Good Sunday morning. Here’s what I am reading:

• Stock Buybacks’ Allure Likely to Fade (Barron’s)
• Judging Bernanke: What the Fed Chair Got Right and Wrong (Fiscal Timessee also Mea Culpa: All This Time I’ve Been Wrong About The Fed (Business Insider)
• DUMB IDEA OF THE DAY: Free those 401(k)s (NY Post)
• Bloomberg Creative Director Richard Turley dishes on “The Hedge Fund Myth” (Society for News Design)
• Marketing Madness: A Postmortem for Generation X (Ted Rall)
• What if the Germans had won the first world war? (The Guardian)
• Are you mad about how everyone’s mean to big banks? Read this book. (New Republic)
Yay! Rationality!  More Americans believe in Human Evolution (Pew Research)
• Four ways to tell if Obamacare is working (Washington Post)
• Shale Oil Basins Around the World (Climateer Investing) but see The Coming ‘Instant Planetary Emergency’ (The Nation)

What’s for brunch?

 

Rising Yields Give Bond Buyers and Issuers Pause for Thought

Source: WSJ

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.

25 Responses to “10 Sunday AM Reads”

  1. chartist says:

    I think it’s time to go back to company sponsored pensions. People just aren’t saving enough. With pensions, folks would have more to spend today thereby helping the economy. This would also improve employee loyalty, reducing turnover, imo.

    • rd says:

      Improve employee loyalty? Most employees would be pleased to have a steady job for 35 years with a pension at the end.

      Guess which end of the employer-employee relationship doesn’t want that?

  2. DeDude says:

    That NY Post piece is a piece of something. The right wing knows that the way to grow the economy is to get consumers to spend more money. With the mortgage equity withdrawal scam done (for some time), next is to allow people to raid their retirement accounts. Apparently anything but the only long-term sustainable solution must be tried. We could not possibly fix the consumption problem with a hefty increase in minimum wage to increase the share of total national income that goes to the consumer class? – no because that would mean more money to poor people.

    If they actually get the problem (lack of consumption) it is amazing how they can avoid seeing the only sustainable solution (income re-distribution).

    • Its my DUMB IDEA OF THE DAY.

      Based on a few emails, I better clarify my disdain. Kinbda like “HOLY SHIT THATS WEAPONS GRADE STUPID”

      • rd says:

        I would actually consider it as the “NEFARIOUSLY EVIL IDEA OF THE DAY.” Unfortunately, it seems like all of the economists, politicians, media, and corporations idea of an economic fix for the planet is to somehow convince the American consumer to increase debt, reduce savings, and spend more as consumers. I rank it up there with destructive ideas like the Laffer curve “demonstrating” that tax cuts pay for themselves, wars are good for the economy, and Wall Street can regulate itself because doing stupid greedy things would not be rational.

      • ch says:

        Why is it so stupid?

        The wealthiest & most-well-connected investors in the world are doing exactly what the NY Post article advocates: Pulling significant chunks of money out of financial claim assets and placing them into physical assets held at geographically diverse locations around the world: http://www.economist.com/news/briefing/21590353-ever-more-wealth-being-parked-fancy-storage-facilities-some-customers-they-are

        From the article:

        “According to reports, some Swiss banks are running short of safe-deposit boxes and imposing stricter conditions for renting them—for instance, that the client also has at least $3m in a deposit or investment account. ($1m used to be ample.) Some disappointed clients are instead renting boxes in hotels. Others are traipsing down to freeports. In July an employee at Geneva’s freeport told a reporter from Der Spiegel that “scared customers” were moving money from banks to the city’s warehouses, and that as a result all the freeport had left to offer was a 10-square-metre room (108 square feet) for SFr22,000 a year.”

        Either the investors that are typically the smartest guys in the room (which is how they got so rich) are doing something stupid or they are scared for a reason. Maybe they are making a mistake. The other possibility is that they are watching the world’s biggest central banks expand their balance sheets at never-before-seen rates and are hedging the only real risk to their wealth – hyperinflation.

        Regardless, if the option is available for the wealthy to deploy their financial wealth into real stuff at tax-advantaged rates, why shouldn’t the same option be open to the hoi polloi in a world where the express goal of the world’s financial policy makers is financial repression to steal purchasing power from savers to bailout the financial system?

      • rd says:

        ch:

        There are the options of self-directed 401ks if the company sets it up that opens up a number of different investing options from the normal list. However, there are a lot of Jordan Belforts out there to help you direct that 401k.

        Re: Swiss banks and safety deposit boxes – one word: Cyprus. It became very clear to people with money in European banks, that confiscation was a very real possibility if the banks needed to be saved.

        Actually, there is a second word: Russia. There are a lot of autocratic dictator-ships or quasi-dictatorships that people want to have safe assets elsewhere, a tradional role for Switzerland.

        Oh, and a third word – IRS: Much of the gold bars in the safety deposit boxes would probably have just been cash in a numbered accoutn before. However, developed countries, especially the US have gotten aggressive in having the Swiss open up the secrecy of their banking system. A safety deposit box with gold bars in it preserves that anonymity. Also, the NSA is poking its noze into all sorts of electronic databases.

      • ch says:

        rd-

        I think your planning on keeping under SIPC/FDIC limits that you noted is prudent but leaves yourself wide open to a massive risk that most Americans are not hedging b/c they have no experience with it, but it is the very risk that the global wealthy elite are hedging by buying hard assets, collectibles, art, real estate, etc., all over the world = currency risk.

        I heard an interesting conversation recently with a healthcare broker: He noted that this year, the avg American’s healthcare costs are up 40%. And then he said – it’s going to go up 40% next yr as well, and the year after that, & the year after that b/c of Obamacare.

        This makes sense – American owes it’s Baby Boomers $120T in healthcare & social security. That money must be paid out. As it does, we are all going to see premiums sky rocket.

        I understand that inflation is officially low right now, but that doesn’t include home prices (rising double digits), food costs (when adjusted for portion sizes, double digits) or healthcare (nearly hyperinflating at up 40-100% for many Americans.)

        Long winded way of saying what I’ve been telling my Boomer parents – your big risk is less that your 401k is confiscated or even that it drops 40% like 08. Your big risk is that you spend $1,000/mth in healthcare now & the implosion of the Medicare/Medicaid/Social Security ponzi scheme due to demographics (which is what Obamacare is trying to fix) forces your healthcare bill to go to $10,000/mth 5 yrs from now. While your food costs rise 10-12% per yr….$120T in obligations against $17T in GDP…some version of this is coming, unless 3rd grade math no longer holds.

        At the end of the day, I think what the global elites are doing what their money is b/c they understand that all around the world, demographics are going to dictate the printing of accelerating sums of money to cover social promises made 60 years ago around the world…just b/c the economists don’t count those obligations as debt doesnt mean they’re not debt…my mom’s Treasury bond checks & social security checks & medicare checks all come from the same place…but economists only count the 1st as debt…

    • ch says:

      DeDude-

      You are right, your way would be the more sustainable, wealth-equalizing & overall more value creating way of restructuring the economy.

      Problem is two-fold in the eyes of TPTB:

      1. With corporate profit margins at/near all-time highs & labor’s share of profits at all-time lows, the lag b/t paying workers more & those workers then spending more would in the meantime create a major drag on corporate profits & therefore stocks – unacceptable to the status quo.

      2. If workers got paid & then spent more, wage/push inflation would likely rise like it did in the 1970s, & that would be unacceptable to the bond market. With the solvency of the banking system ($1Q in debt derivatives) & the Federal government ($17T in debt only serviceable with rates at 180-year lows) at risk in the case of any significant rise in rates driven by inflation, that outcome is also unacceptable to the status quo.

      And so we will continue to try to paper over the problem with balsa wood & baby tears until something really breaks…I suspect that is why the world’s wealthy elite are busy buying & stashing “tangible hard assets” all over the world while the biggest creditor nations in the world are stashing away gold & production facilities/mines/fields for critical commodities like oil, copper & grains – they know how this movie ends, but not when it ends, but they know that they don’t need to report quarterly or annual performance #’s, they just need to be ready for the big one when it inevitably comes.

      • DeDude says:

        Regarding the move of 401K assets to gold in bank-boxes that was not the proposal. The proposal was to allow consumers more consumption by allowing them to take cash in some of the account in order to consume specific items.

        No doubt that the initial effects of increased minimum wage would be a re-distibution of income from the corporations and top 1% to the lowest 20%. There may even be a small increase in inflation although it would be limited by the fact that employers still have substantial power over wages. A real wage/push inflation require that there is a deficit of workers that employers are forces to compete for. We are nowhere near that and actually a little more inflation would be good for the economy. All debtors including the federal government would be served well by inflation.

      • ch says:

        rd-

        couldn’t agree more on your points re: EU bank accounts after Cyprus and Russia.

        But here’s where I’d add something: In December 2012, the FDIC came out with guidelines for resolving problems in TBTF banks in the US. The solution? Cyprus style bail-ins. Shockingly, that FDIC pronouncement didn’t make its way onto CNBC (you can google it, or try this: http://www.fdic.gov/about/srac/2012/gsifi.pdf‎)

        So the FDIC has basically stated that in the next global banking crisis (they have been coming around every 6 years or so since at least 1982), US banks that need bailing will see bail-ins…

        So in that frame work, it makes sense why the elite are both moving into hard assets & diversifying geographically. And it makes no sense to me why the average American shouldn’t be able to pull some or all of their deferred accounts out, penalty free, to invest or spend how they see fit.

        After all, if the US sees bail-ins in the next crisis, where would you rather have your money – in a 401k/IRA or in a group of rental homes or ag land or commercial RE or apartment buildings in an LLC?

        I know where I’d want my money…there are some $17T+ in deferred retirement accounts last I read & the US has some $17T in federal debt, $6T or so of it foreign held.

        For all the talk of confiscation I hear whenever gold is discussed, I rarely/never hear the discussion that with a couple of computer key strokes, the Fed/Treasury could declare that 401k/IRAs must now contain 25% US Treasury bonds yielding 0% & all deferred account balances are now subject to 80% early withdrawal penalties, in the name of national emergency.

        Far-fetched? Probably. But living in a country with structural obligations that total $200T to its foreign creditors & domestic Baby Boomers, I wouldn’t bet very much of my hard-earned retirement money that the people in Washington won’t see it as a honeypot for the taking if the going gets tough (and 3rd grade math or a 1st year chaos theory student would tell us that things are going to get tough with near 100% probably)….

      • rd says:

        ch:

        You can always cash out IRAs and 401ks. The taxes need to be paid as they weren’t paid previously. At 59-1/2, the penalties go away. After 55, a 401k with 10 years service and separation from the company can be cashed out without penalty.

        Confiscation can occur in many forms. Just because you own an apartment block, doesn’t mean that it can’t be confiscated – ask anybody in a foremerly-Communist country. The Swiss safety deposit boxes require people to physically travel there to put things into them and withdraw them. For North Americans, that keeps it down to a pretty small group of people who could do that.

        FDIC insurance only covers up to certain limits on accounts. The US decided to effectively insure all bank accounts and money markets after the 2008 crisis for a few years, the opposite of confiscation, to prevent runs on the banks. I pay attention to FDIC, FSLIC, and SIPC insurance limits as I view anything above those limits as a potential write-off in a financial crisis. When we are consolidating accounts at retirement, I expect that we will still have IRA accounts at a couple of different institutions just to make sure that we have a lot of money below the SIPC insurance limits. That is still not a guarantee against confiscation or institutional bankruptcy/fraud loss, but does reduce the already small probability significantly.

  3. ilsm says:

    Reading to add to TBP thread on Logic:

    http://www.brainpickings.org/index.php/2014/01/03/baloney-detection-kit-carl-sagan/

    Carl Sagan on arguments and ideas, from Brad De Long.

  4. davefromcarolina says:

    Big Banks: “To illustrate the singularity of our preoccupation with banks, Bove notes the ferocity with which three New York State attorney generals attacked the financial industry.”

    Yes, and sent all those bankers to jail. Wait…what?

  5. jeff in indy says:

    This is the first time I’ve read anything from the NY Post and the author specifically. I’m not sure what qualifies this as a “right wing” suggestion, but, based on the premise alone, I would agree it’s one not worthy of serious consideration, regardless of wing.

  6. willid3 says:

    hm, so wall street knows there are bogus trades???

    http://qz.com/162943/wall-street-is-finally-acknowledging-that-bogus-trades-are-a-problem-in-its-own-way/

    just doesnt know what to do about them?

  7. VennData says:

    Koch spending $25M on anti-health-insurance ads, targeting Congress.

    http://thehill.com/blogs/ballot-box/senate-races/194229-koch-brothers-group-adds-shaheen-to-target-list

    Ok, if you don’t like the mandate, and want a system where the young and I’m-healthies don’t get insurance, then to the ONL other alternative to dealing withe them ending up in the ER and walking out, or the half of personal BKs being due to medical bills, is for the Koch Brothers to demand medical bills like student loan debt, you can’t escape it, no way, no how.

  8. pielou says:

    “Instant Planetary Emergency”:
    based on these numbers we know how urgent it is for human politics, zero
    Normal CO2 Levels

    The effects of increased CO2 levels on adults at good health can be summarized:

    normal outdoor level: 350 – 450 ppm
    acceptable levels: < 600 ppm
    complaints of stiffness and odors: 600 – 1000 ppm
    ASHRAE and OSHA standards: 1000 ppm
    general drowsiness: 1000 – 2500 ppm
    adverse health effects expected: 2500 – 5000 ppm
    maximum allowed concentration within a 8 hour working period: 5000 ppm

    The levels above are quite normal and maximum levels may occasionally happen from time to time.
    Extreme and Dangerous CO2 Levels

    slightly intoxicating, breathing and pulse rate increase, nausea: 30,000 ppm
    above plus headaches and sight impairment: 50,000 ppm
    unconscious, further exposure death: 100.000 ppm
    http://www.engineeringtoolbox.com/co2-comfort-level-d_1024.html

  9. Jojo says:

    Drone video. Very cool. Surprised someone didn’t shoot it down. Imagine when the NSA can make these things silent and invisible…
    ————
    Team Blacksheep
    NYC 2

    Back to where it started: New York City and the Statue of Liberty. Perfect proof that freedom and FPV are synonymous

    http://www.youtube.com/watch?feature=player_embedded&v=N1hj0hoKY3s

  10. Jojo says:

    My prediction: Humans will become evermore superfluous as we march into the future.
    ——————–
    When Will We Have Robots To Help With Household Chores?
    By Satyandra K. Gupta
    Posted 2 Jan 2014 | 19:35 GMT

    This is a guest post. The views expressed here are solely those of the author and do not represent positions of IEEE Spectrum or the IEEE.

    Google has recently been in the news for its buying spree of robotics companies. Many people are excited about this and believe that this will greatly accelerate robotics technology development and hopefully make robots ubiquitous in our lives. I hope that’s true, and if so, the big question is: When will we be able to buy robots to help us with household chores?

    In a simplistic sense, the home robot market can be divided into three categories: (1) robots helping with dull and tedious household chores; (2) robots taking on new roles in homes (e.g., education, entertainment, companionship); and (3) robots in assisted living communities. Each of these markets has different underlying economics. In this post, I will focus on the first category.

    So can we expect to see robots helping us at home anytime soon? Before answering this question, let me quickly summarize the societal implications of home robots assisting us with household chores. Here are my predictions:

    http://spectrum.ieee.org/automaton/robotics/home-robots/when-will-we-have-robots-to-help-with-household-chores

    • jeff in indy says:

      which reminds me jojo, I’m due for my first annual rectal scoping and I hear they’re using robots as anesthetists. I can’t wait to see what C3PO puts in my arm, but it should save me about a grand.

  11. 873450 says:

    Falling on hard times, insider trading hedge funder Steve Cohen conducts asset fire sale, slashing $17 million off condo ask price down to $98 million and selling art collection for $88 million.

    http://dealbook.nytimes.com/2013/12/31/steven-cohen-cuts-price-on-n-y-apartment-to-98-million/

    Cohen Cuts Price on N.Y. Apartment, to $98 Million