Month: September 2012

Complexity in International Relations

Complexity in International Relations

One of my sons came to me today, commenting on how stupid it was for there to be deaths that occurred as a result of a lousy movie trashing the so-called “prophet Muhammad.”

My comment to him was, “You have to understand that the world is a complex system, with a lot of parties hating each other, but with not enough impetus to make them fight.? This small film kicked them over the edge, and made them fight.”? Regardless of the film, the pressures were there, and most likely would have exploded, but who could tell what would cause it?? Who would knock over the first domino?

When 9/11 happened back in 2001, I described seven reasons why the terrorists did what they did, and I emailed them to friends who expressed the naive American dismay because “we are nice people, why are they attacking us?”

  1. We support Israel, which they view as a client state of the US in the Mid-East.
  2. We hinder the efforts of those who want radical Islamic governments by supporting? moderates.
  3. They hate the pollution we spread throughout the world, because of the entertainment we allow to be published within our borders, that we do not curtail.
  4. We base troops in their “holy land,” Saudi Arabia.
  5. They are insulted because we are rich, and they are poor.? Islam should lead to blessings to the faithful, and dearth to the infidels, but it is not so.? Rather than realize that their beliefs are false, they hate those better off.
  6. We engage in wars in Muslim lands, showing our dominance over them.
  7. Minority Muslim groups such as the Shia and Alawites feel themselves attacked by American alliance with the Sunnis, through the House of Saud.

This is a complex situation, but the reasons for radical Muslims to dislike America were/are numerous.? Many decried Ron Paul in the Republican debates for saying that there was a rationale behind why a subset of Muslims would want to attack the US.? He was right, and would that more politicians would understand his moderate view.

An event like this was likely to happen for the reasons I described above.? It was only happenstance that the stupid film was the monkey with the match sitting on the gasoline can.

Book Review: The Missing Risk Premium

Book Review: The Missing Risk Premium

In order to get more return, you have to take more risk, right?? Those of us who are value investors, or bond investors, have disagreed with this idea for years.? We get the best returns by avoiding risk.

A great part of of making money in investing is not losing money.? In order to avoid losing money, you have to buy assets that are cheap relative to their value, and intrinsically safe — i.e. what is the worst-case scenario?? Could I lose a lot if things go badly?

This book is two things: it is a teardown of modern portfolio theory as posited by the academics, and the establishing of a new theory that suggests that we get better returns by avoiding volatility of investment returns.

Here’s part of the problem: Scientists are human, just like you and me, and they occasionally defend wrong ideas because they propagated in a time where some novel but wrong papers/books were written, and seemed right at the time, and the consensus accepted them, because it agreed with their biases.

That’s what happened with modern portfolio theory.? The bias of the economists was “You have to take more risk to get more return,” when the reality is that taking more risk to get more return works up to a point, and after that, those buying volatile stocks, bonds, etc., are trying to hit “home runs,” and have lost track of risk control.? People don’t estimate well in high volatility situations, and tend to lose money as a result.

Think of it this way: if you want to be totally safe, invest in cash-like instruments.? You will earn nothing.? If you want to make some money, invest in a portfolio of stocks or bonds that are stable in terms of their market returns.? If you want to lose money, invest in volatile investments.? Most investors will not know the right time to buy or sell those investments.? It is too hard; leave it to the fools that want to take long-shot bets.? Gamblers don’t win in investing.

Low volatility investing is a proxy for safety, but also a proxy for neglect.? Many companies dwell in the shadows of the market.? No one follows them.? They may be big enough to be followed, but they are in an uncool industry, like insurance.? Or they represent an out-of-favor area, where only insiders/experts are quietly playing.

This is a good book for two reasons: it tells you to avoid the idealistic theories of the academics.? Second, it tells you that avoiding risk/volatility leads to better returns.

Most successful businessmen are in the middle. They take prudent risks.? This book may do this from a quantitative investment framework, but that is what it encourages.

Quibbles

The book needed a better editor, but so do most books.? We need more grammar, spelling and typo Nazis.

Who would benefit from this book: ? There is not much math in the book, but there is a lot of discussion of academic papers on finance.? If discussion of academic papers on finance bores you, this is not for you.? If you can tolerate that, this is a very useful book for those that want to do better in investing.? If you want to, you can buy it here: The Missing Risk Premium: Why Low Volatility Investing Works.

Full disclosure: The author sent me a Kindle copy of the book, without my asking.

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.

Sorted Weekly Tweets

Sorted Weekly Tweets

Financial Markets

 

  • State court ruling deals blow to U.S. bank mortgage system http://t.co/QilYZQJZ Washington State Supreme court allows MERS 2b sued &more $$ Sep 14, 2012
  • Partial explanation for flash crash and HFT http://t.co/ylpBj6Bm http://t.co/ABsvytw9 AP http://t.co/7xH09jMn http://t.co/hyznU44r $$ Sep 14, 2012
  • Violation: Prop Feeds #1 and #2 sent data to proprietary customers before NYSE sent data to the public feed. http://t.co/skh2CaUW ouch $$ Sep 14, 2012
  • Equity Firms Like Bain Are Depicted as Colluding http://t.co/8KMIo1xy This could be significant, but some of the legal issues r squishy $$ Sep 14, 2012
  • A Conversation with Ray Dalio http://t.co/clEaTy9C Full transcript, which I like, because watching video is slow $$ Sep 14, 2012
  • Jeff Gundlach’s Eye-Opening Presentation ‘Mirror, Mirror On The Wall’ http://t.co/QE6PHUoP Be prepared for lots of informative charts $$ Sep 13, 2012
  • Fink Belies Being Boring Telling Customers to Buy Stocks http://t.co/MYdrW95h A feature article on $BLK and Larry Fink; next Tsy Sec? $$ Sep 13, 2012
  • Oddly, what Dalio is saying here is very close to Harry Browne’s idea of the Permanent Portfolio. $$ http://t.co/C0x37B3Y Sep 13, 2012
  • Mortgage REITs’ leverage poses significant risks to the overall mortgage market http://t.co/Ifje6AxB Public markets r mismatched/limited $$ Sep 12, 2012
  • Bill Gross Sees Higher Long-Term Yields Amid Reflation http://t.co/eYPeRZlt If that were true, rates would be high already. $$ #youlose Sep 12, 2012
  • Is BlackRock Kissing Individual Bonds Goodbye? http://t.co/s2RywmL3 Mmmm…. converting transaction revenues into an annuity… yes… $$ Sep 12, 2012
  • 361 Capital Weekly Research Briefing http://t.co/nd6akDbW Interesting briefing that makes a mostly bullish case $$ Sep 11, 2012
  • Is Everything We Know About Stock/Bond Allocations Wrong? http://t.co/85D2kUik Questions the wisdom of risk parity for asset allocation $$ Sep 11, 2012
  • Want to Buy a Private Stock? http://t.co/E3WojVi2 Listen to @jasonzweigwsj Do not buy private equity; you don’t have the expertise. $$ Sep 09, 2012

Federal Reserve

 

  • New round of quantitative easing biggest yet? http://t.co/ANA3MX2y Potentially. Problems will come as Fed corners low-rate GSE Resdl MBS $$ Sep 14, 2012
  • FOMC Central Tendencies: Target Fed Funds Rate at Year-End 2012-5, long-run 0.26 0.38 0.80 1.72 4.07 Chg: -0.04 -0.12 -0.30 NA -0.13 $$ Sep 13, 2012
  • FOMC Central Tendencies: Appropriate Timing of Policy Firming extends 7.6 months from June to 2.8 years Sep 13, 2012
  • FOMC Central Tendencies 2012-2015, long-run PCE inf 1.75 1.84 1.82 1.97 2.00 PCE inf 2012-2014 long-run +0.27 +0.08 +0.05 0.00 $$ Sep 13, 2012
  • FOMC Central Tendencies 2012-2015, long-run Unemp 8.11 7.70 6.98 6.38 5.60 Uemp change 2012-2014 long-run +0.01-0.01-0.30 0.00 $$ Sep 13, 2012
  • FOMC Central Tendencies 2012-2015, long-run GDP 1.84 2.78 3.4 3.39 2.44 GDP change 2012-2014 long-run -0.29 +0.210 +0.12, 0.00 $$ Sep 13, 2012
  • Budeeah, budeeah, budeeah, That’s all folks! Sep 13, 2012
  • Something happened around 2:30, but what? Sep 13, 2012
  • Press seems feistier than usual at the Bernanke Presser $$ Sep 13, 2012
  • Wow, a 2% move in gold qualifies as “explodes?” Wow #verbinflation http://t.co/8hodDxcp Sep 13, 2012
  • Extends low FF to mid-2015, ~9 months Sep 13, 2012
  • Fed’s web server is paralyzed, overwhelmed Sep 13, 2012
  • Ding! It’s SHOWTIME, Ben! $$ Sep 13, 2012
  • Bernanke Proves Like No Other Fed Chairman on Joblessness http://t.co/qHWtJv7W Bernanke imagines that he is fighting recession $$ Sep 12, 2012
  • Fed Stuck at Zero Into 2015 Seen in Swaps, QE Odds Reach 99% http://t.co/IM6HBDQR Given that fixed income mkts anticipate: no QE effect $$ Sep 10, 2012
  • An idea better kept in reserve http://t.co/ujKFy1Vc When u r playing around near the zero bound, all sorts crazy things could happen $$ Sep 10, 2012

 

US Politics and Economics

 

  • US Consumer Price Index Increases by Most Since 2009 http://t.co/6u2Di5r4 Given the unlimited QE, hard to see why prices should be weak $$ Sep 14, 2012
  • Airbrushed History and Dusted-Off Promises http://t.co/gMetXbgi Obama promised much more in 2008-9 than he is owning up to now. $$ Sep 13, 2012
  • Household Income Sinks to ’95 Level http://t.co/LA6pnEC3 R U better off than 4 years ago? Mean, yes. Median, no. $$ Sep 13, 2012
  • In Chicago, the Teachers’ Last Stand http://t.co/3uAcUJZT Bad news for the teachers, given underfunded DB plan, $$ struggles will worsen Sep 13, 2012
  • This is Illinois after all…corruption & bad mgmt r normal. Teachers fear 4 their unfunded pensions & high $$ jobs. http://t.co/KVWIURuV Sep 13, 2012
  • About Those Policies That Got Us Into This Mess http://t.co/cUDmsUJy Interesting: many of the critical laws were signed by Democrats $$ Sep 13, 2012
  • White House pushes back on claims from Woodward book http://t.co/IPpUUGXg The fiscal crisis was Obama’s fault as well as Congress’ fault $$ Sep 12, 2012
  • Strike Puts Spotlight on Teacher Evaluation, Pay http://t.co/MJ0A4pCt Break the union and hire non-union teachers who r motivated $$ Sep 12, 2012
  • Stagnant Incomes Signal Restraint in Spending by U.S. Consumers http://t.co/uiBxYBzM Y b aggressive spending when policy is uncertain $$ Sep 10, 2012
  • Why Health Care Matters and the Current Debt Does Not http://t.co/yw4MLv6o Because the healthcare unfunded liabilities r a LOT BIGGER $$ Sep 10, 2012

 

Other

 

  • #FF @TALENTEDBLONDE @prieur @rcwhalen @AmyResnick @AnnieLowrey @brucekrasting @derekhernquist @fundmyfund @ftalpha @BloombergNews $$ Sep 14, 2012
  • Children of Single Parents Much More Likely in Poverty http://t.co/PbaJuoGU “Dog Bites Man” Two parents r normally stronger than one $$ Sep 13, 2012
  • The Manhattan Project to End Fad Diets http://t.co/NvkkihYt Sounds promising, but there is 2 much $$ & wishful thinking w/fad diets Sep 13, 2012
  • Michael Pettis publishes! It’s a great night! $$ Sep 13, 2012
  • Charities Deceive Donors Unaware Money Goes to a Telemarketer http://t.co/vKXjfU7K Don’t ever give money to a charity over the phone $$ Sep 12, 2012
  • Medics Being All They Can Be Find Civilian Job Barriers http://t.co/p7gZbgNT Vets have to have a way to transist to civilian work $$ Sep 12, 2012
  • Is College a Lousy Investment? http://t.co/GoKcgrLB It depends. If u r in the top 20%, no. If u r in next 20%, maybe. Otherwise, yes $$ Sep 12, 2012
  • 13 Tools To Tame Social Media Overload http://t.co/UYXZUMAt A variety of programs that can stiffen your resolve to avoid wasting time $$ Sep 11, 2012
  • Why the New Marketing-Driven Corporate Research Lab Needs the CIO http://t.co/d8wWCDJc Research, Development & Marketing belong together Sep 10, 2012
  • Letting Babies Cry a Bit Is OK http://t.co/UmqwwLbl Babies stop crying (leave aside pain/sickness) when crying does not get rewarded $$ Sep 10, 2012

 

Energy

 

  • Wind is intermittent, advances in batteries that can store energy are also needed. http://t.co/eBsqqW5y Sep 13, 2012
  • Asian Water Scarcity Risked as Coal-Fired Power Embraced http://t.co/C4QQXAQm The need for water is forcing tough choices in India $$ Sep 11, 2012
  • Gamechanging Natural Gas Tech Gets Green Light http://t.co/tiI2hiu2 Methane hydrates r recoverable; triples existing oil & NG reserves $$ Sep 10, 2012
  • Saudi Arabia Concerned About Rising Crude Prices http://t.co/f3eUmId0 High quality problem, but how much can the Saudis a4d 2cut back $$ Sep 10, 2012

 

Rest of the World

 

  • Swiss Farmers Clash With Traders as Bubble Builds in Town of Zug http://t.co/EjPUX0Pa Another report from the Bubble caused by the SNB $$ Sep 13, 2012
  • Skip College Is Top Advice for World-Beating Koreans http://t.co/YQ9DKAZO Any strategy to improve your lot can be overused, even college $$ Sep 12, 2012
  • Less-Rosy Reality http://t.co/HfidgmGM This current round of euro-optimism will wear badly with time. Cash flows will dictate reality $$ Sep 11, 2012
  • Can Asia avoid the middle-income trap? http://t.co/PLB8ER7i How technology is killing the Asian growth miracle http://t.co/ue15U4sd $$ Sep 10, 2012
  • Hollande Challenges Unions on Labor Law as Stagnation Sets In http://t.co/xRBJdqdt Pretty tough to start fighting w/base w/low poll #s $$ Sep 10, 2012
  • Why Merkel Wants To Keep Greece in Euro Zone http://t.co/b3cTiHfq It is cheaper in the short run than bailing out the banks $$ Sep 10, 2012

 

Companies

 

  • Why Ruane Cunniff & Weitz Funds Like Valeant Pharmaceuticals (VRX) http://t.co/QBLd8SGV Combination of Pharma co, & asset-stripper $$ Sep 14, 2012
  • Andrew Ross Sorkin?s Bad Math on AIG http://t.co/pHdsYWRV Notes tax favors $AIG received, could have mentioned forgiven bailout terms $$ Sep 13, 2012
  • Legg Mason CEO to Leave Amid Pressure http://t.co/PB4ZxKCj $LM was better in the past, when they did not rely on fund mgmt as much $$ Sep 12, 2012
  • David Merkel: Why You Will Never Be Buffett http://t.co/iPfn9Gxo @reformedbroker features two of my articles on Buffett. Thanks, Josh $$ Sep 12, 2012
  • Ship Magnate Uses Gut in $11 Billion Bet Worst Since ?70s Ending http://t.co/f5BGyDoZ Long article on the gamblin’ head of $FRO & $SDRL $$ Sep 10, 2012

 

On Bailouts

 

  • Two notes on the bailouts: first, those saying the US Govt made $$ on the bailouts are not counting in Fannie & Freddie Sep 11, 2012
  • Second: they aren’t counting the cost of capital: had they invested $$ at the same time in a 50/50 mix stocks/bonds would’ve made much more Sep 11, 2012
  • So, aside from encouraging future moral hazard, the bailouts lost $$. Strictly on a moral basis, the govt should not play favorites. Sep 11, 2012

 

China

 

  • The Communist Party?s Big Problem? It?s Not Bo Xilai http://t.co/BXRshBNQ Publication of a long, critical commentary of CCP direction $$ Sep 13, 2012
  • Shadow Bankers Vanishing Leave China Victims Seeing Scams http://t.co/4RmbjG8d When bankers flee, go B/K, commit suicide: not good sign $$ Sep 13, 2012
  • China’s Revolution Risk http://t.co/lzs5k5ll One has to remember that not all risks are simple and economically rational. $$ Sep 12, 2012

 

Replies

  • @BarbarianCap @derekhernquist Thanks much. Don’t know what to say. 🙂 $$ Sep 15, 2012
  • @derekhernquist You’re welcome, Derek. I appreciate following you, & you following me. Why did I start the blog? To give something back $$ Sep 15, 2012
  • @moorehn Yeah, I know. I just Googled a few phrases from your show to see what would come up. Sorry that that did. Sep 15, 2012
  • @moorehn Rush Limbaugh also used “It’s like a sugar high.” 4 QE yesterday on his radio show http://t.co/BhS48hxN No, I don’t listen 2 him $$ Sep 15, 2012
  • @ritholtz Yes. First time but there are other cases in the works $$ Sep 14, 2012
  • @LaMonicaBuzz Definitely the latter. Full disclosure: long $SPLS $$ Sep 13, 2012
  • @JamesGRickards Confidence comes from a strong balance sheet & sustainable economic policies Sep 13, 2012
  • @XQuickFixX That figure is for average over a lifetime. Sep 13, 2012
  • @XQuickFixX “average BA college degree makes ($52,200)” Link? Sounds too high Sep 13, 2012
  • @wsquared58 Good for you Sep 13, 2012
  • @TheStalwart Cool, well, we will watch and see to the EOD Sep 13, 2012
  • @TheStalwart Are you forecasting the immediate move, say, 15 minutes, or to the end of the day? Sep 13, 2012
  • . @Nonrelatedsense Browne’s system is simple, like a VW bug. Bridgewater is like a Maserati in comparison. Both are elegant AA ideas $$ Sep 13, 2012
  • @waughkd I have been to SD once in my life; my brother lived on an Indian reservation there 4 years. The physics of wind power is tough $$ Sep 13, 2012
  • @XQuickFixX It used to be that that earned below median incomes; now they earn above median; it’s the pensions that r really high Sep 13, 2012
  • @munilass Thanks for tweeting that; I have had a lifelong interest in prime numbers, though the math here is beyond me. Sep 13, 2012
  • @GaelicTorus I’ve debated that; I sometimes do negative book reviews. More often it doesn’t get a review. Sep 13, 2012
  • @GaelicTorus Book isn’t out yet, not seeking a copy. Sometimes I get books I did not request, e.g., Hank Paulson’s book & didn’t review $$ Sep 13, 2012
  • @GaelicTorus former employee of $GS who left, purportedly because his ideals were shattered as $GS changed 2b more mercenary $$ Sep 13, 2012
  • @JacobWolinsky thanks 4 that data point. traded away most of my commodity stocks a while ago. Did not want to be a hog. $$ Sep 13, 2012
  • @JacobWolinsky If China’s growth materially reduces, many commodities will have a hard time. Sep 13, 2012
  • @groditi I could convert it to a PDF and send it to you just e-mail me at david.merkel@gmail.com Sep 13, 2012
  • Commented on StockTwits: I never use stops. Never. I just buy, hold, and sell after a few years. I you choose well,… http://t.co/HXgjGxic Sep 12, 2012
  • @TheStalwart Car chases go on a lot longer because other cars pull over for the police $$ Sep 12, 2012
  • @MarkDampier I’m skeptical too… $BLK is big enough to be able to get good executions for clients. They shouldn’t have to use ETFs $$ Sep 12, 2012
  • @BradErvin1 You can’t do that. The only thing you can rely on is that glutted sectors will always return less than non-glutted sectors. $$ Sep 12, 2012
  • .@BradErvin1 The crisis came from capital misallocation. The bailouts tossed more capital into sectors that were glutted already. Not C-P $$ Sep 11, 2012
  • @Oval54 comes back w/interest to special interests, not to the average person Sep 11, 2012
  • @EddyElfenbein Can’t be any other way. My first statistics professor told us on on day 1: “Statistics is a meeean profession.” $$ #malehumor Sep 11, 2012
  • @BoydRoddy @finemrespice Funny thing is that Federal Reserve did not talk publicly about the life cos, but sys risk during $AIG crisis $$ Sep 11, 2012
  • @finemrespice @BoydRoddy Agreed, it wasn’t the sole reason. Systemic effects of AIGFP, and do you hae a link on the FRC Basel issue? Sep 11, 2012
  • @finemrespice @BoydRoddy AIG’s Domestic Life companies lost all of their surplus when the AAA subprime RMBS underlying sec lending failed $$ Sep 11, 2012
  • @cabaum1 Quirk of Twitter, no #FM, #FT, #FW, #FTh, #FSa, or #FSu, only #FF for “Follow Friday,” & people typically only do #FF on Friday Sep 10, 2012

 

Retweets

 

  • US Govt outsources a lot RT @paulvieira:Joe Biden Calls Outsourcing “Not Bad If You’re Running A Company” http://t.co/vB42Feia via @buzzfeed Sep 14, 2012
  • RE: @bloombergview Bernanke should do the right thing: admit that he is wrong, and resign. http://t.co/1R5mxQw9 Sep 13, 2012
  • RE: @bloombergview Doing the same thing again and again, and expecting a different result.? You back an insane moneta? http://t.co/73aZFlFI Sep 13, 2012
  • I’m in the stagflation camp too $$ RT @BubblesandBusts: @alephblog I’ll take the under on GDP and over on unemployment and inflation Sep 13, 2012
  • RT @KeithMcCullough: Maybe one of the saddest days in American economic history; history wont forget this Sep 13, 2012
  • RT @credittrader: THIS!! RT @PragCapitalist: Bernanke basically just described the theory that asset bubbles are good for the economy…. $$ Sep 13, 2012
  • I tend to agree $$ RT @Nonrelatedsense:I think any allocation model faces a challenge today. Those two face more than they have in the past. Sep 13, 2012
  • Creation of credit has never brought prosperity. U r deluded $$ RT @BloombergView: Bernanke, You have no excuse | http://t.co/KwoPTjCJ Sep 13, 2012
  • As my Dad would say, for “socks & underwear” too $$ RT @pdacosta: Fed Chairman Bernanke spotted at Wal-Mart. Shopping for kitchen sink. Sep 13, 2012
  • Best since Paulson, including Hank $$ RT @pegobry: Geithner: best Treasury Sec in decades? Sep 12, 2012
  • RT @wesbury: It’s the spending. It’s the spending. It’s the spending. It’s the spending. It’s the spending. It’s the spending. It’s the … Sep 12, 2012
  • Performance art, yes $$ RT @TheStalwart: I think I might like to attend this conference, merely as performance art. http://t.co/PO6fzBp6 Sep 11, 2012
  • RT @dwotapka: RT @AskMiles: My mother used to say I’d get bored with pizza if I had it every day. My mother was wrong. Sep 11, 2012
  • At least those that cite the labor force participation rate $$ RT @TheStalwart: U-6ers are the truthers of the economics profession. Sep 11, 2012
  • RE: @bloombergview Same is true of Obama.? We face gridlock regardless of who gets elected. http://t.co/jGXTXoLI Sep 11, 2012
  • RT @annasacca: “Anyone wanting to learn about private equity would benefit from The New Tycoons by @jasonkellynews” http://t.co/xaF7HhLf $$ Sep 11, 2012
  • RT @BoydRoddy: Sole reason for AIG rescue: Sec.Lending undisclosed scheme under Neuger imperiled largest Life co’s in the world. No Life … Sep 11, 2012
  • As a happy user for around 2 years, I salute you; to my readers, look into getting free Opendns. $$ RT @opendns: Thanks for the RT! Sep 10, 2012
  • RT @opendns: We’re hearing reports that OpenDNS #SmartCache is helping OpenDNS users get to sites otherwise down during @godaddy #outage … Sep 10, 2012
Actuaries Versus Quants

Actuaries Versus Quants

I’m an Actuary and a Quant.? I’m not and Actuary, and I’m not a Quant.

I suppose I could do the other two permutations.? I won’t, but I will explain.

I passed all of the exams from the Society of Actuaries to become a Fellow in the Society of Actuaries.? I maintained that credential for around 18 years by paying my dues.? Oddly, once I stopped paying my dues, and thus ceased to be a Fellow, I got more requests to be on committees, and give talks to the Society of Actuaries.? Things that I recommended to the Society 20 years ago are finally getting a serious hearing now.? My main suggestion, that actuaries should have to pass a writing test is at least floating among some thinkers at the Society.

Why a writing test?? The ability to express ideas verbally to those who may not have a strong math background is important, and correlates with other social skills that aid in leadership.? The Society of Actuaries at one time (not sure when) did have an English test, and in that era, actuaries were not merely math nerds, and many of them were leaders in insurance and pensions.

So, I am no longer a Fellow in the Society of Actuaries.? I am still an actuary.? The way I reason and use math to solve investing and other problems stems from the skills that I learned when practicing as an actuary.? As actuaries went, I was a generalist, and would enjoy tackling unusual and multi-disciplinary problems.? The problems I liked best were the toughest ones — the ones where there is no easy answer, some degree of qualitative reasoning must be employed, and new techniques created.

Unlike most actuaries, I know the investment math relatively well, which makes me a Quant [quantitative analyst].? But I am not a Quant, or maybe, I’m a skeptical Quant.? Why?? I don’t believe that Modern Portfolio Theory is right.? In general, higher returns are achieved by taking moderate risk, not low or high risk.? More risk does not mean more return after some point.

Also, markets are more complex than the Quants will generally accept.? Disturbances are not normally distributed.? Variances of stock returns are infinite, but normality is used in order to get tractable results.? Markets sometimes fail to trade in a continuous manner.? There are jumps/falls in prices far greater than a normal distribution would expect.? And that gets borne out by the greater volatility of markets close to open, than open to close.

So I am a skeptical Quant at best, but if someone asks me whether I am an Actuary or a Quant, I will say I am an Actuary.? Why?

The main thing is differences in method.? Actuaries believe in table stability; Quants believe in bicycle stability.? Actuaries look at the cash flows, and make minimal assumptions about markets continuing to operate.? Quants usually assume that market continue to operate.? Actuaries look long-term, and do stress-testing.? Quants look short-term, and do hedging.

This is one reason why few pure insurance companies failed during the crisis, while many banks did.? If assets and liabilities are matched, it is hard to have a run on the company, aside from credit events.

Actuaries think long-term, while Quants think short-term.? In the short-run, listening to the Quants will yield greater profits.? In the long-run, listening to the actuaries will yield greater profits.

There’s one more issue.? Actuaries have an ethics code.? Quants don’t.? (Quants that are CFAs have an ethics code, but most aren’t CFAs.)? Actuaries are supposed to act in the best interests of clients.

In my opinion, Wall Street would be far better of replacing their Quants in risk control positions with Actuaries.? Actuaries have a public policy interest, and would not merely bend to the needs of the company.? They would cut back risk positions far more than the Quants do.

I know this only makes sense to Wall Street if they are willing to adopt a stable model.? Actuaries would help to stabilize things , and a focus on long-term stability would aid Wall Street.

But if forced to choose: I am an actuary, I am not a quant!

Redacted Version of the September 2012 FOMC Statement

Redacted Version of the September 2012 FOMC Statement

August 2012 September 2012 Comments
Information received since the Federal Open Market Committee met in June suggests that economic activity decelerated somewhat over the first half of this year. Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months. Unchanged GDP view.
Growth in employment has been slow in recent months, and the unemployment rate remains elevated. Growth in employment has been slow, and the unemployment rate remains elevated. No real change.
Business fixed investment has continued to advance. Household spending has been rising at a somewhat slower pace than earlier in the year. Despite some further signs of improvement, the housing sector remains depressed. Household spending has continued to advance, but growth in business fixed investment appears to have slowed.? The housing sector has shown some further signs of improvement, albeit from a depressed level. ? Shades down business investment.? Shades up housing.
Inflation has declined since earlier this year, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable. No change in? their view of inflation. TIPS are showing rising inflation expectations since the last meeting. (5y forward 5y inflation implied from TIPS.)
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. No change. Why bother saying this?
The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Monetary policy omnipotent.
Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. No change.
The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective. Clarifies and tightens its policy objective. CPI is at 1.4% now, yoy, so that is quite a statement.
The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.? The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.? These actions, which together will increase the Committee?s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. Commits to an open-ended purchase of low-coupon agency residential MBS.? Wonder how long it will take them to saturate that market?

Also continues the twist program in Treasury bonds.

Will reinvest maturing MBS in more MBS, and agencies in agencies.

Does not mention how the twist will affect those that have to fund long-dated liabilities.

The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation The Committee will closely monitor incoming information on economic and financial developments in coming months. Moved up from below, no real change
as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. Conditions additional policy changes on the labor market.
  In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases. The FOMC promises what it cannot know or deliver.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. Promises that they won?t change until the economy strengthens.? Good luck with that.
In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015. Extends low Fed funds out by around five months versus the last FOMC statement.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. No change
Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant an exceptionally low level of the federal funds rate. Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted. No change. Only semi-sane person in the room.

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Comments

  • The FOMC pulls out all of the stops.? When this policy doesn?t work, what will they do?
  • The FOMC commits to conditional but potentially unlimited agency residential mortgage-backed securities [MBS] purchases, continues and extends the twist program, and lengthens the period of FOMC Fed funds policy accommodation.
  • 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 investment 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.
  • 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.

A Statement to Dr. Bernanke:

More debt will not get us out of this crisis.? The Great Depression ended when enough debts were compromised, paid off, or cancelled, which from my study is 1941, before WW two started.

Your policies further aid the growth of the budget deficit, and encourage malinvestment in housing and banking, two things in a high degree of oversupply.? The investments in MBS only help solvent borrowers on the low end of housing, who don?t really need the help.? Holding down longer-term rates on the highest-quality debt does not have any impact on lower quality debts, which is where most of the economy finances itself.

The problems with unemployment are structural, not cyclical.? Labor force participation rates continue to decline.? There is greater labor competition around the world, forcing down wages on the low end.? There is nothing that monetary policy can do to change this.? You can create stagflation through your policies, but not prosperity.

When inflation does arrive, the FOMC is going to find it very hard to raise Fed Funds or shrink its balance sheet.? The banks will not react well as you try to shrink, and the long rates that you have held down will react violently.

You haven?t thought through all of the ?second order? effects of your policy.? Even the ?first order? effects, which favor the rich over the poor, seem to elude you.? Assets rise, helping the rich.? Interest rates fall, helping the rich who can borrow.? Commodity prices rise, harming the poor.

Insanity is doing the same thing over and over, and expecting a different result.? When will you realize that the policies of the Fed aren?t helping, and need to be abandoned?

Carrying Capacity

Carrying Capacity

I am usually dubious about the government trying to encourage certain behaviors.? Examples:

  • Buy a house
  • Go to college
  • Manufacture goods
  • Any number of special interest earmarks
  • “Saving” through IRAs and other tax-deferred vehicles

I like to think that most people know well enough to look out for themselves.? They know well enough whether they can afford and need a house.? They know whether they are college material or not.

But in both of those cases, the government provided incentives to invest in houses and college educations, and managed to push up home ownership for a time, and college students as well.

The problem is that not everyone wants to or it capable of taking on the fixed commitment of buying a home.? Not everyone is bright enough or motivated enough to go to college, and the effect of college on wisdom and job prospects is is dubious if you are not a top quartile high school student.

Better to be a welder than a Anthropology BA.? Better to be a plumber than a Sociology BA.? Better to be an electrician than a Humanities BA.? Better to rent than own a home that you can’t afford.

Governments imagine that they can shape outcomes, and in the short-run, they can.? In the long-run, the real productivity of the economy matters, and only those that can make it without government help will make it.? Whatever government policy may try to achieve, eventually the economy reverts to what would happen naturally without incentives.? There is a natural carrying capacity for most activities, and efforts to change that usually fail.

Politicians err greatly, both Democrats and Republicans, by promising that they can create a better economy.? Please, leave the economy alone, and it will do better.? Regulate the banks tightly, because their borrowing short and lending long causes most financial crises, but in general, the government errs when it encourages us via the tax code to do anything.? Eliminate preferences, simplify the tax code, reduce the ability to defer income.

We will do better with humble politicians and bureaucrats who realize that there is not much that they can do, and so the size of government reduces.

Simple government and taxes causes companies to focus on operations, not tax savings.? Same for individuals; let them focus on productivity, not tax angles.

Pushing an economy beyond its natural limits (carrying capacity) by government intervention does not work.? Limited government works, and people have to live with the fact that the government can’t solve every problem.? Woe to those where the government thinks it can do so.

Reforming Public School Testing

Reforming Public School Testing

My wife was a high school teacher in math and science in West Sacramento when we married.? (West Sacramento is in Yolo, not Sacramento County, and is considerably poorer than Sacramento.)? She is forever grateful that I took her away from “all that,” and allowed her to have a life where she homeschools our three biological and five adopted children.? She does a great job, and I assist her where she requests, usually where it involves advanced math.? Having public school teaching experience is an impediment to schooling at home, but my wife has adjusted well.? (In general, what you learn about teaching at college makes you less capable to teach.? My oldest daughter just went through that, and didn’t believe us when we told her that in advance, but agrees with us now after going through the courses.)? Our educational system would be better if we eliminated teacher credentialing, and just hired motivated people who know the subject areas, who love to work with kids of the appropriate ages, and have grit — a determination to succeed.? The present system favors those who are capable at dealing with the paperwork that state and federal governments demand.

For the first two years we were married, I was quiet or sympathetic to my wife’s fellow teachers.? There is a pathology of sorts where because you have gone to school, and have seen a lot of teachers, therefore you understand teaching.? Teachers often do not like amateurs offering their opinions.? I did not volunteer my opinions to them, in deference to my wife.

That said, I would like to offer my opinion on testing students and using those scores to set teacher pay, or district transfer payments.? Remember, this doesn’t affect me because we homeschool; we pay our state/county taxes though we get less from it than most.

(Before I continue, I would like to note that our dealings with the Howard County school system have been unfailingly pleasant; they are a model for how the public schools and homeschoolers should interact.)

Dedicated teachers will say, “We don’t want to teach to the standardized test.? We want to impart real knowledge, rather than the ability to grind out answers to multiple choice questions.”? That’s a good goal.

In my life, I have taken many exams.? I have passed handily with almost everything, but the toughest exams were essay exams where you had to show your reasoning.? This is true in Math, Science, English, Social Science, etc.? This applied to the second half of my actuarial exams, and also roughly half of my CFA exams.? It was true for virtually all of the exams I had in college and graduate school. (As an aside, the actuarial exam multiple choice problems are much, much harder than normal multiple choice problems… schools should adopt their techniques if they do multiple choice because the methods really test people.)

But for the actuarial and CFA exams, those were my experience with broadly administered exams that were mostly essay.? To grade such exams, the test writers create a grading outline and assign points for each point made.? If someone makes a valid point that the grading outline did not account for the grading outline expands to accommodate it.? Typically two people grade each paper, and the average is the grade, unless they differ by too much, in which case a third grader comes in, and the average of the closest two grades is the final grade.

This is real testing and real grading, and guess what?? It is expensive to do, but generates real results.

With both the actuarial and CFA exams, you could not study to the test.? You could only study.? You could not tell year-to-year what would be on the test.? It varied considerably.

The Payoff

That is the way the public school examinations should be.? The tests should be essay-based (after a certain age, like 10), randomized (not everyone gets the same test), unpredictable, but relevant to what should be taught to students at a given age.? Where warranted, the ability to write should be a factor in scoring, because that is a large predictor of how well you have learned your verbal skills.? Partial credit would come to those that show reasoning capability, even if they didn’t get the right answer.

This would be an expensive way to administer exams, but hey, maybe more college graduates without jobs could get some part-time work as a result.? Or, college students could grade them over a summer, lessening the economic cost of college.? But it would be an effective way of encouraging real learning, and measuring it.

Best of all, the essay exams would be a lot like the life they are going to face.? It’s not predictable.? You don’t know what you are going to face.? Face it bravely, or you have no chance.? Prepare now, study hard, or your odds of success diminish.

The same applies to the teachers.? Teach the most important stuff.? Stress reasoning.? Try to create thinkers, not mere memorizers.? Motivate the material in the best way that you can to inspire students to think.? Teach them to write well, and encourage them to read widely.? I may be conservative in my views, but I have read widely, including many things that I disagree with a lot.? Teach them to look at both sides of a question (when they are old enough), and understand the arguments of those that disagree.

And then, let the teachers live with a system where the test is unpredictable, and they cannot affect its outcome directly.? Will they like that?? I don’t know.? What I do know is that if America is serious about reforming its schools, it will adopt an approach like this, and pay the money necessary to have standardized essay tests graded.

But once teachers can’t affect the results of the testing directly, they will teach their students the best that they can, because if they don’t and the scores of their students sag, they may be gone after some time.? This would empower real accountability, and eliminate the deadwood among teachers that can’t do the job.? Remember, aside from the best, most teachers peak in their effectiveness after year six.? As a result, tenure for public school teachers is really a bad idea.

Education improves by removing unmotivated and untalented teachers.? The best teachers love their subject, their students, and love what they do.? They have grit, and are determined to make a difference.? With 35-45 years behind my public school education, I can still name my teachers who were motivated, against those that went through the motions.

PS — to my regular readers, I know this was an unusual post.? I’m not planning on doing more of these.

On Tech Company Dividends

On Tech Company Dividends

There’s a lousy idea floating out there, that it is a bad thing for a tech company to pay dividends (also here).? Not true!? Companies that pay dividends treat their capital more carefully, because now their equity has an explicit cost.? Studies that I have read indicate that dividend-paying stocks do better then those that do not pay dividends, in the long run.

That said, it doesn’t mean that companies that pay high dividends do better than those with low dividends.? It is well-known in REIT stocks that those that pay low but growing dividends have outperformed those with high dividends that grow slowly.? The right combination is that a small dividend is paid, and the company uses the retained earnings wisely, in order to grow the business profitably, leading to increases in dividends.

When Microsoft started paying a dividend I was a skeptic, because Microsoft was overvalued at the time.? No degree of financial engineering would change that.? Dividends are at most a modest positive for any stock.? Better you should look at the underlying ability to grow free cash flow and be able to reinvest it well.

That’s where investors should focus.? Dividends are good, but growing dividends are better.

Best of the Aleph Blog, Part 18

Best of the Aleph Blog, Part 18

These articles appeared between May and July 2011:

Most People are not Better off Buying Common Stocks on their own

versus

Why Amateurs Should Invest in Common Stocks

Yes, I wrote them both, but they complement each other.? Yes, most average people get skinned investing in common stocks, but if you apply yourself assiduously to investing, it will improve your performance in other jobs, by broadening your skill set.

Impossible Dream, Part 2

Impossible Dream Project, Part 1

The latter of (part 1) these was my highest day and month for access of my blog.? I came close to eclipsing the monthly total last month, but missed by 2%.? These pieces take up asset allocation via valuation, and momentum.

Learning Leadership

A story of how Roy and I disobeyed orders a little, and created a lot of growth for the company that we served.? Personally, I think this is a great story… I never created more value than when I worked for Provident Mutual.

On Longevity Derivatives

I like to think that I am an intelligent skeptic on derivatives; in this case credit risk fights any real hedging.

Segmenting to Make Better Decisions

The smaller the range of choices is, the better people do in choosing.? One way to facilitate that is to break down decision making into a series of choices with each having few options.

The Rules, Part XXI

All assets represent future goods.? The prices of assets represent the trade-off between present goods and assets.

The Rules, Part XXII

Rapid money supply growth with no consumer price inflation can only really occur within the confines of an asset price bubble, or else, where does the money go?? Interest rates are low at such a time because of the incredible liquidity, and complacency of lenders that they will get an equal amount of purchasing power back.? Perhaps another possibility is when a country?s currency is being used more and more as a shadow currency, like the US in the Third World.? But even that will come home someday.

Learning to Like Lumpiness

This is probably one of the most important articles I have written, because investment returns are lumpy, and we need to learn to live with it.? For those of us that are smart, we need to take advantage of it.

What is Liquidity (V)

Liquidity cannot be created, but it can be redirected.

Got Cash?

Cash is valuable even when interest rates are low.? Cash is flexibility and optionality.

Enduring Ponzi

Madoff’s Ponzi scheme lasted so long because it raked off so little.

The Costs of Illiquidity

On the tradeoff of liquidity in order to get yield.

Silent as Night

It also taught me a lesson.? When fees are deducted daily, no one notices.

?Is He Economically Rational??

Now after all of this, it?s not so much a question of rationality but ethics.? Who will do the right thing for the one he ultimately serves?? Working for those people is a joy, and is beneficial to those that own. Doing right does well for many.

Downgrade Jitters

On why credit ratings are opinions, and not facts.

Where to Hide?

How to preserve purchasing power, even when it is difficult.

The Costs of Illiquidity ? II

Don’t buy REITs that are not publicly traded.

 

Sorted Weekly Tweets

Sorted Weekly Tweets

Eurozone

 

  • ECB Collateral Moves Reopen ?Soup Kitchen? for Struggling Banks http://t.co/CMMkeby9 Euros available in exchange 4 marginal collateral $$ Sep 07, 2012
  • Jobless Greeks Resolved to Work Clean Toilets in Sweden http://t.co/EqGuottV Really a sad tale; another way of saying EZone has failed $$ Sep 07, 2012
  • Euro: Looks like a duck, quacks like a duck http://t.co/R3y7uG5J Axel Merk argues that current Eurozone troubles will create US Europe $$ Sep 07, 2012
  • Draghi Says Officials Agree on ECB Unlimited Bond-Buying http://t.co/Cyn0tu9O The conditionality will eventually render it ineffective $$ Sep 06, 2012
  • Fears Rising, Spaniards Pull Out Their Cash and Get Out of Spain http://t.co/EMT40EQK When times get tough, people leave. More in Spain $$ Sep 07, 2012
  • Perhaps the Irish economy is rebounding.? Maybe the banks are next? $$ http://t.co/fN5Cyfj4 Sep 05, 2012
  • Two Tears for Two-Tiers http://t.co/YuLV0vnN Will Mario Draghi really create an expensive market for <3yr Spanish & Italian debt? $$ Sep 05, 2012
  • ECB bond-buying would not breach rules-Draghi http://t.co/9iaSdGnn Of course not pooky. Buying the short debt will draw u2 long debt l8r $$ Sep 04, 2012

 

Politics

 

  • California Treasurer Backs Law to Ban Costly Long-Term Bo [sic] http://t.co/P5U2f7DC Capital Appreciation Bonds are expensive 2 issuers $$ Sep 07, 2012
  • We’re Not Out Of Money http://t.co/FKDSbBAM There may not be an economic limit on printing $$ but a political limit when inflation arrives Sep 05, 2012
  • Top Bank Lawyer?s EMails Show Washington?s Inside Game http://t.co/4sSYxs4n Former SEC Commissioner Annette Nazareth uses her influence $$ Sep 05, 2012
  • Suits Challenge Classrooms That Segregate Boys, Girls http://t.co/zHiCmchK My brother ran a school for boys; much better than co-ed $$ Sep 05, 2012
  • Fed’s unemployment target is unrealistic http://t.co/1edPuBTC Global labor competition will keep unemployment high, until exports get big $$ Sep 05, 2012
  • The Clinton Administration did not offer as much public debt, Social Security was running its largest… http://t.co/mySuAvk1 Sep 05, 2012
  • As I said with the Republican Convention, I am very glad that I don’t own a TV. I would rather consider the merits than emotional appeals $$ Sep 05, 2012
  • They grow so fast, treasure them while you can $$ RT @TheStalwart: The Obama daughters have aged a lot. http://t.co/2IguOJdj Sep 05, 2012
  • A radical tax plan the left and right can agree on http://t.co/84PA1xpp Cut corporate tax rates & eliminate all special preferences $$ Sep 04, 2012
  • If You Think Obama?s First Term Was Bad, Imagine a Second http://t.co/4iFeFAfc Same applies to Romney; we will have gridlock either way $$ Sep 04, 2012
  • Why Bernanke has become irrelevant http://t.co/dN9b6kVP Inflating financial assets also inflates financial liabilities &so it does little $$ Sep 04, 2012
  • Putin to Raise Government Retirement Age to 70 http://t.co/TtluvkN0 We should also. Y should young ppl subsidize oldsters who could work Sep 04, 2012
  • The Democrats? Version of Mediscare http://t.co/rRUwEf7s Agreement btw Reps & Dems: cut medicare. The Q is how to do it? $$ Sep 04, 2012
  • Long term real rates in the US hit record lows http://t.co/WQns2veU Can you say “financial Repression,” boys & girls? I thought you could $$ Sep 04, 2012
  • Gloria Romero: Trials of a Democratic Reformer http://t.co/Hblx3Plk Unions (SEIU, CTA, the CA school employees) dominate $$ in Sacto $$ Sep 01, 2012
  • California Lawmakers Send Public-Pension Cutback to Brown http://t.co/pn3uXnjj First, prospective change, next retrospective on actives $$ Sep 01, 2012
  • The duopoly doesn’t like interlopers playing on their turf $$ RT @LaurenLaCapra: Why Is Gary Johnson Being Ignored? http://t.co/qgXnrC49 Sep 01, 2012

The Markets

 

  • Asset Allocation & Portfolio Management: Is the Industry Shifting to a New Paradigm? http://t.co/u69lGilE 2 complex; parameters unstable $$ Sep 08, 2012
  • Student Loans: Debt for Life http://t.co/sd4aNaDo With student loans not dischargable in bankruptcy many students end up debt-slaves $$ Sep 07, 2012
  • Commodities Beat Stocks, Bonds for Second Month in August http://t.co/3Ydp0q3t Anticipated inflation (via TIPS) rising over last 2 months $$ Sep 03, 2012
  • Should You Wade In With a Windfall? http://t.co/lprP4FbX A perpetual debate; best to decide on your asset allocation and invest $$ Sep 03, 2012
  • Are You Making Too Much Money? http://t.co/5uoVQMTF Cramer points out that when a strategy is working too well -> greater prob of blowup $$ Sep 01, 2012

 

Lenders, Insurers, and Housing

 

  • Hedge funds face autumn uncertainty http://t.co/lbTBS8Rx Hard not to be uncertain when deficits are high, monetary policy loose, & EZone $$ Sep 05, 2012
  • With Lax Regulation, a Risky Industry Flourishes Offshore http://t.co/C3RUhCQD Bermuda reinsurers r better managed than largest US banks $$ Sep 05, 2012
  • Assessing Fannie’s Past and Future http://t.co/v5c8Y2QS Sadly, ending the role of the US Govt in lending $$ is not a listed option. Sep 04, 2012
  • Home Prices Are Not Rebounding as Fast as You Think http://t.co/qrYYciDr Market will have to digest a lot of dark supply, post-bottom $$ Sep 04, 2012
  • Breaking Up Banks Is Hard With Traders Hooked on Deposits http://t.co/CtcyqaiH WIll b made up reducing diseconomies of scale $$ #breakthem Sep 04, 2012
  • Bad headline: Nine Insurers Boast Gains On Facebook Positions http://t.co/8rsBZfe1 Read the story: most insurers owning $FB lost $$ Sep 04, 2012
  • Big Banks Are Hazardous to U.S. Financial Health http://t.co/8CxiiLqb Implicit promise of US rescue allows large banks to finance cheap $$ Sep 03, 2012
  • Fighting financial complexity with simple rules? http://t.co/nU1ypbgK Limit leverage, interconnectedness, analyze risk-based liquidity $$ Sep 03, 2012
  • Ranking the Largest U.S. Banks: M&T No. 17 With a Bullet http://t.co/dBLM8EBY Look at how large the top 4 r relative to everyone else $$ Sep 03, 2012
  • Index points to new dawn for US housing http://t.co/c04HLluw There is a lot of dark supply to clear, but bottom has passed on low end $$ Sep 03, 2012
  • Melbourne Hasn?t Seen Worst of Housing Drop as Glut Builds http://t.co/wJRlFbeR I’m sure glut is temporary, “Contained” & banks r fine 😉 Sep 01, 2012

 

Energy

 

  • Shale Boom Cuts Gulf Oil Premium to 24-Year Low http://t.co/O738xxOI Whouda thunk oil production would increase in the US? $$ Sep 07, 2012
  • “Green energy ‘is a big area of unfulfilled promise,'” aka “crazy inefficient dreaming.” Send them to study physics $$ http://t.co/VAsgEdVz Sep 04, 2012
  • RE: Natural gas prices have fallen; that is most of the new energy produced. Little oil so gasoline prices stay high. http://t.co/XCZBTmSR Sep 03, 2012

?

Other

 

  • Stanford researchers’ cooling glove ‘better than steroids’ & helps solve physiological mystery, too http://t.co/D5CqAU9x Muscles overheat $$ Sep 07, 2012
  • FBI vs. Google: The Legal Fight to Unlock Phones http://t.co/i2VbdISV Interesting that $GOOG resists requests 4 smartphone passwords $$ Sep 07, 2012
  • Malware attacks on the rise http://t.co/fzKcSqe8 Now coming to a handheld device near you. Try to decide on a ransom strategy early $$ Sep 04, 2012
  • Awkward Belly Dance for Groupon http://t.co/sCxGrpKo As if $GRPN doesn’t have enough troubles, two large founders back a competitor $$ Sep 04, 2012
  • China, Germany plan to settle more trade in yuan, euros http://t.co/DFtNGvxi Settling $$ doesn’t matter, where proceeds r invested matters Sep 03, 2012
  • The Federal Reserve: From Central Bank to Central Planner http://t.co/YQxbQLq2 The more tasks we give to the Fed, the worse they do $$ Sep 03, 2012
  • You Can’t Trust Airport Security http://t.co/TWGMUwP1 Security systems must balance risks of false positives vs missing positives $$ Sep 03, 2012

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BloombergView Hypocrisy

  • You Pick: a Strong Recovery or an Accountable Fed? http://t.co/VhxdKBH1 The Fed could b genuinely transparent & the economy prosperous $$ Sep 05, 2012
  • Republicans Must Choose: Less Debt or More Jobs? http://t.co/qkV2TPAU The 2r not related. Proceeds of debt do not lead2 hiring necessarily Sep 05, 2012
  • @bloombergview , master of the false dichotomy headline: Republicans Must Choose: Less Debt or More Jobs? http://t.co/qkV2TPAU $$ Sep 05, 2012
  • @bloombergview , master of the false dichotomy headline: “You Pick: a Strong Recovery or an Accountable Fed?” http://t.co/VhxdKBH1 Sep 05, 2012

?

Retirement

 

  • Big Firms a Drag on Pension Funds http://t.co/Q1hchNbH Returns at larger private equity funds have lagged their smaller brethren $$ Sep 07, 2012
  • Retirement security is a big problem — especially for the young http://t.co/DxTcvg4O The developed world lives in a fantasy re: retirement Sep 05, 2012
  • San Jose Cops Rush Disability Retirement Bids as Rules Tighten http://t.co/jSKWSiaQ & I’ll bet the actuary never priced 100% disability $$ Sep 05, 2012

 

Follow

  • #FF @cabaum1 @HousingWire @journalistjosh @LizRappaport @CardiffGarcia @simonconstable @agnestcrane @WSJTheSource @maoxian @jsphctrl $$ Sep 07, 2012
  • #FF @footnoted @LSPollack @MattGoldstein26 @munilass @williamalden @JeffreyMatthews @PragCapitalist @neilbarofsky @MKTWBurton @petereavis $$ Sep 07, 2012
  • @lv_1 I’m doing 1 of these per day listing my favorite tweeps, some of which are lesser known; last group is mostly economics Sep 06, 2012
  • It’s not Friday, but please follow: @GonzaloLiraSPG @rajivatbarnard @John_Hempton @SoberLook @groditi @unstructuredfin @historysquared $$ Sep 06, 2012
  • It’s not Friday but please follow: @finemrespice @prchovanec @vshih2 @BoydRoddy @dpinsen @niubi @manualofideas @wesbury @merrillmatter $$ Sep 03, 2012

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Retweets

  • A permanent problem in a dynamic language $$ RT @BloombergView: These are sad times for grammatical purists | http://t.co/Se0XfLCD Sep 07, 2012
  • RT @DennisDMZ: Obama thanked Biden for being “the best VP I could have hoped for.” Proof that America really has become the land of dimi … Sep 07, 2012
  • Their headlines mislead more than most RT @LaurenLaCapra: This Bloomberg headline is not only weird, but questionable. http://t.co/0CKK9ATE Sep 05, 2012
  • Worth a read $$ RT @TheStalwart: This strikes me as an interesting contribution to the profit margins debate. http://t.co/Bt5S9ZrF Sep 05, 2012
  • RT @PlanMaestro: Very good takedown of Taibbi’s Bain Capital piece. There is a story in there just not this one http://t.co/he0VaYo4 @da … Sep 05, 2012
  • Oops $$ RT @SecurityTube: [News] BitCoin Exchange Loses $250,0000 [sic] After Unencrypted Keys Stolen http://t.co/Yt2l7bp3 Sep 05, 2012
  • How many divisions does Draghi have? MT @TheStalwart: The Most Powerful Man In The World Is Going To Speak Tomorrow. So Is Barack Obama $$ Sep 05, 2012
  • Also worth a look $$ RT @_TPR: One of my favorite tables: Shadow Banking Depositors. The plumbing. http://t.co/i6UVAJan Sep 05, 2012
  • Worth a look $$ RT @_TPR: Another: Credit-Maturity Transformation Spectrum http://t.co/F98xEbgP Sep 05, 2012
  • RT @NickTimiraos: CoreLogic index shows that home prices are now 1.3% above Jan 2009 level. Down 0.7% from June 2010 (tax credit induced … Sep 04, 2012
  • RT @TheStalwart: RT @conorsen: @TheStalwart @diana_olick You should probably have

an auto-RT app for Diana’s stuff. Sep 04, 2012

  • RT @ReformedBroker: As the politicians descend on Charlotte, Carolinians come face to face with more pork than they’ve ever pulled. #DNC2012 Sep 04, 2012
  • Good one, made me smile. $$ RT @pdacosta: This euro crisis thing is really Draghing out. Sep 03, 2012
  • My but Congress was farsighted to recognize a banking benchmark & celebrate! $$ RT @ReformedBroker: HAPPY LIBOR DAY EVERYONE!!!!!!!!!!!!! Sep 03, 2012
  • RT @mbusigin: You know what’s going to happen? People going to pile into Risk Parity strategies just in time for yield volatility modera … Sep 01, 2012
  • RT @simonconstable: ?@Mctaguej: Connaughton is a loyal Democrat–but he pulls no punches in his expose of Obama’s failure to pursue Wall … Sep 01, 2012
  • RT @Convertbond: Thought we had an aging population Ben Bernanke? How many jobs have been lost because 150 mln baby boomers are earning … Sep 01, 2012

 

Comments

  • @BradErvin1 Fair point; we have skills mismatch here as well, & income differences among regions; not as pronounced though, adjusts better Sep 08, 2012
  • @crampell My son thanks you for that article. He runs and the trainers ice him down after practice; going to show it to his coach Sep 07, 2012
  • @ToshibaEric Thanks 4 replying. Talked to 10 people @ Toshiba before I got someone to send me a free mailing box for repairs ~ 2 hours $$ Sep 07, 2012
  • @toshiba also aggravating sitting on hold, getting dropped three times, and representatives hiding behind the legalese Sep 07, 2012
  • @toshiba Really aggravating dealing with your phone support for a new computer that fails on day one, and you do not offer replacement $$ Sep 07, 2012
  • ‘ @Fullcarry It’s kind of like the “pop” that happens when a distressed credit does an equity offering in order to survive. $$ Sep 07, 2012
  • @niubi Perhaps because that would be blocked. China does not want people 2know how much diverse information 2which they do not have access Sep 07, 2012
  • @credittrader The cash he receives will be used to collateralize an account invested in stock index futures $$ 😉 #nevercashonsidelines Sep 05, 2012
  • @moorehn Could we pass a law that all politicians have to write their own speeches, so that they say is more likely what they really think? Sep 05, 2012
  • @_TPR Okay, so I have missed something. I trust Bermuda; I do not trust Ireland as a regulator. Who has moved? $$ Sep 05, 2012
  • @finemrespice Some technological breakthroughs e.g. http://t.co/F4jeyerr, but no 1 mentions costs. Technical efficiency <> Econ progress $$ Sep 04, 2012
  • I just left a comment in “How Pimco?s Gross beats the average bond fund – Mutual Understanding – MarketWatch” http://t.co/Nfq2s7Un Sep 04, 2012
  • We need a new misery index that includes the future pain of present borrowing. At least Carter kept… http://t.co/honmBXQ5 Sep 04, 2012
  • 2, 4, and 6 are not myths. The others are. There are limits to what the government can do. They must tax or… http://t.co/JPa4IGqW Sep 04, 2012
  • Alas, modern worship, odious to God. Bring back a cappella singing of Psalms, like the ancient church.? Also, giving ? http://t.co/OBAwBJnx Sep 04, 2012
  • It is rational for lower-level German politicians to say Greece must leave the Euro. It is what an average German be? http://t.co/6UUYd6e9 Sep 04, 2012

 

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