My morning reading material:

• Five Years After Crisis, No Normal Recovery (Bloomberg) see also State of the World Economy: The Emperor Has No Clothes (Triple Pundit)
• In Defense of Short Selling (The Street)
• Why People Hate the Banks (NYT) see also Is Foreclosure Abuse the Biggest Problem in the Housing Sector? (Institutional Risk Analyst)
Michael Mauboussin: Shaking the Foundation: Revisiting Basic Assumptions about Risk, Reward, and Optimal Portfolios (Legg Mason Capital Management)
• The Q Ratio and Market Valuation (Advisor Perspectives)
The Big Split: Why the hedge fund world loved Obama in 2008—and viscerally despises him today (New Republic) see also Why London, New York Draw the Wealthy (Barrons)
• Worst US Earnings Growth Since 2009 Seen As Stocks Near Highs (Nasdaq)
• Groupon looking like Pets.com of current tech boom (Market Watch)
Kurt Vonnegut: I Am Very Real (Letters Of Note)
• In Manhattan Pizza War, Price of Slice Keeps Dropping (NYT)

What are you reading?

>

Source: Businessweek

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.

14 Responses to “10 Tuesday AM Reads”

  1. A says:

    Why People Hate The Banks:

    Isn’t it a tad hypocritical, that the SEC is chasing a Canadian bank (RBC) while it turns a blind eye to the fraud committed by the banks in its own back yard ??

    Perhaps RBC needs to follow the path of its US colleagues and purchase some bodies in congress. And soon.

    http://www.theglobeandmail.com/globe-investor/us-regulator-accuses-royal-bank-of-wash-trade-scheme/article2389622/

  2. VennData says:

    How can anyone call the Ryan budget a serious attempt at deficit reduction, when he doesn’t name the loopholes he wants to remove?

    ROFL, Ryan is “serious” about the deficit.

    http://www.nytimes.com/2012/04/02/opinion/krugman-pink-slime-economics.html

    http://taxvox.taxpolicycenter.org/2012/03/20/ryans-mystery-meat-budget/

    The GOP always takes us down this road: Reagan with Stockman’s “Magic Astiresk” … Bush and his “temporary” tax cuts” Ryan’s little asterisk is that $700B a year in unnamed loopholes he has yet to name.

    The GOP isn’t serious about deficit reduction. How do you GOP suckers keep falling for this nonsense?

  3. rd says:

    Q-value:

    The Greenspan-Bernanke Put clearly show themselves in the charts of the Q-value, CAPE etc. over the past 13-14 years. Loose Federal Reserve money policies have allowed for an extended period of extra-ordinarily rich stock market valuations coupled with multiple other asset bubbles.

    The fat lady will be finished singing when Q is -50% and CAPE < 10. Until then it is just Ouija board technical analysis trying to catch the Fed-fed stock and commodity market rises while bailing out before the 50% crashes when the spinning plates can't be kept in the air any longer. General dissatisfaction with financial assets, government debt levels, and the demographics of increased retirees will probably keep valuations suppressed then for a few years until the Great American Spirit is reborn in a new economic and market rally.

  4. tradeking13 says:

    Trolling Could Get You 25 Years in Jail in Arizona (Gizmodo)

  5. machinehead says:

    ‘From the time point of view, the Sharpe ratio seems very arbitrary. It’s just something that
    becomes smaller if the fluctuations are larger or the excess return is smaller. But the time
    perspective would just look at optimal leverage to judge the quality of an investment.’
    — Ole Peters, via Legg Mason

    All well and good. But how exactly does one do this ‘time averaging’ that Peters extols? With a Monte Carlo simulation?

    Evidently, some sort of distribution has to be assumed. Likely it is not simple enough, or unambiguous enough, for everyone to just enter it in Excel and get the same answer. Also, there’s a circularity problem, in that the assumed distribution will dictate the results.

    What non-Gaussian return distribution should we use to model common stocks? Peters doesn’t say. Reminds me of a poseur in engineering school: “I’ve got the problem all jocked out … now I just need the equations!’

    So I’ll keep using the Sharpe ratio, thank you very much, until Peters’ time averaging technique is presented in usable closed form. Which ain’t bloody likely … if this egghead physicist is so smart, why isn’t he rich?

  6. NoKidding says:

    “In Manhattan Pizza War, Price of Slice Keeps Dropping ”

    Thanks, a great read. Everything Adam Smith loved, and Karl Marx hated.

    Individual businessmen driving themselves to the edge of destruction to satisfy the masses. But beware of what passes for peperoni on a 75-cent slice!

  7. RW says:

    @machinehead, I had some problems with the implications of Ole Peters work in that interview too. Is he saying there is a distribution to history? A time-series approach to evaluating risk or “optimal leverage” in historical terms? Seems to be but how he plans to go about that is not clear.

    Many markets probably don’t have a Gaussian/normal distribution but treating them as Nassim Taleb (& Mandelbrot) did, basically as power distributions, doesn’t make for easy investment allocations …or maybe too easy because such distributions don’t have a definable variance and the tails are so fat the best tactic would probably be to put 90-95% of your portfolio in Treasuries and absolutely swing for the fences with the remainder.

    I mainly conceptualize markets as naturally seeking equilibrium but periodically becoming chaotic with a change of state to another equilibrium with a different mean and variance. While in equilibrium the regular tools, most of which assume a normal distribution, work fine but neither the transition nor the new state can be predicted in advance so we do what we would do anyway, diversify and hedge. [shrug]

    WRT Sharpe Ratio, I use it because my portfolio program computes it automatically along with other stats but have come to prefer M-square when I’m focusing on risk adjusted returns because it’s also better for comparing assets; e.g., bonds and stocks can be treated as equivalent in M-square terms.

  8. rd says:

    Only Americans are permitted lucrative tax benefits when trading securities:

    http://money.cnn.com/2012/04/02/markets/royal-bank-canada-sued/

    The good news is that the financial regulators are figuring out who caused the financial crisis and are hot on the trail of them – the Canadians.

  9. swag says:

    Duncan Black is counting down to the WANKER OF THE DECADE!

    9th Runner Up, Megan McArdle, aka Jane Galt.

    http://www.eschatonblog.com/2012/04/wanker-of-decade-9th-runner-up.html

  10. Bob is still unemployed   says:

    In Defense of Short Selling

    I’ve no problem with short selling, nor do I understand why there needs to be routine articles defending short selling.

    What I do have a problem with is the short selling when the seller does not have a hard locate for the shares being sold. All too many of the shares being sold short have, at best, a soft locate and mostly just a nudge nudge wink wink, yeah I located the shares for you type of locate.

    Why does the Reg SHO list even exist?

  11. Joe Friday says:

    Groupon looking like Pets.com of current tech boom (Market Watch)

    HEH

  12. Braden says:

    Inquiring non-NY-based minds want to know: WHO’S GOT THE BETTER SLICE ?

  13. rd says:

    @machinehead and RW:

    Pre-”Black Swan” in about 2000, Bill Bernstein took a crack at looking at the various Monte Carlo and other computer programs for assessing retirement savings. In particular, he enjoyed the ones that promised a 95% certainty of success.

    He looked at it from a lifetime risk perspective reviewing various countries and the issues that they had run into over the past century or so where they were able to mushroom cloud their economies. for example, Germany’s repeated economic and financial collapses of the Weimar Republic and 1945, Japan 1945 and 1990, Russia 1917, etc.

    He came to the conclusion that a typical person had about a 20% lifetime risk of participating in one of these events which could simply devastate savings and investments. meanwhile the 95% probabiltiy of success was typically based on the Sharpe-type of data sets that typically look at variabilities over periods of three years or so which usually show nice, neat distributions but do not reflect the fat tail risks of the types of events described above. His conclusion was that any of these long-term types of predictions had a real likelihood of success of 80% or so and there wasn’t much you were going to do to increase those odds through simple investment strategies.