Food: Lamb cutlets with sesame bread
This week, my wife tried her hands at baking sesame bread. The crispy bread went very well with the succulent cutlets, which is one of our favorite proteins.
Love: Read aloud channel
This week I uploaded my daughter’s first read aloud to her own private YouTube channel.
We had watched nursery rhymes animation on YouTube with her while she was a toddler. Her then favourite was Twinkle Twinkle Little Stars by Super Simple Songs. I just realised it now has over 1.4 billion views while the channel has more than 23 million subscribers.
When she was older, I would also watch read aloud stories from BBC’s Cbeebies with her.
So when her progress report said she needs to improved her reading, I thought what better way than to ask her to do a weekly recording and post it on YouTube for family and friends to watch. Not to mention it also puts to good use the Focusrite set I recently bought.
Growth: Tom Sawyer’s smarts
Like Tom Sawyer, Luis von Ahn is an expert at getting others to do work and pay for the privilege, or at least do not expect to be paid. He demonstrated this via CAPTCHA and Duolingo. With the former, users signing up for an email account, for example, helped New York Times cleaned up its digital archives. With Duolingo, during the initial years of the business, users learning English were invited to translate English articles from CNN for example to their native languages. Duolingo then sold the translated articles back to CNN and got paid. However, this is no longer part of the business model as, according to von Ahn, translation is a crappy business with prices going down every year.
I learnt the above from Freakonomics’ sister podcast, No Stupid Questions hosted by Stephen Dubner and Angela Duckworth. I had mentioned Freakonomics in an earlier post. I also totally enjoyed Duckworth’s book “Grit: The Power of Passion and Perseverance”, which philosophy pretty much agreed with my own upbringing, and now provides a scientific basis for how I can become a better parent in raising gritty adults.
Luis von Ahn’s experience prompted me to ask the question: can crowd sourcing be used to improve the financial literacy of internet users? For example, is it feasible to have multi-choice questions that help users learn about finance and investments, and also feedback to them how they perform relative to the wider population?
Investment: Fed “Put” is real
The Fed Put is real, says Anna Cieslak and Annette Vissing-Jorgensen in their paper The Economics of the Fed Put (NBER Working Paper 26894). The two economists provided new evidence on the Fed’s reaction to market declines in the last 25 years. In particular:
- A 10 percent stock market decline has predicted a 32 basis point reduction in the federal funds rate at the next Federal Open Market Committee (FOMC) meeting, and a 127 basis point decrease after one year, and
- On average, an additional 2.6 negative stock market mentions in the current or past FOMC meeting minutes (a one standard deviation increase) was associated with a cumulative reduction of 32 basis points in the federal funds rate.
This corresponds well with the evidence from the 2020 pandemic-oil price induced stockmarket decline earlier this year. The S&P500 Index dropped from 3386 on 2020 Feb 19th to 2209 on 2020 Mar 23rd, a decline of more than 30%. At the start of 2020 Feb, the effective Fed Fund Rate (EFFR) was 1.59%. This dropped to 1.09% on 2020 Mar 4th, 0.25% on 2020 Mar 16th, and further down to 0.05% on 2020 Apr 2nd. In fact, a full 150 basis point decrease in EFFR had been achieved in the span of less than 2 months. There isn’t much scope for EFFR to drop further – the current level is 0.09% – unless the USA goes the way of the Swiss.
The authors also noted that “While the FOMC discussions show a clear awareness of the potential moral hazard effects of loose policy following a crisis, these concerns do not appear to have had a major impact on policy choices.”
While I’m not part of the movement, I have to admit that based on the above research, the bros got it right for now – stocks can only go up.
The same cannot be said for derivatives and more esoteric instruments I mentioned in my previous post. I had mentioned that 30-minutes sales sessions with sales representatives from mutual funds and insurance companies are insufficient for 50-year-olds to fully understand the risks of these instruments. I need to add trading platforms and brokerages in addition to mutual funds and insurance companies. This week, a 20-year-old Robinhood customer committed suicide after seeing losses in his options (a type of derivative) trading account, which was also leveraged.
Awe: Beam me up, Scotty
This week, instead of looking to outer space, we look at the subatomic world of quantum mechanics. Researchers at the University of Rochester and Purdue University found ways to demonstrate quantum teleportation using electrons. This has the potential to revolutionise quantum computing. Human teleportation though, is still confined to science fiction for the time being.
