Yield Curve

The following is the current yield curve.

Note the extensive inversion and flatness.

Here is the spreads:

This does not bode well. The long term rate reflects growth and it is now sinking. The short term rates reflect Government operating costs which are exploding. This is a wedge scenario and one should expect it to be reflected in the stock market soon.

This yield curve is totally untenable. Is anyone looking?

Rare Earths Redux

Back in 2010 I had several pieces on rare earths. Just to repeat, the largest store of these elements are in the US, namely a mine in California. The California government shut the mine down and this opened the door for China which had the second largest supply. Thus if we have any problem perhaps we should do what we did for a century, open the mine! But I suspect California would prohibit it and the 9th Circuit Courts would uphold it. Welcome to our Brave New World!

Opinion Polls vs Facts

Opinion Polls on subjects that have factual bases are generally meaningless. It at best shows the gross ignorance of the public along with the intent by the pollster to generate politically motivated answers.

In a recent NEJM article there is a summary of a multiplicity of polls describing the "public's" belief of certain facts in the delivery of health care. For example they note the following:

Reasons for high health care costs

Reasons for rising health care costs (top 5 from a list of 12; % saying major reason)

Drug companies make too much money 78%
Hospitals charge too much 71
There is too much fraud and waste in the health care system 71
Insurance companies make too much money 70
New drugs, treatments, and medical technologies are often very expensive 62

Reasons for high health care costs (top 5 from a list of 18; % saying major reason)

High prices charged by drug companies 79%
High prices charged by insurance companies 75
High prices charged by hospitals 74
High prices charged by doctors and other health professionals 66%
Actions taken by the federal government that raise health care prices 64%

Now most of these questions can be answered with facts some cannot. For example; what is the basis for drug companies making too much? What is too much? What person in the poll could even name a single drug company? Again what of hospitals making too much. Then as to fraud. We can estimate that and then ask too much? Frankly any fraud should be too much.

As to the case of high prices, especially charged by physicians. First Medicare sets the price not the physician. That accounts for almost 20% of all such costs. The same goes for hospitals. It is true that the Government actions, the ACA, was a cause for the recent rise in costs. But that was for those outside Medicare.

These questions have some factual basis. Yet the way they are posed and the audience asked present only a "feeling" and perhaps that is the greatest problem.

Failure is Not an Option

I was amazed that MIT has now institutionalized the option to fail. They note:

Many members of the science and technology community are inspired by the startup mantra “fail fast and fail often.” They aim to remain calm and resolute when their experiments go awry, startups dissolve, and problem sets occasionally go unfinished. When it comes to the lived experience of navigating setbacks, however, many end up failing at failing. They internalize the experience and treat failure as a reflection of their abilities, rather than an unavoidable part of life, necessary for personal growth.

Starting anything with the assumption that it may fail and failing is not only not bad but good is nonsense. I can think back when I tried out as a Lifeguard in NYC. I could swim but I was clearly not training nor did I rank in the top 400 in NYC, which was the requirement. In those days Catholic High Schools had basketball and track, some times. So my first test I did not pass. I did not fail, I learned what I had to do and the second time I passed. How? I had no pool, so I ran hills every night, snow, ice, rain, through parks for 10 miles. Thus I built up stamina to pass. Failure was not an option.

Praising failure seems to be the Millennial way to make an excuse. They continue:

When confronted with failure, it can be hard to know how to start again. Among the FAIL! Conference speakers, and those who organized the series, there was no one path forward. The only thing that was true for all of them was that they did start again...“It’s scary to fail,” ... acknowledges. “You’ll doubt your ability, your worthiness, and your intelligence in confronting it. But failure is no reason to stop trying. Reflect upon the mistakes you made and learn a lesson from them.”

Would I have hired any of these folks? Unlikely. You don't "fail". You find out why it did not work and you persevere. That is a positive quality. It is strange to see such values institutionalized. Oh, yes, they also want alumni to contribute to this concept. Pity.

My Friend

Just a view of one of my friends. She comes up on my screen door to look me in the eye and get some peanuts. Now she takes the peanuts and buries them. Never said she was that smart! After all, they are roasted and it is mid May! In New Jersey the eat them.

The Draft and a Conjecture

Back in the early 1960s all young men eighteen years of age and over had to register for the Draft. If you were enrolled in college and studying what was an essential course such as science or engineering you were assured a deferral. Thus the motivator for young men was to study these areas as well as getting tuition paid since these areas were funded. Furthermore if you graduated and went into defense oriented work you were again deferred. Thus millions of talented men went to work for defense contractors getting paid nominal salaries and none went to high tech startups, you were likely to get drafted.

This situation I would argue had several long term results. First, the high tech field became male dominated. Women had no Draft obligation and could study Liberal Arts of all types. Few went into the demanding high tech areas where failure meant immediate draft and high risks of death in Vietnam. Secondly, the men in the high tech jobs became follow the leaders and there were no venture funded high tech startups, unless of course you had some Government related Defense funding. In fact these smaller high tech entities dominated Silicon Valley. But, compensation was quite limited and IPOs were far and few between. However the technology was ground breaking and had little to do with today’s oftimes useless social media materials.

But secondarily it created a mal dominated high tech environment. Women could choose with no fear of imminent death in a jungle, unless of course they might be nurses in the military. One could conjecture that the result of this male Draft process may have led to what we see as a bias on high tech. There is no clear data on this conjecture however.

As the Draft was eliminated, a good thing all around since one really wants dedicated military not enforced conscripts. One must remember that many of the military jobs in Vietnam were support whereas in Iraq and other recent adventures they were outsourced to civilians. Wars do not get cheaper, they just spend the money in differing ways. Now instead of an E2 we have some outsourced civilian in a mess hall getting paid several times more but with no VA benefits.

The question is: as the populations in high tech is depleted from this period, what is the length of time necessary to return the system to a balanced state? What if we reintroduced Government funding for high tech jobs, would that work to both expand the US base as well as enable a balanced work force? Just some thoughts.