HBD investing

A while back I wrote that everybody believes in HBD because it’s impossible for those of us who believe in HBD to make money from our beliefs.

Houses in safe neighborhood with good schools (i.e. in areas with lots of white people) are more expensive than houses in crappy neighborhoods, for example. People may hate what John Derbyshire says, but they spend their money as if they believe every word of it and then some.

I have only come up with one exception to my theory – invest in Japan.

By all actual measure of credit quality, Japan is in a world of hurt. They have more debt than crappy Mediterranean countries, for example. In short, if any country has debt problems, it’s Japan – at least by all objective financial measures.

Lots of people – most notably Kyle Bass – have been betting heavily against Japan. It hasn’t been going well for him.

I think the reason is that the Japanese are not like the Italians, the Greeks or the Spaniards. If they need to suck it up to pay off their debts, the Japanese will do so. They’ll do it quietly, efficiently and without too much complaining. They are a nation in the way that few remaining countries are a nation. And they’re smart.

So, I would argue that this is one case where there might be some room to make some money from your beliefs. Japan won’t default. At least that’s my guess.

Place your bets at your own risk.

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7 Responses to HBD investing

  1. Matthew says:

    Would the generalization be: “Never short racists”?

  2. Not sure how this affects the analysis, but most of Japanese government debt is owned domestically thru the Post Office savings bonds. That means their ‘default’ looks very different from Greece which owes mostly foreign banks.

  3. james says:

    I would recommend investing in japanese fashion retailers such as Uniqlo.I predict they will dominate the US market in about 10 years.

  4. Sleemo G says:

    Regarding housing and schools, please let me share my experience with the No Child Left Behind Act (NCLB). I live in a decent city in Orange County, CA. However, I live in the mixed section of town, majority Hispanic with a smattering of many other ethnicities. The town I live in is the most racially-diverse city of its size in the entire US. I effectively earned a discount on my wonderful 4bdr home because of its location and that the neighborhood schools are nearly 100% Hispanic. It’s still very low crime and only slightly blighted, and only in comparison to the surrounding neighborhoods.

    As this is the case with Hispanics however, their school standardized test scores are correspondingly below the district average and also do not meet the minimum to satisfy the NCLB. A key clause of the NCLB is that if your child’s home school is “failing,” then you have the right to move your child to a higher performing school, which of course we did for my son, who now attends a brand-new $100 million middle school across town. This school also coincidentally happens to be majority Asian with a strong White minority and almost no Hispanics.

    Without getting into the intentions or practicalities of the NCLB, suffice to say that if one knows the law, there are ways to profit off HBD that you might not be aware of. My kids attended the best schools in their district without me having to pay the higher mortgages that others are paying.

    Again, intent and reality are different. And life is quite unfair. Which is why one should game the system any way one can. Thank you NCLB!!!

  5. spandrell says:

    They just found shitloads of methane below the sea in Japan. So you might get lucky on this one.

  6. asdf says:

    Japan is weird because they owe it to themselves. They also have massive demographic problems. I’m not sure what to think about Japan, and I’ve lived there.

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