10 Monday AM Reads

800 years after the Magna Carta was signed, we continue the Anglo-American legal tradition of morning train reads:

• Horizons: Markets Are Jittery as Fed Gears Up to Increase Rates (WSJ) but see Don’t Fear Fed’s Rates ‘Liftoff’ (WSJ)
• Billionaire Bunkers: Exclusive Look Inside the World’s Largest Planned Doomsday Escape (Forbes)
• All the Clean-Energy Successes That Came Out of the Program Mostly Known for the Solyndra Flop (Slate)
• Less Is More: What Small Investors Can Learn From a Pension Giant (MoneyBeat)
• Why ‘Buy’ Buttons Will Pose Big Challenges for Google, Facebook, Pinterest and Twitter (Re/Code)

Continues here

 

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Discussions found on the web:
  1. rd commented on Jun 15

    Re: Lawsky

    Q. “So isn’t it going to take major Wall Street figures going to jail to change behavior?”
    A. “I don’t think we’re there yet.”

    This is the guy who has potentially been the toughest regulator for the financial sector over the past decade. We are incarcerating millions of people for minor infractions, choking people to death over selling untaxed loose cigarettes, shooting anybody who runs away from a policemen, and nobody thinks that people stealing billions of dollars or money laundering money for drug cartels should be locked up?

    This is a virtual guarantee of another financial crisis in the next few years.

    • VennData commented on Jun 15

      The loosie crisis is a function of Democratic restrictions on my right to smoke cigarettes where ever I want. This is ALL on Obama, the liberals, the Democrats and their police state.

      Bring back Bush!

  2. willid3 commented on Jun 15

    why dont we like free trade any more?
    anac
    maybe its the track record?

    http://www.theatlantic.com/politics/archive/2015/06/-tpp-tpa-defeated/395792/

    we are always sold that there will be new jobs, better paying ones too. but since we dont ever validate that ‘claim’, we only have speculation from some. and anecdotal evidence from those who got impacted. followed up by those in favor of it basically blaming them for their condition they find them selves in. and then those in favor seem to ignore that having much lower incomes, means those imported prices had better be a lot more that 25% price cuts, which never seem to happen.

  3. reedsch commented on Jun 15

    Can we put all the billionaires in the bunker, with all their money, now? Then lock the doors. Methinks it will help reprioritize their views, and maybe they’ll work a little harder to keep the world afloat without thinking they can enjoy a different fate from the rest of us.

    • rd commented on Jun 15

      They should study the events in France in 1789, Russia 1917, and Germany 1938 to understand how wealth may do nothing to provide protection once the avalanche starts. Often, escape hatches are illusory.

  4. romerjt commented on Jun 15

    On the anniversary of the Magna Carta I’m remembering an article that appeared here months ago, “Is the Rule of Law Vastly Underpriced?” http://ritholtz.com/2014/09/the-rule-of-law-is-vastly-under-priced/
    I recently read, “Thieves of the State: Why Corruption Threaten Global Security” by Sarah Chayes . . . a stunning illustration from Afghanistan, Iraq, and Nigeria of the description “vastly”. How actual workers for funded projects are paid in chickens and goats b/c al the actual money has stuck to the hand of corrupt officials. Nigeria, with 90 million people has 2 shopping centers b/c the transportation of anything valuable is so corrupt that it either never arrives or becomes so ridiculously expensive that it just doesn’t work. Who knew that Boco Harem’s name deriding western education is drawn from the fact that the midlevel corrupt ministers in the government all have western educations. Before we send any more Americans to Iraq we need to realize the role corruption plays in the success and appeal for ISIS.
    http://ritholtz.com/2014/09/the-rule-of-law-is-vastly-under-priced/

    • rd commented on Jun 15

      You misunderestimate the importance of truthiness compared to factual correctness. Presentation of the data is the important thing.

    • swag commented on Jun 15

      Oh, thanks for the reminder, Professor Ferguson!

    • willid3 commented on Jun 15

      along with the correct world view

    • VennData commented on Jun 15

      David Brooks is a “repeat play” of factual errors.

      Is fallacious reasoning is so easy to shred.

  5. VennData commented on Jun 15

    Deadly flesh-eating bacteria makes its way to Florida beaches

    http://jacksonville.com/news/florida/2015-06-15/story/potentially-deadly-flesh-eating-bacteria-makes-its-way-florida-beaches

    Shark attacks in knee deep water.

    http://news.yahoo.com/2-youths-hurt-shark-attacks-north-carolina-coast-104522072.html

    ​EPA RULES! Obama! Liberals! The Democrats have been on a rampage in their elite enclaves forcing changes and Mother Nature fights back. Carly has a issue to run with!!

  6. rd commented on Jun 15

    Re: Hauling Finance Out of the 50s

    It has already been hauled out. Schwab, Vanguard, DFA, Wealthfront et al. have been at the leading edge of the various changes over the past four decades. Value-added services on top of portfolio management, such as what RIAs like RWM provide, also have a place for mass affluent and affluent investors.

    However, I think the ship has sailed on a relentless drive to reduce fees and portfolio complexity. Even the sports stars are figuring out they have gotten screwed by “special opportunities” the financial sector has provided to them. It is a slow slog against the current because of the relentless marketing dollars spent by the financial sector to maintain high fee accounts, but each year another chunk gets taken out of the high fee pool. The robo-advisors are just the latest competitor but the average person now has far more low-costing options than were imaginable even 20 years ago. The research has decisively shown that these options can provide far better returns, especially when they help control the behavioral impulses.

    The financial sector is going to have to rewatch the old Smith Barney commercials about making money “the old-fashioned way – we earn it”.

    • willid3 commented on Jun 15

      it would be nice to think that they would ‘learn’. but its almost impossible to believe that they will

  7. rd commented on Jun 15

    This column about the Chinese threat to US residential real estate is a bit baffling to me:

    http://www.marketwatch.com/story/foreign-investors-pose-threat-to-residential-real-estate-2015-06-15

    If I recall, we saw similar pieces about the Japanese takeover of the US at the end of the 80s. Haven’t heard much about that since then as Japan crashed and burned. The Chinese demographics look similar to what made Japan implode.

    I much prefer elevated housing prices where cash is coming in from outside the country. US home owners (or banks holding underwater mortgages) end up getting cash without an increase in US-based debt. This is very different form the early 2000s where a similar rise of home prices was fueled by US debt that would never get paid back and was a significant element of the financial crisis. Please note that fly-over country is not seeing these price increases, so people can cash out their over-priced coastal homes and move inland and have cash left-over.

    We have been running a trade deficit with China for quite a while. Having them buy what could be over-priced assets using cash sent over from overseas may be a good way to get some of that money back. If Chinese demographics really do drive a crisis back in China, we will likely see many of these properties get sold at much lower prices, but the cash for their original purchase will still be in the US.

    The discussion of “illicit ” money is interesting. It appears most of the illicitness is due to its circumvention of Chinese capital and currency controls, which are the opposite of free trade that the US has promoted. This is different from money-laundering of drug cartel or corruption profits (some of the cash from China may be due to corruption but that is totally different from evading currency controls and was not discussed in the column). So it is not clear to me why we care about Chinese people evading their own currency controls.

  8. DeDude commented on Jun 15

    I guess the idea that people should not be punished unless their guild has been determined in a court of law, is only applicable to rich people. If police decide to arrest you during a demonstration, the judge will automatically and without any evidence presented require a bail to let you free. If you have a lot of money you can put it up and just lose the interest on that money. For many people the problem is that they have to pay a private company 10% of the bail money as the (forever lost) cost. So a peaceful demonstrator may be arrested and ending up either staying in jail or having to pay a private company $25K that will be lost, even after police admit that there is not enough evidence to even charge that person with a crime. So in essence we have given the police officer the authority to hand out $25K fines to people they dislike for exercising their constitutional right to protest. Can you say: BananAmerica.

    http://www.nytimes.com/2015/06/11/us/when-bail-is-out-of-defendants-reach-other-costs-mount.html?_r=1

    • rd commented on Jun 15

      I have always been baffled by the mechanism of putting money in the hands of people with a much lower propensity to spend it in the short-term will generate more economic growth than putting the money in the hands of people who will likely spend every penny in the next couple of months.

      Over the past couple of years, I have seen numerous articles blaming the American consumer for not spending enough. Instead, these consumers have the gall to actually save some money, often investing it in the stock market through retirement savings just like the wealthy folks who are supposed to trickle down their wealth to the lower classes that are expected tto do their duty by spending every penny to keep the economic machine rolling.

    • Iamthe50percent commented on Jun 15

      Well, theory is that the rich will invest the extra money in capital goods creating jobs etc. etc.

      The fallacy of course is that those plants won’t be built/expanded without a growth in demand.
      The theory gained credence in the ’70s when the FED squeezed all the money out of the economy. I guess they didn’t notice that the consumers had no money to buy. At the time I was an engineer at International Harvester which had financial problems. All the cash in world , however, could not get IH to build more plants while they plants we had were idle because the farmers were broke and being foreclosed. (Think “Places in the Heart”).

      Nowadays, extra money goes into stock buybacks and financial engineering, providing riches for GS and their ilk, but doing nothing for the real economy which could really use some welfare payments or a SS increase, both of which would go 100% into demand.

    • DeDude commented on Jun 15

      @ Iamthe…

      Not only does it take increased consumption before “investment money” are needed (can be used). But when there are increased investment opportunities the stock market itself creates all the capital it can use and then some. When the value of stocks go up just 1% you have over $100 billions created out of thin air. Harvesting some of that newly created money is as easy as issuing more stocks.

    • willid3 commented on Jun 15

      yes but we needed to the experiment because

      freedom!

      thats where the money is?

      were not scientists?

  9. VennData commented on Jun 15

    Jeb Bush: I’m ready to lead the US

    http://www.bbc.com/news/world-us-canada-33137582

    Yeah that trip to Estonia sealed it. And he can get his brother and his buddies to execute another flawless bailout of the banks. Oh except the judge ruled FOR Greenburg.

    http://www.nytimes.com/2015/06/16/business/dealbook/judge-sides-with-ex-aig-chief-greenberg-against-us-but-awards-no-money.html

    Republicans are simply incompetent trying to square the ideological bones they toss at their base and the real world.

  10. rd commented on Jun 15

    Apparently, there is some sanity still left in the courts. If the government bails out a company about to go bankrupt, then the government does not have a duty to optimize the outcome for the company shareholders even if the government runs roughshod over the rules in the process. Basically, the company has the choice between the offered terms at the time or simply going bankrupt.

    https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2011cv0779-443-0

    • rd commented on Jun 15

      It is simple: women can now work and make almost as much as men (still some inequality in job selection and pay within jobs) unlike 50 years ago. In many households, particularly where the men have gone to jail or used to work in blue-collar jobs exported to China, the women are the primary breadwinner. So the women can be choosy now and don’t have to take the first offer, or any offers at all. This is probably the first time in history where this has been the case on a wide scale.

    • intlacct commented on Jun 16

      We’re becoming more European. Marriage is not necessary for many of the positive outcomes one would want – health care no longer attached to employment or being married to someone employed in a ‘good’ job.

      In fact with divorces and kids from prior marriages, re-marriage is a hassle or otherwise does not make sense.

      It is a two way street, men don’t see the value of marriage. A dog is much simpler and less fraught with litigation.

  11. VennData commented on Jun 15

    Joe The Plumber Gets a New Job.

    “I’m a Republican who was cast into the limelight for having the temerity to confront Barack Obama on the question of redistributing wealth,”

    http://www.washingtonpost.com/blogs/plum-line/wp/2014/02/18/joe-the-plumber-gets-a-new-job/

    No. You said YOU would be hit by the tax hikes on the rich and didn’t realize you don’t get taxed on your business REVENUES by on PROFITS which were a fraction of that after years of being a plumber you stupid idiot.

    Another GOP hero.

    • willid3 commented on Jun 15

      he had a job?

  12. rd commented on Jun 15

    Goldman Sachs is planning on lending money to the riff-raff and muppets. This has so many opportunities for them to make money.

    First they get to lend the money. Then they will likely securitize it and sell the securities to outside investors for a fee while they collect servicing fees. Once it is securitized, their traders come into play evaluating their servicing records and shorting the securities they sold that don’t look great. Their hedge funds can then set up collection agencies to buy-up low-priced securities from their institutional clients where they think they can do a better job collecting money than their servicing department.

    http://finance.yahoo.com/news/goldman-sachs-wants-lend-money-191300553.html

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