Welcome back from the holiday weekend to a light work week. Many schools are closed for Spring break, but no worries, we have your morning train reads:
• Racing Towards Full Employment (CSEN) but see S&P 500 Rallying 206% Beats Wage Growth by Most in Five Decades (Bloomberg)
• The Competitive Exclusion Principle (Peak Oil Barrel)
• All 3 Preconditions for Active Outperformance are Present (Reformed Broker) see also Why Paying for Financial Advice Makes Sense (NY Times)
• A Dozen Things I’ve Learned from Lou Simpson About Investing and Business (25iq)
• Why the big broker behind your financial adviser might be working against you (Marketwatch) see also Report Says Ads Show Illusion of Fiduciary Duty (US News)
Tyler Cowen’s Three-Card Monte on Inequality
Tyler Cowen used his Upshot piece this week to tell us that the real issue is not inequality, but rather mobility. We want to make sure that our children have the opportunity to enjoy better lives than we do. And for this we should focus on productivity growth which is the main determinant of wealth in the long-run.
This piece ranks high in terms of being misleading. First, even though productivity growth has been relatively slow since 1973, the key point is that most of the population has seen few of the gains …
The long and short is that we know of many measures that can both reduce inequality and increase growth. And, if we want to make sure that everyone’s children have a shot at a better standard of living in the future then we should make sure that their parents have a better standard of living today.
NB: The Koch-funded Mercatus Center (George Mason U.) that Cowen directs has a more subtle approach to disseminating misinformation or promoting doubt than most; e.g., too clever to be caught cheating by merely watching for the switch.
Israel Suggests Ways to Make Iran Nuclear Deal ‘More Reasonable’
http://www.nytimes.com/2015/04/07/world/middleeast/israel-iran-nuclear-deal.html
Netanyahu claimed iran cannot be trusted. How will checning the deal do any good? The guy talks out of both sides of his mouth.
If you GOP nuts vote this down and we get blamed the whole rest of the world will be trading with Iran except the US and they will be doing whatever they want with their nuclear bombs program.
“Israel” (Read: Netnayahu) if you want to have a deal with Iran make one yourself and get the whole world to back you.
Oh, you can’t. I wonder why with such a successful diplomat as Netayahu you can’t be trusted by ANYBODY.
Build more settlements
.
Vox spells out the Republican lunacy quite well.
http://www.vox.com/2015/4/6/8354057/iran-deal-republicans-netanyahu
Mossad said this deal doesn’t reflect reality. The Netanyahu and the GOP who don’t reflect reality.
Bibi’s Iran shocker: How he accidentally revealed his desire for more war
http://www.salon.com/2015/04/06/bibis_iran_shocker_how_he_accidentally_revealed_his_desire_for_more_war/
AIIB takes the world in a different direction
“Largely because of resistance from the right, the US stands alone in the world in failing to approve the International Monetary Fund governance reforms that Washington itself pushed for in 2009.”
http://www.bloomberg.com/news/articles/2015-04-06/larry-summers-the-past-month-may-go-down-as-a-turning-point-for-u-s-economic-power
The families and children of these right wing nuts in Washington will always be followed and remembered that your dad/ granddad etc in Congress family was the one that led the US away .
Anything to stop Obama from getting victories.
http://www.washingtonpost.com/news/morning-mix/wp/2015/04/06/john-olivers-hilarious-interview-with-edward-snowden/
We need to drop some Special Forces on this guy, bring him back to the US and throw him in the slammer.
Why? He’s performed a service to you, all other Americans & non-Yanks around the world on the ravenous appetite of the NSA for our private information.
The guy deserves a prize-not your pedestrian Schwarzenegger fantasy above.
~~~
ADMIN: Pretty sure Venn Data was being sarcastic.
Merrill Lynch is proudly defending consumers from their brokers, although it does appear from the bit of information provided that deceit and fraud may be the root cause, not just legally sanctioned asset stripping.
http://www.marketwatch.com/story/merrill-doesnt-hesitate-to-ax-big-producers-sending-message-2015-04-05
Next time you see some jerk with a book or newspaper open on the steering wheel while driving at 60mph, they may not be multi-tasking at all….
===========
Semiautonomous Driving Arrives, Feature by Feature
APRIL 2, 2015
AUTOMAKERS descended on New York for the city’s annual auto show this week with vehicles ready to do more than just respond to drivers’ commands. However, the question of whether drivers want their cars to take charge remained unanswered.
The path to fully autonomous driving will still take years to reach consumers, but car manufacturers demonstrated this week that they are now able to offer buyers several levels of so-called active safety features — in which the car takes over driving in certain instances. And they plan to introduce even more advanced semiautonomous capabilities in the coming months.
Tesla Motors made a splash when it recently announced plans to add automated highway driving features, which it calls autopilot, to its Model S sedans by the summer. But such capabilities are coming to a range of vehicles sooner than many realize.
…
http://www.nytimes.com/2015/04/03/automobiles/semiautonomous-driving-arrives-feature-by-feature.html
And I used to think that money and social consciousness were inversely related…
http://www.mckinsey.com/insights/strategy/our_gambling_culture
John Oliver Just Changed The Surveillance Reform Debate
Posted 4/6/2015
Remember Edward Snowden?
For many Americans who talked to John Oliver on Last Week Tonight, the answer is no.
It’s been almost two years since the world was captivated by Snowden’s leaks to The Guardian and The Washington Post about American surveillance programs. For weeks it seemed there was a new headline everyday about another previously classified surveillance program or another government official calling for action on this issue. Presidential review groups were called. President Obama called for major changes to the programs.
Although the Snowden leaks certainly proved to be much more than a “three-day story,” American surveillance practices remain largely the same two years later. The main difference is this issue no longer dominates our political discourse. In November, the FREEDOM Act — legislation under development for two years that would have overhauled NSA surveillance programs — died in a Senate procedural vote to little display.
…
http://techcrunch.com/2015/04/06/john-oliver-just-changed-the-surveillance-reform-debate/
R.I.P.
This man showed that investing isn’t a competition
Sheldon Jacobs, who started The No-Load Fund Investor, said that the most important thing in investing is to be on pace to meet your goals.
Sheldon Jacobs won by not losing. He wasn’t the greatest ever at selecting mutual funds, and he didn’t post breathtaking numbers. He won the race in the style of the tortoise: slow and steady.
For years, that meant he was in the conversation whenever someone asked, “What mutual fund newsletter is worth reading?”
And then, when Sheldon retired from the newsletter business, he worked at making investing simpler, at letting investors enjoy their lives as much as the fruits of their portfolio.
Sheldon died last week in Paradise Valley, Ariz., at age 84, and I fear that with his passing the fund game loses one of its few remaining voices of reason, the kind that reminds investors to “Put Money in Your Pocket” — the title of Sheldon’s first book in 1974 — instead of “get better returns than the next guy.” …
NB: Discovering Jacobs writing and newsletter (late 70’s or early 80’s give or take a bit) was the key to building a successful core portfolio strategy when it mattered; early w/ low-cost, well diversified products.
Voter fraud is completely out of hand! We need tougher laws. Long-term prison sentences! Come down HARD and make an example of these irresponsible, lying, ingrates! Show no mercy!
http://takingnote.blogs.nytimes.com/2015/04/06/viva-jeb-bush/
Brokers and fiduciary duty – oh where to start….
I routinely see stories about layoff notices in the financial sector and more and more stories about Vanguard expanding to fill the known universe. These stories are related.
I don’t think the brokers fully comprehend what is going to happen when CAPE = 27 turns into CAPE = 13. The population that has the money in stocks is the population currently in their 50s and 60s because they are the ones with the money. When they see another 50% haircut in their dividend stock and high yield bond portfolios (with some private equity if they are special) pushed on them by their brokers as a safe way to get income and capital gains, their faith will be completely shattered. 2000-2003 was an aberration that is ancient history now. They recovered but then saw everything in their portfolio (as well as their houses) go down in 2008-9 which endangered their retirements. The next round will do serious damage to their future and will sear a profound distrust of the financial systems into their souls akin to the 1940s and 1950s. Their children will observe their parents get crushed and will vow it will not happen to them.
Pre-1990s, they had no alternatives but to go back to another version of the same brokers. They are now figuring out the low cost investor-friendly alternatives, some passive but some (T Rowe Price, Dodge & Cox etc.) are active. They will be flooding to them in droves with the remains of their battered portfolios. The traditional brokerages will cease to exist (although there will always be scam artists like Madoff). Hedge funds will also be unlikely to sidestep the train when it comes through – many of them will likely close.
The future is fiduciary RIA shops and high quality, low cost mutual fund/ETF shops like Vanguard, Schwab, iShares etc. Approaches like Arnott’s Fundamental Indexes will likely do well but many other alternatives will vanish. Each major market crisis since 1929 has improved the alternatives for small investors if they care to look for the improvements.
“S&P 500 Rallying 206% Beats Wage Growth by Most in Five Decades” is not necessarily good news, or evidence of missed opportunity for the uninvested, as the article implies. One must also consider that this could be stark evidence of a massive bubble in the S&P.
I suspect both the S&P 500 and the wages will revert towards their means over the next decade. The demographic punch of retiring baby boomers means companies will need to compete more for employees. That will impact earnings. Baby boomers have the money. Their portfolios will likely become more conservative and overall PE ratios will tend to be lower than the past couple of decades. We are already seeing this happening in Europe where the demographics have been hitting home for a few years now.
I don’t think this time will be different.