Good Sunday morning, here is a quick update of weekend news:

• When Interest Rates Rise, Stocks Don’t Have to Fall (NYT) see also Edgy About Interest Rates? Don’t Pop the Xanax Yet (Fiscal Times)
Fleck: Cracks have appeared in the Japanese bond market, and potentially ours as well, as the world’s finances may be reaching critical stress-points (Washington Post)
Donlan: Should Pot Be Legal? (Barron’s)
The view from Europe: If companies can fire at will, they can also hire at will (Telelgraph)
• Washington ‘Spends’ More on Tax Breaks Than on Medicare, Defense, or Social Security (Atlantic)
• Labor union decline, not computerization, main cause of rising corporate profits (EurekAlert)
• Drones to enter public skies in 2015: Will it be safe? (Yahoo)
• Tokyo Prepares for a Once-in-200-Year Flood to Top Sandy (Bloomberg)
• Are We at the Electric Car’s Tipping Point? (Daily Beast)
• Behind the ‘Internet of Things’ Is Android—and It’s Everywhere (Businessweek)

What’s for brunch?

 

The U.S. Bond Market May Be Much Different Than You Think It Is
Bond-Market-Size-Article-Chart-1
Source: Learn Bonds

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.

35 Responses to “10 Sunday Reads”

  1. chartist says:

    I work for a large Japanese company and travel the heartland from Illinois to Mississippi and I can tell you the Japanese companies are everywhere. They dislike unions and like to set up shop in right-to-work states. Repetitive stress injuries are common and worker’s comp costs are going through the roof. Worker turnover is high and there have been some attempts to organize. $12/hour to start for a line worker though healthcare benefits are very good. These aren’t populated areas and they’re scraping the bottom of the barrel for new employees. So, if you’re young and need a start with nothing to offer but your labor, stop off in Indiana, there’s a job waiting for you.

  2. osheth says:

    Here are four reads I found interesting this week:

    I thought this was pretty insightful — how our mental models affect our explanations. What is conveyed in an explanation is “is a blueprint for the construction of a working model.”
    http://www.farnamstreetblog.com/2013/05/the-nature-of-explanation/

    I also really enjoyed the post on The Single Most Important Change You Can Make In Your Working Habits
    http://www.farnamstreetblog.com/2013/05/the-single-most-important-change-you-can-make-in-your-working-habits/

    You check your phone 150 times a day
    http://www.theatlantic.com/business/archive/2013/05/the-12-most-fascinating-charts-from-mary-meekers-epic-slideshow-of-internet-trends/276350/

    And this useful advice on how to deal with chronically late people.
    http://www.esquire.com/blogs/culture/my-huddled-masses

  3. Alex says:

    OK, this chart made me sit up and take notice. I came to grips with the notion of “structural unemployment” and the steady decline in demand for (most) labor, but a quick glance at that chart suggests that we are embarking on a decline in demand for capital as well. Even with record low, nominal rates, and negative real rates of interest, People just aren’t selling bonds.

    Is this finally the manifestation of the classic complaint that the only people who can get credit are those who don’t need, or want, it? Large firms reducing their capitalizations is strange, although I could see it being very beneficial in the long term.

  4. judabomber says:

    Re rising rates…Krugman had a good post on his blog about that yesterday. He makes a good argument that Ben and Co are failing to do a good job of communicating, and given the still relatively weak job growth in the U.S. (he uses employment to pop ratio, which I’m sure all of us agree is a much better number than the headline unemployment number), and perhaps the market may be pricing in an end to tapering too soon.

    http://krugman.blogs.nytimes.com/2013/06/01/what-we-have-here-is-a-failure-to-communicate/

    Also, re the post a few days back about the ag situation in the U.S. Summer weather drives everything (July for corn and July/August for soybeans). As your local weatherman about what the weather’s going to be like 4 to 8 weeks from now and you will get a bunch of glorified handwaving (see the chapter on weather in Nate Silver’s book for more details).

    http://www.usda.gov/oce/forum/presentations/Westcott_Jewison.pdf

  5. carchamp1 says:

    As to the electric car, the next few years will be interesting. For the last few years, the traditional economic relationship between electric generation and gasoline has broken down. Right now, gasoline is far more expensive than natural gas/coal. When oil prices fall to more reasonable levels, less than half of where they are now, the electric car will lose an enormous competitive advantage.

    • willid3 says:

      not sure that oil prices will fall any time soon. as we may have used up all the easy low cost oil there is availble. and will nedd to go after all the high cost stuff to replace it with,. and there is lots of that but it wont be cheap to get any more. and if the car companies and battery makers get a battery that can support a 300 mile range, with a reasonable cost of the battery, why would you ever use a oil driven car? and thats isnt that far off. in fact they are seeing positive results for batteries that might go much much further.

      • carchamp1 says:

        Saudi Arabia’s cost of production is $5/bbl. There is no shortage of “cheap oil”. We are now producing high-cost oil because the price is so high. Speculators have driven the price of oil up, making higher-cost technologies financially viable. The high-cost of oil is also driving battery (and natural gas) technology and investment, making alternatives to the oil driven car more viable.

        There’s a massive storm brewing against oil prices. See the late 1970s/early 1980s for the last time this happened. Oil dropped from $40 in the early 1980s and bottomed out at $10 in the late 1990s. And the global economy boomed! That is our future.

      • kbuytaert says:

        Your cheapest $/bbl are half the actual price according to US data:

        http://www.eia.gov/tools/faqs/faq.cfm?id=367&t=6

        Please check your numbers. We fear that shalegass energy for US will take away incentives for low emission low energy innovation worldwide. US could lead that innovation.

      • carchamp1 says:

        Two things:

        1. These are averages.

        2. We already found the oil in the middle east.

        Numbers checked.

  6. RW says:

    There is no problem with Japanese bonds that the BoJ can’t fix, something that is true of all developed countries in control of their own currency and it goes double when the currency has reserve status, but there is no doubt the Japan trade was getting crowded and these are nervous times; http://blogs.ft.com/ft-long-short/2013/05/31/hell-in-may/

    • biotrekker says:

      Just because a meme is repeated ad nauseum (by Paul Krugman, usually), doesn’t mean it’s true. Argentina, Mexico and Russia (not to mention Germany post-WW1) all had their currencies. It’s obviously better to have your currency (unless you are an EU bureaucrat in Brussels), but its doesn’t mean you cant default or have a bond crisis.

      • We have 3 modern examples of extreme incompetence in government — what you are “proving” is that if a country is hellbent on Suicide, they can get there eventually.

        Not sure what you mean about Krugman — say hat you will about his politics / online persona, he has been a lot more right than hi critics and detractors have been.

  7. Short funds will be happier this year.

    Rallies Caused By Squeezed Bears = Wile E Coyote Crash.

    Very soon…

    trader618.com

  8. [...] via The Big Picture [...]

  9. swag says:

    Some Sunday morning consilience: Flex your head with Dorion Sagan’s

    “Why are we here? Evolution’s dirty secrets –
    The dirty secret of evolution is that it’s a lot more like the game of Mousetrap than you might think ”

    http://www.salon.com/2013/06/02/why_are_we_here_evolutions_dirty_secrets

  10. A two mile, $2 billion tunnel is replacing our 60 year old – and earthquake-prone – viaduct in Seattle. Bertha, built in Osaka, Japan by Hitachi Zosen Corporation, is the world’s largest-diameter tunneling machine . . . 57.5 feet high, 7,000 tons, 326 feet long. More on Bertha here:

    http://goo.gl/rcGth (Hitachi Zosen)

    “The cutter head alone is 838 tons — of which 9 tons of steel will be scraped off by abrasive soil over the course of a 14-month dig . . .”

    Tunnel machine Bertha’s big green disk descends in Sodo

    http://goo.gl/LSRcU (Seattle Times)

  11. barbacoa666 says:

    Bing cherries, blackberries, a few pecans, and whey protein for brunch. Then off to the gym when it opens.

    I enjoy Fleckenstein’s writings. But it seems like he has been predicting doom for the entire market upswing.

  12. VennData says:

    Imagine Tom Donlan’ the darkest of Barron’s right wing editors laying out the facts on legalization. I bet he waited until AA’s passing because he couldn’t stomach any more “I told you so’s”

    Dear Mr Donlan,

    The problem with your elegant analysis is that you Republicans have nurtured a bunch of emotive dullards who eschew facts for self-re-enforcing nonsense ( see immigration, solar energy, expanded health insurance mandates, etc… etc…). No way your looney supporters will change their wacky beliefs.

  13. willid3 says:

    not sure that those in Europe really understand our employment situation. while employers have the right to fire at will, doesnt mean they will hire at all. a goodly number will actually hire a second business to do what ever is needed to be done (unless its not core to theur business. but even then. ex Apple, sells computers, but thy dont make them. they hired some one else to do that. what happens if that other company fails for any reason? bye bye Apple? course that would apply to more than Apple)

  14. Jojo says:

    FROM THE JUNE 2013 ISSUE
    20 Things You Didn’t Know About… Beer
    Sate your thirst for knowledge with these facts about beer’s ancient origins, health benefits and surprising chemistry.
    By Christian Millman|Wednesday, May 29, 2013

    1. The oldest known recipe is for a 4,000-year-old beer made by the Sumerians.

    2. In the 1980s, Anchor Brewing re-created these ancient Fertile Crescent suds.

    3. Sumeria’s neighbors, the Egyptians, built the pyramids under the influence. Workers at Giza received about four liters of beer a day, according to Patrick McGovern, a biomolecular archaeologist at the University of Pennsylvania.

    4. Beer (in part because it contains antimicrobial ethanol) was a healthier drink than polluted Nile river water.

    http://discovermagazine.com/2013/june/21-20-things-you-didnt-know-about-beer

  15. Jojo says:

    Use your personal smartphone for work email? Your company might take it
    By Bob Sullivan, Columnist, NBC News
    April 23 2013

    If you use your personal smartphone or tablet to read work email, your company may have to seize the device some day, and you may not get it back for months.

    Employees armed with a battery of smartphones and other gadgets they own are casually connecting to work email and other employer servers. It’s a less-than-ideal security arrangement that technology pros call BYOD — bring your own device.

    Now, lawyers are warning there’s an unforeseen consequence of BYOD. If a company is involved in litigation — civil or criminal — personal cellphones that were used for work email or other company activity are liable to be confiscated and examined for evidence during discovery or investigation.

    http://redtape.nbcnews.com/_news/2013/04/23/17864332-use-your-personal-smartphone-for-work-email-your-company-might-take-it

  16. VennData says:

    Who says the Federal Reserve chairman can’t be funny once in a while?

    http://money.cnn.com/2013/06/02/news/economy/bernanke-princeton-speech/

    I can’t wait for ZeroHedge’s scathing, humorless disposition. And the reason the eventual, inevitable end to stimulus and central bank work will be volatile…

    http://www.bloomberg.com/news/2013-06-02/treasuries-decline-will-be-volatile-on-stimulus-exit-bis-says.html

    …is those strident ZeroHedge, Rick Perry and GOP fans who will continue to hold highly-leveraged bond positions even though the Fed – and every numbers-focused analytic out there – is warning them not to. They “know” the US economy is heading into the toilet (So they hold leveraged US Treasuries !) they support the party that wants to demand we stopping paying Treasury interest payments (So the hold leveraged US Treasuries!) and continue to screech their claims or near-victory to all.

    Good luck GOP investors, enjoy those diminishing job retraining programs you fought so hard to end.

  17. PeterR says:

    Bernanke’s Princeton graduation speech should be interesting to read or view as a video when/if it comes out in these formats.

    http://www.marketwatch.com/story/bernanke-channels-his-inner-colbert-2013-06-02

  18. PeterR says:

    Regarding the Business Week article on Android’s near-universality in the Internet of Things:

    “I am putting myself to the fullest possible use, which is all I think that any conscious entity can ever hope to do.”

    HAL
    2013 — A Space Odyssey

  19. sellstop says:

    Fleckenstein strikes a chord with me. His economic “meta-analysis” seems plausible. The idea of a multi-decade bubble in credit and debt, public and private, that must be unwound or at least digested if the rules of finance have any meaning rings true.
    And the social changes as a result of this central bank managing/massaging are the ultimate in “moral hazard”, and have affected the behavior of everyone from bankers to bakers to busboys. Debt is a borrowing from future earnings and future earnings are dependent on everyone elses future earnings.
    When everybody does something nobody gets rich. To get wealth you must get more than most. Otherwise it is only nominal prices that are going up…..
    It is about time that the cash holders got a break…

    gh

    • Theravadin says:

      Except the problem with the Fleckenstein article is that he keeps positing these relationships, but can’t ever explain why they might be true… he might be right, but if so, on his own evidence, it will be just the “stopped clock” sort of right.

  20. Theravadin says:

    Interesting article on Android and the “internet of things”. I’ve been a big believer in Blackberry and QNX in this space, because it is tight, robust, and processor efficient… which Android isn’t. But maybe I’ve been wrong. Maybe the steady increase in processor capacity is about to make tight and efficient redundant… although no amount of processor power (so far) has been able to overcome the essential inefficiency of Windows… I still think that robust will have substantial benefits, though. Maybe you can put up with a less than robust cappuccino machine… although a lot of people might find that challenging… but an integrated system in a car? Not so much so…

  21. catman says:

    AA alert – That is alcohol and alkaloids. Great beer in Toronto – R.L.Mills organic lager. As to the pot spat, when people make it part of their diet and forget to light up the game is totally over. Busted at a road block for peanut butter cookies? Open a bakery and prosper.

  22. Willy2 says:

    I listened (again) to two audioclips from the McAlvany Weekly Commentary. The folks at McAlvany have a very clear view on events in the world. Sadly, they’re a “(Hyper-)Inflationistas”.

    Mr. Michael Pettis explains why China has allowed the US to live beyond its means. It’s a very good explanation for a number of economic inbalances in the world.
    http://mcalvanyweeklycommentary.com/02-13-13/

    Mr. John Williams explains why he doesn’t believe the government statistics.
    http://mcalvanyweeklycommentary.com/03-06-13/
    (Williams (wrongfully) assumes that the US is approaching Hyper-Inflation).

  23. RW says:

    Took the words outta my mouth BR.

    Might have added none of the countries cited by biotrekker were economically developed including post-WWI Germany (which was in recovery while enduring forced war reparations).

    Might have also added that the predominant (and stunningly repetitious) “meme” of this cycle has been the neo-con, supply-side trope that “government debt crowds out private and is intrinsically bad, central banks are printing money like crazy, hyperinflation and economic collapse are inevitable, blah, blah, blah” and NOT the Keynesian/demand-side (and related) and central bank interventionist models promoted by folk such as Krugman but …

    Debating zombie ideas is really boring particularly when you begin to realize that nothing you say can change an infected mind.

    • lrh says:

      A previous post here “(How to Humble a Wing Nut by Cass Sunstein) quotes research that says there is a way to change infected minds. It’s just not accomplished by using the debate tactics we all were taught in school. Worthwhile reading…

      http://www.bloomberg.com/news/2013-05-20/how-to-humble-a-wing-nut.html

      That process being uses by some enlightened businesses to help drive change.

      Keynes himself endorsed the thinking when he wrote “A writer is extremely dependent on criticism and conversation if he is to avoid an undue proportion of mistakes. It is astonishing what foolish things one can temporarily believe is one thinks too long alone.”