Real Estate and Mortgages – Page 6

Sorted Weekly Tweets

Posted on 10 November 2013 by David Merkel

Companies & Industries

Twitter Sold Some Stock http://t.co/oIwxhl5BAh Valuing speculative companies is tough. Ask how much of sectoral profits they could grab $$ Nov 08, 2013
Then discount that at 20%/year, and decide whether you have enough margin for considerable error. I don’t think Twitter gets there. $$ Nov 08, 2013
Most US Blockbuster Stores to Close http://t.co/Q77XgZEYGI The internet changes everything; anything that can be bytes is blown to bits $$ Nov 07, 2013
Utilities in Pain Selling Renewable Assets at Record Rate http://t.co/0v5YgeAoVj Utilities don’t want 2 allocate capital to low returners $$ Nov 06, 2013
FHFA Takes Aim at ‘Forced’ Insurance http://t.co/FZslhVSyLp Won’t happen, b/c banks won’t lend if proprty is uninsured against casualties $$ Nov 05, 2013
Coconut Crisis Looms as Postwar Palm Trees Age http://t.co/C5Ub4BnEgu Coconut Trees have aged w/not enough replanting, cuts into yields $$ Nov 05, 2013
Makes me wonder whether the life companies didn’t also raise mortality charges in order to make up 4 compressed/negative interest margins $$ Nov 05, 2013
Universal Life Policies Hurt by Low-Rate Era http://t.co/qEcwGR3gTQ Guaranteed rates high relative to current interest rate environment $$ Nov 05, 2013
Western Digital Adds Helium to Enterprise Hard Drives http://t.co/tCj4H6ksC4 More storage, less power use,aids big data | FD: + $WDC $$ Nov 04, 2013
Here’s How Much Berkshire Hathaway Made On Financial Weapons Of Mass Destruction In Q3 http://t.co/F7actdnrmv Buffett wins | FD: + $BRK.B $$ Nov 04, 2013
The new American capitalism: Rise of the distorporation http://t.co/KKp7BK91xA Thinly capitalized corporations that distribute profits $$ Nov 03, 2013

Politics & Policy

Obamacare Website Frustrations Persist as Deadline Looms http://t.co/NA5zV7cze1 Harder to fix bad code than to rewrite the system $$ #loser Nov 08, 2013
Artificial Trans Fats in Food Deemed Unsafe by US FDA http://t.co/sXf5r5DjjO Y R we limiting freedom in something so basic as food? $$ Nov 08, 2013
Obama’s Catastrophic Victory http://t.co/Z9gryN2oA7 Wait till people with bronze policies have to pay their costs prior to the deductible $$ Nov 06, 2013
It would involved tort reform, & encouragement of charities to aid the sick, & would shrink Medicare & Medicaid, moving 2a free market $$ Nov 06, 2013
Real health reform would remove all government preferences, including the employer deduction, & move to a client pays directly model $$ Nov 06, 2013
Colorado Education-Tax Measure Fails http://t.co/GV5rpq9NSQ Interesting datapoint; even 4 local schools, difficult 2 raise income taxes $$ Nov 06, 2013
SEC Fines Greater Wenatchee Regional Events District4Misleading Investors http://t.co/oDHpxG5o6I Failed2disclose certain finl projections $$ Nov 06, 2013
CFPB Debt Collection Rules May Move in Unprecedented Direction http://t.co/G5LBwfc3em May even affect ability to collect on private debts $$ Nov 06, 2013
BlackRock, Fidelity Face Initial Risk Study by Regulators http://t.co/SwyaxP14HB That they would consider this proves they r clueless $$ Nov 06, 2013
Obama repeatedly promised people could keep their health insurance under Obamacare http://t.co/dS84R05kzH Law affected ability 2 do that $$ Nov 06, 2013
Jonathan Tepper on Obamacare http://t.co/L163WSrcaL A relatively neutral assessment of PPACA, which does not reduce oligopolies & costs $$ Nov 06, 2013
Wells Fargo Said to Face US Mortgage-Bond Probe http://t.co/nrbZQOiGHy FIRREA statute used. $BAC $CSGN $JPM $C $WFC all face these probes $$ Nov 06, 2013
A tax break for wealthy landowners under scrutiny, from @BBGVisualData http://t.co/lTxFAEPwwk Many parties allied to keep low value break $$ Nov 06, 2013
IRS Cracks Down on Breaks 4 Rich Americans http://t.co/dN6dtnTCQG Cracks down on conservation easements; graphic: http://t.co/8jKqjCi7na $$ Nov 06, 2013
McDonnell v. Royal Dutch Shell Plc 13-cv-07089 http://t.co/HMbTcvLdEV <– If anyone wants 2c the complaint on Dated Brent Crude Rigging $$ Nov 06, 2013
Congress May Push Milk Prices to $8 a Gallon http://t.co/kPPeJ42YlP The solution is 2 end milk price supports; have a free market in milk $$ Nov 05, 2013
Obamacare Expedited Bidding Limited Who Could Build Site http://t.co/EEa2UKZQ78 US Medicare&Medicaid Services preapproved 16, only 4 bids $$ Nov 04, 2013
Obama’s Broken Promise of Better Government Through Technology http://t.co/eaYVdiAYAj Technology is only as good as its implementation $$ Nov 04, 2013
A Stage-4 Gallblader Cancer Survivor Says: I Am One of ObamaCare’s Losers http://t.co/9nZLusmknt PPACA sob story #2 loses coverage & docs $$ Nov 04, 2013
Mr. Obama, I Am Unhappy That Obamacare Threatens To Kill Me. http://t.co/T3YnjqYzRJ PPACA sob story #1, loses his healthcare coverage $$ Nov 04, 2013

Market Impact

The Biggest Little Secret In Money Management http://t.co/zeIzMWJmIz Most new fancy strategies can mostly be replicated in simple ways $$ Nov 08, 2013
The Dividend Challenge http://t.co/icI80BpcoR E.g., In 1993-1994 dividend-oriented funds did horribly as rates soared. Divs aren’t magic $$ Nov 07, 2013
Of Debt, Growth, Interest Rates and History http://t.co/ZEG4za0XLg High debt & real interest rates tend to dampen economic growth $$ Nov 06, 2013
Many bonds only have a small number of holders, so it gets easier to guess who the big traders might b, thus affecting the market price $$ Nov 06, 2013
When bonds don?t trade http://t.co/71JD7XbJ9S Difficult to facilitate buyside trading w/each other; they want to keep their moves quiet $$ Nov 06, 2013
Gross Loses World?s Largest Mutual Fund Title to Vanguard http://t.co/HfpH7pURgE Wonder if Pimco is 2big 4 Gross’ quant strategies 2 work $$ Nov 05, 2013
Over the last 10 years investing in venture capital has not outperformed public equity (Pg 5) http://t.co/GnBTZPRhz0 Capital Index.pdf $$ Nov 04, 2013
Investors Return to IPOs in Force http://t.co/Hn9RFceouq Fresh Fruits r opposite of IPOs, good when plentiful, IPOs bad when plentiful $$ Nov 04, 2013
New Homes Get Built With Renters in Mind http://t.co/j4NYgVS54n If investors r truly long-term 4 running rentals, this could b stable $$ Nov 04, 2013
Reduce the noise levels in your investment process http://t.co/XUE0HYpWGt @ritholtz guides us in telling us what chatter 2 avoid hearing $$ Nov 03, 2013

Rest of the World

China?s Soviet-Style Suburbia Heralds Environmental Pain http://t.co/7Sk5too1g1 Central planning fails again $$ Nov 07, 2013
Kyoto Veterans Say Global Warming Goal Slipping Away http://t.co/DCqPxzIJcE No incentive to cut carbon emissions; eg, Germany’s coal use $$ Nov 04, 2013
Rankings That Rankle http://t.co/xB5bftp7yb Rather than reform further, China would rather shoot the messenger bearing bad tidings $$ Nov 04, 2013
Merkel Facing Power Dilemma as Coal Plants Open http://t.co/fMLyBrg7Zz Note that Germany does not care much about CO2 emissions $$ Nov 04, 2013

Central Banking

Greenspan?s Bequest to Yellen Is Board Harmony Shown in Records http://t.co/gIdq6MQjnX more interesting is Volcker offering 2resign in 86 $$ Nov 07, 2013
MSNMoney’s Jubak:Fed Has No Way Out of Its Mountain of Debt http://t.co/TVhTheDWSj No surprise. Central bank balance sheets rarely shrink $$ Nov 06, 2013
Kozicki Shows Central Bankers Only as Good as Forecasts http://t.co/GwhwxkRLYe Proves we shouldn’t rely on neoclassical economic models $$ Nov 06, 2013

Personal Finance

The red-blue divide in personal finance http://t.co/OgS2PL0jgh Shares my view on Dave Ramsey; useful 4 $$ management, avoid on investing Nov 06, 2013
Can I repo a car if I co-signed the auto loan? http://t.co/2xJp83ppnt Rather, lend them the $$ w/a formal loan document; NEVER co-sign!! Nov 05, 2013
Mom co-signed, now stuck with student loan payments http://t.co/uVenTWv2Oc Never co-sign, not for a child, parent, friend, anyone, ever $$ Nov 05, 2013
The 4% Safe Withdrawal Rule Declines to 3% http://t.co/pSvGBLgXhC My rule: Take 10Y Treasury yield, +1% if neutral, +2% if bullish $$ Nov 05, 2013
Banks offering mortgages with only 5% down payments http://t.co/w62w0qwnOX Financing long-term assets w/low equity helped create crisis $$ Nov 05, 2013

Other

Excel monkeys unite! For today, we are cancelling the circular reference! http://t.co/6D7H9NekSi On the challenging Modeloff competition $$ Nov 06, 2013
The siren call of Microsoft Excel http://t.co/g5isxFXJJS Excel has its uses, but not for security, audit & production. Use 2 prototype $$ Nov 06, 2013
Symbolic Family: De Blasio Success Shows Sea Change for Interracial Couples http://t.co/uzJWeUY0zq We’re one race: We’re human $$ Nov 06, 2013
More Commuters Self-Driven, Census Finds http://t.co/XRcRJ7fSo3 Surprising that no one has found an internet-based solution 4 carpooling $$ Nov 05, 2013
Game of thrones with world chess champion Viswanathan Anand http://t.co/HnEv9GbmRh Long piece on the reigning chess champ & new challenge $$ Nov 05, 2013
Anand On How Computers Have Changed Chess http://t.co/UPjZs61f70 Most openings have become transparent; only odd openings offer surprise $$ Nov 05, 2013
Simple Tech Fix Could Allow Millions to Hear – Bloomberg http://t.co/1HrLV8Vj2u Transmits sound directly to a listener?s hearing aid $$ Nov 05, 2013
Capt.James A. Kirk Takes Command of Navy Vessel http://t.co/DYj4Noyp8z His nickname is “T.” His vessel has advanced cloaking abilities $$ Nov 04, 2013

Wrong

Wrong Fed Study: Lengthen Low-Rate Guidance to Fix Unemployment Faster http://t.co/Sf3X2lsDOz No data on unemployment in liquidity trap $$ Nov 07, 2013
Wrong: Why ‘Rate Shock’ Is An Essential Part Of Health Reform http://t.co/jxxmJQcpTo People should not be forced 2buy more than they want $$ Nov 06, 2013
Wrong: Think inside the (right) box; 5 must-read business books http://t.co/VmxZHuFqsf I read “Big Data.” Good, not great. Rest look iffy $$ Nov 05, 2013
“Disagree. I read “Big Data.” Good, not great. Others look iffy, particularly ‘Antifragile.'” ? David_Merkel http://t.co/wcVPO5mmxK $$ Nov 05, 2013
Wrong: Economists overvalue stock markets http://t.co/vaWef32JS7 Stock prices provide valuable economic signals: http://t.co/XyaEJqXwGn $$ Nov 04, 2013
Wrong: Americans? Debt Hangover Seen Ending in Boost to Growth http://t.co/pJXgAYeEwt The consumer remains highly leveraged vs history $$ Nov 04, 2013
Wrong: If It Looks Like a Bank, Regulate It Like a Bank http://t.co/8BA1XlrLAJ Money market funds don’t look like banks; very safe assets $$ Nov 04, 2013
Wrong: Asymmetric Return With A Catalyst http://t.co/FTHYYP2Rwx Writer doesn’t get difficultly of getting free $$ from life insurers $HRG Nov 04, 2013
http://t.co/jH200iYZyT Comps of $MET & $PRU – horribly optimistic. $NWLI would be better. Another reason I don’t read seeking alpha $$ $HRG Nov 04, 2013

Comments, Replies & Retweets

RT @pdacosta: “Forward guidance is a stupid academic fantasy grabbed by those who wish to escape making real policy.” – @AdamPosen h/t @NHe? Nov 07, 2013
RT @pdacosta: A tragedy and a travesty: Unemployment in Spain http://t.co/u4UlylupKH Nov 06, 2013
http://t.co/fwt1rLXORs You could try applying the same to Title and Mortgage insurer kickbacks.” ? David_Merkel http://t.co/El8F8V0690 $$ Nov 05, 2013
@ritholtz First Bloomberg View Column: Welcome http://t.co/rqAqgL8slw Bloomberg picks up a great columnist grown from financial blogging $$ Nov 04, 2013
“Well done, Barry. Your writing skill has taken you above and beyond.” ? David_Merkel http://t.co/c42lp6sH6i @ritholtz new @bloomberg $$ Nov 04, 2013

On Fat Tails

Posted on 30 October 2013 by David Merkel

I’m reading an investment book that is arguing for market timing.? I’m not impressed with the line of argumentation so far.? I just finished a chapter where the authors pointed out that security price movements are more volatile that the normal distribution would admit.

This is a well known result, or at least it should be well-known.? What I hope to contribute to the discussion is why the tails are fat, and skewed negatively.? There is a famous saying in investments:

Cut your losses, and let your winners run

I regard this saying as vapid, because I have had so many investments where the price action was bad initially, but ended up being incredible investments.? I have also had companies stumble after prior gains, and persevere for greater gains.? Intelligent asset management does not react to the past, but analyzes future prospects, and looks at current margin of safety.

But imagine a situation where many parties have their plans, and they are all similar.? I’ll give a few examples:

Institutional investors decide in 1986 to follow the momentum, but be ready to sell if the momentum breaks.? They want upside, but want to protect the downside.
Japan was a total momentum market up through 1989, and the reverse thereafter.? Loose monetary policy was an aspect of that, as was a loss of fear, warrant speculation, etc.
Those investing in hot emerging markets in the mid-90s did not recognize valuations getting stretched, and the inability of the countries to maintain stimulative policies amid falling currencies.
The guys at LTCM were geniuses until they weren’t.? They had no idea of the risks they were taking.? They did not have an ecological view of investing.? Essentially, they thought liquidity was free, until the jaws of the trap snapped shut, and they died.? Taking a concentrated position is a risk, because the investing typically pushes up the price.? When you are so big in a position that you are affecting the market price, that is a bad place to be for two reasons: 1) if you sell, you drive down the price for future sales, and 2) you no longer know what the fair price would be if you weren’t there.
Aside from that with LTCM, their brokers mimicked their trades, accentuating the boom-bust, but the brokers had risk control desks that forced them to sell out losing trades, which further hurt LTCM.
Think about residential mortgage bonds in 1994.? So many players thought that they had mastered the modeling of prepayment risk only to find amid a Fed tightening cycle that many wanted to limit their interest rate risk as rates skyrocketed, fueling a self-reinforcing panic.
Consider tech stocks 1998-2000.? Momentum ran until the sheer weight of valuations, together with insolvencies, crushed the market as a whole, and tech stocks more.? Think of European financial institutions getting forced by regulators to kick out US stocks in September 2002, putting in the bottom.? Regulators almost always act too late, and exacerbate crises, but they should do that, because worse things would happen if they didn’t.? (Later = bigger crisis, Earlier = Some Type II errors, regulating where it was not needed).
Finally, consider the housing/banking crisis in the US 2005-2009.? People bought homes with a lot of debt financing, and short-dated debt financing.? Banks levered up to provide the financing.? Shallow credit analysis allowed banks to take on far more risk than they imagined.? It all ended in a trail of tears, with many personal, and not enough corporate bankruptcies, with the taxpayers footing the bill.

In each of these cases, you have correlated human behavior.? The greed of investors gives way to fear.

Now if you are thinking about Modern Portfolio Theory, where market players have perfect knowledge, this doesn’t make sense.? These crises should not happen.? But they happen all too regularly, and I will explain why.

Men are not greedy as much as they are envious.? This leads to mimicking behavior when things are going well.? Those not currently playing want a piece of the action, and so they imitate.

Modern Portfolio Theory implicitly assumes that market players don’t react to the actions of other market players, but that is false.? Most market players don’t think; they mimic.

That is what leads to fat tails, because when people move as a herd, you get dramatic price moves.? Because fear is a greater motivator than envy, that is why the big downward moves are almost always greater than the big upward moves.

Add into that the credit cycle, because gains on credit-sensitive bonds are small, but losses are huge when they occur.? The distribution of outcomes has a long left tail.

The main point here is that price movements are non-normal because market players act as a group.? Their behavior is correlated? on the downside, and to a lesser extent on the upside.

Among other things, this means Modern Portfolio Theory is wrong, and needs to be severely modified, or abandoned.? It also means that we need to watch the credit cycle, and speculative activity to get a sense of how committed the hot money is to risk assets.? Hot money follows trends.? Cold money estimates likely returns over a market cycle, and invests in the best ideas when they are out of favor.

I don’t think timing the market is easy.? I do think that fundamental investors have to look at whether they have a lot of opportunities, or few, and vary their safe assets opposite to opportunities.

So beware the fat tails — we haven’t had a lot of volatility recently.? Maybe we are due.

On Liabilities in Asset Allocation

Posted on 17 October 2013 by David Merkel

From an e-mail from one of my readers:

I?m not sure if you have the time to respond to this, but figured I?d send to you and just see!…

(Just FYI, I?m not an investment professional of any sort, so I don?t have any ?skin in the game? as they say, just a geek who follows the markets and DIY financial-planning issues and long-time reader of the Aleph blog)

I recently read an FP article by a guy I?ve read a lot (Alan Roth).? He suggested that, when your analyzing an investment portfolio and making asset-allocation decisions, you need to treat mortgage debt as an ?inverse-bond? or an ?anti-bond??such that any mortgage debt held would dollar-for-dollar negate or reduce your actual bond investment holdings.? And the result is that this made the investor?s actual portfolio risker than they realized, since their ?true? bond allocation was smaller than they had considered.

I thought it was a novel concept, but I found some problems with that approach, within the context of asset-allocation.? My main point was that the primary purpose of analyzing a portfolio?s asset allocation is to manage risk through diversification of assets (generalizing here in interests of being concise).?? The pinnacle of diversification is non-correlation: generally in economic environments where equities soar, bonds will underperform, and vice versa.? However, classifying a debt as an ?anti-bond? doesn?t actually provide any portfolio diversification, or introduce any non-correlation.? It won?t actually negate the amount that your bonds would rise, and it won?t actually offset the amount your bonds would fall, in those respective market environments.? And even if you consider that the real value of the debt is decreased if inflation rises (as the NPV calculation would be using a greater discount rate), that doesn?t have any real-world effect on the portfolio and it?s risk and return behavior.? Since borrowers aren?t allowed to ?mark-to-market? their mortgages, that debt holding value does not fluctuate?it is fixed, and amortized from its historical cost, regardless of any market conditions or any theoretical NPV/DCF changes. ?Therefore, the inverse- or anti- bond holding in the portfolio has zero impact on the portfolio?s actual risk/return behavior, and so it seems to me it doesn?t add any functional value to frame debt as an ?anti? portfolio holding of some sort.

Also, if you were going to do that, to be fair and complete, you must apply that same principle to every single debt the client has (otherwise, it would be rather arbitrary just selecting the mortgage debt).? This adds unnecessary complexity in the asset allocation analysis.

Instead, the appropriate (and only) way to analyze debt is, separate from investable portfolio assets, on the cash-flow side of things.? Simply asking what is the ?optimal? use of the available capital; i.e. what net ?return? do you earn by using capital to eliminate debt, versus what net return could you earn if you kept the debt and employed the capital elsewhere (this will be different for each investor and their unique situations).? This is the way to analyze and evaluate debt, not to mingle it in with your invested assets and classify it as an ?anti-bond? holding within your portfolio.

I was just curious your take on this, and if I am misunderstanding or missing something.? Do you ever consider client?s debt as ?inverse-? or ?anti-? bonds in the context of asset allocation?

Thanks!

When you manage money financial firms, if you do it right, you consider the promises that your firm needs to fulfill.? When will cash be needed to pay obligations?? That helps drive asset allocation, because assets should broadly match liabilities.

Now, I am not a financial planner.? That said, the same principles apply to personal asset allocation.? If someone has a large mortgage or other debts, and he can’t invest his fixed income assets at levels that exceed the yields on those debts with reasonable risk, he should not invest in bonds — he should pay down his debt.? In the case of 401(k)s or IRAs, where there might be matches or tax advantages, the calculation becomes more complicated.? You have to weigh the match and tax deferral vs the negative arb on bond yields vs the mortgage and personal debts.

There is another factor here — how stable is your job?? If stable, it is bond-like, and you can take more equity risk with investments.? If your job has payoffs that vary a great deal with the market — commissions, bonuses, etc., it is stock-like, and you should take less risk in your investing — take excess earnings and pay down the mortgage.? I did that when I went from being a bond manager inside an insurance company, to being an equity analyst inside a hedge fund.? I paid off my mortgage in full, so that I would be free to take risks for my new employer.

As for the article, the concept is not novel.? It is well-known and practiced by institutional asset managers who manage money to the horizons needed by their clients.? As an example, the cash flows of a pension plan are relatively determinate, and the discount rate calculates the value of the liability.? The portfolio should throw off cash when needed in order to minimize risk.

In some cases, where bonds don’t offer enough yield, and equity prices are depressed, it might make sense to tactically mismatch, betting that equities will offer better returns versus the liabilities than bonds would on a risk-adjusted basis.

This argument has made its rounds for the last 20 years in insurance and pension management?? Do we match asset and liability cash flows, or do we trust in the equity premium, and invest in risk assets?? The correct answer is hybrid.? In general, match assets and liabilities, but if there is a significant tactical advantage to not match, then do that.? Think of buying junk bonds in late 1998.? Time to throw matching out the window.? And then in mid-1999, buy equities.

Now, not all clients will allow for that much risk-taking.? Many institutional investors will not let the asset manager take advantage of temporary dislocations.

In general, I think Mr. Roth is correct, but with an adjustment.

In extraordinary times, where bonds yield more than the earnings yields of stocks (think 1987 & 2000), buy bonds heavily, even if you have mortgage and other debts.
In extraordinary times, where stocks earnings yields are much higher than bonds, mismatch and own more stocks relative to bonds.? Just beware deflation, with falling future earnings.
In normal times, an indebted investor should not add to his leverage, but should invest in bonds, or better, pay down his debt.? Being debt-free is an excellent thing, and allows the investor to take more risks when the market is offering bargains.

Debt is either something to be funded by bond assets, or funds a margin account where you outperform the yield, or die.? All of this depends on where the market is in its risk cycle.? Only take risk where it is rewarded.

The Rules, Part LVI

Posted on 16 October 201320 June 2017 by David Merkel

Leverage and risk eventually transfer to the least regulated

I’m coming near the end of this series. ?It will either end at LX or LXI. ?To refresh, I started a file in 1999 of insights before I started writing at RealMoney or Aleph Blog. ?I ended it in 2003, near the time I started writing for RealMoney. ?I threw a few of the insights away, but not many — there may have been near 70 when I was done. ?These ideas stemmed for all of the new ideas I ran into as I transitioned from being an investment actuary to being a portfolio manager. ?Onto tonight’s idea!

After the recent crisis, tonight’s insight may seem rather banal, but I saw it as an actuary many times as onshore insurers would shed reserves using reinsurance treaties to Bermuda companies and other domiciles with weak reserving, capital or tax rules. ?It was reinforced to me when I blew it badly regarding Scottish Re. ?It was only in the midst of their crisis, that I finally saw a full diagram of their corporate structure. ?It was a hodgepodge of all of the weak insurance domiciles, with many lines going this way and that.

A picture is worth a thousand words, and as I have often said, complexity within financial companies is rarely rewarded. ?That diagram focused my research, and changed my view of what was going on. ?After having bought into the decline, we sold into an incredible one day rally when some positive news was released, while my view had shifted that cash could not make it to the holding company, and the common would go out at zero.

What a mess, and the best thing I can say was that selling into the rally was the right thing to do, as the common did go out at zero.

But in the recent crisis:

How many weakly capitalized investment banks died or were acquired?
How many REITs, particularly mortgage REITs died or were acquired?
How much of the mortgage insurance industry died?
How much of the financial guaranty industry died?
How many significant GSEs died?
And with all of these, how many barely survived?

These all had weak financial models, taking on too much credit risk, with weak, backward-looking models for risk. ?It is no surprise that the bad credit risks found the fools that assumed that housing prices could only go up, and incurred considerable leverage to make their bets.

All of these were weakly regulated. ?There was more than a bit of the “this is free money” attitude to many of these businesses — it was an era that rewarded yield hogs for a time.

Thus, when you see financial firms with weak balance sheets taking on significant credit risks, be wary, it is often a sign that the credit cycle is about to turn.

Letters from Readers

Posted on 12 October 2013 by David Merkel

I’ve been reading your blog for quite sometime and I’ve always been astounded by your vast knowledge of just about everything in investments. I’m new to this game and I hope to learn from you, which brings me to the following:

I know we have to calculate “float”, “cost of float” and find the “combined ratio” for an insurance company to value it more accurately. However, I’ve spent hours googling around and I still can’t find what exactly in the balance sheet/P&L/CF statement (or even in the footnotes!) that constitutes as:

loss adjustment expense,?unearned premiums,?other policyholder liabilities,?premium balance receivable,?loss recoverable from reinsurance ceded,?deferred policy acquisition costs,?deferred charges on reinsurance,?related deferred income tax, etc.?

In most insurance companies’ balance sheets, all I see are the usual suspects “cash & cash equivalents”, “goodwill”, “intangible assets”, “derivative financial instruments”, “PPE” and the likes. I’ve never seen any of those above-mentioned terms, are there substitute words for them? I’m obviously missing something out. Thank you for your time!

Let’s clear something up here — there is no GAAP financial statement item called float.? What is float?? Let me teach you something deeper.? How does a property & casualty insurer invest?

There is some wiggle room around this, but typically, the premium reserves are invested in high quality short-term debt.? Premium reserves represent the premiums paid in advance that have not yet been taken into income, because some insureds don’t pay month-by-month, but they have paid for many months in advance.? They are often called unearned premiums.

Claim reserves are typically invested in longer-term debt, where the term of the debt will approximately match the period over which the claim will be paid.? Much of the claim reserves fall into the category “Incurred but not Reported [IBNR].? Insurance claims are not always filed immediately.

Finally, the surplus of the insurance company is usually invested in risk assets — equities, private equity, real estate — whatever area the insurance company thinks they have expertise to make money.

The first two categories, premium and claim reserves, comprise float.? You can try to measure them by looking at the statutory statements of the insurer, where those are real line items on the liabilities page, or you can approximate it by looking at the current liabilities, and adding in the claim reserve, which is usually in one of the footnotes.

Reinsurance can mess this up a little, so try to work with numbers net of reinsurance.

Property & Casualty Insurers do not have to credit interest as they delay paying claims, or receive premiums in advance.? Thus the concept of float.? Few insurers use float to be as aggressive as Buffett.? They invest more conservatively, especially among insurers where claims get paid quickly (home & auto).? With long-tailed claims, like asbestos & environmental, the claims may take so long to emerge that the insurer can be investing in stocks, and that will be the optimal investing decision.

The so-called “cost of float” is net underwriting losses.? If there are no net underwriting losses, float is free, or more often, is a source of profit.

But float isn’t worth much unless you have a clever investor investing the cash that stems from the delay of paying claims.? Even with Buffett, that advantage is uncertain.

Tell you what, I never analyze float in insurance.? I analyze management teams.? Insurance is uncertain enough, that I want a margin of safety, and the best way that I can do that is find management teams that are conservative.? Do they consistently make money on underwriting?? Do they occasionally/frequently deliver negative surprises?

I wouldn’t spend time on float.? Any insurer can generate float.? Look at how they make money.? How do they underwrite?? How do they invest?? Are they conservative in their accounting?? That is what you should look for.

Next letter:

I hope you are doing well.? I have been reading your blog for the last few years and have found myself thoroughly educated and entertained.? My favorite series of posts has been your explanation on the holders’ hands, which is a unique and more useful way of classifying market participants, rather than just using timeframe.

A little bit about myself: I am currently a student at zzzzzzzzz studying Economics and before that I was in the Marine Corps Reserves where I served a tour in Iraq.?

I managed to save some money from that time and began investing, which dovetailed nicely with my burgeoning interest in macroeconomics (particularly through the Austrian and Post-Keynesian lens).

As I learned from my mistakes and improved, I recently felt confident enough to form my own LLC in the hopes of bringing on close family and friends as part owners (essentially limited partners) and manage our savings in a more productive and less expensive manner than the current meta of mutual funds or indexing.

This brings me to the the reason I am emailing you: suppose I would like to expand this type of business…How would I go about this? Am I reliant on word of mouth via friends and family?? I also plan to talk to the Small Business Administration for investors, but I don’t think anybody will even give me a chance until at least after a few years.?

Would it be feasible to talk to pension/asset management firms for interest in investing?? I would love to hear your opinion on the matter and please let me know if there is someone more appropriate for me to send this email to.

If I have this straight, you have started a firm that invests in other firms, not all that much different from Buffett in his days after ending his limited partnership.? In this case, you are limited by the number of people that can invest in your private firm, which in these days, I believe is 1000 people.? I could be wrong here, so consult competent legal counsel to guide you.? Not sure how the SBA would fit in here, though I know they aid funding small firms together with venture capitalists.

What you are doing is too small for pension and asset managers.? Given the JOBS Act, your best option is to recruit medium-sized investors, and invest wisely.? Given that you run a private firm, you might not want to limit yourself to public companies.? You might be able to compound capital faster by buying whole small companies, or large portions of medium-sized companies.

Of course, this all presumes that you have a real talent here.? If you’re not sure, give it up now, and give the capital back to your shareholders.

I wish you well, but if you are doing public assets, far better that you do what I do and manage separate accounts for investors.? It’s a lot cleaner.

The Education of an Investment Risk Manager, Part IX (The End)

Posted on 3 October 2013 by David Merkel

I’m bringing this series to a close with some odds and ends — a few links, a few stories, etc.? Here goes:

1) One day, out of the blue, the Chief Investment Officer walked into my office, which was odd, because he rarely left the executive suite, and asked something like: “We own stocks in the General Account, but not as much as we used to.? How much implicit equity exposure do we get from our variable annuities?”? The idea was this: as the equity markets go up, so does our fee stream.? If the equity market goes up or down 1%, how much does the present value of fees change?? I told him I would get back to him, but the answer was an easy one, taking only a few hours to calculate & check — the answer was a nickel, and the next day I walked up to the executive suite and told him: “If we have 20% of our liabilities in variable annuities it is the equivalent to having 1% of assets invested in the stock market.

2) This post, Why are we the Lucky Ones? could have been a post in this series.? At a small broker-dealer, all sorts of charlatans bring their ideas for financing.? The correct answer is usually no, but that conflicts with hope.? Sadly, Finacorp did not consult me on the last deal, which is part of the reason why they don’t exist now.

3) The first half of the post, The Education of a Mortgage Bond Manager, Part IX, would also fit into this series — the amount of math that went into the analysis was considerable, but the regulatory change that drove it led us to stop investing in most RMBS.

4) While working for a hedge fund, I had the opportunity to sit in on asset-liability management meetings for a bank affiliated with our firm.? I was floored by the low level of rigor in the analyses — it made me think that every bank should have at least one actuary to do analyses with the level of rigor in the insurance industry.

Now, this doesn’t apply to the big banks and investment banks because of their complexity, but even they could do well to borrow ideas from the insurance industry, and do stress testing.? Go variable by variable, on a long term basis, and ask:

At what level does this bring line profits to zero?
At what level does this bring company profits to zero?
At what level does this imperil the solvency of the company?

5) This story is a little weird.? One day my boss called me in and said, “There’s a meeting of corporate actuaries at the ACLI in DC.? You are our representative.? They will be discussing setting up an industry fund to cover losses from failures of Guaranteed Investment Contracts.? Your job is to make sure the fund is not created.”

His concern in 1996 was that it would become a black hole, and would encourage overly aggressive writing of GICs.? He didn’t want to get stuck with losses.? I told him the persuasion was not my forte, but I would do my best.? I said that my position was weak, because we were the smallest company at the table, but he said to me, “You have a voice at the table.? Use it.”

A few days later, I was on the Metroliner down to DC.? I tried to understand both sides of the argument.?? I even prayed about it.? Finally it struck me: what might be the unintended consequences from the regulators from setting up a private guaranty fund?? What might be the moral hazard implications?

At the meeting, I found one friend in the room from AIG.? We had worked together, and AIG didn’t like the idea either.? In the the early parts of the meeting it seemed like there were 10 for the industry fund, and 3 against, AIG, Principal, and us.? Not promising.? We talked through various aspects of the proposal, the three representatives taking the opposite side — it seemed like no one was changing their minds, but some opinions were weaker on the other side.

By 3PM the moderator asked for any final comments before the vote.? I raised my hand and said something like, “You have to think of the law of unintended consequences here.? What will be the impact on competition here?? What if one us, a large company decides to be more aggressive as a result of this?? What if regulators look at this as a template, and use it to ask for similar funds more broadly in life insurance??? The state guaranty funds would certainly like the industry to put even more skin into the game.”

The room went silent for a few seconds, and the vote was taken.

4-9 against creating the guaranty fund.

The moderator looked shocked.

The meeting adjourned and I went home.? The next day I told my boss we had won against hard odds.? He was in a grumpy mood so he said, “Yeah, great,” barely acknowledging me.? This is the thanks I get for trying something very hard?

6) In early 2000, I had an e-mail dialogue with Ken Fisher.? I wanted to discuss value investing with him, but he challenged me to develop my own proprietary sources of value.? Throw away the CFA syllabus, and all of the classics — look for what is not known.

So I sat down with my past trading and looked for what I did best.? What I found was that I did best buying strong companies in damaged industries.? That was the key idea that led to my eight portfolio rules. Value investing with industry rotation may be a little unusual, but it fit my new view of the world. I couldn’t always analyze changes in pricing power directly, but I could look at industries where prices had crashed, and pick through the rubble.

In Closing

My career has been odd and varied, which has led to some of the differential insights that I write about here.? In some ways, we are still beginning to understand investment risks — for example, how many saw the financial crisis coming — where a self-reinforcing boom would give way to a self-reinforcing bust?? Not many, and even I did not anticipate the intensity of the bust.? At least I didn’t own any banks, and only owned sound insurers.

Investment risk is elusive because it depends partly on the collective reactions of investors, and not on external shocks like wars, hurricanes, bad policy, etc.? We can create our own crises by moving together in packs, going from bust to boom and back again.

It is my hope after all these words that some will approach investing realizing that avoiding risks is as important as seeking returns, and sometimes, more important.? It is not what you earn, but what you keep that matters.

The Education of an Investment Risk Manager, Part VIII

Posted on 2 October 2013 by David Merkel

“So you’re the new investment risk manager?”

“Yes, I am,” I said.

CA: “Well, I am the Chief Actuary for [the client firm].? I need you to do a project for me.? We have five competitors that are eating our lunch.? I want you to figure out what they are doing, and why we can’t do that.”

Me: “I’ll need to get approval from my boss, but I don’t see why not.? A project like this is right up my alley.”

CA: “What do you mean, right up your alley?”

Me: “I’m a generalist.? I understand liabilities, but I also understand financing structures, and I can look at assets and after a few minutes know what the main risks are and how large they are.? I may not be the best at any of those skills, but when they are combined, it works well.”

CA: “When can you have it to me?”

Me: (pause) “Mmm… shouldn’t take me longer than a month.”

CA: “Great.? I look forward to your report.”

The time was late 1998, just prior to the collapse of LTCM.? Though not well understood at the time, this was the “death throes” of the “bad old days” in the life insurance industry for taking too much asset risk.? Yes, there had been bad times every time the junk bond market crashed, and troubles with commercial mortgages 1989-1992, but the industry had not learned its lessons yet.

The 5 companies he picked were incredibly aggressive companies.? One of them I knew from going to industry meetings came up with novel ways of earning extra money by taking more risk.? I thought the risks were significant, but they hadn’t lost yet.

So what did I do?? I went to EDGAR, and to the websites of the companies in question.? I downloaded the schedule Ds of the subsidiaries in question, as well as the other investing schedules.? I read through the annual statements and annual reports.? I had both my equity investor and bond investor “hats” on.? I went through the entirety of their asset portfolios at a cursory level, and got a firm understanding of how their business models worked.

Here were the main findings:

These companies were using double, and even triple-leveraging to achieve their returns.? Double-leveraging is a normal thing — a holding company owns an operating insurance subsidiary, and the holding company has a large slug of debt.? Triple leveraging occurs when a holding company owns an operating insurance subsidiary, which in turn owns a large operating insurance subsidiary.? This enables the companies to turn a small return on assets into a large return on equity, so long as things go well.
The companies in question were taking every manner of asset risks.? With some of them I said, “What risks aren’t you taking?”? Limited partnerships, odd subordinated asset-backed securities, high yield corporates, residential mortgage bonds with a high risk of prepayment, etc.

So, when I met with the Chief Actuary, I told hid him that the five were taking unconscionable risks, and that some of them would fail soon.? I explained the risks, and why we were not taking those risks.? He objected and said we weren’t willing to take risks.? As LTCM failed, and our portfolios did not get damaged, those accusations rang hollow.

But what happened to the five companies?

Two of them failed within a year — ARM Financial and General American failed because they had insufficient liquid assets to meet a run on their liquidity, amid tough asset markets.
Two of them merged into other companies under stress — Jefferson Pilot was one, and I can’t remember the other one.
Lincoln National still exists, and to me, is still an aggressive company.

Four of five gone — I think that justified my opinions well enough, but the Chief Actuary brought another project a year later asking us to show what we had done for them over the years.? This project took two months, but in the end it showed that we had earned 0.70%/yr over Single-A Treasuries over the prior six years, which is? a great return.? The unstated problem was they were selling annuities too cheaply.

That shut him up for a while, but after a merger, the drumbeat continued — you aren’t earning enough for us, and, in 2001-2, how dare you have capital losses.?? Our capital losses were much smaller than most other firms, but our main client was abnormal.

To make it simple, we managed money for an incompetent insurance management team who could only sell product by paying more than most companies did.? No wonder they grew so fast.? If they had not been so focused on growth, we could have been more focused on avoiding losses.

What are the lessons here?

Rapid growth with financials is usually a bad sign.
Analyze liability structures for aggressiveness.? Look at total leverage to the holding company.? How much assets do they control off of what sliver of equity?
If companies predominantly buy risky assets, avoid them.
Avoid slick-talking management teams that don’t know what they are doing.? (This sounds obvious, but 3 out of 4 companies that I worked for fit this description.? It is not obvious to those that fund them.)

And sadly, that applied to the company that I managed the assets for — they destroyed economic value, and has twice been sold to other managers, none of whom are conservative.? Billions have been lost in the process.

It’s sad, but tons of money get lost through some financials because the accounting is opaque, and losses get realized in lumps, as “surprises” come upon them.

Be wary when investing in financial companies, and avoid novel asset risks, credit risk, and excess leverage.

The Education of an Investment Risk Manager, Part VII

Posted on 1 October 2013 by David Merkel

In late 2007, I was unemployed, but had a line on a job with a minority broker-dealer who would allow me to work from home, something that I needed for family reasons at that point.? The fellow who would eventually be my boss called me and said he had a client? that needed valuation help with some trust preferred CDOs that they owned.

Wait, let’s unpack that:

CDO — Collateralized Debt Obligation.? Take a bunch of debts, throw them into a trust, and then sell participations which vary with respect to credit risk.? Risky classes get high returns if there are few losses, and lose it all if there are many losses.
Trust preferred securities are a type of junior debt.? For more information look here.

I got to work, and within four days, I had a working model, which I mentioned here.? It was:

A knockoff of the KMV model, using equity market-oriented variables to price credit.

Uncorrelated reduced discrepancy point sets for the random number generator.

A regime-switching boom-bust cycle for credit

Differing default intensities for trust preferred securities vs. CMBS vs. senior unsecured notes.

It was a total scrounge job, begging, borrowing, and grabbing resources to create a significant model.? I was really proud of it.

But will the client like the answer?? My job was to tell the truth.? The client had bought tranches originally rated single-A from three deals originated by one originator.? There had been losses in the collateral, and the rating agencies had downgraded the formerly BBB tranches, but had not touched the single-A tranches yet.? The junk classes were wiped out.

Thus they were shocked when I told them their securities were worth $20 per $100 of par.? They had them marked in the $80s.

Bank: “$20?! how can they be worth $20.? Moody’s tells us they are worth $85!”

Me: “Then sell them to Moody’s.? By the way, you do know what the last trade on these bonds was?”

B: “$5, but that was a tax-related sale.”

Me: “Yes, but it shows the desperation, and from what I have heard, Bear Stearns is having a hard time unloading it above $5.? Look, you have to get the idea that you are holding the equity in these deals now, and equity has to offer at least a 20% yield in order attract capital now.”

B: “20%?! Can’t you give us a schedule for bond is worth at varying discount rates, and let us decide what the right rate should be?”

Me: “I can do that, so long as you don’t say that I backed a return rate under 20% to the regulators.”

B: “Fine.? Produce the report.”

I wrote the report, and they chose an 11% discount rate, which corresponded to a $60 price.? As an aside, the report from Moody’s was garbage, taking prices from single-A securitizations generally, and not focusing on the long-duration junky collateral relevant to these deals.

In late 2008, amid the crisis, they came back to me and asked what I thought the bonds were worth.? Looking at the additional defaults, and that the bonds no longer paid interest to the single-A tranches, I told them $5.? There was a chance if the credit markets rallied that the bonds might be worth something, but the odds were remote — it would mean no more defaults, and in late 2008 with a lot of junior debt financial exposure, that wasn’t likely.

They never talked to me again.? The bonds never paid a dime again.? I didn’t get paid for running my models a second time.

The bank wrote down the losses one more time, and another time, etc.? How do you eat an elephant?? One bite at a time.? It did not comply well with GAAP, and eventually the bank sold itself to another bank in its area, for a considerably lower price than when they first talked to me.

So what are the lessons here?

Ethics matter.? Don’t sign off on an analysis to make a buck if the assumptions are wrong.
Run your bank in such a way that you can take the hit, rather than spreading the losses over time.? (Like P&C reinsurers did during the 1980s.)? But that’s not how GAAP works, and the CEO & CFO had to sign off on Sarbox.
A model is only as good as the client’s willingness to use it.? There are lots of charlatans willing to provide bogus analyses — but if you use them, you know that you are committing fraud.
Beware of firms that won’t accept bad news.

I don’t know.? Wait, yes, I do know — I just don’t like it.? This is a reason to be skeptical of companies that are flexible in their accounting, and that means most financials.? So be wary, particularly when financials are near or in the “bust” phase — when the credit markets sour.

Sorted Weekly Tweets

Posted on 28 September 2013 by David Merkel

China

Chinese Cities Hooked on Land Revenue Fuel Housing Costs http://t.co/8SXwubzUjk Ppl invest in what they think they ctrl; no alternatives $$ Sep 28, 2013
Amway Bankrolls Harvard Course?For Chinese Cadres http://t.co/XVk5MXV2eh May not b pyramid, but successful sellers mostly recruit sellers $$ Sep 26, 2013
Chanos Undeterred by China Growth as O?Neill Bullish http://t.co/xwvC9mOFHa China will become the biggest windshield bugsplat ever seen $$ Sep 25, 2013
Party Will Pay the Price for China?s Rebalancing http://t.co/inQ5BHYMdn The Day has arrived: Michael Pettis is on Bloomberg. Go Michael! $$ Sep 25, 2013
China?s Generation Winnebago Avoids Traffic in RVs http://t.co/Q8z41qGv1j New Chinese status symbol: RVs. Rest while your driver works $$ Sep 24, 2013
China + Gold = 9 Million iPhones Sold http://t.co/DfIAopLDLV Gold may do nothing, but it is beautiful, & beauty drives much marketing $$ Sep 24, 2013
Michael Pettis, in his current newsletter, reminds us that loan growth outstrips ability to repay in China, recent “growth” is a fake-out $$ Sep 24, 2013

Companies & Industries

Meet Hummingbird: Google Just Revamped Search To Answer Your Long Questions Better http://t.co/mtAf5pxGIA Improved Search Engine $$ $GOOG Sep 28, 2013
JC Penney Is on the Brink http://t.co/UtMX5sa3ZT Now $JCP has liquidity, @ a cost, but can they transform their business model? $$ #unlikely Sep 28, 2013
Penney’s Share Offering Prices at a Discount http://t.co/CWVp8dOKln $JCP Danger Will Robinson! Stock price does not hold secondary level $$ Sep 27, 2013
Kat Cole, Former Hooters Waitress, Runs Cinnabon’s $1B Empire http://t.co/sOe9WKUB1v Ppl go gaga 4 Classic Roll. 60% more cals vs Big Mac $$ Sep 27, 2013
Oaktree group to sell US foreclosed homes http://t.co/dUuGn768TI Too many investors chasing residential RE vs owner occupiers $$ #badsign Sep 24, 2013
Meet Prem Watsa: The Man Riding to BlackBerry?s Rescue http://t.co/flg4xn1MkX A case of regret, throwing good $$ after bad $BBRY Sep 24, 2013
Banks Prove Safer Than Industrials in Bond Rally http://t.co/B2t3pbaNGd I would b willing 2 overweight industrials now; they r safer $$ Sep 24, 2013
Do Amazon’s Lockers Help Retailers? Depends on What They Sell http://t.co/Pbd2cPK6zl Works if $AMZN doesn’t sell what u sell, &vice-versa $$ Sep 23, 2013
FireEye Takes Off as Shares Rise 80% in IPO Debut http://t.co/fnY1YkvvD1 Score processes on weirdness, share info globally 2 stop malware $$ Sep 23, 2013

Rest of the World

Irish Billionaire Has ?Boatload? of Customers for Spanish http://t.co/GhyDzrhkhk Get your own Spanish Villa while supplies last! $$ Sep 27, 2013
Debt Disaster Seen Unless VAT Rises to 20% by 2020 http://t.co/fXyeptRNJZ Japan is a bug in search of a windshield; 20% would kill econ $$ Sep 26, 2013
Merkel?s Cold Embrace Leaves SPD Wary of Coalition Talks http://t.co/6pCmU9KgCf If SPD doesn’t compromise, cud a minority government form $$ Sep 24, 2013
Believing Data Not Required W/GDP Warrants http://t.co/36SKEKLcha Do u think Argentina is fudging GDP #s up? Buy Argentine GDP Warrants $$ Sep 23, 2013
For Migrants, New Land of Opportunity Is Mexico http://t.co/jy3XaZeRCA Immigrants r moving to Mexico as the economy deregulates a little $$ Sep 23, 2013
Czechs Yearning for Growth Set to Abandon Merkel Path http://t.co/sU8mxocTL7 No natural political coalition 4 austerity, even when right $$ Sep 23, 2013
Greece Plans Foreclosures to Meet Bailout Demands http://t.co/W7Ryxvv6J6 Inability 2 foreclose gums up Greece’s financial system $$ Sep 23, 2013

Central Banking

Richard Koo says ‘vicious cycle’ taking hold as Fed faces ‘QE trap’ http://t.co/se3uPY5eP1 Similar to my arguments in Easy in, Hard out $$ Sep 27, 2013
Constitutional Money by Richard Timberlake http://t.co/iipZBfnFqm “Treaties may become inapplicable because of changes in circumstances” $$ Sep 25, 2013
US Fed Shouldn’t Give Forward Guidance, Former Bank of Israel Head Fischer Says http://t.co/ZzbTLqTEU9 Correct. Fischer 4 Fed Chair $$ Sep 24, 2013
Why we listen to former FOMC members who r partisans of the Fed, rather than skeptics of central banking, like James Grant, amazes me $$ Sep 24, 2013
Yellen Would Bring Tougher Tone to Fed http://t.co/xoNY2kKWqa Academic economists, like Yellen, do not understand how the economy works $$ Sep 24, 2013

Housing/Mortgages

Mortgage Bonds Without Government Backing Face Tough Time http://t.co/MrtGxmynes Tough 2 mkt private label RMBS, not enough excess spread $$ Sep 28, 2013
Subprime bond bounces back, leaving behind a subprime borrower http://t.co/x7KRB8Rp9n Long article about a deadbeat & his subprime loan $$ Sep 27, 2013
There have been a scad of articles like this, but the guy did not do “due diligence” on the loan, and did not have to buy the house $$ Sep 27, 2013
Home gold rush is over http://t.co/AASXbe14zc Too many investors vs owner occupiers creates an imbalance as smarter players start 2 sell $$ Sep 26, 2013
FHA, Facing Losses, Likely to Tap Treasury http://t.co/Hdpqqdplri Shortfall for Fiscal Year Could b at Least $1B, Early Projection Shows $$ Sep 26, 2013

Financial Sector

BATS Prepares to Take On Big Bell Ringers http://t.co/x8PjU05xE9 NYSE + Arca > BATS + Direct Edge > NASDAQ $$ Graph: http://t.co/rDV3hY7uzf Sep 28, 2013
Shine a Light on Repo http://t.co/KrF4MtaA7Y Did u know that repos r 96 years old? Learn about obscure corner of the fixed income market $$ Sep 27, 2013
The bank that rejects the most mortgages http://t.co/JxD3xhvlY4 $JPM highest rejection rate, $STI lowest, $WFC biggest lender, avg 20.6% $$ Sep 27, 2013
Covenant-Lite Loans Need Uniform Definition http://t.co/RbEywreAEC It would help, but there is always nonstandard data in securitizations $$ Sep 26, 2013
Wells Fargo: New CLO Regulations May Lead to Issuance Slump http://t.co/FcK5NLQvba Forcing securitizers 2 take first losses ruins profits $$ Sep 24, 2013
The VC Secret: 3 Out of 4 Start-Ups Fail http://t.co/jjFrQc9JNP Ratio sounds high, but when VC-backed firm wins, it pays 4a lot of losers $$ Sep 24, 2013
That’s the way 2 manage pension assets if u r big enough. In-source, build up expertise, & keep adding smart people 2 addl asset classes $$ Sep 23, 2013
In-Sourced, Fully Funded, Public, and American http://t.co/ISUDgDvGhC! South Dakota Retirement System manages 65%-70% of assets in-house $$ Sep 23, 2013
America’s latest financial crisis? It’s incredibly personal. http://t.co/yHLcIm7xuR People do NOT understand how to save or handle cash $$ Sep 23, 2013
Value Investor Charles de Vaulx On China, Gold, Apple And Berkshire Hathaway http://t.co/4LgwGyzI7g Longish good interview. $$ $STUDY $BRK.B Sep 23, 2013
Fidelity sued by employees over its own 401(k) plan http://t.co/yo5h32QQD6 Biting hand that feeds them, they object 2 high fees 4 funds $$ Sep 23, 2013
Inside Nasdaq’s succession planning process http://t.co/6uOUsgrpuQ $NDAQ trades at a discount 2 peers; it needs a merger or better mgmt $$ Sep 22, 2013

Other

Billionaires Battle as Bezos-Musk Companies Vie for Launch Pad http://t.co/jEOhw4xXac Fight over a launchpad @ Kennedy Space Center $$ Sep 28, 2013
Supersonic Drones Can Outmaneuver Humans. So Why Do We Still Need Pilots? http://t.co/J5N9FhDVbH Pilots fly better in complex situations $$ Sep 28, 2013
Postal rate hike proposal faces Senate scrutiny http://t.co/aq7gKcDnm1 First Class would go to 49 cents, as internet slowly eats USPS $$ Sep 26, 2013
This Year’s SAT Scores Are Out, and They’re Grim http://t.co/04jtzUJMtL <50% of 2013 graduating seniors got “college-ready” SAT scores $$ Sep 26, 2013
Little GAAP Could Drive Accounting Simplification http://t.co/Ti24zRMFY2 If the acctg is 2 complex, biz is probably 2 complex as well $$ Sep 26, 2013
Work is not waiting for a job. If you don’t have a job, start your own business. http://t.co/pkUXupCOJg Sep 25, 2013
Investors Are Buying High, Yet Again http://t.co/PaTcowZvk8 Opportunities are fewer now, listen to Buffett & Klarman & trim back risk $$ Sep 25, 2013
Tweet tips: Most effective calls to action on Twitter http://t.co/PrcHMiNDMc! U could also ask them to favorite your tweet $$ $TWTR Sep 24, 2013
Death Dinners at Baby Boomers? Tables Take on Dying Taboo http://t.co/68nxd534eB Good 2 talk about death, but r u ready 4 the afterlife? $$ Sep 24, 2013
Here Are The Best Fundamental Investors To Follow On StockTwits http://t.co/a72aV98KUo A good list of resources & teachers; I’m listed #5 $$ Sep 23, 2013
A Backdoor Roth IRA for a High-Income Couple http://t.co/79fYNIF5d6 Invest in regular IRA, convert 2 Roth, repeat process annually $$ Sep 23, 2013

PPACA / Obamacare

Will Obamacare hurt job creation and marriage? http://t.co/n7h7BEkrXK Belief in Obamacare is akin 2 belief in magic; resources r free $$ Sep 27, 2013
Prices Set for New Health-Care Exchanges http://t.co/J4VFjvF5HR Younger Buyers May Face Higher Insurance Premiums $$ Obamacare #FTL Sep 26, 2013
Best of the Web Today: The Young and the Clueless http://t.co/3GbWYOqipM ObamaCare may work, provided no one responds to its incentives. $$ Sep 26, 2013
Young Invincibles Caught in Crossfire Over Obamacare Cost http://t.co/hgyCGtZMaj Note how Obama packs the gallery w/young people $$ Sep 24, 2013

Municipal Debt / Detroit

Stockton to Unveil Plan Including Cuts for Creditors http://t.co/zBj3ngCXMz Trying to preserve pensions may draw lawsuit from bondholders $$ Sep 28, 2013
Detroit spent billions extra from pensions http://t.co/UBdb3GaqtI That’s what u get 4 having 1-party rule, w/no 1 to look over shoulder $$ Sep 27, 2013
Orr proposes freeze for Detroit pension funds http://t.co/sSFtqADV23 Unions don’t get that they destroyed the finances of Detroit $$ Sep 27, 2013
Judge Rules Retiree Health Protected Like Pension http://t.co/xg7bcR28oM! Loopy ruling sets Los Angeles on a course 2 bankruptcy $$ Sep 25, 2013
Hands off DIA, pensions, Detroiters say in poll http://t.co/dHmp2qjc5n! Detroit is an example of a complex system self-destructing $$ #dying Sep 23, 2013

Energy

Pipeline Billionaire Ready for Next Round of Deal Making http://t.co/KhTwsdBDRs $ETP CEO thinks there is room to consolidate pipelines $$ Sep 28, 2013
Six Myths About Renewable Energy http://t.co/G0dB1SJ2aU Balanced article. 3 myths pro, 3 myths con. It will b a minority of total energy $$ Sep 23, 2013

The Economic views of Ray Dalio

One more note, this slideshow put together from BI moves a lot faster than Dalio’s video or the… http://t.co/ytGIHQEaxP Sep 24, 2013
And for those that want to read Ray Dalio’s economic template book, it is free here: http://bwater… http://t.co/f1AVlDufxo Sep 24, 2013

US Politics & Policy

Texas Counties Lead in Job Growth, Lag in Wage Gains http://t.co/XdyNF4ZEJt No surprise, but biz leaves CA & there is high unemployment 2 $$ Sep 27, 2013
CHRISTIE KEEPS PENSION PROBE RECORDS FROM PUBLIC VIEW AS GOVERNOR EYES 2ND TERM http://t.co/NmnbLRxRwd! Running mate has pension scandal $$ Sep 24, 2013
Open-Government Laws Fuel Hedge-Fund Profits http://t.co/P5vZBpkiDq Hedge funds file FOIA requests 2get FDA reports on drugs, etc. $$ Sep 23, 2013
At 77 He Prepares Burgers Earning in Week His Former Hourly Wage http://t.co/jQJaWTiQd3 Example of “failed 2 save” Don’t let it happen 2u $$ Sep 23, 2013
Self-Driving Vehicles Progress Faster Than Rules of Road http://t.co/1lFAmdlJKz Regulations, laws, insurance all need 2b revised 4 this $$ Sep 23, 2013
The Hidden Classified Briefing Most of Congress Missed http://t.co/eSBnz0uPxd How intelligence gets disseminated w/o getting disseminated $$ Sep 23, 2013
How the NFL Fleeces Taxpayers http://t.co/OeG5kRTM2O Longish article on how they get free stadiums, pay no federal or state taxes, etc. $$ Sep 23, 2013
Facebook ?Likes? Are Now Legally Protected Speech http://t.co/Oi7XQkYVlB Political speech is protected by the 1st Amendment even “like” $$ Sep 22, 2013

Wrong

Over the Top: Jordan R. VanOort Earns Prestigious CFA Designation http://t.co/jRMcdyRq1R CFA designation is good, but prestigious? $$ Sep 28, 2013
& really, when there are over 100,000 of us, does receiving your CFA Charter really rate a press release? Tougher to become an Actuary $$ Sep 28, 2013
Wrong:Pimco shook hands with Fed – & made a killing http://t.co/gBlELQ6U7p 2 notes: agency MBS r easy 2 understand, & TBA mkt not obscure $$ Sep 27, 2013
Point: Fed could have easily done this internally. What! They can’t find any among their 1000s of Ph.D. economists to get simple mkts? $$ Sep 27, 2013
It is probable that enough data on what the Fed would do escaped over the transom 2 give PIMCO & the other firms insider info. $$ Sep 27, 2013
Wrong: New idiots, same as the? actually these idiots might be worse http://t.co/Xa5jGmbQII US economy grew faster under balanced budgets $$ Sep 27, 2013
Wrong: Reduce working week to 30 hours, say economists http://t.co/HiI7Zmhimo More work means more production means more GDP, Consumption $$ Sep 27, 2013
Loony: Detroit Union Seeks 2 Revive `13th’ Pension Check Policy http://t.co/Lf5YMVBKxW Practice that continues 4 28Y is a tacit agreement $$ Sep 27, 2013
Wishful thinking: Let ObamaCare Collapse http://t.co/n3yNizNAfP Until the US itself fails, no entitlement has ever been eliminated $$ Sep 26, 2013
Wrong:Shinzo Abe: Unleashing the Power of ‘Womenomics’ http://t.co/R00AN5pUEH This comes from nation w/a shrinking population. Ridiculous $$ Sep 26, 2013
Wrong: How Sensitive Is Public Pension Funding to Investment Returns? http://t.co/hSeoOLsvrc! Should use mkt-based assmptns not historic $$ Sep 25, 2013
Wrong: US city, county public pension levels sank in 2012 http://t.co/o2JUwsi5JF! 2 optimistic, b/c risk assets bottomed in late 2002 $$ Sep 25, 2013
Wrong: Don?t Be Alarmed by Obamacare?s Failures http://t.co/fS63xQpaaP PPACA doesn’t make actuarial sense, young people won’t participate $$ Sep 24, 2013
Wrong: Yellen Isn?t a ?Knee-Jerk Dove,? Kroszner Says http://t.co/0aeTM6BIiB Favoring negative interest rates == ?Knee-Jerk Dove? $$ Sep 24, 2013

Replies, Retweets & Comments

Thanks @TightTalk @BabyFreshNuggz @X9T_Trading for being top new followers in my community this week (insight via http://t.co/sern3wLA13) Sep 27, 2013
“Here is part of my solution: accounting for repos should be bifurcated, so that is not treated ?” ? David_Merkel http://t.co/caWGlbe3eL $$ Sep 27, 2013
Loonies, Detroit is dead MT @ToddSullivan: RT @AmyResnick: just wow. Detroit Union Seeks to Revive `13th’ #Pension http://t.co/u3XJAER0bi $$ Sep 27, 2013
Believe MT @ReformedBroker: You’re not gonna believe this – but Detroit’s pension doled billions left and right http://t.co/9i5MinpGAX $$ Sep 27, 2013
RT @ezraklein: Perhaps if President Obama makes the House GOP 300 sandwiches, they’ll agree to lift the debt ceiling. Sep 27, 2013
#FollowFriday Thanks @ReformedBroker @pelias01 @researchpuzzler for being top influencers in my community this week 🙂 Sep 27, 2013
‘ @allstarcharts @jfahmy The 1st discipline of investing/trading is humility; even if you know more, the timing/environment can be tough $$ Sep 27, 2013
Commented on StockTwits: I think Watsa can be trusted. Aside from financials in the old days that were dodgy, I th… http://t.co/dJ8g2rVKmK Sep 27, 2013
Thanks @abnormalreturns @dpinsen for being top engaged members in my community this week (insight via http://t.co/sern3wLA13) Sep 26, 2013
“I never directly pay for research… most of it is freely available on the web. What is not, I?” ? David_Merkel http://t.co/EAk37XXNdJ $$ Sep 26, 2013
“This is already known by those that study the statistics. Look at year over year figures, you ?” ? David_Merkel http://t.co/5J46Rm19vo $$ Sep 26, 2013
I just left a comment in “We’ve got bubbles, we’ve got troubles – MarketWatch” http://t.co/P11awJw1KQ Sep 26, 2013
‘ @Reddy Cummings is my gerrymandered rep. He is by far one of the most intellectually underpowered members of the House, & that says a lot Sep 25, 2013
@moorehn @ReformedBroker @SimoneFoxman @SallyPancakes @kensweet @jennablan They r favorites of mine. $$ Sep 25, 2013
Entitlements will have to be reduced; it is only a question of how and when. Druckenmiller’s presentation:… http://t.co/BsA9S78RTI Sep 24, 2013
Thanks @MarshaCollier @EdmundSLee @rwohlner for being top new followers in my community this week (insight via http://t.co/sern3wLA13) Sep 24, 2013
Thanks @researchpuzzler @pelias01 for being top engaged members in my community this week (insight via http://t.co/sern3wLA13) Sep 23, 2013

Sorted Weekly Tweets

Posted on 21 September 2013 by David Merkel

Monetary Policy

Buffett Calls Fed History?s Greatest Hedge Fund http://t.co/vToZwL7D21 Buffett great on practical business economics, lousy on politics $$ Sep 21, 2013
Bernanke Faith in Housing Seen Shaken in Bonds http://t.co/F0xtRsM13v The Fed never had control of the long end of the yield curve $$ #barmy Sep 20, 2013
The Fed has lost all credibility http://t.co/NhXbQjxiNa For an institution that values clear communications, things have been murky $$ Sep 19, 2013
Excellent question on financial regulation from the lady from the American Banker. $$ Sep 18, 2013
Good question from @pdacosta on the labor force participation rate and unemployment. $$ #Fed Sep 18, 2013
Less Tapering Becomes Tightening Credit No Matter What Fed Says http://t.co/rQMp900dxA Q: what total pkg does 2 forward rate expectations $$ Sep 17, 2013

Janet Yellen (we get what we deserve)

White Houses Urges Democratic Senators to Defend Yellen http://t.co/pBd1U1dz7u She seems like a lock: to QE Infinity & Beyond! $$ #FTL Sep 21, 2013
Yellen Chances Grow as Obama Aides Test Senate Support http://t.co/kbDdWmlX4L “She will make Bernanke look like a hawk.” Marc Faber $$ Sep 19, 2013
White House official says Yellen front runner for Fed chair http://t.co/wGor8xIJoI This is to make us oppose the uber-dove #anyonebutyellen Sep 19, 2013
Yellen No Lock for Fed Chair Despite Summers Exit http://t.co/ycEBcedvTe “This was an unprecedented struggle for leadership of the Fed.” $$ Sep 17, 2013
Yellen Now Front-Runner for Fed Chief http://t.co/H4xh8vmot1 Yellen means no change from the current failed policies $$ #anyonebutyellen Sep 17, 2013
Fed Leader Doubt Erodes Low-Rate Message as QE Taper Looms http://t.co/CgyxacYaap Can’t appoint Yellen now, lest it look like a loss $$ Sep 16, 2013
Why Larry Summers Bailed on the Fed http://t.co/lVn10kgYIL Bring on Don Kohn, better still, bring on that monetary dissident John Taylor $$ Sep 16, 2013

Rest of the World

Bermuda’s Search for New Wealth http://t.co/LPMJJvD6QE I like Bermuda a lot, & learned a lot here. No paparazzi, much privacy $$ #humble Sep 20, 2013
Rebel-on-Rebel Violence Seizes Syria http://t.co/LsZUvpQTuo Two player games r easy; Three-or-more player games r tough & confusing $$ Sep 20, 2013
What Happens When the US Isn?t the Biggest Gas Guzzler? http://t.co/pl8X9TkOUM 1 reason y I am long energy stocks: rising global demand $$ Sep 20, 2013
Olympic Athletes in Tokyo Risk Hottest Weather in 120 Years http://t.co/4E9MnDTzv5 Same for FIFA in Qatar, but humidity in Tokyo is a factor Sep 19, 2013
Why Even the Worst Bloggers Are Making Us Smarter http://t.co/PhztCBG6kP It is amazing how many people are writing their ideas on the web Sep 19, 2013
China?s Choking Cities Means Job Cuts at Steel Town: Commodities http://t.co/3Xmz1Z7zqh China has over-invested in heavy industry #japan1989 Sep 19, 2013
In Post-Tsunami Japan, Homeowners Pull Away From Grid http://t.co/kPUIVdYq8b Power is now less reliable, some move to solar & fuel cells Sep 19, 2013
What Egypt Wants: Cheaper Bread http://t.co/S8NE6Zo8JU Demand for Subsidized Food Vexed Ousted President and Pressures Interim Government Sep 19, 2013
Obama Rifts With Allies on Summers-Syria Limit Debt Dealing http://t.co/M8f1f1fPm6 Weakened by bad choices but he is the President! $$ Sep 18, 2013
How Did Advanced Economies Get in So Much Debt? http://t.co/QGF1acUQf8 They absorbed bad private debts, rather than letting them fail $$ Sep 18, 2013
On Putin, his NYT editorial: http://t.co/eb45qkGBq1 Peggy Noonan responds: http://t.co/qwFRsk83cR Avoid interfering in foreign wars $$ Sep 18, 2013
Canadian Household – Drowning in Debt http://t.co/hJz8057OMF Total Canadian Household Debt-to-Income Ratio Rises to Record 165.6% @ 6/13 $$ Sep 17, 2013
$$ @paulvieira Point taken. Q: If someone bot an avg house in Canada 2 rent it out, would he make money; if arb is neg, Canada faces probs Sep 17, 2013
Eleven Countries with Soaring Inflation http://t.co/xl6Ivzr5bx Soaring means >6%/yr; leading the parade are Venezuela, Argentina & Egypt $$ Sep 17, 2013
Political Risk: What Should Investors Know About China’s Interest In Peru? http://t.co/85wGZJ1x3W Biz in Peru means negotiate w/locals $$ Sep 17, 2013
Smallest Ships Profitable Again as Logs Feed China Boom http://t.co/YsPOJMW9ul Chinese demand for wood raises freight 4 small ships $$ Sep 17, 2013
Vladimir Putin, the Richest Man on Earth http://t.co/bpLFDXtPWw Who needs wealth when you control a country? Putin makes his cronies rich $$ Sep 17, 2013
China Reins in Popular Voices With New Microblog Controls http://t.co/0tlX38uI1q The internet is a threat & an aid 2 every government $$ Sep 17, 2013
No Confidence in China Markets Inflates Housing Bubble http://t.co/G8qgXC8OEW Distrust other assets leads Chinese 2 invest in real estate $$ Sep 17, 2013
Germany’s Migrating Seniors http://t.co/Bhsqr6TePo Good care cheap, but you have to move 2 Poland to get it. Solves some old age problems $$ Sep 17, 2013
Germans Export Grandma to Poland as Costs, Care Converge http://t.co/e9w45mHkQe But where will the Poles export their Grandmas? $$ #long Sep 17, 2013

US Politics & Policy

Benghazi investigators gave Hillary Clinton heads-up on findings http://t.co/6Oimx1LhSx Mrs. Clinton appointed 80% of the review board $$ Sep 21, 2013
Weeds amidst the ivy |http://t.co/nvMFuNioFN A long & relatively thorough analysis of for-profit colleges & how they milk student loans $$ Sep 21, 2013
House GOP Ties Government Funding to Health Law http://t.co/rcNBBl2c6m This is a Q of short- vs long-run. Balancing budget best 4long-run $$ Sep 20, 2013
Big Insurers Skip Health Exchanges http://t.co/JWvGJSYVdQ Y deal w/ markets that attract sick people w/limits on underwriting & pricing? $$ Sep 20, 2013
What caused the financial crisis? The Big Lie goes viral http://t.co/1qFMg1BYGo The crisis was not merely caused by bad regulation Sep 19, 2013
The Queen Mary of macro trends: Rising rates http://t.co/OSgaYzIQkg Less certain than article says, as the economy weakens, no loan growth Sep 19, 2013
Walgreen will drop its traditional health insurance and instead give its 160,000 workers payments 2buy plans http://t.co/dpvbC8IigC via @WSJ Sep 19, 2013
National pension group challenges Pew?s work http://t.co/iiZROFHzRy! Cash balance plans give lower benefits, but maybe that’s affordable Sep 19, 2013
Puerto Rico can only cover 11.2% of pension costs http://t.co/wdnQJFniEF! Puerto Rico exists 2 make Illinois think it is prudent $$ Sep 19, 2013
Obama Feels a Pinch From Congressional Democrats http://t.co/d78z6b9a2c Obama gets constrained by the Left as much as the Right $$ Sep 18, 2013
Republicans Weigh Defunding Health Law, Avoiding Shutdown http://t.co/cbiqo2vBoW Ignore the economists, they don’t know anything, & cut! $$ Sep 18, 2013
Republican Newcomer Influence in Congress Risks Shutdown http://t.co/dtdHcg59po 3-player games r much less stable then 2-player games. $$ Sep 18, 2013
The Financial States of America http://t.co/xGQ8c6uajo Clever infographic; click a state 2c how it ranks; click on categories 4 diff maps $$ Sep 17, 2013
States With The Most Zombie Homes http://t.co/Dj6hphkUrM >20% of foreclosed homes vacant: Indiana, Nevada, Georgia, Florida, MD, AZ, SC $$ Sep 17, 2013
Heroin Pushed on Chicago by Cartel Fueling Gang Murders http://t.co/GmuhpbSxIk Getting a receipt from the Indiana police 4 forfeited cash $$ Sep 17, 2013
Armed EPA raid in Alaska sheds light on 70 fed agencies w/armed divisions http://t.co/90YKg3TWB2 Interesting how many have police units $$ Sep 16, 2013
Obama stands firm on refusal to negotiate over US debt ceiling http://t.co/kUDp9Q4ZL2 Nothing bad happened from sequester; do it again $$ Sep 16, 2013
How the SOPA law got defeated politically http://t.co/X3ZJiTiJ48 Creation of a website to highlight & affect legislative markups was key $$ Sep 16, 2013
Health Law Faces Skepticism http://t.co/AYf9IjdUL9 Complex laws typically don’t work well; Obamacare/PPACA is the epitome of complexity $$ Sep 16, 2013

Market Impact

The Long, Sorry Tale of Pension Promises http://t.co/6Pi2V0yiPA It started w/accounting rules allowing2much flexibility4funding/valuation $$ Sep 21, 2013
ING CEO Says Stress Tests Without Safety Net Bring Risks http://t.co/Bi7IKXvuYK If u fail the stress test, y would anyone recapitalize u $$ Sep 21, 2013
Challenging the Imperial Boardroom http://t.co/VW6IrzKIF9 @Carl_C_Icahn argues 4 mgmt transparency, competence, & shareholder orientation $$ Sep 20, 2013
Money Market Funds Ready for Battle with Regulators http://t.co/1VIxWqfVLE Floating NAVs will kill money market funds; better solutions $$ Sep 20, 2013
Banks? $10B Sweet Spot Sets Off Buying Spree for Lenders http://t.co/2oDNEEqEdY Bank capital rules r helping create medium-large banks $$ Sep 20, 2013
Avoid ?Dividend Yield Traps?, Look To Releveraging Stocks http://t.co/0k3Qs4mJHx 2 risks: higher bond yields compete; free cash flow 2low $$ Sep 20, 2013
Longevity-Proof Your Future http://t.co/0MB5S7Yx5S The main point is that you need to save. Beyond that, invest well, but savings r capital Sep 19, 2013
Novogratz to Burbank See Stocks Surviving First Fed Taper http://t.co/Xeig2UVtvT So what? We already know “Three steps and a stumble.” Sep 19, 2013
How Social Responsible Investing Can Be Irresponsible — Pension Fund To Sell Energy Stocks? http://t.co/JE6g2S8hHC Vacuous city council Sep 19, 2013
Remembering the families at the center of the financial crisis http://t.co/ICSLkY2TcD If finances were related 2 finance/housing it hurt $$ Sep 19, 2013
Judge Dismisses Bank Lawsuit Over Mortgage Foreclosures http://t.co/aJ5VmA64x2 Richmond needs supermajority 2 use eminent domain $$ Sep 17, 2013
Dr Copper & his funny friends disagree tremendously with SP500 level http://t.co/uNpdfvlbC9 On the divergence of stocks & commodities $$ Sep 16, 2013
Is Fiscal Austerity Good for the Economy? http://t.co/gQif4JHXqc “austerity is costly in the short run, it can provide long-run benefits” $$ Sep 16, 2013
Gross?s Trade Sours as Bonds Lose Faith in Fed Guidance http://t.co/YGZgvVries Depends on level of future GDP growth, keep watching $$ Sep 16, 2013
Montepeque of Platts Caught in Battle Over Oil Assessments http://t.co/4o0wvVyCEz All human systems r gamed, just a question of how much $$ Sep 16, 2013
Wall Street trading in US fuel credits hurts consumers http://t.co/8hZ8shAIJJ Very difficult 2manipulate prices in long run: sup/dem chgs $$ Sep 16, 2013
Uh oh. People buying houses fear rising prices http://t.co/FWAAeHwKdz Bubbles persist until financing costs more than implied rents $$ Sep 16, 2013

Companies & Industries

Twitter announces IPO: The Pricing Game begins http://t.co/GlR7MWJz4X Daring Damodaran gives a value 4 $TWTR w/out having any financials $$ Sep 21, 2013
Secret Rocks and Gem Hunters http://t.co/4Dpm6jGavk Colored gems r like small cap stocks, they r unique & illiquid mkts w/odd characters $$ Sep 20, 2013
Companies Seize on Rate Reprieve to Issue Bonds http://t.co/qQJzknEqhp Many think rates will go higher, & so they issue debt now $$ Sep 20, 2013
Google May Stop Using ‘Cookies’ to Track Web Users http://t.co/MgvZtEHo1Q Could concentrate marketing power in hands of a few companies $$ Sep 20, 2013
How ?Cord Never? Generation Poses Sales Drag for Pay TV http://t.co/10M73Td7jL Once you get used to not paying for your video, u don’t pay Sep 19, 2013
Verizon Pays $5.1 Billion in Extra Interest http://t.co/om7PsDAwzO That was the price of getting a big deal done in the short-run. Sep 19, 2013
Companies are increasingly choosing to generate their own power, delivering a jolt to utilities http://t.co/brVyNOWokp Disintermediation Sep 19, 2013
For TV Shows, It’s a Seller’s Market http://t.co/eja7JEhl1t Producers have many more outlets for content & networks must pay up 4 content $$ Sep 18, 2013
Capstone Metering Provides Smart Water Management Solution, Powered By Verizon Wireless Network http://t.co/0xd77Bnz0q fascinating tech $$ Sep 17, 2013
Berkshire Billionaire Found With More Shares Than Gates http://t.co/wqoceUXHJW Tales of old buyers of $BRK.A & cpmny sellers taking stock $$ Sep 17, 2013
Retailer REI Ends Era of Many Happy Returns http://t.co/0xDYFXDV95 Abuse leads REI to end returns on items bought more than one year ago $$ Sep 16, 2013
Wildcatter Hunch Unlocks $1.5T Oil Offshore US http://t.co/4lTsK10aj0 Longish story of how a hunch led2 deepwater drilling, amid failures $$ Sep 16, 2013
How Did Wal-Mart’s IPhone Discount Defeat Apple’s Price Controls? http://t.co/F3ZuYFvbWM $WMT takes a low margin on sales of $AAPL phones $$ Sep 16, 2013
Home, Sweet (Crude) Home in Fort McMurray, Alberta http://t.co/GpuUq289T8 Economies based on resource extraction flourish 4 a time & die $$ Sep 16, 2013

Economics

Women Waiting Tables Provide Most of Female Gains in US http://t.co/eoetZdyRAi Not so much demand 4 workers w/degrees in certain majors $$ Sep 20, 2013
Martin Feldstein: How to Create a Real Economic Stimulus http://t.co/bH2e2Z67mb Suggests mild entitlement reform; we need retirement @ 72 $$ Sep 17, 2013
Want Marital Bliss? Pool Your Money http://t.co/mJQb3XEkZn The more things r shared in marriage the better/tighter the bond becomes $$ Sep 17, 2013
Mysterious Disappearance of James Duesenberry http://t.co/LD3GfjTyka Old article on relative income hypothesis. Ppl r envious not greedy $$ Sep 16, 2013
Explanation of the discrepancy is that poverty is relative. Ppl r not maximizers & economists resist this b/c the pretty math falls apart $$ Sep 16, 2013
& if the pretty math falls apart, economists can’t publish & there goes their jobs. That is y they would rather hang onto a wrong theory $$ Sep 16, 2013

Other

The Time a Cleveland Newspaper Divulged Manhattan Project http://t.co/mFDKvhJTlW Fascinating tale; clever reporter http://t.co/o5CzDU61nL $$ Sep 21, 2013
Our Chat With Jeremy Grantham http://t.co/FSlADefGi0 In general, need 4 technological change has driven technological change; we will win $$ Sep 21, 2013
Marc Faber’s Biggest Mistake http://t.co/Dui1ZehA09 Really pretty minor. Interesting guy who gets things right, but speaks bearish Sep 21, 2013
Pope Warns Church Focusing Too Much on Divisive Issues http://t.co/2yEMa3O89I More than other Popes, this one is a slave2 liberal opinion $$ Sep 20, 2013
How a 91-Year-Old Geek Helped Keep the Aged Independent http://t.co/GD1AmUK6OQ Small cheap sensors monitor oldsters, watching their needs Sep 19, 2013
Say Goodbye to the Password http://t.co/pTnQ4ng2Xn New technology aims to offer security that is more convenient and more effective $$ Sep 18, 2013
Veggie-Heavy Stress Reduction Regimen Shown to Modify Cell Aging http://t.co/b3KNrSOdSY Cooking from scratch improves your life & health $$ Sep 17, 2013
Jonathan Jacobs: As Education Declines, So Does Civic Culture http://t.co/tk7WHue1mS Biggest complaint about new analysts: can’t write $$ Sep 17, 2013
Gonorrhea Among Drug-Resisting Germs Sickening Millions http://t.co/Fbgw14Q4ZQ Add C. difficile & E. coli; resistance 2 antibiotics grows $$ Sep 17, 2013
Twitter Co-Founder Evan Williams Lays Out His Plan For The Future Of Media http://t.co/e7nv4u8Z0T Need the equivalent of @abnormalreturns $$ Sep 16, 2013
Google?s Boss and a Princeton Professor Agree: College Is a Dinosaur http://t.co/ffUTIQFxdV True, but what do we do 2prove knowledge then $$ Sep 16, 2013

Replies, Retweets, & Comments

Thanks @MarshaCollier @EdmundSLee for being top new followers in my community this week 🙂 | insight by http://t.co/sern3wLA13 Sep 20, 2013
#FollowFriday Thanks @ReformedBroker @pelias01 @researchpuzzler for being top influencers in my community this week 🙂 Sep 20, 2013
@dpinsen I almost never read fiction. Sep 20, 2013
RT @interfluidity: the Fed has learned the trick about stretching your feet out beyond the covers then pulling them back in to feel warm. Sep 19, 2013
RT @BloombergNews: Sold for sex at puberty is village girls’ fate in wealthier India | http://t.co/oZsp9d2LcV Saddest article I have read Sep 19, 2013
@ppearlman Congratulations, Phil. One of my favorite websites is going to get better still. Sep 17, 2013
$$ @joebrusuelas Wrong. Yellen is an imitation of the policies of Bernanke & QE. They don’t work. Summers — rejection of the Rubin clique. Sep 17, 2013
@rj_trades Worked 4 me. Don’t know what’s wrong… Sep 16, 2013