G’morn. Here are my favored midweek reading:

• MUST READ: The Relentless Bid, Explained (Reformed Broker)
• Active vs. index investing: The smartest choice may be to combine the two types of funds (WSJ) see also What if You Only Invested at Market Peaks? (A Wealth of Common Sense)
• Emerging, but No Longer a Mother Lode of Profits (NY Times)
• The Cost of Bitcoin (stratēchery) see also The Most Dangerous Man In Bitcoin Isn’t A Criminal, He’s an Attorney General (FastCo)

Continues here

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.

24 Responses to “10 MidWeek AM Reads”

  1. hue says:

    Weeks before expiration date, Windows XP still has 29% OS market share (ars technica)

    Study: Trying to convince parents to vaccinate their kids just makes the problem worse (Salon)

    The Internet is ready for a new cultural shift. (gaping void)

  2. I love Josh’s piece…

    It explains why I’m been segregating my investment mind from my doom and gloom macro mind the past couple of years…and why it would be wise to continue doing so.


    • willid3 says:

      wasnt the big thing a few years ago to have ‘investors’ move their money from money managers who charged a commission from trades to fees, because it provided incentives to make trades that didnt help the ‘investor’? so maybe their is down side to the for fee system. what would be a replacement for both then? maybe a fee based on returns would be an improvement?

  3. WFTA says:

    The Relentless Bid was a very interesting read. Thanks for sharing it. As someone eyeing retirement in about a year and half I find it, along with Obamacare, very comforting.

  4. Low Budget Dave says:

    I always dislike the the math behind the stories like “What if You Only Invested at Market Peaks”.

    It assumes that your balance will reflect the Dow, or the S&P, or whatever. In reality, it does not.

    While it is true that holding for the long run is always a good strategy, remember that companies come and go from the S&P 500 all the time, and the index is not adjusted for losses on companies that leave.

    When Sears Holding went below the float threshold, the S&P removed them from the list and replaced them with a chemical company. When J.C. Penney fell like a rock, they were replaced with Allegion. The S&P continued to climb as if nothing had happened, but the hypothetical investor would have continued to hold the sinking retailers, or would have had to sell them at a loss.

    The S&P is up a bunch is the period that the article covered, but an individual investor would have enjoyed a much less dramatic return.

    There is also the question of when you sell. The 10-year annualized return through 2010 was about 1.41% But if the investor had been forced to sell a year earlier, the annual return was -0.95%.

  5. rd says:

    Is the “relentless bid” the 2014 version of the Nifty Fifty and portfolio insurance?

    I like your piece about the new highs being normal in a secular bear market, but when I see pieces claiming that we are going to be “stuck” with 5% to 9% gains in the stock market over the next decade, I start to wonder if expectations are beginning to run amuck.

    • catclub says:

      I don’t think so. Nifty 50 was ‘these are the only stocks you need ever buy’

      I see the Relentless Bid as more like ‘the giant pool of money’ which This American Life talked about in the housing boom and bust stories. In this case the giant pool of money is being continuously sprayed on the stock market.

      The fact that the giant pool of money is not searching for yield via CDS is, so far, a good thing.

  6. willid3 says:

    challenge for retirement?


    just how do the 99% actually retire? since their low incomes tend to make it so they live pay check to pay check, and dont have much if any benefits (pensions or 401ks) . just how do we expect them to be able to retire?

    and also how does the impact of dementia impact this? since as we get older we are likely to not be able to make decisions

    • rd says:

      The most interesting part of the table in your link is their presentation that the bottom 10 percentile household has no Social Security.

      The most bizarre part of the Tea Party theater over the past five years has been the unrelenting assault on Social Security. There are some actuarial tweaks that need to be made to it, but it is fundamentally an annuity program funded by the participants with a bit of progressive re-distribution of wealth to the poorest – basically what FDR was looking for in the 1930s. It is the reason why we don’t have a full-blown, flaming retirement crisis right now as average lifespans have extended from the retirement age of 65 when Social Security was first created in the 1930s to 10 years or more past full retirement age today.

      Before Social Security, the poor and middle class didn’t have any better way of saving money than today and many of them just tended to die shortly after working or while they were working so retirement funding wasn’t relevant to much of the population. However, the Great Depression highlighted the dire straits of the poor people who were actually able to live past when they could work which is why Social Security was started.

      china has been getting concerned that the sns and daughters are moving to the cities and leaving their parents on the farms. They don’t have a Social Security system yet, so the elderly are totally reliant on their own savings and their children’s largesse. it hasn’t been clear to me if the goal of much of the rhetoric in the US is to return us back to that golden age of really poor old people.

      It is not clear to me why people are so concerned about income inequality in retirement given the huge inequality that goes on while people are working. To me that is a completely separate question compared to whether or not there should be a fundamental floor of income in retirement so that people literally don’t die of starvation or cold.

      • willid3 says:

        you know for a good chunk of people, they still really dont have a way to save much if any thing for retirement. the average income (not by house holds) is closer to 30,000 a year, which leaves very little money to save with. basically they are just surviving, pay check to pay check with loans thrown in. and the majority do not have 401ks or any thing like it (not that it matters much, they dont have enough income to make a difference). and we still have a big drop off in how long many survive after retirement (if they even do). the less income they make, the less likely they will survive long in any retirement (if they can even do so).
        and i think you hit why we have such a retirement mess. low incomes will equal shorter lives, and a lot of folks never retiring be because they can’t. and i am not really sure why we have been convinced that we must, just must, not have much income.

      • rd says:

        That is hte reason Social Securiy has been so critical. It is essentially a forced annuity funded by about 13% of lifetime income. That sets a floor for people who have been in the general work force or who have had the misfortune of becoming disabled.

  7. slowkarma says:

    re: investing only at market peaks.

    I’d like to see the same kind of analysis applied to somebody who only invested in, say, a Vanguard S&P 500 index fund after a 10% correction, and always got out, and into bonds, when the recovery reached the level that the market was at when the correction began.

  8. willid3 says:

    real life experiment on higher minimum wage?

    seems to actually work out better than really low wage plans

  9. swag says:

    I take “Relentless Bid” as a contrarian sell signal.

    • Good luck with that

      • CD4P says:

        No better way to get away from all the fraud & bust of a financial meltdown than to throw everything into the rebound and ignite the synergistic positive headlines of “new record high!” Now the financial industry looks good, and a bigger market is created for them to sell to.

    • rd says:

      “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
      – Former Citigroup CEO Chuck Prince, summer, 2007.

      The market can stay irrational longer than you can stay solvent.
      John Maynard Keynes, (attributed)

  10. ch says:

    Relentless bid? Every business day, the day starts with the BOJ creating money to monetize Japanese gov’t debt. Then, 8 or so hours later, the BOE gets in on the act.

    5 hours later, the Fed creates $3B to buy mortgage & Treasury bonds.

    All with money created with key strokes. And forcing risk out on the curve. Compare the daily amounts above to the amounts Josh documented.

    Josh is claiming “it’s different this time” b/c of how wire houses get paid on assets. With all due respect, it’s never different this time & economic history fully explains why their is a relentless bid under this market.

    The stock market is the politically acceptable outlet for the inflation the Fed & other Central Banks aren’t creating (allegedly.) Bernanke et al has laid out their wealth effect theories extensively.

    We shouldn’t try to make it more complex than it is.