Tuesday assorted links

by on January 2, 2018 at 2:31 pm in Uncategorized | Permalink

1 JWatts January 2, 2018 at 2:46 pm

“2. What is Uncle Xi reading?”

Well according to the article a key component of his reading is:

“Xi is heavy into Marxist-Leninist writings at the moment, placing The Communist Manifesto and Das Kapital within easy reach of his desk. He’s also reading selected works of Mao Zedong, Deng Xiaoping, Jiang Zemin and Hu Jintao, as well as selected works of Diderot and Rousseau. …Unsurprisingly, considering his tightening grip on the military, his shelves include tomes on the history of the PLA, ancient writings on military strategy, and a Chinese military encyclopedia.”

So, I think we can safely assume that China will remain an authoritarian Communist state for the foreseeable future.

“At this point, Xi Jinping is basically just rubbing it in that he is an intelligent technocrat ”

Ah yes, the generally Left leaning obtuseness of a Medium article. Medium feels like a less thoughtful version of Vox.


2 M Aberson January 2, 2018 at 2:55 pm

If I just read another 20-30 books per year I could understand why massive human rights abuses are the well-informed technocratic policy choice.


3 Roy LC January 2, 2018 at 3:00 pm

Just make sure they are about utilitarianism and how important pretty airports are.


4 Not a Soviet January 2, 2018 at 3:07 pm

I remember reading the guys who minded the shelter Gorbachev would have been sent to in case of nuclear war to coordinate the Soviet reaction (at least thereoticaly the Soviets would have never started the nuclear war) flooded it with the Complete Works of Lenin. As Collin Powell mocked it, it was exactly what a leader would need to take care of a nuclear war.


5 Anon7 January 2, 2018 at 6:58 pm

It’s a shame that China remains a colonial outpost of some of the worst European thinkers.


6 So Much For Subtlety January 2, 2018 at 7:40 pm

The evidence that Xi is 1. intelligent or 2. a technocrat is what precisely? The only non-government job I can find him holding was as a teacher of Marxist Leninism. At a party school. So not really a non-government job.

None of this indicates what Xi reads. It indicates what his PR men in the Propaganda Department think a good leader should be reading. Which is even more interesting. And sadder for China. The way to see if he reads any of this stuff is to see if he quotes it. Anyone here speak Chinese? I am willing to bet that Xi has never quoted Diderot or Rousseau. Nor Hu Jintao, Jiang Zemin or maybe even Deng Xiaoping. He probably has to throw in a token reference to Mao and Marx every now and then, but I am willing to bet he has read neither. Except he probably had to read the Little Red Book during the Cultural Revolution.


7 Moo cow January 2, 2018 at 10:20 pm

He needs a copy of Hitlers speeches on his night stand.


8 mkt42 January 2, 2018 at 2:56 pm

7: I have avoided using valet parking as much as possible ever since a valet parking lot in the Bay Area lost my car keys. How the f do you lose a customer’s car keys? Fortunately I always carry a spare/valet key.

The reporter’s characterization of valet parking as a luxury might be true in most parts of the country, but in high density metropolises it can be more like a way of life. UCLA’s close-in parking lot features valet parking during the day, because to cram more cars in they use valets to double-park or triple-park the cars. Some hotels that I’ve been to have valet parking only; self-parking takes up too much space.

I did like the reporter’s description of the changing market for parking lots. I once rode in a shuttle bus from the airport to downtown; the guy sitting next to me was on his way to a parking lot convention. Before I could scoff at the idea, he described the innovations, challenges, and decisions that parking lot operators face: self-service vs manned vs valet, automated gates vs manual gates vs no gates, cash only or credit cards (nowadays vs smart phones or transponders or RFID chips), etc. As the article describes, the 21st century has brought yet more innovation, which might make valets obsolete or might make them more important than ever.


9 Valet January 2, 2018 at 6:11 pm

“I have avoided using valet parking as much as possible ever since a valet parking lot in the Bay Area lost my car keys. How the f do you lose a customer’s car keys? Fortunately I always carry a spare/valet key.”

Will you stop complaining about it already? I have said many times I was sorry. Why can’t you understand that? It was a key. Keys are misplaced all time.


10 Moo cow January 2, 2018 at 11:22 pm

Why did he give you his “keys” if he had a valet key on him? Wouldn’t he have given you that instead?


11 jack pq January 2, 2018 at 3:04 pm

(6.) No, no, no. Robert Shiller has shown that housing as an investment has zero real returns once you account for changes in quality, required investments for upkeep, repairs etc. I am not convinced by the pre-1900 data. Moreover, for average people investing in real estate or undeveloped land is a bad strategy diversification-wise. Most people are not wealthy enough to include land in their portfolio and keep it diversified. And of course if they own a house they already suffer from poor diversification. C’mon Noah you can do better!


12 JWatts January 2, 2018 at 3:39 pm

There’s probably a good case to be made for buying your own home if you’re conscientious enough to maintain the property. Beyond that, for most people, investing in any kind of broad market index fund would be a much better investment.


13 Harun January 2, 2018 at 6:19 pm

If you have ever had a landlord decide to sell your rental, you’ll also understand that there are some major downsides to renting.

“Oh, you’ve planned a business trip to China, then a family vacation? Too bad. Better find a new place to rent and move all your possessions.”


14 Kevin E January 2, 2018 at 6:32 pm

Or if you want to go travel for 4 or 5 months, subletting your place can be a pain because your landlord has to approve of that person. If you own, you just go on Airbnb, craigslist of Zillow sublet it yourself.


15 JonFraz January 3, 2018 at 1:04 pm

They can’t sell it out from under you that fast. The lease survives the sale, and most jurisdictions have proper notice periods ranging from 30 to 90 days.


16 Dick the Butcher January 2, 2018 at 3:52 pm

God isn’t making any more of it.

Not sure if this is true. Certain RE “experts” I knew argued that investing in raw land and developing it into so-called improved building lots is the most beneficial/profitable means of investing in land. To the extent it avoids the risks and vicissitudes of building and selling, I think it’s worth a look.

In olden days: “Land!” said the king, “If I had it, I’d be powerful.” So, the queen kicked him in the groin and said, “Now, you have two acres.”


17 JWatts January 2, 2018 at 4:10 pm

“Certain RE “experts” I knew argued that investing in raw land and developing it into so-called improved building lots is the most beneficial/profitable means of investing in land”

That almost certainly relies on both an expertise in the matter and time involved researching investments and planning and executing an improvement. Those are skills and knowledge that most people don’t have.

So, your average person should just invest in a broad index fund.


18 Cooper January 2, 2018 at 8:21 pm

And what percentage of potential investors have the skills and connections necessary to actually convert raw land into buildable lots?

The vast majority of people who build their own homes on undeveloped land end up with a house worth less than what they put into it. It’s extremely hard for amateurs to compete against professionals.


19 albatross January 3, 2018 at 9:58 am

“God isn’t making any more of it.”

No, but the Dutch are….


20 Jeremy January 2, 2018 at 3:59 pm

> Robert Shiller has shown that housing as an investment has zero real returns once you account for changes in quality, required investments for upkeep, repairs etc

Source on this?


21 Kevin E January 2, 2018 at 4:28 pm

This really depends on the market. I bought a 3 bdr townhouse for 190k in 2002. It is now worth about 415k. Considering I only put $10,000 down, this is a pretty damn good return. If I had put that 10k in the s&p, I don’t think I would have 200k.

I know my story is only anecdotal but my guess would be that if you took the 10 hottest real estate markets: Southern California, Bay Area, Seattle, NY, Boston, etc, the rate of return would be pretty darn good.


22 Steve January 2, 2018 at 4:37 pm

Leverage. If you could have used $10K to buy $190k of stock you would be doing just fine. That change in value is about a 5% return. Before maintenance costs.

If you just took the 10 best performing stocks you would have done pretty well too…


23 Kevin E January 2, 2018 at 5:10 pm

True, but at 25 (when I bought my first townhouse), I don’t think I would have found anybody that would have lent me 190k at 4%. (full disclosure, it was 6.5% in 2002 but I’ve since refinanced into a 15 year/4%). Also, when we own the place out right, it will generate about 2000 month in rental income after expenses.

I think the point of Noah’s article is that if you have a place like this and hand onto it, the rental income can be used to invest in other things like another rental property or into an S&P fund.

I’m not saying that these index comparisons are wrong just that they are too broad. There is huge variation in Real Estate markets across the country so looking at a national average, to me, is a meaningless exercise.

At the very least, IMHO, it would unwise to completely exclude real estate from a portfolio.


24 Jeff R January 2, 2018 at 5:18 pm

Noah is right. The last 15 years have clearly shown that real estate is a consistently great investment, regardless of location or circumstance. Don’t worry about leverage, diversification, or whether your mortgage has a balloon payment you’ll be able to make, just buy the ticket, take the ride!

25 Vivian Darkbloom January 3, 2018 at 4:53 am

Several factors are not being considered here. While leveraged housing is going to increase the return on own equity, one also has to subtract the on-going interest costs on that leverage. Assuming an average 5 percent interest rate, Kevin would have paid $76K in interest on a 15 year mortgage. Thus, while imputed rents need to be included, actual mortgage interest payments need to be subtracted (as well as property taxes, maintenance, PMI, if any, homeowner insurance, improvements, etc.—it would be hard to believe Kevin didn’t make any during the past 15 years). Also, assuming the net return is positive (imputed rents minus costs), one needs to compute a compounded return on that (after-tax) net. It’s easy to calculate that with stocks, not so easy with housing and I’ve yet to see anyone do it.

And, of course, what anyone should care about is the after-tax, after-commission return. *Some* of those carrying costs are deductible currently (SALT, mortgage interest). Those re-invested stock dividends are “subject to tax”, but given the current regime for dividends, effectively not taxed for moderate income households and an investment of this magnitude; imputed rent is not. It currently costs quite a bit to buy and sell houses. Can we assume a 5 percent entry and exit fee? Broker commissions on stocks are relatively negligible. Capital gains on stocks are taxed at capital gain rates, and so is housing, but the latter enjoys a substantial exemption ($250-500K). Capital losses are deductible against gains (with carry forwards) while losses on personal residences are not (as many have found out the past 10 years or so).

I have yet to see anyone do an adequate comparison containing all these relevant factors. Schiller’s index is particularly deficient to the point of being meaningless for this purpose. And, Noah doesn’t do much better. But, my best estimate is that after all this is taken into account, Kevin E’s investment may not be looking quite as rosy as he is assuming.


26 Moo cow January 2, 2018 at 11:29 pm

Millions and millions of people in the rust belt have seen a negative return. Who knows where the next rust belt will be?

I know, lots of people accidentally stumbled onto a great return on equity. In Seattle, Vancouver BC, etc. The mass middle? No.


27 Joe January 2, 2018 at 5:41 pm

Real estate is historically a good investment for 5-10 years with leverage. My wife has a lifestyle she wants. Problems include scaling if you don’t want a side property management business, risk (leverage), and concentration. Borrowing more money for a bigger house is consumption.


28 Anonymous January 2, 2018 at 11:11 pm

Maybe on average, but it’s WAY easier to evaluate a real estate investment than a stock, and good deals actually exist in many markets.


29 sirr January 2, 2018 at 3:08 pm
30 sirr January 2, 2018 at 3:11 pm
31 Jeff R January 2, 2018 at 3:23 pm

#4: 60 cm in a nine minute period? Get ready for long lines at the stalls, people.


32 clamence January 2, 2018 at 5:16 pm

Note to self: never toss a Chinese person’s salad


33 XVO January 2, 2018 at 7:27 pm

This will be short lived, as soon as people start smearing shit all over the bathroom, everyone will figure out its better and cheaper to let people have their toilet paper.


34 Borjigid January 2, 2018 at 3:30 pm

Is there any reason to think the books behind him during his televised address are actually the books he is reading?

I don’t doubt that he had read Marx, etc but I imagine that it was in paperback 30 years ago (or whatever), not a fancy leatherbound volume last week.


35 JWatts January 2, 2018 at 3:43 pm

Whether he read them or not, the selection of books is a clear indication of signalling. I don’t expect “The Three Body Problem” to show up on Xi Jinping’s public bookshelf any time soon.


36 Borjigid January 3, 2018 at 8:13 am

Yes, he’s definitely signaling. But “Xi is reading Hu Jintao” has a rather different interpretation than “Xi is signaling that he reads Hu Jintao”.


37 JWatts January 3, 2018 at 2:48 pm

True, but he’s probably not going to tell us if he actually read the books or not. So, it’s the best data we have on what he’s actually read.


38 Matthew Young January 2, 2018 at 5:47 pm

” In other words, perfectionism is increasing over time.”

Without reference to time, the law says that perfectionism never decreases. (Look it up in Wiki under second law)

Leaving us the possibility that entropy reaches an uncertain but bound limit. Increasing perfection is decreasing redundancy in any model that represents the series ‘perfectionism’. The universe, and human kind tends to compact in place by removing redundancy and emitting excess variance. it tends to hold the most legitimate model but reaches a point the model cannot be improved. But at any given observation, it looks like compaction is increasing in time. Time is a local index, not global. Somewhere else, unobserved, re-aggregation takes place in any closed system.


39 Anonymous January 2, 2018 at 6:03 pm

5. Perception is not the same thing as reality.



40 Jay January 2, 2018 at 9:39 pm

6. “So in order to address wealth inequality, it’s important to focus on land. Even after the rise of the modern corporate economy, unequal ownership of the most basic and ancient asset of them all is still creating big divisions in our society.”

US home purchase:

House (asset) +200,000
Cash (asset) – 20,000
Mortgage (liability) +180,000
Change in wealth ZERO!


41 Ray Lopez January 3, 2018 at 12:12 am

#6 – by Noah Smith was incompetent since it failed to mention Henry George’s land tax and it teased about fixing inequality via land by failing to mention mandatory land redistribution (a real problem here in the Philippines BTW, and, btw, why should Leland Stanford get all of Stanford University’s land just for doing what exactly? Give it back?!), and failing to mention Proudhon’s “Property is Theft”. Further that land = stocks with land having less volatility is well known for about a generation now, so the article referenced as not really that novel, just a minor wrinkle on already existing literature.

Aside: as a member of the 1% who got rich with DC real estate, I want to be clear: I don’t favor messing with Fee Simple Absolute. Just saying Smith’s article was incompetently written. Check out my comment on TC’s latest solar energy Bloomberg post as well.


42 chuck martel January 3, 2018 at 7:54 am

1. The biggest impetus to extending human lifespans will be preserving the power of business titans and even more important, political figures, a process already underway. In a sane world, doddering, unhealthy geriatrics, John McCain being example #1, would abdicate and allow the next generation to make their own decisions. Obscene behavior like keeping a comatose Ariel Sharon on life support for seven years wouldn’t occur. Of course, the argument will be that research will allow these fossils to maintain both their physical and mental dexterity. The plebs will be far down the list of those eligible for the implementation of the research findings. It will be another difference between the elites and their ordinary underlings.


43 peri January 3, 2018 at 9:57 am

“And homeownership is a way that the middle class and upper-middle class pull away from the working class and poor, a larger portion of which can’t afford to buy and must rent.”

So it would be better for all the housing stock to be in the hands of wealthy landlords? That seems to be the consensus view of the self-styled “urbanists” in my town. They dream of a much-larger city entirely composed of renters, incidentally with no gray heads, and preferably from other countries.

Indeed, if they could, I believe they would tie suffrage to property ownership – the lack of it, that is.


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