Tuesday assorted links


"Kudlow, at CEA, was a big inflation hawk in 2009. Unusually – indeed, pretty much uniquely for this crew – he has admitted that he was wrong. But he surely hasn’t changed his basic worldview, including
rejection of demand-side economics of any kind."

If he now supports NGDP targeting then he has definitely changed his basic worldview.

I wonder if Krugman is actually short the market.

I wonder whether Krugman is quite well.

You can't easily short the market for a crash "sometime between 1995 and when it crashes, by 1997, well, 1998, well, 1999, well 2000", or "sometime between 2004 and 2006, 2007, 2008", or "sometime between 2017 and 2019...".

1986-1987 taught me that markets are virtually entirely irrational after I realized in 1988 that a productive asset generating the same return on assets would be priced much lower in 1988 than in 1986, while assets generating no return would keep going up in price when it would never be able to generate a sustained positive return. This was in computer systems where I had decades of experience. By 2000, my assetment of the value of computer companies being correct was nearly proved accurate, with only Compaq, HP yet to fall to real value. They have since done so.

I knew that hardware and services depend on lots of labor and that means revenue per employee couldn't be higher than $100,000 per worker then, perhaps higher today to $200,000. Otherwise, the books are being cooked or monopoly is charging too much for commodity goods/services. Apple extracts rents from commodities with fashion design, a brand identity, and monopoly power obstructing competition.

Samsung was sued by Apple over design elements like the way corners were rounded, which was with standard machining corner rounding. I was taking classes in machine tool technology covering the design for manufacturing techniques which discussed the tradeoffs of corner rounding radius and the costs of not rounding in 2004 when Apple applied for its design patent. It's this market obstruction that allows Apple to charge excessive profits for a product that at ten million units per year is a commodity with little differentiation. This is a subject I know from experience.

"The market" is pricing Apple on the belief it will find new products that it can put it's brand on to revitalize a commodity market and charge excessive prices to get excessive profits. Like Apple Truck (tm) which is an F-150 with minor design elements by Jonny Ive manufactured under contract by Ford, selling for $100,000, title transferring from Michigan to Ireland to Virgin Island then to the customer country.

The corporations with lots of real productive capital: built, human, and knowledge, are typically valued at less than the cost of replacing them. Revenue per employee is close to cost per employee. If more productive than competitors, growth requires paying workers a lot to expand capacity while cutting prices and profits. Wall Street looks at such firms in terms of merging competitors to grow market share without investing in productive capital, thereby not cutting prices. But that merely leads to the decline of the firm in its capital stock quality and thus long term productivity.

So, I could generalize to the market prices being disconnected from value in the 90s, in the 00s for stocks and real estate, and today for stocks. But I have no idea how to predict the quarter that the crash will occur, and then how to short the market with high enough leverage to make the risk of being early by a month worth it.

The market will crash. It has been rising based on wishful thinking. Based on Trump winning over the decades long conservative obstruction of "stimulus" that actually creates jobs driving labor shortages driving wages and benefits higher.

It will crash on the government shutdown. Which will be in April? June? September? October? Which year? Or will it crash when it's clear Trump will be president of the same Obama economy with no change possible.

mulp is also not well.

Maybe mulp read Krug's bullshit ergo he? is "not well."

I'd read Kruggie each day if he writes whatever he's buying/selling so I could profit by doing the reverse.

"You can’t easily short the market for a crash ..."

Why not?

Maybe not in 1986, but you can now, for example:


BTW, experience with the 1987 "crash", the 2000 market drop and the 2007-2009 drop has taught me several valuable lessons. First, do not try to time the market. Second, don't panic, things snap back over time. Third, protect against the downside with cash and fixed income investments; The upside is always easy to take. Finally, watch your expense and budget, especially if you are retired - this is often as important as investment return.

I was hoping to incrementally increase my equity exposure to take advantage of the Trump drop, but that decline was rather short-lived, contra Krugman.

The old saying is that the market can remain irrational far longer than you can remain solvent.

The 1st link (to Justin Wolfers twitter) appears to be dead.

Super excited for the Patrick Collison interview... just listened to his discussion with Ezra Klein (that you linked) and I have to say it was one of the best podcasts I've listened to in a while. I hope that your interview at Stripe will be either video or audio recorded (please provide a link after if it is)!

Hey Alex,

The Collison interview will be recorded and released to the Convos with Tyler feed. Subscribe here (or wherever you get your podcasts): https://itunes.apple.com/us/podcast/conversations-with-tyler/id983795625


Translate out of sight out of mind into Chinese and back and you get invisible idiot

Krugman doesn't mention the expected corporate tax cuts? From my conversations, that is one of the major drivers of the market rally.

In his model, tax cuts aren't bullish.

Thanks for reading that propaganda for me. I had a touch of curiosity as to what he would say. Glad I didn't waste my time.

You are a hero, sir!

Krugman: "But are the markets getting this right? I suspect not"

Heh. This from the same bozo who locked his mortgage in a panic in 2003. This never gets old:


I know a lot of business people don't understand economics; what's funny is how many economists, especially those who have become political hacks, don't.

Being Paul Krugman means never having to admit you're wrong, even as your predictions turn out to the wrong over and over and over again.

Ignorance or trolling?


Krugman appears to have gone off the deep end in his hatred of Trump but he has acknowledged many previous errors.

Being Paul Krugman means never having to admit you’re wrong, even as your predictions turn out to the wrong over and over and over again.

I'll say! Remember the hyperinflation of the early 2010s?!! Oh, wait...


From the link: We’re not likely to see 7% unemployment for years — and by the time we do, inflation will probably be even lower than it is now.

What a dope! How wrong can you get!


At least Krugman learned from his mistake in 2003. Isn't "bond vigilantes" a Krugman creation?

In other words, Krugman locked in a fixed rate mortgage right before rates started to increase from their then-historic lows. If his rate was tied to one-year LIBOR, the rate went up after 2003 and did not get lower until late 2009 and it is now once again above its 2003 level. Unless he got his fixed rate mortgage at a very disadvantageous rate, it seems he made a pretty sound decision even if it was based on a somewhat exaggerated reading of the economic situation.


Shhh, Ricardo. Krugman's a big dope - a dope, I tell ya!! Read it in the WSJ...

No. His strategy was to lock-in a fixed rate mortgage. You could have saved yourself time and embarrassment by reading the first sentence of the article.

3., 6. Glenn W. Turner had the misfortune of arriving a generation too early. Dare to be great got him a prison sentence; make America great again got Trump the White House. Merriam-Webster's word of the year is surreal. No, that's the word of the year. A couple of years ago the explanation for the lackluster economy was "uncertainty". Today the explanation for rising markets is "uncertainty". Yes, according to Newt Gingrich, Trump's plan is to "kick over the table". Surreal. You know it's not his table Trump will kick over. Has anyone actually listened to the words being spoken by Mr. Collison in that interview by Ezra Klein? Dare to be great, indeed. Maybe I am being unfair to Mr. Collison to compare him to Mr. Turner. Maybe the better comparison is to Chauncey Gardiner.

Chauncey's leaving the White House. Try to keep up. Surreal.

"Uncetainty" is never a CAUSE of rising markets. Although it is possible for them to rise in a context of uncertainty so long as expected returns remain higher despite changes in risk distributions.

Somebody doesn't understand options.

If you can explain to us how higher uncertainty will lead to higher average share prices, then I think there be some prizes and a trillion dollar paycheque waiting for you.

It all depends on what is becoming less certain.

For example, if one year ago scientists were sure a major asteroid was on a collision course with earth, but now they admit they were overconfident, and actually there is only a 50% chance of a collision, economic prospects have just improved a lot, even though there is also a lot more uncertainty.

The markets may similarly prefer a president who is an unknown to a president with known policy preferences that are predicted to harm the economy (in the hypothetical--I don't want to go so far as to claim this is actually the case with Trump vs. Hillary).

The expectation of corporate tax cuts should cause stock prices to increase because they imply that companies that are not subject to perfect competition and have pricing power can use the money they earn in tax cuts to reinvest or pay dividends. This is regardless of whether there is any benefit to the economy.

Krugman isn't arguing that, but I suspect that will become the default argument.

Right.... more money for dividends and re-investment, but "regardless of any benefit to the economy."

In other news, it will rain tomorrow, regardless of whether anything gets wet.

Obviously all the gains are going straight into Scrooge McDuck's money swimming pool.

4. Those Chinese who can afford it send their kids to American prep schools. It's not just the education but the culturalization and language and the increased likelihood of acceptance at one of America's elite colleges as the result of the culturalization and language. The Chinese just want to be like us may not have the same appeal to voters as threats made to the Chinese, but it's better for our economic and physical health.

How long before frustrated American parents start enrolling their kids in Chinese run internet courses taught by American math and science teachers?

Already happening. My kid is learning programming this way from Wyzant. $40/hour, but you don't have to drive anywhere. Teacher also doesn't have to drive anywhere. Win-win.

Ever been guilty of speaking loudly to someone who doesn't use English as a first language? As if volume will somehow help the person understand. I'll admit I'm guilty. What about someone whose first language is English but can't seem to understand a sentence written in English? Since one can't increase the volume of what is written, what's the solution? ALL CAPS? Chinese parents send their kids to America for the culturalization and language. Similarly, American kids spend time in China (as my Godson did last summer) for the culturalization and language. The internet is no substitute.

#5 Ian Bremmer is a CUCK

Ian Bremmer is the absolute worst and another failed pundit. Why does Cowen continue to link to absolute failures like him, Krugman, and Vox writers? I understand the value for wanting some kind of intellectual diversity on here, but those guys have nothing really insightful say other than just the usual partisan demagoguery of anyone who disagrees with them.

I don't know Ian Bremmer from Adam, but what do your comments have to do with the picture?

Sounds like more of this "usual partisan demagoguery of anyone who disagrees with them".

Except, there may be no party that wants to have people like you associated with their name.

I kill about half a dozen rats a year, and I find the old Victor traps to be the most effective. These wood and wire traps work great, but oddly I have no idea how the designers intended them to work, and the instructions on the package are not informative. How is the triangular barb on the trigger plate supposed to be used? It's parallel but slightly offset from the plate. I bend it vertical, so it's perpendicular to the plate, then I use it to stab the bait (half of a peanut butter cup with the chocolate trimmed off).

Why does the design of the catch on the trigger plate seem to imply that the holdback bar should be fully seated in that catch? If it is, the trap will be so insensitive that the rats will steal the bait without triggering the trap. I leave a new trap outside for a few days to get rid of the new trap smell and put a little corrosion on that bar. This roughens the surface, so I can engage the bar just barely with the catch, offset from the fully seated position. This is a hair trigger so sensitive that just putting the trap into position can set it off. Sometimes my traps go off for no apparent reason. But set this way, I can usually kill the rat within 1 day of setting the trap.

I can't imagine the typical consumer knows all these tricks. If you use the trap in the obvious way, it will fail. Why don't the people at Victor either design their traps to have a foolproof hair trigger, or at least provide educational materials on how to use their traps effectively?

"Why don’t the people at Victor either design their traps to have a foolproof hair trigger." Are you serious? Every engineer knows "foolproof" is something that doesn't exist. The fools are the most ingenious people around.

If you invented a better one, the world would overload your e-commerce server.

There are a number of mousetrap-pingpong ball chain reaction videos to be seen online.

I was going to make a similar comment.

I have no experience with rat traps, only with mouse traps. But the design seemed extremely functional, and though it took awhile it did kill the mice. I'd assumed that a rat trap was simply a scaled-up version of a mouse trap, but I guess this is not so.

Judy Shelton should be made the ambassador to the Russian Federation.

The so-called America has become weak and decadent.

I think you mean wet and deciduous.

Oak trees are wet and deciduous. America is weak and decadent.

#5 That pic is only showing half of the story. What are the race for?

(Not safe for children. Gory.)


"""11,000 Penguins VS Santa Claus Army"""

#4b Emm. Not really.


"""the internet-based English education company catering to the Chinese population currently has 10,000 part-time and full-time teachers globally, of which 8,000 are in the Philippines."""

WIth the 2000, that might make it 100% from Philippines.

Paul "The market will never recover" Krugman didn't misread the market! The market misread Trump! No, YOU'RE out of order! Keynes famously said that markets can stay irrational longer than you can stay solvent. The question now is if they can stay irrational longer than Krugman. The power of the market is vast, but Krugman has a Nobel, and is monkey-fucking insane.

I could be wrong, but I think in Russia - which has less experience with large cities than France - rats are not considered with the same disgust that we in the large cities of the west (not me, but most of us) feel. (I may have learned this from Victor Terras' commentary on the "Karamazov Brothers", but I may also have absorbed it somehow back when I lived in Moscow, long ago). The article explains why - if there is less than one rat per person, they are seen as fairly non-obnoxious animals, not much worse than spiders or mice, who stick to their nests and do what they do. There are not that many places in Russia where rats outnumber people, as they unfortunately seem to do in parts of Paris. Homer wrote about the "plague-bringer" Apollo, Lord of the Mice - they knew back then that mice are, without meaning it (hence their association with one of the least unlikeable gods - because they don't mean it) very dangerous from a public health point of view. Mice are less visible than rats, rats seem more honest, when you think about it. Speaking of visible rats, one of the best things about owning a terrier is how happy they are when you are taking them for a walk and they see a rat: it is as if they are acting out that Keats sonnet where the old guy who speaks Spanish sees the Pacific, which wasn't called the Pacific yet, of course - but somehow the old Spanish-speaking guy knew the Pacific was going to get a Spanish name. Terriers are a blast to take on a walk in decrepit neighborhoods. Yes I was offended for a moment when the big rat near the garbage pails looked like it was ready to take a stand and challenge my little "best friends" - but the rat quickly ran away, and all was forgiven. Of course if I was raising a family in that neighborhood I would have had two or three exterminators out and about the next morning - but at the time it was just me and the terriers. The nice thing is you could tell their estimate of my bravery went way up when I, too, stared down the rat - dogs are full of admiration from the get-go and it is fun to see them decide they should feel even more admiration, even if one hardly deserves it.

In NYC, hunting rats with dogs is an organized sport.
See: https://www.vice.com/en_us/article/spending-a-night-with-new-york-citys-premier-rat-hunting-club-127

among many others

Corporate tax cuts are likely part of explanation for market rally, but here is another compelling case imho:

The great rotation from bonds to stocks has begun, I would assume on interest rate expectations:

quote: "Since the US election in November the total market cap of world stock markets is up by $3trn while the global market cap of world bond markets is down by $3trn"

Somewhat surprised to have not seen this article from Bloomberg involving education and China in the recent assorted links of the day here - https://www.bloomberg.com/news/articles/2016-12-19/if-the-u-s-won-t-pay-its-teachers-china-will

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