30 September 2015

I'd Rather Be Lucky Than Good

There's an article on SA, that starts with Abraham Wald, a Brit stat who, during WWII defied the generals. Not a team player, he. The issue was how to re-armor aircraft in order to save them and, more importantly, the flyers. The generals looked at the bullet holes, pointed, and said, "there". Wald also looked and said, "not so much".

What's of interest, beyond the article, is the comments. The gist of which is that, following Wald's thesis, stock picking is foolish, and that inordinant gains are, mostly, just plain luck. You get the market rate of return, period. Unless dumb luck smiles on you.

Which, in turn, raises a question not addressed by either the article or the comments.
Something similar occurs in the investment industry. It claims that some people are extremely skilled, since year after year they've outperformed the market. They'll identify these "investment gurus" and convince you of their abilities. But a simple thought experiment can show that it would be impossible to not have these gurus produced just by luck.

If one goes to the track, and bets on FlapperFluzzy in the seventh, at 40 to 1, and she wins, you get taxed at median income rates, not some capital gains slap on the wrist rate. You got lucky at the track. You don't get an additional tax break.

So, if luck is so much a part of inordinant investment gains, and has even less benefit than playing the ponies, why not revert to the 91% rates of Eisenhower? He of the "fear the military industrial complex"? After all, what else are they going to do with the moolah? Stuff it in a mattress?

23 September 2015

ZPOP [update]

It's been mentioned in these endeavors a few times: 99.44% of macro-economic data is from surveys, rather than census. The sole prominent number is weekly unemployment; that should be a census of all recipients of UI. Other than that, it's sample data mostly run by various parts of the Census Bureau for BLS or whoever. I've admonished gentle reader, on occasion, to read footnotes to the unemployment report, to see:
1) there's not just one unemployment rate
2) the CI of those rates might make your head spin.

Now, comes reporting that the Atlanta Fed is proposing a new measure of unemploymentthat they're calling ZPOP. In essence: percent of prime age working population who want jobs, with jobs.

The first question which crossed my mind, naturally, when reading the reporting: is the Atlanta Fed Red or Blue?, mostly right or mostly wrong? The regional Feds aren't unbiased, non-partisan think tanks, much as most would have you believe. Here's the list of the Fed banks. Lockhart is president of Atlanta. Here's the WSJ rankings of accuracy. Click the labor tab, and Lockhart floats to second. Not bad.

In any case, the notion of focusing on "prime age" unemployment as the standard bearer makes perfect sense. Note, as has been recently mentioned, that labor force participation decline is not from geezers going out to pasture. It's from the genWhatevers living in Mom's basement because they can't get any kind of job. We can't afford it.

Upon further chewing, I've got to discuss something in the CBS News piece. The author is an academic economist (self-describes as econometrician). Here's the quote
One final note about this and other measures of resource utilization. Full employment is defined as more than full utilization of resources. Just because a worker is employed doesn't mean he or she is doing what they're best at or employed in their most productive occupation. If an unemployed engineer takes a job waiting tables to feed the family, that worker will be defined as fully employed, but that worker's potential is hardly fully utilized.
[my emphasis]

This point of view tends to be Left Wing; Right Wingnuts would rather that anyone but them live at subsistence: more of the economic pie for themselves, of course. But there's also a real world issue, which is that, over the last few decades, the more education one has the more likely you're employed in the non-productive sectors of finance or health or government. The problem with GDP is that its measurement is fungible. Not too long ago the BEA changed the playing field:
On July 31 [2013], the U.S. Bureau of Economic Analysis will rewrite history on a grand scale by restating the size and composition of the gross domestic product, all the way back to the first year it was recorded, 1929. The biggest change will be the reclassification--nay, the elevation--of research and development. R&D will no longer be treated as a mere expense, like the electricity bill or food for the company cafeteria. It will be categorized on the government's books as an investment, akin to constructing a factory or digging a mine. In another victory for intellectual property, original works of art such as films, music, and books will be treated for the first time as long-lived assets.

The net effect of this, of course, is to further incentivize folks into non-production employment. Not that Joey's going to read the GDP detail before declaring his college major, but the policy wonks (Left and Right) will and are certain to favor such sectors. Gramm-Leach-Bliley came about just for that reason: "we're good at finance, so let's do more!!" Let the Chinese make the stuff. The richest country on the planet in all of human history, but we don't actually make any of the widgets we buy. This makes sense? As the Bloomberg piece says,
Robert Atkinson, president of the Information Technology & Innovation Foundation think tank, criticizes "intangible-capital fundamentalists" who, he says, unreasonably dismiss the contribution to growth of investment in tangible high-tech equipment.

The point, of course, is to reward the non-producing sectors. You know, like financial services which happily "innovated" us into the Great Recession. We really, really need more folks in finance and cartoons.

19 September 2015


So much interesting news today, but I'll limit this missive to two topics driven by Apple that have been discussed here, more or less, in the past.

First, the advert world is falling!!! Now, I'm more than willing to admit that I'm mostly a Luddite with respect to smartphones: I only use it as a telephone, rather than an entertainment/distraction device. I've better ways to burn neurons in a worthless way.
Just two days after Apple enabled ad-blocking apps through its new mobile operating system, iOS 9, users are embracing the new technology after long complaining that the ads track them, slow down web browsers and are just plain annoying. In less than 48 hours, several ad-blocking apps with names like Peace, Purify and Crystal soared to the top of Apple's App Store chart.

So, of course, the advert pushers scream "bloody murder!!"
"This will be hard on small publishers," said David Jacobs, chief executive of 29th Street Publishing, which helps publishers create apps. "There are definitely some small publishers out there that make 50 percent to 75 percent of their revenue from ads, and they have margins of about 10 percent."

Such assertions are, of course, baloney. InnterTubes adverts are no different from newspaper or TeeVee adverts: a shotgun of content at a, somewhat, captive herd of prey. It's, obviously, harder to avoid adverts in the latter two venues. Hmm, may be there's a business decision to be made here. The advert pushers ignore the gorilla sitting on the coffee table: people who block ads are the sort who're infinitely not inclined to click, ever. In other words, the advert pushers are scamming their business clients with "impressions" numbers, as if such numbers actually measured anything material. Such numbers are no more material than the number of folks who read the NYT are to advert buyers there.

So, I found the PageFair report. What was amusing was the nature of the comments. In the Red Corner, advert pushers claiming that ad blocking is stealing from them, while in the Blue Corner are ad blockers who say
Secondly, this is just a BS number. It's like the RIAA claiming that every single song shared is a loss in sale. The math was bogus then, it's bogus now. I never, ever, ever, click on click-bait ads. Furthermore, someone leaching off me to sell my browsing behavior without my permission is morally bankrupt. The model needs to die.
[BT Richards]

This sounds to my like the world upside down. I'm responsible for these companies missing money for something I didn't ask for? Don't get me wrong, there is nothing wrong with ads, but when someone is canvassing rubbish at my door I also slam the door in his face. So why should I accept this behavior in my browser, which has become my virtual door in the online world.

The comment stream goes on and on. The Blue Corner gets it: adverts are only valuable to those that *want* to be pestered, for everybody else not so much. The Mad Men have been getting away with the "impressions" fiction forever. It's just a scam, only on the innterTubes the scam is just more obvious. Boo hoo. If the advert pushers were serious about the problem, they can implement the Nuclear Option, which is to ban users who don't *actually buy* in some specified period. Obviously, such period would have to be measured from first visit to a pushing site. So, if I visit the ABC site which adverts the SPQR widgets, if I don't buy an SPQR widget within, say, a year, I'm blacklisted from ABC. That would establish that ABC really does provide measurable value to SPQR. Over time, the number of visits to ABC will likely drop by 99.8%, but the value of those visits to advert pushers is demonstrably real.

Will advert buyers and the SPQRs of the world admit that this is the only way to price adverts rationally? Not in the lifetime of Dr. Who (all of them).

Which brings us to the second topic: the sky is falling on the iPhone, and perhaps all of Apple's insistence to sell only to the 20%.
APPLE is offering a new way for consumers to purchase iPhones, and while the company is calling the new system a "financing" plan, it is essentially a lease. The idea is to get people to constantly trade in their one- or two-year-old phones for the newest models. And Apple is employing a tactic similar to one that luxury carmakers use to get more people driving Mercedes-Benzes, BMWs, Audis and Lexuses that they could otherwise not afford to buy: creating a monthly payment that is appealingly low.

Just as the house builders, then the car companies, came to understand that the sticker price is irrelevant to buying, so too now Apple. Got to get that monthly vig down below the pain threshold.
But, of course, these relatively small charges not only accumulate, they never stop, adding one more perpetual charge to consumers' monthly bills. Why not simply buy something as utilitarian as a smartphone, especially since new iterations offer only incremental changes for the average user?

(Aside: there is now the ultra low mileage lease. Cute. One might wonder how Apple will replicate that nuance?
The deal offered gives you only 10,000 miles a year, which is lower than the 12,000 miles that most leases allow - which is still far lower than the national average of 15,000 miles. Right of the bat, I am thinking, "Gee, you could really put your wiener in the wringer with this one!"

So, logically, the Next Step for Apple (get it?) is go ARM (not the chip) on the customers: cheap "lease" payment for the first six months, say, then a nice bump after that. "You're an upwardly mobile Yuppie, working in finance software? Well, then get the Edition. In a couple of years you'll be making more than enough to afford the upsized monthly. Just sign here."

I love it when the more money than brains crowd get clocked.
The Apple plan also seems more expensive than getting an iPhone through a cellular carrier, which will generally charge a lower down payment and build the rest of the phone's cost into the monthly payment. Now, someone on the Apple plan could essentially be paying twice -- first for the phone, and then for the portion of the phone's cost that is embedded in a monthly bill.

Apple's silly gross margin comes from somewhere. I'll leave it to gentle reader to connect the dots.

16 September 2015

On The Road To Bermuda

Hard to imagine, or may be not, what the Hope and Crosby comedy romp "On The Road To Bermuda" might have looked like. But we're seeing a real time version, except rather than those two old ham cut-ups making silly puns, it's China trying to broadjump from largely rural subsistence farming economy to financial manipulation expert.

It ain't working, of course. Yes, China has accumulated oodles of foreign tender, and acts as today's version of 19th century New England company towns. But the fact is: Bermuda, and the other island predators, are able to exist simply because they are tiny populations in the middle of nowhere. They are allowed to exist because international banking wants them. China is none of those. It does have that substantial manufacturing sector.

The Shanghai index jumped in a few minutes at the end of the day:
Remarkably, the Composite was down 0.6% roughly 90 minutes before the end of the session. A late spike in buying interest, however, turned the tide in a big way. While there were some headlines that could ostensibly be cited as a catalyst for the late surge (eg. PBOC Chief Economist making uplifting remarks about the economy), it was generally regarded as a government-backed move.
source: briefing.com

Doesn't Beijing know that only the USofA is allowed to act like the Banker to the Rest of the World?

15 September 2015

The Rent Is Too Damn High

Just shows how much I keep track of certain things. I caught a bit of SNL one time in the last few years, and I thought "The Rent Is Too Damn High" guy was some cast member playing a fictitious nutball. Turns out, not so much. Which brings us to today's topic, Drug Prices Are Just Too Damn High!!

Lots of folks have been making noise about drug prices, but not offering much in the way of fixes. Too much lobbying money to be lost, I expect. The Pharma Pholks justify the sky-high prices of new-ish drugs on the fact that 90% (or so; depends on whose numbers one looks at) of compounds fail to be approved. Of those, more than a few end up not making much.

Today brings an archetype of the problem. Xenoport, a small drug company, just announced the results of a Phase II trial for its psoriasis drug. (For those not following clinical trials: three phases, I being basically safety, II being a few cherry picked patients, III being large sample with a control (often placebo, but sometimes an existing therapy) to gather sufficient data to ask FDA for OK.) The main reason so many drugs don't get approved, or used if approved, is they simply aren't better (efficacy and/or side effects).

The pharma gadfly, Adam Feuerstein has a piece on the trial, and here's the punchline:
The side effects of XP23829, however, raised some alarm bells, notably diarrhea rates ranging from 22% to 40% at the highest, most effective dose. Other GI side effects noted in the study were nausea, abdominal pain and vomiting. Fifteen percent of psoriasis patients treated with the highest dose of XP23829 discontinued the study compared to 2% for placebo patients.

Xenoport, in its press release, said it would proceed to Phase III trials. Now you know where the money goes: pissed down a rat hole. And the CxO folks pull down six and seven figure compensation each and every year. Xenoport is down 28 percent, and change, today. Will that dissuade the Suits from spending the money? Not hardly.
XenoPort, however, said it expected to start late-stage trials next year and that it would explore partnerships to speed up the development of the oral drug globally.

There oughta be a law.

13 September 2015

A Quotidian Day

There's just too much in today's "Times" to cut&paste with commentary, so I'll just give the link, title, and pick a quote (may be two). You do the rest.

Are Western Values Losing Their Sway?
The Chinese vision is not universalist but mercantilist, and Beijing is interested less in remaking the world than in protecting itself from vulnerabilities of globalization, including the chaotic freedoms of the Internet. China, like Russia now, pushes back against Western aspirations and efforts to reshape the world in its own image.

There Is No Theory of Everything
[Frank Cioffi] hated big theories and any kind of metaphysical pretention and he would use little quotations to pick away relentlessly at grand explanations. He used the particular to scratch away at the general, like picking at a scab.

(The on-line text is materially different from my dead trees version. The first time, I think.)

Teaching Slavery to Reluctant Listeners
Twenty-four decades have passed since the Continental Congress deleted Thomas Jefferson's criticisms of slavery from his first draft of the Declaration of Independence, and college students today arrive knowing little about the way America's history of slavery has shaped their lives. Avoidance of the topic is deeply ingrained.

Finally, one young woman had heard enough. Born in Jamaica, S. lived in a working-­class neighborhood in Broward County. She was unquestionably the best writer in the class. S. turned around in her seat and pinned the complainers with a glare. "Stop whining and do the work -- that's why you're here."

Safety Suffers as Stock Options Propel Executive Pay Packages
Stock options have been the jet fuel propelling some of the biggest executive pay packages over the years. From an investor's point of view, these instruments are problematic because they provide an executive with little downside if the company's underlying shares fall but oodles of upside on the rise.

So, there you have it. Life is a seesaw. How you view life depends a lot on where your end of the board points.

11 September 2015

Canary Sing To Me, Part the Second

Recognizing when the Canary flies past whilst digging in the coal mine is more art than science. With Apple's announcement regarding "renting" iPhones, we see a Yellow Bird of Peril flit by. Just as auto makers are turning to 84 month notes to shift product, so too is this move by Apple. Maintaining the iPhone's silly GM leaves Apple little choice but to hide behind "monthly payment" being within the 20% household's budget. Good luck.

10 September 2015

The Best Show on the TeeVee

If you're not watching "Parts Unknown" on CNN, you're a moron. It's, hands down, the best show on the TeeVee. Bourdain's first one, on FoodTV, "Cook's Tour" was 30 minutes and OK; the snark was there from the start. It was mostly a food show.

He then moved to Travel Channel for "No Reservations", and began to find his footing. In August, 2006 there was supposed to be an episode on Beirut, but a couple of days in to the visit, Israel beat the shit out of the city, along with Bourdain and his crew. If you missed it then, Travel Channel still repeats it on occasion. You must find it. What we got was reportage, and the episode got an Emmy nomination. Should have won.

Thence on to CNN and "Parts Unknown", and the reason for this short epistle. My homepage, for the nonce, is CBS News, and it announces that heroin has invaded white America, specifically Vermont. A year late and a dollar short. Bourdain did that last year.
"Like a lot of our shows it's a stealth program -- it claims to be about one thing and it's actually about another," he says. "... In [preparing] for this show I noticed there's been this incredible explosion of heroin use in rural Massachusetts and New Hampshire and Vermont -- small, white, rural, small-town, Norman Rockwell America. No criminal gangs, no outside posses coming in, nothing like that, [but] little Timmy next door is a dope fiend now. And so is mom and grandma. On heroin, the worst drug in the world. How did that happen? So we started to look into it."

It's season 4, episode 8 "Massachusetts". Again, go find it.

04 September 2015

May The Force Be With You

Pundits have been claiming that the dropping unemployment rate is due to dropping labor force participation, which in its turn is due to geezers (and near geezers) quiting work.

Wrong. Here's the BLS data and note that the geezer end of the table is increasing. One can't live on Social Security, and there's no pensions to be had any longer. And, here's this months data. Note that the overall PR is below the geezer actuals from the first table.

All those young slackers.

02 September 2015

From The Mouths of Bambinos

The Donald prates about the Mexicans, while Carson is hot on his heels. Who would have thunk it? You can look it up, but net migration from Mexico to the USofA has been falling for years, and remains 0, more or less. While Carson pulls yet closer.

There has been, may be gone, the Mexico Moment which was supposed to last longer than, well, a moment.

Turns out, even the winners understand that "It's the distribution, stupid".
"Unfortunately the problem in Mexico is the wage rate, which is enough only to survive," said Mr. Rascón, 48. Unless people have money to spend, he added, the companies that sell to them will never be able to expand the way his has.

The Donald really should go have an anchor baby there, with his foreigner wifey, then campaign for President. He'll fix that economy right up.