The Tyranny of Average Cost

When I concocted the phrase 'tyranny of average cost', I thought it was a new description. I've spent the last bit of time searching the innterTubes for that phrase, and nothing comes up. I suppose I should copyright it.

More to the point, there are a couple of pieces on Seeking Alpha, dealing with Apple. More, still, to the point, is that the argument is really about the problem of unit volume, price, and average cost. Seeking Alpha tends to have not the brightest bulbs in the candelabra. With tech and healthcare moving toward evermore capex, variable cost drops as a percent of total, and thus the vendor needs evermore volume to cover cost. Cheap Chinese hands don't mean much when the amount of labor in the widget is minuscule. As mentioned before: if only the X% can afford the Z widget, in short order, the X% won't be able to either because price rises on lowering volume. There's a reason a Chevy costs less than a Mercedes. There's also a reason so much headway has been made in medicine since the 1950s: (largely) universal employer based health coverage provided the funding, which funding didn't exist before then. The Right Wingnuts won't admit this, of course; they assert that only They deserve quality healthcare. Without widespread usage, even the X% couldn't float the boat.

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Dialing For Leprechauns

More than once in these musings, there's been talk of where The Giant Pool of Money (yet growing) goes to find above market risk-free returns. Subprime auto loans is one avenue mentioned here. Regular auto loans, now, too. But that latter is as much an effect of a whithering middle class as anything else. Most folks can no longer afford the monthly for a standard car at the (once) standard 3 year note, which is what I did with my Capri. That was some years ago, of course.

By comparison, 36-month loans were the norm in the 1970s and '80s, while more recently, five-year loans were common.

When will this blow up, too? Soon, in all likelihood. The thing about cars is that, with only a handful of exceptions and none in the near term, their value only depreciates. As the stories point out, you're underwater on the note from beginning to end with these Methuselah loans. Once again, The Giant Pool of sharks goes looking for chum, and finds it.

Here's the link to the FRED graph (click to see it all, if needed).

The Hypocritic Oath

Back when the Euro idea was floated some, not enough, including humble self asserted that it was somewhere between a certain failure and just a cynical attempt by Germany (mostly) to take Europe back to the days of Mercantilism. You can go to the Wiki for more detail, but the essence of Mercantilism is that developed countries extract resources from poor countries and export over-priced goods to these poor countries. Sound familiar?

Why were we so sure the Euro would fail (on the assumption that Mercantilism doesn't equate to success)? For the simple reason that a monetary union divorced from a fiscal union can't work for all. It can, viz. Mercantilism, work for the rich countries, but at the expense of the poor countries. The Euro gave the Germans, and the French a bit less, the ability to export into the southern poor countries and get paid in a German controlled currency. Get it? If you keep track of the quarterlies here in the US, the weeping and wailing about all those other countries to which American multi-nationals export fiddling their currencies, is a major topic. Avoidance of such reciprocal power is what the Euro gave the Northerners. And they won't stand for the Greeks crying foul. That the poor southern countries bought the bill of goods sold by the Northerners and their own stupid politicians doesn't change the calculus.

Italy, or Spain (toss a Euro), is next in Germany's cross-hairs.

Now today's reporting gives us this:

In Germany especially, the fear is that providing new loans to Greece without extracting more spending cuts represents a fateful step toward a so-called transfer union, with wealthier nations providing handouts to Greece and other weaker countries. "If a small country can blackmail the other members into a transfer union without conditions and controls, the euro cannot survive," said Adam Lerrick, a sovereign debt expert at the American Enterprise Institute, a research organization based in Washington.

Too bad the writer, or editor, didn't tell the readers that the AEI is about as right wingnut as it gets. The AEI, as Germany, stands for economic exploitation of the weak. The hypocrisy of the AEI, and American right wingnuts generally, is that they come from the southern dependent states of America. Were the US only a monetary sovereign, like the Euro, all those Red states sucking at the teat of DC would get nothing. The developed North would be grinding the poor and stupid South under its bootheel. As should have happened after the Civil War. The losers have fiddled the electoral system to take control of the money spigot in Washington, sending moolah by the freightcar load to themselves. All while keeping most of their citizens ill fed, ill educated, and ill doctored.

And propagandizing poor whites that their problems stem not from the 1% taking advantage, but from equally poor darker folks. What happened in South Carolina isn't an outlier, but the purpose.

Time to Make a New R

Time to make a new R. Binaries work if you just want to run R from the command line or RStudio, but for geeks like me, a source build is needed to enable PL/R support. I love the smell of burning cpu in a compile. Smells like victory.

Santayana, Deja Vu

Goldman Sachs is at it again. Having bled the housing market, and the rest of the economy, to a near death experience and itself out of lucrative business decides to "innovate" yet again.

"Everything Goldman has done in the last 30 to 40 years has all been focused on the commercial side, or things that abut it very closely," said Chris Kotowski, a bank analyst with Oppenheimer & Company. "I refuse to believe that hiring a couple of programmers and offering to make $15,000 loans online is a highly value-added banking strategy."
[my emphasis]

And, it gets better:

The initial financing for the loans would come from certificates of deposit, which Goldman has been amassing in recent years. As the business grows, the bank may securitize the loans -- bundle them and sell them to investors -- to reduce some of the risk that it holds on its own books.

Is that a tornado klaxon I hear?

No Trump is The Highest Suit

There is a God. Donald Trump is running for president!!! Finally, someone willing to say it like it is, to quote Leona, "We don't pay taxes. Only the little people pay taxes." If only the 1% had yet more of GDP, the 99% will be so much better off. May the banter begin.

White Lies

Matthew Herper is an interesting pundit. He writes for "Forbes", but doesn't routinely pander to corporations. Here's the first sentence from a new piece:

Seven times between August 11, 2008, and June 27, 2013, the Food and Drug Administration declined to approve a new medicine, in part, because patients were more likely to die when taking the drug than in a control group. Yet only one of those companies told investors -- and the public -- about that concern.

Mind, he didn't do much digging here. He's just reporting on a study. But, still, he could have ignored it. FDA is something of a tar baby; drug companies routinely complain that the agency impedes them from getting wonder drugs on the market, while PIRGs and doctors and patient advocates oft times complain that FDA bends over routinely. The Namenda fiasco is archetypal.

One might wonder which whiz-kid figured out that by simply changing the dosage, the company could increase profit at virtually no expense? The truth about quant.