nickles

> Food, shelter and transportation aren't included in the CPI.

This is wrong. Food, shelter, and transportation are all included in the basket used to compute CPI. [0]

> The CPI represents all goods and services purchased for consumption by the reference population (U or W). BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services).

[0] https://www.bls.gov/cpi/questions-and-answers.htm

The Ninth Circuit Court of Appeals held that software is speech in Bernstein v United States. The precedent already exists.

[0] https://en.wikipedia.org/wiki/Bernstein_v._United_States

This is an executive order, not legislation.

> https://en.wikipedia.org/wiki/Expressive_aphasia Speak to a neuroscientist if you don't believe

Your source doesn't support your assertion. It lists the more common causes as:

* Stroke or brain anoxia.

* Brain tumor

* Brain trauma

And is shows less common causes as:

* Autoimmune disease

* Paraneoplastic syndrome

* Micrometastasis

* neurodegenerative disorders

* Certain infections (e.g., Bartonella henselae[19])

* Metabolic disease (e.g., hyperosmolar hyperglycemic state[20])

> In addition the act of reading and writing code does a ton of damage to the Wernicke and Brocas area. Over time it can cause damage to the ventral what pathway to the point of complete speech impediment, memory loss and even Alzheimers.

Source? I couldn't verify this with some cursory searching, and these seem like extraordinary claims. Your links to Wikipedia don't appear to offer support either.

The headline changed since this was posted. It's been updated to reflect the new title.

The article headline changed since this was posted. I've updated it to reflect the new title.

> It's perfectly possible that after this, vitamin D is added to tap water

Vitamin D is fat soluble, not water soluble.

Your comment has a lot of misinformation in it.

> This is the one thing they do which helps, not hurts, human traders.

Providing liquidity is their job, and it benefits the market as a whole. If market making by HFTs is a good thing, it’s difficult to malign those same firms for, well, making markets.

> They rent satellites to count how many trucks leave factories.

This isn’t their business model in the slightest. Quant funds certainly do this, but HFTs look for alpha in market microstructure.

> They have access to person-to-person dark pool trades that never show up on the normal exchanges.

Institutional investors can use dark pools to minimize market impact when trade large blocks. HFTs don’t benefit from having limited information on these flows.

> Algorithmic trading is a secretive black box

Algorithmic trading != HFT in the same manner that a rectangle is not a square.

> It can scale up infinitely.

HFT strategies don’t scale. ‘Scalable’ strategies support a large amount of capital. HFTs run high sharpe, low capacity strategies.

Tweaks like Goldenchaos can help with usability. Volume control becomes a 2-finger slide on the touchbar. It’s not ideal, but it’s certainly better than nothing.

It has been argued that the current environment of low rates is driven by a safe asset shortage [0]. Many investors (e.g. insurance companies, pension funds) need to match liabilities with assets yielding reliable returns. With a constrained supply of safe assets, this demand drives yields down. Austrian economists argue that the resulting level of interest rates may be artificially low, leading to 'malinvestment' [1], a misallocation of investments that ultimately leads to economic contraction.

CDOs attempt to manufacture safe assets from riskier ones. Various debts are pooled, then the pool is divided into 'tranches'. Each tranche has a different rating, indicating riskiness of the tranche, according to the tranche's claim on distributions. A higher rated tranche will get paid before riskier tranches, allowing investors to choose their risk tolerance. Riskier tranches have higher yields commensurate with a greater risk of not being paid.

In theory, this structure is sound, provided that the debt being pooled has known characteristics. During the financial crisis, ratings fraud contributed to the breakdown of CDOs [2]. Lenders made unsound loans and lied about the characteristics of the collateral and the borrowers. Ratings agencies (Fitch, Moody’s and S&P) then rated this debt as being less risky than it actually was, due to having false information and perverse compensation incentives. Additionally, structurers assumed that diversifying geographically would prevent correlated defaults on individual debts (which was not the case). These assumptions led to CDOs having unsound risk pools. More exotic products, like CDO squared (CDOs composed of CDOs), further amplified problems.

Similar products (e.g. CLOs) have been in high demand, as there is a genuine need for safe assets. Ideally CDOs can be produced without succumbing to the issues they faced during the financial crisis. The current interest rate environment exhibits suspicious behaviors, including negative yielding sovereign debt and investment grade/high yield spreads [3][4] roughly as tight as they were prior the financial crisis. Increasing the supply of safe assets may help lead to a rates environment that would previously have been considered normal.

[0] https://voxeu.org/article/safe-asset-shortage-rise-mark-ups-...

[1] https://en.wikipedia.org/wiki/Malinvestment

[2] https://macromarketmusings.blogspot.com/2010/01/academic-vs-...

[3] https://fred.stlouisfed.org/series/BAMLC0A0CM

[4] https://fred.stlouisfed.org/series/BAMLH0A0HYM2/

> mutual fund managers who generally underperform their index for years operating a relatively high-fee fund (compared with ETFs)

There is a bit more nuance here. The fund manager oftentimes has an obligation to follow a given mandate, which may not seek to outperform a given index. For example, investors may want exposure to specific factors (value, growth, momentum, etc.) or asset class (municipal bonds, preferred stocks, etc.). Additionally, investors may seek funds with better risk adjusted returns as opposed to funds with greater absolute returns. In these cases, managers are compensated for delivering on their mandates. The ETF space has similar high fee products.

> Selling a pre-configured hackintosh isn't illegal on any jurisdiction as long as you have a valid license for the OS that you ship

This theory was tested a decade ago by a company named Psystar and didn’t work.

[0] https://en.m.wikipedia.org/wiki/Psystar_Corporation

Technically this is incorrect. Stocks trading below $1.00 may be quoted in sub-penny increments.

> But at some point he was confused why many of his buy/sell orders weren't being executed despite being open for several minutes (hours?) his algo would make bids far away from the current spread, anticipating movement

* Did his levels actually get crossed? It could be that he never had the opportunity to get filled at the price he hoped for.

* What was his queue position? Stock exchanges tend to be price time ordered. If others had submitted orders at the same price before he had, they would have priority when getting filled.

* Apropos the prior point, was his broker actually submitting orders when he sent them? Some brokers may avoid showing deep out of the money orders, which could have affected his queue position.

> He finally concluded that some institutional traders must have access to sub-penny ordering, despite it being against regulation.

There's nothing wrong with this. Reg NMS rule 612 permits sub-penny price improvement [0].

[0] https://www.sec.gov/divisions/marketreg/subpenny612faq.htm#q...

I should clarify I was responding to your assertion that the earth is far past capacity.

~10% of Earth’s land is occupied by humans. Not all of that is arable, but humans have successfully terraformed throughout history and conceivably will become more capable with technological advances.

Malthus is not unique in his prognostications. Ehrlich’s The Population Bomb (1968) was more recent and predicted mass famine by the 1970s. Instead, we produce a massive surplus of food each year, although it’s not distributed adequately at present. This happened well after the Haber process (presumably the fossil fuel dividend you refer to) and occurred as a result of improved farming techniques, equipment, and crops.

Thanks to technological developments in the fossil fuels sector (fracking, horizontal drilling, etc.), fears about running out of oil have largely subsided. Simultaneously, advances in renewable energy sources are rapidly reducing our reliance on fossil fuels. Already, some electric grids are struggling with capacity — not because of a shortage of energy, rather due to an excess of electricity produced by renewable sources.

Although none of this points to an Earth beyond its carrying capacity, it also does not factor in further efficiency gains resulting from future technological progress. At the same time, we are attempting to develop the technology necessary to access extraterrestrial resources. Given that, even the finite resources available on Earth are not necessarily a limiting factor to growth.

> The planet and its resources has a finite carrying capacity. Given we have most of the world in need of developing to reach the levels we enjoy, I suspect we are far past that capacity already

This argument has been made for hundreds of years, and for hundreds of years it's failed to pan out. Perhaps this time is different though.

"The power of population is indefinitely greater than the power in the earth to produce subsistence for man." - Thomas Malthus (1798)

This seems similar to an old technique, 'inoculation', which predates vaccination and was used with some success to protect against smallpox.

[0] https://en.wikipedia.org/wiki/Inoculation

> The fact that they have outlawed and happily tweet about confiscating e-bikes is digusting. NYC has a long ways to go.

e-bikes have been legal in NYC for 1.5 years [0]

[0] https://mashable.com/2018/04/04/electric-bicycle-nyc-ban-end...

> Why hasn't a spot-market for transfer been introduced?

Enron tried to create a market for this.

[0] https://www.wired.com/2001/11/enron-a-bandwidth-bloodbath/

You’re not going to be able to trade swaps with a party that doesn’t have an ISDA.

Journalism, whistleblowing, accessing censored information, preventing stalkers from tracking you, etc.

> Involuntary mental health treatment.

It can be dangerous to give governments carte blanche to do this...

> Sluggish schizophrenia or slow progressive schizophrenia was a diagnostic category used in the Soviet Union to describe what was claimed to be a form of schizophrenia characterized by a slowly progressive course; it was diagnosed even in patients who showed no symptoms of schizophrenia or other psychotic disorders, on the assumption that these symptoms would appear later. The diagnosis has long been discredited because of its scientific inadequacy and its use as a means of confining dissenters. It is considered a prime example of the political abuse of psychiatry in the Soviet Union.

[0] https://en.m.wikipedia.org/wiki/Sluggish_schizophrenia

> To do this they just set the deposit rate under the "floor" to encourage banks to lend above that, but they didn't set a ceiling, assuming it would magically stay in target range?

Yes. The Fed had hoped that IOER would serve as a floor for controlling interest rates, when it ended up acting as a ceiling. They used repo transactions to try and counter this. Prior to ~2007, the Fed used open market operations to maintain a corridor system.

> Does this move mean that the fed is trying to keep its benchmark rate too low and absent market forces it would be much higher?

Fed used to maintain a corridor system, in that they would intervene if effective fed funds went higher or lower than their target. They moved to a floor system, in which they attempted to set a single rate by paying banks interest on reserves (IOER) held at the Fed. For roughly a decade, this worked (a certain arbitrage helped convert this rate from a floor into a ceiling). Recently, effective fed funds has risen above IOER, but Fed was not conducting reverse repo operations to push this down.

> The Fed has been reducing the size of its balance sheet, letting the Treasuries and mortgage bonds it bought following the financial crisis roll off. In turn, that reduces the amount of cash reserves banks hold at the Fed.

I'm somewhat skeptical that the reduction in Fed balance sheet is the impetus for the recent surge in repo rates, especially since the Fed ended its balance sheet unwind in August.

From August 2014 to January 2018, the Fed held $4.4 trillion in assets [0]. From 2014 to 2016, overnight repo rates remained stable and low [1]. In December 2015, the Fed began its hiking cycle. From this point onwards, repo rates began drifting up, consistent with an increasing fed funds rate [2]. It would appear that the changes in repo rates were not driven by Fed balance sheet during this period.

Starting in January 2014, banks held $2.4 trillion in excess reserves at the Fed, peaking at $2.7 trillion in August 2014 [3]. By January 2018, excess reserves held at the Fed had fallen to $2.1 trillion, independent of any change in the size of the Fed's balance sheet. In 2016, repo rates remained steady, despite a $400 billion decrease in excess reserves. In 2017, overnight repo rates drifted up, despite an increase in excess reserves of $200 billion. Here, repo rates do not exhibit any obvious impact from fluctuations in excess reserves.

As Fed balance sheet declined by $700 billion in 2018, excess reserves declined by roughly the same amount. However, even as Fed balance sheet continued shrinking in 2019, repo rates held fairly steady, corresponding to the stable level of the effective fed funds rate.

Given all this, it doesn't look like reductions in Fed balance sheet have been the sole driver of declining excess reserves, nor does it appear that the quantity of excess reserves correlates strongly with overnight repo rates. Furthermore, the Fed announced an August 2019 conclusion of the balance sheet unwind in July's FOMC statement. Finally, excess reserves held at the Fed are now 1000x greater than they were in 2007.

In short, the recent spike in repo rates happened despite a massive overhang of excess reserves and in the absence of a shrinking Fed balance sheet. I wonder if the decline of the interbank loan market, which serves as a source of short term funding for banks, is related. At the time the Fed discontinued reporting interbank loan volume (2018), volumes had declined ~75% from precrisis levels [4]. Such low volumes were last seen in 1979. This, in part, explains the large amount of excess reserves held by banks. If they do not have confidence they will be able to borrow when they need to, they must maintain such reserves.

[0] https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

[1] https://tradingeconomics.com/united-states/repo-rate

[2] https://fred.stlouisfed.org/graph/?g=URW

[3] https://fred.stlouisfed.org/series/EXCSRESNS

[4] https://fred.stlouisfed.org/series/IBLACBW027NBOG

> You mean there has been so much cash around that nobody really needed to get cash via the fed funds market, for quite a while?

Prior to IOER, banks needed to lend money on the fed funds market to earn interest on any excess reserves. Doing so exposed them to the credit risk of their counterparty. Once it became possible to earn IOER risk free, banks had no incentive to expose themselves to the credit risk. Since banks (of all sizes) could not then rely on being able to access the fed funds market for liquidity, it became necessary for them to keep more reserves at the Fed. Perversely, as the quantity of reserves held at the Fed increased, interbank lending decreased (for more detail, see [0] pages 33-39).

> It does seem like the spread between fed funds and IOER is generally just a few bp

Until recently, it looks like the spread has been roughly 5-17bps [1]. For a floor system, it seems rather odd that this would exist at all, especially for a period of a decade (see [0] pages 18-19).

[0] https://www.cato.org/sites/cato.org/files/pubs/pdf/working-p...

[1] https://imgur.com/n3R366c

> That venture has some ROI. The temporarily higher repo rates have to be compared to that. That venture's costs are temporarily going from .002 percent to .02 percent of capital invested. Either way, a small portion. I don't see the emergency beyond "I wish this made the higher profit I am accustomed to".

The difference between rates markets and, say, equities markets is that you think of your risk in basis points and not percentage points. A 10bp change in equities prices on a $1 billion book will cause $1mm change in pnl. However the $1mm dv01 treasury book (with notional $1 billion) will make or lose $10mm with a 10bp change in interest rates. You can see why basis point moves can be much more meaningful in the rates space.

Let's consider market makers now. They are mandated to make money by provisioning liquidity, not by taking views. This means that their return is supposed to come from earning spread and not from being positioned the right way on market moves. This often requires holding and financing hedged positions overnight. If your financing costs are >2bp, there's a pretty solid chance you're going to lose money on the positions you're holding, considering that you hedged them specifically to try to minimize fluctuations. It's not just a matter of making less profit as much as it is one of losing money entirely. Were such increases in financing costs to become prolonged or more frequent, there would be a deleterious effect on rates markets in general.

> The title says "overnight lending market"

This article is about repurchase agreements (repos). They are a form of collateralized loan used in rates trading. If you need to borrow money for a short period, you can do so in the repo market. You sell treasuries to a counterparty, agreeing to buy them back at a later date. You agree to pay an interest rate called a repo rate for this transaction. This is the rate the article is discussing.

> While dealing with assets in the billions

Yes, those costs were computed on a book long 1 billion dollars of notional. There's a difference between notional and risk though. 1 billion dollars of 10y treasuries will be ~1mm dv01. Both matter.

> lending out at higher interest all the time

This isn't how rates trading works. Entering positions costs money. You're not making loans. If you hold treasuries, you're earning the coupon on them for the period that you own them. It gets more complicated when you factor in repo, but typically you pay GC repo when you're long.