My afternoon train reading:

• Havana Gets a Taste of the Free Market (Spiegel Online)
• Bipartisan Support in Washington for 401k Skimming (Forbes) see also Why bother with target-date funds? (Reuters)
• How the JOBS Act triumphed over its critics (Business Journals)
• How to Put More Distance Between Banks and Their Auditors (American Banker) see also Bank Lobby’s Onslaught Shifts Debate on Volcker Rule (Bloomberg)
• The New Blue Collar: Temporary Work, Lasting Poverty And The American Warehouse (Huff Post)
• Everyday Stress Can Shut Down the Brain’s Chief Command Center (Scientific American) see also The Brain on Love (NYT)
• Eurozone debt crisis: how Greece could exit the euro (Telegraph)
• The Science of Why We Don’t Believe Science (MoJo) see also The Science of Truthiness (HuffPost)
• Why “Don’t Be Evil” Is Evil, and Why Google Isn’t So Bad (Pando Daily)
• SCOTUS on HealthCare: It’s Not About the Law, Stupid (Slate)

What are you reading?

California Farmers Feel Pain

Source: WSJ

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

17 Responses to “10 Monday PM Reads”

  1. Molesworth says:

    Writing as a grower from CA, many are abandoning because water tables are falling, the cost of water is prohibitively high and water quality is bad. The water we get from the Colorado is too salty.
    Many think we’re in a drought, but in reality, the very long term history shows we are reverting to the norm.
    In the meantime, people want to live where it is sunny and doesn’t rain and want to import water from the north and Colorado R to water their stupid lawns. Lawns, a hangover of Anglophilia, are a sponge. But the Brits don’t have sprinkler systems. Their lawns stay green because it rains.

  2. JimRino says:

    We All need to incorporate Climate Change into our Portfolio model, or, we will be destroyed by it.

    http://climatecrocks.com/2012/03/26/global-warming-what-we-knew-in-82/

  3. thomas hudson says:

    the reuters article on target funds only briefly mentions why they are popular. the pension protection act of 2006 had a provision in there related to the target funds that gives shelter to employers/plan providers from fiduciary claims if the employee was automatically enrolled in the fund when employed. in other words, if billy bob was automatically enrolled in the plan at x% and 100% of his contributions went into the target date based on his age, then billy bob could not come back later to said employer and sue him for not providing choices, guidance, etc.

    within 6 months, it seemed like every one of our clients had target funds added to their employer’s 401k plan.

  4. JimRino says:

    Climate Change causing: “Intense Human Suffering” – Scientific American

    http://www.scientificamerican.com/article.cfm?id=human-pollution-tipping-scaled-toward-more-weather-extremes

  5. rd says:

    Re: Reuter Target Date article:

    The commentators are mixing and matching advice. Employees are generally limited to the investment options in their 401k. Try and find an S&P 500 index fund that has a 0.08% expense ratio in your 401k! Ours is 0.25%. The other category funds available are active and typically have 0.7%-1% expense ratios, including Pimco Total Return.

    On the other hand, the target date funds in my 401k have an expense ratio of 0.51% with a reasonable glide path and are based on the Dow Jones target date index so they have a fairly diverse mix.

    If you are adept at portfolio construction, then you can spend a lot of time on it and crunch the potential alpha and beta values for the various funds and weighted expense ratios in a spreadsheet to see if you can do better than the target date fund. The target date funds relieve the employees of this duty and generally provide a lower overall expense ratio than the average of the other funds.

  6. mathman says:

    Good job JimRino! i’ve been on this message for years – it’s all connected! If we don’t pay attention (or start changing the way we live) we’ll be extinct in less than a century. We’re going to have to completely change everything – from the idea of “money” to the idea of being human to caring for and cooperating with each other rather than competing for scarce resources – and start cleaning up our acts (stop all the pollution). The elephant in the room is overpopulation though and there’s no easy way to get our numbers down to the carrying capacity of the earth without some death. Maybe after all of the Boomers die (that includes me) what’s left can work on keeping the numbers down. They’ll have problems dealing with the Catholics though (Pope says no birth control except abstenance) and the chronic breeders out there, but nature will help (when there’s no food and or no potable water there’s no population problem), however harshly.

  7. rd says:

    The Dog That Didn’t Bark at MF Global:

    http://www.bloomberg.com/news/2012-03-26/e-mail-clears-jon-corzine-sort-of.html

    There is a lot of discussion about whether or not the e-mail train relating to $175M of transfers damns or clears Corzine.

    I believe that there is a total of about $1.6B missing from segregated customer funds at MF Global. Where is the e-mail or other paper trail for the other $1.4B? Why is the lack of this paperwork not a big topic of discussion? If that is hard to locate, then a Sarbanes-Oxley indictment of Corzine should be in the offing. It should not be possible for a company to accidentally misplace $1.4B without any paperwork or written authorizations.

    Moving $1.4B out of segregated customer funds should not be a trivial activity done upon the whim of a low-level employee. If there is no paper trail, then clearly there were inadequate controls which means the CEO and CFO should do jail time as it is their responsibility to ensure the controls are in place. The paper trail should clearly show when money was taken out of that account and who authorized it.

  8. Sechel says:

    Dallas Fed white paper. They chime in on too big to fail and the Fannie Mae/Congressional role in the mortgage crisis

    http://www.ritholtz.com/blog/2012/03/dallas-fed-choosing-the-road-to-prosperity/

  9. PeterR says:

    Dahlia’s Slate article about the Health Care proceeding before the Supreme Court makes one wonder.

    What a passel of overblown superlatives!

    Nothing in Constitutional Law litigation is so clear-cut. Nothing.

    For her to write with such a gloss of authority makes one question her integrity and sense of responsibility.

  10. Russ says:

    Mooney, the author of the Mother Jones article on not believing science, does well to cite Festinger, an insightful guy who also developed some of the early theory of social networks, theory that helps explain the Facebook phenom.

    For the classic material on why scientists often don’t believe science, see Thomas Kuhn’s book, The Structure of Scientific Revolutions—written about the same time Festinger was doing his work. http://www.amazon.com/Structure-Scientific-Revolutions-Thomas-Kuhn/dp/0226458083/ref=sr_1_1?ie=UTF8&qid=1332805264&sr=8-1

    Still and all, we might wonder why Mooney and other writers usually use the religious fringe for their examples rather than other interesting true believers at, say, CNBC, or at certain university social science departments, or maybe those mathematicians who worship at the altar of certainty. Using the same old tired and obvious examples (without reference to counter-examples such as Augustine, Martin Luther, or Martin Luther King) sets us up for the availability heuristic error, one of the kinds of cognitive errors to which Mooney aims to alert us.

  11. willid3 says:

    a wall street scandal that makes all the rest of them look puny

    http://finance.fortune.cnn.com/2012/03/23/the-wall-street-multibillion-scandal-no-one-is-talking-about/

    Consider what went on here. Banks took a rate that they artificially set themselves, and then went out and convinced municipalities and pension funds and others to bet against them on the rate. LIBOR rates were supposed to be set by bank treasurers reflecting what it cost them to borrow from other banks. But reportedly a number of bank treasurers consulted traders when deciding what rate to report to the organization in London that collected and posted the rates. (LIBOR stands for the London InterBank Offered Rate) What’s more, traders at a number of banks were given access to the systems that bank officials used to enter the rate so they could overwrite the rates with ones that would better suit them. When the rate went the way Wall Street traders programed it to do, the banks cashed in millions.

    The LIBOR rate also affects what many of us pay on our adjustable mortgage, home equity loans, car loans and others. But that is a little bit of an aside. The real, clear damage is in the contracts that banks set up with municipalities and others to bet on their own manipulated rates. Baltimore was sold as much as $300 million in LIBOR contracts. The city is the lead plaintiff in the class action against the banks. The suits say the LIBOR market is as large as $90 trillion. Though some have put the market of things the rates affects as much as $350 trillion in loans and derivatives. The suit says on average over the period it was manipulated the banks artificially held the LIBOR rate down by 0.87%. Go with the smaller figure and by back of the envelope math, you get that the banks could have made as much as $750 billion on their scheme, but it probably wasn’t that much since banks were probably asked to long and short on the rate.

  12. willid3 says:

    In Texas we are a very bad drought (though we are getting a little ahead but). and for Texas, if you go back far enough it was an ocean or gulf. so its not the ‘norm’. as it is water here is also getting expensive. and scarce. locally we need to start looking at least adding more reservoirs, but our state government is going to even consider (can afford that). the other down side for us is going to be the lack electricity. seems power plants (of all stripes) are big water users. so we are expecting to have rolling blackouts. just like last year if we are as hot and dry as long

  13. willid3 says:

    so now the 401k funds will be raided by wall street? and Congress is going to help them do it? so the reality of the retirement savings plans is that is was all a big scam?

  14. formerlawyer says:

    @Molesworth Says:

    Agriculture is the primary user of water in California:
    “In a normal precipitation year, the state will receive a total of about 200 million-acre-feet (maf) of water, including 5 million to 10 million maf of imports from Colorado, Oregon and Mexico. Of the total surface supply, about 60 percent is used directly by native vegetation or cropland, evaporates, or flows to salt sinks like the Pacific Ocean, saline aquifers and the Salton Sea. The remaining 40 percent, or about 80 maf, is referred to as “developed” or “dedicated” and is distributed among agricultural, urban and environmental uses or is stored in surface or groundwater reservoirs.

    About 34.2 maf is used for agricultural irrigation and about 8.9 maf is devoted to urban and industrial uses in a normal year. Most of the precipitation occurs in the mountains north and east of the Sacramento-San Joaquin Delta. However, irrigation water demand is highest in the state’s valleys and coastal plains south of the Delta so storage and transport systems were developed to capture this runoff and deliver it during the dry months.”
    http://westernfarmpress.com/irrigation/california-s-water-supply-and-demand

    Also: “In average year California agriculture irrigates 9.6 million acres using roughly 34 million acre-feet of water of the 43 million acre-feet diverted from surface waters or pumped from groundwater.”
    from: http://www.water.ca.gov/wateruseefficiency/agricultural/

    “Outdoor water use accounts for 42 percent of urban use in California; this includes lawns, large landscapes, parks, golf courses and cemeteries, and a portion of commercial and industrial water use. But regional use varies significantly.
    http://bwnews.us/2012/01/26/what-happened-to-water-conservation/

    While I am not familiar with the details of water politics in California my current impression is that on the basis of “back of the envelope” calculations, 0.42 * 8.9 maf (urban use) translates into 3.378 maf on watering lawns, golf courses, landscapes etc. The difficulty appears to be that agricultural water conservation measures have for the most part already been implemented (by farmers at their own cost) Any further agricultural conservation measures will result in declining returns on water recovery and may be cost prohibitive.

    This is contrast to urban conservation measures where many localities are not even measuring or monitoring individual water use – let alone pricing water as an incentive to conserve. There are municipalities that are in the forefront of urban water conservation but my impression is there is no statewide urgency (or budget) for urban conservation.

    Water is also in short supply (for various reasons) in many of the western states – states which have seen the greatest population growth in the recent years.
    http://bwnews.us/2012/03/06/californias-choices-two-big-expensive-tunnels-or-just-better-water-management/

  15. AHodge says:

    from yesterdays FT
    http://presscuttings.ft.com/presscuttings/s/3/articleText/58179335#axzz1qKF2sxYY
    UBS hands orcel balance sheet power to revive banks stature
    unbelievable stolen from BankAmerica? i started laughing
    bringing all his clients?
    all ten named were skeeby troubled banks italian, spanish, russian
    i almost fell out of my chair–in a good way i am short UBS and BBVA– one of his names
    this is a desperate to make up hidden losses high wire act.
    and with only the swiss central bank behind them–in effect no net

  16. AHodge says:

    the articl notes orcel himself called a Bof A deal with Unicredit as “the scariest of my career” and that ” B of A stunned rivals with its preparedness to take on such a risk”

  17. Molesworth says:

    @ FormerLawyer,
    Thanks for the info. You are right. Water is complicated. I’ll read your entries later when I have some more time. As a small grower, I’m at a disadvantage. The large growers can install reverse osmosis on their pipes and get the salt out–a prohibitive expense for me. The valley has implemented a great deal of water saving strategies. I know because I just drove through there last week. But there is still some flooding irrigation. And of course the Congress Created Drought signs are fading but still plentiful. Congress created the infrastructure that brought water to the desert and made the Valley fruitful. But that is lost on those when the water disappears. It’s complicated.

    This has me concerned:
    http://ngm.nationalgeographic.com/2008/02/drying-west/kunzig-text
    In fact, the tree rings testified that in the centuries before Europeans settled the Southwest, the Colorado basin repeatedly experienced droughts more severe and protracted than any since then. During one 13-year megadrought in the 12th century, the flow in the river averaged around 12 million acre-feet, 80 percent of the average flow during the 20th century and considerably less than is taken out of it for human use today. Such a flow today would mean serious shortages, and serious water wars. “The Colorado River at 12 million acre-feet would be real ugly,” says one water manager.
    * * *
    The wet 20th century, the wettest of the past millennium, the century when Americans built an incredible civilization in the desert, is over. Trees in the West are adjusting to the change, and not just in the width of their annual rings: In the recent drought they have been dying off and burning in wildfires at an unprecedented rate.
    For most people in the region, the news hasn’t quite sunk in.
    Between 2000 and 2006 the seven states of the Colorado basin added five million people, a 10 percent population increase. Subdivisions continue to sprout in the desert, farther and farther from the cities whose own water supply is uncertain