10 Tuesday AM Reads

May 19, 2015 7:30am by

Our 2-for-Tuesday morning train reads:

• Which Stock Market Is Scarier: U.S. or China? (BV) see also Don’t Fret About Tobin’s Q (Crossing Wall Street)
• How likely is a recession? (And how fast is a forecast?) (FRED Blog)
• The Ten Harsh Financial Commandments (Irrelevant Investor) see also Compare and Contrast (Polemics Pain)
• The View from the Front Seat of the Google Self-Driving Car (Medium)
• Letterman, the Last American Broadcaster (WSJ) see also ‘Late Show With David Letterman’: 43 Memorable Moments (Hollywood Reporter)

What are you reading?

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  1. RW commented on May 19

    BrokerCheck

    FINRA oversees the people and firms that sell stocks, bonds, mutual funds and other securities. Simply type in your current or prospective broker’s name to see employment history, certifications, and licenses—as well as regulatory actions, violations or complaints you might want to know about. You also can get information about your broker’s firm.

    NB: Anyone who still uses an individual broker should avail themselves of this tool because, apparently, FINRA does a poor job of protecting broker customers.

    • willid3 commented on May 19

      you mean they were supposes to protect customers? since when? other than saying so, what example of them doing so do we have?

  2. rd commented on May 19

    Re: Interest Rates and Stock Market Valuation

    Mid- and long-term interest rates will rise in response to either panic about monetary and financial conditions (Greece, US in 1970s) or a rapidly growing economy. If it is the latter, then you would expect to see revenues rising for firms which should push total earnings up which would push EPS up if there is no new stock issuance and therefore the stock price would rise. If it is panic that pushes interest rates up, then the it is likely the economy is not doing great and people will be looking for safety, which is unlikely to be the stock market.

    So the plot looks like a shotgun blast, because there are too many variables. However, bond bear markets typically take a decade to play out while stock bear markets take a couple of years. So the valuation ranges look similar but the annual volatility is drastically different.

    Many unrelated valuation indicators are in the top quintile, such as CAPE, Q, GDP/market cap, etc. It doesn’t mean that the stock market can’t rise (1999 is the proof that almost any high valuation is possible, as 1932 is proof that almost any low is possible), but investors should have their seat belts fastened because it may be a very bumpy ride over the next few years. The stock market usually doesn’t sit at a rationalized valuation for very long as the manic-depressive mood swings take over pretty quickly.

  3. RW commented on May 19

    Always worth revisiting this beauty of a blog post (ht PK)

    The D-Squared Digest One Minute MBA – Avoiding Projects Pursued By Morons 101

    Good ideas do not need lots of lies told about them in order to gain public acceptance. … I was first made aware of this during an accounting class. We were discussing the subject of accounting for stock options at technology companies. …Application to Iraq: …
    Fibbers’ forecasts are worthless. …If you have doubts about the integrity of a forecaster, you can’t use their forecasts at all. Not even as a “starting point”. …Application to Iraq: …
    The Vital Importance of Audit. …companies which do not audit completed projects in order to see how accurate the original projections were, tend to get exactly the forecasts and projects that they deserve. …Application to Iraq: …

    • ilsm commented on May 19

      The pentagon can audit nothing it does.

      A review (could not call it an audit) of weapon systems projects would show delays, and cost overruns delivered far less than the original plan!

      GAO annual report on DoD weapon system acquisitions does the math on schedule slip and cost overrun but not the “lost” promises. DoD weapon system acquisitions remains for over 10 years on the GAO list of high risk programs for fraud and waste.

    • willid3 commented on May 19

      nope they cant seem to . probably not a priority with them. but by law they are supposed to

    • catclub commented on May 19

      The link is wrong, but I have read that post more than once. It is a gem of clear thinking.

      It can be found here: https://dsquareddigest.wordpress.com/2004/05/

      Daniel Drezner has two or three posts in a ‘Five best Web postings ever’ list.

  5. VennData commented on May 19

    Spider Rain

    “…Spider rain” happens when large groups of arachnids migrate all at once, using a technique called “ballooning.” According to a 2001 study in the Journal of Arachnology, the spiders will spin out dozens of silk strands at once so that they fan out and form a triangular parachute, allowing the clever critters to catch a breeze toward new ground…”

    http://www.thespec.com/news-story/5633024-why-millions-of-tiny-spiders-rained-from-the-sky-in-australia/

  7. RW commented on May 19

    The 15 Best Behavioural Science Graphs of 2010-13 (ht BDL)

    Economics is a discipline replete with graphs – see many examples in these “Best of” retrospectives by the BBC, Economist, Wonkblog and The Atlantic. Three of my personal favourites from across all of economics are: (1) Who Supports Health Care Reform in the U.S., (2) Changes in Real Income (1988-2008) by Percentiles of the Global Income Distribution and (3) the Mexican Lemon Imports – U.S. Highway Fatality Rate exposé.

    Behavioural Science* has a similar abundance of interesting graphs but to date there hasn’t been a retrospective on them. The approaching end of 2013 seems like a good time to do this. To that end, I asked people in the field as well as my colleagues in the Behavioural Science Centre for their favourite graph of the last 3 years. Many thanks to everyone for their recommendations. ….

    • hue commented on May 19

      bs has not being on the air since the vox story about him leaving, could be vacation too

    • hue commented on May 19

      Bill Simmons Is Officially Done Working at ESPN, but Will Get Paid Through September http://vnty.fr/1L6NcNO we will find out if it was simmons or espn, the draw

    • rd commented on May 19

      The US opted to not prosecute people in the wake of the Financial Crisis and now many of those statutes of limitations have run out, so we just have to settle on the fines that shareholders have to pay. However, the financial sector does appear determined to give Dept. of Justice a second bite at the apple. I wonder if the reruns would convince anyone to prosecute actual people this time instead of shareholders.

  13. Jojo commented on May 19

    NY Times
    Wanted in Saudi Arabia: Executioners
    By BEN HUBBARD
    MAY 18, 2015

    BEIRUT, Lebanon — Job seekers in Saudi Arabia who have a strong constitution and endorse strict Islamic law might consider new opportunities carrying out public beheadings and amputating the hands of convicted thieves.

    The eight positions, as advertised on the website of the Ministry of Civil Service, require no specific skills or educational background for “carrying out the death sentence according to Islamic Shariah after it is ordered by a legal ruling.” But given the grisly nature of the job, a scarcity of qualified swordsmen in some regions of the country and a rise in the frequency of executions, candidates might face a heavy workload.

    Saudi Arabia’s justice system punishes drug dealing, arms smuggling, and murder and other violent crimes with death, usually by beheading in a public square.

    …

    http://www.nytimes.com/2015/05/19/world/middleeast/wanted-in-saudi-arabia-executioners.html

    • rd commented on May 19

      Micro-economics works fairly well because it deals with relatively small subsets with fewer moving parts.

      Macro-economics is at about the same point as astronomy, physics, and alchemy in the Middle Ages. If you go against the accepted policies, then you are excommunicated and possibly executed. The scientists in that period had a lot of really cool ideas, most of which were wrong and didn’t survive even rudimentary real-world testing. But it was the religious beliefs of the day (like our political parties) that held the most sway, so measurements mattered far less than the ideology of the day.

  15. intlacct commented on May 20

    re: what if something goes right:

    The Chicken Littles lack imagination. Imagine:

    1. All the people in Baltimore and other cities feeling included and treated fairly.
    2. The followers of Islam come to their senses, feel less persecuted, are left alone to sort their own things out, and see that secular humanism is the best cover for each sect to play with their ‘toy’ in the privacy of their own home.
    3. We don’t spend $4tt+ on pointless wars.
    4. We follow the lead of every other OECD country, employ massive economies of scale and reduce our health care costs by a third to that of the next most expensive country.
    5. Continue the whirlwind of advances that enable us to years live longer and healthier.
    6. Continue the exponential advances in all areas of life related to silicon and software.
    7. We spend money to make jobs while the cost and demand is low.

    Can 10% of the above come to pass? 20%? 50%? Why does regression to the mean only apply to interest rates and not public works spending or health care costs?

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