My longer form reading to start off your weekend:

• Are You an Investor or a Speculator? (Part One and Part Two)
• Goodbye Groupon: Andrew Mason’s dance with the devil (TheVerge)
• How “Golden Eagle Snatches Kid” Ruled The Internet (BuzzFeed)
• Rescuing Cesar (Men’s Journal)
• Flawed F-35 Fighter Too Big to Kill as Lockheed Hooks 45 States (Bloomberg) see also The Man Who Killed Osama bin Laden… Is Screwed (Esquire)
Why the West Rules—for Now: The Shape of History (The Chronicle Review)
• Are We in Danger of a Beer Monopoly? (NYT)
• How Not To Be A Dick To Your Fat Friends (xojane)
• Cinema Tarantino: The Making of Pulp Fiction (Vanity Fair)
• “I’m Gonna Tell You What I’m Gonna Do”: What It Was Like To Guard Michael Jordan, According To Craig Ehlo (Deadspin)

Whats up this weekend?


S&P500 P/E Ratio

Source: Chart of the Day

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.

20 Responses to “10 Weekend Reads”

  1. farmera1 says:

    Buffetts best quotes on investing.

    If you don’t read his annual letter to share holders, you are missing one of the best sources available for understanding investing. In fact Buffett provided one of the best pieces of information on what was going on in the derivatives/ banking/housing industry, long before it all blew up. He has often written on obscene CEO pay, and many other items that are of interest to any one that invests.

    Don’t ever think you can invest like he does. He has a stellar financial rating, piles of money/cash, great reputation often closing deals quickly, and contacts like nothing you could dream of. He is in a class all his own for many reasons that can not be duplicated.

  2. hieronymus says:

    I think what is generally lost on the greater investing public, pros and novices, is that an absolute p/e, at any given time, is fairly meaningless. What I believe is more meaningful is where that data point is in a given trend. Are p/e’s expanding or declining?I feel we are are in a declining p/e cycle and so what may appear cheap by some historical average misses the point. What direction are we headed is the more meaningful information. We would have to travel a long way down in the multiple to get to that low green line. The implications are many and interesting for what might result for stock market performance.


    BR: I agree, but isn’t that true about any single metric taken alone?

  3. VennData says:

    New Study Finds ‘The Onion’ Has Never Been More Popular, More Beloved, Or More Respected

    Wait. Did you SEE this?! They did this THEMSELVES!

    Notice how everything looks good? This is just like Obama, notice how the numbers all come in good since he was elected, WHEN WE KNOW THE TRUTH!!!

    I’m with Jack Welch. These clowns are massaging the data for political gain.

    The Obama administration is THE MOST CORRUPT EVER.

    And I’m a young educated, tech worker who is their prime demographic as well as a supporter who gave them three dollars and voted for them. But NEVER AGAIN. I will never vote for Obama for President again!!! And you should too!,31505/

  4. RW says:

    Early model construction tends to be error prone but this one shows promise. Even more to the point, inductive (data driven) logic appears to be making a comeback in macroeconomics; that’s good to see.

    Booms and Systemic Banking Crises

    …over the period 1960-2011, the model yields remarkably realistic results. For example, the one-year ahead probability of a crisis is essentially zero in the 60-70s. It jumps up twice during the sample period: in 1982-3, just before the Savings & Loans crisis, and in 2007-9. Although very stylized, our model thus also provides with a simple tool to detect financial imbalances and predict future crises.

  5. James Cameron says:

    > Flawed F-35 Fighter Too Big to Kill as Lockheed Hooks 45 States (Bloomberg) see also The Man

    “Members of Congress are hesitant to make deep cuts to the project in part because it generates work in their states, Wheeler said. The F-35 supports 41,000 jobs in Texas alone, the most of any state, according to Lockheed’s website. The company assembles the fighter in Fort Worth.”

    You can be sure Rick Perry won’t be complaining about this form of government largess. This is a nice series by Bloomberg. See, for example, “Defense-Cut Hypocrisy Makes GOP Converge With Democrats”:

  6. rd says:

    The recent requirements to be less opaque in 401k plans is paying off. Our 401k plan just had some fund classes changed over to lower expense institutional classes and new funds were added with significantly lower expense ratios. Interestingly, a couple of excellent active balanced and equity American Funds have significantly lower expense ratios than Wells Fargo Target Date funds based on the DJ Index. Apparently passive can really cost more than active.

    So, I was able to rework my portfolio using the new funds and classes and I think on Tuesday I will have a portfolio with a net ER about 0.2% lower than it was on Friday for a similar equity-bond ratio and diversification mix. The new average net ER ratio should be about 0.35-0.4% instead of 0.55%-0.6% before. There are a couple of Vanguard index funds now but not enough to have a fully diversified portfolio, but I was able to integrate the very cheap Vanguard S&P 500 index into the mix. Adding a couple of key Vanguard index funds to the plan would probably allow me to get to 0.25% or lower down the road, but I am not holding my breath. At this point, I think the much greater diversification, especially including some international holdings, is more important than chasing down the last 0.1% or so of ER.

    Our plan was good before, now it is very good, and has the potential to be excellent with a couple of more tweaks. Hopefully this is a trend that will be occurring in lots of companies. Effective regulation does matter as I don’t think 401k plans would be improving at this rate if it was just left up to employers and financial firms.

  7. RW says:

    The Philosopher Politicians Reappear at the New York Times

    Really, this is a battle of philosophy?

    Let’s try an alternative explanation. …Let’s imagine that [wealthy political constituents] are not stupid and that they understand completely [that] tax expenditures are a form of spending. In other words, if we give someone a housing subsidy of $5,000 a year by cutting their taxes by this amount if they buy a home, it is the same thing as if the government sends them a check that says ‘housing subsidy.’

    If we take the philosophy view of this debate then Republicans would be all for eliminating the tax expenditures that mostly go to line the pockets of rich people. On the other hand, if we think this is a debate about whose pockets get lined then Republicans who are opposed to spending would be opposed to eliminating tax expenditures for rich people.

    Italy exposes wider crisis of democracy (ht PK)

    Those preaching austerity probably do not see themselves as contributing to a crisis of democracy, but they are. The Italian elections should remind eurozone leaders to pay attention to their voters. Economic fixes have failed to staunch a political crisis that has the capacity to harm not only EU integration, but the legitimacy of the continent’s democratic order itself.

    NB: These ‘experiments’ (mostly) European policy-makers are conducting on their populations and nations are not only very painful they are, once again, demonstrating Keynes was largely correct not only in his macroecnomomic analysis but also WRT his conclusions regarding the social and political consequences of badly timed (and poorly targeted) government austerity. One would think that a European at least would remember that National Socialism’s takeover of Germany in 1933 was immediately preceded by a decade of austerity policies and deflation. Oh well, here we go again.

  8. Jojo says:

    Build/buy your own personal flying drone! Some very cool videos also:

  9. MidlifeNocrisis says:

    Thank you for the link “Eagle Snatches Kid”. Wonderful story.

  10. farmera1 says:

    Now isn’t that interesting, the correlation between the stock market and new jobless claims.

    Here is a follow-up thing about the Dream liner. As was posted on this blog, there are a couple of dozen or so countries suppling major components to the Dreamliner. It also turns out that due to budget cuts Boeing is doing it’s own compliance investigations. Sounds like a plan to me. You know it’s like the banks being self regulating. Some times just like the banks, things crash and burn.
    Eight years ago, U.S. regulators substantially increased their dependence on the aircraft industry to help keep flying safe.

  11. hieronymus says:

    Yes re p/e, or, for that matter, any single metric taken alone. But can you show me another single metric as ubiquitous AND misapplied/misunderstood as p/e as regards the markets and what it hopes to tell you?

  12. VennData says:

    Stop the Liberals from making us insure things! it just raises the costs for the working man … uh.. and small business! and farmers! This is our right to payoff right wing political hacks to make laws favorable to us! You would too if you were rich!!!

    Yeah, yeah I know we’re insurance companies …but we don’t want to insure sink holes!

  13. Pantmaker says:

    Re- hieronymus P/E discussion above. Valuations have an enormous and consistent impact on long-term outcomes and P/E ratios used responsibly can provide solid actionable information. One MUST look at the P/E ratios relative to historical or normalized E….without this they are virtually meaningless.

  14. Still_Learning says:

    Mr. R, Thank you very much for listing weekly and daily “Reads.” I probably wouldn’t find most of these fascinating and informative topics and ideas without your help and thoughtfulness.

  15. dsawy says:

    The F-35 is going to show us, in a much more expensive lesson, that the experience of the F-111 wasn’t a one-off.

    Any time we set up one of these multi-mission, multi-”partner” projects, it becomes a huge, wasteful failure. This was a project from the get-go that ignored decades of engineering experience on large projects. Large projects that claim to be all things to all users invariably excel at nothing and end up delivered with huge cost over-runs.

  16. dsawy says:

    re: The Golden Eagle snatching the kid: The moment I saw it, I knew it was a pile of crap.

    Unlike the vast majority of Americans, I’ve actually seen Goldens, and close-up, whether in person or in my vehicles. I’ve had to swerve to avoid hitting them on highways all over the west as they feed on carrion or their kills on open roadways. I’ve had them swoop down within 10 yards of me on ground squirrels I’d just shot. Like most raptors, they’ll take a free or easy meal any time they can get it.

    Goldens are certainly big as raptors go, but they’re not big enough to hoist anything more than, oh, maybe five pounds off the ground. And to get five pounds off the ground would require the very largest of the Goldens, cold, dry air and probably a good headwind. By the time you’re up to 8+ pounds, the bird is going to be struggling to get into the air and probably won’t be able to move more than about, oh, 25 to 40 yards across level ground. If the kid were hiking on a ridgeline and the eagle did a snatch-n-glide downhill into convection air currents… OK, I might believe that…

    Kill the barking purse dogs of city slickers’ who “moved out to the country?” Yep. Snatch smaller house cats? Absolutely fair game for large raptors. But the reality is that because even large raptors can’t hike more than a few pounds into the air, if a Golden wanted to eat a child, it would hit and kill the child on the ground, pull off chunks of, oh, perhaps at most a pound or more… and then retire to a perch to eat it without being disturbed.

  17. Pantmaker says:

    The F35 fiasco is a living breathing, bipartisan example of the inherent inefficiencies of big government. Projects like this one become greed driven two-fisted money grabs. The sheer size of the project prohibits the establishment of a functional mechanism for responsibility and control and in the end the vastness of scope allows ample cover for waste and abuse. It boils my blood.

    This sort of crap is one of the reasons I have waved my flag of support for the sequestration process. The across the board nature of the proposed cuts have been criticized as “stupid cuts”, “cuts with an axe”, “cuts without concern for people” etc. but thanks be to God they are cuts none the less. The process is politically brilliant because it provides the much needed cover from blame that our chicken shit politicians need to make actual decisions. The administration should do two or three of these a year and eventually sink hole projects like the F35 will be nothing but pipe dreams.

  18. SkepticalOx says:

    Holy crap. The Navy ST6 article is such a gripping read, and maddening at the same time (and I’m not even American!).

    @BR: awesome finds for the reads, as always!

  19. The Pale Scot says:

    I guess all the guys involved with the F-111 are retired and the new bunch will have to learn the lesson all over again.

    I really wish we would go the Russian route of making multiple types for specific roles instead always trying to create one type that can fill all roles.

    Especially since all of our types require good runways and the rusks jets are mostly rough field capable.

  20. dsawy says:

    @Pale Scot: Yea, most of the guys who worked on the F-111 project were retired (forcibly or otherwise) by the defense draw-down of the early 90′s. That institutional knowledge was lost, partly due to those retirements, and mostly because management never, ever wants to learn from mistakes. You can see this all over the tech and defense industries. They never want to talk about failures on projects and ask “What should we do to avoid repeating this?”

    This is true in software projects as well. You can see software boondoggles all over the defense (and even non-defense) sectors of bespoke or single-customer software projects, eg, the NASA probes that have taken a crap due to software issues. NASA and their contractors actually learned some very useful things from software practices on the Shuttle, but they’re reluctant to apply these lessons on the JPL side of the house it would appear. The DOD looked at software projects from the 70′s in the early 80′s and came up with Ada, which is a very large improvement over wretched nonsense like C++… but then they dropped the requirement for delivery of s/w in Ada in the 90′s.

    It’s nuts. From the high end of the defense acquisition process (eg, large, multi-nation projects like the F-35 or F-22) down to infantry rifles, the DOD repeats failures time and time again. Successes like the F-16 and B-52 become the exception, not the rule.