Welcome back to the workweek — here are our ‘pre-Juno snowstorm of the century’ morning train reads (while the trains are still running):
• Tsipras declares end to ‘vicious cycle of austerity’ after Syriza wins Greek election (The Guardian) see also Greece Chooses Anti-Austerity Party in Major Shift (NYT)
• The Swiss franc appreciation and the sorry saga of FX lending (Fistful of Euros)
• The Past Imperfect: Mr. Neuger and Mr. Fitzmaurice Would Like Your Money, Again (SIRF)
• No, the U.S. economy isn’t about to fall into recession (Washington Post)
• The Financial Problems in Your Head: Psychology Explains Why Many People Mismanage Money (WSJ)
Mr. Neuger and Mr. Fitzmaurice have figured out that if you can wrap something up with enough buzzwords and pithy slogans, that you can get the big money to bite.
I see it all the time in management as well. The more words in a memo that are the hot words found in BusinessWeek and Forbes, the more likely the memo will be forgotten within a week. This is especially the case with re-organizations where the memo has been replaced by a new one before the org chart to implement the first memo has even been published.
Winter wonderland time!
Ready for the works, southern NH, snowblower fueled up, good thing we had enough snow Saturday PM to use it, the gas is no longer MT! I was off “in the service” and missed the ’78 blizzard.
Good luck with your storm of hysteric proportions.
RE: WaPo article – isn’t the whole point of QE to break the yield curve and UST market as an indicator?
There was a good post and discussion of QE’s point on this board a couple years ago.
What Is The Purpose of QE?
NB: Jim Bianco made the post and, while a significant element of his conclusion has been contradicted by data, his citations and discussion of Bernanke and FOMC reasoning as well as the subsequent board commentary covers a lot of useful ground (and opinion too of course).
Value Investing As Software Eats the World (ht BDL)
There is a lot to be learned from the great value investors over the past century. A stock will always be nothing but a piece of a business; its value will derive entirely from that business’s ability to withstand competitive erosion of its profits, i.e. its moat. Valuation always matters, and it helps to have a margin of safety when purchasing a stock. Long term returns are dominated by the ability of the underlying company to compound its earnings over the years. These principles are indeed eternal as well as universal; they apply with equal force in the information economy.
However, the economics of information goods is unusual and non-intuitive enough to merit a re-conceptualization, ab initio, of competitive advantage, moats, and the basics of valuation.
@RW–That article about value investing is one of the best things I’ve read in awhile. I was thinking recently about Berkshire Hathaway’s investment in World Book. Not mentioned in the article, but it might have been. I notice they are an online subscription service now but I can’t imagine they are able to offer much that people would be willing to pay for.
The article in Quartz about Andreessen Horowitz and the 16 big trends reminds me of this:
http://ritholtz.com/2015/01/the-activist-investor-scorecard/
These guys are clearly brilliant, but I’m not convinced they have any idea where things are headed. They would never admit it, but luck has been at least as important to their success as brains.
“Jeff Jordan: “With smartphones in our pockets, we not only have access to crowdfunding platforms whenever we want, but to the crowd that comprises the various social circles of our lives—from family to school, work, and the region we live in.””
This idea reminds me of my current read, a Spy Among Friends. In short no one in British Intelligence would examine the possibility of Kim Philby being a spy because he was from the “right class of people”. Try core77.com for some kickstarter examples gone wrong.
Anyone who thinks there’s anything magical about Texas Right Wing politics needs to remember that THEY have been the the biggest US beneficiaries of OPEC’s price fixing.
https://dallasfed.org/microsites/research/surveys/tmos/2015/1501/tmos1501.pdf
Thanks for giving us George Bush and decades of roadblocks to renewable energy and energy efficiency. And take those ridiculous cowboy hats off.
It’s very odd to me now that no one challenged my belief in the “soul” until my history of science prof in college.
http://www.salon.com/2015/01/25/you_dont_have_a_soul_the_real_science_that_debunks_superstitious_charlatans/
I agree with those who have argued that the government austerity advocates in the EC are the real radicals and what we are witnessing in Greece is mainly an attempt to return to sanity AKA relying on mainstream economics and real-world evidence.
But I am also pessimistic regarding Greek chances for success w/o a great deal of further pain; e.g.,
Grexit: it is not the debt, it is the future
…Syriza’s policies are not that radical, crazy or absurd but the negotiation that starts today is between parties that are either scared by what has happened so far or are not willing to be members of a club that cannot commit to not doing this again. I still do not see how they will agree on a model to move forward.
Political Calculations
January 26, 2015
The Physics of Tom Brady’s Balls
Can physics explain what’s wrong with Tom Brady’s balls?
http://politicalcalculations.blogspot.com/2015/01/the-physics-of-tom-bradys-balls.html
Middle Class Shrinks Further as More Fall Out Instead of Climbing Up
By DIONNE SEARCEY and ROBERT GEBELOFF
JAN. 25, 2015
The middle class that President Obama identified in his State of the Union speech last week as the foundation of the American economy has been shrinking for almost half a century.
In the late 1960s, more than half of the households in the United States were squarely in the middle, earning, in today’s dollars, $35,000 to $100,000 a year. Few people noticed or cared as the size of that group began to fall, because the shift was primarily caused by more Americans climbing the economic ladder into upper-income brackets.
But since 2000, the middle-class share of households has continued to narrow, the main reason being that more people have fallen to the bottom. At the same time, fewer of those in this group fit the traditional image of a married couple with children at home, a gap increasingly filled by the elderly.
This social upheaval helps explain why the president focused on reviving the middle class, offering a raft of proposals squarely aimed at concerns like paying for a college education, taking parental leave, affording child care and buying a home.
…
http://www.nytimes.com/2015/01/26/business/economy/middle-class-shrinks-further-as-more-fall-out-instead-of-climbing-up.html
Very poorly written article. The inummeracy involved is mind boogling. Just the fact the income is now made up from two individuals in the houshold from one in their starting point(1960’s) is a start.
Photos From New York After the Blizzard of 1888
Alvin Ward
January 26, 2015
As the Northeast prepares for a potentially record-breaking blizzard this week, let’s look back at the 1888 storm that set all those records. Between March 11 and March 14, the eastern seaboard was ravaged by harsh and snowy conditions. Some areas got as much as 60″ of snowfall and there were 400 recorded deaths.
New York City was buried under 22 inches of snow, stranding its millions of citizens in a complete whiteout. The aftermath is recorded here in these archival photos.
http://mentalfloss.com/article/61301/photos-new-york-after-blizzard-1888
Liberal university researchers refuse to blame the poor for financial crisis despite data showing the poor were not responsible for it. Clearly these researchers are not reliant on Wall Street for funding which means their conclusions should be called into question.
http://www.marketwatch.com/story/poor-not-to-blame-for-housings-meltdown-researchers-say-2015-01-21
Regarding “FX Lending”:
I know – at least – person in the US who is making a FX bet: John Mauldin. He took out a mortgage in Yen. He expects the yen to weaken against the USD. He thinks the USD/Yen, currently at ~ 118 is going higher. I have a opposing view. I think the USD/Yen will drop to – at least – ~ 80 and Hugh Hendry thinks the USD/Yen will go down to the high 50s or the low 60s. Ouch. Poor, poor John Mauldin (or did he hedge the risk of a falling USD/Yen ?)
What’s a superannuated geezer like Mauldin doing taking out a mortgage?
– Good question and I don’t have an answer. Perhaps he didn’t watch how the Yen behaved against the USD & Euro in the past say 15 years.
– Mauldin thinks the USD/Yen will reach 200 at some point. Currently I am short Euro & long Yen.
At lest he is putting his money where his mouth is. Will be interesting to see if he has lost both in 5 years.