Here are a few items from earlier this week worth following up on:
• The latest "Apprentice Investor" column is up, and it addresses the issue of why most investors underperform: Human nature often runs counter to successful investing. Its titled “Know Thyself.”
• The DC Appeals Court struck down the FCC Anti-Piracy tech rules as “over reaching.” Lots of details and links here.
• How many times have you heard somebody say “When this ___ happens, then the market does this ___ .” That’s what I call the fallacy of Single Variable Analysis in Market Forecasts. There’s more details at the link above, as well as an interesting discussion in the comments.
• Comic relief helps during a crazy week, and I thought this and this were hysterical
• The WSJ’s Steve Liesman asks an interesting question: Is there a Philosophical Shift at Fed? If you do not have WSJ access, than try this one: Is the Fed Anti-Bubble or Anti-Inflation?
• Finally, a parting thought on the April NFP report, from Merrill Lynch economist Daid Rosenberg (via Barrons):
"David Rosenberg’s take on April jobs was pretty gloomy. Right off the bat, David, who’s Merrill Lynch’s top economist, casts doubt on the seemingly glowing numbers, which were, as it happens, much higher than the Street was forecasting (there’s always a first for everything).
"Do you believe the economy is growing at a 6% annual rate right now?" he asks rhetorically. "Because if you don’t, in my view, there is no way you can believe the strength in today’s nonfarm payroll report."
April’s jobs data, he feels, "vastly overstated economic conditions last month." The gains that supposedly occurred in retail, construction and telecom just don’t square with what has been happening in those sectors. He notes that the economy is undergoing a classic inventory correction and the trend in the leading economic indicator is down.
All of which means, he contends, job additions in the months ahead closer to 130,000 than 170,000. Dementia, shmentia, we’ll just have to postpone being bullish.”
I am trying not to be guilty of my own biases in selective perception and interpretation. Still, its food for thought.
Happy Mother’s day, mom!
You discuss housing periodically. Check out this anecdotal article regarding cash-out refis generating “wealth”. Tell me how this growth isn’t like the dotcom bubble. Defenses such as “housing has never gone down nationally” are irrelevant when we see unprecedented, ludicrous growth like this.
Gabe Klein, a 34-year-old regional vice president for Zipcar Inc. car-sharing service, is getting a lot out of his Columbia Heights row house, including cash. By refinancing the Northwest Washington property twice in the past three years, Klein has been able to take nearly $300,000 in cash out of his growing equity and plow it back into renovation projects. Those improvements have helped lift the house’s appraised value to $800,000 last year — three times what Klein paid for it three years ago with just a $10,000 down payment.
Only a spike in mortgage rates will burst the bubble. Foreign central banks could make that happen if they stopped buying dollars….. but what else would they buy and how would they keep their principal safe? US treasuries are today’s Swiss bank account for central banks.
Long rates are self levelling on a domestic basis too. Any circumstance that approaches deflationary bubble bursting will trigger money printing at the Fed.
Bernanke is Greenspan’s likely replacement and he said he’d drop dollars from an airplane before he’d allow deflationary forces to take hold.
Amazing offsetting forces mounting on both sides of the long term interest rate conundrum. Meanwhile real estate continues its walk through the goldilocks eye of the storm economy. (Sorry about the mixed metaphor)