My weekend long form article readings:

• Fed two-fer:
…..-How Much Does the Fed’s Plan Really Help Main Street? (Dealbook)
…..-Fed Move Echoes World-Wide (WSJ)
• Should the 401(k) Be Reformed or Replaced? (NYT)
• Your brain on pseudoscience: the rise of popular neurobollocks (New Statesman)
• Michael Lewis uber long profile: Obama’s Way (VF)
• Philosophy v science: which can answer the big questions of life? (Guardian)
• What Krugman & Stiglitz Can Tell Us (New York Review Of Books)
• Dell & HP together on a long road to nowhere (Gigaom)
• Rethinking ‘Junk’ DNA (NYT)
• A Critic’s Manifesto (New Yorker)
The New New Girl: Mindy Kaling promotes herself out of The Office and into The Mindy Project (NY Mag)

What are you reading this weekend?

 

After Fed, Yield Moves to the Fore

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.

22 Responses to “10 Weekend Reads”

  1. rd says:

    I like my 401ks in general. When I change jobs, it goes with me so that I am not locked into a specific organization for 30 years in order to have a retirement program. My employer currently offers a reasonable selection of relatively low cost (0.5-0.6% ER) target date retirement funds that are an acceptable investment (very low cost like Vanguard would be ideal, but it is still much better than the disaster area of health care costs)

    However, like just about any American public policy program, the retirement programs are overally complex and convoluted so that they are nearly incomprehensible to anybody who is not a lawyer and a financial wizard to boot (health care and the tax code are other classic examples).

    Why do we need totally different rules for 401ks, 403bs, IRAs, SEP-IRAs, etc.? Why not simply have a two general retirement account structures with various avenues for funding, such as payroll deduction, employer contribution, etc.? The two parallel structures would be the before-tax contribution and after-tax contribution options that we see with the traditional vs Roth approaches today.

    The biggest problem I see is that there appear to be back door ways for the wealthy to use them to rack up enormous IRA values (e.g. Romney) while many salaried workers are limited by maximum contribution amounts that would preclude large-scale savings for a number of people.

    I think we are in a time of transition when many defined benefit plans are transitioning to defined contribution plans. I think the benefits will outweigh the negatives in the long-run as corporations and governments will be able to have better accounting regarding long-term employee liabilities while employees will have greatly increased mobility. However, it is clear that it is going to take a while for both employers and employees to internalize that a lifetime 15% (or higher) savings rate for retirement alone will be prudent.

  2. rd says:

    On the Fed:

    Much of Main Street’s asset “wealth” is now in 401ks and IRAs since their house prices plunged in value. I find it hard to believe that the average person in the street is going to look at the value of their 401k, inaccessible without taxes and penalties for the next 20 years, and come to the conclusion that a 20% increase in its value means they can go out and buy a new car today. The massive volatility that these people have seen in their 401k accounts over the past 12 years will certainly have traumatized many of them so that they are not necessarily going to believe that Uncle Ben’s stock market sugar high is real until they see unemplyment dropping and their personal income rising. I think Uncle Ben is over-relying on the wealth effect.

    Similarly, I agree with the Dealbook comments on the lack of Main Street interest rate drops (thow in the additional fees that the banks are tacking on all over the place as well). Ben’s moves appear targeted more and more into a fairly select group of investors.

  3. willid3 says:

    rd, the problem with 401ks etc is that they lead people to think they can save successfully for retirement, which for the vast majority (about 75% of us) cannot. they were also designed to be part of the plan, not the whole plan. the other 2 legs, pension and SS were there to make a whole plan. well, pensions are close to being dead, and some want to kill SS. there are other issues with it. a 401k saving plan can and will fail with no fault of the saver. consider the 50% collapse in the stock market of a few years ago. which means that if you retire at the wrong time, your retirement is doomed. i do see that it helps business as it removes the need for long term planning and investment for pensions. but oddly enough it wasn’t that long ago that those same pensions were money makers for companies. and the biggest losses are actually in executive pensions, which seem to not be the ones that are being cancelled

  4. willid3 says:

    simple regulations or complex?
    http://baselinescenario.com/2012/09/14/simple-or-complex/

    simple might be less susceptible to gaming, or maybe not

  5. willid3 says:

    economist and CEO’s can convince DOJ to not prosecute because of economic consequences. maybe drug dealer and other criminals need better arguments.

    http://www.nakedcapitalism.com/2012/09/marcy-wheeler-lanny-breuer-admits-that-economists-have-convinced-him-not-to-indict-corporations.html

  6. willid3 says:

    part of the problem with 401ks etc as retirement plans?

    http://www.nakedcapitalism.com/2012/09/income-inequality-and-the-death-of-trickledown.html

    http://www.nakedcapitalism.com/2012/09/income-inequality-and-the-death-of-trickledown.html/income_inequality

    the lack of income in the bottom 80%
    Because the first 4 quintiles are so flat, it is worthwhile to look at their averages over the 45 years of data.

    For the bottom 20%, their average mean income was $11,618.
    For the second 20%, it was $29,425.
    For the third 20%, it was $48,938.
    For the fourth 20%, it was $74,183.
    For the highest fifth 20%, it was $146,693.

    Now compare these to the 2011 mean income numbers.

    For the bottom 20%, it was $11,239.
    For the second 20%, it was $29,204.
    For the third 20%, it was $49,842.
    For the fourth 20%, it was $80,080.
    For the highest fifth 20%, it was $178,020.
    Read more at http://www.nakedcapitalism.com/2012/09/income-inequality-and-the-death-of-trickledown.html#1Rk5hqp0sRdlS61O.99

  7. rd says:

    willid3:

    A defined benefit plan is typically run by the employer. There was a golden age of about 30 years in length from the 50s to the early 80s when the long-term commitment between employers and employees, largely the “Geatest Generation” folks, was in place so it could work. That social contract has been shattered over the past 30 years and only a small percentage of the population will find it to be a functional model.

    The key to making a 401k work well is for people to plan ahead so that they aare consistently saving early in life. This then allows them to gradually pull back their reliance on equities for growth. A diversified equity-bond-cash fund has dramatically less volatility in the years leading up to retirement and in retirement. However, it does require discipline and education to start saving in your 20s for an event that won’t happen for 40 years. However, it can take much of the same discipline to go to work and stay at an organization for the same length of time to get the pension.

    I think that SS has been one of the huge success stories of government in the past 80 years. I have been completely baffled by the bad press it keeps getting. Even the insolvency diatribes have to be based on 30 to 75 year projections – I don’t believe any reliance on detailed projections going out that far.

    SS (with periodic minor tweaks) combined with 401k/IRA can provide for a very secure retirement with some basic education and discipline. However, the typical person puts less time into understanding their 401k than investigating their next car purchase – therein lies the biggest problem.

    The school system has not attempted to even initiate the discussion (possibly because they are all covered by pension plans?). Every high school should require a basic one year “Everyday Math plus Financial Planning” class as a graduation requirement. Everyday math would include weights and measures, compound interest, checkbook balancing etc. The financial planing would include understanding the differences between assets and income, long-term projections and their reliability, understanding investment types with their risks and expenses, basic real estate and consumer law etc.

  8. NoKidding says:

    Re: your brain on pseudoscience.

    Loved it. Describes how a group of educated science pros can lead themselves and their coterie off into the weeds of popular philosophy, following data that fits a Big Idea into a campaign of self promotion and political pontificating.

    I can think of another area where this has been happening recently. Science by consensus… How could so many be wrong?

    ~~~

    BR: You misunderstood this: Its using Science to punctuate non-scientific conclusions that are empirically unsubstantiated. Your bias has led to the wrong conclusion

  9. Greg0658 says:

    friend & I went camera/electronics store shop’g yesterday in the big city to the NE .. reminds me, when I get out of the sticks HOW BIG THE WORLD IS .. this system* works pretty good .. nothing is perfect / or ever can be .. I sorta need to mea culpa for harping on stuff

    I mostly signed in to join the pension IRA thread – the interconnectedness of “money for nothing chicks for free” open ended accounts for lawful pursuits /// demand /// machine balance

    friend & I got into heated debate coming home on j6p and his boss the tycoon / and what is fair ..
    to save or not to save
    to buy insurance or not to
    to spend or not to spend (on frills)

    in conclusion: (imo) my pension saving and the paper-pushers search for returns – chased work away – thus I helped shoot myself in the foot .. is-us-economic-growth-over ? depends of who you are – always has been always will be .. the next question: is-us-manufacturing-in-decline from NIMBY and stagnation of youth opportunities

    * oh-and OpSys best wishes:
    Rush – Closer to the Heart
    http://www.youtube.com/watch?v=QY2iKzm62AM
    “the men who hold high places
    must be the 1′s to start
    to mold a new reality”

  10. fmcurator says:

    I am going to be reading “The World through Institutional Lenses” over at Edge.org

    http://edge.org/conversation/the-world-through-institutional-lenses

  11. rhodium says:

    The NYT article on the ENCODE results was about the best general one around. Elsewhere you will read that the function of 80% of the genome has been established and its not junk. That is not quite true. A lot of our DNA is old retroviral sequences (RNA based viruses turned into DNA and stuck into the genome). These can still be turned into RNA transcripts, but they probably do not do anything, in general. So even though that DNA is processed, it is more or less junk. However, as most everyone expected, each gene is controlled by lots of different dimmer switches (using several different mechanisms), some nearby, some far away. And probably, in each person’s tissues, the kidney gene for protein X may be controlled differently from the liver gene for protein X (and maybe nearby cells in the same tissue are slightly different, that is hard to tell). And there is still work to be done for the same cell type in different metabolic states or in different parts of the cell cycle. Life is way more complicated than one hoped it would be in the DNA makes RNA makes protein days. Its amazing any embryo makes it to birth, much less 100.

  12. PeterR says:

    “Predator banks and hedge funds run the market for their pleasure — there’s no rational structure, nothing!”

    It gets better!

    http://www.nytimes.com/2012/09/16/nyregion/the-lonely-redemption-of-sandy-lewis-wall-street-provocateur.html?_r=1&hp

    Or worse?

  13. James Cameron says:

    The economy in the Bush years, by contrast, had to cope with the popping of the technology bubble, 9/11, a couple of wars and the financial meltdown, Mr. Ryan continued. “Some of this is just the timing, not the person,” he said.

    He then made an analogy. “Just as the Keynesians say the economy would have been worse without the stimulus” that Mr. Obama signed, Mr. Ryan said, “the flip side is true from our perspective.” Without the Bush tax cuts, that is, the worst economic decade since World War II would have been even worse.

    Aside from Mr. Ryan’s own hand in some of these issues, the excuses being offered are supremely ironic in view of the arguments he and his party are now making against the current administration’s stewardship of the economy.

    Do Tax Cuts Lead to Economic Growth? David Leonhardt

    http://goo.gl/oDgBn

  14. James Cameron says:

    > http://www.nakedcapitalism.com/2012/09/income-inequality-and-the-death-of-trickledown.html/income_inequality

    willid3, I didn’t find his data for 1967:

    For the bottom 20%, their average mean income was $11,618.
    For the second 20%, it was $29,425.
    For the third 20%, it was $48,938.
    For the fourth 20%, it was $74,183.
    For the highest fifth 20%, it was $146,693

    which is from here: http://www.census.gov/prod/2012pubs/p60-243.pdf , Table A-2, Selected Measures of Household Income Dispersion: 1967 to 2011.

    Instead I found:

    $9,419
    $26,098
    $41,670
    $58,301
    $104,920

    The 2011 data checks out. Perhaps I’m missing something.

  15. James Cameron says:

    > The 2011 data checks out. Perhaps I’m missing something.

    willid3, ignore this. I see the income data has been averaged, though in this case I think the picture is compelling.

  16. rktbrkr says:

    Bianco research has a table showing continuous and increasing domestic stock outflows from mutual funds and ETFs since about 2007 and trading volume has been light forever, meanwhile the indexes are at multi year highs as the Fed keeps QEing.

    Who has been buying these stocks up? The big institutions with free Fed money? Meanwhile the Fed keeps squeezing savers – trying to drive them into higher risk investments. Is the game plan to force the prudent into the market and then the institutions pull the rug out from underneath them and pocket huge profits made with free Fed money and leave Main street holding the bag again?

    Am I being overly conspiratorial?

  17. formerlawyer says:

    The bungling of an accidental water body – the Salton Sea saga.
    http://www.wired.com/wiredscience/2012/09/salton-sea-saga/all/

  18. cognos says:

    Are all the BEARS still here?

    Is Bockvar still a contributor? (Not only has that guy been ultra-bearish… He’s been bearish on USTs, even short-term ones… for years. He must be down over 100%).

    Seriously… Im loyal to performance, and the business cycle (boom to bust to ?? oh wait… ive heard this before).

    SECULAR bull market has years to run…

  19. Jojo says:

    Straight out of SF books where spaceships are intelligent enough to rebuild themselves when damaged. Very cool!
    ———-
    NASA Turns to 3D Printing for Self-Building Spacecraft
    Jeremy Hsu, InnovationNewsDaily Senior Writer
    13 September 2012 12:58 AM ET

    Spacecraft could build themselves or huge space telescopes someday by scavenging materials from space junk or asteroids. That wild vision stems from a modest proposal to use 3D printing technology aboard a tiny satellite to create a much larger structure in space.

    The “SpiderFab” project received $100,000 from NASA’s Innovative Advanced Concepts program to hammer out a design and figure out whether spacecraft self-construction makes business sense. Practical planning and additional funding could lead to the launch of a 3D-printing test mission within several years.

    “We’d like someday to be able to have a spacecraft create itself entirely from scratch, but realistically that’s quite a ways out,” said Robert Hoyt, CEO and chief scientist of Tethers Unlimited Inc. “That’s still science fiction.”

    http://www.innovationnewsdaily.com/1611-nasa-spacecraft-3d-printing.html

  20. willid3 says:

    thinking that defined pension and 401k plans use mostly the sane basic methods to accumulate retirement funds. those pension can actually get more creative. what has killed them is that more than a few executives have changed the actuarial assumptions on their employees to enhance their companies profits by reducing company contributions (while some of them also require employee contributions, not exactly clear what happens to pensions that cancelled to the employee contributions). and there was a new pension created exclusively for executives. the former could be sounds by the later almost never is. and of course pensions are run by employers using professionals full time. and employers are killing the employee plan, while leaving the executive one intact. imagine that. 401ks are run part time by amateurs. pensions were killed mostly cause companies didn’t want the responsibility any more. but the majority of workers can’t really afford to save much when they get started in their 20s, since most dont make much more than 30,000, if that. and they really have issues with education debt that they got when they went to school (for those who did, and may eventually have a reasonable income).

  21. Joe Friday says:

    rd,

    I think that SS has been one of the huge success stories of government in the past 80 years. I have been completely baffled by the bad press it keeps getting.

    It is a very well funded campaign.