My latest at FEE. (They picked the title mostly for irony, I think.) You guys think you’ve placed me in a neat little anti-EMH box, don’t you? And then BAM I write something like this:
Suppose your brother-in-law says: “I’ve got a great stock tip! I found this company, Acme, that makes fireworks. Let’s wait until the end of June, and then load up on as many shares as we can. Once the company reports its sales for July, we’ll make a fortune because of the holiday numbers.”
Clearly, your brother-in-law would be speaking foolishness. Just about everybody knows that fireworks companies do a lot of business around July 4, and so the price of Acme stock in late June would already reflect that obvious information.
More generally, the different versions of the efficient market hypothesis (EMH) claim — with varying degrees of strength — that an investor can’t “beat the market” without access to private information. The reason is that any publicly available information is already incorporated into the current stock price.
My blog is arguably a random walk at this point. You have no idea what I’m going to post tomorrow.
[EDIT: I’m trying to confine my thoughts to the narrow question of Christians taking stands on what they believe are matters of conscience, even though they are sinners according to their own value system. I am deliberately setting aside the question of what state officials should do in regards to marriage licenses. My own view on this is fairly nuanced–as opposed to my view on what Christian pastors of Bible churches should do, which is black and white–but I don’t want to distract from the more specific issue I’m discussing below.]
I’m working on zero sleep right now so this post may lack a solid thesis. But something is not sitting right with me regarding the reaction I’ve seen from many quarters to Kentucky Clerk Kim Davis. Let me fire off some observations before I slump over:
==> I don’t understand why they locked her up. Why don’t they just fire her? If a receptionist at Facebook said, “I refuse to make travel reservations for the investors coming here, because I can’t in good conscience aid the sale of our customers’ browsing habits…” they wouldn’t put her in a cage. They’d escort her from the building and have somebody else carry out management’s policies.
==> I totally acknowledge that it is UNBELIEVABLY awkward, ironic, and hilarious that this woman, who has become the Christian Right’s poster child for the protection of Biblical marriage, has followed the adage “practice makes perfect” in this regard.
==> This is total speculation on my part, but I think perhaps what drives some of these ironic cases is that the person feels really guilty about his or her own shortcomings in a particular sin, and so does a full court press to try to make up for it (perhaps without realizing that that is what’s driving it). In other words, I don’t think it would be news to Kim Davis that the Bible takes a stand against heterosexuals divorcing each other, and I don’t think she views herself as having a license (no pun intended) to do what she wants, whereas others are held to a moral standard.
==> No one on planet Earth is perfect. Anytime anybody voices support for moral living, that person is a hypocrite broadly construed. Yes, I could shake my finger at a triple murderer since I’ve never literally done that, but Jesus would say I’m missing the point. And in any event, I have lied before, so should I not teach my son that lying is wrong? Is a convicted murderer (after serving his time) not allowed to teach his kid that murder is wrong?
==> I know their actions often obscure this fact, but Bible-believing Christians are just about the one group on Earth whose official doctrines say they must NOT consider themselves better than anybody else. If she understands the New Testament, Kim Davis doesn’t think, “I’m so glad I’m not a sinner like those homosexuals over there.” No, the New Testament teaches that Kim Davis and Pat Robertson and I all deserve hell because it’s in our very nature to rebel against God and do evil. The reason we are saved is that God bestowed unmerited grace upon us because it suited His fancy. We in no way earned it.
==> I don’t think I’ve seen anyone come out and say it just in this way, but from some people I sense an undertone along the lines of, “It seems the loudest champions of Jesus are the most awful of people. Imagine my shock. *eyes roll*”
But if that type of observation resonates with you, I remind you that the Pharisees considered themselves righteous too, and scorned the common sinners who followed Jesus. But Jesus set them straight (Mark 2: 16-17):
16 And when the scribes and[a] Pharisees saw Him eating with the tax collectors and sinners, they said to His disciples, “How is it that He eats and drinks with tax collectors and sinners?”
17 When Jesus heard it, He said to them, “Those who are well have no need of a physician, but those who are sick. I did not come to call the righteous, but sinners, to repentance.”
Sorry for the scant blogging, but I’m in the middle of a move to Texas. In six months, when you see the prodigious output of academic journal articles, you will thank me. (Or not.)
==> I have a new Cato working paper on carbon taxes. I co-authored it with climate scientists Pat Michaels and “Chip” Knappenberger. Some of it you guys have seen before, but a lot is new.
==> This was a fantastic episode of the Tom Woods show, where his guest explains how to bring a Costco-type business model to health care.
==> Lew Rockwell interviews John Denson, explaining some of his recent reading on historical U.S. foreign policy. Great stuff.
In the comments to this post, both his wife *and* mom showed up to zing him. We all need to be extra nice to Steve this week.
Jeremiah asks an age-old question (I will omit block quotes to keep the formatting appealing):
12 Righteous are You, O Lord, when I plead with You;
Yet let me talk with You about Your judgments.
Why does the way of the wicked prosper?
Why are those happy who deal so treacherously?
2 You have planted them, yes, they have taken root;
They grow, yes, they bear fruit.
You are near in their mouth
But far from their mind.
3 But You, O Lord, know me;
You have seen me,
And You have tested my heart toward You.
Pull them out like sheep for the slaughter,
And prepare them for the day of slaughter.
4 How long will the land mourn,
And the herbs of every field wither?
The beasts and birds are consumed,
For the wickedness of those who dwell there,
Because they said, “He will not see our final end.”
The Lord Answers Jeremiah
5 “If you have run with the footmen, and they have wearied you,
Then how can you contend with horses?
And if in the land of peace,
In which you trusted, they wearied you,
Then how will you do in the floodplain[a] of the Jordan?
6 For even your brothers, the house of your father,
Even they have dealt treacherously with you;
Yes, they have called a multitude after you.
Do not believe them,
Even though they speak smooth words to you.
7 “I have forsaken My house, I have left My heritage;
I have given the dearly beloved of My soul into the hand of her enemies.
8 My heritage is to Me like a lion in the forest;
It cries out against Me;
Therefore I have hated it.
9 My heritage is to Me like a speckled vulture;
The vultures all around are against her.
Come, assemble all the beasts of the field,
Bring them to devour!
10 “Many rulers[b] have destroyed My vineyard,
They have trodden My portion underfoot;
They have made My pleasant portion a desolate wilderness.
11 They have made it desolate;
Desolate, it mourns to Me;
The whole land is made desolate,
Because no one takes it to heart.
12 The plunderers have come
On all the desolate heights in the wilderness,
For the sword of the Lord shall devour
From one end of the land to the other end of the land;
No flesh shall have peace.
13 They have sown wheat but reaped thorns;
They have put themselves to pain but do not profit.
But be ashamed of your harvest
Because of the fierce anger of the Lord.”
14 Thus says the Lord: “Against all My evil neighbors who touch the inheritance which I have caused My people Israel to inherit—behold, I will pluck them out of their land and pluck out the house of Judah from among them. 15 Then it shall be, after I have plucked them out, that I will return and have compassion on them and bring them back, everyone to his heritage and everyone to his land. 16 And it shall be, if they will learn carefully the ways of My people, to swear by My name, ‘As the Lord lives,’ as they taught My people to swear by Baal, then they shall be established in the midst of My people. 17 But if they do not obey, I will utterly pluck up and destroy that nation,” says the Lord.
I totally understand Jeremiah’s question, but I’m not sure I fully understand the Lord’s response. Anyone?
==> Jeffrey Rogers Hummel on backdoor reserve requirements via Basel. BTW, I don’t like the Alchian & Allen argument that Jeff quotes; I think it gets things backwards when it comes to the function of reserve requirements. But that quibble aside, Jeff is an encyclopedia on the details of central banks.
==> OK North Dakota has given the green light to weaponized drones on U.S. soil, but not lethal weaponry. But if the government ever deploys its flying killer robots on U.S. soil, then it will be time to start complaining about liberty.
==> I realized from Levi’s comment that people are genuinely misunderstanding what I was trying to say in that op ed. I’m not going to try to go through it all right now, but check this out. Back in 2013, Ryan Murphy (no relation) was teasing me in the comments here, saying that I should be rich if I know the Fed is driving the stock market. I brought up that guys like Mark Spitznagel made a boatload of money from the two previous crashes, and Spitznagel is heavily guided by Austrian capital and business cycle theory. (Disclaimer: I was a consultant on that book.)
Ryan then said well let’s see how he does in the future. OK, thanks to von Pepe, I see this WSJ story that Spitznagel’s Universa Fund made a billion dollars on Monday (up 20% for the year). Does that count as “profiting from a prediction”? And no, if I understand his portfolio construction, he didn’t give half of it back later in the week, because he didn’t short the S&P, instead he bought deeply out of the money put options. (Click through to the article if you want more details.)
To be clear, I’m not saying, “The scientific validity of Austrian business cycle theory rests on the shoulders of Universa’s 3q performance relative to a passive mutual fund.” And yes, maybe Spitznagel just keeps getting lucky. My modest point is that if you think you can dismiss my perspective with a one-liner, you’re really not even trying to appreciate what I’ve been saying.
I got this inquiry, with permission to post here:
Message: hey mr. murphy,
i am a junior in high school and this fall, ben bernanke will be speaking at my school. as a follower of yours, i agree completely with your views, and love your wit. i expect that after his speech we will be allowed to ask questions, i was wondering if you had an idea for a question that could really trip him up…
For the record, I do not endorse tripping people.
I am really going to drop it after this, partly because we have devolved into metal chair bashing, and partly because I plan on doing some technical papers while at Texas Tech, and Scott may be one of the few bloggers who appreciates them…
Anyway, in this post Scott first lectures me on how the EMH is falsifiable. Right, I know the academic EMH in the journal articles was falsifiable. What I claimed in my post is that in practice it is non-falsifiable.
What do I mean? Check out this screenshot, showing the comments under Scott’s post:
THAT is what I mean when I say in practice, the EMH is non-falsifiable. We could have the stock market drop 40% in a year, have major investment banks fail, and enter the worst world economy since the Great Depression…and still Scott would be high-fiving his audience when they say, in a Joe Pesci voice, “What? Where’s the problem? Minga, you Austrians act like the market did something.”
(And actually, why does the Great Depression get such a bad rap? I mean, humans went to the moon afterwards. How bad could it have been?)
If you want to believe in the EMH, I’m fine with that. But don’t think it keeps passing empirical tests with flying colors, if you’re using it the way most people on the internet are (including Fama).