21 April 2017

Thought For The Day - 21 April 2017

The Right Wingnuts are forever pointing at Unicorns to justify all manner of divide-and-conquer manuevers. Chief among such is that "college doesn't matter, just look at Bill Gates!" The Unicorn Theory of Success. Is and always was nonsense, but even most of the Unicorns find it useful to justify both their paths and also the constriction of access to various paths for the less fortunate. Gates was born with millions in trust funds. Not exactly a bootstrap tale.

Well, another research study puts the lie to the Unicorn Theory:
We found about 94 percent of these U.S. leaders attended college, and about 50 percent attended an elite school. Though almost everyone went to college, elite school attendance varied widely. For instance, only 20.6 percent of House members and 33.8 percent of 30-millionaires attended an elite school, but over 80 percent of Forbes' most powerful people did. For whatever reason, about twice as many senators - 41 percent - as House members went to elite schools.

Where did Devin Nunes go?
After receiving his associate of arts degree from the College of the Sequoias, Nunes graduated from Cal Poly San Luis Obispo with a bachelor's degree in agricultural business and a master's degree in agriculture.

And what about that associate's degree? oops!
WASC placed the college on "show cause" status in early 2013 and required to demonstrate to WASC that it should remain accredited. In early 2014, the accreditation status of COS was changed to "warning" as many of the original deficiencies were corrected but others remained; a follow-up report is due in October.

A shit kicker in Congress.

18 April 2017

Thought For The Day - 18 April 2017

Does anyone else find the new Old El Paso "taco party" commercials just this side of porn? I mean, in the usual context, I prefer tacos over hotdogs. But not as food.

See The Dots, Connect The Dots

Work with me on this one.

We know that Empty Counties are Red just because they're white, uneducated, unskilled, and unemployed. Incestuous hollers. Enough Empty Counties in a state, and it runs Red.

We know that cities are Blue just because they're polyglot, educated, skilled, and employed. Enough cities in a state, it's true Blue. Have you noticed that mongrel mutts are almost always tractable and smart? Same with people. Thoroughbred horses are a nightmare. Same with people.

We know that Red states aren't pure Red, but dotted (or swamped, in some cases) with Blue cities. All that matters is who breeds faster (I'll leave that as an exercise for the reader) and who is dumb enough to believe lots of things that aren't true. And who actually votes.

So, today we find that real estate experts (or some, anyway) expect city rents to decline due to overbuilding. But that this will last only a year or two, since liberals and progressives and the smart and employed continue to flock to cities.

In a few years, not even the Red-est of states will be able to find enough votes in their Empty Counties to overwhelm their Blue cities. Oh the irony of it!! The real Tea Party happened in that most socialist city of all, Boston.

The KKK's worst nightmare.

17 April 2017

Eventual Data

Another in the grab bag of tricks with these endeavors: events drive data, and not the other way round. Of course, one can find hundreds of books on Amazon with the search 'financial engineering'. 6,296 as I type this. That's a bunch. Beginning, in earnest, with Samuelson, my initial profession of economics slid down the rabbit hole of quant. Political economics has always been about policy, which is just a polite way of saying, "how do I kill my opponents and reward my allies?" Orange Julius Caesar as President should dispel any notion of a higher purpose.

Well, surprise. The announcement of the second tier international economics award comes as a big surprise. Or, perhaps not. These missives have oft mentioned Gordon's book the last few months. His approach is very much the wordy approach to analysis that Samuelson and Solow attempted, successfully, to kill off.
The economics association highlighted Mr. Donaldson's interest in historical research, an unusual focus for a leading economist. In one paper, Mr. Donaldson found that the spread of railroads in 19th-century India increased prosperity by increasing trade. A subsequent paper reached a similar conclusion about the United States.

Study the events, and you'll see why the data turned out as it did.
The economics association also highlighted Mr. Donaldson's research techniques. It said he had "formed and become the principal practitioner of a distinctive style of research, based on important conceptual questions, careful data work and credible identification combined with state-of-the-art structural methods."

One might dismiss such as reactionary, but given Trumpism and Creationism and Isolationism and Populism and the like, why not?

Finally, the real surprise to anyone who's kept track of econ research and punditry over the last decade,
Mr. Donaldson, 38, was born in Canada. He graduated from Oxford University with a degree in physics and then earned a doctorate in economics at the London School of Economics. He joined the faculty at Stanford in 2014.

When I was at UMass, I opted into then out of, the Ph.D. program and took the participation trophy MA rather than put up with just such graduate program professors. They could spit derivatives off the end of the chalk (yes, it was that long ago) with supreme confidence, but hadn't much of a clue about economics. Not a one of them would have written what Donaldson has. Not even as punishment for high crimes.

Small Victories

One of the quant-ish memes in these endeavors is its use in the field of pharma. Should NHST be used? Should Bayes be used? Should single arm trials be allowed? And so on. But one of them has to do with the gaming of the system. There are as many ways to attempt that as there are the stars in the sky. Over the last decade or so, one of the most popular has been Orphan Drug designation.

You can read up the wiki article for all the gory details, but the summary is that Orphan Drug designation blesses the sponsor with lots of additional profit making opportunities. One of the more subtle, and not necessarily obvious, during the application process: can/will the drug, if approved, be easily moved into a wider population than the orphan indication? The orphan benefits, by current law, follow the drug into such indications. Some mainstream pundits have kvetched about that and about the number of potential patients which define orphan, currently 200,000. That's a lot.

Well, today's briefing.com brings some good news. If you think spiking the cheating is good news:
6:01 am CytoDyn announces that its application for Orphan Drug Designation was not granted by the Office of Orphan Products Development of the FDA 'because PRO 140 appears to have the potential to treat more than just the subset of multi-drug resistant HIV patients for which the designation was requested'

I wonder how much they'll send along to Jared or one of the Wonder Kinder to have FDA change its mind?

14 April 2017

Thought for the (Good Fri)day - 14 April 2017

Just when you thought Orange Julius Caesar was going to Make America Great Again (whenever, and for whomever, that might be), we get the CPI summary that can, reasonably, be his alone.
The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.3 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today.

Some of that was gas went down (it's been rising since that data was collected), but
The index for all items less food and energy fell 0.1 percent in March, its first decline since January 2010.

Of course, that month was still a Great Recession month, despite what some BLS wonks have said. Falling prices, aka Defeat is in Dee Flation, are the canary in the coal mine keeling over just before it blows up. Welcome to Trump Crater, where the Billionaire Boys get richer and the poor die sooner. The imploding Middle Class (what's left of it) doesn't have lots o moolah to push up prices. If that all sounds like you've read that here before. Well, you have.

10 April 2017

Times A Wastin'

Have many stopped to consider why Orange Julius Caesar is so hot to trot with his "disruptive initiatives"? You might notice that most of the damage is coming from his anti-American agency heads. Pruitt (yeah, it's a tort law firm link, but it was the first one that came up with a money quote, which is what matters) declaring asbestos benign.
Hon. Mr. Pruitt: Asbestos has been identified by the EPA as a high-priority chemical that requires a risk evaluation following the process established by the Lautenberg Act to determine whether conditions of use of the chemical substance pose an unreasonable risk. Prejudging the outcome of that risk evaluation process would not be appropriate.

As if the effects of asbestos were unknown? DeVos expressly denied holding all schools to equal performance metrics
Betsy DeVos admits to Sen. Tim Kaine that she does not support holding charter schools "equally accountable" as public schools.

Of course, Orange Julius Caesar and DeVos made millions fleecing vulnerable folks and the Federal government. I spent about a year "teaching" for one of those for-profit schools (not, so far as I know, owned by either). No diploma? No GED? No problem. We'll turn you into a MultiMate expert in a few months. [If you've ever heard of MultiMate...] Just sign here.

One could go on for hours listing the cynical anti-American exploitation of this crew over the course of just three months. But the underlying question is why the need? Orange Julius Caesar knows, for sure, how much collusion there was between himself, his helpmates, and the Russians. He likely knows how far along the FBI (with help from NSA and CIA) investigation is. He's counting the days until his perp walk. Time's a wastin'.

What he's too dumb to figure out: the sooner he craters the country, the longer the electorate lies prostrate into the 2018 election. And, thus, the greater the threat to the Right Wingnut control of Congress. Even shit kickers in Empty States know when they're being kicked in the face while they grovel in the mud. The Obambi employment surge has past, so good luck.

06 April 2017

Who Was That Masked Man?

In a NYT interview published yesterday, Kim Jong-Don had this to say about Susan Rice:
I think the Susan Rice thing is a massive story. I think it's a massive, massive story. All over the world. It's a bigger story than you know in terms of what other people have done also. The Russia story is a total hoax. There has been absolutely nothing coming out of that.

She's been on various "news" chat shows, and didn't say what needed to be said. I offer up this example of how to do it.
Trump is either an idiot or a pathological liar; likely both. His assertion amounts to saying that the National Security Advisor receives these reports with names of US citizens covered by a piece of tape with "US Person" printed on it, and then the Advisor peels off some of those tapes to see who is named. The further assertion that the Advisor was using these reports to "spy" on Trump and associates requires that the Advisor know, beforehand, that a Trump or associate name is under the piece of tape. That's nonsense, of course. If a report, during the campaign, mentioned Russians and election fiddling, then it would be my job to determine which US citizens were colluding with Russians. That these US citizens just happened to be Trump and his associates is just tough luck for them. Caught red handed. Boo hoo.

In order "unmask" a US citizen name (which is the text "US person number X" and such), the Advisor can only request the name of the US citizen from the originating agency, which may or may not oblige. The Advisor cannot "unmask" unilaterally.

That's what she should have said.

05 April 2017

Thought For The Day - 5 April 2017

Been in another peeing contest with a Bayesian. They're as bad as the tea baggers in believing so many things that just ain't so.

The fundamental flaw in Bayes is the assumption that investigators are both objective and honest. Humans always have an agenda. In the pharma world, sponsors will do most anything to get a drug approved, even glossing deaths. FDA, on the other hand, will renege on agreements (SPA, generally) if they see new data that is worrisome.

Since there are an infinite number of priors available to any study, there's every reason to believe a sponsor will choose the one which best fits the agenda. Good luck with that.

03 April 2017

Orwell Got It Wrong

Two ways of using quant have been, to my mind, wrong: financial engineering because it's been the source of collapse since the beginning of the Nation, and psychoquant which uses data to manipulate the rest of us to the advantage of the few. Well, Noam Scheiber goes long in today's NYT with a detailed expose` of how Uber does it. It should give you the willies. May be not. What the story doesn't tell you: Uber, despite these very expensive efforts to manipulate its "contractors", is massively underwater.
Uber exists in a kind of legal and ethical purgatory, however. Because its drivers are independent contractors, they lack most of the protections associated with employment. By mastering their workers' mental circuitry, Uber and the like may be taking the economy back toward a pre-New Deal era when businesses had enormous power over workers and few checks on their ability to exploit it.
[my emphasis]

The point, of course, is to re-institute the indentured servitude (or, in the extreme, slave) model of the 19th century. For those who think that immigration in the century was the result of National magnanimity, well no. Various folks, generally on a racial basis, were imported to deal with specific projects. Asians building railroads likely the best known. As explained many times previously, as capital substitutes for labor, the less there is for the capitalist to gain from squeezing the workforce. And it matters not whether they're "employees" or "sub-contractors".

The destruction of employment will, in all likelihood, have some predictable effects. Healthcare will devolve to the pre-New Deal model where it's just another consumer spend, and quality will devolve to that level. The reason healthcare evolved so rapidly in the post WWII period was just because of all that moolah injected into the system. Most of the basic tech that was implemented was known before the War. There just wasn't much money coming from the 1% to finance progress. In other words, money can't buy you love or better health. It takes a bit more than a few village people to fund R&D in healthcare.

Retirement funding, similarly. And, by the same mechanism: divide and conquer. The Right prefers the verbiage of "freedom to choose", but, of course, the only way to fend off the powerful few is if the many merge together.

The Editors, most likely, buried the lede to the last graph:
"You have all these players entering into this space, and the assumption is they'll do it through vast armies of underemployed people looking for extra hours, and we can control every nuance about what they do but not have to pay them," said David Weil, the top wage-and-hour official under President Barack Obama.

When you stop to consider the enormous cost advantages, Mr. Weil said, "it says to me this is an area that will grow fast."

Take the time to read the whole piece. It will curl your hair, if you're among those who've not been paying attention to this quant space.

29 March 2017

Location, Location, Location [update]

One of the recent themes of these endeavors is that substituting capital for labor leads to covert side effects. Note, I did not say unintended or unanticipated. I said covert, and mean it. As the share of labor decreases, the need to ever more drastically cut out labor costs, in order to maintain capital return improvements, increases. Saving 10% on 80% of cost is vastly different from saving 10% on 15% of cost. That ole asymptote problem.

One of the long known glitches in the American form of healthcare is that a given billable item will have a different value, depending on the location where the item was delivered. It's also been long known that the doctor's office is, was, and will remain the least expensive. Full fledged hospitals, the most expensive. And with good (well, sorta) reason: hospitals have all that plant and equipment to amortize. See where this might be going?

Well, of course you do. Today's reporting puts some hard numbers to the problem. And their source is the Billionaire Boyking's pals, the corporate hospital.
When my wife fell on the ice a few years ago, she thought her wrist was broken. She went to see her doctor, who advised her to have an X-ray taken in the same building. Since her wrist was still crooked months later, she had a second X-ray done at an imaging facility nearby.

Afterward, her health insurance company sent the "explanation of benefits" for each X-ray. The initial one was billed at $1,200, while the second one cost only $100.

Figures don't lie, but liars figure. A couple of things are going on here. First, the hospitals seek to amortize all that plant and equipment they've bought. One way to do that is to exploit differential payments, which is further explained in the article. It's assumed that service "in hospital" will, some times, require further hospital service due to complications or further information gleaned from the initial procedure. This is the excuse used by anti-choice zealots to require clinics to be, or have immediate access to, full hospitals.

Second, corporate hospitals are vacuuming up physician practices to eliminate the competition. The wonderfully efficient free market in healthcare working its invisible hand magic. More like a handjob, if you ask me. Given a largely free hand to spend like drunken sailors, hospitals incur ever more fixed cost, in the belief they'll be allowed to charge whatever they want. And they do.

OK, Kim Jong-Don fix this:
"Across the country hospital systems are scouring the market in attempts to acquire physician groups," said Medical Billing Advocates of America in an article on its website. "This has contributed to increased costs so far, because some of the services and procedures that were formerly billed as doctor visits are now being billed as outpatient services -- even if it is the same office. In one year, this [facilities fee] added up to $1.5 billion more in charges to the Medicare program."

Medical Billing Advocates referred to this practice as "a real cash cow for hospital systems."

Of course not. Just put a stop to corporate hospital concentration. How about it Kim Jong-Don?

[update]
An older link, may have been offered up, which details the problem and a long standing solution.
In 1964, New York became the first state to enact a statute granting the state government power to determine whether there was a need for any new hospital or nursing home before it was approved for construction. In 1974, the federal government tied funding to CON programs. The 1974 federal Act required all 50 states to have structures involving the submission of proposals and obtaining approval from a state health planning agency before beginning any major capital projects such as building expansions or ordering new high-tech devices. By 1975, 20 states had enacted CON laws; by 1978, 36 states had enacted them. Eventually, all states except Louisiana enacted such laws.

25 March 2017

Thought For The Day - 25 March 2017

OK, so I have to make some thoughtful thoughts on the collapse of AHCA. Just one: Kim Jong-Don and the Tea Baggers finally figured out that neither was the round hole for their square peg. The Tea Baggers saw Kim Jong-Don as easily maneuvered from his "Populist" rhetoric to their outright fascism, while Kim Jong-Don figured that the Tea Baggers would actually swallow whatever not-leftwing projects he tried.

Watching the "negotiations" from the original RyanCare to its final RandCare form, made it crystal clear that the Tea Baggers would accept nothing less than complete capitulation. Kim Jong-Don kept up the "terrific" drumbeat, even as basic services were excised. Ryan is no lefty softy, but he also knows that even toothless shit kickers figured out they'd been had. 17% accepted the final version. 6% strongly accepted. "better, cheaper, everybody" turned into, "get sick, die sucker!!"

Campaigning for the 2018 mid-terms starts this fall. Blowing your brains out with a 12 gauge just in time is not the smartest way to ensure the permanent Right Wing Government.

17 March 2017

Nashville Skyline

Regular reader will recall that, in the post-mortem of the election, I asserted that even Red states really aren't. They're all dotted with Blue cities; some, of course, large enough to stave off the cretins. Some, not.

Today's Times brings us a first person tale of one such situation, as you might expect from the missive's title, Nashville.
I believe my people elected the greatest threat to American democracy since the Third Reich, but I haven't been able to work up a real us-versus-them way of thinking about my own friends and family.

Wow!!! On both counts.
Tennessee is a blood-red state, but Nashville is a blue city, an arrangement that works roughly the way living with an ex in the same house might work. Every time Nashville passes a law to increase inclusion, or decrease idiocy, the State Legislature passes a law that overrides it. Last month, when Nashville residents took to the streets to protest the president's executive order on immigration, a state representative named Matthew Hill proposed a bill protecting drivers from civil prosecution if they happen to run down a protester.

Yep. They are deplorables.
Meanwhile on the other side of the road, the Ecumenical Franciscan was holding his ground right in the middle of the Trump supporters waiting for the line to move. "Beat swords into plowshares -- where does it say that in the Bible?" one guy called out, passing by. "Two different sources," Father Boylan said, turning to speak to him. But his heckler was already gone.

Not too surprising that the Bible thumpers don't even know the basics of the religion. The phrase comes from Isaiah. Yes, while I knew the term from childhood, I had to look it up to find the original source.

12 March 2017

The Asymptote of Progress - part the third

We're getting closer. Even a (nearly) lunatic Right Wingnut, N. Gregory Mankiw the NYT token Rightist, takes up a number of themes of these endeavors likely opaquely to himself, in today's edition. He suggests that Kim Jong-Don talk to an actual economist (not mentioned is that it should be Stiglitz, but that's a bridge too far) to get answers to economic questions. Not that any Freshwater economist would have anything new on offer to Kim Jong-Don. Mankiw does offer up some real facts, which is a miracle on its own.

So, here are some bits from Mankiw.

First:
But a large expansion in the aggregate demand for goods and services is not what the economy needs right now.

Of course, since Kim Jong-Don claims that the "real" unemployment rate is in the neighborhood of 40%, the only possible way to get those millions of unemployed into jobs is to push up aggregate demand. Unless, of course, you just want to leave those out of the labor force hanging out on meth and heroin. Mankiw is taking the 5% reported as globally true. Kim Jong-Don is right that U3 is too narrow a measure for the current circumstances; of course, he's nuts to say it's 42%, which number is generated from total employed divided by total population. Only a lunatic would offer such a number.

Second:
According to a recent paper by Mr. Jones and three co-authors, the number of Americans engaged in research has increased more than twentyfold since the 1930s, yet there has been no similar explosion in productivity growth. Their interpretation is that big ideas are just getting harder to find. Unfortunately, there is no sign that this is about to change.

That is, directly, the asymptote of progress. I claim previous invention.

Third:
Mr. Trump's victory can be attributed largely to the support of white working-class Americans.
...
The question is whether Mr. Trump can alter these disturbing trends. Few economists point to flawed trade agreements as the main source of the problem, as the president often does. More important is what economists call skill-biased technological change.
...
The solution is to increase the skills of the labor force through better education and training. Yet this is easier said than done.

Well, we're back to the solutions presented in previous missives in this series:
1 - you're just stupid and should never have earned such high wages, aided and abetted by evil unions; suck it up and make do with nothing (which is basically what the Right said to unemployed Northern union workers as jobs went South over the last decades)
2 - you're just stupid, but you're Real Americans and thus deserve sinecure for the rest of your life and those of your spawn (who will grow up just as stupid with Red State reactionary education, and then their spawn; repeat)

Mankiw isn't the bloody mouthed Bannon, but even a bit of sanity seeping into the Right is welcome. Whether there'll ever be enough is the critical question. The last billionaire to actually care about the underclass was called FDR. Kim Jong-Don ain't no FDR.

11 March 2017

Risky Behavior

Yes, one should not speak ill of the dead. Today, the NYT has the obit of an award winning economist, Stephen Ross. This is notable not just because he was an economist, taught at MIT, and earned his doctorate at Harvard. A saltwater economist. No, what is notable is that the obit lauds him for his bad news quant theory. Not that most in the profession consider what he did a bad thing. Econ has been on a quant jag for decades.
Professor Ross relished marshaling complex theories honed in the academic world and applying them to Wall Street, where they could be used to address practical problems. His contributions to the finance industry earned him the Deutsche Bank Prize in Financial Economics in 2015.

Jürgen Fitschen, a co-chief executive of Deutsche Bank at the time, said in a statement that Professor Ross's work was the "foundation for all the risk-factor models we use today."

Of course, the use of exotic derivatives were what brought down the world in 2008. And, we now know, that Deutsche Bank got caught washing Russian rubles, provided Kim Jong-Don lots of moolah, and fueled the Great Recession.

I wonder if one can posthumously return an award?

Risky Business?? Where's Scientology when you really need it?

10 March 2017

Clippy Versus Terminator

That didn't take long. Bill Gates said the unsayable. (Here's the original).
Bill Gates, who has done more to propel the world into the high-tech age than almost anyone, recently called for taxing robots. That has provoked enough negative feedback to fry a motherboard, with critics decrying him for wishing to hold back progress.

And here's the FRED graph of labor's share of GDP from last week:

Gates himself said robot job killers risked provoking a Luddite backlash among their victims. But as the humans in the "Terminator" movies found out, stopping the rise of the machines is very difficult. As Lind noted, increased automation is a very strong trend that Gates has done much to feed.

What can we speculate, or infer, from these two "data points"?

Recall the 1%'s standard refuge, Pareto Optimality, which amounts to an "intellectual" defense of the status quo: you can only make A better by making B worse. Even, it can be argued, that making A better out of growth harms B if the re-distribution impacts B's previous slice of the growth pie. That's some catch, that catch 22.

As Obama/Bernanke/Yellen's trickle down monetarist approach to recovery demonstrated, a rising tide doesn't raise all boats. And, thus, income concentration continues to increase, growth stagnates, and inflation never seems to appear. Again, recall that there's three sources of inflation: wage push, cost push, and demand pull. The QE exercises never fueled inflation, outside the asset markets, because all that QE money never made it to either wages or general incomes of the middle and lower classes; it ended up on the balance sheets of corporations and the 1% who then plunged it into fiduciaries, having no cause to buy goods and services. It is curious that the beholden econ and business pundit class never seem to call out cost push when raw materiel, like oil, go shortage (real or imposed), and end user prices rise. They always call for Volker Vengeance on those evil wage slaves.

Of course, taxing robots doesn't hold back progress. As discussed in other recent missives, Kim Jong-Don fed the uneducated, unskilled, unemployed from the Empty States a line of bullshit. Which they ate up by the wheelbarrow full. I pointed out that turning an unemployed 50 year old assemblyline drone into a London Whale isn't such a good idea, even if it could be done. Turns out
Advocates for automation contend that, while some jobs are destroyed, others that pay better are created. The question is whether the number of new jobs will be sufficient to offset the ones rendered obsolete. Another concern: Can low-skilled, poorly educated employees be retrained for the new, more data-driven work arena?

As to the first and second sentences, we already know that automation, unlike the farm to factory migration of the late 19th and early 20th centuries, isn't a one-for-one (or better) bargain. As to the rest, if all one needed to be a London Whale was a GED and a bit of re-training, the tsunami of applicants for such positions would unleash a catastrophic race to the bottom for wages of such work. That ultimate catch 22: supply exceeds demand. Not to mention the psychic scars inflicted on all those Harvard MBAs who find out that all their study and bureaucratic ladder climbing was pointless. They only needed to take a three month remedial quant course at the local community college after high school graduation to earn 90210 wages.

Of more interest, of course, is the question of macro-economic effects of falling labor share and automation. It's not too far a stretch to infer that the falling share is, at least partially, the result of automation to date. We do know that income has been concentrating at an accelerating rate over the last few decades. It's also clear that income concentration yields lower to negative growth, just because at some point there's really nothing more that you want. And, more to the point, income concentration means fewer buyers for whatever the 1% wants to buy. Ferrari doesn't sell as many units as Ford.

The problem with ever more automated production, whether goods or services, is that machines can't be laid off or fired. You bought it, you'll pay for it no matter the level of demand for your widgets. And that's a significant problem for capital. Have you ever wondered why oil output never seems to drop very much? Yes, at times new sources are scarce, but producers always seem to run their equipment at 110%. Why? Because they have to pay for it no matter what. While the MBA types focus on average cost, as production becomes ever more capitalized, producers increasingly submit to marginal cost because they have to: sunk costs are irrelevant to decision making, as the econ types say. In practice that means you are forced to accept any cash flow that helps pay off your machines. You can't fire them.

In time, and it may be less than the current generation, demand collapses without a new and revolutionary method of income distribution. Whether the 1% will realize this before the implosion? Given human's penchant for time horizons that stretch to the end of his nose and no farther, more likely not. A permanent Greatest Depression, imposed by a global police state, is the most likely. Production will be geared to the wants of the global 1%, which will require what the Right has always opposed (as demonstrated by Brexit and "Make America Great Again"): a universal global currency. Such is necessary to ensure that the 1% of, say India, have equivalent buying power to, say that of the USofA. Currency manipulation by governments will be anathema to capitalists (they want those rupees to be worth as much as bucks), so they will see to it that it can't happen. Bitcoin style currency could be the vehicle; too early to be definitive.

Thought For The Day - 10 March 2017

The venerable James B. Stewart tells us about the proto-Trumps today.

What Mr. Stewart and his interviewees ignore: running a democratic government has a diametrically opposite purpose from running a corporation. For the corporate CEO, the goal is to transfer wealth from the many (customers, workers, suppliers) to the few (management, shareholders). Democratic governance, on the other hand, is about equitably governing the whole populace. For some definition of equity, of course.
"I feel many of these chief executives are responding to a public longing for a strongman, or woman, a strong leader," Mr. Gergen said. "There's a sense that's why Trump got elected. You're seeing the same thing in Europe, in Asia, in a long list of countries. People are dissatisfied with standard politicians. Military types and business people with a strong track record offer an attractive alternative."

This is a rather precise example of cognitive dissonance. The "standard politicians" have been in the pockets of the 1% and serving their interests. In other words, behaving like CEOs. Putting a "real CEO" in charge will lead to a better life for the average Joe Sixpack? Defend your answer. Show your work.

09 March 2017

Thought For The Day - 9 March 2017 [update]

It's Thursday, so BLS releases the weekly unemployment number. It's increased 20,000 poor souls. The Kim Jong-Don effect has set in. Sugar high, depression crash. Which got me to thinking about some other dots that appear to be connected.

The first dot. Bannon is an avowed Leninist, not to be confused with Marxist. You can visit the Wiki for all the details you might want. The motivating thrust of Bannon, though, is quite specific. He intends, and has already put into motion, the destruction of the professional Federal civil service. He and his acolytes have called this body of workers "the dark state". His point was described to me by Dr. McElhone way back in the mid-70s this way: the only thing that kept the government running during the Nixon fiasco were the civil servants. They didn't depend on who owns the White House or Congress. Now, the Federal civil service resulted from the assassination of Garfield. Up to that time jobs were parceled out to campaign supporters. We had to kill a president to figure that might not be such a good idea.

The second dot. At least the State department is purging experienced professional staff. The nature of Kim Jong-Don, and his zealots, is to reject anyone or any idea that doesn't comport with established bias. They're getting rid of the "dark state" that knows more than they do. Wouldn't want any voices saying it might not be such a good idea to enable Putin's oil grabs, land grabs, or killings.
Elliot Abrams, Tillerson's top choice to be his deputy, was rejected by Trump after the President learned that the former deputy national security adviser had criticized him during the campaign. No replacement has yet been named.

The third dot. It's widely assumed that the DC metro is the locus of Federal employment. Turns out, not so much. Certainly there a lot of Federal civil servants, but they're not the largest percent of the metro area of all such areas. More to the point, they aren't the ones with the grand mansions in McLean and Bethesda. Those are owned by the lawyers and lobbyists. I know. I lived in DC on a civil servant's pay. Civil servants live in Levittowns or one room apartments in town. Leaving Boston was a bad economic decision.
[update hot off the press]
President Donald Trump's daughter and son-in-law are renting a house from a foreign billionaire who is fighting the U.S. government over a proposed mine in Minnesota.

The Wall Street Journal reports that Ivanka Trump and Jared Kushner are renting a $5.5 million house in Washington's Kalorama neighborhood from Andrónico Luksic. One of the Chilean billionaire's companies is suing the federal government over lost mineral right leases for a proposed copper-nickel mine in northeastern Minnesota.

The fourth dot. I can't speak for all folks who have, or do, work in government, but in most cases it is for public service reasons. Getting a Federal job isn't easy (or, at least, it wasn't). You have to show you know what you're doing. That you have appropriate education and skills. By those criteria, Kim Jong-Don and Bannon and the rest wouldn't be allowed in. That's their point, of course: they are the outsiders who know how "the real America" works. Right. Billionaires who live off the sweat of others. But Bannon is right, although I doubt he understands the reason. Folks who choose to do public service are, by nature, more interested in supporting those who need support than those who don't. Coddling the rich isn't the natural instinct of public service. Which makes them deep enemies of Bannon and the billionaire buddies. Off with their heads.

So, this is a quiet, not quite silent, coup. Remember, Kim Jong-Don's "mandate" came from 77,000 shit kickers in Empty Counties. With Sessions getting to his main duty, voter suppression, Kim Jong-Don may well get the ability to pass on the levers of power to his son. Just like the North Korea version.

08 March 2017

Ingrates United

Eduardo Porter, econ/quant/analysis guru at the NYT has generally been reliable, from my point of view. Not so much today. His article is an attempt to blame the Trump win on clueless coastal Liberals.
So while most beneficiaries of welfare programs are white, many working-class whites perceive them as schemes to hand their tax dollars to minorities.
[my emphasis]

He spends his time blaming Liberals for not getting it with regard to lower class and lower-middle class whites. What's to get is simple racial hatred. It's no longer, post 1965, a Democratic strategy to race bait. Before the Civil Rights and Voting Rights bills, yes, the Dixiecrats mined white hatred of minorities below the Mason-Dixon, but Reagan took that meme without much contention from the rest of the Democrats.

There's really only two responses to the dirt kicking uneducated, unskilled, unemployed angry white folks plaint:
1 - the standard Right wing one of, "it's your own damn fault you're stupid; and why do you continue to vote for union busting Republicans"
2 - an income redistribution scheme to keep them in middle class wages forever

As to 1, well that was the response when the poor were mostly urban and mostly dark, although were mostly silent on the second part (they giggled about it amongst themselves). Now that the poor are increasingly white, suburban, and rural "we must do something about this carnage!!!" One of the nasty secrets of the Empty States is that, since before Scopes and still today, the quality of education in those places has been hidebound to a hideous degree. "It's your own damn fault you're stupid." One can't really expect people taught that the earth is 6,000 years old, people frolicked with dinosaurs, and the Bible is true history to be capable of doing 21st century work. Now, can one?

As to 2, well that's what the likes of Kim Jong-Don and Manchin and such are demanding. But no one in the Republican Congress supports any such thing. Neither does Kim Jong-Don, really. He imports foreigners at slave wages. And, of course, he imports foreign steel and other materiel. They didn't feel that way when the job losses were in unionized manufacturing in Blue states, of course.
... given the only beneficiaries of his decisions to go with cheaper Chinese metals for his construction project are Trump and his family, he is not someone who ever attempted to lead by example by only buying products made in America. He filled his bank accounts with millions of dollars that could have gone to blue-collar workers, many of whom now believe he is the man who will bring back the jobs that he secretly helped to destroy,

An MIT report from just after the election makes the case for redistribution:
The Rust Belt epicenter of the Trump electoral map says a lot about the emotional origins of his appeal, but so do the facts of employment and productivity in U.S. manufacturing industries. The collapse of labor-intensive commodity manufacturing in recent decades and the expansion in this decade of super-productive advanced manufacturing have left millions of working-class white people feeling abandoned, irrelevant, and angry.

Just suck it up and admit that you're lack of education and skill only got you good wages because Rust Belt unions did the heavy lifting. You elected Reagan, and he saw to it that such support would end. Vote against your self interest. Don't bitch about the result.
In fact, the total inflation-adjusted output of the U.S. manufacturing sector is now higher than it has ever been. That's true even as the sector's employment is growing only slowly, and remains near the lowest it's been. These diverging lines--which reflect improved productivity--highlight a huge problem with Trump's promises to help workers by reshoring millions of manufacturing jobs. America is already producing a lot. And in any event, the return of more manufacturing won't bring back many jobs, because the labor is increasingly being done by robots.

Remember: the CEO of UTC, which is the real Carrier company, said (after Pence and Kim Jong-Don and the cameras left) that the $16 million would be invested in more, not less, automation at the facility, and
"We're going to ... automate to drive the cost down so that we can continue to be competitive," Hayes said. "Is it as cheap as moving to Mexico with lower cost labor? No. But we will make that plant competitive just because we'll make the capital investments there. But what that ultimately means is there will be fewer jobs."

What does the Bible say about worshipping false idols?

06 March 2017

Thought For The Day - 6 March 2017

The mainstream pundit class seems non-plussed by Kim Jong-Don's tweet storm about his being wiretapped during the "sacred" election. By the way, if it were so "sacred" he shouldn't have colluded with Putin to bend the result. But I digress.

Mentioned, or alluded to, here in the past is the fundamental difference between Kim Jong-Don and any other pol in memory: he's spent his adulthood living the life of mini-dictator. His "business" is, structurally, exactly like the candy store that was on the street I walked twice a day (back then, grade schoolers were sent home for lunch; really) as a child. He has no shareholders. He has no BoD. He's The Decider. So, in that upbringing, if *he* wanted to wiretapp an enemy, he'd just snap his little fingers and it would be done. Now that he's the Dictator of the USoA, he just assumes that such is the way things are done. If Congress, right wing as its ever been, rolls over for him, he will be Dictator. Roberts sure isn't going to spike is tires.

05 March 2017

The Truth, The Whole Truth...

Mostly likely because I did my grad work in Econ rather than MBA (we mostly viewed them as incompetent empty suits; subsequent recessions caused by this cabal makes the case), I've viewed financial quant with a very jaundiced eye and said so a few times in the course of these endeavors. On the one hand, financial quants spend a good deal of time looking for loopholes in laws and regulations to exploit (CDS), and when loopholes are in short supply, bending such laws and regulations into pretzels (subprime and Alt-A loans). For their sole benefit, of course.

High on my list of foolishness is the notion that quant can actually predict stock prices. Now, that is distinct from having access to money flows data, which allows the holder to front run the lemmings into or out of particular companies or sectors. If you're a large enough holder, you can *be* the leader of the lemmings. Just note the Hunt brothers. They nearly got away with it. My guess is that a similar attempt under the Kim Jong-Don administration will succeed.

Well, in any case, comes a post by another skeptic.
There is a significant body of literature trying to forecast prices and to prove (or not) that financial markets are efficient in pricing publicly available information, including historical prices. This is the so called efficient market hypothesis. I have studied it, tried to trade for myself for a while when I was a Msc student, advised several graduate students on it, and the results are mostly the same: it is very difficult to find a trade signal that works well and is sustainable in real life.

In other words, events move prices, and not the other way around. And, of course, there's that fine print in finance/broker adverts, which goes something like, "pass results are no guarantee of future performance". If data drove prices, they wouldn't have to scuttle behind that mulberry bush. Events aren't predicted by data. Mostly. And, even more mostly, never soon enough for the retail plunger to see them.

Now, testing share predictors on indexes or subsets of same is nearly cheating: over time, large bundles of stocks (or bonds, for that matter) reflect the market rate of interest. Which fact is bedevilling the hedge funds these days.
Since January [2016], investors pulled some $7 billion in assets from so-called multi-manager funds, data from research firm eVestment show. This marks a sharp reversal for a strategy whose promises of diversified strategies and strong returns drew in $56 billion in new cash in 2015.

And, of course, Buffett has something to say
Buffett told investors last Saturday that low-cost index funds are a better option for most than paying higher fees to managers who often underperform, specifically hedge funds.

Now, marry "you're not going to beat the market rate of return" with "you're at the flat part of the asymptote of knowledge", and what you end up with is a zero-sum game twixt consumption and saving (without tech progress, there's no surplus generated by investment over redirected consumption, so that return comes out as diminished consumption). Couple that to an historic low proportion of GDP going to earned income and you see a dark future. The recent rebound? Not going to be sustained.

So, the post's conclusion?
The main results of this simple study are clear: prophet is bad at point forecasts for returns but does quite better in directional predictions.

Which, one might argue, amounts to front running, a bit, money flows. See? I told you so.

01 March 2017

The Asymptote of Progress - part the second

Another in the desultory series on the flattening of the knowledge and progress curves that determine our lives. Battery tech has been mentioned a few times, and it's come up again. This time reporting from the Mobile World Congress. Some of it is just funny:
For sure, there are fancy new phones, internet-connected gadgets (including, for some unknown reason, a toothbrush with artificial intelligence) and enough driverless car demos to sink a battleship ...

A toothbrush? Perhaps it will be used to inject signals into the brain?

Anyway, the bit that caught my eye as it relates to the progress thing:
There's a new bunch of smartwatches on show at the Mobile World Congress, but the biggest selling point is that the batteries of these new devices will last up to a month. That longevity, however, requires turning off almost all of the "connected" services: So companies have basically created, well, a normal watch, but one with a $400 price tag.

Bitten in the asymptote, yet again.
Q: When will longer testing batteries be available? Ones that don't catch fire!
A:
You've hit on the holy grail of mobile technology, and it has come up a lot at the Mobile World Congress. Samsung's recent problems with Galaxy Note 7s that kept catching fire are only one example of how batteries have become a major obstacle to advancement in smartphones.

How long will it take to get longer-lasting batteries? It's hard to say, though my colleague John Markoff wrote recently about "solid state" lithium batteries that could be safer and give engineers greater flexibility. People here in Barcelona say that's years away.

It's worth remembering that this problem isn't new. Here's what Thomas Edison had to say in 1883: "The storage battery is one of those peculiar things which appeal to the imagination, and no more perfect thing could be desired by stock swindlers than that very selfsame thing."

Here's the link to the Markoff piece. These are safer lithium batteries, but no mention that they're higher energy density. Oh well.

26 February 2017

All Hail the US Buck

From time to time in these endeavors, I've weighed in on the question of the USofA foreign trade deficit. From the quant point of view, narrowly, the question boils down to: is having US dollars floating out on the planet a good thing (that can only happen if the US runs a deficit), and if so, is there a limit to how much is too much of a good thing?

My argument has steadfastly been that from the beginning, Bretton-Woods, when the buck became, nearly, de jure New Gold to now, when it has become de facto New Gold with the repudiation of the Bretton-Woods agreements; the USofA must run a trade deficit with RoW if global growth is to be sustained. If we don't, then global deflation and depression result. But, but, but... The lunatic rightwing goldbugs bleat that the global economy should be run only on specie anyway, so reverting to the 19th century model is a good thing. It was just the sporadic gold supply that caused deflation and depression over that century. Even the substitution of silver was opposed by the goldbugs.

But, of course, they neglect to mention that 19th century America, and everywhere pretty much, was a miserable mess of deflation, depression, and privation for all but the era's 1%. Mark Twain wrote "The Gilded Age" for a reason. And praise wasn't it. And for perspective, its publication date, 1873, was nearer the beginning of the period rather than the end. In other words, Twain was as much seer as chronicler.

A bit of innterTubes searching, whilst waiting for one of my few Redneck Pleasures to begin (Daytona), I came across this recent article. Another bandwagon, another rider.
In the foreign exchange market, the dollar rules. More than 85% of forex trading involves the U.S. dollar. Furthermore, 39% of the world's debt is issued in dollars. As a result, foreign banks require a lot of dollars to conduct business. For example, during the 2008 financial crisis, non-U.S. banks had $27 trillion in international liabilities denominated in foreign currencies.

Of that, $18 trillion was in dollars. That's why the U.S. Federal Reserve boosted its dollar swap line -- to keep the world's banks from running out of dollars. (Source: "Is the Role of the Dollar Changing?" The Federal Reserve Bank of New York, January 2010.)
[check the original for the links]

Concern that China and Russia don't want to be tied to the US Buck:
Prior to the crisis, in March 2009, China and Russia suggested the world adopt a single global currency. The goal would be to create a reserve currency "that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies." In other words, China is concerned the trillions it holds in dollars will be worth less if dollar inflation sets in.

That, of course misses the point. Bannon, Trump, the Chinese, and the Russians all assume that one can create a global (not under the control of a country) fiat currency which grows in total nominal value to just match global economic expansion (avoids both ruinous inflation and deflation), is not tied to physical specie which is limited to what might be dug out of the ground at any given time (of course, since it's fiat), and will nevertheless benefit them preferentially as opposed to their economic/political enemies. A multi-nationalist might suggest the UN, of course. Not going to happen.

Without a US foreign trade deficit, global trade collapses. That's the basis of American Exceptionalism in today's world.

Jump on My Bandwagon

Finally, someone has joined my epithet bandwagon. It's Linda Stasi of the New York Daily News, which is a left-leaning tabloid. Perhaps the only one on the planet.
How in hell do the American people think this is OK? It's never OK to bar the press in a society that guarantees freedom of the press. Who is Donald Trump? Kim Jong Un with a combover?

The drum major marches on.

25 February 2017

You're Fired!!

Demented Ronnie earned his cred with the rich lunatics by firing the PATCO workers. Well, Kim Jong-Don has his shot at immortality. He's been at swords' points with "the intelligence community" at least since the first reports of Russian interference. "I don't really think [Russia] is, but who knows? I don't know either. [The intelligence community] don't know and I don't know." Of course, they know. And I'd bet a buck they've got him talking to some Russians. He's behaving like a perp who knows the jig's up. Real soon now.

So, what's the over/under on Kim Jong-Don firing the working analysts, the ones his new appointees want to corral? A month? Two? Nixon tried to get the CIA to spike the FBI's investigation. Why not go all Ronnie? Such a move could be made to fit Bannon's "deconstruction of the administrative state". 'They won't listen to the American people, so I fired them'. Of course, Kim Jong-Don asserts that whatever he does is for the American people, who, based on what he says, are the uneducated, unskilled, hidebound white folk who just want their niggers back.

23 February 2017

Blood Money

OK, so here's the deal: the drug industry (legal ones, that is) is near the top of the list of noxious parasites on the economy. In recent days, one member of that clan, Gilead, has been getting static from the investor class about its less than stellar financial performance. Gilead is a major player in HIV. It was also the lead participant in HepC; the source of the ~$84,000 "cure", several of them.

That marketing started a few years ago, but revenue has waned some in the last year or two. So the idle money rich are getting irritated. If you watch the TeeVee shows suited to the baby boomers, then you've been Gatling Gunned by the ads showing older, white, middle class boomers who, they are told, are at imminent risk!!!! Go get tested, you damn fools!!!! Oh, and then come get our drug (no, Gilead doesn't name itself, of course).

Baloney.

The Red Cross blood banks test for known transmissible diseases, including HepC since ~1992. Here's what they say:
The Red Cross regards blood test results as private and confidential information. The Red Cross may contact you by letter or call to arrange a counseling appointment, but the Red Cross does not disclose information regarding positive blood test results to anyone but the donor, except as required by law. The Red Cross maintains a confidential list of people who may be at risk for spreading transfusion-transmitted diseases. When required by law, we report donor information, including test results, to health departments, military medical commands, and regulatory agencies. Donation information may also be used confidentially for medical studies.

So, in the end, if you've not shot up with someone else's dirty works and have been a blood donor or been in hospital for some operation since 1992, then you've been told. If not, DONATE A PINT OF BLOOD!!! You'll be doing a Good Deed, and find out if you're HepC positive. All for free.

21 February 2017

Light One Candle

It isn't likely a surprise that someone who follows RDBMS and quants generally might also keep track of other science vectors. Fact is, my favourite TeeVee show is "How the Universe Works". These endeavors have made a bit of noise recently about the asymptote of progress, particularly the normal macro-world of science and engineering. There was a report (I didn't save a link, sniff) complaining that the younger generation hasn't been starting businesses as vigorously as previous ones. Of course; there's fewer actually new stuff out there on which to base a new venture. Hewlett and Packard started a business to do that which hadn't before existed. They could do that because science and engineering were digging out new discoveries. When new knowledge becomes scarce, so too do new ventures.

The nano-world and supermacro-world remain more unknown, however. But, however, the knowledge and discoveries in those worlds, the latter specifically, aren't likely to have immediate impact on our daily life in the macro-world. I made up supermacro-world. The standard term is cosmology, the study of the greater universe.

One of the main concerns of cosmology is the fate of the universe. The debate has been going on forever, but in earnest since Einstein. There are three possibilities: the universe is space, commonly conceived as a sphere, which is fixed or static; the universe is expanding at a fixed velocity; the universe is expanding with acceleration. The static universe was the accepted norm until Hubble calculated the red shift of distant objects. Then, the expanding universe was accepted. It wasn't until 1980 (yes, not that long ago) that accelerated expansion was proposed.

With any kind of expansion, the question becomes: what happens in the end? Does the universe expand to the point that matter exists in infinitely small density, with inevitable dispersion of energy to zero density? Or does the expansion eventually slow enough for gravity to halt expansion, and generate another big bang? The former is generally agreed to.

But, being just a semi-talented amateur, I've always wondered whether the cosmologists have been correct. The whole ball of wax rests on a single assumption: that physicists can actually measure the speed at which galaxies and such move. You can't just take out your standard issue police radar gun and point it at the Andromeda galaxy and read off the speed. How is it done? The answer is the standard candle.
Almost all astronomical objects used as physical distance indicators belong to a class that has a known brightness. By comparing this known luminosity to an object's observed brightness, the distance to the object can be computed using the inverse square law. These objects of known brightness are termed standard candles.

Of course, that assumes that we know how bright, in absolute terms, an object is; and that we know, by some other means, exactly how far that object is from us. If we know those two values, then we can compare it to measurements of other objects, do some arithmetic, and get distance, velocity, and acceleration. I've always been skeptical that physicists could actually do that.

Well, turns out, even the professionals have worried about that. We may not know quite as much about the supermacro-world as we thought. In particular, if the universe isn't actually accelerating, then we don't have to posit dark matter and dark energy and the like to balance the equations. Balancing the equations requires, just as it did in Newton's day, a source of power to drive the acceleration. In other words, cosmology may have invented a phenomenon in search of a requirement.
But measuring it requires divining the distances of lights in the sky -- stars and even whole galaxies that we can never visit or recreate in the lab. The strategy since Hubble's day has been to find so-called standard candles, stars or whole galaxies whose distances can be calculated by how bright they look from Earth.

We need a cosmic radar gun. Note that the article doesn't question the current view of acceleration. That's all mine. And, of course, there's no immediate effect on our macro-world. Even with accelerated expansion, the end is trillions of years away. Don't change your vacation plans.

20 February 2017

Rednecks and Robots

Kim Jong-Don got elected because enough of the uneducated and unskilled who used to have high wage jobs in high value industries voted against their own self interest. Some of that wage escalating leverage was driven by oligopoly (autos) and some by inherent demand (energy). The Great Recession put an end to much of that. Kim Jong-Don promised such folk that, by making 'America Great Again', he'd get them their high wage, low skill jobs back. Now. That's just a really, really Big Lie and always has been. The former Rust Belt of the blue collar middle class was built on market control by industry, and countervailing power of industrial unions. Industry sucked monopoly rents from consumers, and unions sucked some of the vigorish from industry for workers. Redistribution by any other name, thy result is sweet.

Reagan set out to fully destroy the blue collar middle class, aided in large part by those very folks. Stupid is as stupid does. And the lunatic Right has only gotten more bold since. So, now we have a billionaire and his billlionaire buddies claiming to be the champions of the lost blue collar middle class, working hard every day to restore them to wealth and happiness. Sure they will.

The Left, and some of the Right, cling to the farm-to-factory history of job destruction/creation from the early 20th century as the panacea. No problem; we've been through this before and it turned out all right, and so again. That's some powerful intoxicant.

Well, today's reporting will be declared fake news by Kim Jong-Don and his mouthpieces. Texas, land of the free, and home of the robot. The stupid who voted for him may well continue to believe that their ship has come in, captained by Kim Jong-Don. But the captains of industry tell a different story. And they're not blaming Mexico, China, or Obama. Imagine such honesty!! As stated before in these endeavors, the early 20th century migration was possible just because the skill/brains needed for the created jobs was no worse, even lower, than those destroyed. And the volume of jobs created was commensurate with those destroyed. Successful employment migrations only work simply if labor is homogeneous or, less simply, if labor can be re-trained at a cost sufficiently smaller than the net income increase over the person's remaining worklife to make it worth the effort. For those who lost out on their high wage, low skill jobs over the last decade or so, the only realistic options:
1 - let 'em starve; they wouldn't keep up their skills so it's their ownself's fault
2 - welfare; they were blue collar middle class, so they deserve to be blue collar middle class forever

Some might posit re-training, but as stated in earlier missives, we really don't need more 55 year old London Whales from 50 year old coal miners. Now, do we?

First, the basic issue:
Oil and gas workers have traditionally had some of the highest-paying blue-collar jobs -- just the type that President Trump has vowed to preserve and bring back. But the West Texas oil fields, where activity is gearing back up as prices rebound, illustrate how difficult it will be to meet that goal.

Then, the slap upside the head:
"People have left the industry, and they are not coming back," said Michael Dynan, vice president for portfolio and strategic development at Schramm, a Pennsylvania manufacturer of drilling rigs. "If it's a repetitive task, it can be automated, and I don't need someone to do that. I can get a computer to do that."

And that's exactly what's been going on. Yes, new jobs are happening in the oil patches. No, these jobs are a fraction of the number lost, and demand skills that the oil rig roughneck hasn't a chance of owning.

Recall what's been pointed out more than once here in the past; labor is a variable cost, so it is easily (in Red states, anyway) expanded and contracted as production waxes and wanes. Automation, capitalized production generally, transforms each replaced worker into fixed cost capital. No matter the level of production, those robots and machines have to be amortized. The nut gets bigger. So:
S.O.C. Industries, a small local pump truck operator and chemical services provider, is forced to invest $100,000 a year to keep up with the computer programs and monitoring equipment its clients request. The added expenses are one reason the company has let go 15 of the 60 field workers employed three years ago. Another is that well operators that once hired five or six people on a drill site to mix chemicals and drilling fluids as well as clean up spills are now hiring only three as mechanization has sliced their drilling time in half.

More fixed capital expense of production. The only way the arithmetic works, of course, is for production demand to at least continue at the level when the switch from rednecks to robots happened. Any falloff in demand means Chapter 7. Arithmetic is a bitch.

19 February 2017

Our Comic Book President

It's said that Kim Jong-Don doesn't want to read, i.e. text, the documents he gets. He likes pictures and maps. Sorta the "Classics Illustrated" approach. Just only pictures.

Well, here's a picture that explains why the right wing, trickle down, approach to macro-economic policy just never does anything more than making the rich yet richer.
(By Waliapreeti (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons)

You don't need to be a mathlete to see that the marginal propensity to consume decreases with income. IOW, if you're already rich, giving you more moolah means you'll just sit on it and not increase aggregate demand in the macro-economy. That asymptote problem, yet again. Most likely, as your rich cabal does, you'll just chase Treasuries. The result of that will reduce yet more the received interest rate. And, of course, you and the rest of the cabal will demand that the damn gummint raise the rate on Treasuries to something you can live on, say, 10%. The problem, of course, is that even if Treasury did sell instruments at a nominal rate of 10% (they can do that now if they wanted to, by the way), rather than at auction, the secondary market would immediately drive down the rate to meet the demand reflected by The Giant Pool of Money, which grows ever larger. So, we'd get a transparent re-distribution of moolah from taxpayers to fat cats. Fat cats would rather their transgression be less obvious.

May be we can rename Kim Jong-Don yet again, to Robin Hoodlum? Take from the poor and give to the rich!

17 February 2017

Thought For The Day - 17 February 2017

Reporting today that Kim Jong-Don intends to remove 11.5 million illegals. Whether anyone knows that the total of illegals is that number, or even one near it is an open question. But here's the thing. For each illegal one could reasonably expect that s/he has some number of kids/spouse tagging along. The kids, if born here, are citizens. Well, until Kim Jong-Don can get the 14th amendment of Constitution repealed.

What might be a side-effect of such a mass expulsion? How about the plunging share price of WalMart? The loss of, say, 40 million poor people will certainly put a crimp in their revenue and profit. Ya think they might just bitch to the little whiney bitch? They'd better get at it. The nasty arithmetic just won't go away.

Babbling Brooks

For some years, David Brooks has self-identified as the coherent conservative, as opposed to the lunatic fringe. Since the ascendancy of Kim Jong-Don, he's become a tad more adamant in that regard. It, therefore, should come as no surprise that his column today carries on in such a manner.

What is refreshing is that he's offering up wisdom that sounds rather like he's been pinching ideas from Your Humble Servant of late. He he. While he doesn't reach the level that I do: Kim Jong-Don's point is to destroy governance, so the conclusion espoused by many, that he's flailing and incompetent is just plain wrong. By the bye: yes, I'm referring to the newly added subhead seen in some versions of these endeavors; I regret the bold font, but that's not me, but the platform's decision. If I ever find a way to get normal display, I will. On to Mr. Brooks.
I still have trouble seeing how the Trump administration survives a full term. Judging by his Thursday press conference, President Trump's mental state is like a train that long ago left freewheeling and iconoclastic, has raced through indulgent, chaotic and unnerving, and is now careening past unhinged, unmoored and unglued.

So, is he crazy? Yes and no. Yes, he's clearly demented, but by his own hand. I'm among those who assert that 99.44% of neurotics are so just because they choose to be, it comforts them. Organic mental health issues, such as schizophrenia, are another issue. So no, Kim Jong-Don's problems, as viewed from the outside, are his assets, so far as he is concerned. The bully in the bully pulpit, so to speak.

Which brings us to the other major point of Kim Jong-Don, which I've expressed more than once in the past (and offer up a self-quote from elsewhere), but bears repeating, since Mr. Brooks gets near it:
Puzder, as well as DeVos and Carson and ..., is that governance is to be destroyed. after all, anarchy favors the rich. and the rich is Kim Jong-Don's only priority. the uneducated and unskilled who voted [for] him were hoodwinked by their own racism. if they were the only ones to be punished.

Mr. Brooks says this
Bannon has a coherent worldview, which is a huge advantage when all is chaos. It's interesting how many of Bannon's rivals have woken up with knives in their backs. Michael Flynn is gone. Reince Priebus has been unmanned by a thousand White House leaks. Rex Tillerson had the potential to be an effective secretary of state, but Bannon neutered him last week by denying him the ability to even select his own deputy.

Yet another self-quote, from an unrelated posting (not mine, that is):
what was that movie (mostly true, I hear) about that mad English king? a recent one, not 14th century or whatever. the moderate Republicans (are there really any left?) don't matter. the lunatic fringe controls the party in Congress and they only care that The Donald won't veto their gifts to the rich, punish the poor, legislation.

Mr. Brooks, today:
Everything about Trump that appalls 65 percent of America strengthens him with the other 35 percent, and he can ride that group for a while. Even after these horrible four weeks, Republicans on Capitol Hill are not close to abandoning their man.

So, a useful Fool. Both to Putin and the lunatic Right.

15 February 2017

Obambi or Godzilla?

The shit storm battering Mar-a-Lago approaches Cat 5, and one must wonder: why now? Why did Obama hold back? He's already on record that he held back the petty stuff in order to avoid the appearance of influencing the election. Why didn't he go for the kill last September? Or another October Surprise? The shit storm isn't intel from yesterday, but from 2015 and 2016. Why?

What we may have is the recognition of strategy versus tactics. If Obama had blown a strong whistle during the election (a tactical move), Hill probably would have won, but the Congress would likely have stayed Right Wing, and so the Supremes. What to do? What to do? And the meme from the Right would have continued for four years: it was all a Liberal plot.

The strategic move, it appears, was to force the Right Wing to implode. Obama knows DC, and in particular the history of Nixon and Iran Contra and such. The rank and file intelligence community is somewhat right of center, but they're not in Putin's pocket; they really are Patriots (I met a few when I was with Jack Anderson for a little while in the 1908s). The WMD fiasco was the fault of the political top of the community, not the professionals. They knew that when Kim Jong-Don accused them during the campaign of having "no idea".

So, now the Republicans have to impeach Kim Jong-Don, at least, may be even Pence, or risk never controlling anything more than the Supremes for decades.

Strategy. Tactic. Perhaps Obama is, ya know, really smart.

14 February 2017

Thought For The Day - 14 February 2017

It's deja vu, all over again. A St. Valentine Day's Massacre.

Back in the 1970s, for those old enough to remember (and enough memory cells left to realize those memories!), Nixon was taken down by his own narcissistic need to hear his own voice for the rest of his life. Let's go to the audio tape!

This time, Kim Jong-Don is being taken down by the very spy agencies he so disparaged while he ran for president. They have all of his, and his minions, skullduggery on tape. These endeavors predicted that his bravado would be his undoing. And so it has come to pass.

QED

Sauce For The Gander

From the news
"If foreign services are paying attention, and I am sure that they are, they are paying attention to all of the individuals who potentially have access, all the types of devices that are there and they are going to think about how they can exploit that in the future," Cordero said.

That, of course, is the analysis of Kim Jong-Don's North Korean discussion with Abe at Mar-a-Lago, in full view of the other $200,000 (yes, he doubled it in January; I wonder why?) joining cost (plus the $14,000/annum dues) fat cats.

So, not only did Kim Jong-Don's goose-steppers use a non-government email server, he's now discussing national security concerns in public?

Lock him up!
Lock him up!
Lock him up!
Lock him up!
Lock him up!
Lock him up!
Lock him up!
Lock him up!
Lock him up!
Lock him up!
Lock him up!

He can have a cell next to Flynn.

There. I feel so much better.

09 February 2017

Diogenes Succeeds

J'Accuse. A guy who's actually run a business has the gonads to tell the truth.
On Monday, Carl Bass, the CEO of $18 billion Autodesk, gave an interview with Pando's Sarah Lacy where he described President Donald Trump as "acting somewhere between a dictator and a small business owner."

Some of us, not nearly so famous, figured that out a while ago. I'd add "whiny brat", but that's just my elite prejudice.
"We are talking about a guy who likes belittling people. He really is a bully. Look, everyone I talk to, the tech guys, who went to that first meeting, well, you saw what they looked like. They didn't want to be there," Bass told Lacy.

And there you have it.

08 February 2017

Mr. Bluster

If you're really, really old you will remember The Howdy Doody Show, and the gasbag Phineas T. Bluster, mayor of Doodyville. Well, gasbag is the operative word. It seems that whenever Kim Jong-Don decides that some company has done him, or his, wrong; a nasty tweet(s) results. Nordstrom is today's whipping boy, for having made the rational decision to dump Ivanka's stuff just because it didn't sell. But remember, he's been going after up-market Blue State companies. His uneducated, unskilled angry old white guys don't shop there, or at any of the other awful places. Why would any of these shit kickers go into a Nordstroms? As Aaron said, "relaaaaaaaaaaaax".

Some Things Are Public Goods

Adam Feuerstein has a plaintive missive today, bemoaning the decline in profits from hepatitis/C drugs. Gilead has ceased being a cash printing machine, since the hep/C drugs do, close enough, "cure" the disease.

I never bought the notion that there was some huge pool of hep/C out in the population, despite (or, perhaps, because of?) Gilead's TeeVee ad onslaught aimed at Baby Boomers. While the virus can hang around asymptomatically for a time, the fact is only IV drug users have been getting infected since 1992 when a test began in blood banks. The notion that middle class oldsters, innocently infected from an old transfusion, are still walking time bombs for the disease is ludicrous. Not to mention that generic drugs have been treating the disease for decades, with nearly the same level of efficacy, just not as comfortably. Why, one might ask, should the non-IV population pay $84,000 per infection for Medicaid drug shooters to feel better? And the drug isn't a vaccine only a cure for the instant infection, so re-infection in the prescribing population is highly likely.

Feuerstein goes on to compare the life-long use of HIV drugs to manage the disease as better.

Right. He is clearly unaware that he's made an iron-clad case for healthcare as public good. Just as Lahren complained that coal miners deserve sinecure, it appears that drug companies do, too. Where's Ayn Rand when you need her?

07 February 2017

This Is Your Brain on Drugs

A previous missive bemoaned the death of the financial quant, which doesn't exactly break my heart. But we now have reporting that Kim Jong-Don has set out to kill off the bio-stat (or pharma quant). This is far more serious. If only because it's an assault on science. Clinical trials are important science, not FDA obstruction. But the Randians only see the real world through her kaleidescope glasses. David Frum, no bleeding heart lefty, said it all (on one of those left wing MSNBC interview shows), this will be the most corrupt administration in history.
Pay attention to the money. That is the story of the next four years. Organized self-dealing, self-enrichment of the Trump administration.

If there were any doubt that Kim Jong-Don and his cabal of Randians needed medical attention, read up this bit of legislation. Snake oil for all.
The bill includes a safe harbor provision which would prevent FDA from considering adverse events tied to administration of unapproved drugs to terminally ill patients under compassionate use. The bill would prohibit the federal government from using data or experiences from compassionate use "to delay or otherwise adversely impact review or approval" of a drug or device.

For those who don't follow the process by which medicines come to you, the major impact of this insanity would be to make controlled trials virtually impossible. There would be no incentive for critically ill patients to seek out clinical trials, and without controlled trials, no one would ever know whether DrugX actually works. And, of course, such snake oil would be nicely highly priced, since drug companies could make any claims they want. The other shoe: once enacted, these same clowns will write legislation compelling Medicare/Medicaid to pay for such drugs. Win/win for charlatans.

Here's the other really notable quote
A 2016 study commissioned by BIO found that from 2006-2015, an average of 63% of Phase I trials were completed successfully, while only 10% of drugs that entered Phase I were eventually approved.

Why all this is important? There are three primary phases of trial (some post-approval testing is called Phase IV). Phase I merely tests on, generally, a handful of individuals, whether the compound is deadly. Eventually, the compound goes through a (or two or three) large population, controlled Phase III trial, which provides sufficient data to demonstrate that it really has no nasty side effects and that, "It works, by Jove, it works!!!" So, of course, an inert compound will pass Phase I; be claimed to be a miracle cure for some nasty sort of cancer, say; be sold for a king's ransom; never undergo further efficacy trials; and rake in millions or billions of dollars to charlatans. Stupid people put Kim Jong-Don on his throne.

We Don't Need No Education

Now that we have Mrs. Scamway running the Department of Education, what can we expect? Simple; for those states with lunatic right governments those kids will learn that the earth is 6,000 years old, humans frolicked with dinosaurs, and that all of science is merely "theoretical". The smart states will not go down that rat hole, and the inequality of the uneducated, unskilled angry white men will be passed on to their spawn. The coastal cities will thrive. The Empty Red States will continue to degrade. The Blue States will continue to subsidize their congenital stupidity.

Have a nice day.

06 February 2017

Thought for The Day - 2 February 2017

The most, and I mean most, existential threat to Kim Jong-Don and his fellow travellers in the GOP is votes from those not in clan. How best to assure permanent control, a la Putin, without getting caught? To date they've used redistricting and penalized polling places to good advantage. But those efforts can be overcome. How about the simple expedient of requiring an e-mail address in order to register? The old and/or poor are less likely to have such, and then the gerrymandering and polling place gigs don't matter anymore. "That's some catch, that Catch-22."

05 February 2017

I Still Hate Neil Irwin, part the sixth

He's done it again, slurped my mission, but other reporting during the week reflecting the asymptote of progress means he'll be lastly discussed in this missive.

Here and elsewhere I've argued that the future of mobile compute devices is squarely (huh?) on the levelling arc of the asymptote since power available to such devices is limited to what can be packed into a battery of such devices' form factor. The Note 7 is merely the latest example of the results of trying to fool Mother Nature. Well, Nova this week reported on the "Search for the Super Battery", narrated by the NYT's David Pogue. It tickled my ovaries to see one of the battery scientists play with a lego-ish version of the periodic table to demonstrate that lithium is as far as we go. Until someone invents a better atom, of course. Kim Jong-Don's unleashing of innovation by giving away the rest of our GDP to billionaires will certainly accomplish that, of course. One point I had long forgotten, but is vital to understanding the issue was the segment on lithium-as-metal battery and lithium-as-ion battery. The first attempts were the former, but way too dangerous. The latter have become the method for exploiting lithium, but provide about half the energy density of metal based batteries. And can be a tad dangerous, as well. There was some discussion of efforts to find a way to use lithium-as-metal in a safer way, but nothing imminent. In any case, power available to mobile compute devices doesn't jump by anything like an order of magnitude. That pesky asymptote.

Friday morning, Adam Feuerstein linked this essay on possible reduction of FDA's efficacy responsibility with quotes such as
What makes drug development long and expensive is the need to prove, beyond statistical doubt, that your damn drug works. That's not on the FDA -- that's on the underlying biology of the diseases we're trying to crack.
-- Michael Gilman
and
Anyone can come up with safe snake oil, but, if that becomes our regulatory standard, that's what we're going to get. Will it create a vibrant industry? No, it will obliterate it.
-- Bernard Munos

Again, that pesky asymptote of progress: it's the real world science/engineering that determines whether a new widget really is better, not financial engineering. It was this latter that has driven our economy's worse collapses. Kim Jong-Don is determined to make that happen all over again. And with drugs, we get the added benefit of super expensive snake oil. I guess we're not in Kansas any more.

Speaking of the Devil, Maher's show Friday night, without any acknowledgement in Real Time, offered up another asymptotic moment. For those who don't do Maher, the main body of an episode is Maher sparring with three guests. Most often, it seems to me, is two sorta liberal and one token from the lunatic right. Friday was, sorta kinda, the other way round. In particular was Tomi Lahren, whom I'd never heard of until then. But, then, she was titled as a "TheBlaze" talking head, so that's no surprise. Off and on, the discussion dealt with "regulation" during which Lahren repeatedly demanded that coal miners were being abandoned due to regulatory burden. In other words coal miners, unlike say auto workers facing mass unemployment during the auto "bailout", deserved life-long sinecure. Which is not to say that traditional underground coal mining is an easy life. But it does seem that a goodly percent of the 77,000 in PA, MI, and WI voted for Kim Jong-Don on the assurance that they'd get their jobs back. Right now. But that pesky asymptote, again. First, electric power plants have been converting to gas as fast as they can, just because it's cleaner and cheaper. One might argue that this conversion effort is "burdensome" EPA regulation, but said regulation is just implementing statute. Without such conversions, the USofA must inevitably have cities as toxic as China's today or London in the early 1950s. Take your pick. And, second, coal mining in the East has turned to hill topping, which dis-employs underground miners entirely.
In Kentucky, for example, the number of workers has declined over 60% from 1979 to 2006 (from 47,190 to 17,959 workers). The industry overall lost approximately 10,000 jobs from 1990 to 1997, as MTR and other more mechanized underground mining methods became more widely used. The coal industry asserts that surface mining techniques, such as mountaintop removal, are safer for miners than sending miners underground.
In other words, coal miners have been replaced by machines and methods long before EPA began to clean the air. And, of course, the House added more profit (unpaid negative externalities) to coal companies emboldened by Kim Jong-Don.

Clean coal?

So, after this leisurely stroll down the Yellow Brick Road, we get to Irwin's latest, which discusses whether US labor is finding life better or worse. It's his usual decent essay, but he elides the two most important points.

First, employment dislocation remains analyzed in the century old context of farm-to-factory, and Irwin doesn't get beyond that. Farm-to-factory worked, in the sense of "new jobs replace old jobs", just because farm work was at least as skilled as factory work and abundant, so the segue was easy. The only real difficult part was getting from shit kicker states to urban ones. That context is simply duplicitous these days. Lahren, see above, argues for coal miner sinecure (but Northern auto workers get shafted) just because there's really no other choice. A 50 year old ex-coal miner isn't going to be retrained to be a 55 year old financial analyst; not that we need any more folks skilled at deceptive finance, of course. Having a GED, or less, is one impediment. The other, of course, is that education is the main part of what used to be called "human capital" and as with any capital expenditure, the cost/benefit decision rests on the pay back period. So, coal miners are either treated as specially deserving of sinecure, as opposed to Northern unionized factory workers, or they're not. Fair is fair. Well, it's supposed to be. Income redistribution is the only efficient path.
"When firms invest in technical change that disrupts employment structures," Mr. Johnson said, "their decisions focus solely on private profit and neglect the costly side effects that society must bear. When one small firm adopts a new technology displacing workers, this may not be a societal crisis. When many firms do this at the same time, the changes in the nature of production and employment across the nation become a profound social problem."

Second, neither Irwin nor his interviews admit to the asymptote problem. But they do, implicitly.
[The Economic Innovation Group] cite federal data showing that in 1977, more than 16 percent of firms in the United States were less than a year old, a figure that had fallen to half that by 2014. New businesses have similarly done less to power new jobs than they once did, while the biggest, oldest firms account for a rising share of economic activity. Market concentration increased for two-thirds of industries between 1997 and 2012, the report found. That coincided with a steady rise in corporate profits as a share of gross domestic product, and in a decline in the share going to workers' wages.

I guess that lunatic right meme, "small business drives the country", is just more bullshit. Why am I not surprised?

That nasty asymptote, yet again. New business depends on true innovation, and Gordon's book, if you read carefully, demonstrates that the driving force is that asymptote.

Finally, I'll admit that the notion of the asymptote is old hat among quants. So far as I know, the term is my invention, but the quant has been around for centuries. It's called the Gompertz curve.