10 Thursday AM Reads

How’s your first week back coming along? Be happy you are not Brazil. One thing i can assure you is our morning train reads will never be jut to junk:

• Market Volatility Has Changed Immensely: Volatility is not what it used to be. (Bloomberg) see also The Stock Market’s Wake Up Call (Servo)
• Patterned By Birth (Irrelevant Investor)
• A Market Update for Real Investors: News for people with long attention spans. (Motley Fool)
• Memo to David Einhorn re: Gold Miner Suckitude (Reformed Broker) see also GLD ETF killed the primary reason for owning gold miners (BV)
• Brief Thoughts and Observations Regarding Today’s ‘Hey Siri’ Apple Event (Daring Fireballsee also Eight Years After the First iPhone, Apple Keeps Going Its Own Way (NYT)

Continues here


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  1. rd commented on Sep 10

    Re: Trees and Deforestation

    William Ruddiman has been looking at the influence of agriculture and plagues on CO2 and CH4 concentrations in the atmosphere for a couple of decades now. He figures that the onset of agriculture about 8,000 years ago and the interruptions in deforestation due to bubonic plague in Europe and smallpox in the America from the 1300s to the 1800s are primary causes of the fluctuations in these greenhouse gases. He points to data of increasing greenhouse gases over the 8,000 years with a dip between the 1300s and mid 1800s as population losses due to disease allowed forests to regenerate triggering the Little Ice Age that was partially responsible for Hobbes’ verdict that life is cold, brutal, and short. This research has been viewed as controversial, but I will be surprised if it does not turn out to be a significant contribution to understanding climate science.

    An early paper that is not hidden behind a paywall: http://stephenschneider.stanford.edu/Publications/PDF_Papers/Ruddiman2003.pdf


  2. RW commented on Sep 10

    The push to normalize interest rates, placing policy emphasis on interest rates instead of employment and wages, isn’t even wrong; it is bunk.

    More (dark) thoughts on interest rates

    The following has numbers for the UK, but the logic if not the numbers also apply to the US: see Mark Thoma here.

    … What are the chances that the economy has, over the last ten years, permanently lost 15% of its normal ability to produce goods and services. …

    • willid3 commented on Sep 10

      i too wonder about this push for higher rates. some seem to think its unnatural. how could it not be? interest rates are man made. so no matter what they are set too, they are unnatural. maybe its just to make it easier to make money, since currently some have to work hard since the ‘easy’ way doesnt really work

      its not like the banks care to pay interest on savings. and this isnt new, its been so for 2 or more decades, as their business model has changed. they make more on fees than loans

    • lucas commented on Sep 11

      How about addressing this question before you repost the link about punishing savers?

      Characterizing the thinking of savers as an ideological belief that the government should give them a risk-free return mis-characterizes their thinking. First, data shows that most Americans do not even have enough savings to diversify what little they have. Second, as Cullen has pointed out, investors who are not gamblers are actually savers, but “savers” do not see themselves as investors. Third, savers have learned since they were little tykes that banks lend out their savings as interest, so they are not looking for risk-free returns from the government. They are looking for returns from the bank’s borrowers, and it has only been since the FDIC was created, that from the saver’s point of view that this return has been risk-free on a principal of no more than $100,000 (or more recently, $250,000).

      Cullen’s explanation of how depositor’s money works is different that what they think, but their beliefs are not ideological, and if they feel the FED is punishing them, it is because whenever they ask the bank manager why their interest rate is so low, the answer is because they base their rates off the FED rates.

      Nevertheless,why should the interest rate policies should never favor the millions of little savers and homebuyers who only see the rates favoring the already very wealthy?

  3. rd commented on Sep 10

    Re: Patterned by Birth

    Interesting commentary. I don’t think it is coincidental that it has typically taken about 16 years for the secular bears to play themselves out over the past century. It think it takes repetition of soul-crushing downsweeps over that length of time to squash the optimism out of the markets to set themselves up for the next 15-20 year secular bull run before unbridled optimism leads to irrational heights again.

    1929-1932 was off-the-scale brutal for stocks and the economy and it took over a decade for the economy to recover (especially with a WW in the last half of that recovery). 1966-1982 crushed stocks (1974), and bonds and commodities (1980-82) and inflation-adjusted wealth was in wreckage by 1982, so prosecutions weren’t necessary to re-adjust attitudes.

    I think we were almost there in 2008-9, but the elevation of the Greenspan Put to the nth degree with ZIRP, QE, TARP, wealth effect etc. allowed the pros off the hook and so we quickly got swept up into a new bull run leading to record levels of margin debt etc. The lack of criminal prosecution for fraud and manipulation meant that there was remarkably little personal sacrifice by most of the pros and they could largely go about business as usual (other than a large drop in traders and retail brokers). I think it is very important that much of the real prosecution of individuals has only occurred over the past couple of years for post-2009 transgressions of insider trading, market manipulation etc. because they thought they could still get away with it.

    The reason that the lack of prosecution is important is that the stock market is now owned primarily by professionals representing institutions and very wealthy individuals, whereas it used to be owned primarily by individuals a half-century ago. Those same institutions and individuals also own a high percentage of private equity as well. Most of the population has little skin in the stock market other than pension promises and 401ks/IRAs, but the pros are still waiting for Mom and Pop to go bonkers whereas it is now most likely the pros that are themselves the indicator of irrational behavior. The move over the past decade towards Target Date Funds and index funds by small investors indicates they have been getting educated. The rise of firms like RWM is an indication of this. So, I don’t think the secular bear will be completely done until the institutions and wealthy individuals have had their optimism fully adjusted. I don’t know if that is the 25% level that Blatnick mentions or a 50%+ drop that many of the valuation measures would indicate is potential, but I think one of those is coming to complete this cycle.

  4. willid3 commented on Sep 10

    the reason private schools tend to be at the top of universities

    might be the tuition, average annual cost at private schools, about 31,000, average at public, about 9,000. and the public university has a lot more students (usually more than double the number). and private schools have large endowments, while public has to deal with cuts by legislators, and they still havent recovered from the recession yet. course there is that demand to cut taxes, and that leads to cuts in education at all levels. course it will lead to an economic problem later, where jobs will disappear. but thats long after the current politicians are gone

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