Apr

16

Investors wrongfooted as ‘higher for longer’ rates return to haunt markets

Zubin Al Genubi asks:

Interest alone on US debt is 1 trillion dollars a year! Anyone concerned?

Larry Williams is definite:

NOPE. NOT AT ALL.

Art Cooper, however:

*I* am certainly concerned, in the long term. When the coverage ratio on gov't debt auctions drops close to 1.0, it will be time to take meaningful action, with a major re-allocation of investment portfolios.

Larry Williams responds:

Not to worry…says MMT guys…as long as we are not gold-backed $, it's all just accounting numbers.

Kim Zussman wonders:

Reallocate to what? (he says looking around twice with stocks near ATHs)

Art Cooper suggests:

There are a universe of hard assets out there, including gold (though GLD could easily go far higher). Because I like to emulate the Sage and shop in the bargain basement, I personally find extremely distressed income-producing real estate of interest. Babies are being thrown out with the bath water.

Larry Williams writes:

The public debt is just $ in savings accounts at the Federal Reserve Bank. When it matures the Fed transfers those dollars to checking accounts (aka reserves) at the same Fed. It's just a debit of securities accounts and a credit of reserve accounts. All internal at the Fed. When gov sells new Tsy secs, the Fed debits the reserve accounts and credits securities accounts. Those $ only exist as balances in one account or the other.

Asindu Drileba adds:

David Graeber once mentioned that the US can never default on its debts since the Fed is the largest holder of Treasuries.

William Huggins comments:

its not that the US -can't- default on its debts, its that 70% of those debts are to americans. so what is the probability of americans voting to default on themselves when they have the ready alternative of printing money? more important might be whether or not the 30% foreign holders will keep playing along but that analysis is an exercise in ranking "next best alternative" for them. when one starts looking under the hood at the alternatives, its boils out like china's bank regulator said in early 2009, "except for treasuries, what can you hold? gold? you don't hold japanese government bonds or uk bonds. us treasuries are the safe-haven. for everyone, including china, it is the only option: "we hate you guys but there is nothing much we can do."

H. Humbert replies:

The Americans would be about equally unlikely to default if most of the debt was held by foreigners. If you can print money there is no need to piss off any of your "customers". It's not like things worked out super well for Argentina, at least until they hit bottom.

Jan

7

Avoid Boring People by James Watson contains 110 lessons that Watson has learned from his very full life in the competitive, challenging and creative worlds of science, education, politics, and research institutes. The lessons are drawn from each stage of the 79 years of his life except for the period when he was head of the Human Genome Project, which he resigned from because of his insistence that none of the discoveries be patented, coverage of which he felt would hurt too many living. It covers his primary education at the Lab School and Horace Mann High school, the University of Chicago, and Indiana University, his research interests in parisitic viruses called phages, his path in research, collaboration, and networking to the Nobel prize, his career in teaching at Harvard, his spearheading a rebirth in vitality in the Harvard biology department, and his transformation of the Cold Spring Laboratory from a $200,000 a year just-surviving institution to an operation with assets now of the mid nine figures, that is generally regarded as the home of molecular biology in the United States. The Epilogue contains a discussion of the state of thinking on science at Harvard in the wake of Larry Summer's remarks that it would be appropriate to study whether genetic differences are partly responsible for the disproportionate influence of women in science. Regrettably, a former student at Cold Springs, Ms. Hunt Graff, interviewed him on tape for the London Times about his remarks on evolutionary differences in humans from different geographical areas, about a line of reasoning that Galton hypothesized about in Natural Faculty regarding Africa's prospects, and set him up for a big fall and after 40 years at Cold Spring he was eased out the door. Sadly, even those who were standing on his shoulders for many years are not in a position these days to even countenance the mere thought that genes that cause differences in individuals and groups might be worth studying as a contributing factor in human behavior.

The book is a scintillating mixture of the many strands of his laboratory, his theoretical work in exploring the structure and working of genes, his attempts at romance with younger women , especially pretty blond Radcliffe students, his efforts to improve himself and his students, his striving to be on the right path to achieve fame and glory in science, and his work habits. The book apparently was prepared from unpublished notes and handwritten manuscripts. After describing each stage of his life, he reflects on the good and bad that characterized that period, and in hindsight gives lessons he feels would help those climbing the ladder of success, especially in science. No matter what your field you'll find that the lessons are insightful and valuable. As he says, you should take only lessons that are based on successful experience. And he has had more successful experiences in his lifetime than almost anyone.

The worst part of the book is that his discussions of his research in biology is highly technical. There is no effort to make if accessible for the layman.There is no glossary of terms of concepts or index. Those who aren't molecular biologists will find it difficult to understand what his innovations, and variations, and studies are about. And most of us would be much more interested in that than his mainly unsuccessful efforts to romance almost every pretty Radcliffe undergraduate, although I found those discussions quite interesting because I had non-romantic contact with most of the women discussed as I was at Harvard the same time he was.

James WatsonI will try to apply some of the lessons in each chapter to speculation and life. In Chapter 1 on childhood lessons he suggests that you should put spin on the ball, never put your life at risk, accept advice that comes from experiences, and find a heroic mentor. The importance of money management is underlined , and the question of how much leverage is relevant (my work, based on simulations, suggests that 2.5 to 4.0 times leverage is the ideal, and this would depend on whether there is rebalancing at the beginning of each year or each month). The importance of the indirect approach follows in the line of Liddell Hart and every good game player knows not to clash directly with a strong opponent but to look for deception and weaknesses. All markets moves are based on deception and feeding chains. Basing your trades on experience is another way of saying "have you tested that?" Finding a good mentor is another way of saying that you should learn from the successful and get a good education.

In Chapter 2 on college lessons he suggests narrowing your intellectual focus to the things that are important. Watson's interest was the gene. No one can be good at all markets and all kinds of trading. Try to pick a good field and then follow the path to success by improving yourself in all aspects that might be helpful to you.

In Chapter 3 on post grad work he suggest having expansive interests over and above your thesis topic. It will make you more interesting, give you more ports in a storm, and enable you to bring disparate disciplines into you thesis, life, or market.

In Chapter 4 on phage experiments, he suggests stopping research in the last days of August, working on Sundays, and getting exercise. He notes that beta endorphins, the human opium molecules, are released, and suggests that August is best for vacations because of water temperatures and leaf color. I find that most markets act mainly to force out the weak during August, and unless you have unlimited capital it's a good time to gather your rosebuds. As for Sunday work, it shows you love what you're doing, and it's a great signal for bosses like him who come into the offices on weekends to see who's really interested in his work.

In Chapter 5 he suggests leaving a research field before it bores you. I would say that it's good to get out of a market or craps game when you're ahead, not when you're forced out. He suggests avoiding boring people, and notes that many of the old faithful lose their vitality and are boring. Try to mix the gray hairs with the brown and black in your business, and enjoy your coworkers as you spend most of your time at work, and happiness is good. He also suggests sitting in the front row, when you are interested. That way you can find out what's happening. Do pay attention to the successful people in your field, and listen closely to what they say. He also suggests that irreproducible results are likely to contain large nuggets of gold. When you find that something doesn't work that's supposed to, like the 11 up opens in a row at the beginning of the year, that failed this Wednesday, try to step back and think what it means.

One lesson from life which Watson should have incorporated is the value of bird watching or any other systematic pursuit of nature at an early age. The habit of keeping notes, and differentiating between species, and appreciating structure and beauty, is helpful in all subsequent pursuits.

Kim Sogi writes:

In the fields of biology and chemistry, James Watson is held with the utmost contempt for his short sighted, racist, sexist, and egoistic views. His first book, “The Double Helix”, was initially declined by Harvard Press because of the protests of those he wrote about, claiming wild inaccuracies about events and his claimed involvement with them. The only one who was not able to change his portrayal was Rosalind Franklin because of her death. Anyone interested in this man should look him up from other people's accounts for all of the controversial comments he has made.

I do not disagree with his great contributions as an advocate for the sciences and for publicizing his many accomplishments. But I disagree with his treatment of all of those around him as well as his blatant sexist and racist views.

Stefan Jovanovich adds:

I doubt that anyone would question that "genes cause differences in individuals and groups."  What he might wonder is how someone who supervised the study of the genome could be so blithely confident that the genes governing the central nervous system, many of which have yet to be isolated, are invariably linked to those regulating melanin expression. Perhaps some of the scientific geese at Harvard thought that President Summer's study of his daughters might have needed a bit more peer review before being released for publication. Perhaps those female faculty quacks also thought that the old gander's past predations on the young women naïve enough to want to study science deserved a generosity equal to the one he showed towards Ms. Franklin?

According to Mark Pagel,

Modern genomic studies reveal a surprising, compelling and different picture of human genetic diversity. We are on average about 99.5% similar to each other genetically. This is a new figure, down from the previous estimate of 99.9%. To put what may seem like miniscule differences in perspective, we are somewhere around 98.5% similar, maybe more, to chimpanzees, our nearest evolutionary relatives. The new figure for us, then, is significant. It derives from among other things, many small genetic differences that have emerged from studies that compare human populations. Some confer the ability among adults to digest milk, others to withstand equatorial sun, others yet confer differences in body shape or size, resistance to particular diseases, tolerance to hot or cold, how many offspring a female might eventually produce, and even the production of endorphins — those internal opiate-like compounds. We also differ by surprising amounts in the numbers of copies of some genes we have. Modern humans spread out of Africa only within the last 60-70,000 years, little more than the blink of an eye when stacked against the six million or so years that separate us from our Great Ape ancestors. The genetic differences amongst us reveal a species with a propensity to form small and relatively isolated groups on which natural selection has often acted strongly to promote genetic adaptations to particular environments. We differ genetically more than we thought, but we should have expected this: how else but through isolation can we explain a single species that speaks at least 7,000 mutually unintelligible languages around the World?

The irony is that the facts of genetic diversity have produced varieties in capabilities and tendencies among humans that make Watson and Summers' categories of "Africa" and "women" seem as laughably crude in their simplicity as my math skills.

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