My morning reads:

• Passive or Active? No Contest, He Says. (WSJ)
Can’t buy me love: Why Bankers Are a Miserable Lot (The Epicurean Dealmaker)
• Exceptional upward mobility in the U.S. is a myth, international studies show (Institute For Social Research) see also Are You Better Off? Here Are the Numbers (The Fiscal Times)
Introducing Megabank: The regulators’ worst nightmare (Financial News)
• Dot-Com Bubble’s Equity Swaps Are Back (WSJ)
• KPMG failed as Auditor for evaluating adequacy of mortgage repurchase reserve (PDF)
• In Stadium Building Spree, U.S. Taxpayers Lose $4 Billion (Bloomberg)
• Bits of Mystery DNA, Far From ‘Junk,’ Play Crucial Role (NYT)
• Muzak makes Supermarket Shoppers Slow Down, Spend More Time, and 20% More Money (Hariot Watt)
Romney vs. Obama: For the Markets/Economy, It Really Doesn’t Matter Who Wins, Ritholtz Says (Yahoo Finance) see also At The 2012 Conventions, 15,000 Journalists Search For A Story (Huff Post)

What are you reading?


Summer Rally Puts the Hurt on Defensive Hedge- and Mutual-Fund Managers

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.

25 Responses to “10 Thursday AM Reads”

  1. NoKidding says:

    Re: Myth of upward mobility:
    “Despite the widespread belief that the U.S. provides exceptional opportunities for upward mobility, these data show that parental wealth has an important role in shielding offspring from downward mobility and sustaining their upward mobility in the U.S. no less than in countries like Germany and Sweden, where parental wealth also serves as a private safety net that not even the more generous European public programs and social services seem to provide.”

    Anyone who can read that intro paragraph and NOT see the mental contortions suffered to preserve the desired headline is braindead.

  2. Concerned Neighbour says:

    I think we need an open thread discussing these two questions:
    1. Will central bankers ever let stock markets fall again?
    2. Will QE ever be priced in?

  3. AHodge says:

    that PCAOB audit the auditors report was mostly brand new to me –thanks so much
    and fascinating–even for non accounting geeks also?
    why are KPMGS egregiously misbehaving clients anonymous? should the investors not know? is this grounds for a lawsuit?
    QUOTES FROM THE AUDIT edited for readability
    “For certain acquired loan portfolios, …failed to address the significant differences between the discount rates… other assumptions, that the issuer used in its fair value measurements (IN CONTRAST TO) those that the Firm’s internal valuation specialist considered reasonable.

    In addition, the Firm tested the valuation of the acquired FDIC indemnification assets by developing a range of relationships between the values of indemnification assets and the underlying loans based on other recent transactions by other banks…… This range, however, was too wide …. three percent to 60 percent…, and the Firm performed no procedures to determine whether the loan portfolios acquired by the other banks had similar characteristics.

    Further, the Firm failed to test certain assertions as of the acquisition date for certain of the other asset and liability accounts acquired, beyond, for some accounts,… comparing … to unaudited pro forma statements
    • During the year, the issuer added a new unallocated reserve component to its ALL. The Firm failed to sufficiently test the ALL,….. without testing any of the specific assumptions used in determining the recorded amount.

    …….the Firm’s approach was to send confirmations as of an interim date and to perform procedures to extend to the year end. The Firm, however, confirmed ..the last statement date, which differed from the interim date, and failed to reconcile. . Further, for confirmations that were not returned, the Firm’s alternative procedures were insufficient…… For confirmations returned with exceptions, the Firm did not investigate the reasons for the exceptions.

    The issuer recorded the fair value of its AFS securities using prices from an external pricing service. The Firm failed to identify and test any controls over the prices…….. For some types of AFS securities without readily determinable fair values, the Firm…….. failed to obtain an understanding of the specific methods and/or assumptions underlying the fair value measurements that were obtained from external pricing services….., and it failed to perform other procedures to support its use of those prices in its testing. In addition, for certain AFS securities that had been in an unrealized loss position for more than twelve months, the Firm failed to test certain assumptions that the issuer used to determine whether the securities were other-than-temporarily impaired. UNQUOTE

    this stuff just dissappears into the void and the big 4 autdit firms truck on and on.

  4. AHodge says:

    this ties in with SARBOX of course.
    the reason there have been no Sarbanes oxley prosecutions, none,
    is that ,i am told, all the CEO has to do
    to completely cover his ass
    is get an OK audit report
    then if his company blows up he is completely entitled to say
    how could i have known…and walk

  5. AHodge says:

    also got to love KPMGs response letter to the PCAOB at the end
    basically fuck off…

  6. AHodge says:

    this is great
    In this audit, for ..investment securities, the Firm obtained estimates of
    fair values from an external pricing service for comparison For a certain type of security, a number of the individual securities had a recorded value significantly below par value (“the identified securities”). ……For each of the identified securities, the Firm accepted the issuer’s recorded value….. Specifically, the Firm determined that the differences in pricing were attributable to differences in a key underlying assumption and concluded that these differences were reasonable. There was no evidence in the audit documentation, and no persuasive other evidence, however, that the Firm performed procedures to provide a basis for its conclusion.

    i read this as KPMG basically letting their client carry a batch of ABS level two with prices at par value even when there were two different market prices at big discounts?????

  7. James Cameron says:

    Regarding “Romney vs. Obama: For the Markets/Economy, It Really Doesn’t Matter Who Wins” some clown wrote this:

    “Who is Ritholtz ?. Not too smart. Don’t you think Romney’s energy plan will cause a surge in employment and energize the economy ?”

    Anyone who has looked carefully at Romney’s job creation claims – obviously this person hasn’t – would be well aware the underlying analysis is exceedingly thin. Certainly, nothing’s been put out that tells us how many of the 12 million jobs he’s pledged to produce his first term are connected to his energy plan (whatever that is . . .). See, for example:

    Romney’s 12 million jobs

    Also see:

    The Romney Program for Economic Recovery, Growth, and Jobs

    a paper written by Romney economic advisors (at least two of whom were economic advisors for George W. Bush . . .).

    One would be hard pressed in this paper to find the analysis behind the policy proposals that supports the 12 million job claim. For what it’s worth, since July 2001 according to BLS stats only 9K jobs/month have been created on average, well below the 250K/month required in Romney’s pledge.

  8. cfischer says:

    Concerned Neighbour: Amen. It’s ridiculous at this point.

  9. Pantmaker says:

    The hilarious thing is no actual connection exists between central bank activity and stock market direction other than the magical thinking that there is a connection. The imaginary safety net? wtf? This morning the suckers bought and the winners sold.


    BR: A self fulfilling prophecy is still looked at as prophecy nonetheless

  10. NoKidding says:

    Pantmaker and BR, maybe at some point in this process the CBs start buying equities.

    The FHA takeovers of the GSEs were executed by creating and owning shares. Why not GE or C or FB? No, I don’t think thats what’s coming, but if the CBs want to buy the stock market I don’t see what stops them.

  11. nofoulsontheplayground says:

    BR, you look like you’ve lost 50-lbs in that Tech Ticker piece. You must be feeling like a champ! I hope you treat yourself to a new suit or two as a reward. How close are you to your goal?

  12. patfla says:

    The managers vs S&P returns graphic prompts a question. Does anyone know of a place on the web where you can see all the current members of the S&P? In principle you’d want to know if there have been any changes within the S&P YTD but they don’t occur frequently and at a first approx current members would be OK.

    Then I’d want their YTD returns and to rank them in this order (you’d probably have to weight by market cap).

    I’ve sent a message but I don’t believe my main trading tool from Schwab will do this.

    Which then leads me to to the idea of programming it (I’d use python). So the first thing (again) that I’d need would be the current components of the S&P. From there I know how to look up the return YTD for each (both price and total) from yahoo finance.

  13. patfla says:

    Hmm – this might work quite quickly. If you can turn the paging off (there are addons to Firefox that will do this) and you can get the whole list in one page – then copy and paste into excel and sort.

  14. patfla says:

    How might people go about tearing down the “job creator” discourse?

  15. patfla says:

    At a first approx – list of 485 and not 500 and Phillips 66 seems to have been resurrected as a holding company for ConocoPhillips and shows not return YTD. Don’t know if this is price-only or total return; and not market cap weighted but:

    Not a very intuitive list. The top 5 are PHM, S, GPS, EXPE and LEN. Two home builders I believe and the GAP?

  16. willid3 says:

    i dont know. but maybe looking to see how many net jobs they created since 2001 might be a start? sort also wonder if they were such great job creators, why haven’t they done it since 2001? after all, they have had their tax incentives for about a decade now.

  17. Jojo says:

    Economic snapshot | Jobs Wages and Living Standards
    If emergency unemployment compensation benefits expire, only around a quarter of unemployed workers will receive UI

    By Heidi Shierholz | September 6, 2012

    A common misunderstanding is that a person who is out of work must be collecting unemployment insurance (UI) benefits to be counted as unemployed. In fact, the definition of unemployment has nothing to do with whether or not the unemployed person is receiving UI. Unemployed jobseekers often are not even eligible for UI. Only workers laid off through no fault of their own are eligible for benefits. New entrants to the labor market (e.g., new graduates) or reentrants after a long absence (e.g., formerly stay-at-home parents) are not eligible. Only employees who have recently worked can collect UI. Even then, they must have worked a minimum amount of time (generally longer than one year) and have received a minimum amount of earnings from their previous employer.

    The figure below, from the forthcoming State of Working America, 12th Edition, shows the share of unemployed people receiving UI over time (both regular state benefits and temporary emergency extensions of benefits passed by Congress). Generally, only around 35 percent of the unemployed are eligible for and receive benefits. (About time someone made note of this! Too many people think that everyone who loses their job collects unemployment benefits. That may be true in Europe but is not true in the USA).

  18. spooz says:

    So NK, what contortions would that be, exactly? It supports a lot of what I read in Chris Hayes ‘ Twilight of The Elites: America After Meritocracy”, a careful analysis of the loss of opportunity that stems from the redistribution of wealth currently underway in our country.

    So please explain your contortions so I can understand what I am missing.

    “Anyone who can read that intro paragraph and NOT see the mental contortions suffered to preserve the desired headline is braindead.”

  19. MorticiaA says:

    Forget Muzak – My local Whole Foods Market has a bar! I go get a glass of wine and shop for groceries.

  20. [...] yesterday morning’s reads, I included the chart below from the WSJ. (PM reads had a different chart from the same article). [...]

  21. Giovanni says:

    RE: Bits of Mystery DNA, Far From ‘Junk,’ Play Crucial Role

    Why is it that every advance in natural science is heralded because it will lead to the creation of new drugs? I guess if all you have is a hammer…..

  22. VennData says:

    Obama is so mean to the job creators. They are afraid of him.
    The community organizer scares them because… uh… because he will raise their taxes back to the Clinton rates pluse 3% to pay old folks health insurance…. and the job creators competitor job creators get the same ‘rough trestmrnt. Mario Bartormo calls it war… it’s war to ask people to rescind their temporary tax cuts… hmm… So their competitor’s also have to pay these taxes… and have much higher taxes for their foreign competitors… so… uhh… THIS is why the President is at war with them. Doesn’t make sense when you take the hatred and emotion out of it does it?