Monday Reading
By Barry Ritholtz - February 1st, 2010, 3:30PM
New week, new stuff to read:
• Dear Wall Street: We’re Sorry (Marketwatch)
• The first review of Paulson’s book is out, via Bloomberg: Paulson Defends Lehman Rout, Gives Bush Primer on Hedges: Books Shorter version: Eh.
• Are Appraisals the New Organized Crime? (Housing Watch)
• Google Economist Explains Why You Won’t Pay For Online News (SF Weekly)
• Jobs calls BS on Don’t be Evil (Daring Fireball)
As noted over the weekend (here and here), the daily reading/linkfests are open threads that encourage you to point to other sources, materials, etc. Any other sites, articles, research papers worth linking to?
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February 1st, 2010 at 4:07 pm
Good assessment of continued misunderstanding by current administration of basic economics -
http://neweconomicperspectives.blogspot.com/2010/02/president-remains-trapped-in-talons-of.html
Obama says “As we work to create jobs, it is critical that we rein in the budget deficits we’ve been accumulating for far too long – deficits that won’t just burden our children and grandchildren, but could damage our markets, drive up our interest rates, and jeopardize our recovery right now”.
However, the article notes … “The President, unfortunately, has yet to put the pieces of the puzzle together. He also fails to understand the idea that a government like the United States – i.e. one that issues a non-convertible sovereign currency (i.e. one the government doesn’t promise to convert into gold or other currencies at a fixed price) – can meet any and all outstanding financial obligations, provided the debts are denominated in its national currency. In this regard, the size of the national debt is irrelevant. This myth, and this myth alone, underpins arguments by orthodox economists against government activism in macroeconomic policy. The President does his Administration and the country no service by continuing to jump on this mythical bandwagon. Myth may constitute good grounds for literature, but is a horrible foundation for sound economic policy.”
February 1st, 2010 at 4:21 pm
Anatomy of a garden-variety fraudulent appraisal and all-around skeevy mortgage, Herrod v. First Republic Mtg Corp: http://www.state.wv.us/wvsca/Docs/Fall05/32611.htm
Footnote: Plaintiff Rita Herrod testified about her experience in January 2002 before our good friends in the Senate Banking Committee. Acting on her and others’ testimony, Congress enacted sweeping reforms of the mortgage industry in 2003-04 that made this kind of abuse a thing of the past. I just wrote that last sentence to see if anyone actually reads my comments. :-)
February 1st, 2010 at 4:25 pm
Any idea about ongoing discussion on 401k and Annuity. Is it going to be one more Ponzy scheme.
February 1st, 2010 at 4:29 pm
* The Telegraph (UK) – Ambrose Evans-Pritchard: Should Germany bail out Club Med or leave the euro altogether?
Germany faces a terrible dilemma. Either Europe’s paymaster agrees to underwrite a Greek bail-out and drops its vehement opposition to a de facto EU economic government, treasury, and debt union, or the euro will start to unravel, and with it Germany’s strategic investment in the post-war order
* Bloomberg.com – Euro Proving No Reserve Asset as Central Banks Shift
Investors are pulling cash out of Europe at a record pace as central banks slow euro purchases, jeopardizing its status as a substitute to the dollar as the world’s reserve currency. Last year, policy makers loaded up on euros, while analysts at Barclays Plc in London and Aletti Gestielle SGR SpA in Milan predicted central bankers would make good on threats to reduce the greenback’s dominance. Now the euro is down 8.4 percent since Nov. 25 in its fastest slide in 10 months amid concern that cash-strapped countries like Greece won’t pay their debts. Billionaire investor George Soros said Jan. 28 that there’s “no attractive alternative” to the dollar. Traders have spurned European stocks in favor of shares elsewhere for a record 19 straight weeks, “clearly hurting” the currency by draining a net $13 billion from the market, said Geoffrey Yu, a UBS AG analyst. Investors are as bearish on the euro as they were when the 2008 financial crisis was pushing them to the dollar’s perceived safety, futures data show. After buying more euros than ever in 2009’s second quarter, central banks pared back, International Monetary Fund data show. “The euro can fall further,” said Neil Mackinnon, a former U.K. Treasury official who is a London-based economist at VTB Capital Plc, the investment-banking unit of Russia’s second- biggest lender. “Sovereign-debt risk will continue to be a key theme,” he said. “The stresses created by the fiscal situation in Greece won’t go away quickly.”
* MarketBeat (WSJ Blog) – Are Greek Bonds the New Subprime?
Still, what is troubling is that this all seems to be a re-run of what happened with “subprime” mortgage bonds and collaterized debt obligations, or CDOs, in 2007. Then too, banks and other investors feared looming downgrades and moved to either sell their holdings or buy “insurance” in the credit-default swaps market (Back then, it was the “ABX” index that was the hot product.) “We saw this in the C.D.O. market. What we’re seeing is a replay of that,” says Brian Yelvington, a strategist at fixed-income brokerage Knight Libertas. It’s a good idea for banks and other investors to try to mitigate their risks. But, as we’re seeing, this process can also shift the risk onto governments. If investors push European credit-default swap prices really high, everyone gets spooked, and this destabilizes the European government bond market. That, in turn, could mean a sudden financing crisis for fiscally-challenged countries like Greece and Portugal. At the very least, it puts enormous pressure on countries to cut public spending that might actually help them get back on their feet.
* The Financial Times – Wolfgang Münchau: What the eurozone must do if it is to survive
First Greece, then Portugal, and then what? The project of European monetary union is entering the most dangerous phase in its 11-year history. Last week, eurozone governments started preparations, for the first time, to bail out one of their fellow members. Greece will probably require a bridging loan at some point. Portugal might too. But they are small countries. No matter what happens, it will not break the euro. The clear and present danger to the eurozone is Spain. Daniel Gros of the Centre for European Policy Studies argued on these pages last week that Spain is in a better position than Greece because of its higher rate of gross national savings. But I believe that Spain is likely to squander that advantage. Spain, like Greece, has suffered from an extreme loss of competitiveness during a period in which it relied on a housing bubble to generate prosperity. While the Greek government is at least beginning to recognise the need for reform, perhaps too late, Spain’s political establishment remains in denial. So what if Spain gets into trouble? Will the eurozone falter, as Nouriel Roubini, professor of economics at New York University, predicted in an interview last week? The question is unanswerable. I find it more constructive to ask what the eurozone will need to do to survive the strains ahead. Three measures are, in my view, essential for survival; a further three almost so.
* The Guardian (UK) – Greek economic crisis worsens with farmers refusing to back down
Talks to resolve a crippling three-week tractor blockade of highways and border crossings in Greece by farmers collapsed today, increasing the pressure on a government grappling with the country’s worst financial crisis in decades. The farmers refused to back down in the row, which is seen as a crucial test of Athens’ determination to impose austerity measures that will salvage Europe’s most indebted economy. Tonight, the Greek agriculture minister, Katerina Batzeli, signalled that while she remained “open to dialogue”, the government was in no position to meet their demands for some €1bn (£867m) in extra subsidies and tax breaks. “The government is determined to get the country out of the crisis,” she said. “It can’t afford the money they are asking for.” The blockade, which is believed to cost €25m a day, has disrupted transport, damaged commerce and strained relations with neighbouring Bulgaria, where exports have also been hard hit.
February 1st, 2010 at 4:32 pm
Bernanke Vote Closer Than It Appeared
The vote on Bernanke’s confirmation produced 30 “no” votes, more than any previous vote on a Fed chairman, even exceeding those against Paul Volcker after he had driven the economy into the most severe post-recession downturn in his effort to wring inflation out of the economy. But that was still a comfortable win, right, even if the finally tally showed considerable unhappiness with Bernanke? Not at all. This observation came from an informed Hill observer:
Despite the wide margin, they were genuinely shitting bricks last Thursday. He was on the brink of going down, but they rallied and won. It was definitely closer than it appeared…. It’s just that once he got the votes, the undecideds broke hard in his direction.
February 1st, 2010 at 4:34 pm
@hgordon
Politics and economics are two different things. Jimmy Carter practiced good economics and bad politics. Ronald Reagan practiced bad economics and good politics.
Guess which one transformed America?
Anyway, the Volcker Rule, which I wholeheartedly support, is rumored to be DOA. The immediate cause is Mr. 41, the new GOP senator from Mass. The real cause is that there are plenty of bought and paid for Dems who don’t want the rule any more than the GOP does.
http://www.ft.com/cms/s/2/76c55844-0f4b-11df-8a19-00144feabdc0,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html
February 1st, 2010 at 4:49 pm
@franklin: It would seem that Obama thus far doesn’t rate good marks on either front. Regarding your FT link, it does seem that our hopes were unrealistically raised, only to be dashed again by the Vampire Squad …
February 1st, 2010 at 4:55 pm
Something to ponder, f411:
You have no doubt heard the well-worn dictum of Karl von Clausewitz, the great Prussian military strategist, that war is the extension of politics by other means. Well, the same is true of economic policy. As often as not, it’s politics by other means….
Robert Samuelson, Newsweek, “Lollipop Economics 101,” Jan. 12, 2008
http://www.newsweek.com/id/91687
February 1st, 2010 at 4:58 pm
Here are some important quotes from the Fed’s quarterly loan survey. “Banks generally ceased tightening standards on many loan types in Q4 but have yet to unwind the considerable tightening that has occurred over the past 2 yrs.” “The net %’s of banks reporting tighter loan terms continued to trend lower.” “Banks reported that loan demand from both businesses and households weakened further, on net, over the survey period.” With CRE, “respondents further tightened their credit standards during the final Q of last yr. In addition, banks reported that they had tightened terms on CRE loans substantially over the past yr.” “Demand from both businesses and households for all major categories of loans weakened further, on net, over the past 3 months.” “Outside of commercial and prime residential mortgages, banks generally expect asset quality to stabilize this year.”
February 1st, 2010 at 5:01 pm
Secret Banking Cabal Emerges From AIG Shadows:
Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.
We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny. ..
Yet when unelected and unaccountable agencies pick banking winners while trying to end-run Congress, even as taxpayers are forced to lend, spend and guarantee about $8 trillion to prop up the financial system, our collective blood should boil.
February 1st, 2010 at 5:27 pm
@tz -
Yes, but the great Ludwig Von Drake (not to be confused with Ludwig Von Mises) was quoted thus:
“Now, most child experts usually study thousands of families and they make one chart. But I studied one family and I made thousands of charts.”
February 1st, 2010 at 5:39 pm
@hgordon: ha! :-)
February 1st, 2010 at 6:02 pm
Just getting to:
This Time is Different:
Eight Centuries of Financial Folly
http://press.princeton.edu/titles/8973.html
Heard it’s like getting repeatedly bitch slapped with a +3 historic data mallet of similarity.
Anybody through it yet? Thoughts?
Barry?
It was on your reading list a couple weeks ago.
February 1st, 2010 at 6:06 pm
@hgordon: ha!
I second
February 1st, 2010 at 6:52 pm
Andy Xie calls the kettle black on bailout of Wall St and the Vampire Squid from Hell
Dress Rehearsal | China International Business
http://www.cibmagazine.com.cn/Columnists/Andy_Xie.asp?id=1231&dress_rehearsal.html
The magic ingredient for resuscitating the financial markets and the world economy has been trillions of dollars of bailouts. That money, not a better economic future, saved the financial markets. It has led to an emerging markets bubble that is supporting the global economy. It will take time for the money to become inflation, but when it does it will show the true cost of the crisis. With the world economy still not structured for another growth cycle, stagflation may stalk the world for a decade.
the “bubble establishment” had the clout to obtain government bailouts that saved their skins but cost taxpayers trillions. Taking advantage of the public panic in the crisis, they sold the story that only reviving the financial sector could stem the economic slide. It was a lie. Directly supporting the unemployed would have cost a fraction as much, while also stabilizing the economy. The remaining fiscal capacity could be used to support economic restructuring.
This round of financial capitalism won’t last. The lag between printing money and inflation may be long in the era of globalization, but it will come.
Global inflation will begin to rise next year. Central banks may raise interest rates, but they will be behind the curve – rates will rise slower than inflation. At heart they will want to maintain loose monetary policies to help growth. Raising rates will be propaganda for cooling inflation expectations – fooling savers into holding onto depreciating bank deposits. But procrastinating about fighting inflation will only cause inflation to surge. By 2012, inflation might be high enough to cause public panic. Central banks will be forced to raise rates quickly, and a second financial collapse could follow.
The world had a near-death experience in 2008. It may not be so lucky in 2012.
February 1st, 2010 at 6:56 pm
Chuck Prince delivers ANOTHER quote to prove that free markets don’t work in finance.
First it was, “When the music is playing, you’ve got to dance”.
Now, this request of Hank Paulson
“Isn’t there something you can do to order us not to take all of these risks?” was the gist of a question posed [to Paulson] by Charles O. Prince, the chief executive who was still dancing at Citigroup Inc. as the bank bumbled toward disaster.
And yet, 33% of the American public is still AGAINST tighter regulations on banks. We are literally doomed.
February 1st, 2010 at 7:11 pm
John Hussman is a must read every Monday…no disappointment today.
http://www.hussmanfunds.com/wmc/wmc100201.htm
“As is true for a variety of similar measures of normalized value, the valuation levels we observe today are comparable with the highest levels achieved in history, except for the bubble period since the mid-1990′s. As that bubble period has been associated with dismal subsequent returns overall, it is clear that post-1995 valuations should not be included in the calculation of valuation norms – at least not if we expect those valuation norms to be informative about the level from which acceptable long-term market returns can be expected. (We’ve seen some otherwise good analysts fold bubble valuation multiples into the calculation of historical valuation “norms”, which is not particularly insightful).
Presently, stocks remain richly valued on the basis of normalized earnings, book values, dividends, revenues and other metrics. Investors now rely on the renewed attainment of bubble valuations in order to achieve acceptable returns.”
Barry, you still bullish? If so, where do you find fault with Hussman’s analysis, or are you betting on a new bubble?
February 1st, 2010 at 8:00 pm
The uptrend remains in place — the recent support break only provides insight into the next level of support — – 1038, then 1025 or so.
All the other bullish factors remain in place. Event he recent Bullishness in surveys was suddenly replaced by a ton of bears.
So yes, I am still giving the cyclical bull the benefit of the doubt.
February 1st, 2010 at 8:40 pm
What I knew would happen months ago is about to happen. GOP “master of fooling the public”, Frank Luntz, has penned a memo titled “How to kill financial reform”
http://www.huffingtonpost.com/2010/02/01/frank-luntz-pens-memo-to_n_444332.html
They are going to do the same thing to financial reform that they did to healthcare reform.
Take for example this line:
“Owning a small business is part of the American Dream and Congress should make it easier to be an entrepreneur,” wrote Luntz. “But the Financial Reform bill and the creation of the CFPA makes it harder to be a small business owner because it will choke off credit options to small business owners.”
Chances that the American public fall for this BS… 1,000,000,000,000%.
Buy bank stocks now and enjoy the ride as the American public gets duped again
February 1st, 2010 at 9:13 pm
Barry Ritholtz: If I were Federal Reserve Chairman I Would …
http://wallstcheatsheet.com/knowledge/interview-knowledge/barry-ritholtz-if-i-were-federal-reserve-chairman-i-would/?p=5928/
Is Momentum Building for an Economic Recovery?
http://wallstcheatsheet.com/breaking-news/economy/momentum-building-for-economic-recovery/?p=6175/
February 1st, 2010 at 9:30 pm
FWIW: I’ve been following “Financial Sense” for years before other blogs go online. They follow Dow Theorgy and warned us about the RE Bubble for a long time.
I don’t ever see them posted here…so I will post. I read the Elliot Wavers, and the Big Momentum…and invest for myself on my own.
Just putting their thoughts out there: (I do feel they tend to be “Gold Buggy” which is different from the folks like BR & others out there these days. But, their views have steered me okay in the past. BTW…I am NOT a TRADER….
They also have charts in their links for those who love to look at the charts and compare to whatever theory they follow in market timing or investing.
————-
Today’s Market Observation 02.01.2010 Mon Tue Wed Thu Fri Puplava Archive
2010, Transitioning From Push to Pull
by RYAN J. PUPLAVA, CMT | february 1, 2010
There were a slew of economic reports over the past two trading days that have meaningful data points to review; hopefully, shedding light on the direction our economy is heading. The main economic releases to review are the Gross Domestic Product (GDP) report released last Friday, followed by the ISM Manufacturing Index and Personal Income today. The economy is transitioning in 2010 from inventory destocking (push) back to a consumer driven economy (pull). For this transition to happen smoothly we should see a few things happen, economically, including a peak in the unemployment rate, better credit flows, and an expanding global economy.
Right now the economic recovery is skating on thin ice. The consumer is deleveraging, unemployment is rising, and banks aren’t lending. Companies have been deleveraging as well, destocking inventories and slowing fixed investment. Herein lies the making of an economic recovery. Demand needs to rise. In order for that to happen, the American consumer needs a job to pay for goods and services. Goods and services need to be produced to create jobs. Credit needs to flow to fund fixed investment.
http://www.financialsense.com/Market/wrapup.htm
————-
Today’s Market Observation 01.29.2010 Mon Tue Wed Thu Fri Wood Archive
A Brief Market Update
BY TIM W. WOOD | january 29, 2010
In late December and early January as the market was performing its levitation act to lure as many people into the market as it could, I had a number of phone calls from people who had “missed the rally” and were calling seriously questioning my analysis. I had been telling subscribers that the price action in December and January was an ending move of the current intermediate-term cycle and not a beginning move with a new cycle. Cyclically and statistically, there was a clustering of cycles due to peak and that is what has happened. Yet, the short-term price action that was appearing late in the cycle did its job perfectly by sucking every last participant it could into the market before it cracked and in the first three down days of this decline some ten weeks of advance vanished. In doing so, those late arrivals to the party were once again left holding the bag. This in and of itself is a cycle that I see over and over again.
Back in February 2009 I warned that there was a clustering of cycle lows coming due, yes, this is in print, and I said then that the longer this rally lasted, the more dangerous it would become. Reason being, people have short memories, they are greedy and the longer the rally lasts the more convincing it becomes. Well, I can tell you now that the Bear has a few more luring tricks up his sleeve. My cycles work tells me that there will be a rebound rally on both a short and an intermediate degree ahead. The short-term rebound will serve to convince a few more that the decline is over and again they will reenter, and just when all the sheep are pulled back in, the Bear will make another sneak attack. This will in turn give us a bit more of a wash out, and then once the market begins to move back up with the intermediate degree bounce, Kudlow, Cramer and the gang will be screaming that we have now seen a healthy and needed correction and that we are once again back on the road to prosperity. But, the cycles work suggests otherwise and again, that intermediate-term rebound will serve to suck every last drop of cash it can back into the market. Then, depending on how the next rally of intermediate degree sets up that will likely set the stage for the Bear to return with full vengeance.
Understanding the proper degree of the cyclical movements and the implications of how they unfold will be key. 2010 should prove to be a transitional year for many markets. By understanding and remaining focused on the cyclical lay of the land and the underlying statistics one can be prepared for the hazards that lie ahead. I see cyclical events ahead that will put the great inflationary/deflationary debate to bed. The CRB is approaching a cyclically important juncture in 2010 as is the dollar and gold, not to mention the equity markets. The timing of these cyclical events is also key and from a cyclical perspective, 2010 will be a very important year.
From a Dow theory perspective we now have a short-term non-confirmation in place. Reason being, the closing high for the Transports occurred on January 11th, while the closing high for the Industrials occurred on January 19th. The current Dow theory chart can be found below.
http://www.financialsense.com/Market/wood/2010/0129.html
February 1st, 2010 at 9:32 pm
Sorry…typo’s. “…they follow Dow theory” and “…before other blogs got online.” Sheesh…those fingers just keep going ahead of the brain..
February 1st, 2010 at 9:32 pm
Max Keiser – “Peter Schiff, J. Rogers will be Financial Terrorists”
http://eclipptv.com/viewVideo.php?video_id=9793
~~
POLICE STATE: Taser introduces app that tracks kids phones and driving
http://eclipptv.com/viewVideo.php?video_id=9790
~~
http://www.denverpost.com/news/ci_14303473
“More than a third of the streetlights in Colorado Springs will go dark Monday. The police helicopters are for sale on the Internet. The city is dumping firefighting jobs, a vice team, burglary investigators, beat cops — dozens of police and fire positions will go unfilled.
The parks department removed trash cans last week, replacing them with signs urging users to pack out their own litter.
Neighbors are encouraged to bring their own lawn mowers to local green spaces, because parks workers will mow them only once every two weeks. If that.
Water cutbacks mean most parks will be dead, brown turf by July; the flower and fertilizer budget is zero.
City recreation centers, indoor and outdoor pools, and a handful of museums will close for good March 31 unless they find private funding to stay open. Buses no longer run on evenings and weekends. The city won’t pay for any street paving, relying instead on a regional authority that can meet only about 10 percent of the need.
“I guess we’re going to find out what the tolerance level is for people,” said businessman Chuck Fowler, who is helping lead a private task force brainstorming for city budget fixes. “It’s a new day.”
Some residents are less sanguine, arguing that cuts to bus services, drug enforcement and treatment and job development are attacks on basic needs for the working class.
“How are people supposed to live? We’re not a ‘Mayberry R.F.D.’ anymore,” said Addy Hansen, a criminal justice student who has spoken out about safety cuts. “We’re the second-largest city, and growing, in Colorado. We’re in trouble. We’re in big trouble.”…”
~~
Tax Revenue exists for the 168. Track n’ Trace ‘Economy’ (vid. clip II), but not for ‘basic services’ (snip III)..calling it out, will brand you a ‘terrist’ (vid. clip I)
February 1st, 2010 at 9:36 pm
“BR: So yes, I am still giving the cyclical bull the benefit of the doubt.”
I admire your guts…you are bullish at 1929 and 1987 valuations.
February 1st, 2010 at 9:41 pm
On-going deterioration amidst the “happy talk” of the SOTU:
http://www.zerohedge.com/article/majority-states-are-now-insolvent-quantifying-disastrous-unemployment-situation
and (from FT.com):
Neil Barofsky, the special inspector-general overseeing the US government’s financial rescue efforts, is to probe allegations of insider trading among bank executives and their associates.
…
Eight of the largest banks in the US received between $2bn and $25bn in October 2008 under a programme to prop up the financial system led by Hank Paulson, then Treasury secretary.
Dozens more institutions followed and Mr Barofsky, who examines the troubled asset relief programme, is looking into whether information improperly made its way to trading rooms during a feverish period in which the government and banks were frequently exchanging information.
February 1st, 2010 at 9:48 pm
@Mark E Hoffer Says:
February 1st, 2010 at 9:32 pm
Max Keiser – “Peter Schiff, J. Rogers will be Financial Terrorists”
http://eclipptv.com/viewVideo.php?video_id=9793
———-
MEH….Not that Max Keiser doesn’t have good points…and that Peter Shiff isn’t a RW Shill (probably linked to Petersen Foundation and J. Rogers shills for himself for years….but don’t you find something very creepy about Max Keiser? I wonder who funds him…. ??? That’s all I can think when I see him…”Who Funds You.”
He’s very Zero Hedgish. I don’t know if he’s real? Actually ….there’s just something that bothers me about him even when I’m agreeing with him! Weird.
February 1st, 2010 at 10:32 pm
http://citylakes.blogspot.com/2010/02/successor-to-magazine-cover-indicator.html
“Shame on You, Wall Street Journal!”
Long-time stock market watchers are familiar with “The Magazine Cover Indicator”: when Business Week (or Fortune, or Forbes, or Newsweek) runs a cover with the title, “The Death of Equities,” or some such — stop what you’re doing, call your broker (does anyone still have one??) . . . and buy!
Buy big cap’s, small cap’s, U.S., foreign, emerging markets — buy everything! Then borrow to buy some more.
Because such magazine covers, when they appear, are as sure-fire a (contrarian) indicator as they come.
In that vein, it seem increasingly apparent that an investing product such as exchange-traded funds has truly come of age — and pose a real threat to Wall Street — when The Wall Street Journal deigns to attack it directly (or more commonly, undermine it indirectly):
The world of exchange-traded funds looks like an ocean of liquidity: billions of shares trading all day long on easily accessible exchanges.
But beneath the surface is a treacherous landscape of potential trading problems that can raise costs for individual investors.
The ease of buying and selling ETFs, which typically resemble index-tracking mutual funds but trade like stocks, has helped make them the darlings of investors big and small. But as ETFs delve into more esoteric areas of the market such as high-yield bonds and commodity futures, trading them has become more complex.
February 1st, 2010 at 10:36 pm
A proposal by former Federal Reserve Chairman Paul Volcker to limit bank’s proprietary trading will be either be dropped or significantly modified in the Senate, lawmakers and staffers told dealReporter
http://www.ft.com/cms/s/2/76c55844-0f4b-11df-8a19-00144feabdc0,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html
February 1st, 2010 at 10:37 pm
‘The Quants’: It Pays To Know Your Wall Street Math
http://www.npr.org/templates/story/story.php?storyId=13
This guy wrote the original blackjack card-counting book in the early 1960′s called, Beat the Dealer. He was the first to show it’s possible to beat the casinos in blackjack (he was later barred from all of them). I found out not too long ago that he later transferred his math and computer skills to beating the market (in fact, not long after writing the book, Beat the Dealer, he wrote a book called Beat the Market – I wasn’t aware of that book until I heard him interviewed on Fresh Air today).
He’s being interviewed because somebody just wrote a book about quant hedge funds so Terry’s interviewing the author and Ed Thorpe. Great stuff.
I should have added that William Poundstone in his book, Fortune’s Formula, says that Thorp (I had misspelled his name in the email below) had come up with the Black – Scholes options formula first, the thing they won the Nobel Prize for. According to the book, Black came up with his idea from reading Thorp’s book, Beat the Market and that Black acknowledged this in his cover letter of his paper.
February 1st, 2010 at 10:41 pm
http://www.boston.com/business/personalfinance/articles/2010/02/01/noisy_brains_may_trip_up_older_adults_on_financial_matters/
[T]he research – in which participants were placed in a brain scanner while they chose stocks and bonds – found that as age increases, so do the mistakes people make. The scans also showed that in older adults, there was more “noise’’ in a brain region thought to be involved in computing value.
February 1st, 2010 at 10:44 pm
TakBak,
see http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Max+Keiser+
also, like Keiser, Zero Hedge/Tyler Durden is a sharp cat–knows where the mice are..
February 1st, 2010 at 10:46 pm
Transor,
our understanding of Brain Nuero-Chemistry is Primative, those peep are 21st C. ‘Phrenologists’..
February 1st, 2010 at 10:54 pm
“…“The bias is for higher rates,” Chief Executive Officer John Stumpf, said on the company’s fourth-quarter earnings call. “We’re willing to wait for that to happen. We think that’s the better trade.”
Warren Buffett’s Berkshire Hathaway is the banks largest shareholder and thus this decision was likely discussed and received the approval of Buffett.
How big of a deal is this for Wells Fargo?
By scaling back on the so-called carry trade, in which banks borrow in overnight lending markets at rates near zero and invest in higher-yielding securities, Wells Fargo aims to protect against losses when rates rise, but it forgoes the interest income it would have earned by putting on the trades.
If the bank had left its investments unchanged at the end of June, it would have earned about $1.15 billion of pretax income from the carry trade during the next six months, assuming an average yield of 6.78 percent on its debt securities and a top funding cost of 3.40 percent. (The yield and funding costs were calculated by Bloomberg and are based on company filings.)…”
http://www.economicpolicyjournal.com/2010/02/wells-fargo-expecting-much-higher.html
~~
“The government watchdog group Judicial Watch obtained documents from the Air Force detailing House Speaker Nancy Pelosi’s use of US Air Force aircraft for Congressional Delegations (CODELs). According to the documents obtained by Judicial Watch through the Freedom of Information Act (FOIA), the Speaker’s military travel cost the United States Air Force $2,100,744.59 over a two-year period — $101,429.14 of which was for in-flight expenses, including food and alcohol.
The following are highlights from the recent release of about 2,000 documents related to Pelosi’s travel:
•Speaker Pelosi used Air Force aircraft to travel back to her district at an average cost of $28,210.51 per flight. The average cost of an international CODEL is $228,563.33. Of the 103 Pelosi-led congressional delegations (CODEL), 31 trips included members of the House Speaker’s family.
•One CODEL traveling from Washington, DC, through Tel Aviv, Israel to Baghdad, Iraq May 15-20, 2008, “to discuss matters of mutual concern with government leaders” included members of Congress and their spouses and cost $17,931 per hour in aircraft alone. Purchases for the CODEL included: Johnny Walker Red scotch, Grey Goose vodka, E&J brandy, Bailey’s Irish Crème, Maker’s Mark whiskey, Courvoisier cognac, Bacardi Light rum, Jim Beam whiskey, Beefeater gin, Dewars scotch, Bombay Sapphire gin, Jack Daniels whiskey, Corona beer and several bottles of wine….”
http://www.theusreport.com/the-us-report/judicial-watch-posts-documents-in-pelosi-air-force-scandal-t.html
TakBak, maybe, for some variety, you could go with, you know, something like TakBak06..
February 1st, 2010 at 11:06 pm
I heard that Terri Gross interview on the drive home today. It was pretty good. Also said Thorp created the first market-neutral hedge fund — which still has never lost money in any calendar year.
Mark, I emailed that to Barry this morning so he or his editor/intern must be going through “the mailbag” and posting stuff (thus by “Transzor”). I agree that the highlighted brain scans look like junk science. This had a repeatable cognitive test component so I thought it looked interesting.
Do you know if the business toughbooks are still selling for $1600 – $2200? I found a review from 2007 but it’s been such a race to the bottom for laptop prices since. The link you provided earlier looks like wholesaler and I was too lazy to call/email for a quote.
I also want to mention the DARPA Network Challenge https://networkchallenge.darpa.mil/darpanetworkchallengewinner2009.pdf.
This is something I think we should all be thinking about in light of Barry’s RSS posts from the weekend and the discussion about why we read TBP and why so many people obviously feel a personal investment in supporting/participating in the site. We’re seeing crowdsourcing right now as people like Yves Smith parse out the AIG Maiden Lane III transaction. But I think it’s also a logical step for people who are committed to watching and observing things in real-time to work together in networks to share information. In other contexts, this is called “intelligence gathering.”
Anybody stop and wonder what DARPA’s interest in the effectiveness of social networking to gather intelligence and report it quickly and accurately in real time is? Hmm? Just sayin’
February 1st, 2010 at 11:24 pm
>> I just wrote that last sentence to see if anyone actually reads my comments. :-)
Transor, will we be tested on this later?? ;-)
…
>> Tax Revenue exists for the 168. Track n’ Trace ‘Economy’ (vid. clip II), but not for ‘basic services’ (snip III)..calling it out, will brand you a ‘terrist’ (vid. clip I)
MEH, do you recommend we cut back on espionage/military spending and maintain local police, fire, garbage collection, and such?
I wish public unions would notice how badly their private counterparts are doing — and take pay cuts. At least, they should be able to plan their future that way. If not, they’ll probably do worse in bankruptcy, at a time not of their choosing.
Of course, when the gap between the rich and poor is growing again and the huge bonuses on Wall Street, “take a pay cut, please” is a hard sell.
February 1st, 2010 at 11:34 pm
Transzor,
I hear you, re: “This had a repeatable cognitive test component so I thought it looked interesting..”
the equation to ‘Phrenologists’ is, a bit, of hyperbole..
~~
re: DARPA and ‘social nets’, the ‘social nets’, themselves, are the ‘intel gatherers’..
much like ‘e|mail chains’ (e|mails that are fwd:’d to your ‘address book, and fwd:’d, and fwd:’d….)
they devolve the linkages throughout the Society+ with way more “Technicolor”..
also, many of DARPA’s ‘outreach’ programs are, merely, feints/mis-directions..
and, that program, in your link, could, easily, be seen as, in an Economy w/ ~20% un-/under-employment, an easy way to prove the willingness of ‘dispersed “crowds”‘ willing to go ‘active’/'co-ordinated’, toward any goal, for a few, mere, digi-’dollars’..
there are not ‘proving’ anything along the lines of your ex. of Yves..that, simply, wouldn’t be in their ‘interests’..
February 1st, 2010 at 11:46 pm
wunsa-
see: “This book is one of the most unusual in the history of political philosophy, and perhaps one of most brilliant. The author’s ideas are thought-provoking and highly original, and he asks the reader to consider arguments, rather than engaging in a “diatribe to convince” (my words here). The author creates a reading atmosphere of intellectual honesty, and this helps to soften the possible uneasiness that some readers might feel in encountering these kinds of arguments for the first time. Some may seem radical and unpalatable for readers of other political persuasions, but any reader who is open to new ideas should find the reading highly interesting. The political philosophy of libertarianism finds its best apology here, but the contents of the book, and the method of presentation will and has found application to other political philosophies, and to legal philosophy.
In the first chapter, the author asks the reader to consider what he calls the “state-of-nature theory”. This (Lockean) notion, although archaic in the author’s view, allows one to answer whether a state would have to be invented if it did not exist, this being a classical question in liberal political philosophy. The chapter is a detailed justification for pursuing the state-of-nature theory. He holds to the premise that one can only understand the political realm by explaining it in terms of the nonpolitical. He thus begins with the Lockean state of nature concept and uses it to build a justification for the state in the rest of the book.
Most of the discussion in part 1 of the book revolves around the “dominant protective association” in a given geographical area. The author then builds on this in an attempt to justify from a moral perspective “the minimal state”. Along the way, one reads about the “ultraminimal state”, which has a monopoly over the use of force except that necessary for immediate self-defense, but will not provide protection to those who do not purchase it. The author discusses the tension that arises between the ultraminimal state and those who decide not to participate in it. The game-theoretic, optimization-theoretic approach that the author takes, although not advanced and rigorous from a mathematical standpoint, is very straightforward to follow for those not familiar with the more analytical and formal aspects of many modern treatments of political science.
In part 2 the author attempts to deal with alternatives to the minimal state, such as those proposed by the political philosopher John Rawls, and incorporating the doctrine of “distributive justice”. The entitlement-welfare state dialog has not abated in modern political debate, and those who desire an in-depth analysis of these debates will find it in this book. And again, game-theoretic analysis comes into play, although not from a rigorous mathematical standpoint. One of the more interesting discussions in this part concerns the right of individuals to leave a state that they find too compulsory. If a compulsory distribution scheme is the most important, why would a state permit this emigration? Would such an overidding principle of compulsory distribution also permit forced immigration? These are the kinds of questions that the author addresses in the book, and some are left solely for consideration by the reader.
Reader who desire a list of platitudes and endless arguments supporting libertarianism will not find them in this book. Readers though who are not concerned with their political and cognitive equilibrium disturbed will enjoy immensely this book. If it can assist in more careful individual consideration of accepted political doctrine and moral cliches, it has done its job.
…and indeed it has.”
By Dr. Lee D. Carlson (Baltimore, Maryland USA)
http://www.amazon.com/Anarchy-State-Utopia-Robert-Nozick/dp/0465097200
February 1st, 2010 at 11:50 pm
wunsa–
see http://www.amazon.com/An*rchy-State-Utopia-Robert-Nozick/dp/0465097200
the review by By Dr. Lee D. Carlson (Baltimore, Maryland USA)
also, note WP has issues w/ An*rchy..
February 2nd, 2010 at 12:01 am
MEH, did you *have* to phone a friend — a philosopher at that?? It’s midnite and I’m going to bed! I can’t hold my eyes open right now to read about Locke and Rawls. ;-)
>> also, note WP has issues w/ An*rchy..
“We should all watch what we say!”
February 2nd, 2010 at 1:43 am
How old Steve has raised ebook prices for everyone. But that’s nothing unusual in corporate America where the name of the game is skimming money without supplying any added value. It’s much like all that finanicial innovation Tall Paul has been talking about.
http://windowsitpro.com/article/articleid/103519/apple-entry-into-market-means-higher-ebook-prices.html
February 2nd, 2010 at 3:33 am
This might be worth adding to the videos collection, Jim Chanos speaking to an Oxford(?) class about the Chinese real estate bubble. Runs for -57min, unfortunately the video doesn’t show any of his slides but I still felt it was worth a listen.
http://www.youtube.com/watch?v=99HNFCn5RP8
February 2nd, 2010 at 8:41 pm
@Mark E Hoffer Says:
The government watchdog group Judicial Watch obtained documents from the Air Force detailing House Speaker Nancy Pelosi’s use of US Air Force aircraft for Congressional Delegations (CODELs). According to the documents obtained by Judicial Watch through the Freedom of Information Act (FOIA), the Speaker’s military travel cost the United States Air Force $2,100,744.59 over a two-year period — $101,429.14 of which was for in-flight expenses, including food and alcohol.
The following are highlights from the recent release of about 2,000 documents related to Pelosi’s travel:
•Speaker Pelosi used Air Force aircraft to travel back to her district at an average cost of $28,210.51 per flight. The average cost of an international CODEL is $228,563.33. Of the 103 Pelosi-led congressional delegations (CODEL), 31 trips included members of the House Speaker’s family.
•One CODEL traveling from Washington, DC, through Tel Aviv, Israel to Baghdad, Iraq May 15-20, 2008, “to discuss matters of mutual concern with government leaders” included members of Congress and their spouses and cost $17,931 per hour in aircraft alone. Purchases for the CODEL included: Johnny Walker Red scotch, Grey Goose vodka, E&J brandy, Bailey’s Irish Crème, Maker’s Mark whiskey, Courvoisier cognac, Bacardi Light rum, Jim Beam whiskey, Beefeater gin, Dewars scotch, Bombay Sapphire gin, Jack Daniels whiskey, Corona beer and several bottles of wine….”
——–
Mark….Pelosi looks too good for her age to be boozing it up like that. And, if she really kept the Booze Flowing …maybe she would have gotten a few Senators into her spider web of booze and perks to get the Health Care Bill passed.
Sadly….the drinks didn’t work and she still looks pretty good for an older babe.
BTW: “We are Sailing….We are Sailing…cross the waters….come with me.”
LOL’s just saying…that was pretty low what you did about Pelosi. Making her sound like the “flight for drunks to live it up on the way back to SF…and let’s just have a little “payola.”
February 2nd, 2010 at 9:54 pm
TakBak,
see some of this http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Pelosi+Plastic+Surgery
though, w/this: “maybe she would have gotten a few Senators into her spider web of booze and perks to get the Health Care Bill passed.”
That was, actually, that other incompetent’s, Reid’s, job..
as I was saying: “maybe, for some variety, you could go with, you know, something like TakBak06..”
past that, you’ll know, that, w/this: “that was pretty low what you did about Pelosi.”, I, certainly, didn’t do it. She, did it, all be her own lonesome..
What is is about “Individual Responsibility” that /most/ (D)s don’t understand? Are they missing a critical chromosome?