July 7, 2009

Barry Is Back

Barry Ritholtz, television commentator and Big Picture blogger, replies in the Comments, continuing our discussion on whether or not "Diversity was a major factor in the mortgage meltdown:"
We live in very different worlds.

Mine is data and numbers and statistics and facts. In the investment world, by how well your theories of what is really going translates into an investable theme; you are judged by performance, not rhetoric.

Your world is all soft theory and suppositions and squishy reasoning and hard-to-prove causation. In my world, it would be described as "not actionable in the investment realm."

I am happy to visit, but the commute is a bitch.

Funny, though, but I've presented 95%+ plus of the "data and numbers and statistics and facts" in this discussion. Barry had only one set of numbers, and when I pointed out how they were too narrowly specified and were generally irrelevant, well, he had shot his wad in the data department and was forced first to make concessions, then to go back to this kind of bluster.

By the way, Barry, did your "investment world" do a really bang-up job of assessing the value of all those mortgages issued in, say, Riverside-San Bernardino in 2005? (Numbers that were readily downloadable from the federal Home Mortgage Disclosure Act database by October 2006, well before the crash?) Maybe, just maybe, your peers were missing a piece of the puzzle intellectually that would have enabled them to make sense of the numbers?

Barry, it's not your fault that you wrote a whole book about the Crash without thinking about the Diversity angle. Nobody thinks about the downsides of Diveristy. It's just not done in polite society You don't have to get your ego all tied up like this in trying to bluster your way out of admitting you made a mistake. Everybody made the same mistake as you.

The interesting legal question is whether it's against the law to use my insights in offering investment advice. It would almost certainly be disastrous for a mortgage lender to be caught in discovery of a discrimination lawsuit exchanging emails about the higher rates of defaults among Non-Asian Minorities. But is it illegal for an investment adviser to use ethnic demographics in, say, advising clients which states' bonds to avoid?

Certainly, the most sensible thing for an investment adviser like Barry to do would be to incorporate my ideas in his decision-making while loudly claiming in public to not believe them.

My published articles are archived at iSteve.com -- Steve Sailer

34 comments:

billy said...

Ritholtz seems like a nice guy, but the "macro perspective" analysis you find on his site is a bit of a joke. It's nothing beyond what a decently smart undergrad couldn't pull out of his a** after a couple hours on Yahoo Finance.

Fred said...

This isn't complicated: Ritholtz is a liberal. Ideology precludes him from seeing diversity as a problem. Sailer's thesis, had he come up with it early enough, would have easily been investable. All he had to do was short Countrywide and the rest of the gaggle of sub prime mortgage companies.

Anonymous said...

Ritholtz is a mediocre money manager from Long Island, but he presents himself as though he's Jim Simons. He's become completely insufferable over the past 18 months.

Vernunft said...

Steve Sailer, anti-stats? Um.

O

K

Bizarre claim noted.

Anonymous said...

Steve: Quit picking on the class retard! It's not very nice.

Anonymous said...

"In the investment world, by how well your theories of what is really going translates into an investable theme; you are judged by performance, not rhetoric."

Uhm. The investment world just went tits up. Their performance sucked.

Truth said...

Darn! When I saw the title, I was expecting a post on Marion.

Anonymous said...

Uhm...wow. An "investment" guy getting snooty about his "science"...now of all times! Amazing stuff. Empires in decline cling to false religion, I guess. Isn't "The Black Swan" like the best-selling popular "finance" book of all time? You know, the one where he exposes all investment gurus as morons?

Sailer's stuff is always meticulously documented. It's just unpleasant to read and consider. So despite the often crushing obviousness (distressingly well-supported), people will say anything to pretend it's not true, including taking refuge in warm ideological baths.

What Sailer's arguing in the MOST actionable thing in the investment realm, and VERY well-supported, where data is available. It just feels utterly despicable to consider implementing, as it once was, de facto. It's illegal, in fact. But had the actionably-brilliant investment geniuses of the world had some momentary vision of the macro-picture of what was happening, independent of their bonuses--and IDIOTIC MATH, too--maybe we wouldn't be in this mess.

Anonymous said...

It's time for equality.

End affirmative action now.

Anonymous said...

Hey, Mr. Ritholtz: what numbers would you accept?

What numbers should we seek to examine in order to determine whether "Diversity" (that is, political interference in finance, prompting lenders to supply money to less credit-worthy borrowers chosen by skin color, ethnicity, and so-forth), that is, whether "Diversity" played a role in creating the conditions which produced the current depression (i.e., massive lending to speculators in a huge credit bubble, with concomitant waste of vast economic resources as market participants squandered ephemeral paper gains on luxuries)?

rast said...

Steve, you're closer to being right Ritholtz is, but please try being less of a dick about it. You'll catch more flies with honey than vinegar, as they say. Thanks.

Anonymous said...

Go for the kill, Stevie Franchise. You were too soft on Manzi. Attack, attack, attack. Stop being so damned principled.

agnostic said...

I am happy to visit, but the commute is a bitch.

Traveling through the world of ideas is much easier when you're not riding a tricycle.

steve wood said...

"Actionable" means "subject to or affording grounds for a lawsuit." It does not mean "something you can act on." The latter usage is a particularly ugly bit of bastardized English. If Mr Ritholtz is merely mimicking the business-speak of the people he writes about, then the word should be in quotations marks. If not, then he should have said "useful," "practical," or the like.

It's bad enough to make up unnecessary new words, like "signage" or "operationalize." ("Signs" and "implement" are perfectly good existing words, the latter, ironically, having been a previous favorite in business jargon.) To take an existing word and give it an unnecessary new meaning that is completely different, almost opposite, in intent from the original is a sin against the language.

Anonymous said...

"shot his wad"
Well I never! I thought this was a family friendly blog.

Chris said...

Oh yes, Ritholtz is Mr. Data. Mr. Objective. A veritable Spock of economics. What a pretentious, deluded ass.

bjdouble said...

Sure, you've totally outclassed me, but where is your investible thesis?

This is known as moving the goalposts . . . very poor form.

AmericanGoy said...

Completely off topic, feel free not to post this comment Steve-o.

Blatant self promotion here.

If you don't post this, please write about Larry Franklin and the whole sordid affair - Thanks!


AIPAC treason trial - Larry's story:

http://americangoy.blogspot.com/2009/07/aipac-treason-trial-larrys-story.html

Anonymous said...

ritholtz is like every other financial blogger out there. bunch of links, bunch of summaries to other articles, not much unique or valuable content there unless you are a clueless schmo.

not only does sailer have stats, he's also been on housing issues longer than anyone, and on the issues that matter. a real investor would appreciate sailer's content, vs ritholtz recycled middlebrow observations.

looking forward and making prediction about the future is what markets, and investors are supposed to be good for.

one could only wish that more people at the big banks read sailer. i'm sure they do too, if they're even aware it exists. funny thing is most of them might have blocked it as a "blog".

i'm not sure that reading ritholtz actually tells you anything that unique about investing. same recycled stuff available everywhere else.

zylonet said...

--Mine is data and numbers and statistics and facts.--

Facts! Barry is living in fantasy land. The investment world is not driven by facts anymore than Hollywood is driven by facts. To date, there is no reliable model for predicting stock performance. The bulk of the high-profit sectors of the investment community is based on the inflation of the money supply and government debt financing. Is anyone so stupid as to believe that so many can make so much without something nefarious going on? I bet Barry hasn't fully absorbed the plain fact: the financial profits of the past 10 years have been based, in large part, on stealing wealth and opportunity from future generations.

When I was in undergraduate my father wanted me to pursue financial engineering. But just two minutes in a finance class is enough to reveal how soulless that industry is. You create nothing yet make tons of money. Only fraud can enable such a screwed up dynamic.

Lucius Vorenus said...

The Fannie and Freddie debacle: An autopsy
By Michelle Malkin
July 7, 2009 09:57 AM
michellemalkin.com

Republican report puts blame for housing on Fannie, Freddie
By Susan Crabtree
Posted: 07/06/09 06:55 PM [ET]
thehill.com

The Role of Government Affordable Housing Policy in Creating the Global Financial Crisis of 2008
STAFF REPORT
U.S. HOUSE OF REPRESENTATIVES
111TH CONGRESS
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
JULY 7, 2009
20090707HousingCrisisReport.pdf

Danindc said...

Stevie Franchise....man I wish I thought of that....and I could have- it was there for the taking. One concern- Steve Francis was all flash, zero substance whereas Steve Sailer, well, the opposite of course (although I heard he drives a Trans Am).

BJ Double had it right- poor form from Ritholz... BJ Double is a great name as well, damn this blog is taking off- I was here first- I want posterity to remember that whether it is true or not

Reading the Corner recently- basically just look for Derb's posts....how can so many conservatives have so little interesting to say....but Derb tries to sneak Steve in as often as he can. That is all.

Bob said...

BR is right not to take up a fight he can't win, but in another sense he has a good point.

Whatever his methods, he seems to have made money for himself and his clients shorting real estate stocks.

That's all the standard of truth such people care about.

CJ said...

Ritholtz was bearish on both stocks and real estate when most of the other finance pump-and-dumpers were saying this time it's different, get in before you're priced out, yadda. Reading his blog was one of the things that convinced me to get completely out of stocks in the spring of 2008. That was one hell of a break for me personally, so it's tough to hold much against the guy.

Barry has also been very consistently outspoken about the deep-seated outrageous fraud perpetrated by so many on Wall Street in recent years. This sharply distinguishes him from hack pump-and-dumpers like Jim Cramer and can't make him too popular in a lot of circles -- like for instance the ridiculously compromised financial media. One of the factors that IMO led Barry Ritholtz to knee-jerk against criticism of the CRA et al is that he thought it was distracting attention from the real villains of the crooked FIRE economy. Well, that and the fact that he is from New York and today's northeastern financial sector is crawling with Ivy League liberals.

It's unfortunately true that the comment sections of Ritholtz's website The Big Picture has become a sort of liberal nest, but by N.Y. standards Barry R. is not a liberal. When he criticizes deregulation he's talking about the SEC and other examples of regulatory capture. He holds that you simply can't leave it to financial interests to regulate themselves. Considering the disastrous results of recent non-regulation of reinsurance, derivatives, and ratings agencies, it's hard to disagree. He's also been consistently against the TARP, the giveaways to the zombie banks, and the rest of that whole catastrophe. He may be guilty of being a prisoner of a New York mindset and of rushing to judgement about Steve's work, but he's not at all guilty of being a toe tag liberal or a con artist.

One thing BR and SS can agree on is that they both despise George W. Bush. For Steve, it's mostly because of "Invade the World/Invite the World" while for Barry it's because of Greenspan and Paulson and everything they represent. The irony of it all is that they're both largely right.

AMac said...

CJ wrote --

"Ritholtz was bearish on both stocks and real estate when most of the other finance pump-and-dumpers were saying this time it's different..."

CJ, that's a perceptive set of observations on Ritholtz. I concur (FWIW). He's been one of the good guys; it makes little sense to tar him an enabler of Wall Street's business-as-usual.

Sailer's statistics-packed root-cause analysis of the residential real-estate market's inflation and collapse is spot-on. Too bad Rithotz's dogma blinds him to that. However--alas!--the financial crisis extends well beyond toxic mortgage-backed securities. Anyone who supposes that the global recession is largely explained by SWPL Diversity groupthink in the U.S. isn't paying attention.

In that regard, Sailer's Pearl Harbor analogy is a good one.

bg said...

barry is indeed one of the few who foresaw the housing crisis and people who followed his advice did very well. He is above Nouriel Roubini because Roubini is a moron who keeps predicting the end of the world since he got his PhD. People actually got money from Barry´s advice

josh said...

Ritholtz is simply wrong about the value of numbers. Without theory, statistics are worse than useless. Steve's got a theory. On the surface its cogent. It is consistent with any set of numbers you can dig up. The dismissive attitude is over the top.

Obviously Ritholtz doesn't really require "numbers" for all of his beliefs (although at the instance he writes these things, he no doubt thinks he does). Take something like evolution. None of us believe in evolution because of "numbers, but rather because it is completely reasonable. I think Mencius Moldbug said something like "Logic doesn't work because its scientific, science works because its logical." Ritholtz probably doesn't realize the mental leeway he allows himself by applying different standards of evidence for different topics. We all do it. Probably we would be better off if we could do the bayesian thing and settle on a "p".

So Mr. Ritholz, Steve, would you each be willing to give a number? What probability would you give for the following statement being true: "Promotion of "diversity" was a major factor in causing the current recession."

Pat Shuff said...

Lucius Vorenus said...

The Role of Government Affordable Housing Policy in Creating the Global Financial Crisis of 2008
STAFF REPORT
U.S. HOUSE OF REPRESENTATIVES

....awards game, set, match to the iSteve court point by point. Link above, worth reading, a synopsis of Steve's findings over the past year, especially section titled

SPECIAL INTERESTS: THE RISE OF THE “AFFORDABLE” HOUSING
COALITION


"The nexus of political advocates of affordable housing, non-bank mortgage lenders like
Countrywide, the homebuilding industry, and Wall Street firms came together to create a
powerful affordable housing coalition led by Fannie Mae and Freddie Mac and their
congressional allies. This group of vested interests used its money, power and influence
to protect its political prerogatives and profits, blocking repeated attempts at reform and
distorting the relationship between government and business."

Christopher said...

Dude's got a five page Amazon wish list. What's up with that?
http://www.amazon.com/gp/registry/PIBBI29EORHA?ie=UTF8&%2AVersion%2A=1&%2Aentries%2A=0

AMac said...

josh asked --

""What probability would you give for the following statement being true: 'Promotion of 'diversity' was a major factor in causing the current recession.'?"

Steve Sailer has offered a logical and plausible set of theories as to how Diversity contributed to the residential real estate runup and deflation. He's offered specifics as to geography ("Sand States"), timing, and motives. For that matter, he's linked quotes from leaders of the Dems, Reps, Fed, GSEs, banks, and others--we've read of their motivations in their own, contemporaneous words! Sailer has also assembled--and linked--a plethora of statistics around real estate transactions, subprime and prime lending, mortgage delinquencies and default, and price changes. All support his narrative. It's an impressive poly-sci accomplishment.

Barry Ritholtz has offered his opinion that "the CRA" did not contribute to the recession. He's nominated a set of other suspects, most or all of which are likely contributors to the financial crisis. Like other complex failures, the global crisis has multiple roots; this is (1) unsurprising and (2) not a rebuttal of Sailer's thesis.

To my knowledge, Ritholtz has not put forward any theories, numbers, or statistics of his own as far as the (lack of) contribution of Diversity policies to the recession. He has not addressed or rebutted any facts, figures, or analyses of Sailer's.

On the strength of the arguments aired to date, I'd put the probability that Diversity policies contributed significantly to the recession at well over 0.9.

Ronduck said...

All of this talk of affirmative action and the misdirection of loans to minorities is actually proof that we could get the Mexicans out of the US if we wanted to. If jobs and loans can be directed to Latinos and illegals they can be directed away from them by the force of law as well.

David Davenport said...

... he seems to have made money for himself and his clients shorting real estate stocks.

How are we to know that for sure?

Because Barry says so on his blog?

Has Mr. Ritholz ever published any hard facts and data about how much his firm has made by shorting real estate? Or is his money making ability a mere theory which has a veneer of plausibility?

Anonymous said...

Has Mr. Ritholz ever published any hard facts and data about how much his firm has made by shorting real estate? Or is his money making ability a mere theory which has a veneer of plausibility?

And that's a goal!

Assistant Village Idiot said...

Barry - "I am happy to visit, but the commute is a bitch."

Further evidence that for liberals, the wittiness of the response is more important than the accuracy. It's a great line, and I may use it myself. But it didn't apply to his place in the discussion.