My afternoon train reads:

• Of course “hedge funds” lose money (Noah Opinion) see also A Professional Preps for the End of QE (Forbes)
• The Buffett Formula — How To Get Smarter (Farnam Street)
• The super soaraway Nikkei (FT Alphaville)
Retirement: How They Do It Elsewhere (NYT)
• Even economists need lessons in quantitative easing, Bernanke style (Quartz) but see Why Hedge Funds’ Criticism of the Fed May Be Right (DealBook)
• Exhuming Lehman (and looking for Signs in the Entrails) (It’s Not That Simple)
• Holder Says Leak Required “Very Aggressive Action”… Bank Crimes, Not So Much (HuffPo)
• Wall Street’s gambler brain lacks moral conscience (MarketWatch)
• 10 Hotel Secrets from Behind the Front Desk (mental floss)
• The Water On the Moon Probably Came From Earth (Smithsonian)

What are you reading?

 

Chart of the Day
Chart
Source: Chart of the Day

Category: Markets

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.

13 Responses to “10 Wednesday PM Reads”

  1. hue says:

    Doping, Adderall & the Meritocracy (Caterina.net)
    Quickoffice In The Browser: The Reason Why Is Microsoft Suddenly So Scared Of Google’s Productivity Tools (TechCrunch)
    Mapping The World With Tweets (Foreign Policy)

  2. MikeNY says:

    Chanos nails it in the DealBook piece.

    • Anonymous Jones says:

      I just don’t get that at all. It seems preposterous to suggest that the hedge fund managers are really worried about actions “leading to recurring booms and busts, which in addition are exacerbating income inequality”. Well, at least I’d like to see evidence (any evidence) for that proposition. Smart people can make money in any environment. Sure feels like something else is going on with these hedgies. As in, they’ve lost touch with reality and feel it is their divine right to win all the time, regardless of how stupid their analysis is or how poor their prognostication abilities prove to be.

      Also, this is just one opinion, but I was crying ‘bubble’ in stocks in ’99 and houses in ’05, as loudly as I could. I literally almost got into fistfights over both incidents. And further, I’m not really long right now in any long-term asset classes except for my residence and a slight bias in stocks. All that said, I don’t see how we are in a “bubble” at all. Right now feels nothing like fin-de-siecle tech derangement or lax-lending housing delusions from mid-last decade. Yes, I think we are nearing a top because long term interest rates basically have only one direction at this point (though tell that to the Japanese), but nearing a top is just not the same thing as a bubble. There have been lots of tops and lots of bubbles, and there are books that explain the difference. Anyone still confused should read one of them.

      • MikeNY says:

        I’ve said it before, and I’ll say it again: asset prices should REFLECT the underlying growth prospects of the economy, they should not be manipulated to DRIVE growth in the economy. This is the fundamental theoretical flaw in the Fed’s model. They believe they can centrally plan growth, (like the old USSR!) by manipulating asset prices. We’ve seen this move twice already under Greenspan and we know how it ends. Surely you know who owns 90% of the financial assets in this country? It’s not the bottom 90% of households.

        If you believe “this time is different”, go to GMO’s website and read Ben Inker’s piece on corporate profit margins and mean reversion. Profit margins are not sustainable, unless you believe 99% of the population will willingly embrace serfdom so that the 1% can enjoy eating bon bons in their Bentleys. I don’t believe that, so I believe the Fed’s policies are going to provoke precisely the social instability that they are supposed to prevent.

      • Here is Ben Inker’s August 2012 piece:

        A summary of our basic points:
        1) GDP growth and stock market returns do not have any particularly obvious relationship, either empirically or in theory.
        2) Stock market returns can be significantly higher than GDP growth in perpetuity without leading to any economic absurdities.
        3) The most plausible reason to expect a substantial equity risk premium going forward is the extremely inconvenient times that equity markets tend to lose investors’ money.
        4) The only time it is rational to expect that equities will give their long-term risk premium is when the pricing of the stock market gives enough cash flow to shareholders to fund that return.
        5) Disappointing returns from equity markets over a period of time should not be viewed as a signal of the “death of equities.” Such losses are necessary for overpriced equity markets to revert to sustainable levels, and are therefore a necessary condition for the long-term return to equities to be stable.

      • MikeNY says:

        BR: It’s the April, 2013 piece. Here is the conclusion, but the entire thing is well worth reading.

        “Given the very long duration of equities, even another decade of above-normal profits would serve only to increase the fair value of the stock market by perhaps 10 percentage points. It is only if profits are truly permanently higher that the impact is a really big deal. Can we swear that such a permanent increase is truly impossible? No. But it seems to us entirely imprudent to assume that such a permanent increase is in the cards, when the implications of being wrong would be quite damaging to our clients’ portfolios.”

  3. willid3 says:

    hm…maybe some one outsourced the writer of this?
    http://www.fool.com/investing/general/2013/05/15/boeing-and-southwest-airlines-launch-737-max.aspx

    you have heard of that Dallas based carrier…Boeing right?

  4. VennData says:

    If people who donate to Tea Party causes are more likely to cheat on their taxes should the IRS be allowed to collect their info and perform audits on them more often the way they perform more audits on people who live in Las Vegas who seems to cheat more often on THEIR taxes?

    http://money.cnn.com/magazines/moneymag/moneymag_archive/1994/08/01/89030/index.htm

  5. Joe Friday says:

    Is the art market getting frothy ?

    Yesterday, THIS Barnett Newman sold for $43.8 million at a Sotheby’s auction.

    Damn thing looks like an overhead shot of a ping-pong table.

    YEESH.

  6. Livermore Shimervore says:

    “2) Stock market returns can be significantly higher than GDP growth in perpetuity without leading to any economic absurdities.”

    ^ When friends ask me if they should invest in the stock market (on an individual equity basis) “now that the economy is improving” I say no. Why? It’s all a bucket shop again…. Instead of getting supiciously late pricing from the guy with the chalk we now have HFT and “glitches”.

    But to the broader point, we can have a lousy economy and resurgent market and probably a resurgent economy and sharp spike to the down on account of the realities of value, or at least the perception of unfair value, which may be misplaced completely. Basically it’s two realities — perception and actual performance… and somewhere in there are some companies that are 1-priced for some wiggle room to build, 2-pay some sort of dividend (can a long-term strategy succeed without?) and arent’ just hoarding cash, 3-aren’t fly by nights with questionable future revenue issues (cough FB), 4-have good prospects in opening overseas markets.
    Sooner or later Wall Street will love them after they’re done crapping on everything else that was once so grand in their eyes..

  7. I’m surprised no one commented yet on how that Chart of the Day on S&P500 Earnings Growth appears to provide a fairly reliable indicator (when growth dips negative) of a significant stock market top/correction… Be interested to see that chart overplotted against the S&P500 itself, with recession bars for good measure…

  8. Richard W. Kline says:

    That chart on S & P earnings is striking—and hairy. As a series, it’s obvious what the next move should look like. Interpreted contextually, there’s every reason to anticipate that that next oscillation will eventuate exactly.

    The oscillation clearly looks to amplify. There could be two reasons. One, damping is reduced. Two, inputs are increased. Yes, and Yes. Transition point, late 80s. Regulation damping speculation begins to be systematically dismantled (and where not dismantled systematically subverted—or ignored.) Greenspan the Subgenious determines that downturns resulting from speculative excess will be cured by extending massive amounts of monies to the same parties for ‘speculative healing.’ At what point the undampned oscillation catastrophically disrupts the context it remains to be seen, but one can guarantee such a result WILL occur given that trajectory. . . . Ugly. And all too human.

  9. lrh says:

    Thanks for the heads up on “Farnam Street.” I found several posts worth reading.