The United States is currently in the second longest economic boom of all time, followed only by the expansion between 1991 and 2001. And as they say, "all good things..."
Obviously the Dow plunging 800 points last Wednesday certainly doesn't foreshadow good things to come. That being said, timing exactly when we will dip into a recession (and how bad that recession will be) are fool's gold. But it appears more and more likely that we are nearing that point.
First, from MarketWatch,
The average stock today is trading at 73% above its historical average valuation. There are only two other times in history that stocks were more expensive than they are today: just before the Great Depression hit and in the 1999 run-up to the dot-com bubble’s bursting.
MarketWatch also notes that the so-called "Buffet Indicator" (the market value of all equities divided by the GDP) is also nearing historic highs. (It was at 151.3% prior to the Dot.com bubble and is at 125.2% today).
In addition, the yield curve is flattening and beginning to invert. "An inverted yield curve is," as Investopedia describes, "an interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality." Normally, investors want to be compensated for risks that may come down the line on longer-term bonds. When the yield curve inverts, that means investors are concerned about the short term; i.e. a recession looms. Here's how it looks today (and compare it to 2008 right before the Great Recession):
Inverted yield curves have predicted the last seven recessions!
Of course, a flattening yield curve is not an inverted one and there's no way to be sure it will completely flip (or that the eighth time will be like the previous seven). We always need to be cautious of the guy who has predicted nine of the last two recessions.
That being said, the signs don't look good. An after over nine years of growth, we're kind of due.
Over at LendingHome.com, I've written one of my most important articles on real estate investing. This is my step-by-step breakdown of how to become a real estate investor. Yes, it's different for everyone. I, for example, started with an internship in my dad's company. I know others that started by investing on the side with their income. And others still who just jumped in.
But there are some universal truths. One of which is that eventually, you need to stop learning and start doing. Indeed, feeling overwhelmed is common for newbies who are just getting started,
I have heard hundreds of times from new investors how overwhelming it can be getting started in real estate. There is just so much information out there, so many gurus selling get-rich-quick schemes and so many different niches and ways to invest in real estate. Thus, real estate investing for beginners is hard to get off the ground and procrastination is an ever-present temptation.
Hopefully, this article can help such newbies as I layout the 8 steps and elaborate on each:
I may be biased, but if you're interested in becoming a real estate investor, I highly recommend you check it out.
Google really needs to change their slogan right about now.
So after Google's creepy, cult-like sob session after the election was leaked, now an 85-page internal briefing with the Orwellian-sounding title "The Good Censor" has been leaked as well.
As Breitbart reports, the briefing outlines the difference between the "American tradition," which is basically free speech, and the "European tradition," which "favors dignity over liberty and civility over freedom.” (Translation: Gobbledigook that rationalizes censoring speech I don't like.)
Given the political opinions of most of the people in Silicon Valley in general and Google in particular, it should be rather obvious what being "The Good Censor" entails.
And that's just a glimpse of it. And that's just what's admitted to in this briefing.
As I've noted before, Google--and to a lesser degree other tech giants like Apple, Facebook, Amazon and Twitter--is becoming a sort of "government of the Internet." It is basically governing the Internet and search engine traffic in the way that the East India Company governed India during the period of "company rule" from 1757 until after the Sepoy Rebellion. And given the power of surveillance modern technology enables, it's hard to see how anything could throw off its yoke if Google and the other tech giants become truly authoritarian.
We should see to it that it doesn't get that far.
This week in "Gee, I wonder why trust in the mainstream press is so low?" I present to you, The Daily Beast (which was basically chosen at random among many potential choices):
Nice title there. Here's what it says a few paragraphs down:
It concluded that the “vast majority” of Warren’s ancestry is European but that “the results strongly support the existence of an unadmixed Native American ancestor in the individual’s pedigree, likely in the range of six-10 generations ago.”
That's about 1/1024th Native American... wow! Quite the lede you've thoroughly buried there Daily Beast!
Yet, somehow Elizabeth Warren actually believes this benefits her!
Yeah, take that Drumpf!
Oh, but silly you Washington Times! Obviously you don't understand the true ramifications of this incredible self-own self-own. We need Bloomberg for that (along with my very deep and intellectual commentary):
My newest article for BiggerPockets is up. This one is on five of the biggest problems landlords have with tenants and how to handle them. Here are the five biggest (in my humble opinion that is):
In general though, the key is making policies and systems that you follow through on each time. Trying to make a decision without a framework for every fire that comes up will drive you crazy.
With regards to virtually every issue, it is best to create a system and stick to it as best as possible. Be polite and empathetic for sure, but don’t bend just because someone gets angry with you or tells you a sob story. And while you can’t come up with a system for each situation, you can for many and then add a policy for every new situation that comes up that you didn’t think of before. As time goes by, there will be less and less situations that come up that don’t have a policy on how to deal with them all ready to go.
The world today is far more technologically and scientifically advanced than at any time in the past. Therefore, it shouldn’t be surprising that marketing techniques are also becoming more and more advanced.
Neuro marketing is probably the most cutting-edge and scientifically rigorous method of marketing that exists today. Erica Dube describes the method as follows,
“Utilizing fMRI [functional magnetic resonance imaging] involves using a powerful magnet to track the brain’s blood flow as subjects respond to audio and visual cues. This allows examiners to access a deep part of the brain known as the ‘pleasure center’ and lets marketers know how people are really responding to their work.” (1)
Researchers can also use electroencephalography (better known as an EEG), which is a much cheaper alternative. The fMRI usually costs $1000 per machine hour. However, the EEG has some drawbacks, most notably, it “does not grant access to deep parts of the brain where the ‘pleasure center’ is located.”
Regardless of the specific technique though, neuro marketing research has some major advantages over the more traditional methods of evaluating how customers perceive a product. Indeed, it has some common traits with the decision-making methodology Empathic Design. Dorothy Leonard and Jeffrey Rayport, who came up with Empathic Design, note the many failings of the more traditional focus groups and survey methods companies had used to figure out what it was that customers actually wanted,
“It is extremely difficult to design an instrument for market research that is amenable to quantitative analysis and also open-ended enough to capture a customer’s environment completely. Market researchers have to contend with respondents’ tendency to try to please the inquirer by providing expected answers, as well as their inclination to avoid embarrassment by not revealing practices they suspect might be deemed inappropriate. The people who design surveys, run focus groups, and interview customers further cloud the results by inadvertently—and inevitably—introducing their own biases into the questioning.” (2)
On the other hand, empathic design stresses that researchers should observe customers in their “natural environment” to actually find out what they want, why they want it and what makes them tick in general.
Neuro marketing could be seen as the next evolution of that process. But instead of simply observing a customer, researchers are now observing what’s going on inside their customers brain.
And as an example of how customers often report something false (even though they think it’s true), a recent post by Neuro Science Magazine found that while customers reported that video gave them a higher emotional response, the biometric data actually found that audio did. (3)
Some of the uses for neuro marketing are very straightforward. For example, Impact notes that “Brands such as Campbell’s Soup, Gerber, and Frito-Lay have used neuromarketing to restyle their packaging designs.” (4) Customers were asked to look at the product’s packaging one piece at a time and record their feelings toward it. This was viewed in conjunction with in-depth interviews and the fMRI scans.
Each part of the product’s packaging, from its color, text size, imagery, texture, etc. were evaluated. For example, Frito-Lay found that shiny bags with pictures of chips on them were viewed negatively, so they redesigned their packaging.
If there’s one thing you quickly learn in business school, it’s that when it comes to business, nothing is done by accident.
Some of the other broad results that neuro marketing has discovered is that simple fonts and simple messages will encourage action. As Roger Dooley, the author of Brainfluence, points out, “If you need to convince a customer, client, or donor to perform some kind of task, you should describe that task in a simple, easy to read font.” In addition, it has been determined that people will look at what a person in an advertisement is gazing at. This can be an effective way to direct people’s eyes toward a call to action.
Free trials and special offers have furthermore been shown to build trust with customers or potential customers. And, as should be expected, smiling goes a long way to improve a brand’s perception and build trust with customers. People in advertisements should always (or at least, almost always) be smiling.
These findings can also give a list of “thou shall nots” to advertisers. For example, a study by Columbia University showed that if a consumer has too many choices, that may actually deter customers. This would be another variant of the “keep it simple” mantra neuro marketing has shown to be so important. (6)
Indeed, the list of broad findings has been quite wide. Other findings include that people have a much greater aversion to loss than want of gain. So, for example, most people would rather bet $50 than $500 even if the payout was also $50 and $500 respectively. Or just simple findings like the fact that customers like products that are fast and efficient. (7)
As one should expect though, there are also serious ethical concerns about neuro marketing. Marketing in general has often been criticized as being designed to manipulate rather than inform the population. One need look no further than political advertising for proof of this. No matter where you stand politically, it’s easy to see that catch phrases such as “Make America Great Again” or “Hope and Change” don’t objectively mean much of anything. But they have obviously had a major emotional resonance with voters.
Famous researchers have noted that the human mind doesn’t operate as a computer. It’s not even particularly rational. For example, Barry Adams sums up the views of the esteemed psychologist Jonathan Haidt, who “…uses the elephant and rider metaphor, where the elephant embodies our subconscious mind and the rider, our conscious mind, is only able to influence the elephant’s general direction in small ways.” (8)
Nobel Prize winning economists Daniel Kahneman and Amos Tversky use a similar analogy with Type 1 Thinking (automatic and instinctual) and Type 2 Thinking (thorough and rational). People rely on Type 1 Thinking far more often than Type 2. (9)
Barry Adams sums up just how easily this knowledge could be used maliciously,
“As neuroscience progresses its discovery of exactly how the human brain works – and, especially, how the subconscious parts of our mind can be influenced, manipulated, and coerced in ways our conscious mind is unaware of – increasingly we see the marketing industry embrace this research and utilise it towards more effective marketing and advertising.
And that is the tip of the iceberg for how neuro marketing could be used to manipulate consumers.
It is good that the awareness of neuro marketing is growing, and people are starting to realize their own biases and try to counteract them. This can alleviate some of the more troubling effects. But even when people know something rationally, that doesn’t mean they will act rationally. Everyone knows that smoking is bad for you, but yet people continue to smoke. And even with things that aren’t physically addictive, such as gambling, there are still many who will act against their best interests. Neuro marketing could (and does) incentivize people to continue to act in these destructive ways.
That being said, neuro marketing is by no means simply bad. The science has helped marketers better reach their customers and producers better design their products to appeal to what customers actually want. Dorothy Leonard and Jeffrey Rayport mentioned one example after another of how companies had improved their products and thereby improved their customers’ experience with Empathic Design. The breakthroughs of neuro marketing should do the same.
But that doesn’t mean that some of the more serious problems neuro marketing presents should simply be brushed under the rug. Unfortunately, there’s no obvious solution regarding regulation. How do you regulate particular styles of marketing? Or should regulation simply target particular products (as was done when regulators banned cigarette companies from advertising on television)? There will probably need to be some rules of this nature. That being said, the government may not be the best institution to regulate neuro marketing because, as noted above, politicians on both sides of the aisle have become very effective at using it.
If you haven't checked out the Youtube channel Charisma on Command, you're missing out. Here he has a great video on five life-changing habits (that are actually quite reminiscent of my articles for Thought Catalog on conquering fear and making your life more awesome). I highly recommend it:
In my latest post for American Thinker, I expand on the ideas I mentioned in this article, namely that "these new postermodernist departments parasitically leach off of the reputation of a university that was built upon the works of other departments." And what better launching pad to talk about this than the recent spate of hoax papers for the so-called "Grievance Departments." As I note,
As one might expect, the subjects and methodologies of these hoax papers were utterly ridiculous. One that was accepted by the journal Gender, Place and Culture was titled "Human Reactions to Rape Culture and Queer Performativity in Urban Dog Parks in Portland, Oregon." Another claimed that men who masturbate while thinking of a woman are committing sexual violence against her. Another was a rewritten chapter of Mein Kampf from a feminist perspective.
But why do such Grievance Departments have any credibility at all? Because, they're "reputational leaches,"
...Not a single university or research institution has ever built up its prestige or reputation based on any of these grievance studies departments. Instead, these universities built their prestige on their science, engineering, computer programming, business, and economics departments, or, to a lesser extent, their philosophy, education, classics, history, and architecture departments.
And unfortunately, such departments is where this mess of hyper-identity politics and intersectionalism came from. And the reaction to that nonsense from the Right is how we got Donald Trump. Regardless, we desperately need to delegitamize these Grievance Departments.
Check the article out here.
I wrote this for SwiftEconomics three years before Donald Trump. In hindsight, this book was quite prophetic as it was the white working class that propelled Trump into the White House.
Coming Apart is the latest book from the highly controversial author, Charles Murray. It is definitely food for thought as well as quite alarming. Murray shows how the upper class and lower class of the United States have diverged in just about everything. He focuses only on white people until the very end to emphasize it’s not a racial problem (in fact, adding race back in hardly makes a difference). While the top and bottom of American society have always been quite different, the trends are pushing them apart into something unprecedented.
The theme, boiled down, is that the “founding virtues” or what Murray believes are the important building blocks of civic society--namely marriage, industriousness, honesty and religiosity--have declined dramatically among the lower class, but have thrived among the upper class. In addition, what’s called social capital (the networks and organizations throughout society), while dissipating throughout society, has plunged in the bottom third. This is not a new discovery, Robert Putnam discussed it at length in Bowling Alone. However Murray has expanded on that by showing the drastic contrast between the classes. He also notes how this trend is compounded by primarily technological forces that have made intelligence much more important. 50 years ago, someone who was really good at math and what not would become a math teacher and get by on a decent salary. Today, they go work for a hedge fund, Google or one of those mysterious quant funds and pull in seven to eight figures a year!
Early on, Murray actually hurts his argument by conceding that “real family income for families in the middle was flat” (pg. 50). In fact, the term “family income” or household income” is highly misleading. As Thomas Sowell has pointed out:
It is an undisputed fact that the average real income… of American households rose by only 6 percent from 1969 to 1996… But it is an equally undisputed fact that the average real income per person in the United States rose by 51% over that very same period. How can both these statistics be true? Because the average number of people per household was declining during those years. (Economic Facts and Fallacies, Pg. 125)
So the only reason the lower and middle classes have a “flat” income is because there are less people in each household working. And yet, the “founding virtues” have still deteriorated.
In one of the most bizarre mysteries of our day, he notes what David Brooks has termed the “bourgeois bohemians.” Namely, very liberal people who live very conservative lifestyles. These are typically the elite of society; those that live in the super zips (zip codes in the 99th percentile of wealth). They get married, stay married, work for a corporation usually, have kids, don’t do drugs, rarely drink and more often than you would think, go to church.
If you go outside of San Francisco, Los Angeles, New York and Washington D.C., those who comprise the super zips are about evenly split between conservatives and liberals. And funny enough, while they’re politics are polar opposites, they’re behavior is basically the same. The elite, or top 20% of society, Murray refers to as Belmont. And whether it’s the tree-hugging or gun-toting sort of Belmont, the people generally adhere to the four “founding virtues.”
At the bottom, things are much different. Charles Murray splits the bottom off at the bottom 30% of white Americans, which he calls Fishtown. Let’s take an example from industriousness:
In the 1960 census, about 9 percent of all Fishtown men ages 20-64 were not in the labor force. In the 2000 census, about 30 percent of Fishtown men in the same age range were not in the labor force. (pg. 216)
Indeed, the number of people on disability insurance has increased by a somewhat significant 900% since 1960! And it should be noted that life and work are getting safer, not more dangerous.
With regards to marriage, it is well established that two parent families do the best in the aggregate. Well, in a truly haunting chart on page 167, Murray shows the percentage of children living with both biological parents in Fishtown when the mother is 40 fell from 95% to 35% in from 1960 to 2005. In Belmont, it stayed put at about 90%.
Murray primarily focuses on the crime rate when discussing honesty. The crime rate is down recently, but is still up a lot (at least in Fishtown) since 1960. I think he again shoots himself in the foot here as I’ve heard of several studies showing a decline in honesty. Here’s one from Britain and I believe the same trend is mirrored in the United States. Still, the crime rate is bad enough, especially given how high the American prison population is.
All this shows a decline in social capital, or the connections between individuals through various civic organizations. This is why Murray finds the decline in religiosity troubling. Although this mostly has to do with the secular (not atheist) poor. It may be the lack of belief in a reason to existence provides no incentive to act or a no moral code to follow. Or it may simply be a lack of social and charitable organizations to take the church’s place.
Murray does give his prescription, which is similar to mine; the government has usurped the civic institutions at the local level and created dependency through its welfare programs. It needs to get out of the way for civic society to reemerge. I should note, this is basically the thesis of Robert Nisbet’s great book The Quest for Community. The bigger the government, the smaller the individual… and civic institutions for that matter. It is not the supporters of the free market who are atomistic or whatever. It is the supporters of big government who are.
Murray also chastises the upper class for both their non-judgementalism (which, in my judgement, is just a way to say you’re too lazy or scarred to have an opinion) and their unseemliness. I heard of a guy building a house with 5 bedrooms, 8 bathrooms, 3 kitchens, 2 glass elevators and an indoor swimming pool with a retractable roof. No one needs that. It seems that the upper classes have simultaneously lost their judgmentalism and their shame, and it all just drives the classes further apart. Classes that have been fairly fluid in years past, but are becoming more solidified.
Murray’s central argument is that this class-solidification is not economic, as liberals tend to say, but a separation of values and behaviors. I think there’s some truth to both (corporate favoritism and Federal Reserve policies have driven some of the class divide, and part of it is overstated in my opinion), but from the work of Murray and others, as well as working in and near lower end areas and witnessing much of this self-destructive behavior first hand, I have to agree more with Murray.
But as he cautions, this book is not primarily about solutions. Instead it’s the first step, and that is to simply admit we have a problem.
"Every day is a new life to the wise man."
The Righteous Mind
Star Slate Codex
Consulting by RPM