“Price discovery” in commercial real estate today; remembering China’s Tien an Men catastrophe of 1989; human living standards by number of homo sapiens lives lived; very briefly noted; neither our co
“Price discovery” in commercial real estate today; remembering China’s Tien an Men catastrophe of 1989; human living standards by number of homo sapiens lives lived; very briefly noted; neither our cognition nor our senses are reliable; when memestonks broke Matt Levine’s brain; I am offended that people demand that I tell pleasing lies about the truly great Thomas Jefferson; how soon before the highly corrupt Supreme Court finds a way to quash Trump’s felony conviction?; we need massive Supreme Court expansion; Fed monetary policy really is in all likelihood too tight to balance risks; life is too short to read a Chris Patten who does not pretend that most of Cameron’s problems were self-inflicted; that we are not Jovians is indeed evidence that there are no Jovians; Boltzmann Brains are bad, but why?; & Musk proximity-based asset valuation; the macro soft landing continues; an interview by Ilari Mäkiela on the birth of modern prosperity; yes, the Roman Empire in the West did fall; Donald Trump is cognitively abnormal; & BRIEFLY NOTED: For 2024-05-30…
“Price discovery” in commercial real estate today:
The other part of it, which we haven't discussed yet, but I think is probably the most fascinating part of the story, is the fees. The fees on these things are unbelievable…. The bondholders… the AAA tranche… 117 million. So, you're looking at… 70 million odd in fees and advances…. The special servicers. It's the middlemen. It's the attorneys. They're making a killing. It's an amazing time to be in the servicing business…. Someone's still making money from the money building, even if the money building is not generating that much money…
Global Warming: It is not just the monsoon that the Indian subcontinent is vulnerable to. The snowpack on the high plateaus of Asia, and storm surges from typhoons pose grave global warming-generated dangers as well. I know the costs will be large; I do not know if they well be economic growth-breaking: Ben Fickling: India’s Scorching Heat Is Making It Unlivable: ‘It could prevent the world’s most populous country from building the economy of the future….Delhi recorded its first heatstroke death amid temperatures recorded by one (possibly erroneous) sensor as high as 52.9 degrees Celsius (127.2 degrees Fahrenheit)…. India has the world’s biggest farm sector after China, and economic growth is at the mercy of the southwest monsoon…. When the mercury heads above 40C, farmers and urban laborers have little option but to down tools or face potentially catastrophic heatstroke…. … <https://www.bloomberg.com/opinion/articles/2024-05-30/india-s-scorching-heat-blights-its-road-to-riches>
Economics: And yet Greater San Francisco Bay is doing fine: Torsten Sløk: Four Years After Covid: Downtown Recovery Remains Weak: ‘Data from downtowns shows that cellphone activity in San Francisco is at 57% of pre-pandemic levels… Las Vegas is at 97%, and Miami is at 82%…. The slow recovery of downtowns combined with rates higher for longer has important implications for retail, restaurants, and offices… <https://www.apolloacademy.com/four-years-after-covid-downtown-recovery-remains-weak/>
Keynes thought it was unwise to make the industrial development of a country the byproduct of the operations of a casino; but a meme?: Matt Levine (2021): Money Stuff: Who’s Winning the GameStop Game?: ‘Senvest Management… made almost $700 million…. They got interested in the stock after hearing “a presentation from the new GameStop chief executive…. By the end of October… owned more than 5% … paying under $10 a share…” Their process for deciding how to sell… really rose to the weird occasion…. “Tesla Chief Executive Elon Musk tweeted ‘GameStonk!!’ a rallying cry to users of Reddit’s WallStreetBets forum…. “Given what was going on, it was hard to imagine it getting crazier,” Mr. Mashaal said…. They got into this stock based on fundamental research… they called the top perfectly based on an Elon Musk tweet. Honestly I am tearing up a little?… What a great investment process. I hope someone is working on a revised edition of Graham & Dodd that incorporates the Did Elon Musk Tweet Yet metric… <https://www.bloomberg.com/news/newsletters/2021-02-04/elon-musk-s-gamestop-tweets-are-now-a-hedge-fund-signal-kkr4olt7>
Definitely time to revise how we think about “financial conditions”: the finance-economics assumption of always everywhere very high elasticity is doing us in: Chris Anstey & Enda Curran: Easy US Financial Conditions Are Masking ‘Anemic’ Credit: ‘Most gauges of financial conditions show a notable easing since last autumn. That’s thanks in large part to a soaring stock market that’s sent indexes to record highs, along with rallies in corporate bonds that have sent premiums to historically cheap levels…. These indexes… don’t represent the magnitude of flows…. Credit extended to US households and businesses…has recently trended at remarkably low levels, rarely seen in data going back to the 1960s…. New York Fed President John Williams… “the behavior of the economy over the past year provides ample evidence that monetary policy is restrictive”… <https://www.bloomberg.com/news/newsletters/2024-05-31/global-economy-latest-us-financial-conditions>
What Claire Brown calls “Buddhist Economics”—looking at what one might call consumption efficiency rather than production efficiency, in other words living wisely and well given our minds and bodies: Noah Smith: The Quiet Rise of Desire Modification: ‘What’s the point of exploring or creating new worlds when we can change ourselves to be better suited to the world?… Things like meditation. More recently we’ve added drugs to the mix…. Now we’re discovering drugs that modify our desires in new and ever-more-interesting ways…. “Us[ing the] GLP-1 peptide to ‘smuggle’ molecules across the blood-brain barrier and into the appetite control center… could harness the brain's plasticity to cement new pathways… remove the desire for alcohol and other addictive drugs…” Drugs…, are only the beginning… Neuromodulation…. Hack[ing] human nature … <https://www.noahpinion.blog/p/at-least-five-interesting-things-f84>
3.5% per year dividend yield, 0.4% per year nominal capital gain, and a 2.1% per year average capital gain, all adding up to a 1.8% per year average total return on teh FTSE 100 over a generation: Marc Rubinstein: A Market Without Investors: ‘The Case of the Shrinking UK Stock Market: My first job was on a trading floor.… Most… was the territory of the UK stock trading business. UK traders sat at its center, conveying prices… in unfiltered Cockney…. Salespeople, recruited from the ranks of the British Army and the England rugby team…. Analysts—my sort, except their focus on UK stocks invested them with more influence. Between them, they steered vast amounts of money around the UK stock market, then the third largest in the world behind New York and Nasdaq. In the decade I joined, the benchmark FTSE 100 index would triple and the London market would grow to host around three times more companies than rival Paris, including four of the 25 most valuable companies in the world. It’s not like that anymore. Since the year 2000, the index has barely returned 20%, and its companies are fleeing… <https://www.netinterest.co/p/a-market-without-investors>
Public Reason: I agree with Josh here on court-packing to repair our highly corrupt, lawless, and ethicless Supreme Court—either informal norms are to be respected, or there’s no crying by losers:Josh Barro: Toward a Less Stupid Supreme Court Discourse: ‘As for court-packing, well, I thought the conservative position was that there’s no crying in baseball. If “rules are rules,” then the same… rules that allows the Senate to refuse to vote… allows the Congress to change the number of seats…. Iit really would behoove the conservative justices to consider how far they can go…. The task remaining for Democrats is to demonstrate those political stakes… saying the word “flag” less, and the word “abortion” more… <https://www.joshbarro.com/p/toward-a-less-stupid-supreme-court>
Neofascism: I still do not understand how Trump got into this particular pickle. “Our default was that payments to a lawyer were legal services, and that payments were for services since the last invoice; we overlooked that that was not appropriate in this case, and thus we created false business records even though we weren’t trying to hide anything because we did not believe we had anything to hide” would have been a much better strategy:Noah Callaway: ‘The lying and dominance strategy walked him directly into a guilty verdict…. It will also be extremely damaging to him at sentencing…. Probation based on similar white collar, non-violent, first time offenders… [is] the median sentencing… [for] someone capable of feigning remorse and sounding like they feel bad… This case will absolutely be an extreme outlier on the “does the defendant recognize the validity of the conviction, and express any remorse or regret”… <https://bsky.app/profile/ncallaway.bsky.social/post/3ktssp4eks22s>
Probably Trump is now a felon for the same reason that he is incredibly bad at presidenting:Jonathan Bernstein: Trump Was Incredibly Bad At Presidenting: ‘It's a job. He never had the skills for it. Still doesn't…. The truth is that even if Trump had followed… the law… have a history of sexual assault… encourage bigotry… he was still quite a bit worse at the regular parts of presidenting than any… modern presidents…. Trump didn’t know much and doesn’t even know how to learn more, and you can’t be good at the job without knowing much. That… made him a very dangerous president… <https://goodpoliticsbadpolitics.substack.com/p/trump-was-incredibly-bad-at-presidenting>
Even if you do want a leader who will punish your enemies rather than one who will fix the potholes, you should pick a leader who is actually competent at the administrative parts of the job: Daniel W. Drezner: The Foreign Policy Dangers of Convicted Felon Donald Trump's Bullshit: ‘The problem with convicted felon Donald Trump’s rhetoric is that if he is elected again, there will come a time when he talks tough and makes absurd threats but no one takes him seriously. That is precisely the formula for stumbling into a great power war. Convicted felon Donald Trump… does want to fulfill campaign promises…. There will likely come a time when the convicted felon crosses a red line, an adversary fails to take him seriously, and one or the other precipitates a shooting war…. The United States should not elect a convicted felon who shoots his mouth off while trying to raise money… <https://danieldrezner.substack.com/p/the-foreign-policy-dangers-of-convicted>
Public Reason: “Reliable” is doing a huge amount of work here. Especially because our senses are not reliable. Witness the Adelson illusion <persci.mit.edu/gallery/checkershadow>:
Thomas Nagel (2012): Mind & Cosmos: Why the Materialist Neo-Darwinian Conception of Nature Is Almost Certainly False: ‘The judgment that our senses are reliable because their reliability contributes to fitness is legitimate, but the judgment that our reason is reliable because its reliability contributes to fitness is incoherent. That judgment cannot itself depend on this kind of empirical confirmation without generating a regress: to make the judgment is necessarily to take it as having authority in its own right. I don’t think any other mental stance is available in the theoretical case… <archive.org/details/mindcosmoswhymat000…>
Since we reason incorrectly just as we sense-perceive incorrectly, shouldn’t we perhaps just cut the Gordian Knot here?
I mean, since Nagel admits that “evolutionary theory, and in particular evolutionary psychology, is in fact capable of giving a credible account” of the success of our sense capabilities (to the extent that they are successful), why is it not the case that “evolutionary theory, and in particular evolutionary psychology, is in fact capable of giving a credible account of the success of our cognitive capacities” to the same imperfect extent that they are successful, which is “far from always”? They are not reliable, but then what is?
After all, Nagel believes that if we see the sun rising in front of us (I gloss): Either I am hallucinating, or I must be going roughly east! I deduce this by my reason, and my reason is a mechanism that can see that the algorithm it follows is truth-preserving! My mind is in immediate contact with the rational order of the universe! I don't just think I am going east! I know I am either hallucinating or going east! And my certainty that I know must be correct!
Cryptogrifts: Back when MemeStonks broke Matt Levine’s brain:
Matt Levine (2021): The Elon Markets Hypothesis: ‘I wrote the other day that “the way finance works now is that things are valuable not based on their cash flows but on their proximity to Elon Musk,” and I am already tired of it. It was a joke? But in a couple of years there are going to be 800-page textbooks on Elon Musk Proximity Pricing…. You might think that “did Elon Musk tweet about a thing” would be a simpler valuation metric than, like, “estimate its cash flows in perpetuity and apply an appropriate discount rate,” but I don’t know, there’s a lot going on…. Hendrik… said he got an intuition that Tesla would invest in Bitcoin…. “Me and my girlfriend, we took acid, and I saw the conversation between Michael Saylor and Elon Musk on Twitter, and I was like, yeah, why shouldn’t he buy into bitcoin?” Hendrik told The Post in a Tuesday Zoom interview from Germany. “He’s crazy and he has a lot of money, so why not?” That’s cool. I hope he has already been hired by a hedge fund and received an ample budget for acid. If you bought Bitcoin based on his post, you’re up about 50% in a month…. Somehow he has an intuitive connection with Elon Musk—the principal source of financial value in the world—that is activated by hallucinogens…. Here is a website called “Elon Stocks,” which promises to send you a text “when Elon mentions a stock in a tweet.”… You don’t need economics anymore, you need memes, I’m so sorry… <bloomberg.com/opinion/articles/2021-02-…>
Journamalism: Ummm… No.
I am offended at a personal level to be told that I am under some obligation to tell lies about and remove giant carbuncles from any pictures of Thomas Jefferson I may paint. Other countries with weak and stupid founding principles may feel that they must tell lies about their founders. We do not. WE ARE THE F***ING UNITED STATES OF AMERICA. We play it straight:
Ayaan Ali Hirsi: We Have Been Subverted: ‘Think of the cynicism and selective truth-telling young Americans encounter in most classrooms. You know Jefferson owned slaves, right?… Never mind that Jefferson set us on the path to emancipation…. A little learning, as the saying goes, is a dangerous thing. Once inside, it is very difficult to escape the mosh pit of civilizational self-loathing. Maybe you can climb to the top for a while by being the white person who hates white people most loudly, or the straight person who goes to the most debauched parades. But most people give up… <thefp.com/p/ayaan-hirsi-ali-we-have-bee…>
A little learning may be a dangerous thing. But I think this demonstrates that zero learning is a stupider thing. Let us give the mic to Big Tom himself:
Thomas Jefferson (1820): To John Holmes: ‘I thank you, Dear Sir, for the copy you have been so kind as to send me of the letter to your constituents on the Missouri question. It is a perfect justification to them. I had for a long time ceased to read newspapers or pay any attention to public affairs, confident they were in good hands, and content to be a passenger in our bark to the shore from which I am not distant.
But this momentous question, like a fire bell in the night, awakened and filled me with terror. I considered it at once as the knell of the Union. it is hushed indeed for the moment. but this is a reprieve only, not a final sentence. A geographical line, coinciding with a marked principle, moral and political, once concieved and held up to the angry passions of men, will never be obliterated; and every new irritation will mark it deeper and deeper.
I can say with conscious truth that there is not a man on earth who would sacrifice more than I would, to relieve us from this heavy reproach, in any practicable way. The cession of that kind of property, for so it is misnamed, is a bagatelle which would not cost me a second thought, if, in that way, a general emancipation and expatriation could be effected: and, gradually, and with due sacrifices, I think it might be.
But, as it is, we have the wolf by the ear, and we can neither hold him, nor safely let him go. Justice is in one scale, and self-preservation in the other.
Of one thing I am certain, that as the passage of slaves from one state to another would not make a slave of a single human being who would not be so without it, so their diffusion over a greater surface would make them individually happier and proportionally facilitate the accomplishment of their emancipation; by dividing the burthen on a greater number of co-adjutors.
An abstinence too from this act of power would remove the jealousy excited by the undertaking of Congress; to regulate the condition of the different descriptions of men composing a state. This certainly is the exclusive right of every state, which nothing in the constitution has taken from them and given to the general government. Could congress, for example say that the Non-freemen of Connecticut, shall be freemen, or that they shall not emigrate into any other state?
I regret that I am now to die in the belief that the useless sacrifice of themselves, by the generation of ’76. to acquire self government and happiness to their country, is to be thrown away by the unwise and unworthy passions of their sons, and that my only consolation is to be that I live not to weep over it.
If they would but dispassionately weigh the blessings they would throw away against an abstract principle more likely to be effected by union than by scission, they would pause before they would perpetrate this act of suicide on themselves and of treason against the hopes of the world.
To yourself as the faithful advocate of union I tender the offering of my high esteem and respect.
This is not an obscure letter. We have the “wolf by the ear, and we can neither hold him, nor safely let him go. Justice is in one scale, and self-preservation in the other…” is not a waterbreak rest stop on the path to emancipation.
I have enormous affection and respect for Big Tom as a historical character. I would not have much liked to be one of his slaves. And I am offended by any suggestion that I should pretend that he put us on the road to emancipation. Others used tools he forged to do so. Not him.
Neofascism: I confess that I am puzzled as to what happened. This, from Ian Millhiser fourteen months ago, seemed and seems to me to be right to me, in the sense that there are six Supreme Court justices (if not nine, if Roberts is willing to offer the Democrats something in trade) willing to use these arguments to throw out convicted felon Donald Trump’s conviction—to say that federalism prohibits New York state from taking cognizance of unadjudicated federal crimes, and that lenity prevails in any case:
Ian Millhiser (Apr. 4, 2023): The dubious legal theory at the heart of the Trump indictment, explained: ‘Bragg has evidence that Trump acted to cover up a federal crime, but… is… Bragg is allowed to point to a federal crime in order to charge Trump under the New York state law[?]… [Moreover] the “rule of lenity”… [when] an unclear criminal law did not give potential defendants “fair warning” that their conduct was illegal… <vox.com/politics/2023/4/4/23648390/trum…>
Resting these felonies on the possibility that the falsified documents were used to commit state tax-fraud would seem to need a finding that there was in this instance state tax-fraud. The case ought, I think, to have been charged and prosecuted at the federal level as a campaign finance-fraud case. When first Bill Barr and then Merrick Garland decided—both for political reasons—not to charge Trump, Bragg figured out a way to assert jurisdiction.
So why didn’t the six Supreme Court votes we all know are there propagate themselves down the chain of the legal system to interrupt this? Indeed, how, exactly, did Michael Cohen wind up in jail on this? And how long will it take them to do so?
Neofascism: The very sharp Ed Luce gets this, I think, exactly right:
Ed Luce: ‘Only part of the US legal system showed it was working on Thursday…. The fact that Alvin Bragg, New York’s much-maligned public prosecutor, convincingly won his case, is a measure of why Trump has gone to such lengths to ensure the other trials do not happen before November…. The conservative-majority Supreme Court has been openly sympathetic to Trump’s claims of immunity from prosecution for acts he committed as president, including the allegation that he tried to overthrow an election. The court’s delay on the immunity ruling has all but guaranteed Trump will not be tried before the election. That is a colossal failing of the US legal system. On Thursday, a New York jury showed that no man is above the law. Their fellow Americans could over-rule that in November. A majority of the country’s highest court are siding with Trump. But the only court that matters now is the polling booth. Until then, it is premature to say the US system is working… <https://www.ft.com/content/fdc03850-2645-4c48-999b-2f7536918737>
I think that if the Democrats hold the Senate and the Presidency and take the House, the Supreme Court needs to be expanded to 15 on January 21, 2025. And a job of “Vice Chief Justice” needs to be constructed to handle the substantive business of the court, with the Chief Justice’s role reserved to gaveling open—not scheduling—oral arguments, and calling on other justices in inverse order of seniority.
Economics: Yes, Fed monetary policy is too tight. That “2.7%” is the trailing one-year change:
Claire Jones & Harriet Clarfelt: Fed’s preferred inflation metric remains at 2.7% in April: ‘US inflation held at 2.7 per cent in the year to April, according to the metric the Federal Reserve uses to set its target for price pressures. Friday’s data on personal consumption expenditures was in line with economists’ expectations that inflation would remain the same as in March… <https://www.ft.com/content/6c0b34a3-63d7-4dad-865b-5554ff7b73ff>
Certainly no signs of any meaningful uptick at all. And also no signs of a weakening in growth that would pull inflation further down significantly. There are questions:
Should we still give credence to our beliefs that current interest rates are well above r*, and hence that substantial economic weakness is coming—that the Federal Reserve is still hitting the economy on the head with a brick, albeit a small brick?
What are the risks involved in the Federal Reserve having to suddenly move fast and far, the Federal Reserve to wait to see economic weakness before it starts cutting interest rates is to all but guarantee that it will have to move fast and far?
Elementary optimal control theory says that without very good reason you should set your course so that you do not have a strong opinion whether you next want to move the tiller left or right; what is the good reason not to be following that principle right now?
Yet when I ask “what is the good reason?” and “wouldn’t you be happier if, all else being equal, interest rates right now were a full percentage point lower and thus closer to r*?”, I do not get back anything I find coherent.
Journamalism: I have decided that life is too short to read Chris Patten ever again:
Chris Patten: Britain’s Make-or-Break Election: ‘To be sure, Cameron inherited a mountain of economic problems from his Labour predecessors, unlike the stable economy that Tony Blair’s <project-syndicate.org/columnist/tony-bl… Labour inherited from John Major’s <project-syndicate.org/columnist/tony-bl… Conservative government in 1997. But while public spending needed to be reined in to reduce the debt incurred during the 2008 financial crisis… <project-syndicate.org/columnist/chris-p…
Cameron inherited an economy with problems—and immediately set about making all of them worse. And not least among his failings was a failure to do the arithmetic and understand that in the conditions of 2010 to 2020 it was not contractionary but expansionary fiscal policy that reduced the debt burden.
Sean Carroll (2017): Why Boltzmann Brains Are Bad: ‘The idea that we should reason as if we are typical observers… has been criticized by Hartle and Srednicki… [in an] argument is closely related to the Presumptuous Philosopher[s]…. [Imagine] there are… two scenarios in front of us, with equal priors: one in which humans are the only intelligent observers in the Solar System, the other of which over 99% of the intelligent observers are Jovians. HS point out that adopting the likelihoods (18), with the role of OOs and BBs replaced by humans and Jovians, respectively, would lead us to conclude that there was less than a one percent chance that the Jovians existed, even though we haven’t actually gone to look for them. That’s because, in the scenario where there are any Jovians at all, a typical intelligent observer in the Solar System is a Jovian, so the fact that we are human counts as strong evidence against their existence. Once again, we seem to have helped ourselves to very strong conclusions about the universe without looking at it… <https://arxiv.org/pdf/1702.00850>
Suppose you were in a dining room along with the 300 undergraduates of a residential college at a university, and suppose none of them were Computer Science majors. Then you would have a reasonably justified true belief that that university did not have a CS major—that people were, rather, EE, or EE&CS, or some such.
Or suppose you intercepted a spaceship from the solar system, and it turned out its crew were humans. Then that would count as evidence against the existence of Jovians, or at least against the existence of Jovians who could build rockets.
And, indeed, the fact that I see no Jovians anywhere on earth counts as strong evidence against the existence of Jovians (who can build rockets). The idea that we would have had to go “looking for them” before we can start interpreting the universe by taking account of background probabilities…
So I do not understandHartle and Srednicki…
Philosophy: No, we are not Boltzmann Brains. But it would be nice to have a good reason to justify our conclusion that we are not Boltzmann Brains.
This “we cannot think coherently at all if we are Boltzmann’s Brains, and the Crawling Chaos is coming toward us from all directions at lightspeed” is indeed a thing, but not quite what we are really looking for.
Here Sean Carroll shifts Decartes’s “cogito” into a different key—it is not the fact that we can imagine perfection that can only have come from the existence of a perfect being, but rather that we must believe that we can think coherently about an external world, and Boltzmann Brains cannot do so:
Sean Carroll (2017): Why Boltzmann Brains Are Bad: ‘What we can do, however, is recognize that it’s no way to go through life…. In a randomly-fluctuating scenario, there’s no reason for this “knowledge” to have any correlation whatsoever with the world outside our immediate sensory reach…. Use our reasoning skills… to deduce that… we are probably randomly-fluctuated observers, even after conditioning on our local data… [and] also… that we then have no reason to trust those reasoning skills… [and] no justification for accepting your own reasoning…. In a universe dominated by Boltzmann fluctuations… we can’t trust anything we think we know… <https://arxiv.org/pdf/1702.00850>
Milhiser is simply wrong about the NY prosecution. Basically, Bragg charged that Trump violated a NY state election law during the federal election. He almost certainly violated federal law too, but Barr (corruptly) and Garland (incompetently) failed to prosecute.
I think Dan Drezner has it exactly right. It isn't as if we don't have ample examples from teh past. In this nuclear age, WWII would be an existential event. No time even for the super-rich to reach their expensive island bunkers (and for the few that do, there will be nothing for them to emerge to).
Milhiser is simply wrong about the NY prosecution. Basically, Bragg charged that Trump violated a NY state election law during the federal election. He almost certainly violated federal law too, but Barr (corruptly) and Garland (incompetently) failed to prosecute.
I think Dan Drezner has it exactly right. It isn't as if we don't have ample examples from teh past. In this nuclear age, WWII would be an existential event. No time even for the super-rich to reach their expensive island bunkers (and for the few that do, there will be nothing for them to emerge to).