👋 ASB Partners Nuggets 2.14.25
This is a short weekly email that covers a few things I’ve found interesting during the week.
Interesting Links/Reads
Many links are sourced from Marginal Revolution
Two trillion dollars in annual savings was the goal bruited by Elon Musk for his DOGE task force. Unrealistic as an aim, it isn’t unrealistic as an estimate of how much money goes out the door without producing any real value for taxpayers. A large, opaque, unaccountable and practically unsupervisable process for disposing of $6.75 trillion inevitably is going to produce many outcomes indistinguishable from setting piles of money on fire.
Let’s be blunt: Getting Congress out of the business of trying to run one of the major industrial enterprises supporting the U.S. economy is such a low-hanging fruit of many-layered deliciousness that bipartisan supporters, including Mr. Gore, have pushed for it for three decades.
4th Quarter Commentary January 2025
3.Closing the carried interest “loophole”
Again, not as obvious as it seems in either direction.
I have some money. You know how to cook. Let’s start a restaurant! But I don’t have that much money, and I’m worried that you won’t work hard. Rather than pay you a salary, why don’t I give you stock in the restaurant? If the restaurant does well, you can sell your stock and make a boodle of money. This is the essence of carried interest.
That seems like a good idea. What’s wrong? Well, if you make your money by selling the stock, you pay the capital gains rate rather than the ordinary income tax rate on the money. Thus, the government, by offering a lower capital gains rate, gives an incentive for us to structure the deal with stock rather than as wages. And the government gets less money, at least before any behavioral response to higher taxes is figured in.
6 .Weekend Thoughts: Diamonds, Tail Risks, and the Assumptions We Take for Granted
I can tell you what I would find useful. If you are especially pessimistic on this front, which are the securities prices that would indicate an actual constitutional problem? Particular equities? Interest rates? The value of the dollar? Measures of volatility? Something else? Don’t restrict yourself to the absolute level of share prices, surely there are favored and disfavored companies and sectors, right?
I am allergic to the view that “fascism could come and market prices would not even budge.” In fact, I think it is extremely skeptical and subversive of democracy, or shall I better say a constitutional republic. I think fascism, or a constitutional collapse, would be a terrible outcome in a variety of very practical ways, in addition to its moral failings. At the very least it would matter for many particular enterprises.
In a variety of other contexts, such as tariffs, market prices have been super-sensitive to the actions of the Trump administration. So people, on this question, which exactly are the measurable, market price indicators? After all, you don’t want to be like those doomster AI skeptics who think no one can trade on the (supposed) truth.
Software development job postings, the trend.
Podcast/Videos
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I hope you enjoyed it.
Adam