Category: Pensions

Misunderstanding the Tax Debate (II)

Misunderstanding the Tax Debate (II)

I’m going to do something different to start this post.? I’m going to highlight those that disagreed with the last post.? Thanks for disagreeing, because it makes this post better.

Response 1:

It?s all well meaning but it?s likely to fail in practice, with unintended consequences and nasty corner cases where you have to reintroduce complexity.

For example imagine a taxpayer with one, liquid but volatile asset, which is essentially long term flat. It goes up +X in one year, -X the next, etc. So the taxpayer has essentially zero income (amortised) but must pay on the +X on the positive years. The no deferral rule prevents creating an offsetting tax credit on -X years, so he?s either paying tax on non-existing income, no good (>100% tax rate), or requires a refund on the down years, which creates a new class of enforcement problems that didn?t exist before (people creating fake losses to get actual cash, when they could only get tax credits before).

Another example is a taxpayer with a single illiquid asset, say a small business owner who owns nothing else, and the business is with tight cash flow, or a disabled/elderly person who owns their house outright but nothing else and who lives on welfare. If the business/house valuation goes up, these guys have a tax bill. So now they must raise money out of an illiquid asset just to pay tax, and as it?s illiquid and they don?t have cash flow they might have to either pay distressed credit rates on their tax borrowing, or just sell the business/house which is a bit of a harsh punishment for a tax-cashflow issue.

Income is intrinsically a tricky problem. You can clean up the crud from time to time, indeed you must as some nonsensical rules will inevitably accumulate, but a simple tax idyll is unfortunately not realistic I believe.

Response 2:

I respectfully don?t think so. The example of the taxpayer with the volatile asset could also be compared with a person who pays income taxes on a salary. If they lose their job next year (volatility) they would have paid too much this year by your model. The issue is that it seems less fair to tax work (salaries) at a higher rate than wealth (dividend income). Perhaps it could be separated from capital gains ? which isn?t real income until it is sold at a profit. It could also be argued that salaried people contribute more to the economy than dividend income does. I?m not a job creator if I go sell a $100K of stock on the NY Stock Exchange ? what have I added to the economy?

Response 3:

This does not strike me as a good idea. It isn?t practical to tax appreciation of illiquid untraded assets, and the overhead and intrusion involved in doing something like this fairly would be tremendous.

I don?t see why we should be so reliant on taxing income anyway. Pigovian taxes would be better for the economy, and consumption taxes would be easier to levy. Even a Henry George style single-tax would seem preferable to trying to impute income to people as a result of asset fluctuations.

I like my readers.? Why do I like my readers? One, they are bright people, even if I might disagree with them.? Second, they are relatively polite.? I was walking through Times Square with another prominent blogger, and he said to me, “When I see the comments at your blog, David, you have nice commenters, whereas those at my blog are not.”? I said to him that there were three factors in play:

  • He has more readers than I do.
  • His format did not allow for filtering.? I filter, but rarely.??? Also, it’s harder to comment on my site, and that’s a feature, not a bug, because I want people who are determined to comment, not something that is off the top of the head.
  • I pointed out to him that his rhetoric had bomb-thrower tendencies, and what kind of crowd would that attract?

So, I like my readers, and commenters.? In general, if you comment here, and I don’t delete it, I respect you.? (Deletion rate is less than 0.1%.)

But now to my main point.? Much as I like Buffett, I disagree with him on tax policy, because he is a hypocrite.? Let him argue that stock holdings should be taxed annually on the unrealized increase, and I would agree with him.? He doesn’t pay as much taxes as he should because:

  • Berkshire Hathaway doesn’t pay a dividend.
  • He never sells shares of his company.
  • He engages inside his company to avoid taxes in every legal way.? He is not interested in paying taxes in the slightest.

My tax proposals would make Buffett and those like him pay, and others who game the system as well.? The critiques above miss the point in a major sense.? Much avoidance of taxation comes from having companies that are heavily indebted.? I don’t believe that having heavily indebted companies is a good thing.? If they faced taxation on the presumed increase in their value annually they would be forced to have more liquidity, and that is a good thing.

My proposal would lead to companies not being so heavily indebted.? That’s a feature, not a bug.? We need to discourage debt in the financial sector, because it tends to create booms and busts.? If you want to do a big capital investment, save for it, or borrow on a very short term basis.

My proposal on taxation should be phased in gradually.? Mr Buffett should not be presented with a bill for $12 billion, but rather a request for $1.2? billion for 10 years, reflecting the value he has obtained untaxed.? With respect to taxation, he is the ultimate hypocrite.? If he did not speak on such matters, I would respect him, because he is generally such a wise man, but he has prostituted his position to the current political scene.? Thus I don’t respect him here.

(As an aside, we could drop the estate tax after instituting this, because appreciation would be taxed annually.? As such, the cost basis at death would be very near market.? One thing that was little noted in the one year elimination of estate taxes in 2010 was that if you inherited something in that year, your tax basis did not step up to market, but remained at the cost basis of the decedent.? The taxes may be delayed, but they weren’t eliminated.? That’s still quite an advantage.)

I believe that a less levered system is better for the economy as a whole.? It is far better to disallow interest as a deduction for corporations. and allow corporations to dividend to shareholders without taxation.? Or, eliminate corporate taxation, and tax dividend receivers directly, combined with a tax that taxed profitable companies that did not pay dividends.

The economy is better off when it is less levered.? Debt obligations make the economy less flexible, demanding fixed payments, regardless of how likely they are.? For modeling, it is best to think of the unlevered economy. What is the native demand, leaving aside the? speculative demand?? Borrowing to create speculative demand should not be encouraged by the tax code.? After a phase-in, interest should not be tax-deductible, but would add to the cost basis of assets.

My views are relatively simple:

  • Taxes should be moderate, and levied on the approximate increase in value annually.
  • Corporations and individuals should avoid borrowing to finance investment/consumption, at least, it should not be tax-favored to borrow in the short run.
  • Everyone should be taxed; there is no way to avoid it.? This ensures fairness.
  • All classes of income should be taxed at the same flat rate.
  • There are no non-income deductions/credits, and no use of the tax code for social engineering.
  • This should be phased in over ten years to avoid a shock.
  • For illiquid situations, businessmen would have to plan in advance for taxation, which would impose a cost on illiquidity in the economy.
  • We would not favor savings over consumption — goodbye to the complexities of IRAs, life insurance, pensions, and all other deferral vehicles.

The overarching idea is to create a flat taxation system, where the increase in value is taxed annually, and where there is little incentive to engage in any sort of action to convert one sort of income into another.? This would level out many of the advantages that the wealthy have, while leaving in place a relatively transparent taxation system with few preferences which would be stable, and create predictability in taxation.

Those are my views.? I am trying to create something more stable, fair, and transparent (can’t hide income).? Those are desirable goals.? Why shouldn’t everyone love this, aside from the rich that use the overly generous tax code?? Feel free to comment below…

PS — this would have implications for US entities owning foreign assets, but I haven’t figured out how to make this work globally without making people/firms flee the US.? Ideas are welcome.? Thanks to all readers/commenters, I appreciate all of you.

Sorted Weekly Tweets

Sorted Weekly Tweets

Valuations

 

  • High Yield Closed End Funds 68% over NAV, 3% avg premium. Loan Participation CEFs 40% over NAV, -1% avg discount. Conditions r medium hot $$ Apr 07, 2012
  • Why Stocks Look Too Pricey http://t.co/TWqZzGg3 Various Indicators Suggest the Market Is No Longer a Bargain, at best fairly valued $$ Apr 07, 2012
  • Contra: The alarming fall in syndicated lending http://t.co/hiGK9UoK With the high yield mkt running hot why not avoid restrictive banks $$ Apr 06, 2012
  • Not so new… Eddy Elfenbein said something similar 4 months ago: http://www.crossingwallstreet… http://t.co/mhIxGGwt Apr 04, 2012?(on inflation expectations driving stock prices in the short run)
  • Time to take some risk off the table http://t.co/sCuYxc6u Trends breaking globally, US looks okay. Humble Student has made good calls lately Apr 04, 2012
  • The Dangers of an Interventionist Fed http://t.co/thKsHa8J QE Removal: what happens to banks if Fed does & 2 inflation if Fed doesn’t $$ Apr 03, 2012
  • Junk Bonds ? Getting Risky for a New Reason? http://t.co/7bJ08JxT Record pace of junk issuance bodes ill 4 performance… 3 yrs from now. $$ Apr 03, 2012
  • Two Pros Weigh In on U.S. Stocks: Ben Inker’s Bearish View http://t.co/iJ7742P5 Katie Nixon’s Bull View http://t.co/Zn9jj503 $$ Apr 02, 2012
  • Eichengreen on Credit Bubbles http://t.co/bSs0MHPA Leading indicator of finl stress in em mkts: loan growth > 2x GDP growth 2 yrs earlier $$ Apr 01, 2012
  • Taking the High Out of High Yield http://t.co/WYIvHb0n Nonprofessionals are the ones buying junk at the margin. This won’t end well. $$ Apr 01, 2012

 

Central Banking

 

  • The ECB has completely lost control over the monetary policy for Greece http://t.co/MHNTXLHo Massive liquidity drain; total credit failure Apr 07, 2012
  • Post-war financial repression is back http://t.co/JGLo9Aic If the post-war experience is any guide, savers face many years of suffering. Apr 06, 2012
  • Bernanke – I’m Slowing Down the Ship http://t.co/TJcJl20n Stocks don’t like less inflation coming and so they fall. But bonds rally. $$ Apr 06, 2012
  • Draghi Scotches ECB Exit Talk as Spain Keeps Crisis Alive http://t.co/rREDdqrW LTRO can only go so far; can solve liquidity, not solvency Apr 06, 2012
  • The Market?s Obsessive Fixation on The Fed & QE http://t.co/W6kg1n7k Runs through a Fed tightening scenario, thinks Fed won’t sell bonds $$ Apr 04, 2012
  • Oest.. Nationalbank follows Bundesbank in refusing some periphery collateral http://t.co/96xx0xg7 Not so big in itself; Tear in EZ fabric Apr 04, 2012
  • Draghi Tested as German Pay Deals Add to Euro Divergence http://t.co/glKumOZx Inflation rising @ core? May even labor productivity some $$ Apr 04, 2012
  • @federalreserve Tried using your Data Download Program today http://t.co/vRroRPMt I managed 2get the data I needed, but it was tough 2use Apr 03, 2012
  • Bernanke – ‘The Fed never makes mistakes’ http://t.co/JBgRHqx2 He goes, speaks to soft audiences, argues that no one could have known #dope Apr 01, 2012

 

China

 

  • Coup Rumors in China Have Deeper Meaning http://t.co/QaoDxKFF Small fissures appearing in the Communist Party’s hold on power $$ Apr 07, 2012
  • Australia?s Export Slump Intensifies Rate-Cut Pressure http://t.co/sIDzeteW China sneezes, Australia catches a cold, mate. $$ Apr 06, 2012
  • China doomsayer sees crash coming http://t.co/2QatU1ps Hardly a crash, but GDP shrinking. Wait, that *is* a crash for China? $$ Apr 06, 2012
  • The Revenge of Wen Jiabao http://t.co/nw5qvCNa Long read. Eye-opening. Formal system of Comm Party eclipsed by family coalitions that war $$ Apr 04, 2012
  • The informal aspects of how China is governed relies on rival coalitions of elite families over the long run. Short-run, Comm party rules $$ Apr 04, 2012
  • China Accelerates Markets Opening as QFII Quota Doubles http://t.co/yrXVDcdR May prove 2b significant due to unintended consequences $$ Apr 04, 2012
  • China Manufacturing Gain Masks Exporters? Woes http://t.co/VyeN9AWF Goods unneeded by the rest of the World build up in China $$ #glut Apr 03, 2012

 

United States

 

  • When safe assets return http://t.co/QLUPuj1j Long piece on the status of money-like instruments, public and private. Many questions. $$ Apr 07, 2012
  • Income Inequality Is Killing the Economy, Obama Says?Is He Wrong? http://t.co/xrA4pGu2 Going up in developed world, going down globally $$ Apr 07, 2012
  • And I don’t get it as well, Josh.? I’m as Libertarian as they come, but with financial services, I know that trickery? http://t.co/lIJDCr1Y Apr 05, 2012
  • More woes in Fedl subsidized solar power: http://t.co/83ch2YUM & http://t.co/6XaEjl10 ht: @zerohedge | Send bureaucrats 2study physics? $$ Apr 04, 2012
  • The return of the US manufacturer http://t.co/75WCMyPi Manufactured goods represented 61 per cent of all US exports during 2010 $$ Apr 04, 2012
  • +1 RT @ReformedBroker: ADP is the Diet Arizona Iced Tea of Employment gauges. Like, we’ll take it if it’s there but no one’s looking for it Apr 04, 2012
  • When does the US Treasury bubble burst? http://t.co/8agHomQH “Pomboy pointed out that Treasury yields are less than current CPI rates” $$ Apr 03, 2012
  • Why Are the Fed and SEC Keeping Wall Street?s Secrets? http://t.co/bZYF3LgV Fed & SEC view those they regulate as their clientele $$ Apr 02, 2012
  • US consumers dipping into savings http://t.co/757XDPuW Implies that the recovery is weaker than presently posited, demand comes from savings Apr 01, 2012
  • Obama Campus Fervor Losing 2 Apathy as Students Sour on 2012 http://t.co/kcyQbWKI Students thought they were getting change, got Bush-plus Apr 01, 2012
  • How Stockton, California Went Broke in Plain Sight http://t.co/ggOzSOmV If you hand out benefit increases like they are candy… $$ Apr 01, 2012

?

Finance

 

  • Quants: The Alchemists of Wall Street http://t.co/L0CzLQVN Recommend this video, features Paul Wilmott, Matthew Goldstein, & more $$ Apr 07, 2012
  • The 401(k): Americans ?just not prepared? 2 manage their own retirement funds http://t.co/8Tr0wggt Conclusions similar http://t.co/etCEp8BT Apr 06, 2012
  • Hedge Funds Accomplishing Very Little in the Aggregate? http://t.co/pxqjw2kk HFs tend 2b volatility-averse, weaker funding than long-only $$ Apr 04, 2012
  • Ackman SPAC a nice touch, no? RT @ReformedBroker: Private Equity-held Burger King coming public again. “Hooray!” said no one to no one else Apr 04, 2012
  • Performance persistence in hedge funds http://t.co/zORfjAts How do hedge funds differ v unlevered value investors? $$ gets pulled vals drop Apr 04, 2012
  • ETN Double Dipping With GAZ? http://t.co/Uo9y1T5p Interesting piece. An ETN issuer can make more $$ stopping creation & lending shares Apr 04, 2012
  • Loan classes “season” over 10-30% of the life of loan… defaults/prepays stabilize. Large cohorts 4 bond issuance go bad in the 3rd yr $$ Apr 03, 2012
  • Merrill, Morgan Stanley seen losing grip on rich http://t.co/44mW7ki0 Top 4 brokers mkt share 56% in 2007, 45% in 2011 & still falling $$ Apr 03, 2012
  • Low Vol Underperforming http://t.co/NYqjw2Fp Every valid strategy has times when it doesn’t work, to shake out the weak hands $$ Apr 03, 2012
  • Corporate pension funds break away from equities http://t.co/EMPaDGea Yes, when yields r low, DB plans move 2 bonds. Brilliant. $$ Apr 03, 2012
  • Does Danger Loom for Multiemployer Pension Plans? http://t.co/VpfDZ04m Plans that are <80% funded must take steps 2 nurse plans 2 health $$ Apr 01, 2012
  • Credit Suisse Opened Volatility Bets to Small Investors http://t.co/ZLMGANXh Wall Street produces products 2 benefit itself, not retail $$ Apr 01, 2012
  • Keynes: One Mean Money Manager http://t.co/WJ2jESFE “The board of King’s College gave him uncontested authority to invest as he wished.” Apr 01, 2012

 

Japan

 

  • Just a guess, but after Japan’s Current Account goes into deficit for ~2 years, the big adjustment down in the Yen will happen. $$ #ouch Apr 06, 2012
  • @valuewalk Probably because so many have lost money shorting the yen, & some have made $$ long the yen, that many just trust the momentum $$ Apr 06, 2012
  • @valuewalk long-dated yen currency puts have fairly low vol 😉 Not doing that either, but… someone will. Apr 06, 2012
  • Yen Forecast: Xie Sees 40% Drop, Japan Bubble Bursting http://t.co/EjI7hytt Wow. Thinks Japan near tipping point 4 internal financing fail Apr 06, 2012
  • Japan?s Strongest Storm Since 1959 Slams Into Tokyo Region http://t.co/CCOVz7C6 Very unusual 4 Tokyo 2 have such strong winds w/no typhoon Apr 03, 2012
  • Yen Losing Most Since ?95 Not Enough for Toyota http://t.co/IT0g84s8 Japanese Industry cheerleaders 4 “penny parity” $$ #race2thebottom Apr 02, 2012

 

Insurance

?

  • Advisers, B-Ds retreat from Hartford http://t.co/garB6Bwn Not offering new annuities means can’t roll to $HIG products when surr chg ends $$ Apr 03, 2012
  • Agents will try to get holders of $HIG annuities to roll elsewhere when surr charge ends (new commission $$ ), but be careful if you own an+ Apr 03, 2012
  • annuity from $HIG, b/c one reason they are getting out of the biz, I think, is that some of the secondary gtees were 2 generous + Apr 03, 2012
  • there is probably a business in analyzing secondary gtees, b/c some r quite valuable, &u wouldn’t want 2get tricked into rolling it by agent Apr 03, 2012
  • Contra: Rising equity markets to drive US life insurers-Barclays http://t.co/S6JtPun7 Catch my comment at the end, didn’t get new DAC issue Apr 02, 2012
  • Insurance Fees, Revealed http://t.co/mLzhpT6V NY State says agents must disclose how compensated & offer to provide full details #woohoo Apr 01, 2012

?

Personal

 

  • Sinkhole at the bottom of my street after a water main break. The water is more than 5′ deep & and hollowing out the road beneath. Apr 07, 2012
  • Street is one way, so I took my son who is a Police Explorer 2 talk to the policeman there. They knew each other. It’s a one-way street so + Apr 07, 2012
  • I asked the policeman (who was short handed) if he would like us 2 block street 2 traffic. Gratefully “yes.” We set up the safety gear. Apr 07, 2012
  • This is the opposite of last summer where we didn’t have power 4 6+ days, but we had water. We have power but no water. Hope it won’t b long Apr 07, 2012
  • Three Year Anniversary http://t.co/0HDD3iyD Congratulations, Hunter! @DDInvesting is our internet guide to all distressed debt $$ Apr 04, 2012
  • LinkedIn Events: Towson University Investment Group – Markets Summit http://t.co/kpgkDTto I’ll b participating on a panel. See you there! $$ Apr 04, 2012
  • @Frank_McG @volatilitysmile As I said to my wife today, “Take care of your wife, and she will take care of you.” Worked for the last 25 yrs Apr 02, 2012

 

Miscellaneous

 

  • Reprise: The Elfenbein Gold Model http://t.co/r3rHvZw3 @eddyelfenbein at his best, I fully subscribe to his model, reflecting cost of carry Apr 06, 2012
  • Matzo Ball Soup, Check. iPad, Check. For Passover, Jews Try Techie Seders http://t.co/xUW3izZl I dislike technology in religion. Yuck $$ Apr 06, 2012
  • Flying Auto Reviving Dreams of Chitty Chitty Bang Bang http://t.co/WixQb8AV Cheap @ $279K, this one might actually work $$ Apr 06, 2012
  • This discussion has problems because there is no agreed upon definition of what “free will” means.? As with all quest? http://t.co/NoMpZf0U Apr 04, 2012
  • Here Come Tablets. Here Come Problems. http://t.co/ezFK4Wfu Five common mistakes: a slow rollout is better to get the bugs out. $$ Apr 03, 2012
  • Gene Maps Are No Cure-All http://t.co/JOLTtWTK Study Warns That DNA Scanning to Predict Disease Can Mislead; ‘Not a Crystal Ball’ $$ Apr 03, 2012
  • Ten Claims in Support of IFRS Adoption by the SEC ? & Why They are False http://t.co/nj2PZ1pd & http://t.co/4YrMSvaH & http://t.co/7lLtioGo Apr 03, 2012
  • The Mighty Mathematician You?ve Never Heard Of http://t.co/9Qp1NqOB Never heard of her & her impact on physics was as great as that of math Apr 01, 2012
  • Mangled Horses, Maimed Jockeys http://t.co/6Dl1gEmJ Maybe there is a public policy reason to close down racetracks, & after that boxing $$ Apr 01, 2012

 

Energy

 

  • Australia LNG Boom Threatened by US Shale Exporters http://t.co/qleN6sVd Cheap US Hydrocarbons invert prior economic certainties $$ #shale Apr 04, 2012
  • Shale oil: from curse to cure for East Coast refiners? http://t.co/MdlXvjIb US Shale oil is high quality; challenge is delivery2refineries Apr 04, 2012
  • Repsol Worst Debt Swaps on YPF Seize Threat http://t.co/BewpJA4p Argentina not 2b trusted; would buy $REP bonds on weakness, stock a ?? $$ Apr 04, 2012
  • Encana in Play as Petronas Seeks Natural Gas http://t.co/SEx832F1 Petronas looking long-term, b/c prospects for natgas pricing r poor $$ Apr 04, 2012
  • Why high gas prices at the pump? The answer is BICS http://t.co/LopjaesG Brazil, India, China, & Saudi Arabia have increased gasoline demand Apr 03, 2012
  • The rapidly shifting supply fundamentals in US natural gas http://t.co/myofZrQD Injection cycle starting early w/supplies high already $$ Apr 03, 2012

 

Rest of the World

 

  • Contra: The Buck Stops Here: A BRIC Wall http://t.co/RYykjXXr The BRIC nations r2 statist 2 link 2 gold. Good idea, doesn’t fit the politics Apr 06, 2012
  • Germany Asked to Forgo $1.3 Billion Deutsche Telekom Payout http://t.co/b8cvOOlB Interesting how Capex constrains euro-telcos, not US $$ Apr 04, 2012
  • Europe?s Ratings Revenge Founders on Market Reality http://t.co/D3dNu7sF Eurocrats stumble in dark; will return 2 old system; it worked $$ Apr 04, 2012
  • How A Baby Bust Will Turn Asia’s Tigers Toothless http://t.co/VE78u9tu Economic growth is partially population growth; sterile societies $$ Apr 01, 2012
  • Swedish High Street Rebound Ends Bets for Riksbank Cuts http://t.co/jYioq0NN A relative bright spot in Europe; having the Knonor helps $$ Apr 01, 2012

 

Company News

 

  • RE: @emergingmoney Never been crazy about firms that perpetually run w/neg working capital. Interesting idea, though. http://t.co/Xx6yFf8v Apr 04, 2012
  • Optical Delusion? Fiber Booms Again, Despite Bust http://t.co/9QiAmZOH Whouda thunk it? I knew this was getting close, demand 4new fiber Apr 04, 2012
  • Scarred Avon Is Takeover Target http://t.co/f2T9E7V7 Don’t think $AVP is a good takeover target: toss dist syst or incompatible syst $$ Apr 03, 2012
  • Technology obsoletes too easily, particularly in hot sectors. Very difficult to get to $1T of?Market Cap. Bit-by-bit? http://t.co/XjGU9ouG Apr 03, 2012
  • $AAPL ‘s War on Android http://t.co/ILGQVAZD Long, fascinating article; perversely, attempts to enforce patent can invalidate patents $$ Apr 02, 2012
  • Dude, is There any Value Left in $DELL ? http://t.co/iG5q5iea U know your marketing is stale when people reference advertising >10yrs ago $$ Apr 02, 2012

 

Housing

 

  • The rebound is now http://t.co/l4coNvgt Worth watching, but I would wait until the foreclosures have been mostly cleared, b4 saying bottom Apr 07, 2012
  • Home Prices Seen Dropping 10% in US on Foreclosures http://t.co/BBjzxKiU Once f/cs clear out, the market will normalize maybe even rise $$ Apr 03, 2012
  • McClellan on Lumber?s tendency to leading housing stocks http://t.co/cevWyVTs If past is prologue, housing prices are set for another dip $$ Apr 01, 2012

 

Funds

 

  • I’ve owned this in the past, but not now.? It’s been around for 19 years as a CEF — just have to watch the premium/d? http://t.co/XMVs6RBS Apr 06, 2012
  • Why I Won?t Be Buying TAGS http://t.co/2S8bqcQJ Expense ratio does not include the expenses paid on underlying ETFs owned by $TAGS $$ Apr 04, 2012

?

Financial Distress

 

  • Reddy Ice Considers Filing for Bankruptcy http://t.co/IgpYjHue Is it just me, or are we seeing an uptick in insolvencies? $$ Apr 04, 2012
  • Hostess Serves Up New Batch of Cuts http://t.co/fHBXwHes Future failure as people don’t buy so many of the “sugar fat bombs” 4 kids $$ Apr 02, 2012
  • Failures: Pinnacle Airlines http://t.co/BXkJ8v9j AFA Foods http://t.co/xs4wsFEE Airlines & Meat renderers r born 2 fail $$ Apr 02, 2012
Sorted Weekly Tweets

Sorted Weekly Tweets

 

China

 

  • China’s first bond default could be good market medicine http://t.co/8ShFniYM Bond trader: “We don’t really have a credit risk culture.” $$ Mar 31, 2012
  • Is China’s slowdown worse than previously estimated? http://t.co/CkZw8tLK Could b business conditions that are worst since 2009. $$ Mar 31, 2012
  • China Banks Said to Underestimate Local Government Risks http://t.co/qpPicyEe China has a clever bureaucracy; always has; big CYA $$ Mar 25, 2012
  • Chinese capitalism is just another knockoff http://t.co/w2hSozQL China is not Capitalist; it rewards Party members, not citizens. $$ Mar 25, 2012
  • Debating a ?Hard Landing? http://t.co/NMnYk2XX friendly debate – Andrew Batson & Patrick Chovanec over China facing a ?hard landing? in 2012 Mar 25, 2012
  • I Am Jordan’s Complete Lack of Surprise: Chinese Co’s Forced to Falsify Data http://t.co/BMj7ux0T Command & control economy, not free $$ Mar 25, 2012

 

Market Dynamics

 

  • The Nature of a Crowded Trade http://t.co/sf1phJjP A July 2008 article of mine where I reflected on the high correlations of the prior 3 yrs Mar 31, 2012
  • A Market Lacking Diversification http://t.co/khXUVjaL Correlation conditions similar to 2006-2008, only diversifier hi-qual long bonds $$ Mar 31, 2012
  • Pension Deficit for 100 US Company Plans Increased 41% in 2011 http://t.co/FdIZTltW Low long hi-qual rates & cruddy returns on risk assets Mar 31, 2012
  • 2277 Stocks and Still Not Diversified? http://t.co/iu0Pw8Ty Recommended solution is similar 2a levered version of the Permanent Portfolio $$ Mar 31, 2012
  • New from Aleph Blog The Rules, Part XXXI: The offering of liquidity through limit orders is a real service to th… http://t.co/ZiuzWIo5 Mar 30, 2012
  • Passive Aggressive: Index-Linked Securities and Individual Investors http://t.co/ZrjMCKCz Curbs stock picking, encourages factor timing $$ Mar 29, 2012
  • Bankers are telling corporate clients this is their chance to refinance http://t.co/Eh9tHEX6 The window of cheap junk financing is open $$ Mar 28, 2012
  • New from Aleph Blog Replacing Defined Contributions: I think that it is pretty certain that defined contribution… http://t.co/Dis34ql2 Mar 27, 2012
  • What Will Replace the 401(k)? http://t.co/miLAuoYc How about DB pensions where it depends on how much the employee kicks in plus match? $$ Mar 27, 2012
  • US Stocks Advance Following Bernanke?s Comments http://t.co/D7sORuIU Stox react 2 increases in inflation expectations. TIPS & Bonds fall $$ Mar 26, 2012
  • Hedge Funds Capitulating Buy Most Stocks Since 2010 http://t.co/XHwxzxNO Short-term money alert! Will propel mkt 4 a while, then… $$ Mar 26, 2012
  • If Bloomberg Business Week is a better magazine than old Businessweek (I think so), what magazine should we use now 4 a dumb $$ indicator? Mar 26, 2012

 

Asset Management

 

  • Nontraded REITS should be a nonstarter for clients http://t.co/O1ZuMvX8 And here’s one that just announced a 72% loss: http://t.co/la8d29my Mar 31, 2012
  • Oaktree IPO Could Pay 2 Founders $117.2M Each http://t.co/Yufla6Jk The Most Important Thing is getting rewarded 4 building AUM 😉 $$ Mar 31, 2012
  • The Trouble With Exchange Traded Notes http://t.co/ZL7dVpjO Unsecured credit, total return swaps, low level of regulatory protection $$ Mar 31, 2012
  • Good 4 all of us RT @frankvoisin: My interview Research Magazine’s April issue: http://t.co/zioono6R Also features @VitaliyK @alephblog $$ Mar 30, 2012
  • Bain Gave Staff Way to Swell IRAs by Investing in Deals http://t.co/4LlAExBt Letting employees in on the fun shares the wealth. Good $$ Mar 30, 2012
  • Lying By Omission: Mutual Funds, Track Records & Departing Managers http://t.co/4MUyNRYs Track recrds shuld b suspended when critical ppl go Mar 29, 2012
  • New from Aleph Blog A Pox on Promoted Stocks (2): By this time, I would think that it would be worth the the tim… http://t.co/DJkH6E4W Mar 28, 2012
  • The Measured Approach to Value http://t.co/XiZOUMOn Features investors Vitaliy Katzenelson & Croft-Leominster, & smaller Frank Voisin & me Mar 28, 2012
  • GoodHaven Realizes Its Vision http://t.co/zJVmCFMa The CIO of Markel, Tom Gayner showed them favor and invested with them. Good for them. $$ Mar 27, 2012
  • What This Industry Needs is a Good Disruption http://t.co/imKDcElR There r a few areas of the financial industry that justify their fees $$ Mar 27, 2012
  • Found PDF slide presentation: http://t.co/0GfhME7m The Market for Financial Advice: An Audit Study $$ Worth a read, paper not free @ SSRN Mar 26, 2012
  • Treasuries Rise for Fourth Day on Global Growth Concern http://t.co/JYpanHTu Funny how the sentiment has reversed; who is surprised? $$ Mar 25, 2012

 

Monetary Policy

 

  • @kyles09 No, not a believer in MMT, MMR, or neoclassical macro. 2 much aggregation, not everything happens at once, goods/services central + Mar 30, 2012
  • @kyles09 and $$ only facilitates goods/services. Debt is important, but not central, some goods owned outright, w/no liabs. Money is a + Mar 30, 2012
  • @kyles09 creation of a culture, not the government, because @ the edges, FX & commodities will crowd out bad currencies. MMT -> inflation $$ Mar 30, 2012
  • What Does Bernanke Know? http://t.co/LydpOqk1 Introduces “The Guy Rate” http://t.co/zNVeUYmP Unemployment of older guys has hi costs Mar 29, 2012
  • Demand for U.S. Debt Is Not Limitless http://t.co/NWKHcpCD In 2011, the Fed purchased 61% of Treasury issuance. That can’t last. $$ Mar 29, 2012
  • Bitter Money Fights Shaped U.S History http://t.co/36jWnkQq Abandoning Gold Helped Dollar Gain Preeminence http://t.co/QbYMkTNL $$ Mar 28, 2012
  • For the last tweet, those r2 good articles by Simon Johnson & James Kwak, authors of ?13 Bankers? & co-founders of The Baseline Scenario $$ Mar 28, 2012
  • Housing bubbles and interest rates http://t.co/9TfzMpt2 Makes my point that asset price levels should be part of monetary policy $$ Mar 31, 2012

 

Banking & Finance

 

  • FiveBooks Interviews > @Ritholtz on Causes of the Financial Crisis http://t.co/RQQZfHTz Many good perspectives from 6 authors on the crisis Mar 31, 2012
  • Geithner?s Math Puzzle Beyond Numbers for DeMarco http://t.co/Eg9BjcgE Principal forgiveness would have moral hazard impacts. $$ Mar 30, 2012
  • Why not make LIBOR off of binding offers of the banks to borrow/lend to any of their group $10M short-term unsecured? Avg — LIBOR/LIBID $$ Mar 30, 2012
  • Libor Links Deleted as UK Bank Group Backs Away From Rate http://t.co/HOy8TOof British Bankers? Association distances itself from LIBOR $$ Mar 30, 2012
  • Branson?s Virgin Money Seen Disrupting U.K. Retail Banks http://t.co/bPcD8im7 Always been a Branson skeptic; he have audited financials? Mar 30, 2012
  • Why not make LIBOR off of binding bids/offers of the banks to borrow/lend to any of their group 10 million dollars sh? http://t.co/wK3HyopV Mar 29, 2012
  • Is Hartford Financial’s market exit a death knell for the annuity crowd or just more Hartford haplessness? http://t.co/AUEVqxWQ Both. $$ Mar 29, 2012
  • The Birth (and Death) of the Moral Age of Wall Street http://t.co/eStszd7i At one point the moral code of $GS had some meaning, not much now Mar 29, 2012
  • @BarbarianCap More subtle than that; for insurance accounting &the concept of release from risk, it is the conservative side of realistic $$ Mar 27, 2012
  • A Proposal for the Resolution of Systemically Important Assets and Liabilities: The Case of the Repo Market http://t.co/WYQGAVVx +1 $$ Mar 26, 2012
  • But, disagree. Would b simpler and more effective to disallow repo financiers unrestricted access to collateral even in counterparty default Mar 26, 2012
  • Obama Relies on Debt Collectors Profiting From Student Loan Woe http://t.co/pYWwgLq2 How independent debt collectors get people 2 pay $$ Mar 26, 2012
  • A Bailout by Another Name http://nyti.ms/GRTNMM GSE writedowns would constitute a direct & sizable gift from taxpayers 2 the largest banks Mar 26, 2012
  • Banks? preemptive strike against Dodd-Frank http://t.co/wjHW0nyv Banks adjusting strategies in order to keep doing as much biz as possible Mar 26, 2012
  • MF?s Corzine Ordered Funds Moved to JP Morgan, Memo Says http://t.co/cYaT9sHy The most likely cause may prove to b correct $$ #corzine Mar 26, 2012
  • BOE’s Tucker: Rehypothecation Consequences ‘Under the Radar’ http://t.co/0X8ZQMMH Good. Rehypothecation should b reviewed, perhaps limited Mar 26, 2012
  • @EpicureanDeal @dsquareddigest I would still lay the blame @ the door of $GS mgmt. Could have grown via retained earnings &stayed private $$ Mar 26, 2012
  • @EpicureanDeal @dsquareddigest Also, there r real advantages 2 partnership culture in an investment bank; risk control works a lot better $$ Mar 26, 2012
  • The Age of the Shadow Bank Run http://t.co/deJRQGgy Borrow short, lend long; clip a spread. Surprise! During the crisis you lose big! $$ Mar 25, 2012
  • The Interest Rate Swaps that Are Bankrupting Local Governments http://t.co/yHQZ1r3u Not true. Gov’ts tried to minimize taxes w/swaps, failed Mar 25, 2012
  • Three?s a Crowd http://t.co/KHtbrqpe Disagree w/the conclusion, because $GS did not have to go public; problem is mgmt, not shareholders $$ Mar 25, 2012

 

Pensions

 

  • Brazil?s pension system http://t.co/90O97tQ4 They allow people to retire too early & offer too much. More unsustainable than Medicare $$ Mar 30, 2012
  • @AlexRubalcava Perhaps a cash balance plan would do that. DB plans are not expensive because of explicit costs. They r expensive b/c + Mar 28, 2012
  • @AlexRubalcava during boom times benefits look free and get set too high, leading to high costs in the bust phase & plan terminations. $$ Mar 28, 2012

 

Politics

 

  • Obama Is a Loser Who Wins, Like FDR in 1936 http://t.co/K0x9go0T Don’t assume a bad economy insures the defeat of Obama. FDR won in ’36 $$ Mar 31, 2012
  • The Rejection of Austerity Begins http://t.co/CgWKa9x6 Until failure, ppl vote 4 politicians who promise magic prosperity thru govt fiat $$ Mar 30, 2012
  • Germany: The Final Frontier… Whose True Debt/GDP Is Now 140% http://t.co/KgW2d76E When you add up the guarantees, doesn’t look so good. $$ Mar 29, 2012
  • Justices Suggest Parts of Health-Care Law May Be Thrown Out http://t.co/cMvKHR20 B best 2 throw the whole law out; let Congress start over Mar 29, 2012
  • Contra: Court Can?t Let Broccoli Get in Way of Health Care Law http://t.co/5Yp2o8tB Sup Ct is moving 2 define interstate commerce better Mar 26, 2012
  • Death Tax Defying http://t.co/FrkL5yLB Eliminate the estate tax; Tax everyone on unrealized capital gains. $$ Same result. Mar 25, 2012
  • Intelligence community can keep data on Americans with no ties to terrorism for up to 5 years http://t.co/PCM7ldiG Stinks; call the ACLU $$ Mar 25, 2012

 

US Economy

 

  • Why Natural-Gas Prices Could Fade to Red http://t.co/GApb0xie When everyone tries 2 frack @ once, there is too much natgas, price falls Mar 30, 2012
  • US coal production declines as industry faces further stress http://t.co/l3WpZtDC Fracking has unpredictable consequences; affects energy $$ Mar 29, 2012
  • Bidding Wars Erupt as U.S. Supply of Homes for Sale Falls http://t.co/JsgIdewr In certain locales, & on the low end, there r bidding wars Mar 29, 2012
  • The Biggest Bellwether In The World Is Giving Some Ominous Comments About Growth http://t.co/vHWs9lwB $FDX says things r slowing down $$ Mar 29, 2012
  • Planned Pipelines to Rival Keystone XL http://t.co/qQZ1Dsj2 Enterprise Products Partners & Enbridge may build competing pipelines $$ Mar 28, 2012
  • ‘Pink slime’ producer suspends operations http://t.co/CvptYPhU Goes from 4 factories to 1. 600 people will probably lose their jobs $$ Mar 28, 2012
  • @valuewalk @The_Analyst It is better for students to start small businesses. Forget economics, it is a waste. Profit/loss best teacher $$ Mar 27, 2012
  • The Economic Surprise Index is now trending down http://t.co/eJCEEdvy @soberlook reminds us that not everything is going well $$ Mar 27, 2012

 

Miscellaneous

  • Like it? I’ve actually bought cars that way! RT @mprobertson: http://t.co/UHdFL0Eu How to buy a car using game theory. very interesting. $$ Mar 31, 2012
  • Eating Chocolate Regularly May Make You Leaner, Survey Suggests http://t.co/l8c6MMpA This means one dark chocolate Dove promise/day $$ Mar 27, 2012
  • The second most dangerous people in the world are smart people with wrong postulates. Mar 25, 2012
  • The most dangerous people in the world are politicians who peddle the views of the smart people with wrong postulates. $$ Mar 25, 2012
  • Madoff FBI Files Reveal How He Fooled His Own Employees http://t.co/lmq2AoZG Gives hope to those accused; Madoff controlled data tightly. Mar 25, 2012
Replacing Defined Contributions

Replacing Defined Contributions

I think that it is pretty certain that defined contribution [DC] plans 401(k)s, 403(b)s, 457s, much as they have grown to be dominant, have been a failure.? Many, though not all people like the illusion of control, and seeing their cash balance — makes the pension plan tangible, even if they don’t get what they will really need at retirement.

Pension plan reform has to face three realities.? The first is people don’t know how much to put away for retirement.? I’ll give you a hint: for almost all people, it should be over 10% of your gross pay.? The second is that people don’t know how to invest, so hand it off to advisors who will do it for them, and cheaply.? The third is silent, and leaves a lot of money on the table — most people would be better off taking an annuity from their pension plan than a third party, or trying to manage a lump sum on their own.? This is usually an option only for defined benefit [DB] plans.

On the last point, annuities from insurance companies will almost always be inferior to those from DB plans — the investment policy of the DB plan will likely yield more than the investments of the life insurance company.? The DB plan has more ability to take risk, and its expenses are lower.

And speaking of lower expenses, that’s another reason to replace DC plans.? Not only do DB plans provide better security, they have lower expenses.

But employers don’t want to fund expensive DB plans, particularly in a low interest rate environment.?? Fine, that’s not what I am arguing for.? I am suggesting an odd sort of DC plan:

  • Participants can contribute what they wish
  • Employers can contribute what they wish
  • Professionals manage the assets; no asset management by participants.
  • During active employment, the cash balance can transfer with a change of employment.
  • At retirement, it converts to a DB plan, and an annuity is granted, more generous than could be obtained privately.? The retiree does not get the agony of managing a lump sum.

I think this would lead to much better results for plan participants.? The case would have to be made to participants that they have not done well managing their own funds — they will underperform by less through third party managers.? Also, few are good at managing lump sums for income.

This is the sort of plan that would yield better results for most, given that DB plans are out of favor, and participant-directed DC plans lead to high expense lousy results.? Best to have a hybrid plan.? Trustee-directed DC plan for accumulation.? DB plan for distribution.

That’s how I would structure it at present.? Better ideas are welcomed.? Thoughts?

The Best of the Aleph Blog, Part 14

The Best of the Aleph Blog, Part 14

This period of the Aleph Blog covers May through July of 2010.? The one big series that I started in that era was “The Education of a Corporate Bond Manager” series.? The idea was to describe how a neophyte was thrust into an unusual position and thrived, after some difficulties.

The Education of a Corporate Bond Manager, Part I

How I learned the basics, and survived 9/11.

The Education of a Corporate Bond Manager, Part II

How I learned to trade bonds, and engage in intelligent price discovery.

The Education of a Corporate Bond Manager, Part III

What is the new issue bond allocation process like, and what games get played around it?

The Education of a Corporate Bond Manager, Part IV

On the games that can be played in dealing with brokers.

The Education of a Corporate Bond Manager, Part V

On selling hot sectors, and dealing with the dirty details of unusual bonds.

The Education of a Corporate Bond Manager, Part VI

On dealing with ignorant clients, and taking out-of-consensus risks.

Then there was the continuation of “The Rules” series:

The Rules, Part XIII, subpart A

On the biases the come from yield-seeking.

The Rules, Part XIII, subpart B

Repeat after me, “Yield is not free.”

The Rules, Part XIII, subpart C

Reaching for yield always has risks, but the penalties are most intense at the top of the cycle, when credit spreads are tight, and the Fed?s loosening cycle is nearing its end.? It is at that point that a good bond manager tosses as much risk as he can overboard without bringing yield so low that his client screams.

The Rules, Part XV

Securitization segments a security into liquid and illiquid components.

The Rules, Part XVI

Governments are smaller than markets; markets are smaller than cultures.

A fundamental rule of mine, but one with a lot of punch.

The Rules, Part XVII

On the differences between panics and booms.

The Journal of Failed Finance Research

Much research fails quietly, but other researchers don’t learn about the dead ends.? Better that they should learn of the failures, and avoid the dead ends.

How I Minimize Taxes on my Stock Investing

Sell low tax cost lots and donate appreciated stock to charities.

Place Political Limits on Overly Compliant Central Banks

Gives a simple rule to control central banks so that they avoid the present troubles.

Yield, the Oldest Scam in the Books

Yes, offering yield is the oldest way to trick people into handing over their money.

A Summary of my Writings on Analyzing Insurance Stocks

A good place to get started if one wants to get up to speed on insurance stocks, but there is a lot there.

Economics is Hard; the Bad Assumptions of Economists Makes it Harder

Going over Kartik Athreya?s letter criticizing nonprofessional economics bloggers.? Why the math behind macroeconomics and microeconomics doesn’t work.

Why Are We The Lucky Ones?

When you are a part of a small broker-dealer, all manner of harebrained deals get offered to you.? This explores three of them.? Note: management did not ask my opinion on the fourth deal, and that is a large part of why they no longer exist.

One more note: the guy who was going to pledge $5 million of stock in example 2 for a $1 million loan?? The stock is worth $7,000 today.

Watch the State of the States

The economics of the states tells us a lot more about the national health because they can’t print money to buy national debts.? (Though they can can raid accrual accounts…)

We Might Be Dead In The Long-Run, But What Do We Leave Our Children?

My view is that neoclassical economists are wrong.? Aggregate demand has failed for four reasons:

  1. Overleveraged consumers will not readily buy.
  2. Citizens of overleveraged governments will not readily spend, for fear of what may come later from the taxman, or from fear of future unemployment.
  3. Aggregate demand is mean-reverting.? It overshot because of the buildup of debt, and is now in the process of returning to more sustainable levels.? The same is true of private debt levels, which are being reduced to levels that will allow consumers to buy more freely once again.
  4. When the financial system is in trouble, people get skittish.

The Market Goes to the Dogs, Which Chase Their Tail Risk

Complex and expensive hedging solutions, many of which embed some credit risk, can be less effective than lowering leverage, and (horrors) holding some cash.

Fishing at a Paradox. No Toil, No Thrift, No Fish, No Paradox.

This one had its detractors, because I believe the paradox of thrift is wrong.? Too much aggregation, and it does not allow the dynamism of the economy to adjust over time, even from severe conditions.

Sorted Weekly Tweets

Sorted Weekly Tweets

I am considering making this an end-of-the-week feature as a news recap.? Comments?

 

Financials

 

  • BofA?s Clash With Fannie Intensifies as Insurers Reject More Loan Claims http://t.co/fKgxwcVO Originators need to bear UW error results $$ Mar 03, 2012
  • Life as Libor Traders Knew It Seen as Abusive http://t.co/H5o5cH3G An inside look at the problems of LIBOR. Collusion & marketless numbers Mar 03, 2012
  • $AIG Earnings an Illusion of a Bend in US Tax Laws http://t.co/GCZHUKsu IRS gives AIG special treatment by allowing it to use NOLs post-BK Mar 03, 2012
  • You have a good point, and I may reference it when I write this evening, but valuations have compressed for all insur? http://t.co/BRTuHnvf Mar 01, 2012
  • Fannie, Freddie and the $180 billion hole http://t.co/Lnoh7VPH F&F transferred wealth to early investors from taxpayers & late investors $$ Feb 25, 2012
  • Make losses and prosper, AIG edition http://t.co/EYykmbmZ Hey Q: how much $$ will $AIG make in the future in order to not pay taxes? $$ Feb 25, 2012

 

Berkshire Hathaway

 

  • Contra: Warren Buffett on Investing http://t.co/OH0dQxXP Buffett has not been a deep value investor for 30 years; this article misses it $$ Mar 02, 2012
  • +1 RT @valueprax: Thoughts On Mergers, Acquisitions And Conglomeration From Rothbard And Buffett (@AlephBlog, $BRK) http://t.co/khZH5Uiq Mar 01, 2012
  • The Truthiness of Berkshire’s Performance http://t.co/5iSsrAHL Don’t think Buffett anticipated the P/B squeeze in insurance stocks. $$ Mar 01, 2012
  • Buffett Plans More Solar Bonds After Topaz Deal http://t.co/pjrAKQub Buffett doesn’t give suckers an even break, no guarantees on solar $$ Mar 01, 2012
  • RE: @TheStreet_News When I wrote for RealMoney, I was often critical of Buffett, but I have shifted.? He is a great e? http://t.co/r4z14uUC Feb 29, 2012
  • When you think you made a great purchase (Warren Buffett edition) http://t.co/ME9RwqFf I was surprised to learn about this $BRKa sub also $$ Feb 28, 2012

 

Home Schooling

 

  • Question of priorities, could conserve RT @ReformedBroker: “How am I supposed to live on $350,000 a year?” – you’re right, kill yourself $$ Mar 01, 2012
  • @ReformedBroker Have his wife call my wife; can save lots of $$ if u go from private school 2 homeschool, & it is easier than 1 would expect Mar 01, 2012
  • @ReformedBroker The downside is that it is a lot of work, but not hard work, and the challenge is controlling your children frequently $$ Mar 01, 2012
  • @merrillmatter I know you’re kidding, but the mothers I know who homeschool would be fearsome in the business world were they redirected $$ Mar 01, 2012

 

Municipal Finance, or lack thereof

 

  • If Stockton Is Broke, Then Why Isn?t San Diego? http://t.co/dzCE9FjX Govt Unions fight to keep benefits govts shouldn’t have granted $$ Mar 03, 2012
  • Pension Pain Mounts, Low Rates Boost Liabilities http://t.co/NZndpR5g More evil results of Fed policy substituting debt 4 organic growth $$ Mar 01, 2012
  • To Pay New York Pension Fund, Cities Borrow From It First http://t.co/feOXK8E3 Shell game at best; net contributions needed to DB plans $$ Feb 29, 2012
  • Raiding the coffers http://t.co/5h2Fx5ZL State pension plans r borrowing from their pension plans 2 fund their own pension contributions Feb 29, 2012

 

North Korea

 

  • @LSilverspar You made me laugh, yes, all of these have impacts on us… but given their counterfeiting, some action should be taken $$ Feb 29, 2012
  • @dpinsen And access of the Dear Leader to his favorite Scotch… hitting him where it hurts. 😉 $$ Feb 29, 2012
  • @dpinsen Agree, bigtime. We got them to the bargaining table last time by cutting off their financial access to the rest of the world. $$ Feb 29, 2012
  • Then once NK starts to counterfeit it, go back to new $50s & $100s; make their life tough. Feb 29, 2012
  • How the U.S. Could Pressure North Korea Tomorrow: Quit the $100 Bill http://t.co/DkXUZsy7 This is worth doing, and create a $75 bill $$ Feb 29, 2012

 

Eurozone

 

  • Greek PSI exchange summary – an offer you can’t refuse http://t.co/K4OUOqm3 Yes, we all voluntarily give up 70% of the value of r claims $$ Mar 03, 2012
  • Greek Crisis May Test the Value of Swaps http://t.co/hG27iIak ISDA wimps out and does not declare a credit event; will destroy Sov CDS mkt Mar 03, 2012
  • A Primer on the Euro Breakup http://t.co/OB2sdwzB Explains why the Euro will break up, at least at the fringe &y this should not surprise $$ Mar 02, 2012
  • ECB Free Money May Carry a Cost http://t.co/g1bNl281 Makes governments relax & ignore structural problems, & banks arb the ECB $$ Mar 01, 2012
  • ECB Allots ?529.5 Billion in Long-Term Refinancing Operation http://t.co/8o0OE7XO Higher than anticipated takeup of cheap funding $$ Feb 29, 2012
  • More signs of Draghi’s “stabilization” http://t.co/zdFol9Vj euro area banks show material tightening conditions in the banking system $$ Feb 28, 2012
  • On PIGS on Drugs http://t.co/VtOZYdwt European states owe ?12-15 billion to the pharma industry; they stop paying suppliers b4 cutting staff Feb 28, 2012
  • http://t.co/wQYFVFWH “Amused – Italian banks figured it out. An hour before LTRO results, 5 Italian banks issued & bought their own bonds.” Feb 28, 2012
  • Europe Gets Ready for Round 2 of Bank Loans http://t.co/N0rpX9O7 Heightening the dependence of stressed banks and govts on the ECB. $$ Feb 28, 2012
  • You may want to hold off on buying that Italian villa http://t.co/EP92Zd4m 66.5% of agents report a fall in housing prices during 4Q $$ Feb 28, 2012
  • @japhychron Can’t think of anyone, btw, there is a theory that a decent # of stressed banks used LTRO 2 buy in their own debt… $$ Feb 28, 2012
  • LTRO programs’ impact on sovereign bond purchases by banks (past and present) http://t.co/ffbNfY3B Indirect way of financing fringe govts $$ Feb 28, 2012
  • Mario Draghi reveals the Grand Plan http://t.co/Dal4wEDo & http://t.co/KNj9mhgx Good austerity results in freer mkts, more growth $$ Feb 28, 2012
  • Merkel torn by conflicting pressures in Greek vote http://t.co/0iCZV4kQ Any other Firefox users noticing that Reuters pages format badly? $$ Feb 27, 2012
  • @moorehn Good piece, I think many will benefit @soberlook has been writing some good stuff also http://t.co/tAlkFpXR & http://t.co/jcLBc04c Feb 24, 2012

 

China

 

  • China?s Billionaire Lawmakers Make US Peers Look Like Paupers http://t.co/d2haqyDc China’s lawmakers r absolutely more wealthy than US peers Mar 01, 2012
  • China May Double Rare Earth Exports as Demand Rebounds http://t.co/MaDQX4rc Quite a change from prior, makes u wonder why they change… $$ Mar 01, 2012
  • Why China Will Have an Economic Crisis http://t.co/xn3W2Wxa This is getting very mainstream, makes me think I could be wrong. $$ Feb 29, 2012
  • Fortress? Michael Novagratz on Lessons from OWS, and China http://t.co/yTSqXqYR Cronyism raises the odds of domestic violence in China $$ Feb 25, 2012
  • Evil Overlords or Lucky Devils: The Men Who Rule Hong Kong http://t.co/BEqw7Z0Z Long but interesting, re the influential wealthy in HK $$ Feb 25, 2012

 

Credit

 

  • Junk Isn?t http://t.co/olYEeOGe Spreads are down and investor interest is up; this is my biggest intermediate-term concern at present. $$ Mar 02, 2012
  • Junk vs. Loans http://t.co/JbIHAFtt & http://t.co/tccF8pML Loan participation funds cheap compared 2 junk, but downside still there. Feb 29, 2012
  • The rating agencies are the farm teams for credit analysts, in the same way that Value Line is for stock analysts.? A? http://t.co/Qfj1lYhu Feb 29, 2012

 

Upcoming Book of Josh Brown

 

  • I invite you to read his website http://t.co/Qom9t2Zy .? He writes a lot of clever stuff there.? One of ? http://t.co/r34pi1pR Feb 29, 2012
  • Confessions of a Reformed Stockbroker http://t.co/B4dkJ5XI Another preview article 4 @reformedbroker ‘s forthcoming book $$ Feb 29, 2012

 

Personal Investing

 

  • Dividends Rise Again http://t.co/gT6AcZXq Their coffers bulging with cash, companies are increasing the once out-of-favor common dividend $$ Mar 03, 2012
  • IRAs Get Sexier http://t.co/XVG5u56g All manner of illiquid assets can b crammed in2 an IRA if you have a friendly custodian $$ #beware Mar 03, 2012
  • Treasury yields and credit spreads divergence is not sustainable http://t.co/LvfHNU4t Ordinary times credit spreads r inverse 2 Tsy yields Mar 02, 2012
  • The Myth of Commodity Diversification http://t.co/ZoMhgv7M A defense of why gold is a true diversifier of portfolios versus commodities $$ Feb 29, 2012
  • Conflict of All Conflicts http://t.co/RgZmO3nv from @reformedbroker I rarely get angry, but this one annoyed me; skewed incentives $$ Feb 29, 2012

 

Accounting rules (yes)

 

  • Standard Setters Strain 2 Avert More Revenue-Recognition Angst http://t.co/jRlnmLPa Industry-specific revenue policies r better; reject IFRS Mar 03, 2012
  • Another “Case” of Terrible Decisions Borne of Terrible Accounting Rules http://t.co/wb2PB5BF Don’t compromise on revenue recognition. $$ Feb 29, 2012
  • Mark-to-Market Pensions Show Brutal Year http://t.co/NhwMePZG Some companies are biting the bullet and moving pension acctg to mark2mkt $$ Feb 25, 2012

 

Corporate News

 

  • Natural Gas Renaissance Sparks Favorable Chemical Reaction http://t.co/G0QHxkVu Petrochemicals benefit from cheap fracking feedstock $$ Mar 02, 2012
  • Apple Dividend May Return Part of $98B Cash http://t.co/FzFTTr2X If $AAPL can’t use all of its cash then give it to shareholders $$ Feb 29, 2012
  • @PlanMaestro Operating profitability is poor, and given their business mix, their P/B is fair for a company with a 5% anticipated ROE. Feb 29, 2012
  • @ToddSullivan Now if they can achieve a decent ROE, and not have weak reserving… I was wrong regarding Maiden Lane when I wrote about it. Feb 29, 2012
  • CNA: A P&C Insurance Turnaround Story http://t.co/WRwhf5sV A fair analysis of $CNA, worthy for insurance investors 2 read. O, he cites me $$ Feb 29, 2012
  • One thing that is not mentioned frequently is that shale gas production profiles tend to peak and decline rapidly. Th? http://t.co/flnQvRwt Feb 28, 2012
  • ?Hope Phase? for Stocks May End in Tears Again http://t.co/z6Sbfu7n Markets anticipate sustained US growth & soft landing for China $$ Feb 28, 2012
  • Confronting a Law Of Limits http://t.co/kIFgxwk8 How does $AAPL grow into its valuation? Especially where obsolescence moves rapidly? $$ Feb 25, 2012

 

Miscellaneous

 

  • FDA Warns on Statins http://t.co/7K37iJVe Every drug has side effects, w/statins it may be diabetes. Be wary, & avoid all drugs if u can $$ Mar 01, 2012
  • Seriously? Any reason to avoid it? RT @kasie: Days since Mitt Romney has taken questions from the national traveling press corps: 17. Feb 25, 2012
  • Slavery should be an issue where liberals and conservatives could agree for policy, and maybe apply the Palantir technology 2 root it out $$ Feb 25, 2012
  • Fishing as Slaves on the High Seas http://t.co/0Bakkir5 Another place where slavery still exists; sex trade, Dubai construction & more $$ Feb 25, 2012
  • Why Doctors Die Differently http://t.co/e3rnOTz8 Careers in medicine taught them the limits of treatment & the need to plan for the end Feb 25, 2012
  • ‘Japanese Madoff’ Flagged http://t.co/U7vgrOap Industry Newsletter Warned in 2009 About Firm’s ‘Unnaturally Stable Returns’ $$ #ponzi Feb 25, 2012
  • Killer App http://t.co/kUT8X9Ji Have a bunch of Silicon Valley geeks at Palantir Technologies figured out how to stop terrorists? Palantir. Feb 25, 2012
  • At 35, I was a devoted Husband and Dad of 5 children, with the oldest being 7 years old.? Nominally, I was the invest? http://t.co/AYUuRMsi Feb 25, 2012
  • War with Iran:Would you go bankrupt for your country? http://t.co/d5rVA9Ww War does not stimulate the economy, contrary 2 popular belief $$ Feb 25, 2012

 

Economy

 

  • Is Japan Doomed? http://t.co/qZev2jSA What? There’s a free lunch where the Govt can borrow indefinitely? NO! Cash flows about 2 shift b wary Mar 02, 2012
  • Core inflation is once again above expectations http://t.co/uxjbXofE There is inflation coming; stagflation even; bad policy begins to bite Mar 02, 2012
  • A Wake-Up Call for Japanese Watchdogs http://t.co/r1JMhnM2 Bigger than MF Global, smaller than Madoff; how do you say Ponzi in Japanese? Feb 28, 2012
  • Oil denominated in EU currencies is at record highs; demand destruction likely http://t.co/KwWkFvJM Wonder where breaking point is? $$ Feb 28, 2012
  • Gundlach warns U.S. stock market vulnerable http://t.co/g8hKrNSJ Investors concede rally almost over; still expect to earn coupon-> danger Feb 28, 2012
  • Architecture Billings Index indicated expansion in January http://t.co/nZV1OCdw leading indicator 4 new Commercial Real Estate investment $$ Feb 28, 2012
Notes on the 2011 Berkshire Hathaway Annual Report, Part 2

Notes on the 2011 Berkshire Hathaway Annual Report, Part 2

Picking up where the last post left off:

13) So Buffett told us he has a successor lined up, but won’t tell us who, but will tell us that the successor doesn’t know that he is the successor.? Really does not seem like much of an improvement over the past, except that the CIO function is getting better defined with Todd and Ted.

14) Todd & Ted share their performance 80/20 — 80% of their own and 20% of their colleagues performance.? Seems like a fair idea, balancing the team vs the individual.

15) The regulated subsidiaries, and manufacturing, services and retailing did well. That operating income growth is what drove the year.? The turnaround at NetJets was also a help, and that was fast.

16) We are still waiting to see what problems BRK’s decentralized system can develop.? To this point, the flexibility for managers within a structure that oversees reinvestment of cash flow is admirable.

17) The economic spread of BRK businesses is significant, and I would argue, unrivaled in terms of conglomerates.? It almost makes me think that Buffett is aiming for owning an extra-productive slice of US/World GDP.? It makes acquisition criteria #1 less relevant, because if you are small and private, and want to be acquired by BRK, it means that you analyze BRK, identify the portion of it that you are most similar to, and talk to the CEO of that segment, not Buffett.

18) That brings up my view of Buffett at present.? He has changed as the amount of assets under management has grown.? The last phase for Buffett is not large cap value manager, but private equity manager / conglomerateur.? He uses the float that his insurers produce to invest in a wide number of enterprises that will produce excess returns.? He does not run a closed end fund, but runs a conglomerate.

19) Interesting to see Nebraska Furniture Mart open its third store.? Logical to do, if the experience is replicable.

20) ?We do not talk one-on-one to large institutional investors or analysts.? Bravo.? Would that this would be true of more companies.? When I represented a large holder of Safety Insurance, the management asked me what we wanted in terms o market disclosure.? I said that it did not matter to us, and that we would be happy if they never talked to the media/analysts, and only emitted 10-Qs and 10-Ks, even without notifying us as to timing.

21) Buffett notes that a decent number of borrowers that lost their homes did well in the crisis, because of all the money they extracted from loans.? That might be similar to a private equity manager profiting through deals to borrow where he pays himself a dividend.

22) Owning 11% of Munich Re gives Buffett additional influence over the reinsurance market.

23) Because of the need for collateral, BRK will not be making any more significant derivative bets.

24) Buffet repeats his screed that he issued to Fortune regarding bonds and gold.? I repeat my screed.? It’s all logical, Warren, but you have to think more broadly and read about the gold medal gold model.

25) It makes sense that flying to Kansas City is a better strategy than going to Omaha.? But as this becomes widely used, make sure you reserve a car early.

26) If you want to ask Buffett a question at the annual meeting, you can do it by e-mailing the following:

(In your e-mail, let the journalist know if you would like your name mentioned if your question is selected.)

27) There will be insurance analysts at the annual meeting, and they are Cliff Gallant of KBW, Jay Gelb of Barclays Capital and Gary Ransom of Dowling and Partners.? I have a lot of respect for Gary Ransom — listen to the questions that he asks.

28) Minus & Plus: Negative change in AOCI & comprehensive income of noncontrolled interests down.? Strong CFO, net of capex, supports goodwill.

29) At for BRK’s big options: BAC in the money, GS at, GE/DOW out of the money.

30) Do parts of all asbestos liabilities eventually go to Berkshire Hathaway for reinsurance?? Who don?t they reinsure?? “The liabilities for environmental, asbestos and latent injury claims and claims expenses net of reinsurance recoverable were approximately $13.9 billion at December 31, 2011.”

I know that Buffett thinks he can earn money off of the float on these claims in excess of the implied interest rate.? But when he begins to become the preferred habitat for reinsurance, he makes BRK more volatile with respect to legal judgments.

31) “Without prior regulatory approval, our principal insurance subsidiaries may declare up to approximately $9.5 billion as ordinary dividends before the end of 2012.” And that is because only 10% of the regulatory surplus of $95 billion can be released.

32) BRK, unlike many firms, has more reasonable assumptions on DB pensions: expected return: 6.9%, discount rate 4.6%.

33) To date, share repurchases have been insignificant.? Looks like $67 million from the Statement of Shareholders Equity.

34) “On January 31, 2012, we issued an additional $1.7 billion of parent company senior unsecured notes, the proceeds of which were used to fund the repayment of $1.7 billion of notes maturing in February 2012.”

Why not pay down short-term debt?? BRK has the cash, and you state that you have an aversion to debt, particularly at the holding company level, but you are not acting like you have an aversion to debt over the last 10 years.

To Buffett: is there a level of debt at which you would be uncomfortable at the parent company, or subsidiaries?? Also, would you ever make an effort to get the AAA rating back?

35) BRK has a very diversified reserving book if you look at page 84 of the annual report — impressive.

36) I appreciate acquisition principle 6, which deal with aspects of value that accounting does not capture.? Buffett takes the right position to value those fully, because you will eventually get that value, and others will not pay up for it.

37) Buffett makes a lot out of the virtues of deferred taxes and float. He argues “they are liabilities without covenants or due dates attached to them.”? This is true, though deferred tax liabilities assume that you will make money, and will continue to grow.? Float is similar, it assumes you will underwrite well, and it would be nice if you grew.

38) Buffett says toward the end of the annual report:

There is a third, more subjective, element to an intrinsic value calculation that can be either positive or negative: the efficacy with which retained earnings will be deployed in the future. We, as well as many other businesses, are likely to retain earnings over the next decade that will equal, or even exceed, the capital we presently employ. Some companies will turn these retained dollars into fifty-cent pieces, others into two-dollar bills.

I’ve written about this before.? Some managements teams with skill should retain all earnings, and not pay a dividend.? Management teams without skill should act like REITs and pay out 90% of taxable income (or free cash flow).

39) Buffett says he was wrong on housing.? I think he is still wrong on housing; it will take a lot longer for this situation to normalize.? The key variable is the proportion of houses with debts exceeding a 90% LTV.? Those houses are illiquid; can’t be sold except in a short sale.

40) One final wild idea: would BRK consider buying out the corpus of AIG?? I have better small insurance acquisition targets than that, but buying out AIG would be delicious given the comments Greenberg made to Buffett back when BRK was smaller.? He was very dismissive of BRK.? Also, Buffett could fold ILFC into NetJets (or vice-versa), sell off the life companies, and impose greater discipline on the P&C underwriting.? Personally, if BRK made a bid for AIG at $32, I think Buffett could make a lot out of it, and he would not have to worry about a lot of fuss, because the major holder is the US Government.

Recent Sorted Tweets

Recent Sorted Tweets

Finance Business

 

  • Breaking Ranks: Former Broker Turns Bomb Thrower http://t.co/q1vpz9dh @reformedbroker interview previews his book: http://t.co/Yigg2sEE $$ Feb 24, 2012
  • Why CLO managers continue to struggle http://t.co/a13j8jVG Low issuance, warehousing is tough, need more subordination, fewer senior buyers Feb 24, 2012
  • My Favorite Quote from Baupost’s 2011 Annual Letter http://t.co/VOvbqab3 DIstressed bond mgrs get itchy in bull phase & buy new junk @ par Feb 24, 2012
  • SEC IFRS Plan Endorsement http://t.co/8xguvs2G IFRS is not worth giving up comparability or sovereignty for. Project is a total loser. $$ Feb 24, 2012
  • Very cool, congrats RT @Finovate: @AlphaClone to offer Alternative Alpha ETF from U.S. Bancorp http://t.co/srufb3qd Feb 23, 2012
  • SEC May Ticket Speeding Traders http://t.co/oNCbF7pa Worthy of an experiment like the kind they did to study the “uptick rule” $$ Feb 23, 2012
  • AQR?s Aaron Brown on Red-Blooded Risk http://t.co/ZM7hn5P4 When I was a bond mgr, could sense some aspects of risk listening 2 broker’s tone Feb 23, 2012
  • The Volcker Rule is not going to bring your house back http://t.co/ADKMABfE Prop trading was not a leading cause of the financial crisis. $$ Feb 23, 2012
  • Pimco Said to Quit Mortgage Bond Group http://t.co/YsQZs1IE Feels wrong parties (their clients) r paying 4 bad servicing,instead of banks Feb 23, 2012
  • ?If you want, I can dig up an old research piece on analyst coverage — there are basically 3 factors that explain 70? http://t.co/tBinshJJ Feb 21, 2012
  • Stressed VAR is still a “protractor in the jungle” http://t.co/GRGgwvsd Risk management sh/not b done w/central measures but stress tests $$ Feb 21, 2012
  • How One Company Teaches Employees the ABCs of Finance http://t.co/fqO19foq More companies should do this, they would b more profitable. $$ Feb 18, 2012
  • Gross Fund at 66% Premium Shows Pimco Allure in Quest for Yield http://t.co/LY8Rv4SS Yield illusion distracts many investors. Avoid it. $$ Feb 17, 2012
  • Read:Which three of DOL’s new 401(k) rules represent the biggest land mines for financial advisors and plan sponsors? http://t.co/ZVoMPmQu Feb 15, 2012
  • The 400% Man http://t.co/nrRhYIZl Wish I could meet some of his disappointed investors who came to kick the tires and were disappointed. Feb 15, 2012
  • Contra:Foot-Dragging on IFRS Decision Could Strip SEC of Power http://t.co/VNUFhWD5 The US could lose representation on IASB. Good, drop out Feb 14, 2012
  • Notes from iGlobal’s Global Distressed Investing Summit: Part 2 http://t.co/9iOty0Iz Leveraged loan market seems to be in decent shape $$ Feb 14, 2012
  • Pimco: $25 Billion Foreclosure Deal to Hit Pensions Harder Than Banks http://t.co/DKFtMI9B Gives MBS buyers a reason 2 sue originators $$ Feb 13, 2012
  • Missing at MF: $1.6 Billion http://t.co/QSUMYbNO Included for the 1st time is roughly $700 million in client money residing in the UK $$ Feb 13, 2012
  • Stockbrokers: A Guide to Private Placement Due Diligence http://t.co/tbwtu6Jy Illiquid investments are ways to cheat average people. $$ Feb 11, 2012
  • Why illiquid? Can’t recover the commission otherwise.? Can deceive people that their investment is worth more than it? http://t.co/cYjvUhWx Feb 11, 2012

 

Market Strategy

 

  • Jim Stack was right, and he?s still bullish http://t.co/GfEqtTKl Basically a forward P/E plus momentum argument, & lack of sharp falls $$ Feb 24, 2012
  • S&P 500 Gets 9% Cheaper on Record Profits http://t.co/DWPGz5Y2 Makes a P/E argument; profit mrgns will eventually revert, may take a while Feb 23, 2012
  • The dangers of dividend-paying stocks http://t.co/FymTmAAi Hint: they are stocks. No maturity date, no certain cash flow, low BK priority $$ Feb 23, 2012
  • Falkenblog: Low Vol Commodity Timing Strategy http://t.co/M4FFRoCx Low volatility seems to work in a large number of areas, this is one $$ Feb 23, 2012
  • Retro Investing?Look Back to Get Ahead http://t.co/vYiPCu9J The 50s, w/post-WWII financial repression, recurs as a current investing meme $$ Feb 22, 2012
  • The Intelligent Investor: Are Index Funds Messing Up the Markets? http://t.co/VAoFtksw May also be traders following each other $$ Feb 21, 2012
  • If history is any indication, high dividend stock outperformance should continue http://t.co/C5GaWmW8 Uses 40s & 50s as analogy $$ Feb 20, 2012
  • Breakout or consolidation? http://t.co/GTSkBjIT Many market seem to be at inflection points. Which way will they go? Wildcards: EZone, China Feb 20, 2012
  • RE: @alea_ Interesting analysis.? I would be wary of teasing too much out of the cluster analysis of sector correlati? http://t.co/zirdOJ8v Feb 18, 2012
  • MORGAN STANLEY: January Exhibited This Tell-Tale Sign Of A Market Top http://t.co/IQqidpUE When everything rises at once, look out! $$ Feb 18, 2012
  • Apple Stock May Not Be as Cheap as It Looks http://t.co/2dgfjfPq Earnings quality has declined, and so has the PE multiple $$ Feb 18, 2012
  • @ampressman Common summary stat 4 acctg quality 4 $AAPL Net Operating Accruals / Assets, has been deteriorating 4 last 7 years + Feb 18, 2012
  • @ampressman $AAPL acctg used to be very conservative, now modestly liberal by that statistic. It’s a bad direction, not a bad position, yet Feb 18, 2012
  • Should the Rich Invest Like Colleges? http://t.co/M9OaPEPA Better question: what are your goals? Do you have an infinite horizon? $$ Feb 18, 2012
  • High Yield Bonds as Equity Indicator | The Reformed Broker http://t.co/OXUtZrWG Meet my friends & former colleagues Ed Meigs & Sean Slein $$ Feb 17, 2012
  • When Earnings Slow, Focus on Big Cap, Quality http://t.co/zjD3RPKA High quality is the place to be at present, credit cycle shifting some $$ Feb 16, 2012
  • A Lesser Known Indicator http://t.co/8oivTJFl Cash enters market through IPOs, employee grants, & exits through cash buyouts, buybacks $$ Feb 16, 2012
  • Parabolas have 2 end somewhere $$ RT @ReformedBroker: $AAPL sold off because people were getting impatient with how slowly it was moving up. Feb 15, 2012
  • FPA Capital?s Bryan Beats Peers Embracing Oil Volatility http://t.co/7ebuGmrb A clever focus on absolute retruns, w/a long horizon $$ Feb 15, 2012
  • Paulson Gives Activism a Go http://t.co/dkHb3cht Not as easy as it looks w/ $HIG. Acctg may not fairly capture variable liabilities $$ Feb 15, 2012
  • RE: @SoberLook DB hedges its bets.? Average years rarely happen in high yield, they are either good or bad. http://t.co/0C51uulu Feb 14, 2012
  • THE 1987 MYTH?. http://t.co/mHSU4nM3 ?Illusion of stability within disequilibrium? Very well said, in one short phrase. $$ Feb 14, 2012
  • America Inc. Faces Margin Stall http://t.co/RbqvqbT9 US companies have begun to see rising costs eat into the bottom line. Finally. $$ Feb 13, 2012
  • Hulbert: Insiders Selling at Heavy Pace http://t.co/qOPk2cbY Just another straw blowing in the wind, but insiders usually have good sense $$ Feb 10, 2012

 

Greece

 

  • Greek PSI outcomes tree: credit event probability at 93% http://t.co/jcLBc04c Clever grraphic shows high likelihood of Gk CDS triggering. $$ Feb 23, 2012
  • The market is now pricing in Greek sovereign CDS trigger http://t.co/w5vJ42Fa Upfront prices for Greek CDS moving up $$ Feb 22, 2012
  • Despite Pact, Unease Lingers for Greece http://t.co/Urp7mmag “Many Problems Remain Even Under Best-Case Scenarios” Shrink, shrink… $$ Feb 22, 2012
  • Greek Rescue Is Not the End of the Story http://t.co/IOCVcCTb Won’t save Greece on its own & there r other fringe nations 2 deal with $$ Feb 20, 2012
  • ECB Greek Plan May Hurt Bondholders While Triggering Debt Swaps http://t.co/Aya9urfV ECB may get better treaqtment than private holders $$ Feb 20, 2012
  • So, what would your plan for Greece be? http://t.co/SAd2f28O Play the game, and let Keynes sneer @ u as u attempt 2 solve the impossible $$ Feb 18, 2012
  • Greek Economy Shrinking Rapidly http://t.co/VzXi375M And it may shrink more rapidly depending on what the rest of Europe does $$ Feb 14, 2012

 

Eurozone

 

  • ECB’s Mario Draghi magic corrupts bond markets http://t.co/r0ZCmYpb Banks become dependent on ECB, bank bondholders more subordinated $$ Feb 24, 2012
  • European Banks May Tap ECB for $629 Billion Cash http://t.co/Re5TjLR5 ?There is a ?lose-lose? air around the ECB?s auction next week,? $$ Feb 24, 2012
  • The Eurozone should be prepared for a new government in France http://t.co/qGFPC20S And that govt will be more hostile to current actions $$ Feb 22, 2012
  • Spain Sinks Deeper Into Periphery on Debt Rise http://t.co/wkuef6tS As debts grow higher, the probability of escape gets lower. $$ Feb 22, 2012
  • Iron Lady Merkel Bucks German Street on Greek Aid http://t.co/Wc95xI47 Strategy working 4 now, but what if colleagues lose their seats? $$ Feb 20, 2012
  • Moody?s Cuts European Sovereigns http://t.co/GvJuES7t Spain, Italy, Portugal, Slovakia, Slovenia & Malta all cut. France & UK -> neg outlook Feb 15, 2012
  • Unlisted in euroland http://t.co/AQQrJMUf Didn’t catch this in Jan. Private bonds can offered 2 ECB as collateral; helps French banks $$ Feb 13, 2012

 

The Well-off Fringe Nations

 

  • Icelandic Anger Brings Debt Forgiveness http://t.co/P4BH8HKN If the debt problem is not severe, austerity. If it is severe (Iceland) default Feb 22, 2012
  • Nordic Currencies Stung in Crisis http://t.co/teorxG1P Much of the world, looking for a store of value, drive fringe currencies up $$ Feb 21, 2012
  • Canada housing market: poised 4 ‘severe correction,’ George Athanassakos says http://t.co/05kaVIAD Canada is used to the boom/bust cycle $$ Feb 21, 2012
  • @joshuademasi You’re right, but most of the fringe currencies are facing the same dilemma; who to favor, consumers vs exporters, etc… $$ Feb 21, 2012
  • Israel Safest as Investors Discount War Threat http://t.co/3oXTlILj Well-capitalized banks & balanced economy w/much high tech $$ #warrisk Feb 20, 2012
  • A hedge fund bets big on a Canadian mega quarry http://t.co/k7OZBC9u Property rights r tough here. What if an existing farmer tried this? $$ Feb 18, 2012
  • Australia?s Gillard Urged to Increase Mortgage Purchases http://t.co/ylsCuvq4 A mistake, far better to let the market fail. $$ Feb 17, 2012
  • You’re right, reminds me of an old piece I wrote: http://t.co/XkgO7z7A Thanks $$ RT @joshuademasi: The 5 stages of USD grieving ! Feb 15, 2012
  • Norway?s Rate Policy Dilemma Pits Household Debt Against Krone ?Headache? http://t.co/Ud4FCOsI Cut rates, asset bubble grows, Krone weakens Feb 15, 2012

 

 

China

 

  • Plan B for China’s Wealthy: Moving to the U.S., Europe http://t.co/X9jRPy6q Wealthy Chinese know their govt, thus the need for flight $$ Feb 22, 2012
  • China?s FDI and Trade Outlook Horrible Says Commerce Spokesperson http://t.co/LIlvmxIL Hard 4 Comm Party 2command domestic consumption up $$ Feb 18, 2012
  • ‘Mother of all bubbles’ will pop China stocks: GMO http://t.co/OMENKZOI Low prob: China successfully navigating soft landing out of a bubble Feb 18, 2012
  • China’s excess exports turn negative http://t.co/CiLgTKqC Key Q: how will China grow its economy by stimulating domestic consumption? $$ #uh Feb 18, 2012
  • Too many bearish on China, but I’m bearish also.? What to do? Seek out China bulls.? If their arguments sound dumb, d? http://t.co/vrhUIdsh Feb 17, 2012
  • The Silent Victims of the U.S.-China Currency War http://t.co/6DXAnE3m Smaller nations get caught in crossfire of competitive devaluation $$ Feb 17, 2012
  • China’s Military Spending to Double by 2015 http://t.co/5Va8kiLr I think it take some losses before DC takes this seriously. $$ Feb 17, 2012
  • China?s Tenuous Hold on Peace http://t.co/dOFr68tL Tibet is restive, China blames its problems on the economic mismanagement of foreigners Feb 14, 2012
  • Glimpses of a Chinese Town Under Lockdown http://t.co/AFoW0zsM some reporters managed to get there to document the heavy security presence Feb 14, 2012
  • Liu Mingkang Outlines the Reforms China needs to Undertake http://t.co/L0cXMoIf Will the communist party willingly reduce its power in China Feb 13, 2012

 

Japan

 

  • Japanese Equities Herald Return to Inflation http://t.co/rxlt5OhI If Japan bond market breaks, ructions will be felt the world over. $$ Feb 23, 2012
  • Energy imports will pressure Japan’s trade deficit http://t.co/lieDm3T4 But, Japan has a current account surplus from its net foreign assets Feb 23, 2012
  • Japan Suggests No Quick G-20 Deal on IMF Funding http://t.co/RZYF5EB2 non-European members of the IMF waiting on the Europeans to act $$ Feb 22, 2012
  • Tokyo Small-Caps Set for Longest Win Streak http://t.co/mD3ySrzh Unnoticed but true, look @ this CEF: http://t.co/VcdMQDxL FD: long $JOF Feb 22, 2012
  • Yen Slumps After Japan Expands Bond Buying http://t.co/L6yImwzC Competitive currency devaluations driving Forex $$ #beggarthyneighbor Feb 15, 2012

 

Iran

 

  • Japan Refiners Said to Stall on Iran Deals http://t.co/uEq1DYtb Life is harder on those that need Iranian oil, like India, China, Japan $$ Feb 21, 2012
  • Iran Says It Loaded Locally Made Fuel to Nuke http://t.co/6HkMaEFj Not sure I believe this, but if it’s true, the Israelis will know 😉 $$ Feb 15, 2012
  • Iran presses ahead with dollar attack http://t.co/Hd4Qtnvz Unlikely to work, but it’s all they can do w/oil transport shut down $$ Feb 14, 2012
  • Letter Writers Break Iranian Taboo http://t.co/M3NMfmk1 They are so desperate that they write the Ayatollah and criticize conditions. $$ Feb 14, 2012
  • Iran Sanctions Tighten as Shippers Stop Loading http://t.co/ubEtI6om Risk goes up, shipping insurance premiums rise, shipping stops $$ Feb 13, 2012

 

Rest of the World

 

  • Record Redemptions Loom Amid Akbank $1.3 Billion Loan Talks http://t.co/x5iDTSwE Never knew Turkish firms financed w/so much Short debt $$ Feb 18, 2012
  • Chavez Missing $10 Billion a Month by Curbing State Oil Investment http://t.co/uTG1Z8d8 PDVSA falls behind Pemex? How low can you go? $$ Feb 15, 2012
  • Ch?vez Opposition Faces Hard Election http://t.co/YBWi9PaW Chavez controls media & oil wealth; tough for Capriles, but he can still win. Feb 14, 2012
  • Gunfights in Saudi Arabia Show Spread of Tensions http://t.co/dNxhg2ij Shia in Saudi Arabia fight the govt. Biggest split in Mideast $$ Feb 14, 2012
  • The Real Reasons the Rich Are Moving Cash to the Caymans http://t.co/gh7d85ZA Litigation risk, and US political risk; diversify yr govts Feb 13, 2012

 

Federal Reserve / Monetary Policy / Fiscal Policy

 

  • Those believing the Fed is on hold for the next 3 years will be in for a rude awakening http://t.co/VYggm431 FF futures & TIPS betray mkt $$ Feb 24, 2012
  • Exported Inflation to Return Home, but When and in What Form http://t.co/UHT61w4Y The Fed will find it hard to shrink its balance sheet $$ Feb 24, 2012
  • Healthcare expenses will overwhelm the US federal budget http://t.co/lLUABMYy Suspect a deal will b driven 2 reduce benefits somehow $$ Feb 23, 2012
  • ?Fiat Money and Collective Corruption? http://t.co/lRAa2xnG Hard money would help, the bigger problem is light regulation of banks/credit $$ Feb 23, 2012
  • Fed Writes Sweeping Rules From Behind Closed Doors http://t.co/UtozNgly Q: Why? 2 avoid bank influence, or 2 hide bank influence? $$ Feb 21, 2012
  • The Race To Debase In All Its Glory http://t.co/rPtS9EqD Balance sheets of major central banks expand rapidly $$ #racetothebottom Feb 21, 2012
  • Wealthy Enriched by Double-Dipping U.S. Plan http://t.co/YtGTfakC Long article describing unethical use of SBA $$ . #eliminatetheSBA Feb 21, 2012
  • Over-regulated America http://t.co/uMKtg2W0 The home of laissez-faire is being suffocated by excessive and badly written regulation $$ Feb 18, 2012
  • Geithner: GOP Walked Away From Tax Overhaul – Bloomberg http://t.co/yupPqVeO Articles like this indicate another stalemate in the making $$ Feb 17, 2012
  • Potomac Divide Shows Foreclosures Thru Courts Slow Home-Price Recovery http://t.co/kilW75GM MD has slow foreclosures, housing mkt lags VA Feb 16, 2012
  • Sober Look: Regulate it all, ask questions later http://t.co/qnpfakfJ New regulations reduce the liquidity of the corporate bond market $$ Feb 16, 2012
  • FHA is almost broke. What will DC do when it goes critical? RT @HousingWire: FHA defaults up for ninth straight month http://t.co/TSZFHCeD Feb 15, 2012
  • Pentagon May Oust Troops Involuntarily to Meet Reductions in Budget Plan http://t.co/VnY4At7J Tough time 2b let go if you r a veteran $$ Feb 14, 2012
  • What a surprise! $$ RT @pdacosta: Bernanke’s big housing speech makes no mention of the Fed’s regulatory laxity in run-up to the crisis. Feb 10, 2012

 

Bonds

 

  • Contra: Should Mortgage Rates Even Be Lower? http://t.co/lODEFb1P Mortgages do not price off of Tsys, but swaps and bank bond yields $$ Feb 22, 2012
  • Wall Street Crowds Into Trader Joe?s http://t.co/dHZT83VK CMBS mkt getting heated; loans linked 2 retail rose to 45% 4 bonds sold in 2011 Feb 22, 2012
  • ?Have a lot of friends who have lost a lot of money waiting for $TLT to break. FD: long TLT http://t.co/Lw6Rqn02 Feb 21, 2012
  • A $360 trillion confidence trick http://t.co/Kar0f3Cz I have argued that LIBOR should be based off of binding offers to borrow/lend $$ Feb 14, 2012
  • http://t.co/VOIG2gUk W/TIPS NY Fed concentrates on the long on-the-run & nearby, w/nominals opposite. Makes implied inflation look higher $$ Feb 10, 2012

 

 

Muni Bonds

 

  • Stockton, CA, to Weigh First Steps Toward Bankruptcy http://t.co/d2lsCmx8 Start of negotiations to reduce emplyee pensions & healthcare $$ Feb 24, 2012
  • Good piece, thx RT @munilass: Evaluating Chapter 9 Bankruptcy for City of Detroit: Reality Check or Turnaround Option? http://t.co/PxWo5qHA Feb 21, 2012
  • Yes. http://t.co/4DUVVTKi $$ RT @BarbarianCap: @munilass isn’t this the muni book that @AlephBlog reviewed very favorably a few days ago? Feb 20, 2012

 

Pensions

 

  • New Rules Wreak Havoc forRetirement-Plan Sponsors http://t.co/HzHWTTtL I would expect rules to be modified, else headaches 4 DC plans $$ Feb 24, 2012
  • @BarbarianCap Looking at the RFP, that is one of the few things *not* under consideration, pity too, because it is more important. #DumbOCPP Feb 23, 2012
  • @BarbarianCap The audit is a test of methods and data, not assumptions. That’s actually pretty normal unless you an assumptions outlier $$ Feb 23, 2012
  • @BarbarianCap I’ve said it many times b4, if life insurers have 2b conservative in accounting, DB plans s/b more so, but they r less so $$ Feb 23, 2012
  • @BarbarianCap Some cases, deals will be driven to reduce benefits, depends on state/muni laws, Ch 9 allowable; not protected by ERISA/PBGC Feb 23, 2012

 

Stocks

 

  • The Capabilities Premium in M&A http://t.co/9CdZIugk Long piece that explains why some mergers work; they aid organic growth & r small $$ Feb 22, 2012
  • Elemental to Raise $1.7 Billion Next Year to Mine Potash http://t.co/w7GNsA2H Potash pricing has been volatile lately, cross-currents $$ Feb 22, 2012
  • Gamestop to J.C. Penney Shut Facebook Stores: Retail http://t.co/zSui0fCf $FB may have a more difficult time w/retail than some expect $$ Feb 20, 2012
  • Hewlett-Packard’s Message: We’ve Been Here All Along http://t.co/vU8piGMt Note: long $HPQ . HPQ definitely sounds more certain now. $$ Feb 16, 2012
  • Icahn Pushing CVR?s Sale Means $1 Billion Gain for Shareholders http://t.co/TfBKGErf What refiner wants more capacity now & fertilizer? $$ Feb 16, 2012
  • Hedge Funds Switch Positions, While Paulson Switches Investing Style http://t.co/MznmLhci Issue w/ $HIG is value of Variable product biz $$ Feb 15, 2012

 

Miscellaneous

 

  • The Control Revolution And Its Discontents http://t.co/FY4XgPde There is a “sweet spot” for market efficiency, too much & things get chaotic Feb 24, 2012
  • The Decline In Inventory Right Now is NOT a Good Sign http://t.co/Ra1Iz65H Fall in seller confidence & decline in new distressed inventory Feb 23, 2012
  • Spring Lambing in UK Turns Deadly as New Virus Kills Young http://t.co/PrO4neT1 Infects pregnant sheep, cows and goats, 5% infection rate Feb 22, 2012
  • Midwest Farmland Prices Update for the Year 2011 http://t.co/se9DbEgB Good discussion after a good article; things r getting a little bubbly Feb 22, 2012
  • Finding Treasures Among Insurer’s Wreckage http://t.co/jiFZiydE Never bot Atl Mutual’s Surplus Notes, but historical curiosities, wow $$ Feb 18, 2012
  • @StockTwits Insurance is boring, but antiquities at the oldest companies are fascinating. Wonder what Nationwide did w/Provident Mutuals? $$ Feb 18, 2012
  • @StockTwits I would hold meetings every now and then in Provident Mutual’s underused antiquities room; would start good conversations $$ Feb 18, 2012
  • Why Is Violent Crime Declining in US Cities? http://t.co/SLgD8bEL & http://t.co/RRRI2m8X Smarter law enforcement makes DC safer. Wow! $$ Feb 18, 2012
  • Thanks, liked it. RT @onwrdnupwrd: you will like this one from this weeks economist http://t.co/DMqhgXBB Feb 18, 2012
  • Interracial Marriages in US Reach a Record http://t.co/RJjWnTso Interesting that it is more prevalent with college educated people. $$ Feb 18, 2012
  • Harvard Mapping My DNA Turns Scary http://t.co/m5stl0d2 Journalist learns hard things about his DNA. Would he be better off not knowing? $$ Feb 18, 2012
  • Groupthink: The brainstorming myth http://t.co/7VBlhzKC People do better solving problems on their own, and sharing ideas w/the group $$ Feb 18, 2012
  • Fear, Submission, and Authoritarianism; a Disturbing Trend http://t.co/0lb32tOw Negative social mood leads to loss of liberties $$ Feb 16, 2012
  • Santorum?s Electability Pitch Undermined by 2006 Senate Re-Election Loss – Bloomberg http://t.co/8xglQQPJ Shouldn’t be an issue, here’s why: Feb 15, 2012
  • As the late Bob Casey said, “You can’t lose if you are a pro-life Democrat.” This is true, and it is why Santorum lost to his son. $$ Feb 15, 2012
  • Cracking the Long-Jump Code http://t.co/MN9d9EdJ Fascinating science applied; the key seems 2b2 jump higher, not just longer $$ Feb 15, 2012
  • The Best Foods for Thought, Literally http://t.co/tMyLW9E2 Perhaps the Mediterranean diet can aid brain function, or a lowcal diet $$ Feb 14, 2012
  • Contra: Almost Half the Price of Oil is Speculative Premium http://t.co/z8t51JOl It should be impossible to so overprice such a large mkt $$ Feb 14, 2012
  • The Hunt Brothers thought they could corner a much smaller silver market, and were not able to do it.? The oil compan? http://t.co/MLYVH5w3 Feb 14, 2012
  • So, What’s Your Algorithm? http://t.co/lC4voWCI Being able 2 crunch large amounts of data can lead to more objective decisions $$ #ornot Feb 13, 2012
Sorted Recent Tweets

Sorted Recent Tweets

Trying a new format here, I think readers will like it better.? Most things are better after additional effort.? Think of this as a news links by subject post.

Economics

  • If you look in the back, it seems that there were 58 respondents. From page 13: Methodology & Panel Selection Invi? http://t.co/p8sVZl9g Feb 06, 2012
  • Will the great interest rate gamble pay off? http://t.co/hgj5XSKc People want to believe that you can get something for nothing; ain’t true. Feb 05, 2012
  • Central Planning at the Federal Reserve http://t.co/X8qmqU6C Fed: we can create prosperity by holding interest rates down, right? $$ #wishes Feb 05, 2012
  • Labor Force Participation Rate: 28-year Low http://t.co/kLgQ61iK Everyone still happy about the lower unemployment rate? $$ Feb 05, 2012
  • Bill Gross: Free Money Ain?t Really Free http://t.co/LXWxpxp5 It will lead to stagflation, IMO, depending on what fiscal policy does $$ Feb 05, 2012
  • Life & Death Proposition http://t.co/XuZS5Snn Where does credit go when it dies? Back where it came. It delevers, slows & inhibits ec growth Feb 02, 2012
  • US unemployment ?progress? http://t.co/WoIVZPGp If you add back the discoraged workers, all of the improvement in U-3 goes away $$ Feb 02, 2012
  • The Perniciousness of ZIRP http://t.co/dYlFMbLe Gonzalo Lira on how ZIRP loses effectiveness b/c people think it’ll b there a long time $$ Feb 01, 2012
  • Why Neoclassical Economics Doesn’t Work In The Age Of Deleveraging http://t.co/D3IAhTyv Steve Keen explains y Krugman & others r wrong $$ Feb 01, 2012
  • Warning: Goat Rodeo http://t.co/JQ2FV9LS Hussman makes his case that equities are overvalued and could pull back 25% $$ Feb 01, 2012
  • Who Owns World’s Financial Assets? & Why R US Households So Fascinated W/Stocks? http://t.co/5rp52OM4 American Exceptionalism in investing Feb 01, 2012
  • As an aside, that is one reason why the US net foreign debt hasn’t spiraled up. We own equities abroad & they own our debt. $$ declines + Feb 01, 2012
  • $$ declines reduce the value of our debts, but not the value of r foreign holdings. I think the US will come out of this crisis rel well $$ Feb 01, 2012

 

Housing

  • Home Prices Tumble http://t.co/N1gdNslr No surprise here with all of the dark supply; houses come onto mkt when ppl can bear loss $$ Feb 01, 2012
  • Too lazy to be knowns http://t.co/flXRR6fM I know many who understood what would happen if home RE prices fell, but none who got the size $$ Feb 01, 2012
  • Freddie Mac’s “inverse floater” allowed more loan origination http://t.co/5devKZ17 Other side to the Propublica story http://t.co/KjXJHU1x Feb 01, 2012
  • I’m no fan of the GSEs; I think they should be abolished, but the GSEs have always made a variety of bets on prepayment over time. $$ Feb 01, 2012

 

International

  • On China, Henry Kissinger and Fareed Zakaria see Domestic Tension and Risk of Geopolitical Conflict http://t.co/1bhvrI3U Ferguson is wrong. Feb 05, 2012
  • Tightening lending standards vary materially across the Eurozone http://t.co/ciWUK9cm Conditions tight in Italy & France, but not Germany $$ Feb 02, 2012
  • Japan Auto Sales Notch Record Jump http://t.co/0VzF4WST Another small bright spot. Of course, bouncing back from a low level $$ Feb 02, 2012
  • Socialist Hollande, Who Wants Full European Treaty Renegotiation, Increases Lead Over Sarkozy http://t.co/J3qCpZZ3 Eurozone Wild Card $$ Feb 01, 2012
  • Hong Kong Homes Face 25% Drop as Loans Fall in Year of Dragon http://t.co/ifg1146H And this is with wealthy mainlanders fleeing China. $$ Feb 01, 2012

 

Markets

  • RBC Takes On High Frequency Predators http://t.co/MfA5qdxm Where there is offense, there will b defense; nothing goes unanswered in the mkts Feb 05, 2012
  • Global Strategists Abandoning Bearish Views http://t.co/dOXCUMA7 Makes me think we r getting close to a turning point. Feb 02, 2012
  • Dividend stocks: Buyer beware http://t.co/SvMCHtCj Makes the valid & missed point: high qual div paying stocks r stocks & can lose $$ #yeah Feb 01, 2012

 

Credit

  • 6 High-Yield Canaries-in-the-Coalmine http://t.co/4pz6SSQc 6 reasons y high yield is overheated http://t.co/fKnHmBqD & http://t.co/UPVev0iD Feb 02, 2012
  • QOTD: Regulators Watching Aggressive Yield Chasing http://t.co/iWimo3eg FINRA warns of undue risk in income seeking. Advisors take note $$ Feb 02, 2012
  • Contra: The Safest 7% Yield in America http://t.co/VrXoLEFH Poor analysis does not take into account the highish leverage on mtge repo $$ Feb 02, 2012
  • Shipping Loans Go Bad for European Banks http://t.co/y5Z0wt3R Highly glutted area w/many dead firms walking; how far down will the losses go Feb 02, 2012

 

 

Politics

  • Group lists top stock investments by members of Congress http://t.co/CarxUCjS Top 50 hldgs -> in top 100 cos by mkt cap. Hard2manipulate $$ Feb 05, 2012
  • Obama Re-Election Odds Versus the Stock Market http://t.co/F5EETcve Example of 2 variables that r correlated b/c they anticipate GDP changes Feb 05, 2012
  • RE: @abnormalreturns Gold is mostly political philosophy. How much control do you want the government to have over mo? http://t.co/hRxIkaoo Feb 03, 2012
  • Getting back to the gold standard http://t.co/pCk8Ij6j Gingrich & Ron Paul have said they would like to appoint James Grant as Fed Chairman Feb 02, 2012

 

Companies

  • Carlyle’s proposed IPO disaster http://t.co/OqGke8eN So there’s no board. Most boards don’t do much. Mgmt will have no board 2 shield them Feb 05, 2012
  • For These Fans, a Day With Buffett Offers Wealth of Photo Opportunities http://t.co/UpcwVKe7 I think Buffett is enjoying life more now. Feb 05, 2012
  • Buffett Railroad Boosts Capital Plan to $3.9B http://t.co/9XEw2gyT Buffett changes; organic investment in capital-intensive biz $$ #olddog Feb 01, 2012
  • Pep Boys Seen Gaining 27% as Cheapest Value Lures Bids http://t.co/GyfH7qRL Could a bidding war start? Company is undermanaged $$ Feb 01, 2012
  • Jefferies Allows Bonus Recipients to Swap Stock 4 Cash With 25% Discount http://t.co/pfGB3Vmc Fair way2 let employees disconnect from $JEF Feb 01, 2012

 

Financial Services

  • I’ve just started “Acts of God and Man,” by Michael Powers. In the intro, he goes through the various meanings of th? http://t.co/tX7uAlWl Feb 05, 2012
  • When evaluating Investment Funds, use Dollar-weighted Returns http://t.co/N5g7PI0d This is a neglcted concept that is enjoying a rebirth $$ Feb 02, 2012
  • After a Delay, MF Global?s Missing Money Is Traced http://t.co/4s6U8yOe Investigation moves to how to recover the $$ and who is at fault. Feb 01, 2012
  • http://t.co/wBbJTe3D FINRA Alert: Do you use complex products? What additional work do you do 2 assure that they are being used properly? $$ Feb 01, 2012
  • Banks Need Higher Interest Rates to Start Making Money http://t.co/SneRACCi Flat front end of yield curve squishes bank interest margins $$ Feb 01, 2012
  • 401(k) Plans Step Into the Sunshine http://t.co/fvKeup2L But as with DB plans, as costs rise, companies will offer them less. $$ Jan 31, 2012

 

Value Investing

  • The SEC’s “90% Convergence” Fantasy http://t.co/bkWaAS5S US GAAP has many flaws, but we know them. IFRS will introduce abusable flexibility Feb 02, 2012
  • But on the bright side, value investors may do relatively better as financials become less trustworthy; the accruals anomaly will sing $$ Feb 02, 2012
  • Need to consider (Cost of goods sold)/user $$ RT @ErikSchatzker: Facebook gets $4.39/yr of revenue per user. ESPN gets $4.69/mo. Feb 02, 2012
  • Berkowitz: Fund Plunge ?Makes Little Sense? http://t.co/pcoPLahW BB, appoint someone in your group 2 seek out opinions contrary 2 yours $$ Feb 01, 2012
  • @ADayforRabbit I have argued in the past that BB is not paying attention to the delevering, which is a real headwind for the banks. $$ Feb 02, 2012
  • New Fund Hopes to Prove Outspoken Analyst?s Thesis http://t.co/cuVpRzvO I bet @rcwhalen does well like my friends @ Hovde or M3 Partners $$ Feb 01, 2012

 

Hedge Funds

  • Are Hedge Funds Worthwhile Investments? http://t.co/Lw2EhRPr Yet another “Hedge Fund Mirage” citation; the book is having a lot of influence Feb 02, 2012
  • Are the hedge fund and private equity boys pulling a fast one? http://t.co/TNXFJo62 Beginning 2c the args of “Hedge Fund Mirage” everywhere Feb 02, 2012
  • Did Hedge Funds Trigger the Financial Crisis? http://t.co/lNIb2dgF Secured asset classes can be overlevered; when they collapse, big mess $$ Feb 01, 2012

 

Miscellaneous

  • Do the Job You’re Meant to Do http://t.co/wR3OX20N LIfe is too short to work with people you don’t respect, or tasks unfit for you $$ Feb 02, 2012
  • Millionaire adopts girlfriend as daughter http://t.co/zffGCWbu Asset shelter. Does incest rely on consanguinity or on legal relationship? Feb 02, 2012
  • Charles Murray Reiterates Willpower http://t.co/smeXZKNh Lack of self-control can destroy relationships, jobs, firms & lives $$ Feb 02, 2012
  • I ran into @twitalyzer today. Lots of interesting analytics for tweeting. Here are some for me: http://t.co/HDdcFYaU & http://t.co/8uFFOMuP Feb 01, 2012
  • At the first blogger summit at the UST, I recommended to the powers that be that they issue floaters. I also recommen? http://t.co/R3U8OHSi Feb 01, 2012
  • California Faces Cash Shortfall by March on Low Receipts, Controller Says http://t.co/QxH1a6Re Could be interesting given the elections $$ Feb 01, 2012
Defining Benefits Down

Defining Benefits Down

I have long thought that Defined Benefit plans are the best retirement plans for workers.? They are also the worst for employers.? Why?

Employees are incapable of making intelligent investment decisions in aggregate, much as they like the feeling of “control.”? Far better to have professionals choose investments where they don’t give in (as much) to fear and greed, and lose a lot of money in the process.

Defined benefits give retirees a fixed budget, which is good; they are not capable of managing a lump sum over a lifetime.? Indeed that would tax most “professionals.”? The pensions are also judgment-proof, aside from QDROs.

The cost of providing fixed benefits amid low interest rates is tough for most employers, who have seen their liabilities expand dramatically.? It takes a lot more assets to provide a pension if you are investing in safe bond investments.

This is particularly true for public pensions, since they had the greatest tendency to defer making contributions to avoid raising taxes.? Now they are in the soup.? It will be interesting to see what the municipalities do with the pensions.? There may be compromises driven over retirement benefits for future employees, current employees, and even current retirees.? Then again, maybe taxes will be raised to cover the expense.

That will vary by state; some will accept more taxes, and some won’t… beyond that, some will move out of high taxation states, creating a “death spiral” for taxes, or a default/compromise on pension payments.

All that said, I can simply say that in a period of low interest rates and low returns from risk assets, it is unlikely that pension payments will be maintained in many states, unless taxes are raised, and many will oppose that, because their own retirements so not look so promising.

 

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