Back in the saddle, here are my morning reads:

• The Market Looks Toppy Fundamentally And Technically (Comstock Funds)
• Following the Investment Herd Isn’t Always a Bad Idea (WSJ)
Apple v. Samsung: The infringing device scorecard (CNetsee also Triple damages and injunctions: what comes next for Apple and Samsung (Gigaom)
• Obama or Romney? Markets don’t care (Market Watch)
• A Nation Adrift From the Rule of Law (WSJ) see also Why No Prosecutions (Credit Slips)
• Best Buy Wants You to Stop Using Its Stores as Showrooms (New Deals)
• 26 Internet safety talking points (Dangerously Irrelevant)
• Why Serious Talk of Balancing the Budget Went Bust (The Fiscal Times)
• How Long Do You Want to Live? (NYT)
• Law prof: Romney Probably Owes Back taxes Due to Management Fee Conversions (A Taxing Blog)

What are you reading?


Suits Mount in Rate Scandal: Billions of Dollars at Stake in Claims

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.

10 Responses to “10 Monday AM Reads”

  1. What are you reading?

    “The government consists of a gang of men exactly like you and me.
    They have, taking one with another, no special talent for the business
    of government; they have only a talent for getting and holding office.
    Their principal device to that end is to search out groups who pant and pine
    for something they can’t get and to promise to give it to them.
    Nine times out of ten that promise is worth nothing.
    The tenth time is made good by looting A to satisfy B.
    In other words, government is a broker in pillage, and
    every election is sort of an advance auction sale of stolen goods.”
    – H. L. Mencken
    (1880-1956) American Journalist, Editor, Essayist, Linguist, Lexicographer, and Critic

    “A person’s right to a job is as specious as his boss’ right to success in business. There is no right to a minimum wage, just as there is no right to success in self-employment.”
    – Rex Curry
    Source: letter to the Washington Times National Weekly Edition, May 5, 1996

    “[W]hensoever the general government assumes undelegated powers,
    its acts are unauthoritative, void, and of no force.”
    – Thomas Jefferson
    (1743-1826), US Founding Father, drafted the Declaration of Independence, 3rd US President
    Source: Kentucky Resolves

    Obviously, ‘Quotes’ from differing Eras..

    Some things remain *True.

  2. eliz says:

    BR – thanks for pointing out, “Law prof: Romney Probably Owes Back taxes Due to Management Fee Conversions.” It’s great to get a more detailed taste of how private equity firms operate.

  3. machinehead says:

    Permabear Dr. John Hussman, evidently besieged with customer mutinies as he valiantly fights the tape, now offers this astonishing claim:

    Simple trend-following schemes (like moving-average crossover rules) are unlikely to be very effective in isolation, and are not usefully applied as a top-level filter in the hope of catching market rallies without being vulnerable to downside risk. Typically, the best that can be achieved with popular moving-average crossover systems is a moderate reduction in drawdown risk, but zero or negative incremental long-term return versus a buy-and-hold.

    What is wrong with this claim? Two things. First is that the longer-period moving averages (34 and 55 week) typically are long stocks about 72% of the time, and flat the remaining 28% of the time. When risk-adjusted return (e.g., the Sharpe ratio) is calculated, these flat periods give the MA models a substantial and robust advantage over buy-and-hold, even when they don’t beat buy-and-hold in absolute return (after all, the MA models were only invested 72% of the time). Examining absolute instead of risk-adjusted returns borders on statistical malpractice.

    Secondly, although Dr. H mentions the common practice of deploying a one-percent deadband around the MA to reduce whipsaws, he apparently doesn’t use it. So his crippled MA models get tagged with more whipsaws and higher trading costs than real-world implementations of MA models do.

    For a more objective backtest of what MA models can and can’t do, consult Mebane Faber’s landmark book The Ivy Portfolio.

    Dr. H is a smart guy who is generous about publicly sharing his weekly comments. But at this point, I’m afraid he’s in an existential crisis with his 20-year attempt to ‘predict the market’ and then implement his expert predictions with time-decaying options. (As a subscriber to his former newsletter, I watched him fight the tape all the way up from 1995 to 2000, based on low dividend yields.)

    Not only are MA models simple and robust, but also they do not scale well to large size due to trading costs increasing with the 1.5 power of volume. Individuals whose transactions are small in relation to daily volume can dump their stock exposure without the market batting an eyelash. But when the big guys attempt this, it looks like 19 October 1987. This is our dirty little secret, along with the fact that an MA whips a PhD Econ.

  4. VennData says:

    Tea Party and GOP Are Now In Sync

    Whew, just in time. How fortunate. Thanks for the update WSJ! What a great reporter of ‘news’ is foreign-born Rupert Murdock is…. wait a sec….

    Republicans Worry About Keeping Factions Reined In

    Well someones lying. I’m sure the GOP got their act together on this last night so it must be that despicable New York Times. It’s from New York City after all!

  5. formerlawyer says:

    TA-NEHISI COATES on President Obama

    FiveBooks Interviews > Dan Ariely on Behavioural Economics
    Especially the other books recommended in the comments.

  6. rd says:

    I am always worried about whether or not my wife has spent my paycheck before I receive it, so I think there is a real potential capital loss on a regular basis regarding my payroll income since I don’t control her expenditures and my future income is therefore uncertain. I should be able to convert this uncertain future income into a capital gain according to the PE logic, and declare it as a capital gain when I have a positive income. My wife’s spending could then be viewed as a capital loss to me and carried over to offset other income down the road.

    It sounds fair to me. What could be the problem other than the fact that I have not bank-rolled a SuperPAC which would almost assuredly keep the IRS at bay?

  7. VennData says:

    The root cause is that we have become a financially driven economy. The view of shareholder value as corporations’ primary objective has dominated since the 1980s. That motivation—to get short-term shareholder returns—then pushes to lower priority all the other things we used to think about as a social contract: that wages and productivity should go together, that there should be an alignment between the interest of American business and the overall American economy and society. That creates a market failure: it’s not in the interest of an individual firm to address all of the consequences of unemployment and loss of high-quality jobs, but the business community overall depends on high-quality jobs to produce the purchasing power needed to sell their goods and services to the American market. Sixty percent of U.S.-based multinational corporations’ revenue still comes from the U.S. market. We’ve got to solve this market failure.
    And the Ownership society

  8. kaleberg says:

    re: “Why Serious Talk of Balancing the Budget Went Bust ”

    Just wondering who was the last Republican to even be slight concerned with balancing the budget. It wasn’t either of the Bushes, though Bush I did raise taxes in that direction. It sure wasn’t Reagan who was a Keynesian and borrowed up a storm. It wasn’t Nixon who ran up the Vietnam War deficit. Was it Eisenhower? I was pretty young back then, so I’m not sure. Maybe it was Herbert Hoover, but Hoover and Ike are both long dead and gone. Many Democrats take balancing the budget seriously, but I can’t think of any living Republicans.

    Hoffer does make some interesting points, but if you are going to use government issued money and expect the government to enforce your contracts for you, you’re going to have to put up with their rules, just as you have to be street legal and follow the driving laws to drive your car on the government’s streets. Yes, the government is as bad as the private sector. Just try running your own phone on a cell phone company’s network or hooking up your own wires to the NYSE trading floor, and see how quickly you get slapped down.

  9. kaleberg,

    you go with a huge Caveat..”…but if you are going to use…”

    you should understand (note: I’m not sure that you don’t..) that those examples that you enumerate are, certainly, not ‘Givens’..

    as well, the Structures, of the two ‘Private’ Firms that you mention, are, radically, deformed by the, current, Mass of “Government” Regulations..

    1. To count off or name one by one; list

    2. To control the speed or magnitude of; regulate: a valve that governs fuel intake.
    3. To control the actions or behavior of: Govern yourselves like civilized people.
    4. To keep under control; restrain: a student who could not govern his impulses.
    5. To exercise a deciding or determining influence on: Chance usually governs the outcome of the game.