Slate Money – The Disappearing Edition (May 13, 2017)

Overview

In this episode of Slate Money, host Felix Salmon, joined by Anna Shymansky and Jordan Weissmann, explores the idea of “disappearing”—from financial policy distortions that should vanish to inexplicably absent volatility in today’s markets, and finally, the precipitous decline in Snap’s share price. The crew debates the mortgage interest deduction, low volatility in the U.S. stock market, and Snap Inc.’s disastrous first earnings report. They finish with their trademark “numbers round,” each bringing a statistic that caught their attention this week.

Main Discussion Topics & Insights

1. The Mortgage Interest Deduction Debate (00:29–16:24)

Why Talk Now?

• Matthew Desmond’s NYT Magazine article on the mortgage interest deduction (MID) provides a news hook for Jordan and Felix’s long-running debate on its merit.

Key Arguments

• Jordan’s Summary (01:51): “We subsidize rich people’s housing through the mortgage interest deduction... and we do a really, really, really horrible job supporting low income families with housing.”
• The U.S. spends tens of billions on homeowner subsidies for the relatively wealthy while providing insufficient support (e.g., Section 8) for the poor.
• Only 1 in 4 eligible Americans get rental assistance (01:51).
• Anna questions the oft-cited $1B figure to end homelessness (03:02).
• Felix: $134 billion a year goes to homeowner subsidies (03:19): “That is the GDP of Portugal.”

Is the MID Defensible?

• Jordan (03:39): “It is an objectively bad piece of policy that should have never come into existence... However, it is also baked into the savings of... the vast majority of Americans who do have savings.”
• Anna and Felix push back, noting that:
  • Homeownership rates haven’t correlated with changes in MID value (05:38).
  • The deduction mostly benefits upper-middle-class/coastal homeowners who itemize (06:50).
  • Marginal impact on the average middle-class family is low due to the standard deduction (07:18).

Will Ending the MID Crash the Housing Market?

• Studies cited: abolishing the MID could lower prices ~7% on average, though effects vary by geography and price point (06:32).
• Felix challenges the idea that falling house prices are inherently bad: “How is that the end of the world?” (08:57).
• Jordan: Wealth and consumer spending are tied to home prices; rapid changes could risk an economic downturn (09:59).

Political Realities & Reforms

• Discuss how doubling the standard deduction (as in some Republican tax plans) would render the MID moot for the middle class while preserving its benefits for the wealthy (12:40, 13:55).
• Anna: “If you want to help often low income people, you often have to structure a subsidy inefficiently to also help people who have more political power...” (15:30).

Quick Poll – Should Policy Make House Prices Go Up? (15:51)

• Jordan: Yes.
• Anna: Yes.
• Felix: “I’m gonna take the no on this one. I just don’t see it...”

2. The Case of the Disappearing Volatility (16:24–26:38)

What’s Happening?

• The VIX (volatility index) dips below 10 for the first time since the 1990s (16:24).
• Comparison: VIX at 86 in Nov. 2008 (16:24).
• Anna: VIX represents expected S&P 500 movement over a month; under 10 shows investors expect little change (17:01).

Does Low Volatility Signal Trouble?

• Jordan: “Is this like... we’re in a horror movie and it’s just like a little too quiet?” (17:51).
• Felix & Anna: No empirical evidence that low VIX always precedes market crashes; it’s mostly mean reversion anxiety (18:09).
• Felix: “If you look back over the past six months when the VIX has been at all time lows, stocks have gone up a lot.” (19:54).

The “50 Cent” VIX Mystery (20:23)

• Anna: Hedge fund Ruffer was buying millions in VIX options at 50 cents—a big insurance bet on a market downturn (20:23).
• Felix: “This is the classic like Nassim Taleb thing—I keep on losing nickels... but eventually, I’m going to make a windfall.” (21:21).
• Insurance thinking: most hedges expire worthless, but you buy protection just in case.

Why Is Volatility So Low?

• Anna: Investors are betting that current political turmoil doesn’t translate into economic upheaval (23:06).
• Felix: “The news used to move the market and now it doesn’t move the market.” (22:25).
• Anna: Lower correlation among sectors is reducing overall volatility (23:38).
• Felix’s theory: rise of passive/quants—“the marginal price setters... are increasingly a bunch of robots” unmoved by headlines (24:22).
• Anna: As passive investing and quant funds grow, this will matter more on the margins, possibly dampening volatility (25:27).

3. Snap’s Disappearing Share Price (28:28–39:18)

What Happened?

• Snap’s first earnings report as a public company was disastrous: missed revenue/user growth, lost $2.2B in a quarter (29:42).
• Anna: “Apparently investors didn’t think they were going to pay out the equity compensation they were required to...” (29:49).
• Felix: “This was a big fuck you to the markets from Snapchat. Because hey, none of you shareholders have any votes and there’s nothing you can do about it.” (30:28).

Can Snapchat Compete with Facebook?

• Instagram Stories, which barely existed at Snap’s IPO, has now overtaken Snapchat in popularity (30:49).
• Jordan: “Is there any good way to stop a company like Facebook from... ripping off its competitors’ features and then demolishing them...?” (31:51).
• IP law hasn’t prevented this “nightmare scenario”; antitrust law not designed for feature copying.

Is Facebook’s Dominance Bad?

• Anna: “Is that actually harmful for the overall marketplace?” (33:09)—if features remain and consumers benefit, maybe not.
• Felix: “Competition is actually bad for consumers” if they’d rather just have everything in one place (34:09).

Antitrust's Purpose Reconsidered

• Jordan: “If we think about it only in terms of consumer efficiency, it is kind of hard to think of what’s happening to Snapchat as a bad.” (34:09).
• Anna: The real concern is innovation—if start-ups won’t bother because FB will rip off/“Sherlock” them, consumer choice and innovation could suffer (35:19).
• Felix: “It’s very easy to look at the might of the big four... They haven’t been unassailable that long... In 10 years time they are not going to be the unassailable big four.” (36:52).

Global Competition & Regulatory Context

• Anna: U.S. behemoths face strong competition in China: Alibaba, Baidu, Huawei, etc. (37:17).
• Jordan: “I don’t think U.S. antitrust policy really should be concerned about what’s going on in China.” (38:05).
• Felix: Reforms should consider the global landscape as tech is not purely domestic anymore (38:19).
• Anna: Problem for Snap is also lack of broad, global focus compared to FB (38:50).
• Felix: European regulators are less timid than the U.S.—more aggressive toward big tech (39:18).

Numbers Round (42:45–46:34)

• Jordan: 1967. The year U.S. middle-class men’s lifetime earnings peaked; for 25-year-old men entering the workforce, earnings have trended down since (42:45).

  • “The top 10% are still good. Yeah, you’re still good. The top 10.” (44:19)

• Anna: 10.3 million. U.S. box office for Indian Telugu film Baahubali 2—showing rising economic power of the Indian-American community, and, personally, Anna’s desire for more musical-action mashups (44:27).

• Felix: 99. Percent of NYC school “child in crisis” handcuff incidents (262 in 2016) involving Black or Latino children (45:41).

  • “Of those 262 children, 99% of those children were black or Latino.” (46:33)

Notable Quotes & Memorable Moments

• Felix: “If you consider housing wealth to be a form of savings... sometimes your savings go down in value. Sometimes your savings go up.” (11:12)
• Jordan, on the Republican tax plan: “It essentially eliminates the mortgage interest deduction for what few middle, actual middle class families benefit from it, but preserves it for wealthier families... to me this is just so fucking perverse.” (13:55)
• Jordan, on market fear: “Is this like the kind of thing where we're in a horror movie and it's just like a little too quiet?” (17:51)
• Anna, on Snap’s IPO: “All the jokes about disappearing value, like they’re writing themselves.” (28:35)
• Felix, on Snap’s IPO results: “This was a big fuck you to the markets from Snapchat. Because hey, none of you shareholders have any votes and there’s nothing you can do about it.” (30:28)
• Felix: “It’s very easy to look at the might of the big four... In 10 years time they are not going to be the unassailable big four.” (36:52)

Timestamps for Key Segments

• Mortgage Interest Deduction: 00:29–16:24
• Stock Market Volatility/VIX: 16:24–26:38
• Snap Inc.’s Earnings/Antitrust: 28:28–41:05
• Numbers Round: 42:45–46:34

Tone

The episode’s tone is energetic, irreverent, and sharp, with plenty of playful ribbing between the hosts—and clear willingness to challenge each other’s assumptions. The language is direct and sometimes explicit, encouraging debate and skeptical inquiry into all corners of business and finance.