Saturday, November 4, 2017

Oh, Bitcoin is SUCH a bubble.

This is such a bubble, it's only a matter of when:

Reuters - craptocurrencies' market cap surpasses $200 billion. Note: the mortgage-backed securities whose implosion destroyed the world economy reached a total peak value of $7.3 trillion. So we're only about 3% of the way there.

And the MBSes actually had an underlying value, they were never "worth" $0, it was just the immediate drop in price that was the problem.

And the coming crash in craptocurrencies hopefully won't bankrupt any banks and cause a liquidity crisis; all it'll do is bankrupt a bunch of weekend-anarchist fruits, which is fine because in an ideal world they'd all be broke anyway.

No, you say? No, it's not a bubble? Well, just look at this:

FT Alphaville - how Buttcoin is marketed to the masses. Yup, they send invitations out to stupid people, bring a bunch of said stupid people into a seminar, and pitch them a get-rich-quick scheme:
It was this feeling that Mr Ahonsi and his associates targeted last week. One man, who identified himself as Dev Patel, told the crowd: “You want a bigger house, better car, nice clothes, private school for your kids, exotic holidays, etc. […] It’s that cryptocurrency that’s going to get you the financial freedom.”

He was more explicit later. “If you follow us and you go through what we’re going to say, you will make money and you will get your financial freedom that you’re looking for,” Mr Patel said.

Mr Ahonsi and Mr Patel were speaking at an event run by Pro FX Options, a firm based at the WeWork in Aldgate that trains ordinary people to trade binary options, a controversial form of fixed-odds gambling.

The free seminar on cryptocurrencies lasted around two hours. At the end the attendees were encouraged to sign up for a £420 one-day course where they would be taught how to trade and helped to sign up with Coinbase, which pays Pro FX Options a referral fee.
Multiply 200,000 stupid millionaires by a million dollars each, and you get Bitcon's capitalization.

And let me tell you: here at university I'm surrounded by idiot children of the 905 bourgeoisie, whose mommies and daddies are worth over a million, who spend years at university for a rubber-stamp BA without ever having to read a book or have a coherent thought, who think in a fourth-year seminar class that prefacing their answer with "I think that..." and then going on about their feelings and stupid beliefs counts as academic discussion.

Put succinctly, there are literally millions of stupid millionaires in their 20s and 30s out there today, who need to get fleeced and lose their wealth. I applaud the Russian pedophiles, Moldovan pimps, and American neo-Nazis who will fleece these people out of their mommies' and daddies' cash via craptocurrencies, because at least the money's going to go to people who have a bit of character.

The idiot bourgeoisie has been handed nothing but fucking candy by the kleptocratic elite in government for the past 40 years, their lives have been so fucking easy. And, just like you'd expect, their race has now devolved into semi-intelligent Eloi. They're stupid and slow-moving, and they need to get fucking eaten.

And now any Morlock out there who wants a meal knows where and how to get it.

Let's fleece all the rich fuckers.

Yup, I'm finally on board with this Bitcoin thing. Yay Bitcoin!

Friday, November 3, 2017

Friday videos: I Break Horses

Here's a song that Jason Pierce wishes he had written:

On Boston pulling its 2024 Olympics bid once the figured out what they'd signed on for

This is fucking nuts, but then again, you'd expect it when the Olympics is run by tax-dodging, corrupt thieves.

Tim Taylor - on Boston and the 2024 Olympics. Quote:

On January 8, 2015, the US Olympic committee chose the city of Boston from among four finalists to be the US city that would compete for the right to host the 2024 Summer Olympic games. By July, the USOC had retracted the invitation. What happened? Andrew Zimbalist, who had a ringside seat for the controversy from his position at Smith College as well as a professional interest as a researcher in sports economics, tells the story in "Boston Takes a Pass on the Olympic Torch: Scholarly research does sometimes have a positive effect on public policy," which appears in the Fall 2017 issue of Regulation magazine (pp. 28-33)

Part of the issue was a lack of transparency so complete that it blended into outright disinformation. For example, a group called Boston 2024 had submitted Boston's proposal to the USOC, but the proposal was not publicly released. The mayor of Boston, without a vote of the city council or a public debate, signed a "joinder agreement" that committed the city to accept all terms of the US Olympic Committee and the International Olympic Committee if the city was chosen.

As the details came out, they weren't pretty. As Zimbalist reports:

"One such term [of the joinder agreement] was that the city would provide a financial guarantee to cover any deficits in the event of a cost overrun or revenue shortfall. ... The 2012 Games in London alone had a nearly threefold overrun, with a final cost in excess of $18 billion. Given that background and the fact that the entire Boston city budget was only $2.7 billion, it was not a trivial matter that Walsh had signed this agreement."

Other elements of the plan turned out to include a gag rule: "The City, including its employees, officers, and representatives, shall not make, publish, or communicate to any Person, or communicate in any public forum, any comments or statements (written or oral) that reflect unfavorably upon, denigrate or disparage, or are detrimental to the reputation or stature of, the ICO, the IPC, the USOC, the IOC Bid, the Bid Committee, or the Olympic or Paralympic movement. ..."

Other requirements turned out to involve tax breaks, shutting down the Boston Common, and more[....]

And so on.

Suggestion: maybe we should let the Olympic Games be held by corrupt totalitarian dictatorships from now on. That's essentially what the Olympics organization is, anyway.

Thursday, November 2, 2017

Why did Manafort work for Trump, anyway?

Back to doing lots of work for school. Strangely, this means I mostly post here at night now.

And here's your evening Trump news:

Talking Points Memo - why did Manafort work for Trump? We need to ask, because he's not the type of person to work for free:

It was an extremely bad idea for Paul Manafort to get involved in a presidential campaign on the way to the nomination when he was sitting atop so much dirty laundry.

Unless of course, he had no choice.

This is not simply a nasty comment. Even based on what is publicly known, what was publicly known a year ago, that Manafort has been involved in highly questionable foreign representation for decades and a lot of financial transactions that look like money laundering. As I said last night about President Trump, lots of people slip through for years or decades without getting in trouble for their financial crimes. Some never get caught. Going to the white hot center of the US political process is a really good way to get caught.

Why would Manafort do that?

One plausible explanation is simple hubris. Arrogance makes people stupid. But there are other indications that Manafort needed money, that he was overextended and desperate. But he, quite conspicuously, worked for Trump for free.

That’s odd. Because there’s nothing about Paul Manafort and his forty years in the US political world that suggests he works cheap or for free. But a salary is not the only way or even the primary way someone like Manafort could restore himself financially through getting tight with Donald Trump. The big pay off would be in the influence he would gain and the money he could make off the work – either re-juiced for the US political game or to get the big money in Russia or the Ukraine with his influence batteries recharged. We know about exchanges Manafort had with colleagues speculating about how he could ‘make himself whole’ based on the newfound celebrity, particularly in the former Soviet sphere.

After Manafort sealed his arrangement with Trump, he asked his Ukrainian fixer Konstanin Kilimnik to pass on word to top Russian oligarch Oleg Deripaska that he could provide briefings on the campaign if Deripaska would find that helpful. Manafort and Deripaska had a longstanding business relationship. Manafort also asked Kilimnik “How do we use [this] to get whole?” In other words, can do we use working for Trump to recoup their finances.

And so on....

K-dog says Paul Ryan likes autofellation

The Krugginator - Paul Ryan is choking on his own mystery meat. Bonus points to the Kruggatolah for that reference to sucking one's own dick, though it's not entirely apropos here:

Now, a cynic might have expected Republicans to go for full-on cynicism: “What, you took it seriously when we talked about fiscal responsibility? The joke’s on you! Ha ha ha!” And to a certain extent that is what they’ve done: after all the deficit-hawk posturing, they’re openly admitting that their intention is to increase the deficit by $1.5 trillion.

But they apparently didn’t feel free to cut completely loose: they did set a deficit target, and as I understand the mechanics of reconciliation, the budgets passed by the House and Senate, while they don’t actually set policy, kind of leave them stuck with an upper limit on just how much they can blow up the deficit.

And they have no idea how to get there. Try to cut one set of deductions, and the homebuilders get mad at you. Try to cut another, and upper-middle-class suburbanites in blue states who still vote GOP get mad. And so on.

The point is that these problems were always predictable, which is why the Ryan budgets were always obviously fraudulent. Ryan’s fakery may have fooled his naive constituents — by which I mean practically the whole Beltway pundit class — but never fooled anyone who could do the math.

So will the GOP pass something? Probably — but it’s more likely to be a miniature Christmas tree of handouts to the wealthy than the grand tax reform they’ve been promising.

And let’s hope that whatever happens gets reported as the failure it is. Ryan and company promised big stuff, but never had any way to deliver.

As a side note, I wonder what happened to all the Republicunts who spent eight years screaming about how badly Obama was doing? Because they're awfully silent now that their own clowns are fully and completely in charge.

I mean, they're not fully silent, sure, because they still scream about Killary and open borders and Sharia and terrorism... but they seem to have forgotten that their own party of clowns and thieves is now in charge, and could easily do something about all America's "problems" if they felt like it.

Yup, Papadopoulos wore a wire

The Atlantic - Yup, Papadopoulos wore a wire. Quote:

The inquiry is examining potential collusion between the Trump campaign and the Russian government in what American intelligence agencies have said was an attempt by the Kremlin to sway the 2016 election in Trump’s favor. The special counsel is also reportedly looking into whether the president himself sought to obstruct the investigation.

Although the plea was unsealed Monday, Papadopoulos was arrested at Dulles Airport on July 27. The next day, in the motion to seal the filings associated with his arrest, the office of the special counsel argued that “public disclosure of the defendant’s appearance” would “significantly undermine his ability to serve as a proactive cooperator.”

“I assume that means he wouldn’t be able to wear a wire and trick a target of the investigation into making incriminating statements, because his cooperation would then be known,” said Bruce Green, a former associate counsel in the Iran-Contra affair and a Fordham Law School professor.

That phrase, “proactive cooperator,” is what implies that between the moment of his arrest and the unsealing of his plea agreement, Papadopoulos might have engaged his former colleagues on behalf of federal investigators.

“I take ‘proactive cooperator’ to mean that he’s out on his own gathering information for the investigation that it is interested to have him continue to gather before he is exposed as a cooperator,” said John Q. Barrett, a law professor at St. John’s and a former associate counsel for the government in the Iran-Contra case.

And what does it mean for Trump and the Republican Party's chances of staying out of jail?

“Everyone who had previously dealt with Papadopoulos knew knew there was an investigation; they may have been incautious,” Green said, “but they’d have to have been truly stupid to engage in incriminating conversations with Papadopoulos at this point.”

Truly stupid? Check!

Wednesday, November 1, 2017

Russia uses Interpol to harass critics

QZ - how Russia is using Interpol to harass Bill Browder. Intro goes like this:

Bill Browder used to be Russia’s biggest foreign investor; now he is one of its harshest critics. The Russian government tried three times between 2012 and 2015 to get Interpol, the international policing organization, to issue a global “red notice” for Browder—a request for other countries to arrest him.

All three times, the attempts failed, with Interpol declaring them politically motivated. This year the Kremlin has changed tactic and twice unilaterally issued a different type of notice—a “diffusion,” an arrest request that isn’t public and isn’t vetted by Interpol itself. The latest one was filed last week, on Oct. 17, and within the US immigration bureaucracy it apparently triggered an automatic ban on Browder, who is a UK citizen. It took the US a day (paywall) to realize its mistake and revoke the ban. Interpol took nine days to finally block Russia’s warrant, Browder says.

“It’s outrageous that Russia has repeatedly abused the Interpol diffusion system for political and criminal purposes,” he wrote in an email to Quartz. “The only way to stop their abuse is to take away Russia’s right to unilaterally post diffusions and have any future notices vetted by non-Russians at Interpol headquarters.”

Why not just shut Russia out of Interpol? I mean, sure, then all the world's child molesters, mass murderers, terrorists and mafia would move there... but most of the world's child molesters, mass murderers, terrorists and mafia live there already, right? Why not stick all of them in one country so we know where they all are?

Machine learning sux

Still catching up on the last week's news items....

FT Alphaville - machine learning sux. Quote:

But the failure of all of the algorithms to perform well in 2016 and 2017 highlights the age-old problem with models.

“2016 was a kind of a tricky year,” says Oikonomou, noting that the algorithms “didn’t handle sharp changes in the market”.

“Even this year you could argue that the market is not driven by fundamentals,” he adds, which is maybe not the best environment for a model trained to detect historical patterns in fundamentals.

Or, just maybe, once you put enough algos into the market, all the beta gets arbed.

First iron law of the markets 1, twentysomething quants with grad school training and a working knowledge of Matlab 0.

Tuesday, October 31, 2017

Papadopoulos has worn a wire for the FBI for months

This is just luscious.

BBC - The real Trump indictment story. Quote:

If there's anyone in Trump's campaign circle with something to hide, they should be concerned that Papadopoulos was arrested back on 27 July. He struck a plea agreement with the Mueller team on 5 October.

That was nearly four weeks ago and, according to the court documents, Papadopoulos has been co-operating with government investigators ever since. In fact, Mr Mueller told the relevant court he did not want the arrest made public because it would "significantly undermine his ability to serve as a proactive co-operator".

So who has Papadopoulos spoken to since his arrest? And what sorts of topics could he have discussed?

According to Dan Dale of the Toronto Star, a former prosecutor told him the term "proactive co-operator" can indicate someone who is willing to wear a wire tap.

HotAir Blog goes through an extended what-if scenario that envisions how Papadopoulos could go about surreptitiously gathering incriminating details from members of Trump's campaign inner circle. He could ask for their "advice" on how to disrupt Mr Mueller's investigation after disclosing that he had been arrested.

"Suddenly those people woke up this morning and realised they'd had conversations with Papadopoulos recently about how to throw Mueller off the trail and only now do they realise he's been in cahoots with Mueller for three months," the theory goes. "Hoo boy."

Ha! And now all the Trumptards are triggered!

Three newsblobs


Calculated Risk - are house prices in a bubble? tl;dr: no.

Uneasy Money - more on John Taylor being a twit. He's pretty sure that the Fed chairship instead goes to Powell if Yellen doesn't keep it. This blog seems to have more common sense than the wharrgarblers who are still harping on about Taylor.

The Nation - what killed the Democratic Party? Well, to me, it's probably a mix of bailing out Wall Street instead of Main Street, and spending 2 years pretending to stand up for the people til they lost the 2010 midterms and had no power anymore. Frankly, 2012's Obama victory was just momentum.

Hey, remember eDigital? Yeah, blockchain has become like that.

FT Alphaville - this is the dumbest thing we've ever seen. When's the crash? For those of you who remember eDigital, which is probably only just Pharmasave Dave if he's still around:

On-Line PLC is a little AIM-listed business whose website looks like this:

Its primary asset is a stake in ADVFN, a markets data site that looks like this:
Yesterday, On-Line PLC said it would be adding the word ‘Blockchain’ to its name. And now its shares look like this:

Monday, October 30, 2017

Longer-form reads for those of you as intellectual as me

Here's some longer-form reading to help you get up to my admittedly very advanced level:

Simon Wren-Lewis - why is the government making such a mess of A50? The British really have utterly no bloody clue how to secede from Europe.

Grow The Con - where did all the investment go? Short story is, you don't need it in an oligopolistic plutocracy. Need help getting your head round that? Read some history of medieval economies, or the history of the Antebellum south. I don't see how this should be news... except for an economist.

Stumbling and Mumbling - capitalist triumphalism, a brief history. Here's the intro to get you interested:

Ken Burns’ history of the Vietnam war is getting many plaudits. What’s not been noted about it, though, is that it reminds us of something we’ve forgotten – that the victory of capitalism over communism was not generally regarded as inevitable at the time. The idea that it was owes more to the hindsight bias than to historic fact. Indeed, capitalist triumphalism – of the sort we see from CapX, the IEA and Very Selective Reading of Wealth of Nations Institute – is relatively new.

What I mean is that the American government did not commit mass murder, sacrifice tens of thousands of its own young men, cause vicious domestic social divisions and jeopardise the economy in order to save Vietnam from a flawed economic experiment. It did so because it feared communism would succeed, not that it would fail – that communism could supplant capitalism. Equally, the Macarthyism of the early 50s was aimed not at rooting out cranks but genuine threats to American capitalism.

When Khrushchev spoke of “burying” and “overtaking” western capitalism, nobody laughed. The danger was a serious one. And the launch of Sputnik suggested to the world that Communism could produce technologies that eclipsed capitalist ones. As Francis Spufford showed in Red Plenty (discussed here and here) the Soviets had a genuine optimism that they could beat capitalism – and cold warriors feared they were right.

NDD on treasury market DOOOOOM

New Deal Demoncrat - treasury market DOOOOOM. Quote:

The top chart is the IEIs, which represent the 3-7 section of the treasury curve. The middle chart is the IEFs, which are the 7-10 year section of the curve, while the bottom chart is the TLTs, which represent the 20+ year section of the curve. All three fell through technical support yesterday; all are below their respective 200-day EMAs.

There are two reasons for this. First, the market believes Trump will nominate a more hawkish Fed governor, probably John Taylor. Second, the market is betting the Republicans will pass a large tax cut. Traders believe this will lead to higher growth and more inflation. Therefore, they are selling bonds, which under-perform in a higher growth, higher inflation environment.

Um, #2 only applies to idiot Republican traders who trade based on ignorant beliefs. The tax cut can't lead to higher growth and more inflation, because the Fed's duty is to respond to zero-unemployment growth and higher inflation with higher rates.

#1 is the only explanation.

Or, alternatively, traders have found somewhere else other than bonds to put their money into. Idiot republicans only came out of cash last November, so now they're probably running up the risk chain.

Three from New Deal Demoncrat

New Deal Demoncrat - leading indicators negative for second straight quarter. Quote:
There are two long leading indicators in the GDP report: real private residential investement and corporate profits. Since the latter is not released until the second or third revision, the less leading proxy of proprietors' income serves as a placeholder.

Real private residential investment declined at a -6.0% annual rate, following a revised -7.8% annual rate for Q2 (blue in the graph below). That's even worse when you take into account that the best measure is housing investment as a share of GDP (red). Since housing investment declined and GDP rose, that's an even bigger hit.
Yes, and that's especially bad if the housing cycle is the economic cycle.

Yeah seriously, he's been wharrgarbling about Trump for a while, but now with actual data backing him up he's got my attention.

New Deal Demoncrat - weekly indicators: mortgage rates turn negative. And just imagine how worse it'll be with a new Fed chair hell-bent on raising rates by a couple percent because of all the hyperinflation we've been having.

New Deal Demoncrat - real cost of renting versus home ownership. I guess what the working class is supposed to do is go back to living 6 to a room, like in the age of Dickens.

Sunday, October 29, 2017

Stock valuation: portfolio theory versus discounted PV

Apropos of nothing,

1. Stock (or bond, or land, or anything) market prices don't depend on their discounted net present value of future flows.

Yes, the underlying value of an investment is its discounted NPV of future flows, but "underlying value" doesn't mean much.

Investment prices depend on how much money chases how much paper. That's all.

2. The population is heterogeneous in consumption and saving; the marginal propensity to consume is real. In fact, any "economist" who doesn't admit this is a fraud.

3. The population at the low end of the pay scale (where all money is going into consumption) contribute directly to a business' NPV of future flows.

Thus, when low-pay people are seeing big raises, the underlying value of investments will tend to go up.

4. The population at the high end of the pay scale invests more than it consumes. Thus, when the high-paid population are seeing big raises, they contribute to inflation of investment prices.

5. Thus, any long-trend divergence between underlying investment values and market prices is indicative of more money going to the rich.

6. Equities and bonds are not capital; capital investment is productive investment, while equity and bond investment is just the purchase of money flows.

Yes, when investment in productive capital provides a higher return than investment in (say) zero-real-yield-or-worse bonds, then money should flow into investment in productive capital. Productive capacity will increase, and thus the economy grows in size.

But, money will not flow into generating new productive capital when there's no expectation of consumption growth. (Capital investment behaves according to a risk-averse utility function.) It also won't flow into generating new productive capital when monopolistic/oligopolistic power contributes to a new firm entry cost that's higher than the paltry expected returns in a no-consumption-growth market.

Thus, the only place for money to go is bonds and stocks.


Plutocracy results in a stagnant economy and grossly inflated asset prices.

Inclusive economic equality will result in deflated asset prices and high economic growth.

You can give me my Nobel Prize any time.