Monday Reading
By Barry Ritholtz - November 16th, 2009, 4:30PM
Some interesting stories to start off your week:
• China has now become the biggest risk to the world economy (Telegraph)
• Hedgies Unhinged (New York Magazine)
• Gold prices are a dead giveaway (Independent)
• The Debt Economy (James Surowiecki)
• Coming Soon: Jobs! (Slate)
• Gretchen Morganson: Home Builders (You Heard That Right) Get a Gift
• Water on the Moon (NASA)
• Belle de Jour revealed as research scientist (Times of London) “She has been writing a novel, and the Belle blog will “continue for a bit — I’d like her to have happy ending”.” (I assume the pun was unintentional)
• Video: Leopard Seal teaches photographer how to hunt penguins (National Geographic)
What are you reading?
Hedgies Unhinged http://nymag.com/news/intelligencer/62055/
November 16th, 2009 at 4:38 pm
Meet publishers’ enemy No. 1: Cory Doctorow
-Doctorow’s books are free to download from his website, but his last book was still a bestseller.
-Sci-fi novelist Cory Doctorow is shaking up the traditional book-selling model, and apparently getting rich doing it
November 16th, 2009 at 4:47 pm
as always… EPS reports and transcripts…
PSUN today on OCT qtr…..
“Through the first 11 weeks of the third quarter, our business performed at the higher end of our internal said Gary Schoenfeld, president and chief executive. “We’ve since seen a precipitous decline across both genders during the last two weeks of the third quarter and into the first two weeks of the fourth quarter.
November 16th, 2009 at 4:51 pm
South African gold on final deathwatch as top grade scientist finds residual gold is more than 90% less than claimed
http://mineweb.co.za/mineweb/view/mineweb/en/page34?oid=93062&sn=Detail
Bank analyst Whitney bearish on U.S. market
http://www.reuters.com/article/companyNews/idUSN1650456120091116
1 in 6 Americans goes hungry
http://money.cnn.com/2009/11/16/news/economy/food_insecurity/
Mapping Unemployment – You Make The Call – Downloadable Spreadsheet
http://globaleconomicanalysis.blogspot.com/2009/11/mapping-unemployment-you-make-call.html
November 16th, 2009 at 4:59 pm
Well, I can tell you I’m NOT reading “Going Rogue.” After your thread regarding Ayn Rand, I’ve added to my reading list Why People Believe Wierd Things (Shermer) and Howe We Know What Isn’t So by Gilovich.
November 16th, 2009 at 5:15 pm
The Gilgovich book is dry, but excellent
November 16th, 2009 at 5:17 pm
That Gretchen Morgenstern article is outrageous… How that got passed is a mockery of democracy (no rhyme intended…).
November 16th, 2009 at 5:28 pm
China article is fascinating – so much for their being the engine to pull us all out of this mess.
November 16th, 2009 at 5:31 pm
Highlights -
The reality is that much of Beijing’s $600bn stimulus has been spent building yet more plant and infrastructure so that China can ship yet more goods, or has leaked into property and stocks.
Credit has exploded. Allocated by Maoist bosses for political purposes, it has become absurd. China is rolling as much steel as the next eight producers combined. It is churning more cement than the rest of the world. Fixed investment is up 53pc this year. Once you know that Hunan authorities have torn down two miles of modern flyway so that they can soak up stimulus by building it again, or that the newly-built city of Ordos is sitting empty in Inner Mongolia, you know what must come next.
November 16th, 2009 at 5:40 pm
Google Could Double Web Speeds With SPDY Protocol
http://www.switched.com/2009/11/14/google-looks-to-boost-web-speeds-with-spdy/
May be of interest to some here (if you can sober up from the fifties and stop hanging out with Weedy McStupidHigh).
November 16th, 2009 at 5:41 pm
lyng1 Says:
November 16th, 2009 at 5:17 pm
That Gretchen Morgenstern article is outrageous… How that got passed is a mockery of democracy (no rhyme intended…).
I am not surprised. to get much of any thing in the last 8 years, it seems they have have a giveaway to business. otherwise its really tough for them to do much
November 16th, 2009 at 5:43 pm
Great. Water on the moon?
Then it wouldn’t be inhumane to send Bernanke, Hank Paulson, Geroge Bush , Bill Clinton, Phil Gramm, Bob Rubin, Alan Greeenspen, Dennis Orszag, Gary Gensler, Lord Blankfein, Jamie Dimon, Ken Lewis,
Dick Fuld, Stan O’neal, Angelo Mozillo, Tim Geithner, Joe Cassano, Bernie Madoff, Barney Frank, Chris Cox (funny how all those responsible, once they leave office, get a free ride after running their shops like deaf dumb an blind men) and on and on and on—- up to La Luna on soonest available flight.
November 16th, 2009 at 5:50 pm
The “Gold Prices are a Dead Giveaway” article seems to make the same fatal assumption that was made in the housing market boom, that people buying a given commodity are experts, or even close to knowledgeable. While the rest of the article seemed reasonable enough, the only mention of gold was in a sentence at the end where Mr. King stated, “The strength of the gold price in recent months suggests that investors still have their doubts about unconventional policies. ” Really? That seems like a bit of a leap to me. I bet a large portion of the current investors don’t know squat about monetary policy, or are banking on gains resulting from new buyers who fit that description. Their idea of monetary policy is that gold was used as money for a long time. Yeah, but so was nickle, copper, tin and salt. And the “there’s only so much gold” argument is about as valid as the “there’s only so much good land” argument. Just like fiat currency, it’s only worth what people will trade you for it. “Gold can’t be printed by the fed” sounds like “real estate is a hedge against inflation, land and construction prices will only go up.” It might still be a good investment so long as people continue to buy these arguments, but, to me, gold sounds more and more like real estate every passing day – totally at the mercy of crowd mentality.
I seem to remember a lot of real estate “investors” during the housing boom. Should we have taken their “investment decisions” as a sign of the direction of the economy? The “buy gold” advertising budget seems to be bigger than ever in this down economy. To me, that’s a sign of a bubble being inflated, not a statement on the health of the overall economy. This is kinda’ like all in infomercials about getting rich on RE that were so popular a few years ago. If these people were getting so rich buying RE, why the infomercials? It was, of course, because they knew that more buyers means more price inflation, which meant that they could get richer. The DVD sales were just a perk. Personally, I’m not going to trust Ed McMahon any more than Eric Estrada. Both, I’m sure, are paid for their acting talent, not their economic savvy.
November 16th, 2009 at 5:53 pm
this sounds like a bad thing huh?
The world economy is still skating on thin ice. The West is sated with debt, the East with plant. The crisis has been contained (or masked) by zero rates and a fiscal blast, trashing sovereign balance sheets. But the core problem remains. The Anglo-sphere and Club Med are tightening belts, yet Asia is not adding enough demand to compensate. It is adding supply.
like nobody is paying attention to whats going on around them?
November 16th, 2009 at 5:59 pm
reason to drop the tax break on corporate interest rates?
http://blogs.reuters.com/felix-salmon/2009/11/16/reasons-not-to-tax-interest-payments/
November 16th, 2009 at 6:07 pm
Hugh Hendry, the last unintimidated bear has his latest fund report out. Whether you agress with him or not, he’s always interesting. I think he’s got it generally right.
http://www.scribd.com/doc/22606253/Hugh-Hendry-Eclectica-Nov09
November 16th, 2009 at 6:10 pm
Forgot about the Houston real estate stories that came out over the week end:
Despite Houston’s supposed advantages, Realtors admit condo prices down 20% Y/Y, so it’s probably worse. Of course, plenty of optimism.
http://www.chron.com/disp/story.mpl/business/6720224.html
Possibly extreme, but maybe not, condo price example here:
http://blogs.chron.com/primeproperty/auction/
The condo at 3388 Sage Rd., #2402 had an asking price of 565k; min bid at auction is 199k. It’s near the Galleria in a reasonable area. Google maps shows these prices at the same address:
Real estate at this address:
$549,000, 3 bed, 2.5 bath
$539,000, 3 bed, 3 bath
$1,399,000, 3 bed
Housing price cuts increase:
http://blogs.chron.com/primeproperty/2009/11/_housing_price_cuts_increase.html
Office space cost drops about 50% Y/Y
http://www.chron.com/disp/story.mpl/business/sarnoff/6720230.html
November 16th, 2009 at 6:29 pm
and now for some thing entirely different
http://www.miamiherald.com/living/columnists/dave-barry/story/1312718.html
November 16th, 2009 at 6:40 pm
Thor,
Evans-Pritchard is a bit of a neo, but he’s right in this case. Well, I suppose he’s right in almost every case
Michael Pettis lives and teaches in China and has produced a long series of articles with a similar theme at http://www.mpettis.com. He compares China to the US of the 1930’s, where our overcapacity did us in while the Europeans made out somewhat better.
November 16th, 2009 at 6:49 pm
Mike – Thanks for that! I used to read his sight but have unfortunately let it slip from my reading list of late. I’ll add it back in.
I wonder about the “China is like the US in the 1930’s” analogy. On the surface I think it makes sense but I wonder how that will pan out for the future . . . .will China come roaring out of this as we did after WWII? Or will their future look more like Japan’s present?
November 16th, 2009 at 6:59 pm
thor they might end up looking like Japan. they have some of the same demographic problems, just written much larger
November 16th, 2009 at 7:05 pm
Thor,
I suspect long term the Chinese have good prospects as they have all the money. The US was much more stable and it was in some danger from people like Huey Long. WWII solved the overcapacity problem that hadn’t really been resolved before then.
China’s future depends on avoiding revolution following the collapse of the huge bubbles it has blown. China’s wealth is very ill distributed and they have many millions in the countryside who live in what we would think of as extreme poverty.
November 16th, 2009 at 7:09 pm
Mike – agree on all points. Mao must be spinning in his tomb eh?
November 16th, 2009 at 7:44 pm
“Mao must be spinning in his tomb eh?”
Didn’t realize you were Canadian
November 16th, 2009 at 8:21 pm
china? really?
http://www.statesman.com/business/content/business/stories/personalfinance/2009/11/15/1115burns.html
November 16th, 2009 at 8:37 pm
Willid – Friedman is a very interesting guy, his book was quite good.
November 16th, 2009 at 8:44 pm
Story this morning on NPR about China. Ends on a familiar note.
http://www.npr.org/templates/story/story.php?storyId=120405700
November 16th, 2009 at 9:23 pm
Dear Prudence, Won’t You Come Out to Play?
BY BRIAN PRETTI
For years now, I have been focused on the macro theme of the credit cycle in all its wonderful glory quite intently. For those reading the discussions over the years, you’d probably characterize it as focused “to a fault.” Again and again during the current decade I asked, is it a business cycle or a credit cycle? Of course after the events of the last few years, it sure seems that question has been answered in spades. At the moment, this little credit cycle obsession is still the key focal point for what may lie ahead in terms of real economy and financial market outcomes. In this discussion let’s have a brief look at components of credit cycle character that as of today simply have no precedent over the last six decades of recorded Fed data. After looking at these data points, I suggest you ask yourself, should we really be expecting a “typical” economic recovery? Secondly, I want to briefly have a look at historical patterns of consumption in prior recessionary cycles and what experience of the moment may be telling us relative to behavioral patterns of the past. Let’s get right to it.
When it comes to the macro credit and conjoined economic cycle, an important item to keep in mind is that historically, US economic recoveries of the last half-century have had similar “fingerprints.” Those being pent up demand for auto’s, housing and accelerating credit usage by the private sector. Every single one. They all look the same. But what we are seeing at the current time that is completely different than anything seen over the last six decades is net private sector credit contraction. The following chart could not be more clear on the issue. Remember, the private sector is made up of households and corporations (including the financial sector).
…..
Let’s step out of the Fed numbers for just a second and have a little walk down memory lane. Memory lane of personal consumption expenditures. This is the natural counterpart to what we see playing out in the FOF numbers. If households are paying debt down, then something has to be given up for that balance sheet reconciliation decision. And the give up is consumption. Although you may not realize this, and this is clearly one of the key reasons why the long tenured Street truism suggests no one bet against the US consumer, personal consumption in nominal dollars has actually increased during each and every recession of the last six decades (at least). Each and every recession until the present, that is. The following table documents the increase in nominal personal consumption expenditures during each recession since 1960. Of course in the table we are assuming the current recession ended 6/09, given the perceptually positive 3Q GDP number.
…..
Of course we also need to remember that ours has been the longest official recessionary period on record since the Depression. So everything you see in the tables above for prior cycles happened over a much more compressed space of time. In other words, we have had much more time in the current cycle for personal consumption to pick up, but it has not. Lastly, it’s also important perspective to remember that in our current circumstances, households have been treated to some of the lowest interest rates of a lifetime and consumer product price weakness has been pronounced. Yet still zip in terms of consumption gains 19 months into official recession territory.
http://www.financialsense.com/Market/wrapup.htm
November 16th, 2009 at 10:05 pm
An excellent article by Doug Kass. Really!
http://www.thestreet.com/story/10627106/1/kass-what-recovery.html
November 16th, 2009 at 10:32 pm
The Onion pegs the Beck/Limbaugh crowd:
http://www.theonion.com/content/news/area_man_passionate_defender_of?utm_source=onion_rss_daily
November 16th, 2009 at 11:59 pm
one of my favorite junior gold mining companies, San Gold reported record revenue and its first ever operating profit. The stock has done extremely well this year in part because it has made some excellent discoveries at Rice Lake in Canada, and because I am still long term bullish on the gold price, I think the stock has a lot more room to run.
November 17th, 2009 at 12:03 am
Doug Kass is just pissed off that every call he seems to have made since his infamous “Generational low” call of the dow at 6600 has been completely STUPID. Remember this summer when he called for an 8-10% correction that never came? Or how about his utterly wrong belief to short Berkshire Hathaway which not only on its own does fine but is also supported by Uncle Sam? Remember a few weeks ago when he said the market’s highs for the year were made? OOPS…the market has gone up several hundred points since then.
Barry should go a la Mish on Peter Schiff last year and call a spade a spade. Kass called the bottom, but has been ever so wrong since. And then he bitches and tries to justify why the market is not doing what he thought it would.
November 17th, 2009 at 1:17 am
Re:The Debt Economy
Advocates of the mortgage-interest deduction, for instance, claim that it increases homeownership rates. But it doesn’t: in countries where mortgage deductions have been eliminated, homeownership rates haven’t dropped. Instead, the deduction simply inflates house prices.
This is what I have argued for a long time. Inflated house prices means more expensive mortgages and higher interest rate payments. It basically is more cash in the pockets of the lenders who are, as we all know, bankers. I’ll bet they even dreamed up the scheme
November 17th, 2009 at 1:51 am
The global imbalance – a view from South Asia……
http://beta.thehindu.com/opinion/columns/Chandrasekhar/article47005.ece
November 17th, 2009 at 8:58 am
November 16, 2009 at 11:01:54
The Moral Compass Missing From The Greatest Trade Ever
For OpEdNews: David Fiderer – Writer
John Paulson was dissatisfied. The marketplace had not satiated his appetite for placing bets against subprime mortgage securities. So he cooked up a scheme to issue billions more in new securities designed by him to fail. The scheme worked, and his hedge fund earned billions.
The most interesting part of The Greatest Trade Ever, by Wall Street Journalreporter Gregory Zuckerman, describes Paulson’s plan to give irrational exuberance an extra boost. It’s one thing to trade against the value of securities that have already been issued. That’s what the free market is all about. But it’s quite another thing to direct your banks to originate new securitizations for no legitimate business purpose. No wonder Paulson slammed the book for “numerous inaccuracies”without citing specifics.
http://www.opednews.com/articles/The-Moral-Compass-Missing-by-David-Fiderer-091116-965.html