This stretches from August 2010 to October 2010:

The Education of a Corporate Bond Manager, Part VII

On the value of credit analysts.

The Education of a Corporate Bond Manager, Part VIII

On price discovery in dealer markets, and auctions gone wrong.  I never knew that I could haggle so well.

The Education of a Corporate Bond Manager, Part IX

On the vagaries of bulge-bracket brokers, and how a good reputation helps on Wall Street.

The Education of a Corporate Bond Manager, Part X

On how we almost did a CDO, and how it fell apart.  Also, how to make money in the bond market when you reach the risk limits.

The Education of a Corporate Bond Manager, Part XI

On my biggest mistakes in managing bonds.  Also, on aggressive life insurance managements.

The Education of a Corporate Bond Manager, Part XII (The End)

On bond technical analysis, and how to deal with a rapidly growing client.   Also, the end of my time as a bond manager, and the parties that came as a result.   Oh, and putting your subordinates first.

Queasing over Quantitative Easing

Queasing over Quantitative Easing, Redux

Queasing over Quantitative Easing, Part III

Queasing over Quantitative Easing, Part IV

Queasing over Quantitative Easing, Part V

Queasing over Quantitative Easing, Part VI

The problems with the Fed’s seemingly “free lunch”strategy.  Pushes up asset prices and commodity prices, benefiting the rich versus the poor.

The Economic Geography of Publicly-Traded Companies in the United States by Sector

The Economic Geography of Publicly-Traded Companies in the United States by Sector (II)

Shows what US states have diversified vs concentrated economies by sector, and what states dominate each sector.

Portfolio Rule One

Industries are under-analyzed, relative to the market on the whole, and relative to individual companies. Spend time trying to find good companies with strong balance sheets in industries with lousy pricing power, and cheap companies in good industries, where the trends are not fully discounted.

Portfolio Rule Two

Purchase equities that are cheap relative to other names in the industry. Depending on the industry, this can mean low P/E, low P/B, low P/S, low P/CFO, low P/FCF, or low EV/EBITDA.

Portfolio Rule Three

Stick with higher quality companies for a given industry.

Portfolio Rule Four

Purchase companies appropriately sized to serve their market niches.

Portfolio Rule Five

Analyze financial statements to avoid companies that misuse generally accepted accounting principles and overstate earnings.

Portfolio Rule Six

Analyze the use of cash flow by management, to avoid companies that invest or buy back their stock when it dilutes value, and purchase those that enhance value through intelligent buybacks and investment.

Portfolio Rule Seven

Of Investment Earnings Assumptions and Century Bonds

If we could turn back the clock 65 or so years and set up a more conservative method of accounting for pension liabilities, we would be much better off today.

Who Dares Oppose a Boom?

This piece won a small prize, and in turn, I received three speaking engagements.

Fairness Versus Economics

Fairness Versus Economics (2)

People care more about fairness than improving their own economic/social position.

Earnings Estimates as a Control Mechanism, Flawed as they are

Earnings Estimates as a Control Mechanism, Flawed as they are, Redux

Earnings estimates have their problems, but they exist to give us a flawed method of estimating the future performance of companies.

-==-=-=-=-=–=-=

That’s all for now.  Never thought I would do so many long series when I started blogging.

Before I start this evening, if you like my reviews generally, please go to Amazon and tell them that my reviews are helpful.  From this link, it does not take long to do so.  Thanks.

This was one of those books that grew on me.  The author, the well-known John Mauldin, strings together a bunch of ideas originated by others.  That’s not much different than what Tadas Viskanta does at Abnormal Returns.  He brings us the best ideas that he has culled from others.  That is a significant piece of work that should not be denigrated by others.

The beginning of the the book is consumed with 12-20 year market cycles.  There are times when investing in risky assets where you face headwinds and tailwinds. The headwinds and tailwinds are driven by valuation, often expressed through Q-ratio, CAPE, or 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.

Regardless of the method, if you buy in at high valuations, the wind is in your face, and you are not likely to earn much.  The opposite is true for low valuations, but at the valuation trough, everyone is disgusted, and few are willing to buy.

So it takes a strong stomach and mind to follow a method like this.  Strong stomach, because when it is time to buy one will fear that the money will be lost.  Strong mind, because near valuation peaks people will tell you that you are nuts to leave the party — it’s just getting started.

But what if a decent sized portion of institutional money did this?  The cycles would go away, or be muted.  That’s not likely to happen in my opinion: some men may change, but you can’t change mankind.  Emotions of fear and greed dominate over clear thinking.

The book touches on many other topics:

• Why strategies go in and out of favor
• Why to be skeptical of those who give investment advice (including Mauldin & me)
• That the growth rate of the economy eventually limits the growth rate of any company.
• The effect of demographics on the markets
• Why chasing performance doesn’t work.
• Why most newsletter writers strategies could never be as good as they state, or they manage money in tiny niches.
• How to detect value in stocks.
• How to use bonds and commodities in asset allocation.

I say “touches on” because in line with its title, it is a “little book.”  You are only getting a taste of what an intelligent investor who hires other managers to manage money for clients thinks.  This is especially true as you go through the section on value investing, which does not get much beyond dividend yield, dividend growth, and price-to-book (common equity).

As such, this book will not be a complete answer to any investor wanting to learn about the markets.  It introduces basic concepts in ways that most ordinary people could learn.  Reading time should be less than two hours.  One more thing, the book has very little in the way of math.

I appreciated the short summaries at the end of each chapter.  If someone wanted to get the gist of the book, they could read all of the short summaries in about 10 minutes, and then they would have the skeletal ideas of the book, allowing them to read all or part of the book with greater understanding.

Quibbles

The book could have used an index.

Who would benefit from this book:People who want an introduction to investing, including long-term market cycles would benefit from this book.  It would be of modest help to experienced investors who understand market cycles.  If you want to, you can buy the book here: The Little Book of Bull’s Eye Investing: Finding Value, Generating Absolute Returns, and Controlling Risk in Turbulent Markets (Little Books. Big Profits).

Full disclosure: This book was sent to me without my asking for it.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

Market Dynamics

• On Paradigm Shifts http://t.co/h68quEDX Hunter takes us through mental exercises 2 make us intelligently contrarian. “Invert, Always Invert” May 02, 2012
• Hedgers’ net short position vanishes in US oil http://t.co/X0hLOWGB Commercial interests do not fear lower prices, could be bullish 4 crude May 02, 2012
• There’s Plenty of Money for Junk http://t.co/vXML0Bao Presently the credit cycle is virtuous; vicious part is coming, but no appt set $$ May 02, 2012
• Bad Models Mistook Housing Bust for Dot-Com Bubble http://t.co/IxC8m2mk Busts of assets that are heavily levered harder than unlevered $$ May 02, 2012
• Best U.S. Real Estate With Self-Storage http://t.co/mxyHdK2U Self storage a winner in the past, may not do so well in the future; hi vals May 02, 2012
• Marginal oil production costs are heading towards $100/barrel http://t.co/G2zNB5JS Same as my reasoning on high crude prices $$ May 02, 2012
• Four-percent rule a relic, advisers say http://t.co/PrdHQy48 Better rule: 10y Tsy yield plus 0% if bearish, 1% if neutral, 2% if bullish $$ May 01, 2012
• The remarkable resurgence in synthetic credit tranches http://t.co/1iIZ8ous Increases in the notional amounts of several corp bond swaps May 01, 2012
• Contra: Black Scholes & the formula of doom http://t.co/flVNsYMx Debt levels & Asset-Liab mismatch largest causes of crisis not BS model Apr 30, 2012
• Energy’s Pain is Consumer Discretionary’s Gain http://t.co/lM7UW0T7 I have been on the wrong side of this trade. Sigh. $$ Apr 30, 2012
• Notes from the DoubleLine Lunch with Jeffrey Gundlach, Spring 2012 http://t.co/KDiqA5Sp Gives a good overview, w/a large topping of snark $$ Apr 30, 2012

China

• China’s Auditing Train Wreck http://t.co/UeIZtw06 Any Chinese firm listed in the US, the auditors should be subject to SEC scrutiny. $$ May 05, 2012
• China bear Pettis says world coming around to his view http://t.co/lo1nGc7e Pettis isn’t a bear but a realist; invt-led growth overplayd $$ May 04, 2012
• The Family and Corruption http://t.co/R4NwZ6od Family ties & group affiliation dominate economic/political power among Chinese Communists $$ May 04, 2012
• Who is Fu? Chinese exile is ‘God’s double agent’ http://t.co/plyQhwtg Story of a Chinese Pastor in US & escape of Chen Guangcheng $$ May 02, 2012
• Microblogs Survive Real-Name Rules–So Far http://t.co/5UItJjwj Even the CCP would have a hard time shutting down their Twitter-apps $$ May 02, 2012
• Beijing’s secret: It’s not really loosening http://t.co/3RPhAOwH There is not enough demand in China 2 pay all of the high prices. $$ May 02, 2012
• China’s Left Behind Children http://t.co/OL0gmSFE Economic growth that separates parents from children imposes significant costs on China $$ May 02, 2012
• China Closes Unirule Website http://t.co/ItkW0p0A Founder receives award from Cato Institute; China government shuts down his website $$ May 02, 2012
• China’s property boom has peaked, forever http://t.co/aLC2U8F8 Amount of deadweight in China property is so large that prices have peaked $$ Apr 29, 2012

Financial Services

• Caution: Contents May Be Hot http://t.co/cp9yjbH3 I worry about ETF slippage from bad creation/redemption unit design & bad trading by users May 04, 2012
• Well, That Was Awkward… http://t.co/zS5f6zAI Bank Chiefs’ Regulatory Concerns Met With Official Silence; maybe regulators getting fed up May 04, 2012
• A talent shortage looms as the industry booms http://t.co/QGLZzzg7 Financial planners getting old/retiring faster than the Baby Boomers $$ May 04, 2012
• 2nd attempt2 automate bond trading 1st failed RT @BloombergNews: Goldman preps trading system for corporate bonds | http://t.co/NceasmN7 May 04, 2012
• Mortgage Rates in US for 30-Year Loans Fall to Record Low http://t.co/LPolAP5Q Mtge rates b nimble, MR b quick, MR go under limbo stick $$ May 04, 2012
• Spending A Year On An M&A Bidding War Is Apparently Overrated http://t.co/tKguPYGy It’s well-known that scale acquirers underperform $$ May 04, 2012
• Every liability has an asset, but not every asset has a liability. Some are owned outright. http://t.co/fB3ARju7 May 03, 2012
• Canadians Dominate World’s 10 Strongest Banks http://t.co/qj6TOgA3 Ask again after their housing bubble pops, same 4 other fringe nations May 03, 2012
• Pimco’s latest ETF shields against price spikes http://t.co/TmOrCIj2 I wonder if active ETFs will have more performance slippage. $$ May 02, 2012
• Hedge Funds Hurt by Volatility http://t.co/ogoL62qT Hedge funds r vehicles that do better when credit spreads r tightening $$ May 01, 2012
• Bond Market Is Creating A New Galaxy for Trading http://t.co/YgvNwz1j Dealer inventories thin; trading costs rise; electronic mkts start May 01, 2012
• US banks still cutting commercial real estate exposure http://t.co/qsqIMRph Banks still rotating out @ an almost constant rate since 2009 $$ Apr 30, 2012
• Largest U.S. Banks Resist Federal Reserve’s Credit Limits http://t.co/JndcrvWI Big banks need 2b broken up or shrunk; they don’t accept it Apr 29, 2012

US Fiscal/Regulatory Policy

• CEOs rank Texas tops for business, California worst http://t.co/jWEIGP89 8th year in a row for this survey; high taxes/regs annoy CEOs $$ May 04, 2012
• Exposing the Medicare Double Count http://t.co/HIVIx3lJ Same $$ being spent twice, must borrow the difference. May 02, 2012
• Coburn: `We Ought to Totally Revamp Our Tax Code’ http://t.co/71WquMIf Very similar to my proposals; simplify code eliminate deductions $$ May 02, 2012
• U.S. Considers Notes That Float http://t.co/jynXGcYG Intermediate-dated Tsy floaters would trade above par, neg yields like TIPS $$ May 01, 2012
• Trying to Shed Student Debt http://t.co/0GmvckOn Lawmakers Rethink Bankruptcy-Law Ban on Walking Away From Education Loans $$ #slavery Apr 30, 2012
• Can the US Economy Recover Without a Housing Recovery? http://t.co/Tqy4l8J3 It will probably have to try w/o housing’s assistance $$ Apr 30, 2012
• Central Bank paper suggests house prices have ‘over-corrected’ http://t.co/KDrXCkzy Have Irish housing prices overshot? Tough 2 say. $$ Apr 30, 2012
• http://t.co/KbnUO93s Treasury floaters could b issued @ premium 2 par 2 inflation speculators allowing the Tsy 2 finance @ negative rates Apr 30, 2012
• U.S. Perfecting Formula for Budget Failure, Says Bowles http://t.co/vlLQzZ8q It’s nice 2b a part of a nation that is a global leader $$ Apr 30, 2012
• Will TARP Make a Profit? That’s the Wrong Question http://t.co/MZBHaO51 Conflicting govt goals make policy hard 2 implement & interpret $$ Apr 30, 2012
• You will buy more Govvies, or else http://t.co/DLrnyb9u Financial Repression, Quantitative Easing, Debt Monetization, Hyperinflation $$ Apr 30, 2012
• On Student Loans, Accounting Gimmicks, Electric Cars, FX and a note on SS http://t.co/2BCB9nAi Hodgepodge of insight from @brucekrasting $$ Apr 30, 2012
• “The Treasury should be issuing 100 year or perpetual bonds until the market can’t stand it anymore to lock in these … http://t.co/gXMUXW4C Apr 30, 2012
• The floating YTMs will probably be negative, as interest rate speculators will pay more than par for the floating rat… http://t.co/OSmE7QuJ Apr 30, 2012

Eurozone

• The euro crisis just got a whole lot worse http://t.co/XSqmQnGv Election of Hollande may lead2 Euozone policy paralysis; growth v austerity May 04, 2012
• Making eurozonians, or not http://t.co/JmuO5OXC The Eurozone was never a natural place to set up a shared currency. $$ May 04, 2012
• Madness in Spain Lingers as Ireland Chases Recovery http://t.co/BXdYSX5e Ireland may b rebounding, as Spain’s slump deepens #austerity $$ May 02, 2012
• Why the New York Times’s Paul Krugman is clueless about the European economic crisis http://t.co/xMuzZXC7 Aside frm Ireland no austerity yet May 02, 2012
• Core infection and eurozone PMIs http://t.co/xr97yPgD Core of the EZone sluggish @ a time when it can least afford it $$ #depressionary May 02, 2012
• ECB Measures Pushing Domestic Bonds Into Domestic Banks, Planting Seeds for Euro Disintegration http://t.co/HAITJJnX Yeh, this da future $$ May 02, 2012
• The rise in the Eurozone money supply has not improved credit conditions http://t.co/rYazqcuP Euro M3 diverges from bank loans $$ May 01, 2012
• The ECB lending to periphery governments via “backdoor SMP” http://t.co/uQeG2QQK How to stuff the ECB full of Eurofringe debt, c/o LTRO $$ May 01, 2012

Rest of the World

• Brazil: cutting at any cost? http://t.co/mh3vN1Te Pushes up asset & price inflation, as currency held down 2aid exporters; unsustainable $$ May 04, 2012
• Turkey Credit Rating Outlook Cut by S&P on Worsening Trade http://t.co/pFDzEhZl Wide current account def & hi external financing needs $$ May 02, 2012
• Once poster child of crisis, Iceland recovers http://t.co/Sgr2wTGl Letting banks fail & stiffing foreign creditors -> winning solution $$ May 02, 2012
• Which emerging economies are at greatest risk of overheating? http://t.co/olHdiYRE A gauge from the Economist on which Em Mkts r2 hot $$ Apr 29, 2012

Company News

• Buffett’s CTB Adds Chicken Eviscerators in Dutch Purchase http://t.co/K6Q3NGt2 Buffett’s firm is no chicken; it has a lot of guts! $$ May 04, 2012
• Sorry, really sorry… May 04, 2012
• Ackman Rejects Canadian Pacific Deal Ruling Out CEO Pick http://t.co/KYe970NJ Pick is former CEO of $CP rival $CNI – Bad blood; good CEO May 02, 2012
• Impressive work Mr. Einhorn. The analyst that wrote up the question deserves praise; if you did that… http://t.co/tSTWxqBa May 01, 2012
• Phillips 66 aims to run more shale oil http://t.co/tC7NBfLO LD: + $COP $PSX First day of trading for the new $PSX. Combo up 2%+ so far $$ May 01, 2012
• Value investing does not mean cheap. It means margin of safety. Cemex does not have that. Look at the debt. $CX $$ http://t.co/ydklVkth May 01, 2012
• Falcone Agrees To Step Aside http://t.co/bYgLxMMV “a final agreement may not be reached, and a bankruptcy filing was still possible” $$ Apr 30, 2012
• Delta to buy US refinery for $150 million http://t.co/IsK9xsDu If zero is dumb & 100 is very dumb, this one scores in the 90s. $$ Apr 30, 2012
• Discuss “At $1.7 billion, Nook is worth more than Barnes http://t.co/xOz6skwP Spin off Nook 2 create value $$ $BKS $AMZN #interneteatsbooks Apr 30, 2012
• @ampressman Would it have been value-enhancing to $BKS 2 sell the whole Nook unit 2 $MSFT, in your opinion? $$ Apr 30, 2012

Statistical Analysis

• trading-and-the-null-hypothesis http://t.co/QpYutOTb Problem:No academic journal wants2 publish studies with ‘no result’ as their conclusion May 04, 2012
• . @thenumb47 Allows for too much of a specification search; would be good to require disclosure of everything tried but not published $$ May 03, 2012
• Have to allow for accidents! RT @incakolanews: just scrub the word “validate” and I think you have a great idea May 03, 2012
• Thus my proposal for economists: come up w/research idea: goes 2a database. Randomly assigned economist will analyze & trash/validate it $$ May 03, 2012
• Unlike double-blind studies, raw statistical research allows health analysts to inject their own bias into the analysis, as economists do $$ May 03, 2012
• Analytical Trend Troubles Scientists http://t.co/bzcAIpHG Health researchers using statistics like economists find ambiguous results $$ May 03, 2012

Miscellaneous

• 14 Lessons From Benjamin Franklin About Getting What You Want In Life http://t.co/BWAjCz1l Advice from 1 of the wealthiest men of America $$ May 04, 2012
• Is Wall Street Meeting God’s Expectations? http://t.co/5H5j2QGG Many Christians misuse the Bible; almost all non-Christians misuse it $$ May 03, 2012
• What would Jesus trade? http://t.co/Dkrfwt9k Many Christians misuse the Bible; almost all non-Christians misuse it; another example $$ May 03, 2012
• And in a more honest way than Google RT @SconsetCapital: Long good, short evil. May 03, 2012
• Apparel-Swapping Millennials Eschew Stores and Malls http://t.co/B7jq2dcY “Is that a new outfit?” “Well, it’s new to me!” An odd trend $$ May 03, 2012
• @TheStalwart Kasriel was different enough that he will be missed, kind of like the sound of one hand clapping $$ #littledoghasbuddhanature May 01, 2012
• The record 4 tallest bldg s/b based on weighted average height; weighting based on cross-sectional area @ height http://t.co/03HNZ0BB $$ Apr 30, 2012
• So if you have something thin at the top, it wouldn’t count 4 much. A rectangular parallpiped would get full credit 4 height $$ #usingmath Apr 30, 2012
• That would work, simpler than mine $$ RT @Pollack7: @AlephBlog Meh.Highest continuous occupancy floor. Apr 30, 2012
• As the smartest boss I ever had said “Make bets, but never bet the franchise.” http://t.co/qWdHX3BS Apr 30, 2012

Monetary Policy

• Bernanke Charts New Mission For Fed: Financial Stability http://t.co/6RrWEQws Fed has a hard enuf time w/a double mandate, triple will b wrs May 02, 2012
• Then again, if focusing on financial stability forces the Fed to be more restrained in its monetary policy, that would be good. $$ May 02, 2012
• Bernanke: Be Humble! http://t.co/6icSHD1K The picture says it: http://t.co/OqOflqsI Humility in BB’s view: leaving monetary policy loose $$ May 01, 2012
• My Speech Delivered at the New York Federal Reserve Bank http://t.co/DbAhOdQR An Austrian let loose amid the marble palace in NYC?! Wow. $$ Apr 29, 2012

US Politics

• Renewed Hope that Jon Corzine, President Obama’s Top Tier Campaign Bundler, Will Face Criminal Charges http://t.co/wCLrXFve J. Tavakoli $$ May 01, 2012
• Occupy Wall Street Plans Global Protests in Resurgence http://t.co/0FLjKfiJ #OWS won’t b effective until they organize as a 3rd party $$ + May 01, 2012
• Or, organize to influence the Democrats the way the t-party does the Republicans. #OWS is irrelevant until then, b/c it doesn’t do anything May 01, 2012
• Is that a bailout in your pocket? http://t.co/8xwW4Cbi Boyazny, panel’s populist, replied that the credit markets had become “undemocratic” May 01, 2012

I consider Tadas Viskanta to be a friend of mine.  I write my eclectic blog, and Tadas occasionally features me on his daily curation of the economics/finance/investment blogosphere.

But it is not friendship that leads me to write the following: this is a really good book.  Why?  Every day, Tadas curates the best thoughts in finance.  He finds them, he motivates them, and links to them.  If I had just one site to visit everyday, it would be his, not mine.  He’s really good at finding the best content in finance.

But it goes a step further than that.  Tadas is a very good blogger in his own right.  It’s not that he comes up with new insights, but he is very good at taking the insights of others and weaves them into a greater insight than the separate thoughts of the individuals.  He finds themes, and he finds disagreements.  Each provides good food for thought.

Now, if Tadas can do this on a daily basis, let’s call him the Chief Synthesizer of the economics/finance/investment blogosphere — then, what happens if he decides to take several steps back, and synthesize the grand themes he has seen in six years of writing his blog.

It’s been a violent period, after all.  Tadas has been blogging from the peak of residential real estate (October 2005), through the tail of the boom (October 2007), to the bust (March 2009), to the present.  He keeps it relevant, and he doesn’t take sides, which allows him to source the best content better.

So as he synthesizes the themes of the last six or seven years, he comes down to really basic ideas for each chapter: Risk, Return, Stocks, Bonds, Portfolio Management, Does Active Investing Work, ETFs, Global Investing, Alternative Assets, Behavioral Finance, Using Media, and the Lost Decade.  He handles them deftly, highlighting differences, but giving a consensus opinion.

The book is modest, in that it does not promise you greater profits if you follow his advice.  It is a realistic book, because most of us know that the basic principles of investing are straightforward, but they get clouded by academics and hucksters.  After you read this book, you may or may not earn more, but you will probably be safer.

Also, the book is an easy read; I glided through it in less than three hours.

Quibbles

The editor could have done more work to make the index complete; I was surprised to find myself mentioned in the book more times than the index noted.

Who would benefit from this book: Most amateur investors would benefit from the book, and many, though not all professionals would benefit from the book’s basic approach. Think of it this way — what if you could explain basic concepts to the uninstructed more clearly? Wouldn’t it help you in your business?  If you want to, you can buy the book here: Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere.

Full disclosure: I asked the publisher for the book and he sent it to me.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

Sorry that I have not been posting much of late.  April is always rough for me.  Taxes play some role in April, because I get a certain amount of my tax data late, but the main reason stems from some charitable boards on which I serve, which meet in/near April.

One of the questions that came to me was how we could educate some of the workers to put away more of their income for retirement, because we don’t have a Defined Benefit plan.  After a little discussion, I said that I could give them good friendly advice.  As most committees go, when someone volunteers to solve a problem, discussion ends.

Now, what I have done is pretty simple, and violates one of my rules — I don’t believe in constant compound interest.  Markets don’t work that way, but for some perverse simplifying reason, retirement planning models do.

What I have done is create a model for retirement income, attempting to express it in terms that someone non-knowledgeable could understand.  You can download the Simple Retirement Calculator (free to download) that I created.

My base case assumes 3% inflation, pay keeps pace with inflation, and the real return on investing is 2% over inflation.  Other assumptions: one works for 45 years from age 25 to 70, and that the options for payout are limited to those that respect spouses and heirs.

So what can one 25 years old expect from saving over a 45 year period of time?

This table expresses what is needed in order to have effective income during retirement.  The average investor can’t control asset returns.

J&S 100% Cash Refund -> Spouse gets 100% after death of annuitant, heirs get a payment annuitants got less than the lump sum value at retirement.  Indexed benefits increase at the rate of the CPI.

With a 2%% real return, it takes a lot of saving to replace current income in retirement, even over 45 years. Note that the real return assumption has the largest impact on the results.

Much as I think DB plans are superior to DC plans for the average person, most companies in the present environment will not subsidize a DB plan to the degree that will allow a person to retire at the same level of purchasing power that they had while employed.

There are many ways that I could improve the results of this model, but the improvements would only be incremental.  The main point of this model indicates that most people do not save enough, if all of their retirement outcomes rely on a defined contributions plan.

Let me know what you think  in the comments below.  Thanks.

Federal Reserve

• Long Term U.S. Credit Boom Chart http://t.co/Ywub8HQH By bailing out short-term credit cycles, the Fed created a big asset bubble $$ Apr 28, 2012
• Quantitative Deleting: The Fed’s $400 Billion ‘Gift’ http://t.co/qavtYcQy Fed’s actions lower cost of funding the US Treasury’s deficit 4now Apr 26, 2012
• Bernanke Takes On Krugman’s Criticism Ignoring Own Advice http://t.co/AZ37nx1W Blind & Blinder $$ Apr 26, 2012
• I think Ben needs one too. Barkeep, make that a double for the the Fed Chairman! $$ RT @soooouuuuurrrrr: @AlephBlog I need a drink. Apr 25, 2012
• That’s all folks — the FOMC show is over!! $$ Apr 25, 2012
• Stocks loving Bernanke, who says he doesn’t act to please markets, but I think that he does, b/c he aims to reduces rates & spreads $$ Apr 25, 2012
• Good Qs on Labor force participation rate and the “bond bubble.” Bernanke obfuscates. Apr 25, 2012
• But the real canard here with the enhanced guidance is that the Fed is poor at forecasting & consistently drags toward current conditions $$ Apr 25, 2012
• When will Fed “transparency” finally be understood to not mean “increased reliability?” Apr 25, 2012
• Interesting that long Treasuries r rallying off of the FOMC second stmt after falling on the first. Not much difference between the 2. $$ Apr 25, 2012
• So, short-term inflation up, LT unch. ST Unemp down, LT unch. ST GDP up, 2013-4 down, LT unch. Tightening 6 mos closer than Jan, FF path up Apr 25, 2012
• Central tendencies and ranges of economic projections, PCE average change 2012-14 +0.22%, +.10%, +.09%, longer run 0% (natch) $$ Apr 25, 2012
• Central tendencies and ranges of economic projections, unemployment average change 2012-14 -0.40%, -.21%, -.08%, longer run -.01% $$ Apr 25, 2012
• Central tendencies and ranges of economic projections, GDP average change 2012-14 0.16%, -.08%, -.24%, longer run 0% $$ Apr 25, 2012
• The enhanced guidance of the FOMC is causing more confusion than enhancing understanding $$ Apr 25, 2012
• Overview of FOMC participants’ assessments of appropriate monetary policy; Appropriate Timing of Policy Firming 6 months sooner than Jan12 Apr 25, 2012
• Target Federal Funds Rate at Year-End average change 2012-2014, +.015%, +.044%, +.206%, long-run -.015% $$ Apr 25, 2012
• PDF isn’t as friendly as HTML… but that’s probably intentional on the part of the Fed. $$ Apr 25, 2012
• here they are, Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents http://t.co/OzeYZbRa $$ Apr 25, 2012
• Clocks must be slow at the Fed’s website… Apr 25, 2012
• Bond/stock trading bots set loose within the next minute! Apr 25, 2012
• @bondscoop When the FOMC said they would do this, I said “Do they really get what they are setting themselves up for?” Tight coupling. Apr 25, 2012
• @bondscoop Thanks. I’ve got the ancillary data loaded into a spreadsheet to make a quick comparison Apr 25, 2012
• @bondscoop That’s not out yet, right? Apr 25, 2012
• Redacted Version of the April 2012 FOMC Statement http://t.co/wJbPNf5P Shaded up views on housing, inflation & global financial risk. $$ Apr 25, 2012
• Of course, that can only last so long as inflation stays low. Brian Wesbury thinks inflation might be rising http://t.co/YfLFURA3 $$ Apr 24, 2012
• Gundlach Says Fed Won’t Preemptively Raise Rates http://t.co/YTfjQ6Wj W/debt building up 1 thing saving us: interest rate collapsing $$ Apr 24, 2012
• There r historical accidents. The worst that we r dealing w/is Ben Bernanke as Fed Chairman with his mistaken views on the Great Depression! Apr 24, 2012
• Awash in money and piles of debt http://t.co/C9hbSWmf Up next: More QE, financial repression, inflation, deficit spending -> stagflation $$ Apr 23, 2012
• $$ Coming soon +1 RT @ReformedBroker: Hilsenrath: After-Hours Sell-Off in Netflix Pushes Fed Governors Toward to Further Easing… $NFLX Apr 23, 2012

China

• Are these companies feeling the Chinese slowdown? http://t.co/bIO0m2vF Machinery companies: Volvo, ABB, $CAT seeing China orders fall $$ Apr 26, 2012
• China Internet Crackdown Silences Another http://t.co/ukw0qzWg More closure of accts found 2b spreading “malicious political rumors.” $$ Apr 26, 2012
• Why Wukan Will Remain a One-off http://t.co/LO3tK7kT Optimistic piece shows when there is enough pressure in China, change can happen $$ Apr 26, 2012
• China Tire Demand Slows as Economy Decelerates, Bridgestone Says http://t.co/yUK3UEye Q is how much things slow for the Chinese economy $$ Apr 26, 2012
• China Escalates Crackdown On Internet Amid Scandal http://t.co/QblN4v3S China wants the internet 4 its economy, but not its politics $$ Apr 26, 2012
• China and Social Media Today vs. Japan bubble in 80s http://t.co/0uxQ40xV Vitaliy Katzenelson shares his reasoning on bubbles $$ Apr 26, 2012
• Why China’s Economic Policies Are a Failure: Andy Xie http://t.co/WZjILv4J Building redundant capacity, cronyism, recipe for disaster $$ Apr 25, 2012
• China Hidden Liabilities for Central Government Seen @ CNY10.94Trl http://t.co/gaqD4suu Opaque governments w/lots of debt can b trouble 2 $$ Apr 25, 2012
• Shide Group Mired in Financing Crisis, Massive Debt http://t.co/Iws3h9Ec Beware complex companies w/lots of debt. Default probs higher $$ Apr 25, 2012
• The Startling Plight of China’s Leftover Ladies http://t.co/WWK3en7R Leftover Chinese men r not good enuf 4 them, even w/sex ratio tilted $$ Apr 24, 2012
• Behind a Chinese City’s Growth, Heavy Debt http://t.co/6eKX3kJp Bo Xilai leaves behind a legacy of debt 4 taxpayers to fund $$ #surprise Apr 23, 2012
• Cities get a sinking feeling: report http://t.co/xQE2d46k If China’s cities aren’t careful about their water tables, they’re sunk $$ Apr 23, 2012
• Can China Reflate the Housing Market? http://t.co/rMtYHX0Y Maybe one more time, but eventually you can’t resuscitate a corpse $$ Apr 23, 2012
• US barnyards help China super-size food production http://t.co/38GkPJ0T China builds protein industry by purchasing live animals from US $$ Apr 23, 2012
• Beijing’s Cracked Consensus http://t.co/1Xep2j6s Don’t assume the fall of Bo Xilai 2b 2big; the CC Party still fights 4 the CC Party $$ Apr 23, 2012
• Farmers Retool to Feed China http://t.co/c0loHf82 Dairy processors make longer-lasting milk powder 2sell2 China. They like almonds 2 $$ Apr 23, 2012
• China May Finally Let Its People Move More Freely http://t.co/fiTQgY5c Of hukou: how China uses household registration 4 control purposes Apr 23, 2012
• The End of China’s One-Child Policy? http://t.co/dK7sUMTq China is getting old before it gets rich. Toxic combo. Watch wages rise. $$ Apr 23, 2012
• The China Rising Leaders Project http://t.co/QuKsr7w2 Very long piece giving very detailed info on next generation of China’s leaders $$ Apr 23, 2012
• China’s Biggest Banks Are Squeezed for Capital http://t.co/uveB69fJ Too much and overaggressive lending strains their balance sheets $$ Apr 24, 2012

Eurozone

• Spain’s current unemployment rate exceeds the US rate during the Great Depression http://t.co/bj86umZp Ugly chart: http://t.co/M6uchbAx $$ Apr 28, 2012
• Why Spain Won’t Reform http://t.co/aIuYUctZ Cultural argument that Madrid historically does not act on problems outside of Madrid $$ Apr 28, 2012
• Rising Italy-to-Spain Yields Keep Banks on Life Support http://t.co/kSdshke5 Many banks simply cannot refinance their maturing debt $$ Apr 25, 2012
• Continuing flow of capital out of Greece http://t.co/psvzWbJk E.g. Greek refineries r unable to obtain credit & rely on Iran for crude $$ Apr 25, 2012
• Spanish property crisis will require Ireland-style banking system recapitalization http://t.co/pDLNF2X7 But who has the money 2do it? $$ Apr 23, 2012
• Bundesbank’s Weidmann Says What No EU Politician Wants to Hear http://t.co/ecLHlLIJ EZone monetary policy loose; fiscal union negligible Apr 23, 2012
• Holland, Not Hollande, Is Europe’s Latest Worry http://t.co/AeQtOIVv If Dutch don’t care 4 austerity, little hope 4 rest of the EZone $$ Apr 23, 2012

Pensions

• How Retirement Benefits May Sink the States http://t.co/oIEsAWhh Companies emigrate 2 states where future tax pressures r lower $$ #bye Apr 28, 2012
• Point Man on Pensions http://t.co/DaXsdkgx PBGC director has experience in restructuring; serves him well negotiating w/dud companies Apr 23, 2012
• Tidbit in last article: FV of DB pension liabs for $SWY > market cap. Actuarial profession goofed on DB plans valuations; ests r liberal $$ Apr 23, 2012
• The Multiheaded Pension Monster http://t.co/oBDNBZYN Multiemployer DB plans- not enough coverage: moral hazard, low PBGC guarantees $$ Apr 23, 2012

Energy

• Chevron sticks with oil. And it pays off. http://t.co/uUlsjbBK FD: + $CVX | That said, buy & hold conventional NG could b good idea now $$ Apr 28, 2012
• Tough Talks Loom at Chesapeake http://t.co/OkMGyu8J Having a CEO who has differing interests from common shareholders is a risk $CHK $$ Apr 28, 2012
• Saudi oil puzzle, continued http://t.co/z76fSKTZ Prices r high, but the Saudis keep stockpiling oil. Why? $$ #idunno #gouging #painfreak Apr 25, 2012

Information Issues

• Saudi Clerics Out-Tweet Liberals Forcing King to Balance http://t.co/A1TcHeSJ Don’t underestimate the influence of Wahhabi Islam. $$ Apr 26, 2012
• Google Stores, Syncs, Edits in the Cloud http://t.co/BrRSauno Walter Mossberg likes $GOOG Drive, thinks $MSFT Skydrive worth a try $$ Apr 25, 2012
• PGP Creator Phil Zimmermann Has a New Venture Called Silent Circle http://t.co/KNJQJ4X4 There’s also a promise of no backdoors 4 anyone $$ Apr 24, 2012
• A New Email Encryption App Your Network Admin Might Not Like http://t.co/7b967z7e Enlocked can encrypt email w/a click, could go viral $$ Apr 24, 2012
• Surveillance State evils http://t.co/BKkmM78J Don’t say anything that you don’t want the government 2 know. Repeal the Patriot Act! $$ Apr 23, 2012
• Astounding. Reprogram it $$ RT @AnnieLowrey: This essay awarded a perfect score by a robo-grader is just delightful. http://t.co/Vc1ORC8T Apr 23, 2012

Company Issues

• Heat Turned Up on Falcone http://t.co/zaiW1Jzu The deal w/the devil comes due for payment; Falcone faces checkmate or LS bankruptcy $$ Apr 28, 2012
• Woes at Law Firm Deepen http://t.co/to4dZbJY Dewey & LeBoeuf’s troubles w/debt & revenue shrinkage. Law does not work well 4 big biz $$ Apr 28, 2012
• Health Insurers to Give Back $1.2 Billion, Goldman Says http://t.co/VX0V9sL9 health overhaul limits <20% premium for expenses & profit $$ Apr 26, 2012
• US Airways Said to Approach AMR Bondholders on Merger http://t.co/iArkC4nq The unsec bondholders r the economic equity of $AAMRQ now $LCC Apr 25, 2012
• Genworth Credibility Eroded as Australia Plan Shelved http://t.co/oyJJ4OCC I’ve almost always ben a sceptic on $GNW. Toxic lines of biz $$ Apr 24, 2012
• Google Unveils Drive Storage Service http://t.co/5R1CAkR0 I use Microsoft Skydrive as a real time backup of my files. $$’ Apr 24, 2012
• MGIC Posts $19.6 Million Loss as Borrowers Struggle on Loans http://t.co/fvoY6cZN Regulators should halt $MTG’s ability 2 write new biz $$ Apr 23, 2012

Rest of the World

• Bubble Down Under? http://t.co/jk4UBFzA “Name a credit bubble built on a commodity bull market built on a bigger Chinese credit bubble?” Apr 26, 2012
• North Korea Poised to Rattle Region With Nuclear Blast http://t.co/MJmALgYi Will believe when it happens; NK always seems 2 get tech wrong Apr 26, 2012
• Swiss housing market inching towards bubble http://t.co/KCbYrs6x Makes me wonder when the Swiss Central Bank will break its Euro peg $$ Apr 24, 2012

Financial Markets

• Conference Notes http://t.co/VF5FIPOg On 4/13, Chicago Booth held its 7th Annual Distressed Investing & Restructuring Conference. $$ Apr 26, 2012
• No surprise when they only put 3.5% down $$ RT @pdacosta: Falling home prices drag new buyers under water http://t.co/bayZVELO Apr 26, 2012
• TARP Profit A Myth, Claims TARP Inspector General Christy Romero http://t.co/iv77kkne Q is related to foreclosure prevention aid & GSEs $$ Apr 26, 2012
• My Sister’s Pension Assets and Agency Problems by Jeremy Grantham http://t.co/ANDMdZae On the value of a non-constrained mandate $$ Apr 25, 2012
• Force Fed by Ben Inker of GMO, last 3 pgs of http://t.co/ANDMdZae Goes through the problems of Asset Allocation with yields so low $$ Apr 25, 2012
• Wall Street Promotes Junk Bonds as Europe Erupts http://t.co/5kIRG7Oi grabbing for yield — it’s the national pastime! $$ Apr 25, 2012
• US 10 Year Bond Yielding 0.5% http://t.co/Zrnj9zdL Japan scenario for the US? The 10Y at 0.5% seems farfetched, but everyone hates bonds $$ Apr 25, 2012
• REITs Spring an Unnerving Surprise http://t.co/qgStDii0 I’ve warned b4 on Private REITs http://t.co/liQr20vq More bad surprises coming $$ Apr 25, 2012
• So, if Egan-Jones did do ABS & governments, that would have been news to me. Surprising to see the SEC going after them $$ Apr 25, 2012
• Credit Rater Egan-Jones Lied, SEC Charges http://t.co/c1ym3feC Firm was known 4 its corporate bond ratings by a contingent claims model $$ Apr 25, 2012
• Misleading ETFs http://t.co/Z8uKHfA7 Buyer beware, read your prospectuses and semi/annual reports; go to the sponsor websites 4 more data $$ Apr 24, 2012
• Who Gets the Equity Risk Premium? http://t.co/gqdPYexG LT holders, brokers, taxes, firms that issue & retire shares at inopportune times $$ Apr 24, 2012
• Commodities don’t provide “diversification” in a crisis http://t.co/7ue9vvjJ Commodities provided diversification when few did it; no more Apr 23, 2012

Catastrophe Bonds

• @merrillmatter If I ran a life insurance portfolio, a closed end fund, an open end HY fund, I would buy cat bonds, u need a balance sheet $$ Apr 24, 2012
• @merrillmatter With all the goofy ETFs issued, surely someone could create $CATB, the Cat bond ETF. Would b very tough 2 source bonds 4 $$ Apr 23, 2012
• @merrillmatter That’s why many high yield funds buy them w/both hands. Also special hedge funds that tear Cat bonds apart 2 get the best $$ Apr 23, 2012

The Perils of Sitting

• On the sitting kills you piece, would like to get a copy. Est’d increase in death rate from 0.76% to 1.06%/yr. Big %, not so big absolute $$ Apr 23, 2012
• Confirmed: He Who Sits the Most Dies the Soonest http://t.co/aif1e8xX I found this article worrisome. I sit > half of my waking hours. $$ Apr 23, 2012

US Economy

• New Mad-Cow Discovery Stirs Fears http://t.co/DPm6aLzI This story will have legs, 4 2b exact. Beef will b down until scope clears $$ Apr 25, 2012
• On the Social Security 2012 Report to Congress http://t.co/RPG3qz1p Age <53 today can expect to get 75% of the value a baby boomer got $$ Apr 24, 2012
• Rosenberg: U.S. Clients View Canada as ’51st State’ http://t.co/EqVvLFpX Careful, w/rates so low, housing is looking bubbly & banks?? $$ Apr 24, 2012
• Fees and Anger Rise in California Water War http://t.co/9GjE5jwx Bad geography to get water to, unless you want to try desalinization. $$ Apr 24, 2012
• @moorehn Heidi, I was 1 of the 8 bloggers @ the 1st blogger summit at the Treasury, & not 1 of the noisier ones. I spoke twice in the 90mins Apr 24, 2012
• @moorehn So here is my Q4 Geithner: How do we get out of the entitlements crisis? We have promises equal to 4-5x GDP!? [Amid the deficit] $$ Apr 24, 2012
• Housing market no longer yours for a steal http://t.co/xb2E2JIy Low end res RE is not accepting lowball offers to buy as it used to $$ Apr 23, 2012
• You Won’t BELIEVE How Bearish Investors Are On Treasuries http://t.co/q9t2sZdE 2% bullish, 81% bearish in Barron’s poll. FD: + $TLT $$ Apr 23, 2012

Miscellaneous

• US College Education Bubble, Planning for the Wrong Future http://t.co/BScEbQJI But many smaller job fields req college & pay well. $$ Apr 28, 2012
• Hong Kong Glued to ‘Bride Wannabes’ http://t.co/6p9RCs0X Reality TV aids lovelorn 30-something women, ending w/a mass marriage 4 some $$ Apr 26, 2012
• But really, with Agriculture doing so well in the US, isn’t it time to finally cut farm subsidies? And beef up (oops) USDA food safety? $$ Apr 25, 2012
• Government Keeps Picking Winners, Losers on the Farm http://t.co/PKiJBHIp Farmer complains healthy food gets less subsidy than unhealthy Apr 25, 2012

Since coming back to work in Baltimore in 2007, I’ve tried to be more active in the Baltimore CFA Society.  That has taken on a number of different forms:

• Serving on the program committee, lining up speakers as I can — sometimes I find it hard to get well-known friends to do it… surprising to me.  Ask me to speak, I’ll be there.
• Speaking at the International Markets Summit that the Towson University Investment Group put on this Spring
• Writing for the Baltimore Business Review in 2011 and 2012, jointly sponsored by the the Baltimore CFA Society and the Towson University College of Business and Economics.
• Being a judge at the Washington/Baltimore Investment Research Challenge.

But now the program season ends with a bang, with Maryland Governor Martin O’Malley.  What questions would you ask the Governor of one of the bluest states in the US, one that has the advantage of living next door to the money vortex known as Washington, DC?  It’s not as if there aren’t any problems:

• We face a significant budget deficit, and the most likely solution is a special session of the legislature that raises taxes, when taxes are already high.
• The government pension funds are significantly underfunded, and don’t ask about government retiree healthcare…
• Maryland (outside of Montgomery County, and maybe Howard and Baltimore Counties [note to non-Marylanders, Baltimore City is a county, and is different from Baltimore County which is kind of a ring around Baltimore City.]) isn’t the best place to run a public corporation.  Taxes and regulations are high, and it is not a right-to-work state.

That said, aside from proximity to DC, Maryland has a number of things going for it:

• An educated workforce
• The biotechnology industry, aided by the NIH & Johns Hopkins
• The REIT and Hotel industries have a large presence here

So, if you want to, and can make it, there are a limited number of seats to come and hear Martin O’Malley speak.  Please come.  If you can’t come, and you would have a question for the Governor, list it in the comments below.  I will take the best question, and ask the Governor that.

Following this is the press release for our meeting:

Center Club 100 Light Street, Baltimore, MD 16th Floor, Harbor Room

Maryland Governor Martin O’Malley Speaks to the Baltimore CFA Society: Maryland’s Jobs, Economy, and Innovation

Baltimore, MD, April 26, 2012:  In a time when the economy is under stress and the economies of many states are depressed, Martin O’Malley, Governor of Maryland, comes to speak to the Baltimore CFA Society at Noon on May 3^rd, on Maryland’s Jobs, Economy and Innovation.  The meeting will be at the Center Club in Downtown Baltimore.

Though seating is limited, the event is open to the public and registration is available at this web address: Register & Pay.   Check-in starts at 11:45 AM.

In particular, Governor O’Malley will discuss the role of innovation and entrepreneurship in strengthening Maryland’s economy. Financial services play a key role in Maryland’s economy. How will the Invest MD program build on recent success?

Join us for a lively talk and discussion with the current Governor of the great State of Maryland.

BALTIMORE CFA SOCIETY

The Baltimore CFA Society was founded in 1948.  Its mission is to facilitate the exchange of ideas, networking and professional development while adhering to a Code of Ethical Standards.  The Baltimore CFA Society has promoted Baltimore and Maryland businesses through the Baltimore Business Review (www.baltimorebusinessreview.org).  The society’s diverse membership represents over 600 financial service professionals from across the State of Maryland. 

-End-

Comments

• No significant changes from last time.  They shaded up their views on housing, inflation, and global financial risk.  That’s all.
• In my opinion, I don’t think holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy finances itself.
• Also, the reinvestment in Agency MBS should have limited impact because so many owners are inverted, or ineligible for financing backed by the GSEs, and implicitly the government, even with the recently announced refinancing changes.
• The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.  As a result, the FOMC ain’t moving rates up, absent increases in employment, or a US Dollar crisis.  Labor employment is the key metric.
• The Fed is out of good policy tools, so it will use bad policy tools instead, and for longer than before.
• Do they want the yield on 30 year TIPS to go negative?  Looks that way.
• GDP growth is not improving much if at all, and the unemployment rate improvement comes more from discouraged workers.  Inflation has moderated, but whether it will stay that way is another question.

Questions for Dr. Bernanke:

• Is it possible that you don’t really know what would have worked to solve the Great Depression, and you are just committing an entirely new error that will result in a larger problem for us later?
• Why do think extending the period of accommodation by a little more than a year will have any significant effect on the economy, aside from stock and bond prices?
• Discouraged workers are a large factor in the falling unemployment rate. Why do you think the economy is doing well?
• Couldn’t increased unemployment be structural, after all, there is a lot more competition from labor in emerging markets?
• Why do you think that holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy finances itself?
• Why will reinvestment in Agency MBS help the economy significantly?  Doesn’t that only help solvent borrowers on the low end of housing, who don’t really need the help?
• Isn’t stagflation a possibility here?  I mean, no one expected it in the ‘70s either.
• Could we end up with another debt bubble from keeping short rates so low?
• If the Fed ever does shrink its balance sheet, what effect will it have on the banks?

This book is highly optimistic that we will restore a gold standard to our world.  Much as I would like it, because it restrains the power of governments that increasingly behave like thugs, I don’t think a gold standard is likely to replace the status quo.

The book has many good areas to commend it, where it deals with history, explaining the problems of the past.  It trashes the concept of the SDR of the IMF, it is the Euro on an even weaker footing.

But the book is weak, because it does not recognize that the standard for money and the regulation of banks are separate issues.  Merely instituting a gold standard will not bring stability.  One must regulate heavily the degree that banks borrow short and lend long.  We had many crises during the gold standard in the 19th century, none as bad as the Great Depression, but they all stemmed from a lack of bank regulation.  I have no sympathy for the concept of “free banking.”  Anyone that is making a large number of promises needs to be regulated; he is a systemic risk.

Chapter seven is the critical chapter of the book, and it fails because it doesn’t go far enough.  In the chapter, Russia adopts a gold standard, and requires payment in gold for exports.  Fair enough, but as other nations attempt to adopt a gold standard, they would find their exporters objecting, leading to no adoption of a gold standard.

Chapter seven is the only thing that makes this book unique, and it is why I requested it from the publisher.  That makes this book a “fail.”

On the bright side, I now know that a gold standard would be difficult to appear, unless hyperinflation drove people to a commodity standard.  (And the odds of that are better than 20% over the next 20 years.

Quibbles

I do not recommend this book.

Who would benefit from this book: No one.  If you want to, you can buy the book here: The Golden Revolution: How to Prepare for the Coming Global Gold Standard.

Full disclosure: I asked the publisher for the book and he sent it to me.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

Busy week last week.  Here’s the economic and other news:

=-=-=-=-=-=–=-=-==-=-=-==-=-=-=-=–==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-

China

• Bloomberg: Inflated Notions http://t.co/hvMoIFH6 Patrick Chovanec questions whether Chinese economic statistics are correct. $$ Apr 22, 2012
• China’s Political Stability Questioned, while Deposit Withdrawals Accelerate http://t.co/X9kJ9oZb Deposits exit China’s banks; many worry $$ Apr 22, 2012
• Asia dominates new treasury purchases http://t.co/BXvgGQRi If you want to favor your exporters, you have to suck in the debts of the buyers Apr 22, 2012
• China’s Achilles heel http://t.co/3TPxHEvL Very difficult to change the practice of having fewer children once it is entrenched $$ Apr 22, 2012
• Son is a good man, more worthy than Dad $$ RT @mprobertson: & the first wife had a son. http://t.co/dFzgm1kp extra extra, read all about it Apr 19, 2012
• Chinese Move to Wealth Products May Undermine Bank Stability http://t.co/bYK4qImP Disintermediation happening increasing shadow bank risk $$ Apr 18, 2012
• Chinese Officialdom Indulges in the Almost-Free Lunch http://t.co/tTMkP8JK A modest subsidy/perk looks big if the 1 looking in is poor $$ Apr 18, 2012
• The Power Shift in China http://t.co/bgxN7t8h Shifts: 1.weak leaders < strong factions 2. government < interest groups 3. party < country $$ Apr 18, 2012
• More Chinese get US green card http://t.co/ZU30ahwF They know where they’ve got it good, not in the Socialist worker’s paradise! $$ Apr 18, 2012
• So many Chinese officials r arrested 4 embezzling funds through Macau that 2 scholars devoted a study to the subject http://t.co/YZbDqX57 $$ Apr 18, 2012
• That’s Governor Zhou to you http://t.co/AkXcHbPZ Check out chart of central bank balance sheet growth http://t.co/VG0bySGA China leads $$ Apr 18, 2012
• China widens the range 4 currency fluctuations. Is it really making x-rate more flexible? http://t.co/Rv79vI0q PBOC still targets x-rate $$ Apr 18, 2012
• Rotting From Within http://t.co/vAwKBTzb Investigates the massive corruption of the Chinese military; makes corruption in the US look small Apr 18, 2012
• Bo Xilai’s first wife gets her revenge at last http://t.co/UsrGejSF Some Chinese r very good @ maintaining a grudge 4a long time $$ Apr 18, 2012
• China Doubling Yuan Band Signals Drive for Convertibility http://t.co/FK9OohMh Importance overstated; will not have a big effect on x-rate Apr 18, 2012
• China Adds Treasuries for Second Month on Reserve Growth http://t.co/Ev9Fqi8s Export earnings have 2b invested somewhere $$ is best of bad Apr 18, 2012
• China New Yuan Loans Surge in March as Money Supply Quickens http://t.co/DmXg6QB5 Sounds inflationary, if not 4 goods, then 4 assets $$ Apr 18, 2012

Energy

• Peak oil goes mainstream (again) http://t.co/BijPuVFG Oil & Gas will never run out, but the price to get them could get high $$ Apr 22, 2012
• Feeling peaky http://t.co/4mefPCBR “But there is a simpler explanation: that supply is inadequate to keep up with rising demand.” $$ Apr 22, 2012
• Could US natural gas run out of storage capacity? http://t.co/8R1aYxjM Yes, it could, and we could see the price of spot gas go 2 zero $$ Apr 22, 2012
• Delta’s Oil Refinery Plan Flies Against Economic Sense http://t.co/0xAnIV2z It rarely makes sense to be vertically integrated. $$ Apr 22, 2012
• Obama’s oil market plan more politics than substance http://t.co/w2vwKhNx Crude oil market is so big; would be difficult 2 game secretly Apr 18, 2012

Eurozone

• Odds of bankruptcy http://t.co/v0xBexrW Short table of bankruptcy odds: European banks = E-Zone Fringe > US Banks > Other nations $$ Apr 22, 2012
• The bank-sovereign linkage in the Eurozone http://t.co/9q7Sx9cn Not 2 surprising; governments & banks comprise most systemic risk $$ Apr 22, 2012
• Spain’s loan delinquencies accelerate http://t.co/3Nlf2QDu Really ugly graph: http://t.co/iJVux7fj The Spain issue is not dead $$ #ezonedead Apr 22, 2012
• Paulson Said to Short Europe Bonds Amid Spain Concern http://t.co/hJQwSc9n This one isn’t as easy as shorting subprime. Be careful $$ Apr 18, 2012
• Modell Deutschland über alles http://t.co/DtrBNHDL Suggests EZone imitate German labor rules, but not austerity $$ Apr 18, 2012
• French Campaign Enters Final Week With Hollande Extending Lead http://t.co/whQhmUb1 & widening recently; could make Ezone matters messy $$ Apr 18, 2012
• Downgrades Loom 4 Banks http://t.co/EdDRDGQa Moody’s Weighing Ratings Cuts to 114 Institutions in 16 European Countries $$ #lookoutbelow Apr 18, 2012
• Spanish Minister Asks ECB to Buy Bonds as Crisis Deepens http://t.co/cUcLRHLW Things r calmer now but this is the path of least resistance Apr 18, 2012
• Spain’s Surging Bad Loans Cast New Doubts on Bank Cleanup http://t.co/QQT2BSsB NPLs /totallending jumped to 8.16% in February, <1% in 2007 Apr 18, 2012
• Weidmann says not ECB job to tackle Spain’s problems http://t.co/kRUWSfyQ Famous last words $$ ECB only entity w/flexbility 2act fast Apr 18, 2012
• Ray Dalio’s Bridgewater Says Spain Is Worse Off Than It Was Before The LTRO http://t.co/nVMDpG5c It’s a solvency, not a liquidity problem Apr 18, 2012
• GEORGE SOROS: The Euro Crisis Just Entered A ‘Less Volatile But More Lethal Phase’ http://t.co/uzIev7nm LTRO papers overinsolvency probs Apr 18, 2012

Rest of the World

• Argentina’s shadow FX rate shows total loss of confidence http://t.co/RVRicp1p Dishonesty in one area makes others distrust u elsewhere $$ Apr 22, 2012
• Cristina: she is not alone http://t.co/gBWcllwU Many nations engage in expropriation from foreigners. $$ Apr 22, 2012
• Pakistan And India To Go To War Over Water? http://t.co/2mx9a7u9 Whiskey’s for drinking, water’s for fighting over — Mark Twain $$ Apr 18, 2012
• Unlikely but never say never RT @SCMITHA: @AlephBlog Sir No chance of war bet India & Pakistan both Nuclear Army Chief Kayani wants peace Apr 18, 2012
• Mexico Manifesting its Own Destiny http://t.co/kLwx5A6l “Mexico has clearly stood out to me for its relative and absolute strength.” $$ Apr 18, 2012
• Japan’s Teachers Fund to Start Investing in REITs, Hedge Funds http://t.co/9nKnY0zM Trend following; late to the alternative assets party Apr 18, 2012

US Tax Policy & Pensions

• Congress Eyes 401(k)s Again http://t.co/nRL9IkeO Interesting article on some possible/unlikely proposals to change 401(k)s $$ Apr 22, 2012
• How to Pay No Taxes: 10 Strategies Used by the Rich http://t.co/ljjgefpc The main problem is defining income, not tax rates on the rich $$ Apr 22, 2012
• Occupy defined-benefit pension funds! http://t.co/eQooNetC Employees would be better off with DB plans, even if had to fund them themselves Apr 22, 2012
• New Suits Over Do-It-Yourself IRAs http://t.co/B6UYpG5m They aim for the wrong target; the custodian is only a conduit, not a referee $$ Apr 22, 2012
• As population ages, institutions reduce equity holdings http://t.co/rPfescwH A first: US pensions have allocated more to bonds than equities Apr 18, 2012

Miscellaneous

• The New York Times Company in 2015 http://t.co/qp451VDA An optimistic view of $NYT three years from now. I will not buy it. $$ Apr 22, 2012
• Joel Kotkin: The Great California Exodus http://t.co/WOvr2BFE Y California is in deep trouble & will shrink as better places r found $$ Apr 22, 2012
• Contra: Climate Change Has Nothing to Do With Al Gore http://t.co/GO0S60J3 Misinterprets Lk 16:2, & I am to believe he is a Christian? $$ Apr 22, 2012
• The Celestial Event That Sparked a Revolution http://t.co/Kn3E9XJb Fascinating tale on the transit of Venus across the Sun $$ #June6th Apr 22, 2012
• The Downside of Cohabiting Before Marriage http://t.co/a1fFySzW For a man & woman 2 live together long run requires decisive commitment $$ Apr 18, 2012
• Amazon’s knock-off problem (35 Shades of Grey, anyone?) http://t.co/oRJNKhVB Fascinating that some r knocking off books & selling on $AMZN Apr 18, 2012
• Median age for first marriage spikes to record, holding back family formation http://t.co/Uf2SbCTI Long-run effect on society won’t b good Apr 18, 2012
• To Pay Off Loans, Grads Put Off Marriage, Children http://t.co/G72NieZI Far better to skip college than put off marrying & children $$ Apr 18, 2012
• The 101 Finance People You Have To Follow On Twitter: http://t.co/pIaCWK1n A good list, but where’s @moorehn, @interfluidity, @edwardnh $$ Apr 18, 2012
• Dark Meat Getting a Leg Up on Boring Boneless Breast http://t.co/7BDSaTru “Every single day we have shortage of dark meat.” Who knew? $$ Apr 18, 2012
• ‘Pink Slime’ Furor Means Disaster for U.S. Meat Innovator http://t.co/uGwKSIhw The other side of the story; fighting bacteria in beef $$ Apr 18, 2012
• RAIL TRAFFIC CONTINUES TO SOFTEN http://t.co/EnhWT7Ay Economy slowing; just another straw blowing in the wind. $$ Apr 18, 2012
• Freeport Deal Talk Intensifies on Cheap Copper http://t.co/DH26Nf1s Would be a big deal & difficult to pull off; Interesting idea tho $$ Apr 18, 2012
• Taxes are filed and now I have some time to tweet, making up for lost time… Apr 18, 2012
• @danprimack Private Investment Limited Partnership. Features: asset & profit-based fees. Limited liquidity & information. Aims high gets low Apr 17, 2012 (DM: defining “hedge fund” in 140 chars)

Economics & Finance Theory

• Is modern portfolio theory bunk? http://t.co/NrplQvbp Low volatility anomaly says bunk; if you didn’t know MPT was bogus alre ady-> #hopeless Apr 22, 2012
• U.S. money supply growth offers bullish signal http://t.co/aqV6oP0c It is bullish in nominal terms for risk assets; not bullish for the rest Apr 22, 2012
• Slump Taught Profligate Americans Value of Saving http://t.co/22jWf3OL Having slack assets & not being in debt is a virtue not a vice $$ Apr 22, 2012
• The Great Depression as a Credit Boom Gone Wrong http://t.co/OBXRGeY2 Until the great depression is viewed as the bust after a credit boom + Apr 22, 2012
• …we won’t get policy right. The credit cycle is real, & the Fed ignores it, providing liquidity as if it were not a structural problem. $$ Apr 22, 2012
• El-Erian Breaches The Final Frontier: What Happens If Central Banks Fail? http://t.co/pRcdN42N Goal: print enough credit until promises -> 0 Apr 18, 2012
• Deflation Does Not Lead to a Depression, suggests Research http://t.co/2VTu2bAd Separate probs; falling inflation vs systemic impaired debts Apr 18, 2012
• Depression is a choice http://t.co/F4YdBn8x Every creditor wants 2b paid off @ par; many debtors would like compromise, enabling econ growth Apr 18, 2012
• Difficulties in forecasting the impact of shadow inventory on the housing market http://t.co/xcALioOb Mtge > value makes sales slow, $$ low Apr 18, 2012

Financial Markets

• Are fixed income ETFs the new “securitization” product? http://t.co/6qo2U7Zg Shows the many ways that sponsors make $$ off of ETFs Apr 22, 2012
• Time for the SEC to institute new disclosure rules on CEO leverage http://t.co/nMJZslXg Insider CEO deals r material & should be revealed $$ Apr 22, 2012
• Fear Barometer Bubbling http://t.co/HjXre23p Puts getting more expensive relative to calls on the S&P Apr 22, 2012
• Is This the Book that Inspired Jamie Dimon’s Warnings About Regulation? http://t.co/ikzuXwlD Regs make banks behave alike ->systemic risk $$ Apr 22, 2012
• @historysquared One question I always ask is how mgmt/directors treat outside passive minority shareholders. Do we ride the back of bus? $$ Apr 18, 2012
• @historysquared Yeh, don’t let management control audit, nominating, or compensation committees. Split Chairman & CEO, etc., etc., etc… $$ Apr 18, 2012
• Regulators should encourage more diversity in the financial system http://t.co/xhfvsTlS Consistent regs create less diversity forces conform Apr 18, 2012
• In New Funds, Old Flaws http://t.co/h931mglc Some have high fees, longer-term tracking error, hidden counterparty risk, enable stupidity Apr 18, 2012
• Why Investors Should Pay Attention to the JOBS Act of 2012 http://t.co/kk9seYVH Here’s what Hunter thinks are the positives of the JOBS Act Apr 18, 2012
• Fannie Mae Fix Said to Retain Some US Mortgage Role http://t.co/YPAFyygs Crazy people @ UST. 2much debt on housing in general->instability Apr 18, 2012
• Wells Fargo, JPMorgan Label More Junior Liens as Bad Assets http://t.co/QpwE2S43 Wow, this took a long time to finally happen $$ #reality Apr 18, 2012
• Structured-Note Fees (etc) http://t.co/rYf5WXBS IBs must disclose likely value of securities, fees incurred in creation of the notes $$ Apr 18, 2012
• Citadel, Millennium Above $115 Billion With Rule Change http://t.co/j53AMUGG Many hedge funds have borrowed lots; now we know how much $$ Apr 18, 2012
• Year’s first outflows from HY bond funds http://t.co/mUmIq0Yw May eventually lead to $$ weakness Apr 18, 2012
• Green Light for Hedge-Fund Ads Means Caution on Main Street http://t.co/4mh9LNgW Most people will not fare well w/complex investments $$ Apr 18, 2012
• Doing the Right Thing: Upside? Zero. Downside? Financial Ruin… http://t.co/eZlNDJJA We aren’t paid 2b sheriffs a la: http://t.co/egqIsb9V $$ Apr 18, 2012
• Do Jubilee shares make any sense? http://t.co/2LxtggJ1 I don’t think so. Unnecessary complexity; increased illiquidity; would not work $$ Apr 18, 2012
• 12 Intriguing Insights on Mutual Funds http://t.co/6U3JZegh Interesting mutual fund trivia from Morningstar $$ Apr 18, 2012
• Interesting post. But a successful spec on 1 risk can morph into credit risk post-crisis. … http://t.co/Vzlb5xdT Apr 17, 2012
• Falcone looks like a one-trick pony who made one lucky bet and won. Now he loses regularly. http://t.co/dsivgMCs Apr 16, 2012