Its a “mixed” batch of news this morning, but we never let that stop us from curating the best damned morning train reads in the business:
• IT’S NOT 1999 (Stratechery) see also Monitoring Bubble Risk In The US Stock Market (The Capital Spectator)
• Oil Prices Tumble as Supplies Hit New Record (WSJ)
• Job Openings Climb to Highest Level in 14 Years, But Hiring Declines (Real Time Economics) see also Job Openings in the U.S. Rose in February to 14-Year High (Bloomberg)
• A comparison of investor sentiment indicators (Behavioral Quant)
• Are Emerging Markets Still An Asset Class? (A Wealth of Common Sense)
Low oil prices might effect the war profiteers’ permanent Middle East dream. The Saudis will need US military aid like Egypt and Israel; so all three are ready to war against eachother, get stuck bombing Yemen, and suppress Iran/Shiite majority in Iraq. What happens to poor al Qaeda and ISIS? More CIA funding?
Heaven forbid Lockheed lose orders!
Wall Street Fees Wipe Out $2.5 Billion in New York City Pension Gains
http://www.nytimes.com/2015/04/09/nyregion/wall-street-fees-wipe-out-2-5-billion-in-new-york-city-pension-gains.html?ref=nyregion
“… The analysis concluded that, over the past 10 years, the five pension funds have paid more than $2 billion in fees to money managers and have received virtually nothing in return, Comptroller Scott M. Stringer said in an interview on Wednesday. … the pension funds have reported the performance of many of their investments before taking the fees paid to money managers into account. After factoring in those fees, his staff found that they had dragged the overall returns $2.5 billion below expectations over the last 10 years. … Why the trustees of the funds — Mr. Stringer included — would not have performed those calculations in the past is not clear.
… Mr. Stringer, who was a trustee of one of the funds when he was Manhattan borough president before being elected comptroller, said the returns on investments in privately traded assets, such as real estate, have traditionally been reported without taking fees into account. The fees have been disclosed only in footnotes to the funds’ quarterly statements … Over the last 10 years, the return on those “public asset classes” has surpassed expectations by more than $2 billion, according to the comptroller’s analysis. But nearly all of that extra gain — about 97 percent — has been eaten up by management fees, leaving just $40 million for the retirees, it found.”
Obama, in Jamaica, Seeks to Reassert U.S. Influence in Caribbean
http://www.nytimes.com/2015/04/10/world/americas/obama-jamaica-caribbean.html
Congress outraged, swears to stop Obama’s weak, error-prone, stumbling, hard-headed, go-it-alone liberalism with an up or down vote, clearing away any and all infrastructure bills to make the point that this president is out of touch, in bed with this fat-cat donors, and the worst President in history.
Whether it is money supply or greenhouse gases the distinction between stocks and flows can be critical to analyses and policy recommendations. However even those who understand the distinction can get analysis wrong if they fail to assess how the flow out of a given stock may differ from the flow in to that stock.
Of Bathtubs, Bombshells and Boilerplate
The bathtub in question is the analogy Linda Booth Sweeney and John Sterman use to illustrate a dynamic stock-flow system, such as the relationship between greenhouse gas emissions (a flow) and the accumulation of greenhouse gases in the atmosphere (a stock). …
What’s fascinating about the bathtub analogy is how consistently people get the dynamics of accumulation wrong. …A frequent source of error is something Booth Sweeney and Sterman call “correlation heuristic”: …that changes in stock will have the same shape as changes in flow.
…According to the correlation heuristic logic, many people would assume that a reduction in greenhouse gas emissions would directly translate into less greenhouse gases in the atmosphere. It doesn’t.
1. my name, i’m not selling anything, my page capture tweets, links of fincl bloggers
top 3 stories
5. barenaked ladies, Brian Wilson, the rocking roll post is 2nd most popular all time http://on.mtv.com/110uOmg
6. teabagging for jesus (imgur) http://bit.ly/XdNzx
7. A Sex Researcher Explains That Hilarious Dissatisfied-Husband Spreadsheet (nymag) http://sciof.us/1pcJsBe
8. ghosting, the irish goodbye (slate) http://slate.me/1c0uuIv
9. Best Advice: Spot Bad Advice Early In Your Career (LinkedIn: Pedrosky) http://linkd.in/1hSMc6f paul’s old site, much better than rebel mouse
The irony of this is mind-blowing. Corporations are discovering that their under-paid workers who are about to have their jobs off-shored are stressed about their finances which means their productivity is less than desired. So the obvious solution to improve productivity is to provide counseling and training on finances to help them be debt-free. Paying them more money in conjunction with the training would presumably be inefficient.
http://www.wsj.com/articles/youre-not-getting-a-pay-raise-youre-getting-a-money-management-class-1428423285
no pay raises. just keep the pressure on, cutting costs at every chance. except for the stock buy back program of course. musnt cut that. nor can we cut bonuses and executive pay. we can cut employee benefits though. and will. but not executive benefits
Apparently, not having money is a disincentive for saving and investing in the stock market. Who knew?
http://www.marketwatch.com/story/why-most-millennials-dont-invest-in-the-stock-market-2015-04-09
I assume that Millenials and Generation X are the people the baby boomers are supposed to sell their stocks to as they spend down in retirement.
Interesting posts on bubbles etc.
My basic definition for a “bubble” is simple – something where the valuation has become detached from the underlying fundamentals (clicks replacing revenue in 1999) and the valuation reach a level where 70% declines occur and take over a decade to recover (or never recover) to previous price peak. NASDAQ 2000 is one, 1929 is another. We will find out down the road if current long-term interests are another if inflation raises its head significantly in the coming few years.
Substantial over-valuations (I think we are in one now for the stock market) are a different value where the pricing temporarily moves away from the underlying fundaments and then gets reset by 25% to 60%, probably with an overshoot to the downside, so the price level can reach its previous peak in less than a decade as the fundamentals and price move together for at least a substantial part of the move.
It would not surprise me at all if we saw the S&P 500 at 1,000 within the next three years. I would be surprised to see it fall below 800 as that would likely represent a significant over-shoot to the lower P/E side. I think it would take a substantial economic and earnings recession to make that happen – possible but not as likely as a milder recession with a reset in P/E expectations. However, the equivalent to a 1932 low would be about 300, so there is a wide array of potential outcomes based on past known stock market history.
Ran Paul budget will lead to a recession?
http://www.pragcap.com/why-rand-pauls-budget-proposal-would-likely-be-recessionary
many seem to forget that some one elses spending is their income. cut that and you will have less income too.
Interesting article about technology in schools. My wife is a teacher. The school district’s IS staff is incredibly inefficiently managed. Once the equipment shows up it can take months to get everything up and running as there are usually three or four different teams that have to show up to handle different tasks and they are rarely coordinated. . If there are any problems, a rapid response is about two weeks. It is not unusual for tickets to take two months or more to get responded to. As a result, much of the equipment is functional for maybe 50% of the time in the first couple of years. By then they are usually onto a new official curriculum and more, different technology shows up to repeat the process.
My basic conclusion is that the entire budgeting and curriculum system is inefficient and expensive. They would be better off spending money on putting aides into the classrooms, or reducing classroom sizes, and teaching the old-fashioned way. Most of the kids in her school have very broken home lives and more adult one-on-one contact during the day would be invaluable.
http://www.bloomberg.com/news/features/2015-04-07/news-corp-s-1-billion-plan-to-overhaul-education-is-riddled-with-failures