Goldman Plans Hiring Spree in Trading (Only Coders Need Apply)

I’ve been telling students for years: get comfortable with programming and automation or be replaced by a robot. This plan to hire programmers by Goldman is not new to the industry. Last year I posted an article about Citi doing the same thing: https://efficientminds.com/2018/06/14/citi-wants-analysts-to-add-python-to-list-of-languages-on-resume/

So when you took/take my class, be mindful of why I weave programming into the course.

-Dr. Moore

Goldman Plans Hiring Spree in Trading (Only Coders Need Apply)
https://www.bloomberg.com/news/articles/2019-08-21/goldman-plans-hiring-spree-in-trading-only-coders-need-apply

JPMorgan’s Dimon Among CEOs Rejecting Shareholder-Centric Model

I doubt any of these CEO signatories suggested a reduction in their own pay. For instance, a cap on CEO to average worker pay at 50X as opposed to the 278X today (https://www.ibtimes.com/infographic-ceo-pay-growth-has-wildly-outpaced-average-worker-2814353).

But the words sound good: “consider all stakeholders.” Let’s see what actions are taken.

JPMorgan’s Dimon Among CEOs Rejecting Shareholder-Centric Model
https://www.bloomberg.com/news/articles/2019-08-19/jpmorgan-s-dimon-among-ceos-rejecting-shareholder-centric-model

Trump Says Apple’s Cook Concerned About Losing Edge to Samsung With Tariffs

So Tim Cook made a good argument. Why wasn’t there foresight on the part of the Trump Administration regarding these easily identifiable unintended consequences? SMH

Nevertheless, I wonder if the answer will be to tariff everything from Samsung also. Either way, I believe I posted an earlier article that shows most of the tariffs are passed on to US consumers. SMH again.

Oh well. Hopefully my iPhone 7 lasts past 2020.

-Dr. Moore

Trump Says Apple’s Cook Concerned About Losing Edge to Samsung With Tariffs
https://www.bloomberg.com/news/articles/2019-08-18/trump-says-apple-s-cook-concerned-about-losing-edge-to-samsung

Smash the Ceiling | The New Yorker

"Every other democratic country, with the exception of Denmark, does fine without one.”
"since 1974; Congress now passes comprehensive budget resolutions that detail exactly how the government will tax and spend, and the Treasury Department borrows only the money that Congress allows it to”
"debt-ceiling votes merely perpetuate the illusion that balancing the budget is easy."

So what does all this mean? Well, to answer that question I took a quick look at measures from the Bloomberg terminal: US Total Debt Outstanding (DEBPTOTL) and US Treasury Cash Balance Total Federal Tax Deposits (USCBFEDT). The top half of Exhibit A shows that yes, debt has increased perpetually. Is that good or bad? Well, one way is to examine the ratio of debt to tax revenues. The bottom half of Exhibit A shows that the ratio fluctuates around some long-run an average and that average crept higher after the financial crisis of 2008.

Now lets look at why the debt keeps increasing. Is it due to inflation or a perpetually unbalanced budget? Exhibit B shows that our federal government has a habit of running a deficit (Clinton had a surplus though!).

In conclusion, I tend to agree with the author that we do not need a debt limit. However, our federal government does need to learn how to balance the budget. Perhaps congress can begin by examining the circumstances around times when we had a budget surplus. (Spoiler alert: I bet those are times with higher tax rates…)

-Dr. Moore

Exhibit A – US Total Federal Debt and Ratio of US Total Federal Debt to Tax Revenues

Exhibit B – US Budget Surplus or Deficit

https://www.newyorker.com/magazine/2011/08/01/smash-the-ceiling

Smash the Ceiling

James SurowieckiAugust 1, 2011 Issue
In the past few years, the U.S. economy has been beset by the subprime meltdown, skyrocketing oil prices, the Eurozone debt crisis, and even the Tohoku earthquake. Now it’s staring at a new problem—a failure to raise the debt ceiling, which would almost certainly throw the economy back into recession. Unlike those other problems, however, this one would be wholly of our own making. If the economy suffers as a result, it’ll be what a soccer fan might call the biggest own goal in history.

The truth is that the United States doesn’t need, and shouldn’t have, a debt ceiling. Every other democratic country, with the exception of Denmark, does fine without one. There’s no debt limit in the Constitution. And, if Congress really wants to hold down government debt, it already has a way to do so that doesn’t risk economic chaos—namely, the annual budgeting process. The only reason we need to lift the debt ceiling, after all, is to pay for spending that Congress has already authorized. If the debt ceiling isn’t raised, we’ll face an absurd scenario in which Congress will have ordered the President to execute two laws that are flatly at odds with each other. If he obeys the debt ceiling, he cannot spend the money that Congress has told him to spend, which is why most government functions will be shut down. Yet if he spends the money as Congress has authorized him to he’ll end up violating the debt ceiling.

As it happens, the debt ceiling, which was adopted in 1917, did have a purpose once—it was a way for Congress to keep the President accountable. Congress used to exercise only loose control over the government budget, and the President was able to borrow money and spend money with little legislative oversight. But this hasn’t been the case since 1974; Congress now passes comprehensive budget resolutions that detail exactly how the government will tax and spend, and the Treasury Department borrows only the money that Congress allows it to. (It’s why TARP, for instance, required Congress to pass a law authorizing the Treasury to act.) This makes the debt ceiling an anachronism. These days, the debt limit actually makes the President less accountable to Congress, not more: if the ceiling isn’t raised, it’s President Obama who will be deciding which bills get paid and which don’t, with no say from Congress.

One argument you hear for having a debt ceiling is that it’s useful as what the political theorist Jon Elster calls a “precommitment device”—a way of keeping ourselves from acting recklessly in the future, like Ulysses protecting himself from the Sirens by having himself bound to the mast. As precommitment devices go, however, the debt limit is both too weak and too strong. It’s too weak because Congress can simply vote to lift it, as it has done more than seventy times in the past fifty years. But it’s too strong because its negative consequences (default, higher interest rates, financial turmoil) are disastrously out of proportion to the behavior it’s trying to regulate. For the U.S. to default now, when investors are happily lending it money at exceedingly reasonable rates, would be akin to shooting yourself in the head for failing to follow your diet.

Advocates of the ceiling like the way it turns the national debt into front-page news, focussing the minds of voters and politicians; they think it fosters accountability, straight talk, transparency. In reality, debt-ceiling votes merely perpetuate the illusion that balancing the budget is easy. That’s why politicians like the debt ceiling: it allows them to rail against borrowing more money (which voters hate) without having to vote to cut any specific programs or raise taxes (which voters also hate).

You might think that there are benefits to putting negotiators under the gun. But, as the Dutch psychologist Carsten de Dreu has shown, time pressure tends to close minds, not open them. Under time pressure, negotiators tend to rely more on stereotypes and cognitive shortcuts. They don’t consider as wide a range of alternatives, and are more likely to jump to conclusions based on scanty evidence. Time pressure also reduces the chances that an agreement will be what psychologists call “integrative”—taking everyone’s interests and values into account.

In fact, by turning dealmaking into a game of chicken, the debt ceiling favors fanaticism. As the economist Thomas Schelling showed many years ago, “It does not always help to be, or to be believed to be, fully rational, coolheaded, and in control of oneself” when it comes to brinksmanship. It doesn’t, in short, help to be President Obama. That may be why all the deals that have been taken seriously this season rely much more heavily on spending cuts than on tax increases: the deals represent Republican priorities, because the Republicans seem to be more willing than the Democrats to let the country default. It’s not pure craziness that’s rewarded—when some congressional Tea Partiers said that they wouldn’t vote to raise the ceiling under any circumstances, they became irrelevant to the conversation, since no compromise would make them happy. But recklessness does equal power: that’s why Eric Cantor, the House Majority Leader, and John Boehner, the Speaker of the House, have implied that they’re willing to go over the cliff (in part by suggesting that their fellow party members will force them to) but also that they can be persuaded to do the right thing.

We may nonetheless end up with a halfway sensible budget deal. But that would be the result of luck, not design. Instead of figuring out ways to raise the debt ceiling, we should simply go ahead and abolish it. The U.S. economy has plenty of real problems to deal with. We shouldn’t have to wrestle with ones we’ve created for ourselves. ♦

David J. Moore, Ph.D.
Associate Professor of Finance
California State University, Sacramento
david.j.moore

China Knows How to Take Away Your Health Insurance

A sobering thought in the potential role of AI in health insurance. In a nutshell, you take away Obamacare provisions for covering everybody, and the means to pay for it via the individual mandate, we will be left with only healthy and wealthy people with insurance. Those who need insurance simply won’t be able to afford health insurance premiums, even if they find an insurer willing to accept them as a customer.

I wonder how many people who voted for this anti-Obamacare Trump Administration are now on the path of being without health insurance?

-Dr. Moore

China Knows How to Take Away Your Health Insurance
https://www.bloomberg.com/view/articles/2019-06-14/china-knows-how-to-take-away-your-health-insurance

Stop Trump on Trade

This article points out two glaring hypocrisies in Congress:

1. The Republican profession of “free markets” vs. support of this Administration’s trade war and associated restrictions.

2. The Republican complaints of presidential overreach during the Obama presidency vs. silence on the matter as Trump routinely invokes emergencies and executive orders to circumvent the very congress they say shouldn’t be circumvented.

All are subject to hypocrisy – Democrat, Republican, Independent, and so on. I am not saying other party members are perfect. But Bloomberg does point out some glaring hypocrisies that have damaged, are damaging, and will further damage the United States. I echo the sentiment that Congress should stop playing politics, choose the right actions, and do the job our taxes are paying then to do.

-Dr. Moore

Stop Trump on Trade
https://www.bloomberg.com/view/articles/2019-05-31/mexico-tariffs-trump-s-latest-move-on-trade-is-dangerous