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Messages - aaron

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Economics & Investing / Re: Schwab starts talking about recession
« on: October 22, 2018, 07:25:22 PM »
The odd one is the idea that recessions are typically timed to when unemployment rate is equal to the inflation rate. I'd never heard that before. My first reaction was that there were so few data points, that could be a spurious correlation (and it might be), but it seems to hold pretty well since 1990 across a half-dozen countries.

I don't think my economics brain is sophisticated enough to see why that in particular would provoke/indicate recession
If the unemployment rate is low it suggests there might not be a lot of slack in the economy (or that the economy might already be overheating) & that inflation might pick up (as rate shifts take about 3 to 6 months to work their way through the economy, they care just as much about the trend as the level), which would encourage the central bank to lift rates, which in turn would cause credit growth to slow & financial asset prices to fall.

Analyst who predicted the 2008 crash warns of bubble brewing in U.S. household wealth
Assets are priced at some multiple of earnings based on discounting forward cash flows, but many/most assets are either highly illiquid or are priced on the margin based on a small portion of the market turning over. Each stock transaction changes the imputed market cap of the company & even a few percent of a company's shares being sold can have a dramatic impact on its value. Check out the trade volume of Yandex over the last couple days compared against their float & look at how much their market cap has dropped in a couple days. On Thursday they opened at $35.50 and by Friday they had fallen to $24.90, a 30% slide in 2 days. 

Some assets are priced based entirely on ponzi pricing where almost everyone hopes they'll be able to sell to the greater fool. But ultimately financial asset prices are based as much (or more) on debt leverage than financial savings.  Look at Netflix today announcing another $2 billion bond offering. And how any hundreds of billions of debt have their competitors (AT&T, Disney, Comcast, etc) took on to beef up to compete.

As interest rates rise the cost of carrying debt goes up when it needs to be rolled over. If the cost of market rates at the time of roll over is too high it might need to be paid down rather than rolled over. Money spent on debt servicing or paying down debt lowers the amount of money that can be spent on share buybacks, acquisitions, etc.

my old roommate mentioned when he was in college he mutated switchgrass seed genetics using radio waves & if that impact can be had on the seeds there's also likely a significant impact on humans, but he said a few years back there's no money to pay for the research. all the money is going for a permanently connected & distracted life with an ever-present cell phone. glad to see someone is researching it. :)

Marketing / Re: (US) March of the Non-White Babies
« on: October 22, 2018, 01:32:45 AM »
#2 high cost of living
massive money printing that flowed into juicing financial asset prices & the cost of living while offshoring, automation & semi-formal jobs destroy the ability of labor to keep up with inflation almost guaranteed large segments of the population would go on the doll rather than struggle to try to make the numbers work. the opioid epidemic is all about a lack of hope.

there are unemployed people who are on disability for being drug abusers who while not having a job have no time for exercise either & then are getting weight loss surgeries & other such benies. then the cost of that stuff (along with the endless middle east wars) gets rolled across to productive members of society either through inflation or taxes. and then the self-employed person paying a grand a month or more for a garbage health insurance policy they don't even want is heavily squeezed.

The primary roll of Obamacare was a wealth transfer scheme from young & healthier people to older & unhealthy people. The problem is many of those young people came into the labor force after it was horribly damaged from the recession (lower incomes) AND more part time gig jobs (no benefits / the health insurance costs are out of pocket AND are carrying student loan debt (higher costs) AND now find asset prices priced nearly for perfection (a second subsidy to older & wealthier people further up the career, income & savings ladder).

Two of the major assumptions in economic theory are that people seek their own self-interest and that they are rational actors.  Neither of those assumptions are true for most people.
The other issue that is missed with those above assumptions is we anchor our perception of the near future based on the recent past (pro-cyclical bias in both directions) AND our behavior is path dependent. A bank with a million loans on their books can have some of them go bad & still be fine, but if at any point an individual family is bankrupt they don't get an easy way to work their way around it as part of a portfolio or such. And they don't get the bailouts the big banks got.

And then there is the sanctity of contracts, and an attempt at (reasonably) enforcing justice equally which have both went in the trash.

The federal government requiring AIG to not sue Goldman Sachs for their fraud to receive a bailout that would in part flow through to Goldman Sachs at 100 cents on the dollar.

The Eric Holder memo about the impracticality of going after large criminal racketeers in the finance market guaranteed high finance learned nothing other than the wonders of socializing losses from the global recession they caused & were made whole on at the expense of the rest of society.

Even as recent as the past few years Wells Fargo was making millions of fake customer accounts, charging fees against them, and then sending people to collections for non-activity fees on an account the customer never even wanted, opened, or knew about until they started getting collections notices in the mail.

The shifting of the capital structure on the GM bailout where senior bondholders at the loss while some inferior positions on the capital structure were made whole.

The ever-changing online terms of service, forced bundling, offshoring coupled with non-competes for domestic employees & gag clauses in layoffs, etc.

There's basically no transparency in healthcare pricing.

Hardware & Technology / Re: Big G throws their toys out the pram
« on: October 18, 2018, 05:07:30 PM »
In the short run I don't think there is an actual difference other than sleight of hand accounting.

They will charge a licensing fee for one app (that was formerly free) & then likely slightly lift the payment they offer for taking the others, so it will net out to pretty close to zero.

Higher licensing revenues offset by perhaps equally higher traffic acquisition costs.

Which ultimately will mean if Microsoft or someone else wants to outbid Google they'll have to bid more than Google values the traffic & they'll also ultimately be paying part of the Android licensing fee with their bid.

This was a point Ben Thompson made on Stratechery today.

Also worth noting by the time Windows Phone was dead Microsoft was already offering a free license.
That never took though because it was too bloated & they didn't have the developer support back then.

Paradoxically, in the years since, now the "free & open" Android has many important pieces carved out of the core OS, and is up to 6 gigs in size
and it now charges a licensing fee

interesting roll reversal...Microsoft lost mobile because they did a port of Windows desktop that was too bloated and wanted paid for license. After they lost bad enough they made licenses available free but didn't matter as developers were already supporting Android and they were toast. Quietly Android becomes ever more bloated and now is up to 6 gigs in size for the OS. And now because of EU fine Google will make core Android free but has ripped out important hooks to leave it as useless junk without the other bits & now they are able to start charging licensing fees for the other stuff :)

They better hope Jeff Bezos doesn't take interest.
For whatever reason they have been happy with just monetizing their share of the 10% of searches that are highly commercial or such & they haven't put much effort into general web search. Even when they ran A9 it quickly became more of a internal site search project than a web search project & as recently as this year the web search option hosted on was powered by Google.

Amazon took down their web search page earlier this year
The web search home page is no longer available. Please update your default home page.
no idea why they would just throw that traffic away. I am sure they could get an 80%+ revshare from either Bing or Google do host a reskinned web search offering there.

This is the big issue for Facebook on a forward basis. Their video inventory is mostly garbage because they have done a poor job sharing revenue or paying enough to get real premium inventory.

For a decade they've got fat margins from eating off free content.

The web was text, then it was images and then it was video.

Billions of people can write a sentence quickly at low or no cost. But as one moves up to more complex media formats the cost grows geometrically with the complexity.

Facebook stunk at getting Instant Articles adoption on news sites because they were too greedy (why not share 100% of the ad revenue with the trusted news publishers as a PR-friendly move & then simply wrap more ads in the feed around the native articles), so there's no way in hell they are going to seriously compete in the long run on long form video.

Facebook has so long gorged themselves on $0 content cost that they don't really have the mindset to compete in video where AT&T & Disney are making huge acquisitions, Google owns YouTube which is intentionally losing money on their TV offering to help move people across, Amazon has a strong video offering & owns IMDB & Twitch, Netflix is spending $8 billion a year on content, etc.

Facebook would likely need to acquire Roku or build out some sort of separate destination site in order to do better with longform video to have solid & sustainable video ad inventory as the web becomes TV.

But each person who subscribes to Netflix or other similar competing offerings is going to be one more person who hates interruptive video ads on other sites.

Water Cooler / Re: Nate Silver on media hype and twisted numbers
« on: October 17, 2018, 12:35:03 AM »
The issue is not just a lack of understanding, but also more incendiary & absolute headlines are more likely to be spread by home team (who love it) and away team (who are outraged by it).

The guy who mentions

The margin of error on the poll between x and y is 3% and the vote appears to be in a near dead heat with 44.9% for x and 55.1% for y

that guy will get nowhere near the spread / virality of his story as the person who slants coverage to talk about how this person is racist or historically the vote has been this way and the key vote segment z etc etc etc

ultimately people want to read people rooting for their side, so that's what they get.

and thousands of local newspapers disappear "About 20 percent of all metro and community newspapers in the United States — about 1,800 — have gone out of business or merged since 2004, when about 9,000 were being published."

Luckily they already acquired PillPack, so whenever you feel down they'll have the perfect pick-me-up. Soon enough they will advertise free telemedicine to push scripts ;)

this is the sort of series of threats that if/when acted upon has frequently led to quick disappearances of the associated governments
If US sanctions are imposed on Saudi Arabia, we will be facing an economic disaster that would rock the entire world. Riyadh is the capital of its oil, and touching this would affect oil production before any other vital commodity. It would lead to Saudi Arabia's failure to commit to producing 7.5 million barrels. If the price of oil reaching $80 angered President Trump, no one should rule out the price jumping to $100, or $200, or even double that figure. An oil barrel may be priced in a different currency, Chinese yuan, perhaps, instead of the dollar. And oil is the most important commodity traded by the dollar today.

Russia and China are ready to fulfill Riyadh’s military needs among others. No one can deny that repercussions of these sanctions will include a Russian military base in Tabuk, northwest of Saudi Arabia, in the heated four corners of Syria, Israel, Lebanon and Iraq. At a time where Hamas and Hezbollah have turned from enemies into friends, getting this close to Russia will lead to a closeness to Iran and maybe even a reconciliation with it.

Riyadh would stop buying weapons from the US. ... in addition to the end of Riyadh’s investments in the US government which reaches $800 billion.
Cutting oil production (sparking inflation), not recycling petrodollars (would increase US interest rates & lower financial asset prices) AND pricing oil in another currency (lowering global demand for the Dollar & hitting the Dollar during an inflationary spike) would be begging for trouble.

The above would be a quick bout a chaos, as we are around a $1 trillion deficit during a non-recession & a huge portion of gov revenue is tied to asset price inflation. Since the 90s tech boom & the broad wave of outsourcing production to China the US has become structurally dependent on asset bubbles.

A guy named Luke Gromen does a great job of following major geopolitical issues related to reserve currency, US trade war with China, etc.

How do you win this war?  Or Iraq?

There is no realistic acceptable outcome.  Eventually we will just decide to stop spending money and lives to sustain the occupations.
Iraq was about oil & maintaining the petrodollar

Libya wanted gold-backed currency across Africa
that's how they got a failed state, anarchy & open slave markets

While the push away from the Dollar was panned in FP as conspiracy theory
it is worth noting China created a Yuan denominated oil exchange
and they have a gold exchange & have been importing hundreds of tons of gold
it's no coincidence the US-China trade talks must cover currencies

If China creates a parallel market to the Dollar for pricing core commodities that lowers the power of US sanctions. If China has a large gold pool which they allow convertability into for their currency then countries trading with them can price the transactions in the Yuan, lowering global demand for the Dollar.

Good reminder.

World opinion, however, largely disapproved of the Taliban’s social policies—including the near-total exclusion of women from public life (including employment and education),
Not sure if you have ever seen the Adam Curtis documentary called The Power of Nightmares, but he highlights how we armed them and brought them to a more influential place to fight off the Russians only to have it blow up in our faces later.
I am not sure if it was that documentary or another one of his called Hypernormalization, but he mentioned how people were claiming their neighbor was Taliban to settle an old score & basically everything was fake & we were just sort of funding anarchy which was self-fueled & available in basically unlimited supplies so long as the capital and military power flowed.

World opinion, however...

Honestly, I didn't want to get into any of that. I was just thinking of the men and women serving there, all but forgotten, while the war is basically unmentioned in the current election cycle, on the news or anywhere else. I just feel like, no matter how you see the war, they deserve to be remembered and recognized.
The big issue driving the need for all the military spending & foreign military adventure stuff is the trade & economic imbalances.

Onshoring supply chains fixes part of that because a lot of economic innovation comes near the source of manufacturing through combining processes.

If the US were to fix the corruption in the healthcare system it would easily be the most efficient economy in the world & have far less need to dominate global politics with military force.

It shows how fast things can grow on the internet.  That is pretty neat.

I hope for their sake, Bing doesn't jump the shark. They are dependent on Bing.
Bing is already profitable as a standalone business. And over time Yahoo! is leaking desktop search share to Bing in the US.
They have no incentive to end their search engine at this point.

They have already sunk billions into building Bing, are profitable running it, use some of its features in their other products, and might end up with a major market opportunity if regulators hit Google hard.

A few weeks back an article mentioned a Goldman Sachs analyst estimated Google was paying Apple $9 billion this year to be the default search provider on iOS & in Safari.

So long as Google has productivity software, a cloud hosting offering, etc. … Microsoft keeping Bing around as a hedge to force Google to bid higher on search syndication partnerships is important for ensuring Google doesn't slide down their revshare on search syndication & plow those profits in trying to beat Microsoft with more subsidized hardware and such.

I think Chromebooks are already have a massive install base in schools & then Android powers almost 90% of mobile phones, so for Microsoft to shut down their search operation they'd be losing a very valuable hedge to try to keep a competitor honest.

Also even in the US the install base of desktop computers is shrinking as many people view tablets or phones (& other connected devices like Fire sticks, Chromecast, etc.) as good enough / all they need.

I think a lot of the regulations were applied to the big-get-bigger banks & so those really huge banks started to invest in / fund credit flows to alternative lenders as a way of more easily passing their stress tests and navigating the tighter regulatory environment.
In 2011, 50 percent of all new mortgage money was loaned by the three biggest banks in the United States: JPMorgan Chase, Bank of America and Wells Fargo. But by September 2016, the share of loans by these three big banks dropped to 21 percent. At the same time, six of the top 10 largest lenders by volume were non-banks, such as Quicken Loans, loanDepot and PHH Mortgage, compared with just two of the top 10 in 2011.

“Now banks only approve ‘perfect’ loans, not ‘good-enough’ loans,” Taylor says. “This created an opportunity for non-banks that focus entirely on mortgages and are less regulated than big banks.”
Their capital levels aren’t as heavily regulated as banks, and they don’t have deposits or other substantive business lines. Instead they usually take short-term loans from banks to fund their lending. If the housing market sours, banks could cut off their funding—which doomed some nonbanks in the last crisis. In that scenario, first-time buyers or borrowers with little savings would be the first to get locked out of the mortgage market.

I'm not an economist... so why is a 2.4% drop in GDP (likely considering the likely 3.6F rise because there is no way we're going to stay withing the 1.5C/3.6F limit) a crisis? Is anything short of growth a crisis?
In a debt-based monetary system growth is required to pay interest on debt outstanding.

Most of the money circulating across the economy isn't originated as money, but rather as debt, accumulating interest from day 1.

If money supply doesn't grow, then in aggregate the interest repayments on outstanding debt will extinguish a portion of the money supply, leading to cascading defaults.

Look at the tiny dip on the curve around 2009
That lack of growth in credit required far greater economic intervention than gearing up for WW2 & inflating away the war debts from the world wars.

Hardware & Technology / Re: Has Android already hit it's high?
« on: October 11, 2018, 09:37:04 PM »
I don't think Android has peaked for 3 reasons

1.) Google's less-than-free model where they pay carriers & manufacturers a revshare in addition to offering the service without direct cost (beyond spying on people)

2.) in a market like Russia where Google was fined for setting Android default & they switched away from default settings they did lose *some* share of mobile search, but they still retained a good slice of the market

3.) there is already consumer (& developer) lock-in with the Play store. Chinese app stores often give developers about 30% while keeping about 70%, while the Google & Apple app stores only take about 30%. Some huge players like Netflix have incentive to try to circumvent that payment, but most smaller developers would find paying that cheaper than maintaining 4 versions of their codebase & testing across 4 operating systems or such.

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