, then basically the banks will own it, unless Musk tries to fold it into $TSLA, or some recapitalization that spreads the pain Jan 17, 2023
Odds and Ends
California Has a Gas-Price Mystery: Too High, But Why? https://t.co/FlrG5NHpsB Low refining capacity, low number of gas stations per driver — blame California regulations. Jan 20, 2023
Appliance makers are betting that internet-connected “smart” appliances will help transform their businesses and customer relationships—but not all consumers are plugging in https://t.co/z2p59IWD06 Better to buy simpler appliances, they break less, & fancy features are marginal Jan 20, 2023
A major Hollywood producer just pulled back the curtain on how hard it is to make movies—and how the streaming model killed the independent film https://t.co/LkO6HxoEj3 In general, this is good. Edgy content is usually bad content. Jan 20, 2023
Tech startup workers are grappling with what the market tumult means for their finances. https://t.co/gbBj7Y8ijd It’s a big risk to give up a lot for the startup company you work for in order to have a chance at a big score. ~80% don’t succeed. Jan 19, 2023
The Financial Accounting Standards Board is moving to permit companies to apply a certain accounting method to more tax-credit investments https://t.co/Kfdvz15ydT This is an interesting corner of investing. The accounting issues matter less than risk-based capital issues Jan 19, 2023
Fake meat companies promised to halt climate change, protect animals and make people healthier— while making billions. But they’ve turned out to be another food fad https://t.co/gYtcLlx7D8 It comes down to lower quality at a higher price Jan 19, 2023
Something has been killing American young people in sharply rising numbers, but it’s not vaccines, @foxjust says https://t.co/d0WWDl5z5S Large increases due to accidents, homicides, suicides, & C19 Jan 19, 2023
Bob Prince, who helps manage the world’s largest hedge fund, says more people need to lose their jobs before inflation will be brought under control https://t.co/GH6YFITkMR No, the Phillips curve does not exist in the presence of global trade. Don’t create a financial crisis Jan 18, 2023
Food waste is a major contributor to climate change. This startup wants to reroute your kitchen scraps from the landfill back to the farm https://t.co/svDMWmZAaH But why make them pay to do this? This is your cause. You should pay for it. Jan 18, 2023
The Consumer Financial Protection Bureau is weighing new restrictions on fees companies charge to wire money abroad https://t.co/998tjpQ24v It’s fine if compensation is disclosed or undisclosed, just not both. https://t.co/HWWVFqqmCr Jan 17, 2023
Going electric is often prohibitively expensive for truck drivers operating at US ports. One California startup may have a solution https://t.co/sy5KNgEFql All-in, a lot of the supposed environment advantages go away when applied to extremely heavy vehicles. Jan 17, 2023
CES, the consumer electronics convention held in Las Vegas this month, felt a lot like the flashy auto shows of yesteryear, with a techy twist https://t.co/mMJPoHDJWj Just be for real; flashy niche ideas that are costly will not pay off. Jan 17, 2023
I know I don’t write as much as I used to. I typically write when I motivated by a given topic, and that’s just not coming as much to me now. But I still tweet on Twitter. I did sorted weekly tweets from 2012 to 2014, then I stopped tweeting as much for a while, and so discontinued them.
I can think of three good reasons to try this again:
Readers can see the most interesting articles that I have been reading, and can see some of my thoughts about them.
It may give me an idea for a blog post when I see them categorized.
In the past, some people have asked me to try this again
So, here is the first episode of this go-round of “Sorted Weekly Tweets.”
Credit Trends
The worst year for equity bulls since 2008 will also be remembered as one when the predominant investment strategies veered from one another by the most in 21 years https://t.co/BWG0OaRZok 2022 key: “immunize yourself from interest-rate sensitivity.” 2023 key: reduce credit risk Dec 31, 2022
Despite performance, corporate issues OneMain Financial to raise $460.5 million https://t.co/wszreQ7DXr Though terms of the securitization offer more structural protection than prior, underlying asset quality looks poor. Credit deterioration on the low end. Dec 31, 2022
Predictions for 2023: Car Prices Fall as Dealers Suffer https://t.co/glne5aK761 There are a lot of good charts and analysis here. Should be good deals on used cars around mid-year 2023, if you have cash… Dec 31, 2022
Consumer ABS experts: Keep an eye on employment amid rate policy, inflation https://t.co/cCv1vsPkPP Early signs of weakness on the low end of credit Dec 31, 2022
Multiple stress points are emerging in credit markets after years of excess. With cheap money becoming a thing of the past, this may just be the start https://t.co/SqGbFUu5wR Recently issued loans, with weak covenants, became the financing of choice for many weak companies Dec 28, 2022
Still one place to get a good deal on an auto loan: Credit unions, which have been offering some of the lowest rates around, undercutting banks and other lenders https://t.co/kDiPkbSfPy They don’t pay taxes; gives more flexibility. Can cut deposit interest if defaults spike Dec 28, 2022
Politics
Trump’s tax returns released, launching fresh scrutiny of his finances https://t.co/q9B3s71DTG If it becomes a question of fraud for assets Trump wrote down in the past to generate losses, his tax returns prior to the seven-year limit could be audited also, particularly 2009. Dec 30, 2022
Brazil President-elect Luiz Inacio Lula da Silva has selected a senator and former Petrobras official to lead the country’s state-controlled oil giant https://t.co/Bc9PRFoPDi Sounds like a disaster that will come back to bite Lula. Another unforced error, like Europe & China Dec 30, 2022
Weeks before the government approved a wind farm off Rhode Island, US scientists warned it could jeopardize the area’s iconic cod https://t.co/Ent7FU1qFK Environmentalists arguing with environmentalists Dec 30, 2022
10 Ways Secure 2.0, Part of Spending Bill, Changes Retirement Planning https://t.co/45p2tW2xzT Marginal ideas at best Dec 27, 2022
Going Boldly: The Retirement Savings for Americans Act 2022 https://t.co/HkIDtzSrlq This will do less good than most imagine. Many poor people need the money to live now. They will not use this. Dec 27, 2022
Inside TurboTax’s 20-Year Fight to Stop Americans From Filing Their Taxes for Free https://t.co/Fa0tWhAzNA & Intuit spends millions lobbying amid accusations of deceptive TurboTax advertising https://t.co/UZ378WSCa7 $INTU is annoying, especially paying annually for Quicken Dec 24, 2022
Intuit collects as much as $1.6Bn in annual income from its TurboTax products, and ProPublica & OpenSecrets find that $INTU has spent >$10Mn lobbying Congress to keep the IRS from simplifying taxes (which would undercut the need to purchase TurboTax). https://t.co/iLHl9qJqk3 Dec 24, 2022
The Sordid Saga of Hunter Biden’s Laptop https://t.co/VeY2ynEWSW “The most invasive data breach imaginable is a political scandal Democrats can’t just wish away.” Very long, and sadly, we will likely hear a lot more about this. Dec 24, 2022
The Surreal Case of a C.I.A. Hacker’s Revenge https://t.co/g6Z8kIovAN This is indeed surreal, and quite long. Who watches over the watchers? Dec 24, 2022
I golfed a full course of congressional districts in 84 strokes – 11 strokes over par! Tee off in @washingtonpost’s Gerrymander Invitational: https://t.co/pbmw1nZSvv I live in MD’s 3rd district, likely the most gerrymandered in the country. It is hole 9, par 26 on this course Dec 24, 2022
“Isn’t administrative complexity a problem for the government to solve, not a bunch of unelected do-gooders?” @AnnieLowrey writes: https://t.co/N8T8Q6OUIy Cool idea. I am concerned that in dealing with the government, poor people are disadvantaged by legal & regulatory complexity Dec 24, 2022
Cryptocurrencies
Opportunities Around GBTC – Valkyrie https://t.co/fkPmSuOPzR Why should Grayscale voluntarily give up its profits? Dec 30, 2022
Has Sam Bankman-Fried finally managed to make accounting class sexy? https://t.co/miOiI5y865 No, but he has shown its necessity. Also, the “run on the bank” at FTX would have happened even if CZ hadn’t taken action. That said, when will Binance have its run? Dec 30, 2022
MicroStrategy shares hit the lowest since 2020 after the enterprise-software firm, the largest corporate buyer of Bitcoin, disclosed its first ever sale of the token https://t.co/XVVczgL629 $MSTR is just levered Bitcoin. Goes broke in 2025 as 2028 secured notes accelerate. Dec 30, 2022
Criminal charges against a trader who swiped $100M from a DeFi platform show that even as crypto remains largely unregulated, it offers no shield against prosecution over alleged fraud https://t.co/gUtpv4I4fF I think the plaintiffs have the better argument. Dec 30, 2022
Markets
Cash holdings at U.S. state government pension funds dropped to the lowest level since the financial crisis https://t.co/xBk8rGpJhh Many of these funds are desperate: looking for higher returns to bail out the underfunding, taking on risks they don’t grasp including illiquidity Dec 30, 2022
Tech-heavy hedge funds had a banner year in 2020, but that was the last of the good times https://t.co/zXBkkzK66a In general long-only management is less risky than hedge funds, and over a full market cycle provide better returns Dec 30, 2022
After the worst year for global stocks in more than a decade, & a rout in bonds that’s unmatched this century, some investors aren’t going to take anything for granted in 2023 https://t.co/4i6ExvYesP In the past, few took account of war, contagion, expropriation, sovereign crises Dec 28, 2022
Home prices fell 0.5% in October compared with the previous month, as higher mortgage interest rates continue to weigh on home-buying demand https://t.co/cUEtw52Ppd Leading indicator on inflation and growth Dec 28, 2022
Stocks
Wall Street’s best and brightest got inflation all wrong this year, leaving them & their clients exposed to the full brunt of an epic market collapse. Now, they have to adjust to a new era https://t.co/7Y4AcgaLWd Stock valuations are still top decile by the equity share model Dec 30, 2022
US automobile industry; Final Sales of 2022 and Trends for 2023 https://t.co/p2THEFWRXZ Of the top 10 new car sellers: 1) 9 had their stock price fall. Exception: Subaru. 2) 8 sold fewer cars than 2021. Exceptions: Tesla and GM. In general, I prefer owning auto part makers. Dec 30, 2022
@MikePTraffic @retheauditors As a value investor, I could not see how Border’s would survive vs $AMZN. It was weakly capitalized, and had to carry a lot of inventory. I agree with your point about management loving their business, and understanding the economics thereof. There is no generic business. Dec 30, 2022
Used Tesla prices are plummeting four times faster than other cars https://t.co/GEKnx91fIg Calling Elon Musk! Time to focus on your main business! Dec 30, 2022
VanEck is the latest asset manager to liquidate Russia ETFs nearly a year into Vladimir Putin’s invasion of Ukraine https://t.co/44trdYkzRf Isn’t it: 1) Convert ADRs to local Russian shares 2) Deposit Russian shares with a Russian broker 3) Sell them on a Russian exchange? Dec 29, 2022
4) Convert rubles to dollars. 5) Wire dollars to the custodial account in the US. 6) Distribute pro-rata to shareholders https://t.co/De3NJTMy2y Dec 30, 2022
Silicon Valley staff rush to offload start-up shares as valuations plummet https://t.co/T6hxfFB1TV Too much money chased too little profit in the past. Now liquidity is needed. Who will provide it, and at what price? Dec 29, 2022
Economics
After a turbulent year, signs are emerging that wage inequality may be starting to reverse https://t.co/lTdjd4aOVi Unlikely. Technology aids those who are intelligent, and doesn’t help those who aren’t. Dec 30, 2022
David A. Shaywitz reviews “Escape From Model Land” by Erica Thompson https://t.co/522DtNmOMl Send a copy to the Fed Dec 29, 2022
We Aren’t Ready for a Financial Crisis https://t.co/u5to9iTDqY We grew faster when we had less debt, public and private, and ran balanced budgets. Dec 24, 2022
Central Banking
The central bank horror story https://t.co/HBpCjxDEWJ May not be so bad. Swaps in aggregate net to zero, but there are winners & losers. If the losers run out of money while margining, the winners may lose as well. Dec 30, 2022
The Bank of Japan announced a third day of unscheduled bond purchases as it fights back against speculation it’s moving toward ending its super-accommodative monetary policy https://t.co/TFZ322s70j Rippling across global bond markets, creating lots of Yen deposit liabilities Dec 30, 2022
The long Australian boom shielded the central bank. That’s changing, for the better https://t.co/IG9Yba411h Just set up a currency board, and end your misery. Dec 30, 2022
Global debt markets extended an end-of year selloff Wednesday, prompting additional bond purchases from the Bank of Japan https://t.co/9TEV4yBfWO Say goodbye to negative yields. Hope we never go there again. Dec 29, 2022
China
Rural residents worry for elderly as COVID rips across China https://t.co/m38cO0ORAO It would have been better if the CCP had given two months warning so people could get vaccinated prior to dropping the COVID zero policy. But the CCP couldn’t be thoughtful Dec 30, 2022
China’s unprecedented assault on its housing market has left would-be home buyers asking if it was all worth it https://t.co/BJyH7vsZvf The real estate situation in China is even worse than Japan’s in 1989. Crackup, or three lost decades? Dec 29, 2022
A growing number of affluent Chinese are coming to Japan to live, in an indication of social and political tensions back home https://t.co/MHst0tbhLe I find this fascinating given the past antipathy between Chinese & Japanese. Dec 28, 2022
Global
Billionaire Adani Says India Will Add $1 Trillion to GDP Every 12-18 Months https://t.co/FAbMGwkyV5 Not likely. When this overindebted conglomerateur flames out it will be stunning. Dec 29, 2022
Putin Wants Fealty, and He’s Found It in Africa https://t.co/rdCmko1vD7 The Central African Republic has always been among the most corrupt nations in the world. Should this be surprising? Dec 28, 2022
In Record Numbers, Venezuelans Risk a Deadly Trek to the U.S. Border https://t.co/bgoGTQNV9a This is dated, but I had not heard about this. You have to be pretty desperate to take on a trip like this. Thanks a lot, Chavez & Maduro, for ruining Venezuela. Dec 24, 2022
Science
Unlike Covid shots, vaccines for cancer need to be customized for each individual, writes @lisamjarvis https://t.co/rDIed7BhJn Looks promising, but there is a long way to go. $MRK $MRNA FD: + $MRK for clients and me Dec 31, 2022
Our investigation traces plastic recycling from US households to a city in India where the items are burnt for energy https://t.co/jdtBUxjxbr I’m surprised that you would not expect this. People have to live. Global warming is just a theory. We need 100 years to make it a fact. Dec 28, 2022
The deep freeze that blanketed most of the US temporarily plunged millions into darkness, and laid bare just how vulnerable the electric grid has become to a full-on catastrophe https://t.co/VYidNKPC8Q I would not assume this won’t revert. Weather often has decadal streaks Dec 28, 2022
These Prenatal Tests Are Usually Wrong When Warning of Rare Disorders https://t.co/kSGzVgjj8R This is a practical example of how the misuse of statistics by scientists (ignoring false positives) harms patients. Aside from common diseases, it is better not to get your baby tested Dec 24, 2022
Odds & Ends
Explaining the baby formula shortage. Mapping abortion access after the end of Roe v. Wade. Breaking down the FTX collapse. Here’s how we used data and graphics to tell 2022’s most important stories https://t.co/8I4bdgJzdB Beautiful graphics on an artistic page that is clunky Dec 29, 2022
As travel springs back and even China dismantles the last remaining Covid curbs, one stark truth is beginning to emerge — the world is running desperately short of planes https://t.co/rhJjRDk6Xx I missed this. Thought the planes in the desert could be easily restarted, but no Dec 28, 2022
You can fix most of your tech problems with these simple troubleshooting tricks from @nicnguyen https://t.co/nBpr4Cv02I I knew about these, but it is very good and simple advice. Off and on. Disconnect and reconnect. Uninstall and reinstall. Clear Cache. Delete Cookies. Dec 28, 2022
@TasteAtlas The last battle in the manga “Food Wars” was to make a dish that no one has ever seen before using elements of the five great cuisines of our world. What was their list of five? Chinese, Indian, French, Italian, and Turkish. A reasonable list. Dec 28, 2022
Twitterati are looking for their next destination. https://t.co/MmUw4w4J9F Then again, there may be some out from Twitter, but Twitter stays large enough to remain dominant over things that are trying to be like Twitter. Elon may bail on the investment, but Twitter will survive Dec 28, 2022
How Telegram Became the Anti-Facebook https://t.co/6l5kFll3GO Utterly long, but fascinating. There will always be demand for unfiltered social networks, and governments will fight that. Dec 24, 2022
These three brothers scammed their investors out of $233Mn. Then they lived like kings https://t.co/W7J0nv3hmj There is never anything easy about investing, especially if aiming for high returns. Safety can be controlled, mostly. Avoid people who advertise easy high returns Dec 24, 2022
The Precarious Future of Sanibel Island https://t.co/XFmkZrwWWk I went to beautiful Sanibel as a boy. Time & chance happen to all men and places. “Old Town” Ellicott City has been badly flooded twice in the last decade. Twice rebuilt, but the cost was high, & higher for Sanibel Dec 24, 2022
@VIXandMore I get it. Hope you are doing well, Bill. I write less than I used to, but I am still writing. Dec 24, 2022
Photo Credit: duncan c || I know it is graffiti, but face it, most arguments regarding COVID-19 or politics are little better than graffiti
There’s a popular argument going around about the VAERS [Vaccine Adverse Event Reporting System] database that the COVID-19 [C19] vaccines are killing a lot of people. I am here tonight to tell you that is likely false, but at minimum, that you can’t prove that through the VAERS database.
First a digression: Out of group of one million picked at random in the US, how many people will die on a given day?? Using 2019 US crude mortality data, roughly 20.?
So, out of 470 million vaccine doses administered, how many should have died for any reason within one day of receiving the dose of vaccine? Roughly 9,400.? Within two days? 18,800. How many deaths are in VAERS after one day? 1,921. Two days? 2,415. Expected deaths for any reason versus VAERS data after five days? 47,000 vs 3,244. Fourteen days? 131,600 vs 4,458. 30 days? 282,000 vs 5,629. There are 4,799 additional deaths 31 days and after, and those where no date was specified in the VAERS data. So, 10,428 deaths from COVID in the VAERS database.
So, the VAERS data does not support the idea that the vaccine is killing people.? Now the VAERS database has inconsistent and uncontrolled reporting ? it is a voluntary database, and anyone can post to it, makes any study design pretty useless, which is part of their disclaimers. Many allege underreporting but ask yourself “Could there be more than 25 deaths from the vaccines for every one reported?” Really, I doubt it. A big blip in the death rate from vaccination would get noticed ? you couldn?t suppress it. The news outlets would be all over the story.
We have never had a vaccination campaign of this size in the US before.? We should expect people dying post-vaccination at an ordinary rate.? Where VAERS could be useful would be looking at cause of death codes for a given vaccine, and seeing if there are any death causes that are unusual in proportion.? And that?s what the researchers mostly use the VAERS database for.
From other statistical work I have done I can tell you that the vaccines are generally effective, and that if you don’t have a medical reason to not get vaccinated, you should get vaccinated. The vaccines reduce the likelihood of infection, severity of infection, and the likelihood of death from C19.
And for my Christian friends who object because fetal tissue from abortions long ago were used in the process of creating the vaccines, I will ask you this: many drugs get tested or developed using the aborted fetal tissue, including aspirin, Tylenol, Ibuprofen, Lidocaine, Mucinex, Pepto Bismol, MMR Vaccine, Remdesivir, Tums, Maalox, Preparation H, Claritin, Robitussin, Lipitor, Zoloft, Aleve, Ex-Lax, Benadryl, Suphedrine, and Sudafed, among many others. Are you willing to make the moral claim and do without almost all drugs, not just the C19 vaccines?
Those children are dead, and nothing can be done about it. The cells that comprised their bodies are long since gone. The cells existing today are many generations removed from the babies who were killed through the abortions. Not that they should have been killed (let’s end Roe v Wade), but they have indirectly done more good for mankind than most people (including me) will ever do.
Public health is a proper province of government, unlike most matters that governments concern themselves with today, because it involves matters in health that can be made better via collective action. The Mosaic Law supports this idea. And so I say to my Christian friends, get vaccinated, and stop listening to the right wing media that milks you to make money via advertising.
Picture Credit: photosteve101 || Maybe we can get some glue…
I used to write about this topic after the financial crisis a lot. I stopped after the SEC made their last set of changes. But when I read this article today, I decided to tweet this:
Investment firms are wary as money-market regulation changes are studied after the run early in the pandemic. https://t.co/SS34ndPUeM My proposal makes more sense — NAV under 0.995, cancel enough shares to renormalize NAV to 1.0025, at which point runs strengthen the MMMF
When I was an investment actuary, I developed and worked with a large number of insurance products that were managed to be pure savings vehicles. There was usually a short-term guarantee of crediting interest together with a full guarantee of principal. The difference between the short-term guarantee and actual earnings would get factored into the next short-term guarantee, making the short-term guarantee reflect the actual asset performance over time. Benefits would get paid at book value, while plan sponsor deciding to terminate would get something a little under the market value of the assets.
The names for those products were Initial Participation Guarantee, Guaranteed Investment Contracts, Stable Value Funds, and hybrids and synthetics of them. For fixed income investments that acted like savings accounts they worked well for pension plans and their beneficiaries in an era when interest rates started high, and kept falling. They were complex compared to running a money market fund because they ran with longer fixed income, making stability of principal much more tricky.
I even created a product that was relatively short duration that could trade like a mutual fund, making it eligible for a wide number of applications. (Sadly, I left shortly after it was created, and those who followed me didn’t run it right, and so it didn’t amount to much.)
So, when I write about money market funds [MMFs], I think I get the math going on there, and the problem is simpler because of the short duration, yet harder, because all assets are redeemable at par immediately. With the longer-dated insurance products, terminating customers would face a relatively harsh market value adjustment at termination. The challenge with MMFs is to make those demanding liquidity in a crisis pay the penalty, while those staying in do not get penalized, and possibly, get rewarded.
My proposal is slightly different than my prior proposal, but the math is the same. (Bond math is inexorable, even if bonds aren’t.) The first thing to do is define when a MMF is under stress, which is when its shadow NAV is under 0.995. If at the time the shadow NAV is calculated at the end of the day, the shadow NAV is under 0.995 then two things happen in this order:
Those withdrawing funds lose additional units in the MMF in order to renormalize the shadow NAV to 1.0025. If any are doing a withdrawal of funds great enough that they won’t lose enough units, they suffer a market adjustment penalty of the same amount. The maximum amount of economic loss is 10% of the amount withdrawn.
If the shadow NAV is still below 0.995 after step 1, units of those that remain are cancelled to the degree that the shadow NAV renormalizes at 1.0025.
Why penalize those who exit in a crisis? They are causing the crisis. Liquidity is not a free good, and certainly not in a crisis. This will make them think twice about liquidating, because they will absorb a disproportionate amount of the loss.
Why renormalize to 1.0025? Why not to 1.0000? This helps prevent further runs on the fund. If parties exit when the shadow NAV is over 1, it will boost the shadow NAV further. Even if the continuing holders lose units when the shadow NAV is renormalized, they don’t lose any value unless there are genuine defaults within the assets held in the MMF. If there are no defaults, the unit losses will be made up by a higher yield which will pay back the unit losses over the weighted average life of the assets involved.
A weak analogy to this is what Vanguard does on some funds that are less liquid. They charge a small termination penalty, but it gets paid to the fund, not Vanguard. Long -term holders get a small benefit from this.
The benefits of this proposal are:
Allows all MMFs to have a $1 share price all of the time
Penalizes those that grab for liquidity when an MMF is under stress
Discourages runs on MMFs
Would allow regulators to allow Prime MMFs to run a more aggressive investment policy
This sounds too good to be true, right? Well, it isn’t. My next post will run some scenarios to show how this would work. Personally, I think if this were adopted, corporations using Prime MMFs would appreciate the stable share price of $1, the potentially higher yield, but against that they would think about how liquidity would not be so easily available in a crisis, and that they would have to report credit losses when units are renormalized.
There is no free lunch, but there are ways to discourage people from running for the exits in the midst of a crisis, to the harm of everyone else.
PS — when I started writing tonight, I was just going to trot out my old proposals, but when I went through my history of working with guaranteed insurance products, I was reminded that our best risk-controlled products spread the losses onto those who leave at inopportune times. When I realized that, my old idea got a lot sharper.
