Welcome back to the middle ages

It's not really as bad as the middle ages, but zero productivity growth is something that should really truly concern anyone who believes in investing in equities:

NY Fed - low productivity growth: the capital formation link.

Unfortunately, one problem is that this kind of investigation requires growth accounting, and if it's one thing I learned last semester it's that growth accounting requires such insane assumptions that it's hard to tell if the numbers it yields are worth anything at all. (For example, are you generating the capital stock through an assumed depreciation rate and by assuming investment equals capital? Or, if a brand name is "capital", are you including advertising as investment?)

Basically these exercises require making up a shit-ton of numbers and assuming variables remain constant, and their inability to work across countries (i.e. if you use a method to generate capital stock and depreciation rate for Belgium, that same method will generate nonsensical numbers for Japan and Sweden, and I know cos I did the work). The method always fails dismally out-of-sample, so I don't see how you can write a serious article on the topic.

There's also an ideological impurity in this work, in that it asserts a worker should only see an increase in real income if their productivity improves: that's nice, except if employers have increased market power in the labour market due to say 30 years of anti-labour legislation, they won't be passing much of their improved earnings to workers.

And actually, that reminds me of the one argument for why the Industrial Revolution happened in England. The idea is that with labour being scarce and with cheap coal able to drive machines, the English industrialists invested heavily in capital to substitute away from labour; the result of this was that the scarce labour being employed became more and more productive because it was combined with more and more capital, and a positive feedback loop caused the English economy to spiral up to a high-capital equilibrium.

In that case, the problem with the US is lack of effects from labour scarcity: partially from labour being replaced with overseas labour, and partially from existing labour scarcity not causing a higher labour price (wage inflation) due to anti-labour political policy at home.

Basically, there's a completely different argument for why capital formation in the US is still poor.

Friday videos: Spirit in the Sky by... wait, what?

I always liked their version better.

BERWICK WAS RIGHT ALL ALONG

OMG BERWICK WAS RIGHT ALL ALONG!

THE NEO-NAZI FASCIST THOUGHT-CONTROL ELITE HAVE BEEN PLANNING TO ENSLAVE ALL OF YOU THRU BIG DATA!

NOW THE PROOF OF THEIR PLANS IS EXPOSED... BUT FOR HOW LONG?

READ THIS ARTICLE WHILE YOU STILL CAN!


BBC News - personal political details of 200 million Americans in giant database! Quote:

Sensitive personal details relating to almost 200 million US citizens have been accidentally exposed by a marketing firm contracted by the Republican National Committee.

The 1.1 terabytes of data includes birthdates, home addresses, telephone numbers and political views of nearly 62% of the entire US population.

Including political views! Two hundred million Americans have had their political views catalogued by the evil Republican thought police!

The information seems to have been collected from a wide range of sources - from posts on controversial banned threads on the social network Reddit, to committees that raised funds for the Republican Party.

The information was stored in spreadsheets uploaded to a server owned by Deep Root Analytics. It had last been updated in January when President Donald Trump was inaugurated and had been online for an unknown period of time.

Donald Trump himself has been secretly collecting information on you! Your own private political opinions are now the property of the Nazi thought elite!

Apart from personal details, the data also contained citizens' suspected religious affiliations, ethnicities and political biases, such as where they stood on controversial topics like gun control, the right to abortion and stem cell research.

Yes! Because the authoritarian plutocracy needs to know your race and religion! So they can decide which death camps to send you to, no doubt!

The file names and directories indicated that the data was meant to be used by influential Republican political organisations. The idea was to try to create a profile on as many voters as possible using all available data, so some of the fields in the spreadsheets were left left empty if an answer could not be found.

Their goal is obviously to enslave the entire USA! This is like that really bad Captain America movie where the Nazis build an armada of aerial gunships to exterminate all thoughtcrime! And it's here today! And it's the Republican Party!

Freedom my ass, they want to enslave all America, stamp each of you with a number so you can be properly coded for extermination, and we now have the proof! 

There are fears that leaked data can easily be used for nefarious purposes,

NO SHIT SHERLOCK!

Why isn't Berwick all over this already? This is a much bigger story than that idiotic Jewish Armageddon bullshit he's been pumping.

Abortion

Funny:

Three dissents with the Fed

A fair number of people think the Fed is being far, far too aggressive with rate hikes:


Larry Summers - 5 reasons the Fed may be making a mistake.

Jared Bernstein - is the Fed fighting an old war?

Neel Kashkari - why I dissented again.


FWIW, I'm one of the guys who likes to point out

(1) recessions don't start on their own and we have no forward indication of a recession starting for the next few years, so there's no reason to be in a hurry to raise rates just so we can drop them later;

(2) we (or those of us who aren't idiot RBC theorists) actually know for a fact that Fed rate hikes can cause recessions, and those aren't in the Fed's mandate;

(3) a tight employment market can easily produce zero upward wage pressure if labour has zero market power;

(4) we're not seeing any inflation pressures either, so there's no reason for the Fed to do anything;

(5) the Fed's employment numbers are pretty useless anyway.

Though at the same time, I'm strangely OK with the idea that an IS curve can be vertical for upward rate hikes (what we're seeing now) as well as downward ones (which is one theoretical reason for downward rate drops having no positive impact on investment).

Jojo is incredibly bearish gold

Jordan Roy-Byrne - man oh man so incredibly bearish gold. As in a retest of the Dec 2016 lows bearish:

Both the technicals and fundamentals argue there is increasing downside risk in the precious metals sector. Real interest rates are rising and as the rate of inflation continues to fall, Gold will come under pressure even if nominal rates don’t rise. From a bird’s eye view, the price action in Gold and Silver so far this year is corrective, meaning it is a correction of the sharp downtrend seen in the second half of 2016. There is a strong risk of that downtrend reasserting itself and metals ultimately retesting their bear market lows before the end of this year. With respect to the gold stocks, the initial downside target is the December 2016 lows which could be reached in the next month.

Then again, I remember watching him call for $3000 gold (upon a massive repudiation of debt) a few years ago. So....

Four by New Deal Demoncrat

Four bits of data worth looking at:

New Deal Demoncrat - household permits and starts a long leading negative. Um, actually, I wonder why you think that? Because a turndown in housing construction would be an effect of a recession, not a cause. Unless, maybe, you think the next recession will be a Volcker due to the Fed forcing a yield curve inversion, in which case I'd ask how likely it is that housing contractors plan their work according to Fed policy. Basically, I'm unconvinced, though I have now studied enough economics to believe in time travel and inverse causation now.

New Deal Demoncrat - real wages make new high. Which is a good thing. So maybe this plus the previous, plus Trump's evisceration of the safeguards put in place to protect against the last crisis happening again, means an imminent housing bubble? There's been a lot of consumer deleveraging, right?

New Deal Demoncrat - weekly indicators. Real estate, M1 & M2, and tax withholding all look fine.

New Deal Demoncrat - every little thing that you say or do, I'm hung up: hung up on you. Hey, it's not my fault you're quoting Madonna, buddy.

Realistic Mortal Kombat

Somehow I've come across comedy videos at YouTube. I guess they exist!

Friday videos: Jesus and Mary Chain

It would have been better if they'd been murdered by Charlie Manson in 1986:



Hey, they said the same thing about the Rolling Stones.

economics post

Noah Smith - summing up my thoughts on macro. He seems more hopeful than most. Also,

Noah Smith - is economics a science? Short answer: no. Understanding the long answer would require you to have studied philosophy and structure of science and to have seen some advanced undergrad econ, but basically the long version of the short version of the long answer is again no, at least when it comes to macro.

Basically, macroeconomics never works out of sample, and there is no such thing as a falsifying empirical result that causes you to throw out your theory. They compensate for that fucking joke by saying "oh, well every macro theory is wrong, we know this", which begs the question of why academic macroeconomists always arrogantly asserts that their patent fucking nonsense should inform policy.


From what I've seen, though, economics seems to behave well as a science (a) when it's as far away as possible from politics (like, calculating where your company should hedge prices, or figuring out the demand curve for soybean meal) and (b) when real money is at stake, like doing corporate micro or central bank policy.

But once you put the economist near a politician, he turns into a fucktard.

Thursday news

Some reading stuff:

Calculated Risk - rail traffic increased in May and LA port traffic increased in May. Quit piddling yourself.

FT Alphaville - tech tantrum shows how the market has changed. Everything's algorithmic now, and the computers tend to all puke stocks at the same point, which explains the nutbar volume bars we're seeing in QQQ. It's as if they want to lose money. Well, maybe it's just that the kids programming these algos are dumb brats who just finished a Master's in quant at university, and they don't actually have a clue about anything.

NY Times - the Conservative plan to cause the next market crash. Every single thing the party is doing is explicitly intended to destroy the USA.

Simon Wren-Lewis - Conservative zugzwang. With the election result, the UK conservatives are now backed into a corner and can't win no matter what they do. Good job!

post-Yellen post

Calculated Risk - 25bp rate hike. The only one voting against was Neel Kashkari, who if you remember I was very nasty about a few years ago but who turns out to be the only one on the Fed board who has sufficient common sense.

Gold miners get hammered on a 0.25% rate hike, but what's really weird is people selling SPY down on Yellen's statements.

It's as if it's a dudebro fad or something. Like getting a barbed wire tattoo.

so today, re GDX....

So today, everyone thinks Janet Yellen is going to raise rates another quarter point, despite inflation being nonexistent in the US.

Of course, she has to make her decision based on future expectations a year out, not based on what's happening today.

But all previous one-year-out future expectations that have come from the Fed have proven to be a joke, and maybe at some point the Fed hawks will realize this.

Then again, Trump is supposed to pursue inflationary policy.

But then again, it's not like the Republican House, Senate and WH have demonstrated any ability to accomplish a single fucking thing so far, and who says Trump is even going to be around 6 months from now?

So there's no way to pick a direction.

I would have bought gold miners yesterday at an RSI of 50 and at SMA(200) support, except then I caught myself hoping that the trade would come out positive. If your trade involves hoping for a positive result, you should get the fuck out of that trade.

So I'd like to see what happens today before taking much of a position.