Some Monday reads to prep you for the week (continued here):

• As US stocks soar, bonds offer a warning (MoneyBeat) see also The ‘other’ great bond mispricing theory (FT Alphaville)
• Our Top 100 Hedge Funds (Barron’s)
• Why US manufacturing is poised for a comeback (maybe). (WSJ) but see Germany’s success in manufacturing may hold a key lesson for the US. (WSJ)
• Noise Trading, Bubbles, and Excess Volatility in the Aggregate Stock Market: Noah Smith and Robert Shiller and Andrei Shleifer and Jeremy Greenwood vs. John Cochrane and Gene Fama and Company: Progressive vs. Degenerative Research Programs in Finance (DeLong)

continued 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.

13 Responses to “10 Monday AM Reads”

  1. RW says:

    Forget the 70′s: persistant low/declining inflation is like deflation but in drag. This isn’t the ‘structural’ change most of the pundits and know-nothings (but I repeat myself) tend to natter on about — job skill-mismatches and such — but the FOMC obliges where it can.

    Dallas Fed lays an important Foundation for Fisher Effect

    There is a movement taking place to understand the Fisher Effect. …the idea is that low and stable nominal interest rates from the central banks leads to low and stable inflation. …

    The Fisher Effect is slippery like a fish. You need to have the right economic conditions for it to appear. Here are 4 conditions: …

    And of course there are always policies that can make bad times worse for ordinary citizens nevermind those slippery Fishers

    Kansas tax revenues plunge again

    The state reported Friday afternoon that revenues fell $217 million below estimates in May, the second month in a row they came up short of expectations.

    The latest decline leaves the state about $310 million short for the current fiscal year, which ends June 30.

    The numbers again raise questions about Gov. Sam Brownback’s income tax cuts from 2012 and 2013 and their effect on the state’s financial health.

    Must have been due to taxpayers cashing in capital gains early cuz they were skeered tax rates were going up, yeah that’s it. Or maybe it was that fiscal cliff thingie, dang Washington DC …certainly couldn’t have had anything to do with policy choices we made, no way.

  2. DeDude says:

    An excellent outlay of inequality with a CEO pay discussion at the end. Are the CEO compensation advisory companies the “bond rating agencies” of leadership pay?

    http://www2.ucsc.edu/whorulesamerica/power/wealth.html

    Other good things on that website.

  3. RW says:

    DeLong’s article in the links above is (probably intentionally) using the framework of Imre Lakatos in his title — progressive vs. degenerative research programs — and also in statements such as

    …I look at the situation, and I have to judge that those who explain aggregate stock market deviations from the crude Shiller fundamental as driven by rational agents’ revising their views of the curvature of their utility functions [e.g., Fama et al] are people …who are themselves in an irrational intellectual bubble. They really do appear to me to be people who ought to have been persuaded by Shiller a generation ago. They were not. And so now they are are turning their smarts to constructing reasons to justify their not having been persuaded.

    This is a useful framework in many respects, in particular because it addresses Kuhn’s critique while still requiring a certain precision in evaluating what is, or is not, a scientific program, at least in the long run.

    “Progressive” in this framework means capable of answering important questions, better explanations of reality, suggesting productive lines of further research whereas “degenerative” means most effort is expended in developing explanations for why your theories or core beliefs are not wrong; i.e., its virtually all defense, incapable of predicting novel facts (not yet discovered) or even adequately explaining history.

    Shiller is engaged in a progressive program and is almost certainly closer to the truth than Fama et al but IMHO there is an even more simple explanation for the phenomenon of reversion to the mean: Granularity of measurement (just because a stock is priced to the penny or dime doesn’t mean that is necessarily a significant digit).

  4. VennData says:

    The FT article that QE raises rates is ridiculous. The price of money is set by supply and demand.

    Here’s what’s happening: 1) Traders gaming the EU move 2) central banks buying Treasuries 3) post 2013 asset reallocation 4) insurance industry capital rules and 5) the big momentum trade of 2014 is long bonds and 6) Hedge fund window dressing are all in confluence and will all unwind leaving the Rick SanYellis of the world with yet another bad prediction on their record.

  5. RW says:

    Piketty’s work is getting most of the press these days but when it comes to understanding household debt and the role it played in the runup to and persistence of the Great Recession the experts are unquestionably Atif Mian and Amir Sufi who wrote the book, House of Debt, and also write a useful economic blog with the same title.

    WCEG: Amir Sufi presents House of Debt

    Sufi’s formal presentation begins 09:30 and ends 33:55; total length is 1:30 including panel discussion and Q&A

    NB: The conclusion of the book includes a proposed mortgage structure that would allot part of the risk of loss at sale to the lender in return for a percentage of the profit if sale is profitable (it’s a bit more complicated than that but Sufi explains it near the end of his presentation). The structure could be quite attractive to private equity and similar firms.

  6. Jojo says:

    I visited as a kid. Did you? WHY aren’t there World’s Fairs anymore?
    ============
    In Focus
    1964: The New York World’s Fair
    Jun 2, 2014

    The theme of the 1964 World’s Fair in New York City was “Peace Through Understanding”. 650 acres of pavilions, public spaces and displays from exhibitors around the world. Countries, cities, corporations, and private groups set up shop to display their ideas and accomplishments to more than 50 million visitors. Corporate America was heavily-represented, with one of the most-remembered exhibits being General Motors’ Futurama, displaying colorful and imaginative views of future society. Collected here are some views of the 1964 World’s Fair, a half-century after it first opened — the last of five entries focusing on events of the year 1964. Be sure to see all earlier 1964 entries as well: The World 50 Years Ago, Civil Rights Battles, Beatlemania, and Alaska’s Good Friday Earthquake. [32 photos]

    http://www.theatlantic.com/infocus/2014/06/1964-the-new-york-worlds-fair/100749/

  7. willid3 says:

    reported extensively on a story that the Wall Street Journal broke two weeks ago, which is that the private equity kingpin KKR looks to be cheating the limited partners in its funds by not sharing fees charged to portfolio companies by its in-house consulting firm, KKR Capstone. This is a serious charge because if the critics are right, KKR is embezzling. Moreover, this case also shows the degree to which private equity investors, who have negotiated to have the overall fees they pay reduced via rebates against the management fee, are having their intentions vitiated either via grifting or extremely sneaky maneuvers that they can’t readily detect or police.

    http://www.nakedcapitalism.com/2014/06/kkr-capstone-scam-picture-worth-10000-words.html

  8. willid3 says:

    why economists will never be a science?
    they can’t agree on any thing to speak of?

    http://pragcap.com/economists-like-physicists

  9. rd says:

    An interesting “Freakonomics” type of odd correlation = causation issue for a relationship you would expect to be random. Apparently, researchers calculate that hurricanes with female names result in much higher death tolls than male-named hurricanes. Their studies indicate that people believe the female named hurricanes are less intense than male ones and therefore they are less willing to evacuate. The feminine names just give less of an aura of toughness.

    http://www.washingtonpost.com/blogs/capital-weather-gang/wp/2014/06/02/female-named-hurricanes-kill-more-than-male-because-people-dont-respect-them-study-finds/

  10. willid3 says:

    why do we get such large rules and laws?

    cause business wants it that way.

    http://qz.com/215692/why-we-need-a-3000-page-rule-to-say-pollute-less/