Thursday, June 11, 2020

Well, that's reassuring


Pretty much everyone with an econ background I talk to or follow has been perplexed by the speed with which the stock market has shot up despite large sectors of the economy having no perceivable plan for getting back to pre-pandemic levels. 

I'm not sure "day traders" is the answer we were hoping for.

Everywhere You Look Under Surging Stocks Is Fervid Retail Buying
By Sarah Ponczek


Companies that have been soaring are in many cases the same firms that have seen skyrocketing interest at brokerages popular with individual investors. Turnover is surging: average daily volume for these stocks has occasionally been 30 times what it was in 2019.



Their favorites list includes Norwegian Cruise Line Holdings Ltd., American Airlines Group Inc., United Airlines Holdings Inc., and Carnival Corp. The 10 Russell 3000 stocks that have seen their popularity rise the most over the last month on the Robinhood investing app, according to website Robintrack, are up an average of 93% since early May -- nine times the S&P 500’s return.

Conversely, six of the S&P 500’s 10 best performing stocks over the last month appear on a list of companies that have seen the biggest pickup in interest among users of Robinhood. On the surface of one particularly baffling phenomenon -- firms whose shares are surging despite having filed for bankruptcy -- the fingerprints of retail investors are everywhere.




American Airlines, for example, has seen an average 101 million shares change hands each day over the last month -- 23 times what was normal last year. The airline has 423 million shares outstanding, of which 417 million float -- meaning those that are available to the public. Loosely put, that means every American Airlines share publicly available is traded every four days. (Since it’s likely that many of these shares are held for longer periods by institutions, a smaller -- but still sizable -- pool of the company’s stock is trading even more frequently.)

Norwegian Cruise Lines, up more than 100% in the last month, has seen its average daily volume balloon to 73 million -- 37 times the 2019 norm. With 254 million shares in the firm’s equity float, hypothetically every share could be traded in less than four days.



“There’s a very well documented tendency for investors to buy ‘lottery tickets’,” said Jason Thomas, chief economist at AssetMark. “If you’re looking for a huge return in the near-term, a huge bump, you’re not going to go buy a consumer staples company. You’re going to buy something that is either a biotech where it’s basically an option, a binary kind of a thing, or just pick whatever has been hit the hardest.”

Wednesday, June 10, 2020

Mask-wearing and social distancing on the homefront

From the comic strip Nancy, 1943.


Tuesday, June 9, 2020

I don't like giving too much weight to historical analogies.

But the precedent is worth noting.
 
You should listen to this (but you should definitely turn the volume down first)



And while we've got the Archive open...



For the few moderate Republicans still out there.

Monday, June 8, 2020

Four years ago we said that the New York Times was about to be in a lonely place. Now they are trying weasel out of it with scapegoating and revisionism

Fallout comes at you fast in 2020.


  





 


 



The New York Times would love to cast their sins upon Bennett's back and send him out in the desert (despite the fact that false balance has been more of a problem for the news side compared to the opinion section). In case that fails, they've already sent out their big guns to try to convince us that "even-handedness, both-sidism, the 'view from nowhere'" is everyone's problem, rather than being an approach strongly associated with the New York Times.


Before you accept the spin, take a minute to remember what people were saying in 2016.

Wednesday, September 21, 2016


"Why do you hate us for caring too much?" – – Dispatches from a besieged institution

Public Editor
From Wikipedia

The job of the public editor is to supervise the implementation of proper journalism ethics at a newspaper, and to identify and examine critical errors or omissions, and to act as a liaison to the public. They do this primarily through a regular feature on a newspaper's editorial page. Because public editors are generally employees of the very newspaper they're criticizing, it may appear as though there is a possibility for bias. However, a newspaper with a high standard of ethics would not fire a public editor for a criticism of the paper; the act would contradict the purpose of the position and would itself be a very likely cause for public concern.

I don't want to impose a template, but generally one expects public editors to serve as the internal representative of external critical voices, or at least to see to it that these voices get a fair hearing. A typical column might start with acknowledging complaints about something like the paper's lack of coverage of poor neighborhoods. The public editor would then discuss some possible lapses on the paper's part, get some comments from the editor in charge, and then, as a rule, either encourage the paper to improve its coverage in this area or, at the very least, take a neutral position acknowledging that both the critics and the paper have a point.

Here are some examples from two previous public editors of the New York Times.


Clark Hoyt
The short answer is that a television critic with a history of errors wrote hastily and failed to double-check her work, and editors who should have been vigilant were not. But a more nuanced answer is that even a newspaper like The Times, with layers of editing to ensure accuracy, can go off the rails when communication is poor, individuals do not bear down hard enough, and they make assumptions about what others have done. Five editors read the article at different times, but none subjected it to rigorous fact-checking, even after catching two other errors in it. And three editors combined to cause one of the errors themselves.

Margaret Sullivan

Mistakes are bound to happen in the news business, but some are worse than others.

What I’ll lay out here was a bad one. It involved a failure of sufficient skepticism at every level of the reporting and editing process — especially since the story in question relied on anonymous government sources, as too many Times articles do.



The Times needs to fix its overuse of unnamed government sources. And it needs to slow down the reporting and editing process, especially in the fever-pitch atmosphere surrounding a major news event. Those are procedural changes, and they are needed. But most of all, and more fundamental, the paper needs to show far more skepticism – a kind of prosecutorial scrutiny — at every level of the process.

Two front-page, anonymously sourced stories in a few months have required editors’ notes that corrected key elements – elements that were integral enough to form the basis of the headlines in both cases. That’s not acceptable for Times readers or for the paper’s credibility, which is its most precious asset.

If this isn’t a red alert, I don’t know what will be.

But these are strange days at the New York Times and the new public editor is writing columns that are not only a sharp break with those of her predecessors, but seem to violate the very spirit of the office.

In particular, Liz Spayd is catching a great deal of flak for a piece that almost manages to invert the typical public editor column. It starts by grossly misrepresenting widespread criticisms of the paper, goes on to openly attack the critics making the charges, then pleads with the paper's staff to toe the editorial line and ignore the very voices that a public editor would normally speak for .


[Emphasis added]

The Truth About ‘False Balance’
False balance, sometimes called “false equivalency,” refers disparagingly to the practice of journalists who, in their zeal to be fair, present each side of a debate as equally credible, even when the factual evidence is stacked heavily on one side.

There has been a great deal of speculation as to what drives false equivalency, with the leading contenders being a desire to maintain access to high-placed sources, long-standing personal biases against certain politicians, a fear of reprisal, a desire to avoid charges of liberal bias, and simple laziness (a cursory both-sides-do-it story is generally much easier to write than a well investigated piece). Caring too much about fairness hardly ever makes the list and it certainly has no place in the definition.

Spayd then accuses the people making these charges of being irrational, shortsighted, and partisan.

I can’t help wondering about the ideological motives of those crying false balance, given that they are using the argument mostly in support of liberal causes and candidates. CNN’s Brian Stelter focused his show, “Reliable Sources,” on this subject last weekend. He asked a guest, Jacob Weisberg of Slate magazine, to frame the idea of false balance. Weisberg used an analogy, saying journalists are accustomed to covering candidates who may be apples and oranges, but at least are still both fruits. In Trump, he said, we have not fruit but rancid meat. That sounds like a partisan’s explanation passed off as a factual judgment.

But, as Jonathan Chait points out, Weisberg has no record of being a Hillary Clinton booster. The charge here is completely circular. He is partisan because he made a highly critical comment about Donald Trump and he made a highly critical comment about Donald Trump because he is partisan.

But the most extraordinary part of the piece and one which reminds us just how strange the final days of 2016 are becoming is the conclusion.

I hope Times journalists won’t be intimidated by this argument. I hope they aren’t mindlessly tallying up their stories in a back room to ensure balance, but I also hope they won’t worry about critics who claim they are. What’s needed most is forceful, honest reporting — as The Times has produced about conflicts circling the foundation; and as The Washington Post did this past week in surfacing Trump’s violation of tax laws when he made a $25,000 political contribution to a campaign group connected to Florida’s attorney general as her office was investigating Trump University.

Fear of false balance is a creeping threat to the role of the media because it encourages journalists to pull back from their responsibility to hold power accountable. All power, not just certain individuals, however vile they might seem.

Putting aside the curious characterization of the Florida AG investigation as a tax evasion story (which is a lot like describing the Watergate scandal as a burglary story or Al Capone as a tax evader), equating her paper's pursuit of the Clinton foundation with the Washington Post's coverage of Trump is simply surreal on a number of levels.

For starters, none of the Clinton foundation stories have revealed significant wrongdoing. Even Spayd, who is almost comically desperate to portray her employer in the best possible light, had to concede that “some foundation stories revealed relatively little bad behavior, yet were written as if they did.” By comparison, the Washington Post investigation continues to uncover self-dealing, misrepresentation, tax evasion, misuse of funds, failure to honor obligations, ethical violations, general sleaziness and blatant quid prop quo bribery.

More importantly, the Washington Post has explicitly attacked and implicitly abandoned Spayd's position. Here's how the Post summed it up in an editorial that appeared two days before the NYT column.
Imagine how history would judge today’s Americans if, looking back at this election, the record showed that voters empowered a dangerous man because of . . . a minor email scandal. There is no equivalence between Ms. Clinton’s wrongs and Mr. Trump’s manifest unfitness for office.


Charles Pierce's characteristically pithy response to this editorial was "The Washington Post Just Declared War on The New York Times -- And with good reason, too."

If is almost as if Spayd thinks it's 2000, when the NYT could set the conventional wisdom, could decide which narratives would followed and which public figures would be lauded or savaged. Spayd does understand that there is a battle going on for the soul of journalism, but she does not seem to understand that the alliances have changed, and the New York Times is about to find itself in a very lonely position.


Friday, June 5, 2020

In which a film critic reviews his own early work and realizes he'd been a huge asshole.

As previously mentioned, I'm an admirer of film critic Bob Chipman, in part because of his willingness to re-examine his own work and, when appropriate, apologize.



I was going to troll Andrew Gelman with this human Spirograph clip, but we've had to reschedule this post so often I doubt anyone remembers the original comment.



And finally a bit of Wes Montgomery to kick off the weekend.


Thursday, June 4, 2020

And the view from a year ago.


Tuesday, February 5, 2019

Rational actors, stag hunts and the GOP

We have hit this idea in passing a few times in the past (particularly when discussing the Ponzi threshold), but I don't believe we've ever done a post on it. While there's nothing especially radical about the idea (it shows up in discussions of risk fairly frequently), it is different enough to require a conscious shift in thinking and, under certain circumstances, it can have radically different implications.

Most of the time, we tend to think of rational behavior in terms of optimizing expected values, but it is sometimes useful to think in terms of maximizing the probability of being above or below a certain threshold. Consider the somewhat overly dramatic example of a man told that he will be killed by a loan shark if he doesn't have $5000 by the end of the day. In this case, putting all of his money on a long shot at the track might well be his most rational option.

You can almost certainly think of less extreme cases where you have used the same approach, trying to figure out the best way to ensure you had at least a certain amount of money in your checking account or had set aside enough for a mortgage payment.

Often, these two ways of thinking about rational behavior are interchangeable, but not always. Our degenerate gambler is one example, and I've previously argued that overvalued companies like Uber or Netflix are another, the one I've been thinking about a lot recently is the Republican Party and its relationship with Trump.

Without going into too much detail (these are subjects for future posts), one of the three or four major components of the conservative movement's strategy was a social engineering experiment designed to create a loyal and highly motivated base. The initiative worked fairly well for a while, but with the rise of the tea party and then the Trump wing, the leaders of the movement lost control of the faction they had created. (Have we done a post positing the innate instability of the Straussian model and other systems based on disinformation? I've lost track.)

In 2016, the Republican Party had put itself in the strange position of having what should have been their most reliable core voters fanatically loyal to someone completely indifferent to the interests of the party, someone who was capable of and temperamentally inclined to bringing the whole damn building down it forced out. Since then, I would argue that the best way of understanding the choices of those Republicans not deep in the cult of personality is to think of them optimizing against a shifting threshold.

Trump's 2016 victory was only possible because a number of things lined up exactly right, many of which were dependent on the complacency of Democratic voters, the press, and the political establishment. Repeating this victory in 2020 without the advantage of surprise would require Trump to have exceeded expectations and started to win over non-supporters. Even early in 2017, this seemed unlikely, so most establishment Republicans started optimizing for a soft landing, hoping to hold the house in 2018 while minimizing the damage from 2020. They did everything they could to delay investigations into Trump scandals, attempted to surround him with "grown-ups," and presented a unified front while taking advantage of what was likely to be there last time at the trough for a while.

Even shortly before the midterms, it became apparent that a soft landing was unlikely and the threshold shifted to hard landing. The idea of expanding on the Trump base was largely abandoned as were any attempts to restrain the president. The objective now was to maintain enough of a foundation to rebuild up on after things collapsed.

With recent events, particularly the shutdown, the threshold shifted again to party viability. Arguably the primary stated objective of the conservative movement has always been finding a way to maintain control in a democracy while promoting unpopular positions. This inevitably results in running on thinner and thinner margins. The current configuration of the movement has to make every vote count. This gives any significant faction of the base the power to cost the party any or all elections for the foreseeable future.

It is not at all clear how the GOP would fill the hole left by a defection of the anti-immigrant wing or of those voters who are personally committed to Trump regardless of policy. Having these two groups suddenly and unexpectedly at odds with each other (they had long appeared inseparable) is tremendously worrisome for Republicans, but even a unified base can't compensate for sufficiently unpopular policies. Another shutdown or the declaration of a state of emergency both appear to have the potential to damage the party's prospects not just in 2020 but in the following midterms and perhaps even 2024.

So far, the changes in optimal strategy associated with the shifting thresholds have been fairly subtle, but if the threshold drops below party viability, things get very different very quickly. We could and probably should frame this in terms of stag hunts and Nash equilibria but you don't need to know anything about game theory to understand that when a substantial number of people in and around the Republican Party establishment stop acting under the assumption that there will continue to be a Republican Party, then almost every other assumption we make about the way the party functions goes out the window.

Just to be clear, I'm not making predictions about what the chaos will look like; I'm saying you can't make predictions about it. A year from now we are likely to be in completely uncharted water and any pundit or analyst who makes confident data-based pronouncements about what will or won't happen is likely to lose a great deal of credibility.

Reviewing our take on the state of the GOP seven years ago.


Not especially prescient but not much I wouldn't still stand by (though I wish I would have considered the possibility -- and implications -- of a wealthy, well-known candidate appealing directly to the base).

Tuesday, August 6, 2013

Metablogging -- stag hunts, misalignment, principal agents and all that jazz

Shortly after Josh Marshall posted this analysis of recent events in the GOP, Joseph called me up to compare reactions. We've been having this conversation for so many years that much of it has devolved into a self-referential shorthand. As an illustration, at one point, after a fairly long-winded comment by me, Joseph simply said "Stag hunt." and tossed the ball back to me and we moved on to the next topic.

We agreed (with, I assume, fingers crossed on both ends of the line) that we'd write some posts on the subject, but I'm starting to think that it might be more useful to step back for a minute and talk about how we've been framing the question of what's going on in the Republican Party (politically, not socially or in terms of policy. Those are entirely different metaposts).

For years now, the two of us have been talking about the post-Tea Party GOP in terms of a multi-player stag hunt. Over the past few years the stakes (particularly the costs of failure) have increased. At the same time, participation rates required to take down the stag have also increased. As a result, progressively smaller groups have gained the power to kill the enterprise. (In a different conversation Joseph pointed out that, in a military context, shooting deserters is also a predictable result of this situation.) We could dig deeper into examples and implications (particularly with respect to the trade off between the power of an alliance vs. its stability) but for now I want to limit the discussion to framing.

(there might also be a place here to talk about symmetry breaking, but I'd need to give that some thought first.)

Another way of looking at the story we've found useful is to look at misalignment of interests, especially what looks to us two non-economists as a particularly nasty two-level principal agent problem where a small group of big donors determine the pool of viable candidates and a relatively small but coherent subgroup of the primary voters make the purchasing decisions for the entire party. You'll notice that, like the stag hunt frame, under this scenario small groups can acquire disproportionate power.

And of course there's the mandatory Influence reference, framing the story in terms of social psychology. If you check out the chapters on commitment and consistency, social proof, and scarcity you'll find all sorts of applicable discussions of the ways groups united by a common belief system deal with ideological challenges and the loss of dominance.

Nothing particularly fresh or profound here, but these idea have proven a pretty good framework recently. I'm not saying they should be the basis of the standard narrative -- I'm not sure there should be a standard narrative -- but they do come in handy. More importantly, I think you can make the case that too little of the public discourse is spent examining underlying assumptions and asking about the different ways to frame our questions.

Wednesday, June 3, 2020

Deferred Tuesday Tweets








Lifestyles of the Rich(?) and Famous.

 I'm not going to weigh in on the scientific debate, but the politics of hydroxychloroquine is worthy of study.


 
Flack-to-Hack ratio at work.

 
Mandatory hyperloop reference.

 
Common sense from Krugman.

 
At least the Onion's on a roll.

 
Zuckerberg is a horrible person...


 
... and yet still better than....


 
One of the stories we're following closely.

 

Amazing how a company this well run could have lost over eight billion dollars in 2019.

 

Brought to you by the good people of MOD.

 
Time to revisit our dysfunction thread. Excellent by Fallows.


 The revolution will be tweeted



 



 


 



 





 




 




 


Tuesday, June 2, 2020

LA is still not burning


I have great respect for the resilience of NYC journalists. If the New York Times were consumed in a great conflagration, I have  no doubt that the survivors would crawl from the wreckage, mix their blood with ashes for ink, and scrawl out an op-ed on how bad things are in Los Angeles.

Here are some tweets I posted Sunday.

[Should have been more clear, but the next part refers mainly to the national situation.]
Later that evening things got more intense, but not in a way that disproved my point.



Here's where the old city/county question reappears. When people talk about NYC , they are referring to a city comprised of various counties. When people talk about LA, they are usually referring to  a county comprised of different cities. The city/county distinction is important because, while the city is very big, the county is huge, with over 10,000,000 residents and land area of over 4,000 square miles.

In this case, almost all of the footage of riots and looting came from the cities of Long Beach and especially Santa Monica. This is clearly a county level story. Therefore it is essential to remember that the scenes that dominated the news were largely limited to two neighborhoods in a place with considerably more residents than NYC.

This is not to downplay the anger here or its causes or the damage it can do to innocent bystanders when it gets out of control, but when the media focuses all its attention on a tiny sliver of a town, the rest of the country gets a false impression, particularly when some people use the misinformation as disinformation.



Monday, June 1, 2020

A few points to consider when reading about Tesla (2020 edition)

1. [As previously mentioned] Tesla's valuation has always depended more on the story than the fundamentals.

Finally, it is essential to remember that maintaining this “real-life Tony Stark” persona is tremendously valuable to Musk. In addition to the ego gratification (and we have every reason to believe that Musk has a huge ego), this persona is worth hundreds of millions of dollars to Musk. More than any other factor, Musk’s mystique and his ability to generate hype have pumped the valuation of Tesla to its current stratospheric levels. Bloomberg put his total compensation from Tesla at just under $100 million a year. When Musk gets tons of coverage for claiming he's about to develop telepathy chips for your brain or build a giant subterranean slot car race track under Los Angeles, he keeps that mystique going. Eventually groundless proposals and questionable-to-false boasts will wear away at his reputation, but unless the vast majority of journalists become less credulous and more professional in the very near future, that damage won’t come soon enough to prevent Musk from earning another billion dollars or so from the hype.

2. Since I wrote that, Musk made a big bet on the stock price and it has worked out very well for him.
Tesla confirmed that CEO Elon Musk earned the first tranche of his massive incentive payout, in a document filed with the Securities and Exchange Commission on Thursday.
The tranche is comprised of about 1.7 million shares of Tesla, and would be valued around $775 million based on Thursday’s closing market value. Shares in Tesla closed at $805.81 on Thursday, and the options have a strike price of $350.02.

Thursday’s filing, which also set a date of July 7 for the company’s annual shareholders meeting, said: “As of the date of this proxy statement, one of the 12 tranches under this award has vested and become exercisable, subject to Mr. Musk’s payment of the exercise price of $350.02 per share and the minimum five-year holding period generally applicable to any shares he acquires upon exercise.” It is not clear if Musk has yet exercised the options.

3. With this in mind, the recent surge looks a bit convenient.

As you can see from the 5-year chart below, Tesla's stock didn't do much for quite a while then, about a year ago, it more than quadrupled in about three quarters.




It's useful to compare this to the stock performance of the far larger and more profitable GM.


Particularly these numbers:
vs. Tesla's

4. These incentive plans can incentivize some bad behavior.

Jack Welch demonstrated how easy it was to nudge the books to create the profitability picture Wall Street likes. Running up a stock's value isn't that dissimilar, and there are lots of questions about Tesla's books. Add to that the power of the company's narrative, the cult of personality around Musk, and investors' willingness to reward even the distant promise of viability from any business that can label itself a tech company (we live in the WeWork age).

When Musk compares covid-19 to a cold, pushes miracle cures or lobbies hard for a quick end to the lockdown, it's important to remember...

5. What's good for Tesla isn't necessarily good for America.