My afternoon train reading:

• The computers that run the stock market (CNNMoney)
• A Portfolio That’s as Simple as One, Two, Three (WSJ)
• Consumers Boost Borrowing (Real Time Economics) see also It’s Not Just ‘Jobs,’ It’s the Kind of Jobs That Matters (Moneybeat)
• S&P to court: Reasonable investors wouldn’t rely on our ‘puffery’ (MarketWatch)
• Audi to Zappa See Trade Talks as Chance to Cut Rules (Bloomberg)
• Good Urban Design Losing in Miami Beach (World Property Channel)
• How Spitzer as comptroller could impact Wall Street (MarketWatch) see also Sex Scandal, Just Another Spitzer Campaign Event (Bloomberg)
• China’s Great Rebalancing Act (The Diplomat)
• Top iOS apps and games go free ahead of App Store’s fifth anniversary (Verge) see also The Only Smartphones Worth Buying Right Now  (Business Insider)
• Scientists find black hole bonanza (CNN)

What are you reading?


The bond fund outflow, charted
Source: FT Alphaville

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.

23 Responses to “10 Monday PM Reads”

  1. Interesting chart. What does it suggest?
    Finally after 4 years of bull market the equity funds will see a positive inflow and bond funds will see an outflow finally?
    If this really comes true the dow goes to 20,000 and the US government will have a big issue with cost of debt. Did we just set the foundation for the next crisis?

    • rd says:

      It looks like it went into cash, not stocks since the blues barely spiked.

      I still don’t see how US stocks compete well with 3%+ bond interest rates if the earnings aren’t growing at a healthy clip so that dividends can rise.

      • constantnormal says:

        It would be really interesting to see a fourth set of bars on that chart, representing money-market funds. My gut feel is that it would dwarf both equity and bond funds, but that’s only my gut, and not anything based on data.

      • Would make perfect sense, since gold is also falling. I know gold is a relatively small instrument to take up large funds from the entire market.
        But if funds were moving into cash, there will be a push effect later. They can’t keep cash for long time, money needs to work. I think this sets a good basis for buying any dips in the market in the coming months.

  2. > see also The Only Smartphones Worth Buying Right Now (Business Insider)

    The iPhone 5 is the best choice for most people. You’re guaranteed to get the best apps before anyone else, plus Apple is really good at making sure iPhones get timely software updates with new features.

    Price: Starts at $199 with a two-year contract (Sprint, Verizon, and AT&T). $146 plus $21 per month for 24 months on T-Mobile.

    I think this is highly debatable. New phones coming out this fall, and you’re getting locked into another expensive two year contract? And I’m not sure that Apple’s apps have much more to offer than, say, Google’s for most people, anymore. Personally, I use the Nexus 4 (#5 on THEIR list) through the T-Mobile prepaid program, and HSPA+, at least here in Seattle, has never been an issue (Google’s streaming music service, All Access, is really superb, ditto Rdio) But the real advantage IMO is these high end, low cost phones, which are updated with every software release, can be replaced easily with each new phone, if that’s your desire.

    On a related subject, see:

    “The Chinese also switch phones far more often than their counterparts in the West — generally after about six months, analysts say, compared with every two years or so in developed economies. Fickle customers mean market share shifts swiftly, and the fortunes of companies rise and fall almost as fast”

    China Taps a Growing Phone Market (NYT)

  3. MayorQuimby says:

    “One possible allocation is 40% U.S. stocks, 20% international stocks and 40% bonds. That Vanguard portfolio, rebalanced annually, returned an average of 7.14% a year over the last decade”

    Oi vey…sure it did – based on today’s closing price! If we correct 15% the entire 10 year period of return gets chopped! Talking about these longterm returns is always silly in that context.

    Oh and anyone that has 0% cash allocation is psychotic btw.

  4. rd says:

    It is interesting that the WSJ journal doesn’t point out that the 1,2,3 portfolio is already available in single all-in-one funds like the Vanguard Lifestrategy series with 20% increments for the equity share for different risk-reward profiles. They are self-balancing and don’t have any additional costs above the expense ratios of the underlying index funds.

    It is almost like they want to make this stuff look difficult for the average investor to execute.

  5. rd says:

    In case you ever wondered why train locomotives are still running when parked:

    Not many fail-safes built into parked trains.

  6. catman says:

    Bogleheads? As in parrotheads and dittoheads. Let’s hear it for the WSJ.

  7. Molesworth says:

    When I look at that bond fund chart, I my first take is “Zounds. Massive over-reaction.”

  8. Internet Tourettes says:

    I love it when companies try to use “Puffery” as a defense tactic. The best was Joe Nacchio in his insider trading case….. Now S&P is using it per Bloomberg below:

    “S&P Raises Puffery Defense Against U.S. Ratings Case”

    “Standard & Poor’s, at the first court hearing over the U.S. government’s claims that the rating service defrauded investors, argued reasonable investors wouldn’t have relied on its “puffery” about credit ratings….

    “They’re seeking to blame the entire financial crisis on Standard & Poor’s,” Keker said in court. “Those generic statements don’t make a scheme to defraud. For a scheme to defraud, there has to be a specific intent to harm the victim, in this case the investor.”…

    S&P said in its request to dismiss the case that the government can’t base its fraud claims on S&P’s assertions that its ratings were independent, objective and free of conflicts of interest because U.S. courts have found that such vague and generalized statements are the kind of “puffery” that a reasonable investor wouldn’t rely on….”

    I hope they get taken to the cleaners….

  9. RW says:

    S&P Legal Defense—No Reasonable Investor Would Take Us Seriously

    The law is the law, but this line of defense simply underscores that these agencies deserve to die.

    • rd says:

      All that needs to happen is that the three ratings agencies are not in a position to define “investment grade bonds” for financial and insurance firms and pension funds. They would be DOA in a week after that.

  10. Bob is still unemployed   says:

    >> The computers that run the stock market

    Computer programmers have a wonderful life. In what other profession can one make a mistake and blame the ramifications of that mistake upon a lifeless piece of hardware, or some abstract thing like a piece of code.

    With appropriate props to Grace Hopper, “there’s a bug in the software” or “there’s a bug in the code” are nothing less than attempts to divert the cause of the problem from the programmer who wrote the code to the code that was wriiten by that programmer.

    Getting back to the quoted phrase… computers do not run the stock market, programmers run the stock market.

    Go to the root of the action. Computers do only what programmers instruct them to do.

    People, a.k.a. computer programmers, run the stock market.

    Don’t try to place the blame for our dysfunctional financial system on the poor inanimate coputers. Place the blame where it belongs… on the greedy people who command those computers.

    • RW says:

      Right on brother. I’d add that in most cases computer programmers are not a whole lot better off than the computers they program — both pretty much follow orders even if programmers have a bit (ha, ha) more latitude — but, yeah, that’s the bottom line: don’t blame the machines — all they can do is work as constructed or break trying — it’s the command logic and the context that makes it logical that bites.

      • Bob is still unemployed   says:

        >> I’d add that in most cases computer programmers are not a whole lot better off than the computers they program

        I’ve managed programmers for more than a decade. I cannot disagree with your comment [thanks for adding it, btw]

        I’ve had programmers on my team who have pushed back against management directives. The fate of those programmers was not good. As you can see by my alias, the fate of me was not good as well.

        There is a point where one must draw an ethical line which cannot be crossed. I refused to cross that line….

      • san_fran_sam says:

        A computer programmer is about to head out to the store when his wife says, “Honey, get a loaf of bread. And if they have eggs, get twelve.”

        He comes back with 12 loaves of bread.

  11. bear_in_mind says:

    Some great photos of the Interstate 5 bridge collapse over the Skagit River on May 23, 2013… but we don’t need no stinkin’ infrastructure!

    NTSB ‏(@NTSB)


    • rd says:

      This is an early bridge design for interstates. It is “fracture critical” so losing a bridge lement means losing some or all of the bridge. Since those days civil engineers have worked hard to build in more redundancy and resiliency into bridge designs while still keeping costs low.

      The financial markets in 2008 proved that they are “fracture critical” where one or two Lehman and Bear Stearns crashing into beams were enough to put the whole bridge into the river and were only saved when Helicopter Ben brought in his huge SkyCrane helicopters to hold the bridge up temporarily (although some of the helicopters are still in place).

      So when will the financial engineers learn to design their systems with some robustness? The next major market decline will inform us if the Dodd-Frank bill and other measures will have succeeded. My hopes are not high on that front. I suspect that the financial engineers will once again look like alchemists or mad scientists.

  12. bear_in_mind says:

    James Woolsey on Energy and National Security
    Johns Hopkins University | Nitze (Paul H.) School of Advanced International Studies
    Jul 8, 2013

    Former CIA Director James Woolsey outlined the national security implications of U.S. dependence on oil and the importance of alternative energy resources.


  13. bear_in_mind says:

    Three Innovations That Saved Lives In The SFO Crash
    July 8, 2013

  14. Greg0658 says:

    saw this and FYI:
    a good lawyer is gonna get the fire dept or the railroad or the train manufacturer or the media .. PEOPLE engines need POWER to keep the brakes engaged