Ferguson’s Law & The Peak-End Rule

Daniel Kahneman spent his life studying behavioral economics, cognitive biases and learning why people make irrational decisions. He won the Nobel prize for his research and wrote the most influential book ever on the topic titled “Thinking, Fast & Slow.” At age 90, his closest friends and family were shocked and upset when they received an email from him saying that he would be ending his life through assisted suicide, even though he was still in relatively good health. From his email:

“I am still active, enjoying many things in life (except the daily news) and will die a happy man. But my kidneys are on their last legs, the frequency of mental lapses is increasing, and I am ninety years old. It is time to go. 

Not surprisingly, some of those who love me would have preferred for me to wait until it is obvious that my life is not worth extending. But I made my decision precisely because I wanted to avoid that state, so it had to appear premature. I am grateful to the few with whom I shared early, who all reluctantly came round to support me.

I discovered after making the decision that I am not afraid of not existing, and that I think of death as going to sleep and not waking up. The last period has truly not been hard, except for witnessing the pain I caused others. So if you were inclined to be sorry for me, don’t be.“

Kahneman knew the psychological importance of happy endings. In repeated experiments, he had demonstrated what he called the peak-end rule: Whether we remember an experience as pleasurable or painful doesn’t depend on how long it felt good or bad, but rather on the peak and ending intensity of those emotions. It is the case that in following this carefully thought-out plan, Danny was able to create a happy ending to a 90-year life, in keeping with his peak-end rule. He could not have achieved this if he had let nature take its course.

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One reason why the younger generation doesn’t like to drink is because every moment of their lives is either being filmed or only seconds away from the next picture that will be shared online. “I think that a lot of times we’re so consumed with how other people are looking at us that we don’t even want to risk being considered messy,” said Sofie Ruiz, a sophomore at Texas Christian University. This fear of being perceived as “messy” is fueled by the popularity of the “clean girl” aesthetic. A “clean girl” is often associated with healthy habits like yoga, pilates, green smoothies, and journaling—definitely not heavy drinking. The epitome of the popular girl is now one who projects an image of a balanced, healthy, and often sober lifestyle. This ideal is heavily promoted on social media, influencing what is seen as desirable and aspirational. College campuses also have school-specific social media apps, such as Yik Yak, where a drunken night out can get posted by peers with lasting and embarrassing consequences, said Ruiz. With social media comes permanent and wide-reaching evidence, and students are choosing not to be seen in a certain way in perpetuity.

The reputation repercussions can run deep. Ruiz has a friend who attends a university with its own dedicated Instagram account. Students can send in anything, and it will likely be posted. A female student was kicked out of her sorority for being drunkenly featured on the page. “We grew up a lot hearing the concerns of a digital footprint. People don’t want to risk their future on stuff like that,” said Ruiz. “Guys don’t have as much to be scared about, I think. Because even if they do something embarrassing and it gets posted, they, by history, most likely will not get the same repercussions as a girl might. As a girl, you don’t want to be hungover, you don’t want to feel sick, which also goes into the clean girl aesthetic thing.” “I think that if social media wasn’t a component, it would definitely be a lot different,” she said. The opposite is true with marijuana. Ruiz said that cannabis’s popularity may stem from its perceived social acceptability: “You’re kind of at less of a risk to embarrass yourself because if you’re high, you’re normally just going to chill out. Whereas when you’re drunk, you don’t really have control over your actions.”

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Are there financial determinants of great-power decline and fall? “Ferguson’s Law,” which states that any great power that spends more on debt servicing than on defense risks ceasing to be a great power. The paper identifies the “Ferguson limit,” or the point at which interest payments exceed defense spending, as the tipping point after
which the centripetal forces of the aggregate debt burden tend to pull apart the geopolitical grip of a great power.

This is because the debt burden draws scarce resources towards itself, reducing the amount available for national security, and leaving the power increasingly vulnerable to military challenge. Looking at historical case studies that are analogous to the situation of the modern United States as the dominant global power, it is very rare but not unprecedented for a great power to return to the right side of the Ferguson limit. The United States began violating Ferguson’s Law for the first time in nearly a century in 2024.

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Don’t let your kids get on motorcycles, if possible.

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Atlanta-based Chick-fil-A is on the vanguard of fast-food drive-through science, regularly dispatching specialist teams to its more than 3,000 restaurants to study the minutiae of parking-lot traffic patterns and how employees hand off orders. In years past, some Chick-fil-A operators would climb onto restaurant roofs to study traffic flows. These days, the chain sends out traffic-analysis teams that use drones to capture aerial footage, which team members splice with video from kitchens and drive-through windows to create roughly hourlong videos for store owners. The insights are reshaping Chick-fil-A’s restaurants. One opened outside Atlanta last August with no dining room but four drive-throughs that can serve some 700 cars an hour. A second-floor kitchen prepares food that is delivered to the cars below via a system akin to a dumbwaiter. 

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Turning-Tides in Emerging Markets. A quick history of emerging market cycles, and the case for investing in India, Indonesia and Brazil.

Savoring, Scammers & A.G.I.

For the last couple of months, I have had this strange experience: Person after person — from artificial intelligence labs, from government — has been coming to me saying: It’s really about to happen. We’re about to get to artificial general intelligence. What they mean is that they have believed, for a long time, that we are on a path to creating transformational artificial intelligence capable of doing basically anything a human being could do behind a computer — but better. They thought it would take somewhere from five to 15 years to develop. But now they believe it’s coming in two to three years.

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Seth Godin: “Once you have enough for beans and rice and taking care of your family and a few other things, money is a story. You can tell yourself any story you want about money. And it’s better to tell yourself a story about money that you can happily live with. So if you want more money, you need to understand you’re always going to have to trade something for it, and you need to be very clear with yourself what you’re willing to trade.”

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30 Charts That Show How Covid Changed Everything

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The Atlantic magazine in 1920: “The older generation had certainly pretty well ruined this world before passing it on to us. They give us this thing, knocked to pieces, leaky, red-hot, threatening to blow up; and then they are surprised that we don’t accept it with the same attitude of pretty, decorous enthusiasm with which they received it, way back in the 1880s.” Some things never change.

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Savoring has been defined as “the capacity to attend to, appreciate, and enhance the positive experiences in one’s life.” This can mean focusing on a current, future, or past experience with particular attention to the positive parts. Savoring has been shown in research to stimulate the brain’s striatum, a region involved in processing reward, and is effective in lowering symptoms of depression. The result, correspondingly, is a higher level of reported happiness. 

Savoring positive experiences in the moment also leads to happier memories later on. Researchers found when they instructed people to savor these experiences more fully as they recorded them, their subsequent memories were more vivid, and in effect they enjoyed the experiences more. Easier said than done, unfortunately: We are evolved less to savor the good things in life than to take note of what we dislike and harbor resentments. Humans typically exhibit a “negativity bias,” meaning that adverse events arrest our attention more than positive ones.

This makes sense in an evolutionary sense: Your suspicious, nervous troglodyte ancestors survived to pass on their genes while their blissfully unaware friends became a saber-toothed tiger’s lunch. But in our modern world, largely free of prowling super-predators, our negativity bias tends to be maladaptive. Many scientists have pointed out that a negative disposition makes us error-prone in our predictions, and this anachronistic bias simply lowers our quality of life.

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You want your parents to have health insurance so that medical needs don’t bankrupt them, right? You want them to have car insurance so that if they get in an accident, they don’t need to pay out of pocket to replace an entire car or in case someone sues them for $100,000, right? These are examples of potential economic devastation wrought by a couple different risks. Getting scammed is a risk that can be just as disruptive and economically devastating. 

What advice can I give me parents to protect them from scam calls that is extremely easy and simple to execute that won’t require any judgement in the moment?” I settled on advising them to say this every time a financial institution calls: “Where are you calling from? Thank you. I’m going to hang up and call back.”

Then go find the institution’s phone number (from a statement, the back of the credit card, or by typing in the URL of the website itself and finding it on the website; you can’t just search for the website because scammers can manipulate search results) and call the institution yourself. I also told my loved ones, “And you can always call me if you have any questions about what’s going on or what you should do.”

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Winners of the 2025 World Nature Photography Awards

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Why crashed cars are increasingly totaled; pandemic-era trends accelerated the percentage of vehicles that are declared a total loss, for multiple reasons.

  • The cost of replacement parts spiked.
  • The amount of time needed to get repairs increased, which also increased the amount of time that insurers had to provide loaners to car owners.
  • The cost of loaners soared as car prices skyrocketed, when the chips shortage created production delays.

Independence, Memory & Religion

When you’re independent you feel less desire to impress strangers, which can be an enormous financial and psychological cost. Speaking of hidden forms of debts: How much of what takes place in our modern economy is done purely for signaling reasons? It’s impossible to quantify, but you know it when you see it. And taking an action to impress other people is a direct form of dependence. 

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After shuffling the cards in a standard 52-card deck, Alex Mullen, a three-time world memory champion, can memorize their order in under 20 seconds. As he flips though the cards, he takes a mental walk through a house. At each point in his journey — the mailbox, front door, staircase and so on — he attaches a card. To recall the cards, he relives the trip. This technique, called “method of loci” or “memory palace,” is effective because it mirrors the way the brain naturally constructs narrative memories: Mullen’s memory for the card order is built on the scaffold of a familiar journey. 

Analyses have generated a new understanding of how the human brain constructs narrative memories. Nearly the entire brain is involved, contradicting earlier ideas that placed memory in specific brain regions. And memories are built in temporal pieces, each of which ranges from a second to a minute in length. The brain places those pieces onto the scaffolds of event scripts. It’s all a construction. It’s not like you have this video camera of exactly what happened, exactly as it happened. You have to reconstruct, based on pieces of the experience, what you think happened.

The brain doesn’t simply record what it perceives. Instead, much if not most of the brain’s reaction to an event or story originates in memories of how that type of event usually plays out. In other words, we process the present through the past.

There are two critical steps to constructing memories. As we go about our day, we record the new experiences in pieces of varying size and complexity, from simple perceptions to stunning plot twists. Meanwhile, our brains access templates for these new events based on knowledge of similar ones, and place the pieces of the evolving memory in that context. Memories, it turns out, are more like paint-by-number than rendered from scratch on a blank canvas. The way we experience and remember events arises largely from our mental state, as opposed to properties of the events themselves.

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We report eleven studies that show declines in life satisfaction and happiness among young adults in the last decade or so, with less uniform trends among older adults. In the U. S. life satisfaction rises with age. This is broadly confirmed in several other datasets including four from the European Commission across five other English-speaking countries: Australia, Canada, Ireland New Zealand and the UK. There is broad evidence across all of these English-speaking countries that happiness and life satisfaction since 2020 rise with age. In several of these surveys we also find that ill-being declines in age. The U-shape in well-being by age that used to exist in these countries is now gone, replaced by a crisis in well-being among the young.

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Which Sports Provide the Best Return on Your Time Investment? Football has the greatest amount of “false advertising” in terms of how much time the game actually takes versus how long it lasts on the clock. Hockey, by contrast, is the most honest American sport — with a ratio of 2.5 “real” minutes per minute on the scoreboard — with NBA games checking in right behind at 2.8 “real” minutes per clock minute.

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The U.S. has become much less Christian, driven in large part by Gen Z and younger Millennials, according to a new Pew study. “We’ve had rising shares of people who don’t identify with any religion — so-called ‘nones’ — and declining shares who identify as Christian, in all parts of the country, in all parts of the population, by ethnicity and race, among both men and women, and among people at all levels of the educational spectrum,” he says about the survey findings. A significant portion of U.S. adults (35%) have switched from the religion of their childhood.

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Lessons From This Year’s Berkshire Hathaway Letter. Sixty years ago, Warren Buffett bought control of Berkshire Hathaway. He’s highlighted that mistake on and off ever since. He did so once again in this year’s annual letter, which came out over the weekend.

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India is best thought of as a country of 1.4 billion people of whom about 300 million are leading a relatively comfortable life in major cities like Bombay and New Delhi while 1.1 billion are in rural or urban poverty.  India is poor but 300 million middle-class citizens is a population almost the size of the United States. Again, that’s the point. A U.S.-sized middle-class population already exists in India with 1.1 billion more people waiting to join the ranks. The growth potential is almost beyond comprehension.

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My quest for cheap stocks has led me to South America. Specifically, Brazil. The largest Brazil ETF, EWZ, currently trades at around 8x earnings with an 8% dividend yield. An entire country ETF offering an 8% yield. Meanwhile, the dividend yield on the S&P 500 is 1.27%. EWZ trades at 1.5x book value, while the S&P 500 currently sits at 5.01x (a higher multiple means stocks are more expensive). The chart combines seven metrics to show just how expensive the U.S. stock market has become.

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The U.S. stock market as a whole is the most expensive in the world, but when you pull out just the technology stocks, they are on another planet in terms of how they’re priced relative to their earnings.

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Jim Chanos spoke with Paul Krugman this week on market sentiment, A.I. and data centers:

How about the capital being employed? There better be something new. I mean, we’re talking now for the just a top handful of companies doing $300 to $500 billion in capex [capital expenditures] annually. I mean, AI isn’t like the internet, which made things more capital efficient and raised returns on capital. So far, AI is doing the opposite. It is a massively capital-intensive business. Someone joked that the top tech companies are now looking like the oil frackers did in 2014, 2015, where more and more capital is chasing arguably a variable return.

Fracking technology has revived the U.S. oil and gas industries, and along with renewables, has made America energy-independent for the first time in generations. But the fracking companies themselves turned out to be far less profitable than they led investors to believe.

Midlife, Luck & Nostalgia

John Gardner worked as a director of Shell Oil, American Airlines, New York Telephone and Time Inc, in the nonprofit world as a foundation president, in federal government as a cabinet officer, in the military as a Marine Corps officer and member of the Scientific Advisory Board of the Air Force. The paragraphs below are clips from a speech he gave at age 79 :

“When you reach middle age, when your energies aren’t what they used to be, then you’ll begin to wonder what it all added up to; you’ll begin to look for the figure in the carpet of your life. I have some simple advice for you when you begin that process. Don’t be too hard on yourself. Look ahead. Someone said that “Life is the art of drawing without an eraser.” And above all don’t imagine that the story is over. Life has a lot of chapters.

It isn’t a bad idea to pause occasionally for an inward look. By midlife, most of us are accomplished fugitives from ourselves. The things you learn in maturity aren’t simple things such as acquiring information and skills. You learn not to engage in self-destructive behavior. You leant not to burn up energy in anxiety. You discover how to manage your tensions, if you have any, which you do. You learn that self-pity and resentment are among the most toxic of drugs. You find that the world loves talent, but pays off on character.

You come to understand that most people are neither for you nor against you, they are thinking about themselves. You learn that no matter how hard you try to please, some people in this world are not going to love you, a lesson that is at first troubling and then really quite relaxing. Those are things that are hard to learn early in life, As a rule you have to have picked up some mileage and some dents in your fenders before you understand. As Norman Douglas said “There are some things you can’t learn from others. You have to pass through the fire.’

So you scramble and sweat and climb to reach what you thought was the goal. When you get to the top you stand up and look around and chances are you feel a little empty. Maybe more than a little empty. You wonder whether you climbed the wrong mountain. But life isn’t a mountain that has a summit, Nor is it — as some suppose — a riddle that has an answer. Nor a game that has a final score.

Young people run around searching for identity, but it isn’t handed out free any more — not in this transient, rootless, pluralistic society. Your identity is what you’ve committed yourself to. It may just mean doing a better job at whatever you’re doing. There are men and women who make the world better just by being the kind of people they are –and that too is a kind of commitment. They have the gift of kindness or courage or loyalty or integrity. It matters very little whether they’re behind the wheel of a truck or running a country store or bringing up a family.”

(Full speech here).

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Our egos are hardwired to fall into the trap of confounding luck and skill. Suppose you decide to drive drunk and you make it home safely. That was a bad decision with a good outcome. One week later, after a good night of drinking Zinfandel, you ask a designated driver to drive you home. The driver gets into an accident. That was a good decision with a bad outcome. (Setting aside that you drank Zinfandel, which clearly is a horrible decision.)

Because of randomness, outcomes are often silent on the quality of decisions. Worse, they can mislead. In a world in which we can’t predict much of the future, good decisions can lead to bad outcomes, and bad decisions can lead to good outcomes. In the business of investment management, we say there’s “randomness.”

This problem is acute in the investment world. You can make money, at least for a while, by making bad decisions like holding a concentrated portfolio or investing in fads. If you don’t examine your process and the quality of your decisions, in other words, if you only focus on outcomes, you may think you’re an absolute genius. But you’re unlikely to be a successful investor in the long run.

Annie Duke’s excellent book, Thinking in Bets, has become required reading in the investment world. Duke is a business consultant and ex-professional poker player. She explains that we instinctively associate good results with good decisions and bad results with bad decisions. She calls this instinct “resulting.” But in poker and many aspects of life, “winning and losing are only loose signals of decision quality.”

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Nostalgia for terrible things may sound absurd, but many people experience it, for reasons that speak to the way people make meaning of their lives. The central reason for this phenomenon, according to researchers who study nostalgia, is that humans look to our past selves to make sense of our present. Reflecting on the challenging times we’ve endured provides significance and edification to a life that can otherwise seem pointlessly difficult. The past was tough, we think, but we survived it, so we must be tough too.

To be sure, part of the explanation is that people tend to romanticize the past, remembering it more rosily than it actually was. Thanks to something called the “fading affect bias,” negative feelings about an event evaporate much more quickly than positive ones. As a difficult experience recedes in time, we start to miss its happier aspects and gloss over the challenges. And nostalgia is usually prompted by a feeling of dissatisfaction with the present, experts say, making the past seem better by comparison.

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An excellent discussion on bubbles in financial markets and why they seem to be repeating in specific asset classes faster than they did historically.

It used to be assumed that the financial memory should last, at a maximum, no more than 20 years. This is normally the time it takes for the recollection of one disaster to be erased and for some variant on previous dementia to come forward to capture the financial mind. It is also the time generally required for a new generation to enter the scene, impressed, as had been its predecessors, with its own innovative genius.

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The Cryptocurrency Scam That Turned a Small Town Against Itself. How did a successful, financially sophisticated banker gamble his community’s money away? The behavioral psychology case studies around crypto are simultaneously heartbreaking and endlessly fascinating.

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Japan has experienced severe economic stagnation for two decades, but it is still a desirable place to live and work. Why? The major costs of living, like housing, energy, and transportation are not particularly expensive compared to other highly-developed countries. Infrastructure in Japan is clean, functional, and regularly expanded. There is very little crime or disorder, and almost zero open drug use or homelessness.

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Money, Happiness & Cancer

William Vanderbilt was the son of the great Cornelius Vanderbilt. When his father died, Cornelius was the richest person on the planet. Billy took his father’s wealth and almost immediately doubled it with some shrewd business maneuvers (in today’s terms, imagine Elon Musk’s son inheriting $500 billion when he dies and then investing it and quickly doubling it to $1 trillion). Being the richest rich person didn’t make William Vanderbilt any happier:

“The sheer magnitude of his fortune, he told Chauncey Depew, gave him no advantages over men of moderate wealth. “I have my house, my pictures and my horses, and so do they. I can have a steam yacht if I want to, but it would give me no pleasure, and I don’t care for it.” On another occasion he spoke of a neighbor saying, “He isn’t worth a hundredth part as much as I am, but he has more of the real pleasures of life than I have. His house is as comfortable as mine, even if it didn’t cost so much; his team is about as good as mine; his opera box is next to mine; his health is better than mine, and he will probably outlive me. And he can trust his friends.”

Being the richest person in the world brought him, he said, nothing but anxiety.

The founder of MVMT recently sold his company for $100 million at age 29. He recently posted on Reddit how two years after selling his company he’s lonelier than ever and deeply depressed. Money dramatically improves everyone’s lives up until the point they can relax and be content. After that, assuming they are in moderately good health, almost all happiness comes internally.

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The largest medical A.I. randomized controlled trial yet performed, enrolling >100,000 women undergoing mammography screening, was published today. The use of A.I. led to 29% higher detection of cancer, no increase of false positives, and reduced workload compared with radiologists without A.I.

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The Drug Industry Is Having Its Own DeepSeek Moment. It isn’t just artificial intelligence—Chinese biotechs are now developing drugs faster and cheaper than their U.S. counterparts. Many top scientists trained in the U.S. have returned to China over the past decade, fueling the emergence of biotech hubs around Shanghai. And just as DeepSeek built a formidable chatbot—allegedly on a lean budget with limited access to semiconductors—Chinese biotech companies are also scrappier, capitalizing on a highly skilled, lower-cost workforce that can move faster. Additionally, companies can conduct clinical trials at a fraction of what they would cost in the U.S., while recent changes in the Chinese regulatory system have streamlined and accelerated the approval process to get a study started.

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A new study by Stanford University researchers finds that the average online sportsbook customer expects a gain of 0.3 cent for every dollar wagered. In reality, sports bettors lose an average of 7.5 cents per dollar wagered, reflecting widespread overoptimism about financial returns. We found that people more or less understood the amount of money they had lost in the past, but they just thought the future would be better. Parlay bettors do so much worse than single-outcome bettors and are so much more overconfident in their chances that they likely account for most of the excessive optimism in the overall sample.

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Only 13% of U.S. imports come from China:

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European stocks have under-performed U.S. stocks in 12 of the last 15 years. However, the pedestrian pace of the European economy and markets could be a virtue for investors in the years ahead. Europe suffers from none of the over-building excesses that haunt the Chinese economy. European equity markets have none of the bubbly valuations that pose a threat to U.S. stocks. A starting point of a weak euro and monetary easing, combined with a high savings rate and fiscal capacity has the potential to boost both economic growth and dollar-denominated returns on European equities. Attractive dividend yields can allow European equities play a respectable role in generating income. Moreover, political pressure from within Europe, along with the threat of tariffs from the United States, could motivate bolder action from European policymakers in both deregulation and fiscal stimulus, triggering greater economic momentum. The strongest case for European equities is simply a value case. At the end of January, the MSCI Europe ex-UK had a forward P/E of 14.7 times compared to 21.8 times for the S&P500, a discount that is more than two standard deviations greater than its average over the past 20 years. It also sported a dividend yield of 3.3% compared to 1.3% for the S&P500.

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The silver market is heading into a perfect storm. Even in our most conservative case, holding everything but solar demand constant, we’re looking at potential deficits of 100-200 million ounces annually for the next decade. Solar panels now consume one in four ounces of silver mined globally. Even at current solar installation rates – before factoring in any AI-driven surge in energy demand – we’re looking at a supply-demand gap as large as the entire elastic (price-sensitive) portion of silver supply. Solar demand is structurally inelastic – panel manufacturers will buy silver at almost any price because it represents a tiny fraction of total costs but is essential to functionality. The sheer scale of the energy transition dwarfs anything in silver’s industrial history – we’re talking about rebuilding the entire global energy infrastructure.

Marriage, Scammers & Losing It On Live TV

Losing It on Live TV. Lorne Michaels reportedly dislikes when “Saturday Night Live” cast members break character. But over 50 seasons, it’s become one of the show’s signature moves — one that usually delights the audience.

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A common narrative is that less people are getting married, and the number of births is declining because more college educated women are choosing their jobs over starting a family. In reality, the graph below shows it’s the opposite. The married rates for college educated women have held steady, while the number of non-college educated married women has plummeted.

The reason: Men without degrees have seen their economic prospects decline over the past few decades. These financial troubles have led to lower marriage rates for men — and for women without four-year degrees (even as these women have seen their incomes rise). In other words: a “good” man has become harder to find, at least for women with less than a four-year degree. So, they’re getting married less.

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Scammers are seen as faceless, evil people who make Aussie lives a living hell. We decided to track down a scammer, and this is how and why he does it. He worked alongside hundreds of others aiming to steal money in a ‘pig butchering’ romance scam in a sophisticated operation designed to part unsuspecting victims from their cash. This type of scam devastates thousands of Aussies a year.

Seen below, scammers will queue up “the model” to speak to the victims on video calls.

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The Endowment Effect is sneaky. It whispers, “Hold on. This is yours. It’s special.” But the truth is, nothing is special just because you own it. A bad stock doesn’t become good because it’s in your portfolio. A house isn’t worth more because you have memories in it. How do we fight the Endowment Effect?

  1. Ask: If I didn’t own this, would I buy it today? If the answer is no, it might be time to let go.
  2. Detach from the purchase price. The stock doesn’t know what price you bought it at.
  3. Think like an outsider. What advice would you give a friend in your position?
  4. Set clear exit rules. Have a plan for when to exit an investment before you even enter.
  5. Seek a devil’s advocate. Have someone play devil’s advocate to convince you out of your decision to hold.

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The graph below shows wealth concentration/inequality among top the 10% in the OECD member countries. The United States is unlike anywhere else in the world:

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How many decades since 1900 has the United States stock market outperformed the rest of the world? Only 3:

  • 1900’s
  • 1910’s
  • 2010’s

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America dominates the rest of the world in venture capital (VC) investments:

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Perhaps the single greatest divergence in equity markets has been the continued outperformance of US versus international equities—and thus the widening of the valuation gap between the US and the rest of the world. To try and determine why, we regressed value against the other common risk factors for the top 1,000 stocks globally. By far the most significant difference, explaining about half the valuation gap, is the domicile of listing. US-listed stocks are substantially more expensive than internationally listed stocks for no reason other than the place of listing.

Were a larger percentage of the valuation gap explained by fundamentals; we’d expect such a gap to persist. But given that the valuation gap is primarily explained simply by the location of listing, we think there’s a strong reason to expect a convergence—and therefore to favor international over US-listed stocks, despite their terrible relative performance over the past decade.

Figure 1: Premium of US vs. International Equity Valuations (5-Year Average, P/B)

Stories, Failing & Fartcoins

63 life lessons/principles from Nabeel Qureshi, including:

  • Think about what makes you ‘imbalanced’ as a personality, & do things where this gives you an edge.
  • Once you are ok with people telling you ‘no’, you can ask for whatever you want.
  • Doing as much as you can every day is a form of life extension.
  • Always be high integrity, even when it costs you. The shortcuts aren’t worth it.
  • Figure out what your primary focus is and make progress on that every day, first thing in the morning, no exceptions. Days with 0 output are the killers.
  • If you find yourself dreading Mondays, quit.
  • No matter how bad things seem, everything passes.
  • Form opinions on things and then find the strongest critique of those opinions. Repeat.

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The function of the mind is to process information and to interpret it according to its unique perceptions. It’s not a fact-gathering machine, but an opinion-generating one. It attempts to find the personal narrative that weaves through everything it knows, and will then communicate that opinion in the hopes that it will resonate with others. In other words, AI can give you all the information you want, but that’s not what creativity is. Creativity is about finding the unique connections within those facts and communicating the result to others, and that can only be done through the skill of storytelling.

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The reason we hate being bad at things and failing is because when goal-directed activity is inhibited or blocked (either by an outside force or our own lack of aptitude), that stimulates our dorsal anterior cingulate cortex, which is part of the brain’s pain circuitry. This is the same region affected when we experience social rejection. This kind of mental pain does, however, have an evolved benefit—creating the motivation to succeed, if not at the activity at hand then at some other one.

This motivation effect is detectable in business activities. When employees are frustrated by their relative incompetence at one task, they tend to be motivated to show more competence for something they’re already better at.

Ruminating on failure is widely recognized to be a destructive waste of time, because this type of reflection focuses on self-worth and what failure says about one as a person. Action rumination is different: It is task-focused and involves replaying the exact missteps that one made and how they could be rectified in the future, which can lead to learning and improvement as opposed to frustration and chagrin.

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Are we overprescribing antidepressants in the U.S. or are things worse here?

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The probability of divorce for married people has been declining steadily for a long time, and in 2023, a record-low 1.4% of married adults got divorced.

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A global perspective on what the DeepSeek A.I. technology out of China means for the economy and financial markets, from a the CEO of a research company that is from France, has a child going to school in the U.S., and works in Hong Kong.

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The lunatic fringe of the U.S. financial system seems to be experiencing a speculative mania involving cryptocurrencies and crypto-related stocks. It could be called the Fartcoin stage of the market. The current meme coin mania makes the bubble of 2021 seem like a relatively sober exercise in rational valuation. At least back then, Roaring Kitty talked about earnings, and crypto enthusiasts rhapsodized about use cases. They might have been delusional, but at least they were delusional about the right things. Karl Marx said that history repeats, first as tragedy, second as farce. He was too optimistic. The truth is that history repeats, first as tragedy, second as farts.

College, Cancer & Wages

The share of elite MBA grads still looking for work 3+ months after graduation is up sharply at practically every high-ranking school. The traditional elite-MBA absorption process—1) Get degree; 2) Glide path to Big Tech/Consulting—seems disrupted.

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Gen Z is the most money-centric generation we’ve seen yet.

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The face of cancer in the U.S. is getting younger—and more feminine. Cancer rates for women in the U.S. have risen over the past half-century, particularly among women under age 65 diagnosed with breast cancer. For decades, the cancer burden in the U.S. was higher for men, who started smoking en masse in the 20th century. Their rates of lung-cancer cases and deaths soared. Lung cancer remains the biggest cancer killer for men in the U.S., but case and death rates have dropped, after smoking rates declined. 

Women started smoking heavily later than men and have been slower to quit, so their lung-cancer decline started later and hasn’t been as steep. That has had a significant impact: Lung cancer incidence among women under 65 was greater than among men for the first time in 2021. Women are also more likely to get diagnosed with lung cancer as nonsmokers. 

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We rank nine major U.S. airlines on seven equally weighted operations metrics: on-time arrivals, flight cancellations, delays of 45 minutes or more, baggage handling, tarmac delays, involuntary bumping and what the Transportation Department calls passenger submissions (which are mostly complaints).

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Parlays, the tough-to-win multipart wagers with tantalizing payouts, are bringing in casual and newbie gamblers, and betting companies are making a killing. FanDuel said 90% of its same-game parlays, or bets on multiple developments within one event, have a wager of $30 or less, while 60% are $5 or less. About 20% of all money spent by DraftKings on national TV advertising last year hyped parlays, compared with 11% in 2022.

Parlays accounted for about 27% of the money wagered on all sports bets last year through October in Illinois, New Jersey and Colorado, states in which gambling regulators report data by bet type. That’s up from 22% of all sports bets in 2021. The multi-leg bets delivered about 56% of sports-betting revenue after payouts for companies in the three states during that period, up from 50% in the same stretch of 2021. 

Multi-leg bets are so lucrative that FanDuel parent company Flutter Entertainment recently increased its expectation for total online gambling revenues in the U.S. to $63 billion by 2030, up from its estimate of $40 billion two years ago, driven in part by parlays, the company said.

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People are usually surprised when they see how Japan has grown its dividends at a 6.9% annual clip over the last 20 years, outpacing the 6.7% growth pace of the S&P 500. Japan trades for 13.5x forward earnings, or a 37% discount to the S&P’s P/E of 21.3.

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A massive wage arbitrage has opened between the US and its competitors. The overwhelming majority of people in the US have no idea just how much more money they make than the Japanese, French, British, etc.

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Of the stock market’s 10 largest companies, there are more that trade for a P/E > 30 than there were on Dec. 31, 1999. With the exception of maybe AT&T, every single one of 1999’s top dogs were considered unstoppable, dominant, kings, never to be unseated. Until they were.

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US stocks are expensive relative to the rest of the world, even if you excludes big tech:

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Stress, Attractiveness & Stocks

Minimum Levels Of Stress, a phenomenal new article by one of my favorite authors; Morgan Housel.

A day after the September 11th terrorist attacks, every member of Congress stood on the steps of the U.S. Capitol and sang God Bless America. Could you imagine that happening today? It’s easy to say no, given how nasty politics has become. But if America faced an existential crisis like 9/11 again, I think you’d see the same kind of unity return. There’s a long history of enemies putting their differences aside when facing a big, devastating threat. People get serious when shit gets real. If that sounds like wishful thinking to you, let me propose a reason why: Part of the reason today’s world is so petty and angry is because life is currently pretty good for a lot of people.

There are no domestic wars. Unemployment is low. Household wealth is at an all-time high. Innovation is astounding.

As the world improves, our threshold for complaining drops. In the absence of big problems, people shift their worries to smaller ones. In the absence of small problems, they focus on petty or even imaginary ones. Most people – and definitely society as a whole – seem to have a minimum level of stress. They will never be fully at ease because after solving every problem the gaze of their anxiety shifts to the next problem, no matter how trivial it is relative to previous ones. Free from stressing about where their next meal will come from, worry shifts to, say, a politician being rude. Relieved of the trauma of war, stress shifts to whether someone’s language is offensive, or whether the stock market is overvalued.

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The graphics below show that in general, men rate women more highly than women rate men.

A summary and thoughts on the data from the author:

  • The typical woman is disgusted by the typical man
  • The typical woman is moderately disgusted by the median man
  • The typical woman is strongly disgusted by the bottom quarter of men
  • Men should stop taking rejection so personally. When the typical women rejects you, the problem isn’t so much that she finds you unappealing. The problem is that the typical woman finds almost all men unappealing.
  • Men should try harder to be less disgusting. 
  • Women should try harder to be less disgusted. Most women eventually accept a guy who isn’t visibly attractive. Much of the reason is that superficially unappealing guys win them over with charm, humor, and devotion.
  • It’s not hard to use evolutionary psychology to explain why the typical man disgusts the typical woman: Since women’s maximum reproductive capacity is strictly limited, they’re evolved to be hypergamous, with a strong preference for mating with the best of the best.

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Numerous studies show a strong relationship between stock market valuation and long-term subsequent returns. Since 1979, global stock market indices have been valued on average at a Shiller-CAPE of 20 and a price-to-book ratio (PB) of 1.9. Investors who invested at attractive valuations in recent decades were able to achieve above-average returns over the following 10-15 years. Those who bought at high valuations, on the other hand, were generally disappointed in the long term.

Here’s a look at where countries stand today. The lower left are the least expensive countries/stock markets and the upper right are the most expensive. You can see that India is off the charts expensive while the United States is in another solar system based on how overvalued it is.

What long-term stock market returns can investors expect in the 20 most important stock markets based on valuation?

  • Based on CAPE and PB, Latin America and Asia currently show the lowest valuations, particularly in Brazil, Korea and China. These equity markets are currently trading at a CAPE of 9-12 and a PB of 0.9-1.4.
  • Historically, comparably attractive valuations have been followed by above-average returns of 9-11% (in real terms) over the next 10-15 years.
  • In general, the emerging markets (with the exception of India) are currently valued much more attractively than the developed markets. Historically, comparable valuations in the emerging markets have been followed by annual returns of 7.7%, while the developed markets are expected to achieve rather low returns of 2.5%.
  • The low return expectations of the developed equity markets are caused by the extremely high US valuation: with a CAPE of 35.4 and a P/B ratio of 5.1, the US market is trading at around twice the level of recent decades. In the last 140 years, such high valuations have been followed by long-term returns of only 0.1% p.a.
  • Among the developed markets, Germany, Italy, Japan, Singapore, Spain, Norway and the UK still appear attractive. Investors here can expect annual returns of 7-8% in the long term here.

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Anti-Social, Bubbles & Walking

Derek Thompson wrote a great article this week called The Anti-Social Century: Americans are now spending more time alone than ever. It’s changing our personalities, our politics, and even our relationship to reality. He also released a podcast episode discussing the article.

  • Men who watch television now spend 7 hours in front of the TV for every 1 hour they spend hanging out with somebody outside their home.
  • The typical female pet owner spends more time actively engaged with her pet than she spends in face-to-face contact with friends of her own species.
  • From the late 1970s to the late 1990s, the frequency of hosting friends for parties, games, dinners, and so on declined by 45%, then it got worse. Between the early 2000s and the latest data, the average amount of time that Americans spent hosting or attending social events declined another 32%.
  • A 5-percentage-point increase in alone time is associated with about the same decline in life satisfaction as was a 10% lower household income.
  • From 1965 to 1995, the typical adult gained 6 weekly hours in leisure time. They funneled almost all of it into one activity: watching TV.
  • In 1970, just 6 percent of sixth graders had a TV set in their bedroom; in 1999, that proportion had grown to 77 percent.
  • The share of boys and girls who say they meet up with friends almost daily outside school hours has declined by nearly 50 percent since the early 1990s.
  • Today’s adults spend an additional 99 minutes inside their homes on any given day, compared with 2003.
  • The share of U.S. adults having dinner or drinks with friends outside the home on any given night has declined by more than 30% in the past 20 years.
  • Restaurants used to be the ultimate “social” business. But today, just one-quarter of restaurant traffic is “on-premises”—that is, sitting, ordering, talking with people at a table. With the rise and rise of delivery 74% of all restaurant traffic now comes from “off premises” customers—takeout and delivery. And solo dining has increased by 29% in just the past two years. The top reason given? The need for more “me time.”

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Gen Z spends an average of 109 days per year looking at a screen. Eighty percent of our waking hours are spent consuming information, up from 40% in 1980.

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Do You Even Maxx Bro? Chewing-gum workouts for sharper jawlines. Specialty products for feathered bangs. So. Much. Cologne. Exploring the extreme self-care trends shaping a generation of young men.

In the past, I might have tuned out a very online trend like looksmaxxing, but I regret to inform you that we can’t skip this one. Because looksmaxxing might be the key to understanding Gen Z and Gen Alpha behavior, knowing where they’re headed, and, frankly, answering a larger question you’ve definitely thought about: Are young men okay?

Someone unexpected has emerged as an unlikely Gen Alpha role model: American Psycho’s Patrick Bateman, the yoked killer from the 1991 Bret Easton Ellis novel, memorably played by Christian Bale (and his cheekbones) in the film. In forums on Reddit , looksmaxxers have coalesced around Bateman, whose well-moisturized face has become an extremely popular profile pic for self-described “sigmas,” a Gen Alpha term for independent men who prioritize power, class, and self-control, known to attract beautiful women aroused by their bank accounts.

As Bateman says in the film: “You can always be thinner…look better.” For many, that starts with “mewing,” a non-medical technique that involves pressing your tongue to the roof of your mouth to reshape your jawline. Men now receive ads for Jawliner gum, part of a new category of fitness chewing gums, which is 10 times harder to chew than a standard piece and is designed to tone the masseter muscles in their face. Terms like brotox have made their way into professional conversations, and more men have been seeking jawline-enhancing procedures.

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Great newsletter from Howard Markets this month discussing bubbles and valuations in the market using historical examples from his decades of experience in the financial industry (started in 1969). Some highlights:

  • In bubbles, investors treat the leading companies—and pay for their stocks—as though the firms are sure to remain leaders for decades. Some do and some don’t, but change seems to be more the rule than persistence.

My early brush with a genuine bubble caused me to formulate some guiding principles that carried me through the next 50-odd years:

  • It’s not what you buy, it’s what you pay that counts.
  • Good investing doesn’t come from buying good things, but from buying things well.
  • There’s no asset so good that it can’t become overpriced and thus dangerous, and there are few assets so bad that they can’t get cheap enough to be a bargain.

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Studies continue to show that any type of movement (even just taking a simple walk) can be extremely beneficial for mental health.

  • Researchers analyzed 33 studies examining the movements of nearly 100,000 adults using smartphones, pedometers and other fitness trackers. Those who clocked more daily steps were less likely to report depressive symptoms or be diagnosed with the condition than those who walked less.
  • Participants ranged in age from 18 to 91 years old and lived in 13 different countries. Those who logged at least 5,000 or more daily steps were less likely to experience depressive symptoms, with the greatest effect coming for those who logged more than 7,500 steps a day — they were 42% less likely to suffer depressive symptoms.
  • A subset of studies included in the meta-analysis found that for every 1,000 daily step increase, adults reduced their risk of developing depression by 9%.
  • The message is very consistent: more is better, and some is better than none.

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An in-depth report from Reuters on the origins of OnlyFans and how it turned into one of the most profitable businesses in the world.

  • Created in 2016, OnlyFans has paid out over $20 billion to its creators, who now number 4.1 million. The company takes a 20% cut of creators’ revenue.
  • In 2023 alone, content creators generated $6.6 billion on the platform that has over 300 million users
  • Its dividend payout of $472 million to the owner was more than Ralph Lauren earned from the fashion company he founded, and Nike co-founder Phil Knight earned from the sportswear giant – combined.

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While no one is ever going to feel bad for someone that co-founded a company and sold it for $975 million, Vinay Hiremath wrote a blog post this week titled: “I Am Rich & Have No Idea What To Do With Myself.” After selling the company he found himself lost, depressed and breaking up with what sounds like an amazing girlfriend that loved him. He just booked a ticket to Hawaii to do some soul searching (again, no one is going to feel bad for him), and is asking himself:

  • Why couldn’t I just leave Loom and say “I don’t know what I want to do next”?
  • Why do I feel the need to only be on a journey if it’s grand?
  • What is wrong with being insignificant?

It’s an introspective look into someone’s open, honest mind providing another example that money solves a lot of problems, but it can’t solve all of them. Most of the time people seem to end up less happy at the destination than they were along the journey to get there.

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