• Go Your Own Way: Correlation Breakdown in the Market http://t.co/3Zwpx3kB @japhychron hints at deterioration in US stocks as USD strengthens May 26, 2012
• RE: To me it implies that conservative HY investors are running out of places to put money.  Yellow flag. http://t.co/eUSRq8dY May 25, 2012
• Vanguard Closes High-Yield Fund — ETF Alternatives http://t.co/bMmYUMTC Note: ETFs proposed take more credit risk than Vanguard fund does $$ May 24, 2012
• Vanguard’s high yield fund was fairly conservative; they may feel strain in the size of their positions relative to t… http://t.co/lLJFeiYc May 24, 2012
• RE: They were called the Americus Trusts, sponsored by the Americus Shareowner Service Corp., and they had Scores and… http://t.co/TPNPkL8T May 23, 2012
• Wealthy Americans Turn to Trusts to Shield Assets http://t.co/2rKGuNWb Reasons: taxes, liability, avoid probate. Covetous world $$ May 23, 2012
• You can say that again, momentum is addictive $$ RT @credittrader: lol – never learn – especially when momentum feels so good haha May 23, 2012
• @credittrader I’m well. Fascinating that $JPM didn’t learn from the correlation crisis in 2005; tranche px/corr relationships shift $$ May 23, 2012
• IG CDX diverges from S&P500; JPMorgan advocates mean reversion trade http://t.co/FIsOqhBN Long IG spreads vs HY spreads and equities $$ May 23, 2012
• Kroll Sees Supplanting S&P in Rating Commercial Mortgage Bonds http://t.co/IrzfQ6cH Gratuitous trash talk on competitor S&P from Kroll $$ May 22, 2012
• Treasuries in Longest Winning Streak Since ’98 on Europe http://t.co/EWJkiN5u Everyone knows that Treasury yields can only fall, right? $$ May 20, 2012

Eurozone

• Merkel May Be Persuaded on Euro Debt-Sharing Compromise http://t.co/P3yQaN1K H/L misrepresents Merkel; does not seem likely politically May 25, 2012
• Indeed, why not? RT @TimABRussell: “http://t.co/831diM1O Why not just pick the best person for each position regardless of sex, race, etc? May 25, 2012
• If a man will not respect his “wife” by marrying & staying with her, why should you expect him to respect women in mo… http://t.co/83lvXtu1 May 25, 2012
• Stock Market Performance Versus Dollar http://t.co/mfrXyqvp Difficult for the US stock market to do well when the $$ is strengthening v Euro May 25, 2012
• Slim Family Sees European Crisis as Good Time to Invest http://t.co/XZOgx3xX Buy when there is blood running in the streets $$ #slimchance May 25, 2012
• Europe Girds for Greek Exit http://t.co/HMfsVt86 Two problems: Can’t kick Greece out & Greece can only leave Eurozone by leaving EU $$ May 24, 2012
• Euro-Zone Economic Contraction Deepens http://t.co/b49VctDj Overindebted Eurozone muddles as politics/bureaucracy strangle growth $$ May 24, 2012
• EU Chiefs Clash on Euro Bonds as Crisis Summit Bogs Down http://t.co/S1YnHrbM Fiscal Union requires political union; elephant in room $$ May 24, 2012
• The Seeds of the EU’s Crisis Were Sown 60 Years Ago http://t.co/SsWQUvGa Overly ambitious EU goal of “ever closer union” leads 2 crisis $$ May 24, 2012
• War-Gaming Greek Euro Exit Shows Hazards in 46-Hour Weekend http://t.co/WD7HSbMI Assumes Greek competence & they care about global mkts $$ May 23, 2012
• A Greek Exit Could Make the Euro Area Stronger http://t.co/C7v2mDmM Concludes that a Greek exit would lead the rest 2 pull together $$ May 23, 2012
• Campaign for Joint Euro Bonds Builds http://t.co/xXAvSU73 Will the core Eurozone countries give up resources to bail out the fringe? $$ May 23, 2012
• Europe’s Prisoner’s Dilemma – LTRO Needs to Continue for Years http://t.co/NldAsVL2 Until govt debt is gone from finl sector’s bal sht $$ May 23, 2012
• Germany to Sell Interest-Free Bonds http://t.co/q7ewNqd2 It is good to be king. People give you their money, & they pay for the honor $$ May 22, 2012

US Politics / Economics

• Even with a High Court win, Obamacare won’t work http://t.co/NKhyAe56 Failed ideas @ the states will not add up to a successful Federal plan May 26, 2012
• USDA Is a Tough Collector When Mortgages Go Bad http://t.co/ZX24InYJ Definitely has different goals than most of the govt re mortgages May 26, 2012
• Report: Negative Equity More Widespread Than Previously Thought http://t.co/UkQBpbGY Adds in value of second liens, 31%+ inverted $$ May 24, 2012
• Let Mr. Reid look to his own spending extremism.  As for me, let the tax cuts expire, and automatic cuts happen.  Bet… http://t.co/cabthITQ May 22, 2012
• Shale Glut Means $1-a-Gallon Savings at the Pump http://t.co/RHlFbT3L Liquefied Natgas would shave $1/gal over diesel for trucking $$ May 22, 2012

China

• New Signs of Global Slowdown http://t.co/2o4kFRkD Weak Reports in U.S., Europe and China Suggest Economies Are Slipping in Sync $$ May 26, 2012
• @researchpuzzler Pettis is among the best on China. @ritholtz and John Mauldin are good friends. Trends in China r very negative… $$ May 25, 2012
• EM investing: check out the grid http://t.co/dIEGJeJC 3Qs How much electricity do they have? Future development? Probability of success? May 24, 2012
• China flash PMIs point to contraction, again http://t.co/DZGf3ZZS The number for May is 48.7, compared to 49.3 in April. 7th decline. $$ May 24, 2012
• China, North Korea ties hit rough weather http://t.co/r7TlDbux Kim Jong Un needs lessons showing honor2the Suzerain: Chinese Communist Party May 24, 2012
• RE: @SoberLook I’ve heard that Chinese electricity consumption has flatlined.  Another straw in the wind. http://t.co/IqAHJCgo May 21, 2012

Companies

• Facebook Investor Spending Month’s Salary Exposes Hype http://t.co/eGhCiHXq Please. Stox r risky. High expectation stox r veryrisky $$ $FB May 24, 2012
• General Mills Unveils Restructuring, Job Cuts http://t.co/IUHltbai $GIS Budget-conscious US consumers push back against price increases May 23, 2012
• Benihana Agrees to $296 Million Buyout http://t.co/YxJtfun3 Agreed 2b acquired by investment firm Angelo Gordon & Co. for about $296M $$ May 23, 2012
• The Miracle on Wellington Street http://t.co/DUbSY81d Fairfax Financial Holdings’ tricky transaction for 6.6% of Odyssey Re -> legal trouble May 21, 2012
• Barclays to Sell Entire $6.1 Billion BlackRock Investment http://t.co/notUgeFk Basel III rules make it uneconomic to hold as capital $$ May 21, 2012
• Houghton Mifflin Harcourt Publishing Files for Bankruptcy http://t.co/heUuF3gj Bank debt -> New Equity, old Equity -> warrants for 5% $$ May 21, 2012

Financial Sector

• JPMorgan Gave Risk Oversight to Museum Head Who Sat on AIG Board http://t.co/INr9ebI5 No banking experts on $JPM ‘s risk ctrl committee May 25, 2012
• Goldman to JPMorgan Swap Trades Soar on Risks http://t.co/fvSPysAp A cheap-ish option on systemic risk rising. And not in the eurozone! $$ May 25, 2012
• JPMorgan Copper ETF Plan Seen Creating Havoc by Merchant Groups http://t.co/zoJ0BfeM They oppose retail hoarding b/c it hurts them $$ May 24, 2012

Advice Regarding Life

• I Wish I Had Known: Don’t Underestimate Compounding In EVERYTHING http://t.co/mIdFf5Dx People overrate their ability to change habits $$ May 26, 2012
• Compound Experience, Not Just Interest http://t.co/n6CaWLN0 Early behavior influences later behavior, and the options that will be open 2u May 26, 2012

Berkshire Hathaway

• Buffett Says Free News Unsustainable, May Add More Papers http://t.co/medRWMWm Strategy: Buy papers, end free distribution on Internet $$ May 25, 2012
• Buffett’s Idiot Challenge Seized by Jain in Premium Hunt http://t.co/89qcKilo Misses how Jain blew it reinsuring life & LTC from Swiss Re May 23, 2012
• Don’t get me wrong, Ajit Jain knows more about insurance than me; I’m saying he is not perfect; he does not know all insurance equally $$ May 23, 2012

High Frequency Trading

• +1 That would work too RT @merrillmatter: @AlephBlog how about for all orders, one second minimum life May 24, 2012
• Mutual Funds Promised Haven From Speedsters http://t.co/iCFFZXsU I proposed this HFT solution @ BaltimoreCFA 2 1 of those interviewed $$ May 24, 2012

Miscellaneous

• The sex slavery stuff makes me sad/angry. I have daughters. $$ RT @moiracathleen: Brothels on Wheels http://t.co/COBuwJbS @leafjohnson May 25, 2012
• How a bizarre legal case involving a mysterious billionaire could force 1.2M Canadians 2b married, against their will http://t.co/zv7QJBCz May 24, 2012
• Veterans Face Ruin Awaiting Benefits as Wounded Swamp VA http://t.co/W0Ydcu3x Long sad tale: wounded vets not getting enuf disability pay May 24, 2012
• Gold Boom Spreading Mercury as 15 Mln Miners Exposed http://t.co/f7oBSo26 Long fascinating article about mercury poisoning in Colombia $$ May 24, 2012
• Rust-Belt Babushkas Live Alone as Fewer Remain to Marry http://t.co/ASbsIAMg % of US single person households up ~250% since 1940, 8%->27% May 23, 2012
• Private Spacecraft Lifts Off Toward Space Station http://t.co/JlGRR2m0 The sustainable space age has begun, w/private $$ flying rockets May 23, 2012
• Fitch Downgrades Japan http://t.co/rITu0126 Blasts the govt 4 taking a “leisurely” approach2solving country’s spiraling debt problems $$ May 23, 2012
• Is the College Cave Age About to End? http://t.co/ispDBLTX Thinner slices of “deeper” knowledge produce less relevant research & teaching May 21, 2012
• Getting America on a Diet That Works http://t.co/vooh1iNN What’s funny2me is how little agreement there is today on what works in diets $$ May 21, 2012
• +1 Fatal Risk RT @ToddSullivan: AMAZING book…one of my favorites RT @alephblog: Please follow my friend @BoydRoddy, who is new to Twitter May 21, 2012
• Please follow my friend @BoydRoddy, who is new to Twitter. $$ May 21, 2012
• Read my review: ‘The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds’ by Maneet Ahuja via @alephblog http://t.co/kJf89aVT May 21, 2012

Dynamic hedging only has the potential of working on deep markets.

Arbitrage pricing can reveal proper prices in smaller less liquid markets if there are larger, more liquid markets to compare against.  The process cannot work in reverse, except by accident.

The recent case of JP Morgan’s hedging activities bring to light an observation that should be clear to all but isn’t.  Hedging only works when you are small relative to the markets in which you hedge.

Let’s consider tranched credit index default swaps.  We can create models where the prices of each tranche can be calculated given default frequency and severity.  But default is not a constant beast.  Defaults come in waves, and when incidence is high, so is severity of loss.  Vice-versa when incidence is low, leaving aside fraud.

We might have a good idea of where credit default should trade for a basket of corporate debtors “credits” so long as we look at the thing as a whole,  and don’t carve it up.  In general, a basket of borrowers is easier to predict than individual borrowers.

But the basket gets difficult when we split it up into first loss, second loss, third loss, etc. claims where different parties lose their capital at differing levels of total loss.  Yes, in theory, we can come up with prices.  We can even come up with hedge ratios  that show the theoretical tradeoff between tranches as losses increase or decrease, which might work, might, if you are a small player in that market.

Woe betide you, if you do anything too fancy, and you are big relative to the market.  Because you are big, you have affected the prices of the market.  Price relationships that were normal before you arrived have shifted and reflect your interests, which in the short-run makes your accounting look better.  As the bubble grows, those investing in the bubble look better.  But as the bubble expands, those that have invested in it find a wave of cash fighting against them, but it doesn’t matter, because momentum investors are still buying.

At the end, the large investor amid the bubble finds himself stranded.  The market knows his positions, and he can’t make trades to extricate himself, because the terms are onerous.

Look, I used to trade small-issue lesser-known bonds.  I only bought stuff that I knew would be money-good, i.e. pay off.  In that case, you have the option of speculating when spreads are wide, and selling when they get tight.  But if you do that with bonds that you don’t know whether they will likely pay in full, the ability to hedge is meaningless, because your hedge could break in a default.

And so it was for JP Morgan.  When you get too big relative to the market, it had better be when you are the buyer or seller of last resort, and you are catching the turn.  But in normal markets, bigs are pigs, and are likely to be slaughtered.

It doesn’t matter what your model says is the right tradeoff if you are too big relative to the market.  Your own actions have poisoned the signals that your models receive.

Amaranth fell into this same bucket, with a talented energy trader who understood how the market generally worked.  As his success grew, so did his size, and he didn’t realize that the size of the fund was distorting market prices.  At the end there was one unlikely scenario that was unhedged, and that was the scenario that occurred, and the results led to the collapse of the fund.

If Amaranth had been smaller they could have traded out of it.  At their size, they were “elephants in an elevator.”

Size matters, and for investment purposes, smaller is better.  And for the most part, less complex is better too.  Don’t demand liquidity from markets, or you will lose.  If liquidity comes to your door, and it seems to be a good deal, wave it in.

“Why does a Shiller disciple care about profit margins?“

Now, I am not a disciple of Dr. Shiller, I disagree with him on many issues, Trills for an example.  When Shiller talks, odds are 50-50 that I agree, which makes him interesting to me, unlike Bernanke and Krugman who I almost always disagree with, and James Grant and Caroline Baum, who I almost always agree with.  Someone who agrees with me and disagrees with me equally is interesting, because he makes me think harder.

And with his cyclically-adjusted price-earnings [CAPE] ratio, I was a reluctant partial convert.  Consider this piece.

There are a couple ways to answer the question:

1. Most stocks are cheap on a forward P/E basis, less so on a trailing P/E basis, and still less so on a P/B or P/S basis.  The difference between P/E and P/S is profit margin — E/S.
2. Consider the critiques from Dr. John Hussman, who awaits the reset that will come if/when profit margins get competed down.
3. My answer: we should care about it a little, for the above reasons.  But labor is no longer scarce, which leads to higher profit margins for a time while wages are depressed.

My view is that profit margins will not revert to mean for many years, until the increase in capitalist labor is absorbed.  Until then economic results will be poor those that labor on the low end — you have got a lot of new competition.

As I wrote earlier:

A reason to consider the validity of the CAPE is twofold: it has a huge similarity to Tobin’s Q-ratio, which compares market capitalization to replacement cost.  It also has a similarity to Michael Alexander’s Price-to-Resources ratio, out of which the book makes a lot (link here for an example).  It’s a Price-to-Adjusted Book value ratio as I see it.

The CAPE has value as a proxy.  It mirrors overall market value pretty well, like other fundamental ratios.

But I don’t agree, at least in part because profit margins should remain high, until readily obtainable labor is less scarce.  Getting there could be a long time.  Profit margins could remain high for a long time as a result, leaving  markets in a limbo zone, where it treads water as underlying value builds.

So profit margins should remain high for now.  Once labor is scarce globally,  and companies must pay more to get more or better quality labor, then will profit margins come under stress.

At the beginning of the crisis, most economists, including the present Fed Chairman, said that problems ere limited, because they only affected limited areas of the residential real estate market.  Now, part of that response reveals that the Fed and other regulators beneath them had not been doing their jobs, because it is well-known now that underwriting quality of all residential mortgage lending had deteriorated.

When an economic system is overleveraged, with leverage that is layered, such that a domino effect can occur, small failures can have disproportionate results.  It is almost like the economic system during the bull phase self-organizes for the largest possible failure.  (Note: self-organizing systems do not always optimize for the long term.  Think: what other ideas could that invalidate?)

An overlevered residential real estate system had the possibility of a self-reinforcing decline in prices, once prices started declining nationally.  Now we face a still-overlevered residential real estate sector with a lot of the market inverted, where people owe more than the house is worth, though pockets on the low end of prices show recovery in some areas of the US.

Little things are important.  Some people say, “How can Greece pose so much risk to the rest of Europe?  It’s economy is so small relative to the rest of Europe.  Well, that’s where the leverage comes in again.

Core Eurozone banks have lent to Greek entities, and those banks are not well-capitalized.  If Greece left the Eurozone, and repaid loans in depreciated New Drachma, it would lead to a crisis in confidence regarding loans made to Spain, Portugal, and Italy.  The exposure of core Eurozone banks is significant, to the point where it could cause a broader crisis.

Little things are important where the system has been optimized; where something near perfection is needed to insure the proper performance of the over-evolved system where many entities are playing for a slice of the cash flow, and most have over-borrowed, and overpaid.

The optimized scenario is akin to the dominoes being set up, and they are beautiful, but woe betide the one who knocks over a domino.  (Note: as a kid, I would build domino structures, but would leave out every tenth domino, in order to create something where if I made a mistake, only a little would fall down.  The last dominoes were added with the greatest care.)

There are some worries in the US over European exposure.  I don’t think that is likely, except with some of the biggest banks.  Maybe that could spill over, but I doubt it.  If it does spill over, it will prove that the biggest banks should be broken up.  My favored way is to regulate banks like insurers.  You can do business across state lines, but you are tightly regulated by your state.  Much better than what we have currently.

Survivable systems exist when adequate returns are earned without high leverage.  That may sound vague, but vague is often the best we can do in economics.

When debts are complex, aim for simplicity.  Complex systems tend to die.  Simple systems survive.  This is a rule of value investing, measure simplicity versus reward.  Complexity has a price; avoid it unless well compensated for it.

• If Greece Quits Euro, Its Ruin Will Be Pointless http://t.co/2DotggME Suggests Greece will face more pain if leaves E-zone than stays $$ May 17, 2012
• Experts Try to Chart Path for Exit From Currency http://t.co/dtIAoo3g Let’s see, where is that manual for unscrambling eggs? Mmm… $$ May 17, 2012
• On the E-zone: the politicians, like sorcerer’s apprentices, thought they could reshape Europe; end up fighting forces beyond their power $$ May 17, 2012
• The Running of the Bank Depositors http://t.co/WC7aN5LP Governments r smaller than economies, which r smaller than cultures $$ #fightgravity May 17, 2012
• Governments are smaller than economies, which are smaller than cultures.  The Eurozone is a huge experiment that igno… http://t.co/YUqGTSLN May 17, 2012
• Greek President Told Banks Anxious as Deposits Pulled http://t.co/mx5626V2 If u thot u faced a conversion 2 new drachmas, ud w/d euros2 $$ May 16, 2012
• ECB Said to Stick to Current Crisis Stance as Tools Reviewed http://t.co/vSKBTnax No worries; ECB policies r meeting the challenge $$ May 16, 2012
• Bet on Greek Bonds Paid Off for ‘Vulture Fund’ http://t.co/nrka09y7 While Greece is in disarray, makes full pmt2 hedge fund Dart Management May 15, 2012
• Lightning Strike Delays Hollande Trip http://t.co/G0hgIGsP Weird, but he gets to Germany anyway to have a disagreement w/Merkel $$ May 15, 2012
• Hazardous Greek-Exit Scenario http://t.co/LZooTMlf WSJ goes through the steps and effects of an orderly Greek exit, should there b1 $$ May 15, 2012
• European Officials Warn Greece http://t.co/WJ4Wmk5B No way to kick Greece out; what do you do if they refuse to pay? $$ #enduredefault May 14, 2012

Rest of the World

• Hugo Chávez’s Enemy No. 1 http://t.co/LtdZXcM7 Henrique Capriles, governor of Miranda state & candidate selected by the united opposition May 19, 2012
• Kolatch Bullish on Argentina’s Debt http://t.co/8dfUoRdv When someone is willing to cheat others, he is more likely to cheat you $$ #FTL May 17, 2012
• Iranian Rapper Fears for His Life After Fatwa http://t.co/AD27SHZY Interesting how killing ceases 2b murder after cleric issues fatwa $$ May 16, 2012

Bond Markets

• US insurers seek $300 mln cat bond cover http://t.co/rNw0b4hu There’s a hard property reinsurance market, so alternatives r attractive $$ May 18, 2012
• Junk-Debt ETFs Set Markets ’Abuzz’ After Record Trades http://t.co/Zzq4BHV2 New ways of putting biggish HY positions on/off quietly $$ May 18, 2012
• @Fullcarry @munilass At least the Treasury yield curve is “out of this world.” Have long Tsys on as a hedge in my bond strat, when2punt? $$ May 17, 2012
• Every two years, the annual shareholder filing for the iShares Trust, which holds the big bond ETFs, doubles in size: now 20MB $$ May 15, 2012
• RT @Munisrgood: @munilass More room to go. If you subscribe to Hoisington’s predictions, (I do to an extent) 30 yr tsy could be 75-100 l … May 15, 2012
• +1 Needle in red zone $$ RT @groditi: HY CEF wavg premium 15%; min -8.27 max 67.3%; +1.1stdevs; sample-size: $11B (40 funds) #YieldChase May 14, 2012
• Euro-Zone Fears Drive Bund Yield to Record Low http://t.co/sNntlOYU Opposite risk: Germany might leave EZone; ECB actions disliked $$ May 14, 2012
• Euro Officials Begin to Weigh Greek Exit as Euro Weakens http://t.co/nERx6dAG Note the shift, indicates the bailouts may b over 4Greece $$ May 14, 2012

Elderly Poverty

• See pg 26 4 details http://t.co/NnS2Jyo2 Figure is low IMO b/c 25% “don’t know” what they have saved. They r prob below $50K, so ~60% <$50K May 17, 2012
• Report says “Overall, slightly more than one-third have saved less than $50,000.” http://t.co/NnS2Jyo2 Still thought the % was higher, ~50% May 17, 2012
• Same here RT @ballenmo: @AlephBlog @fundmyfund 20%? I’m surprised the number is so low. May 17, 2012
• +1 that’s what I think RT @fundmyfund: @AlephBlog 20% of 50 and 60 yr old dont have 50K to their name, not to mention saved for retirement May 17, 2012
• Expected worse RT @MoneyMag_Penny 20% of workers in 50s & 60s have saved less than $50,000 for retirement: Transmerica http://t.co/PqWIm74w May 17, 2012

JP Morgan

• Lawrence Lindsey: Why Washington Hates Jamie Dimon http://t.co/dZEzVnOq Not a diplomat & does not perform kowtows to politicians $$ $JPM May 18, 2012
• For JP Morgan Trader, From ‘Caveman’ to ‘Whale’ http://t.co/U2iXH2uJ It is often dangerous to win, next step is try to win big & fail $$ May 17, 2012
• Romney Vowing Dodd-Frank Repeal Hits JPMorgan Risky Trades http://t.co/Y9aMyHR0 Tough sell; existing law had enuf pwr, but regs didn’t use May 14, 2012
• The core problems with JPMorgan’s failed trades http://t.co/HktxLRnq When that illiquid, putting positions into runoff only solution $$ May 14, 2012
• Dimon Fortress Breached as Push From Hedging to Betting Blows Up http://t.co/Rc5TXU9E $JPM too big relative 2market; hard2mark prices $$ May 14, 2012
• Bank Order Led to Losing Trades http://t.co/00llzrIO $JPM ‘s Efforts2Shield Itself From European Market Fallout Prompted Disastrous Bets May 12, 2012

Buffett & Newspapers

• Why Warren Buffett is buying newspapers http://t.co/a6qVZAet It certainly isn’t for economic reasons; he overpaid, plain & simple. $$ $BRK.B May 18, 2012
• Warren Buffett buys into ‘declining’ newspapers http://t.co/BYmAmiZT $MEG does have TV and data businesses, not sure how much that helps. May 17, 2012
• Berkshire Buys Media General Newspapers for $142 Million http://t.co/ISIniNZG add in a $400 million term loan with an rate of 10.5% $$ May 17, 2012

(As an aside, if you read any of my comments on Buffett, newspapers, and Media General, I made the mistake of think that he had bought Media General, when he bought most of their newspapers, a portion of the company, and lent them $400 million at 10.5% with a first priority of payment in bankruptcy.  Now that I realize my mistake, I can’t say whether Buffett got a good, bad, or indifferent deal.  Apologies for the mistake.)

US Economy

• ‘One Recession Away’ From Next Bull Market – John Mauldin http://t.co/WwOL8nj7 5 min interview, short-term bearish, long-term bullish $$ May 17, 2012
• Paul Krugman’s Simple — or Is It Simplistic? — Reasoning http://t.co/0lmcAVSQ Is there any level of govt spending or debt that is2much? May 17, 2012
• North Dakota Tops US States in Credit Ranking as Florida Rises http://t.co/cttmsatF Amazing what energy & the influx of elderly will do $$ May 17, 2012
• North Dakota Tops Alaska in Oil Output http://t.co/Ulo7jzcU The US potentially has more hydrocarbons than Saudi Arabia. TX, ND, AK $$ May 17, 2012
• RE: @bloombergview The two papers look pretty good, but would the bureaucracy have the guts to rein in a boom based o… http://t.co/mvScOD74 May 16, 2012
• Tom Frost: The Big Danger With Big Banks http://t.co/414ZAkTV Fine, but it was mortgage lending that led the crisis, not invt banking $$ May 16, 2012
• When I used to mix sound, there was a knob on my board called “contour.” That’s what QE is to the Fed.  When I would … http://t.co/DC0O0kjS May 17, 2012
• Midwest Sees a Sand Rush http://t.co/815yYdBQ Fracking Spurs Demand for the Stuff, Sparking a Mining Boom—& Vexing Some #midwestboom $$ May 14, 2012

US Politics, Regulation, and Culture

• SEC Probes Role of Hedge Fund in CDOs http://t.co/wMUFuoPt Don’t forget the blame due the yield hogs 4 their inadequate due diligence $$ May 17, 2012
• Dental Abuse Seen Driven by Private Equity Investments http://t.co/QzEb161T Long article on unscrupulous dentists that harm poor kids 4 $$ May 17, 2012
• The creeping disaster for USPS is that as they cut services, they become irrelevant. The internet changes everything… http://t.co/ION20cep May 17, 2012
• School-Test Backlash Grows http://t.co/RIiaRg1Z Some Parents, Teachers & Boards Rebel, Saying Education Is Being Stifled $$ #room4both May 16, 2012
• Please apply the same logic to the liberal justices of the court, who have flouted the Constitution for far longer. http://t.co/gEsZGazC May 16, 2012
• Jerry Brown vs. Chris Christie http://t.co/T0uyb6iC More states r realizing that the road2fiscal hell is paved w/progressive intentions May 15, 2012
• California Deficit Swells to $16 Billion, Governor Says http://t.co/LJT9Dl1s & http://t.co/2Rg8E98K CA in self-reinforcing neg spiral $$ May 14, 2012
• Obama Hits Romney on Bain as He Raises Wall Street Money http://t.co/09M2hhHK “The pot calls the kettle black.” $$ (has 2ba better phrase) May 14, 2012
• Midnight Was Movie Hour, Nap Time in New York Air Tower http://t.co/cNT0C080 Long piece; parts of the FAA r seriously messed up $$ #unions May 12, 2012
• Trouble in Coal Country for Obama http://t.co/dJoko2Aj If persists, could mean Obama wins popvote, Romney win the election $$ #kingcoal May 12, 2012

Companies

• Tsst… $COP is no longer in the refining biz, it spun of $PSX which is.  FD: +COP, +PSX $$ Oh, and selling the comp… http://t.co/LxFTP91s May 17, 2012
• Facebook ($FB) announces that they will no longer accept General Motors ($GM) cars in exchange 4 advertising exposure $$ #lamejoke May 15, 2012
• Avon Shares Tumble After Coty Pulls Bid http://t.co/SVZ4zZgN Coty might b better off creating the parts of $AVP it wants organically $$ May 15, 2012
• Margin Call: The Most Exposed http://t.co/4v2IsU16 Interesting what CEOs have borrowed against shares of the companies that they run $$ May 15, 2012
• Yahoo CEO’s resignation spotlights tech action http://t.co/mUF19hRa We keep the board of $YHOO around 2make that of $HPQ happy. FD +HPQ May 14, 2012

Miscellaneous

• Paper Plane Champ Watches His Record Fly, Fly Away http://t.co/zdPMR62e Division of labor in design & tossing-> paper airplane record $$ May 18, 2012
• @ReformedBroker You really had lunch w/Mauldin? Cool, I know he is friends w/ @ritholtz ; I just reviewed his recent “Little Book.” $$ May 17, 2012
• When people get 2 deep into a sliver of knowledge, they get dumb RT @jasonzweigwsj: is your sense of self an illusion? http://t.co/PHUXLmdB May 17, 2012
• 5. They sometimes bring specialized knowledge of the topic at hand. 6. They tend to write for users, not reviewers o… http://t.co/T3oElbxQ May 17, 2012
• Going for Gold—or Whatever http://t.co/F6kSto8O Secret to an Aging Olympian’s Endurance: Don’t Let Training Get in the Way of Fun $$ May 16, 2012
• When you show up DD, you usually make me smile $$ RT @DoubleDeuce: Wisdom: “try to convince, don’t gripe” by @AlephBlog http://t.co/kDwSKgYJ May 15, 2012
• ‘Trigger-Happy’ Investors Boost IPO Insurance Through Litigation http://t.co/GQKdNia3 Looks like Errors & Omissions coverage applied 2IPOs May 14, 2012

Now, I don’t have a Facebook account, and I have no intent of getting one.  But I must have been thinking about Facebook as an investment, because I asked him, “What about something like Facebook then?  Doesn’t that have value?  It’s profitable, and current estimates say it might be worth $25-50 billion dollars.”  He replied that Facebook was emblematic of what was wrong with our economy, because it doesn’t produce anything, and consumes a lot of productive time in the process.  I had to call the meeting back to order, so I had to leave it there.

Today, with the Facebook IPO, I heard on the radio a number of times, “We don’t make anything anymore.”  From politicians, “We need manufacturing jobs.”  When Governor Martin O’Malley spoke to the Baltimore CFA Society two weeks ago, he sounded the theme of manufacturing jobs as well.  Afterward, I spoke with a Deputy Secretary at the Maryland Department of Business & Economic Development, and in passing mentioned that I owned part of a manufacturer operating in Maryland.  He asked me for the name, and when I mentioned it, he said, ‘I visited there two weeks ago.  Great firm!”

I know it is a great firm, but I also know that it costs Maryland and the Federal Government to encourage manufacturing.  I see the pro-rata deductions on my personal taxes, and wonder at why we care so much about manufacturing.

When I go places with my kids, I sometimes point out to them business parks where light industrial work goes on.  We are very good today at hiding where things get made, and so people think that factories don’t exist.  We have ordinances on noise, pollution, etc., and most of these entities have moved outside the big cities where the land values are cheaper.

So part of my answer here is that we are still making things here in America.  We just don’t notice it.

America is an amazing place.  The breadth of resources that can be extracted, the crops that are grown, the amazing division of labor, the level of technological innovation, and the relative degree of freedom to pursue any of these is astounding.

We make a lot of things.  We just do it with far fewer people than we used to.

And that is the great increase in manufacturing productivity. We don’t need as many people to makes things as we used to.  That’s a good thing, so people can be released to more productive uses.

Labor productivity is a squishy thing, though.  Measuring labor productivity in manufacturing is relatively easy, because the output and its value is easily measured.

With services, the same calculation can be done: output/revenue per worker, but it doesn’t have the same punch, because goods produced have mostly the same quality, but the quality of services varies widely.

But maybe we can look at this a different way.  Even though it is not easily measurable, what if the right thing to value is not production, but happiness, health, or freedom?

Services provide value, or people would not pay for them.  Facebook exists because it allows people flexibility and facility of communicating with many people.  It makes money from ads that are targeted off of data collected from users.

Many people like using Facebook.  It is a large part of their lives.  For most it is not a part of their work, but a part of their recreation.  Recreation is valuable, and people use their extra time as suits them best.  Keeping “friends” informed on what you are doing and thinking has subjective value to those who do it.

Services make life easier, and sometimes make manufacturing more productive.  The consultant that reviews a factory’s activities, and submits a report to enhance productivity did not make anything, but made producing things less expensive.

Having more people employed in services is not a weakness.  As productivity increases, we need fewer people for extraction and production, and this is true globally.  Manufacturing employment is falling globally.  So is agricultural employment.  As a result, we have many people available to tailor services that make our lives richer.  We don’t just need goods; we need help.  In that way, the service economy is not a waste, but closer to what we need than “goods.”

I know this is not erudite, complete, whatever.  I am comfortable (absent major war), that the “lack of manufacturing” in America is not true, and even if true, is not a problem.  So relax, and enjoy the good life you have in America, with all the help that is available at a price.

My goal as an actuarial businessman was to make profits with modest risk for my ultimate owners, who were the mutual policyholders.  Once I faced a situation where there might be easy profits — writing floating rate GICs.  So, I went to my models and tried to figure out how we could make money safely while our interest rates would shift every three months.  I came to the conclusion that there was no safe way to do so, and so I walked into the office of my boss and told him so.  He surprised me by supporting my thesis, and in his usual back-of-the-envelope way, explained to me in a few minutes why it had to be so.

A few weeks later, he informed me that an actuary from Goldman Sachs (yes), would be dropping by to tell about one of their new derivative contracts that would enable us to write floating rate GICs profitably.  The meeting day came, and I validated the expectations of my boss.  The year was 1993.  I asked the actuary from Goldman what happens if the yield curve inverts.  He answered honestly, “This strategy blows up when the yield curve inverts.”  Score a small victory for me.  I gave myself points for avoiding trendy bad ideas.  Over the next twelve months, two major insurers and one investment bank would announce billion-dollar blowups from following that strategy.

After the blowups, I went back to the buyers of floating-rate GICs, and asked them if they would accept a lower spread over LIBOR.  The response was a firm “no.”  So much for that market.

Those few players in that market had mispriced the risk.  Is it any surprise that they got a lot of volume?

Here’s another example:

Two years after that, I was at the Society of Actuaries annual meeting, where I met a well-known actuary who had worked inside the corporate actuarial area of the Equitable during the critical years.  I.e., he watched and analyzed the assets and the liabilities as they arose.  The conversation went something like this:

David: What was it like working inside the Equitable during that period of fast growth?

Corporate Actuary: It was amazing.  It took everything we could do to stay on top of it, and still we fell behind.

D: Didn’t you think that perhaps you were offering guaranteed rates that were too attractive?

C: We wondered about it, but with money coming in, everyone felt great about the growth.  We simply had to find ways to productively deploy all of the cash flow.

D: But wait.  Didn’t the investment department have a difficult time investing all of the proceeds?  With that much money coming in, the likelihood of making severe errors would be high.

C: Were you a bug on the wall at our meetings?  Yes, that is exactly what happened.  The money came in faster than we could invest it prudently.

D: Wow.  I thought that was what happened, but it amazes me to hear it confirmed.

They offered free options, and surprise, investors took them up on them.  They couldn’t make enough to fund the promises, and undertook a risky strategy in the late 80s that I called “double or nothing.”  The strategy failed, and they almost went broke, except that AXA bought them, pumped in a little capital, and then the real estate market turned.

What’s my point here?  Twofold: one, rapid growth in financial institutions is rarely a good thing; it usually means that an error has been made.  Two, there is a barrier in many financial decisions, where responsible parties are loath to cry foul until it is way past obvious, because the cost of being wrong is high.

Long Term Capital Management became large relative to the markets that they “arbitraged.”  Anytime you can feel yourself moving the market, it is time to stop.

There was a correlation crisis in the CDO market in 2005.  For those with access to RealMoney, I wrote about it here.  Some quants with clever ideas, much like the current JPM fiasco, thought that they could hedge mezzanine against subordinated.  True when the trade is small, wrong when the trade is big.

Beyond that, we have the brain-dead example of AIG.  They dominated the market for AAA subprime mortgage insurance.  It was free money, until it wasn’t.  If you have a large share of a market where there are no barriers to entry, you should stop and ask why you are the only smart one.

The problem with becoming large relative to the market, is that you begin distorting the price signals of the market.  If you have a large long position and the price starts to fall, it is easy to justify purchases, because your internal model indicates that it is cheap.  But every model has weaknesses, consider the examples listed above.  Anytime you get a large fraction of the market’s volume, you should stop, and re-evaluate.  You’re probably doing something wrong.

Markets by their nature invite diversity, and do not admit anyone to dominate them except under abnormal circumstances.

So, if you find yourself growing large relative to your market, calm down, and re-evaluate your positions, before they get large enough to bite you.

That said I feel more sorry for younger workers who have to pay high amounts into Social Security/Medicare, and they will not get out of program what they put in.  There’s a longish article here, excerpting from a recently released book on the topic.  In general, the older you are, the sweeter the deal was for those who received payments from Social Security, at least until 2026 when benefits will be cut by 25%, or taxes raised.

What this means is that in aggregate, Americans don’t save enough, particularly the Baby Boomers, of which I am one, but not a negligent one.

We are heading for elderly poverty/work for a large portion of Americans.  I suspect that many older people will continue to work, solving their problem but taking jobs from those who are younger.

This should be no surprise.  Incomes should be declining for lower skilled people in the US, because there are more people who can do that work abroad.  My advice to all readers is to make sure you cannot be obsoleted by foreigners.

One more note: don’t expect the asset markets to bail you out.  Returns to financial assets will do poorly as so many begin to sell them to pay for living expenses, whether directly as individuals, or indirectly as defined benefit plans pay retirement benefits.

This is on top of the problem that when high-quality long interest rates are so low, it is typically a bad time to try to make money in financial assets, because returns on risky assets are typically only 0-2% percent higher than the yield on long BBB/Baa debt over the long run.

All for now…

• Lousy fiscal policy — way too much borrowing by the government
• Lousy monetary policy — way too much expansion of the monetary base, and for little good reason, and funding the deficits of the government as a result…
• Negative real interest rates on Treasuries 15 years out; that is financial repression, and that can’t happen without the Treasury and Fed conspiring to do so.
• Low equity market valuations, but only because profit margins are abnormally high.  There are reasons to think that profit margins will not mean-revert this time, because the increase in the global capitalist labor pool is depressing wages.  Wages may remain low for a longer time than many expect.  Sorry to the laborers, but there are more of you than the globe can accommodate.  Thus I remain agnostic on high profit margins; let’s revisit the issue when wage rates rise.

Personally, I think that the fiscal multiplier is negative.  Spend money on government projects, many of which do not build value for the economy, and the economy grows slower or shrinks.

We would do better with austerity.  The economy would grow faster with a balanced budget, and a sense that government was not out of control.  Shrinking the bureaucracy and its rules, would allow the economy to grow faster.  Delegate more responsibilities to the states, particularly regulation of financial companies.  Relatively few insurers fail, which are state-regulated.  Many banks fail, which are federally regulated.  It is far easier to co-opt a single federal regulator than many state regulators.  Best yet, split all of the too big to fail banks into 51 entities, divided into the states and DC.  No more interstate branching — that’s the real problem, not Glass-Steagall.

Limiting banking to states keeps it small, Glass-Steagall tinkers at the edges, but if banks are kept small by limiting their size by states, like insurers, they won’t become systemic problems.  Simple, huh?

Much like the AT&T breakup, I think a breakup of interstate banking would be good for the US economy.  It would unleash competition in financial services, and would eliminate systemic risk in the financial economy.  And once banking regulation is returned to the states, like insurance, we can eliminate the Fed, which has been a poor regulator of banks, and a bad manager of monetary policy.  Go back to a gold standard, or at worst a currency board.  Get money out of the hands of the government, who diverts much of the economics back to themselves.

• Danske Bank’s Patience With Moody’s Evaporates http://t.co/eGbf3kV5 Questions over willingness of Denmark to provide support in a crisis. May 11, 2012
• CIC Stops Buying Europe Government Debt on Crisis Concern http://t.co/dljk9Tau Overblown; China will return to funding the Eurozone $$ May 10, 2012
• Greeks May Hold $510 Billion Trump Card in Renegotiation http://t.co/P7U4LSpG Depends on how well Core EZone banks have divested Greece $$ May 10, 2012
• Spanish Banks Erode Creditors With ECB Loans http://t.co/HaEx3bgT Better collateral highly encumbered; Unsec debts implicitly subord 2 ECB May 10, 2012
• Greece Euro-Exit Debate Goes Public http://t.co/0xOgsa7G Core Eurozone wrestles w/how to kick Greece out, even though they can’t. $$ May 10, 2012
• How a Radical Greek Rescue Plan Fell Short http://t.co/Ds0589IG Greece is failing as a culture due2 corruption; no rescue would work $$ May 10, 2012
• Denmark’s Banks Endure Writedown Shock Delaying Recovery http://t.co/A2Vdpymn Good sign on Denmark; take pain early -> in good shape $$ May 10, 2012
• Greek Election Surprise Rejects ‘Barbarism’ of Bailout Austerity http://t.co/oX0nt5SF Growth is magic, magic I tell u! Just invoke it! $$ May 08, 2012
• Merkozy End Means Franco-German Gulf; Greek Voters Rebel http://t.co/iCd0Cs6l Loss of Sarkozy may not b bad, but Greek paralysis will b $$ May 08, 2012
• Francois Hollande has ten weeks to avert a French bond crisis http://t.co/3SEAWJB5 When few adults r in the room the children run wild $$ May 08, 2012
• Challenge to Austerity, And Germany, Is Sharpened http://t.co/BWbgQJ85 The odds have risen that Germany will leave the Eurozone $$ May 08, 2012
• Obvious but it needs 2b said $$ RT @Hawk100Clemens: Mauldin tells #CFA12 every monetary union in history has failed. May 07, 2012
• France faces 40pc house price slump http://t.co/nPuMaVnJ If French banks have trouble now, just wait until the bad mortgage debt hits $$ May 06, 2012

JP Morgan

• What Beached the London Whale? Credit Indices http://t.co/JKFxfaMb Crosshedging long credit risk by buying protection on an index? $$ May 11, 2012
• J.P. Morgan Trades In Its Crown http://t.co/QUJ6hmoA That goes for firms and CEOs as well: $JPM and Jamie Dimon will not get free passes May 11, 2012
• Drew Built 30-Yr JPMorgan Career Embracing Risk http://t.co/uocyyVC1 Lifetime 2build reputation; few years 2destroy it; revealed: 1 day $$ May 11, 2012
• And the best way to reduce risk is to lower leverage & raise cash $$ RT @marydchilds: “The best way to hedge something is to get rid of it.” May 11, 2012

Facebook

• Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO http://t.co/kL1VQYXU Cuts down on the tax bill; discount prior 2 IPO $$ May 11, 2012
• Facebook IPO Said to Get Weaker-Than-Forecast Demand http://t.co/ktK5Bgun $FB faces slowing revenue growth, order books 4 IPO go slack $$ May 11, 2012

Miscellaneous

• Google’s Brin Makes Strides in Hunt for Parkinson’s Cure http://t.co/YvL4LUNA He may get it one day; his Mother already has Parkinson’s $$ May 11, 2012
• And also for those who call vegetables “veggies?” RT @jasonWSJ: Can we impose a $40 fine on dudes who refer to sandwiches as “sammies”? May 10, 2012
• Firefox browser group irked with Microsoft, Windows 8 http://t.co/tBZ9GFuw Only Internet Explorer runs on Windows 8; expect some lawsuits $$ May 10, 2012
• Aluminum Buyers in Japan to Pay Record Fee on Supply Drop http://t.co/7AVU1knI Smelting capacity reduced, China buys more, Japan pays up May 10, 2012
• @RobTheStreet A lot depends on the definition of marriage, Would you allow people to marry inanimate objects, animals, or multiple parties? May 09, 2012
• Brookstone to sell Lilliputian portable power chargers, this year http://t.co/FnSvdfOw Impressive technology if it works. $$ May 08, 2012
• Economy Reshapes Wisconsin Recall Vote http://t.co/G0OetHhV My wife and father were forced in2 unions by collectivist brutes. Go Walker! May 08, 2012
• Father’s Shadow as Transit Leader Hard to Evade for Shuster http://t.co/0FAZUqd4 Bud Shuster is a jerk, forcing us through Breezewood $$ May 08, 2012
• Kellogg’s Kashi Targeted as Web Food Fighting Escalates http://t.co/BNhf5294 We need 2 send a lot of people back 4 science reeducation May 08, 2012

Rest of the World

• Sony, Panasonic Fall to 30-Year Lows as TV Losses Mount http://t.co/Euo37RLQ Sold Panasonic after reviewing uneconomic “green” agenda $$ May 11, 2012
• Kim Jong Un Bashes ‘Pathetic’ North Korea Fun Park http://t.co/gb4S9HBc He should know; he lived outside NK, where there is real fun $$ May 10, 2012
• Sukhoi SuperJet Disappears During Indonesia Demo Flight http://t.co/0JrxAkAw Another sign of degraded Russian abilities in aerospace $$ May 10, 2012
• Bad H/L: Shooting to Kill Pirates Risks Blackwater Moment http://t.co/laW55VEo Correct H/L: Hiring Armed Guards protects cargoes &crews $$ May 10, 2012
• Drug-Defying Germs From India Speed Post-Antibiotic Era http://t.co/XGeno5mf Long. Scariest article of the day; wash your hands w/soap $$ May 08, 2012
• Israel Pyramid Rules Turn Insurers Into Buyout Targets http://t.co/4tXBqehx Interesting:

Israel is limiting holding company levels to 3 $$ May 10, 2012

• UK Pay Protests Oust Aviva Chief http://t.co/WKVdmQGM I remember when they overpaid for Amerus Life in the US; sign of bad management $$ May 10, 2012

Energy

• RT @merrillmatter: @AlephBlog Methinks we’ll need to see some epic blowouts in natgas space (ha ha) before supply/demand can come back i … May 10, 2012
• Chesapeake Deals Carry $1.4 Billion in Undisclosed Liability http://t.co/UFohsseZ $CHK May b worth a look when things stop getting worse May 10, 2012
• When the Exxon way stops working http://t.co/BgN2zLO6 $XOM learns 2b more cooperative w/foreign countries where it wants 2 explore 4 oil $$ May 08, 2012
• Argentina Taps Ex-Schlumberger Executive Galuccio to Run YPF http://t.co/j5P1oyoS Possibly a good choice to run the purloined company $$ May 08, 2012

Fixed Income

• Still time to make money in Treasury bonds http://t.co/ABl43gzM The depressionary bull case 4 long T-bonds; D. Rosenberg & Lacy Hunt $$ May 10, 2012
• Why Emerging Market Corporate Bond ETFs are Hot http://t.co/tWvz0sif High USD yield, but be wary. Laws governing creditor rights vary $$ May 10, 2012
• In other words, the 30-year Tsy sold well today b/c some seek Depression insurance & others hedge convexity or immunize long liabilities $$ May 10, 2012
• Treasuries Pare Losses as Europe Concern Aids Sale http://t.co/C7jytF08 Investors make sure they get income 4 30-yrs & $$ back when old May 10, 2012
• S&P Warns Of $46T Perfect Credit Storm http://t.co/jZTbvy42 If companies have adequate cash flows from operations, this is not an issue. May 10, 2012

Canada

• In Canada, Alternate Currency Keeps Traction With Fans http://t.co/ePyXRH1f Paper Money, Issued by Canadian Tire, Is Popular Way 2Pay $$ May 11, 2012
• Revisit after their housing bubble pops RT @vgmac: There is a lot of love for Canada’s banking system here at the Chicago Fed conferences $$ May 10, 2012
• @vgmac Then again, at the first Treasury/blogger summit I told them they should imitate the Canadian regulators and central bankers. #canada May 10, 2012
• Canada Housing Bubble Concern Shown in Insurer Query http://t.co/kGHcqgDE Should the Canadian govt try2exit the mortgage insurance biz? $$ May 10, 2012
• CMHC Says Capital Levels “Double” OSFI Requirements http://t.co/R4p5TuBO F&F also had capital far higher than their disaster level $$ May 08, 2012

Cisco Systems

• Cisco shares drop on tech spending worries http://t.co/06maBaX4 Global economic weakness feeds into tech firms that sell much abroad $$ May 10, 2012
• @ampressman Cramer said something like, “It’s not a growth company if they have to talk about the economy, weather, industry factors, etc.” May 10, 2012
• @ampressman $AAPL is a growth company, at least for now, $CSCO was a growth company somewhere in the last 15 years… May 10, 2012

Delta Air Lines

• Buy Delta Air Lines: Trainer Refinery Purchase & Improving Financials Will Lift The Stock http://t.co/W7YeEmgb Poorly reasoned thesis $$ May 08, 2012
• Remember when $DD bot Conoco? There would b synergies in petrochemicals. $DD bot it at the peak, spit it out at the bottom $$ #limitscope May 08, 2012
• $DAL substitutes risk in jet fuel pricing 4 risks in crude oil, gasoline, heating oil prices, & operational risk in a biz it doesn’t know $$ May 08, 2012
• @The_Analyst Agreed, though enough capacity has come out of the industry through mergers that they might finally c some pricing power $$ May 08, 2012

US Housing

• 5 Pitfalls of Home Refinancing http://t.co/ZxGUF3HM Longer maturity, Closing costs, Contract terms, Hidden fees, Appraisals $$ May 10, 2012
• Look Who’s Pushing Homeowners Off the Foreclosure Cliff http://t.co/T6CBkUAt Mtge docs exist to protect the lender’s property interest $$ May 08, 2012
• RE: @bloombergview Read any mortgage contract; it exists to protect the rights of lenders, including protecting the m… http://t.co/ob9eIcBt May 08, 2012
• No Repeating Slowdown Seen by U.S. With Banks to Housing http://t.co/A0LNwrjh While hi % of mtges r underwater, finl stress will remain $$ May 08, 2012
• Pimco Housing Bear Kiesel Says It’s Time to Start Buying http://t.co/f3zaBNZA He assumes dark supply will hang on for higher prices. $$ May 06, 2012

US Regulation

• Maybe to be perfectly fair, the government releases the data on a website at midnight ET, long before the US markets … http://t.co/9Zqniljs May 10, 2012
• A Jury of Peers for Broker Disputes http://t.co/5Ly14oKJ The playing field may be more even now; odds r still stacked against investors May 10, 2012
• Congress Seeks Postal Overhaul While Making It Impossible http://t.co/lvcEBxmw The real danger is after reduction, PS is less relevant $$ May 10, 2012
• US Millionaires Told Go Away as Tax Evasion Rule Looms http://t.co/Tx6lr1Bl Fewer foreign banks will accept accts w/US citizens/firms $$ May 10, 2012

Berkshire Hathaway

• Biggest Buffett Targets Seen Spanning Deere to Henkel http://t.co/dLbp9pic Muses about what Buffett would buy 2 eclipse BNSF $$ May 08, 2012
• +1 RT @Kevin_Holloway: Good read on possibilities of recent $BRK.B purchases among some other gd thoughts by @AlephBlog http://t.co/xkN8SlXu May 08, 2012
• Deep in the Insurance Weeds at Berkshire Hathaway http://t.co/GkH9oWBo This helps explain the life reinsurance losses at $BRKB. LTC $$ May 08, 2012
• Buffett understands tech. But he searches for revenue streams that can’t easily be obsoleted. $AAPL & $GOOG could be … http://t.co/VyOnKUTy May 07, 2012

Market Dynamics

• World’s Simplest Stock Valuation Measure http://t.co/OvmQTmHs Growth Rate/2 + 8 = PE Ratio; @eddyelfenbein & his conservative PE formula $$ May 10, 2012
• Dole Food Breakup Seen Bearing Fruit With 58% Return http://t.co/C4SvaNvw Can $DOLE become a high margin biz, & pay down debt? $$ May 10, 2012

Financial Sector

• What about front-running? $$ RT @abnormalreturns: @MebFaber: Nail in the Mutual Fund Coffin (NAV Based ETF Trading) http://t.co/SZ3CbIY3 May 08, 2012
• BTW, for those holding dividend funds, back in 1994, stock managers following a yield strategy got crushed. $$ #annushorribilisforbonds May 08, 2012
• The Dangers of Dividend Funds http://t.co/5WSdEFwN Dividend funds may b safer than other stock funds, r still stock funds w/real risk $$ May 08, 2012
• True 4 many $$ RT @ReformedBroker: “Daddy, what do you do at your job?” http://t.co/mxrcVyhm May 08, 2012
• BofA’s New Black-Belt Data Chief Targets Blinding Gaps http://t.co/P60yhtAk Merger integration didn’t happen in $BAC ‘s IT areas $$ #mess May 08, 2012
• Billion-Dollar Traders Quit Wall Street for Hedge Funds http://t.co/2yFJ2JXr Volcker Rule reducing dealer-driven market liquidity $$ May 08, 2012
• Flash-Crash Story Looks More Like a Fairy Tale http://t.co/0mBQDGKZ Still a mystery; but4any self-feeding panic, players leaning wrong way May 08, 2012
• Almost Half of Finance Graduates Seek New Jobs, PwC Says http://t.co/YUuH9KJl The bubble in financial jobs has popped, decamp 2 other inds May 08, 2012
• “Where is Everybody?” http://t.co/7YPOcMUb Little retail participation is bullish; it means that only the relatively smart $$ is playing May 08, 2012
• 50 Ways to Restore Trust in the Investment Industry http://t.co/VHhllKyp The CFA Institute gathers opinions from members on cleaning up $$ May 08, 2012
• RE: @bloombergview Equity is more expensive than other types of bank capital; raising the cost of capital means fewer… http://t.co/qPvVygll May 07, 2012
• Heat’s on Triparty Repos http://t.co/7Jk7DrTS Fed Is Pressing Big Players to Reduce Exposures to $1.7 Trillion Market $$ May 06, 2012

Company Specific

• How Hewlett-Packard lost its way http://t.co/pA683e3H Very long & ugly article about board & mgmt dysfunction @ $HPQ. FD: +$HPQ 4 me&clients May 08, 2012
• A Real Concern For Apple’s Stock: Telecom Carriers Threaten to Kill Subsidies on Phones http://t.co/JlQwSDAq Interesting thesis $$ May 08, 2012
• AMR Said to Seek More Overseas Flights as Suitor Circles http://t.co/eUHdHju4 $LCC wins more backing, could allow filing another plan $$ May 08, 2012

Politics

• Exodus From Tiburon to Texarkana Is Exaggerated http://t.co/nsyd3QjF Truth is, people & firms r sticky, until they finally get fed up! $$ May 10, 2012
• If we do not discipline ourselves, the bond market will discipline us $$ RT @carney: Why the left will keeping winning. http://t.co/kJcfgEt4 May 08, 2012
• Too bad, we need a better opponent to Obama $$ RT @BloombergNews: Breaking: Santorum Endorses Former Rival Romney as Republican Nominee May 08, 2012
• Don’t Worry (About GDP), Be Happy http://t.co/BaSDMbTM GDP approximates economic growth; more subjective progress measures r ridiculous May 08, 2012
• @justinwolfers Last thing we need on the Fed is another neoclassical Ph. D. economist. Let’s try some brainy generalists, value investors $$ May 07, 2012
• @GaelicTorus @justinwolfers All I am saying is value investors understand how the economy works better than neoclassical economists do $$ May 07, 2012
• Disabled Americans Shrink Size of U.S. Labor Force http://t.co/NX6ZzCjK I still resent former neighbor on SSD, putting Xmas lights on roof May 06, 2012
• But are they ending with an accrual basis surplus, not just a cash surplus? That’s the question. http://t.co/uGa7WX14 May 06, 2012