My afternoon train reads:

• The Zero Upper Bound? (Noahpinion)
• How I Learned To Build Products People Care About (Fast Company)
• 850K Underwater Mortgages Finally Gasp for Air in 1Q (Fox)
• The Unlikely Evolution Of The @ Symbol (Fast Company)
• Silicon Valley’s Long History of Government Codependence (Echoes)
• CIA Chooses: Amazon or IBM? (WSJ)
• Connecting the Dots on PRISM, Phone Surveillance, and the NSA’s Massive Spy Center (Wired)
• Using Metadata to Find Paul Revere (Kieran Healy) see also Paul Revere’s Vision of Occupied Boston (The Vault)
• Voice-Activated Technology Is Called Safety Risk for Drivers (NYT)
• Amazon Will Seize 3D Printing (Climateer Investing)

What are you reading?


27-year trend of the 10-year Treasury bond
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.

21 Responses to “10 Wednesday PM Reads”

  1. VennData says:

    NSA ‘Committed’ to Privacy Rights, Director Says

    ​​We’re allowing terrorists an “opt out” choice.​

  2. > Connecting the Dots on PRISM, Phone Surveillance, and the NSA’s Massive Spy Center

    Great piece . . . I think we’re going to see a lot more of this subject in the time ahead . . .

  3. gstream says:

    The pop-up ads that just showed up this week are quite annoying, Barry.

    However, TBP would have to start flatulating in my face for me to stop reading…

  4. 873450 says:

    Here we go again:

    Benjamin M. Lawsky, New York’s superintendent of financial services, has accused life insurers of using “shadow insurance.”

    “New York State regulators are calling for a nationwide moratorium on transactions that life insurers are using to alter their books by billions of dollars, saying that the deals put policyholders at risk and could lead to another taxpayer bailout … Insurers’ use of the secretive transactions has become widespread … now affect life insurance policies worth trillions of dollars … These complex private deals allow the companies to describe themselves as richer and stronger than they otherwise could in their communications with regulators, stockholders, the ratings agencies and customers … New York’s superintendent of financial services, said that life insurers based in New York had alone burnished their books by $48 billion, using what he called “shadow insurance,” … transactions are so opaque … it took his team of investigators nearly a year to follow the paper trail … insurers in New York were seeking out states with looser regulations and setting up shell companies there for the deals. They then used those states’ tight secrecy laws to avoid scrutiny by the New York State regulators … BECAUSE THE TRANSACTIONS MADE COMPANIES LOOK RICHER THAN THEY OTHERWISE WOULD, SOME WERE DIVERTING RESERVES TO OTHER USES, LIKE EXECUTIVE COMPENSATION OR STOCKHOLDER DIVIDENDS … most frequent use … was to artificially increase companies’ risk-based capital ratios, an important measurement of solvency … similarities between what the life insurers were doing now and the issuing of structured mortgage securities in the run-up to the financial crisis of 2008.”

    “Those practices were used to water down capital buffers, as well as temporarily boost quarterly profits and stock prices … ultimately, those practices left those very same companies on the hook for hundreds of billions of dollars in losses from risks hidden in the shadows, and led to a multitrillion-dollar taxpayer bailout … transactions at issue are modeled after reinsurance, a business in which an insurance company pays another company, a reinsurer, to take over some of its obligations to pay claims.”

    — Interesting not surprising:
    “The big users generally appear to be publicly traded companies, which have to meet Wall Street’s expectations for earnings growth and returns on capital. Life insurers that are owned by their policyholders, called mutual companies, do not have that pressure, and some, like State Farm, Guardian and New York Life, appear not to be reinsuring through captives at all.”

    This is what happens when serving the best interests of your client-customer drops down to a 3rd or 4th priority.

    • Frwip says:

      Typical case of control fraud.

      But what’s been defrauded there is not just than the interests of the clients/customers but also the regulator. Insurances companies cannot simply do whatever they want with the money they collect. Fudging with asset statements impact directly the compensation pool.

      For once, we may see some action, may be not in courts but through restatements.

      • Frwip says:

        Holy Molly, that Deal Book article is a doozy

        MetLife said in a statement Tuesday that it “holds more than sufficient reserves to pay claims on its policies” and added that it used reinsurance subsidiaries “as a cost-effective way of addressing overly conservative reserving requirements” for certain insurance products. If it had to set aside that level of reserves more conventionally, it said, it would either have to borrow — putting its credit rating at risk — or raise the money by selling stock, dragging its returns below the level its stockholders require.

        But the itsy bitsy tiny problem for MetLife is that it’s up to insurance commissioners to say what adequate reserving requirements are. It’s not up to the insurers themselves. It’s actually the whole point of having insurance commissioners in the first place.

        And there, we have, in essence, MetLife flat out admitting they just decided to ignore the regulations they didn’t like, because there, and also too.

        This is surrealistic. This country is wonderful…

    • bear_in_mind says:

      Alright, this got my damn blood pressure roiling.

      With so many ordinary folks are already near their breaking point, if these fat-cat financiers take the country to the brink again, they better get busy building deeper, wider moats.

  5. rd says:

    The support line is close to 4% which would be about double the current S&P 500 dividend yield.

  6. formerlawyer says:

    FEMA won’t extend disaster relief as the Texas Fertilizer explosion was “too small” to constitute a disaster.

    DeNile is a River in Africa – East African water war? (with apologies to Samuel Clemens)

  7. Mike in Nola says:

    formerlawyer: Ya think the FEMA decision had anything to do with the secessionist/anti-regulatory governor of Texas allowing an extremely dangerous plant in a town? And these people who were hospitalized; I hope they don’t think they are getting Medicaid from our governor.

  8. Mike in Nola says:

    As I mentioned a couple of weeks back, ARM Holdings stock seems to be taking a hit from expectations of competition from Intel. It looks like the competition has arrived. I guess I won’t be getting that Windows RT tablet after all.

  9. GoBigRed says:

    I am reading Austerity: The History of a Dangerous Idea by Mark Blythe. Very good,

  10. BenE says:

    These dropping 10-year bond yields are terrible for us millennials. Retirees may complain they are not getting good returns but at least, they were getting great returns while they were saving.

    Compounding has lost all its magic. I calculated that my generation has to put aside almost double the percentage of income that boomers had to save for us to end up with the same amount saved at retirement. Given that a lot of us are over-educated, indebted, unemployed or underemployed, it’s no wonder we are not buying cars and houses.

  11. formerlawyer says:

    Mike in Nola, yeah I don’t know, perhaps it is political. I got lost in looking through the Stafford Act and its gazillion regulations and policies to try and make sense of how FEMA is delivered – even with my (admittedly modest and antiquated) legal training I could not on a cursory review make head nor tails out that morass.

    Regardless the FEMA disaster page for West Texas Explosion is located at:

  12. bear_in_mind says:

    Hi Barry,

    Given your perspective (well, prior to tonight’s 6+ pct dive in the Nikkei) that the NYSE action is unfolding like an ordinary correction, would this not be an opportune time to rebalance the portfolio? Or just sit tight while this choppiness plays itself out?


    • We have portfolio rebalancing set on an automatic schedule (we optimize it via software and then let it do its thing).

      The whole idea behind rebalancing is that you remove the emotional element and guesswork out of it. Otherwise, it risks becoming poorly executed market timing.

      If it were manually executed, think about how many people would have been rebalancing under-weighted equities — buying stocks — in Q4 2008 or Q1 2009. The idea is to automate the process so as to remove the human cognitive baggage, risk aversion, and general emotional errors.

  13. bear_in_mind says:

    One other item — you should check out this fascinating read on the PRISM backstory by James Bamford @ Wired magazine called, “The Secret War”:

    Holy moly… it makes one really question if the tens of trillions being invested in consumer-based tech over the last 15-20 years was REALLY, truly worth it?

    I mean, being instantaneously “connected” to the entire world is cool, but when you think about the first, second, third-order costs this article illustrates, it really makes one wonder, WTF are we doing? If all the investment in digitizing records, knowledge and communications for ease-of-access and portability comes at the cost of virtually zero security or transparency by the gatekeepers, I sense we’ve been supremely duped.


  14. The Debt Wall model has been enhanced to forecast 10-yr Treasuries & tipping points for USA bond rating downgrades thru to 2030: