Category: zerohedge

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Nor, of course, is that the end of their contribution to the wider good. These types of people are always the first target of the charity fund-raisers, whether they are looking for a new church roof or a children’s cancer ward. These are the people who put bread on the tables of families who – if the rich didn’t invest in supercars and employ eau de cologne-dabbers – might otherwise find themselves without a breadwinner. And yet they are brow-beaten and bullied and threatened with new taxes, by everyone from the Archbishop of Canterbury to Nick Clegg.

So according to Boris, we couldn’t survive with oligarchs. Why not just bring back royalty? Oh wait…

The rich are resented, not so much for being rich, but for getting ever richer than the middle classes – and the trouble is that the gap is growing the whole time, and especially has done over the past 20 years. It is hard to say exactly why this is, but I will hazard a guess. Of all the self-made super-rich tycoons I have met, most belong to the following three fairly exclusive categories of human being:

It’s not hard to say exactly why the gap has widened. I’ve basically been writing about it for years. His conclusion; however, exposes his embarrassing bias.

(1) They tend to be well above average, if not outstanding, in their powers of mathematical, scientific or at least logical reasoning. (2) They have a great deal of energy, confidence, risk-taking instinct and a desire to make money. (3) They have had the good fortune – by luck or birth – to be able to exploit these talents.

I know a lot of people that demonstrate the above qualities. Many, many people, and none of them are oligarchs. So please give it a rest.

We should be helping all those who can to join the ranks of the super-rich, and we should stop any bashing or moaning or preaching or bitching and simply give thanks for the prodigious sums of money that they are contributing to the tax revenues of this country, and that enable us to look after our sick and our elderly and to build roads, railways and schools.

Now he’s totally off the deep end. I hear the Onion is looking for writers…

Indeed, it is possible, as the American economist Art Laffer pointed out, that they might contribute even more if we cut their rates of tax; but it is time we recognised the heroic contribution they already make. In fact, we should stop publishing rich lists in favour of an annual list o
f the top 100 Tax Heroes, with automatic knighthoods for the top 10.

Knighthoods. Makes a lot of sense actually since there generally seems to be a strong negative correlation between folks being knighted and being decent human beings.

If this was your attempt at continuing to inflate a oligarch housing bubble in London, congrats Mr. Johnson. Well done. Perhaps some day, you’ll receive your precious knighthood.

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/gyThQgioBOs/story01.htm Tyler Durden

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Nor, of course, is that the end of their contribution to the wider good. These types of people are always the first target of the charity fund-raisers, whether they are looking for a new church roof or a children’s cancer ward. These are the people who put bread on the tables of families who – if the rich didn’t invest in supercars and employ eau de cologne-dabbers – might otherwise find themselves without a breadwinner. And yet they are brow-beaten and bullied and threatened with new taxes, by everyone from the Archbishop of Canterbury to Nick Clegg.

So according to Boris, we couldn’t survive with oligarchs. Why not just bring back royalty? Oh wait…

The rich are resented, not so much for being rich, but for getting ever richer than the middle classes – and the trouble is that the gap is growing the whole time, and especially has done over the past 20 years. It is hard to say exactly why this is, but I will hazard a guess. Of all the self-made super-rich tycoons I have met, most belong to the following three fairly exclusive categories of human being:

It’s not hard to say exactly why the gap has widened. I’ve basically been writing about it for years. His conclusion; however, exposes his embarrassing bias.

(1) They tend to be well above average, if not outstanding, in their powers of mathematical, scientific or at least logical reasoning. (2) They have a great deal of energy, confidence, risk-taking instinct and a desire to make money. (3) They have had the good fortune – by luck or birth – to be able to exploit these talents.

I know a lot of people that demonstrate the above qualities. Many, many people, and none of them are oligarchs. So please give it a rest.

We should be helping all those who can to join the ranks of the super-rich, and we should stop any bashing or moaning or preaching or bitching and simply give thanks for the prodigious sums of money that they are contributing to the tax revenues of this country, and that enable us to look after our sick and our elderly and to build roads, railways and schools.

Now he’s totally off the deep end. I hear the Onion is looking for writers…

Indeed, it is possible, as the American economist Art Laffer pointed out, that they might contribute even more if we cut their rates of tax; but it is time we recognised the heroic contribution they already make. In fact, we should stop publishing rich lists in favour of an annual list of the top 100 Tax Heroes, with automatic knighthoods for the top 10.

Knighthoods. Makes a lot of sense actually since there generally seems to be a strong negative correlation between folks being knighted and being decent human beings.

If this was your attempt at continuing to inflate a oligarch housing bubble in London, congrats Mr. Johnson. Well done. Perhaps some day, you’ll receive your precious knighthood.

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/gyThQgioBOs/story01.htm Tyler Durden

Lately, the CNBC management team and show producers, and certainly the Comcast C-suite, have been engaged in a flurry of activity: from the departure of the iconic money honey Maria Bartiromo, to the retention of virtually every nubile (and not so nubile) Bloomberg TV anchor, it seems the station that was once known for breaking and analyzing financial news is more focused on the perfect mix of TV anchors. Supposedly in lieu of relevant, actionable content, this will offset the boost viewership. Or so the thinking goes. Sadly this is the same sort of thinking that has made slideshows, kittens, and all-caps headlines an ubiqutous click bait fixture of web media. Unfortunately for CNBC (and perhaps explaining Bartiromo’s decision to jump ship after decades of loyalty) it is not working. According to the latest Nielsen Research data, in November, CNBC’s core 25-54 demographic saw its fourth consecutive month of declines, and dropped to just 31,000 – a declined of over 40% from a year earlier, and the lowest since February 1993: a fresh 13 year low.

 

Some other highlights. CNBC has seen a constant decline in its viewership starting with 2008 when it attracted a total of 274,000 viewers, and 88,000 in its demo, for its full day audience. Subsequently viewership dropped as follows:

• 2009: P2: 226,000; 25-54: 75,000
• 2010: P2: 208,000; 25-54: 65,000
• 2011: P2: 199,000; 25-54: 60,000
• 2012: P2: 171,000; 25-54: 52,000

And the full 2013 breakdown: P2: 147,000; 25-54: 42,000.

In short – total viewership has plunged by 46% in the total audiences, and by 52% in the demographic over the past five years. Which incidentally follows the volume of the “stock market” nearly tick for tick.

What this means is that Bartiromo may have been the latest high profile departure from the station, but she certainly won’t be the last one – the writing on the wall is very clear.

The “good” news is that one can expect progressively more eye candy to grace the mute ticker, as instead of focusing on the only thing that matters to viewers – content – the station follows virtually all other dying legacy (and social) media in pursuing the lowest common denominator, which usually comes in high heels and a mini skirt.

Finally, if interest in CNBC is indeed comparable to overall retail (and institutional) participation in the market as many believe, then not only is the retail investor not coming back, ever, contrary to what the doctored propaganda from assorted funds would like to represent (because strength is always in herds, pardon, numbers) but Bernanke better hope that the “BT(F)D mentality” so eloquently popularized by the abovementioned now ex-CNBC anchor, never departs or else there will be nobody to pick up the pieces on the way down when the selling begins.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/E20vX9dygdA/story01.htm Tyler Durden

The Economist found, rather sadly, despite all the glad-handing and happy-talk, that 53% of financial services executives believed that strict adherence to ethical conduct would make career progression difficult. As this former Wall Street trader told The Guardian, “a precedent needs to be set, to slow down Wall Street’s wild behavior. A reminder that rules are there to be followed, not exploited.” The reason, among others, is summed up by the following, “if a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs.”

 

Via The Guardian,

My first year on Wall Street, 1993, I was paid 14 times more than I earned the prior year and three times more than my father’s best year. For that money, I helped my company create financial products that were disguised to look simple, but which required complex math to properly understand. That first year I was roundly applauded by my bosses, who told me I was clever, and to my surprise they gave me $20,000 bonus beyond my salary.

 

The products were sold to many investors, many who didn’t fully understand what they were buying, most of them what we called “clueless Japanese.” The profits to my company were huge – hundreds of millions of dollars huge. The main product that made my firm great money for close to five years was was called, in typically dense finance jargon, a YIF, or a Yield Indexed Forward.

 

Eventually, investors got wise, realizing what they had bought was complex, loaded with hidden leverage, and became most dangerous during moments of distress.

 

I never did meet the buyers; that was someone else’s job. I stayed behind the spreadsheets. My job was to try to extract as much value as possible through math and clever trading. Japan would send us faxes of documents from our competitors. Many were selling far weirder products and doing it in far larger volume than we were. The conversation with our Japanese customers would end with them urging us on: “We can’t fall behind.”

 

When I did ask, rather naively, if this was all kosher, I would be assured multiple times that multiple lawyers and multiple managers had approved the sales.

 

One senior trader, consoling me late at night, reminded me, “You are playing in the big leagues now. If a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs.”

 

I rationalized that our group was careful by Wall Street standards, trying to stay close to the letter of the law. We tried to abide by an unwritten “five-point rule”: never intentionally make more than five percentage points of profit from a customer.

 

Some competitors didn’t care about the rule. They were making 7% or 10% profit per trade from clients, selling exotic products loaded with hidden traps. I assumed they would eventually face legal charges, or at least public embarrassment, for pushing so clearly away from the spirit of the law.

 

They didn’t. Rather, they got paid better, were lauded as true risk takers, and offered big pay packages to manage similar businesses.

 

Being paid very well also helped ease any of my concerns. Feeling guilty, kid? Here take a big check. I was, for the first time in my life, feeling valued for my math skills – the ones I had to hide throughout my childhood, so as not be labeled a nerd or egghead. Ego and money are nice salves for any potential feeling of guilt.

 

After a few years on Wall Street it was clear to me: you could make money by gaming anyone and everything. The more clever you were, the more ingenious your ability to exploit a flaw in a law or regulation, the more lauded and celebrated you became.

 

Nobody seemed to be getting called out. No move was too audacious. It was like driving past the speed limit at 79 MPH, and watching others pass by at 100, or 110, and never seeing anyone pulled over.

 

Wall Street did nod and wave politely to regulators’ attempts to slow things down. Every employee had to complete a yearly compliance training, where he was updated on things like money laundering, collusion, insider trading, and selling our customers only financial products that were suitable to them.

 

By the early 2000s that compliance training had descended into a once-a-year farce, designed to literally just check a box. It became a one-hour lecture held in a massive hall. Everyone had to go once, listen to the rushed presentation, and then sign a form. You could look down at the audience and see row after row of blue buttoned shirts playing on their Blackberries. I reached new highs on Brick Breaker one year during compliance training. My compliance education that year was still complete.

 

By 2007 the idea of ethics education fell even further. You didn’t even need to show up to a lecture hall; you just had to log on to an online course. It was one hour of slides that you worked through, blindly pushing the “forward” button while your attention was somewhere else. Some managers, too busy for such nonsense, even paid younger employees to sit at their computers and do it for them.

 

As Wall Street grew, fueled by that unchecked culture of risk taking, traders got more and more audacious, and corruption became more and more diffused through the system. By 2006 you could open up almost any major business, look at its inside workings, and find some wrongdoing.

 

After the crash of 2008, regulators finally did exactly that. What has resulted is a wave of scandals with odd names; LIBOR fixing, FX collusion, ISDA Fix.

 

To outsiders they sound like complex acronyms that occupy the darkest corners of Wall Street, easily dismissed as anomalies. They are not. LIBOR, FX, ISDA Fix are at the very center of finance, part of the daily flow of trillions of dollars. The scandals are scarily close to what some on Wall Street believe is standard business practice, a matter of shades of grey.

 

I imagine the people who are named in the scandals are genuinely confused as to why they are being singled out. They were just doing what almost everyone else was, maybe just more aggressive, more reckless. They were doing what they had been trained to do: bending the rules, pushing as far as they could to beat competitors. They had been applauded in the past for their aggressive risk taking, no doubt. Now they are just whipping boys.

 

That’s the paradox at the core of the settlements we’re seeing: where is the real responsibility? Others were doing it, yes. Banks should be fined, yes. But somebody should be charged. Yet the people who really should be held accountable have not. They are the bosses, the managers and CEOs of the businesses. They set the standard, they shaped the culture. The Chuck Princes, Dick Fulds, and Fred Goodwins of the world. They happily shepherded and profited from a Wall Street that spun out of control.

 

A precedent needs to be set, to slow down Wall Street’s wild behavior. A reminder that rules are there to be followed, not exploited.
The managers knew what was going on. Ask anyone who works at a bank and they will tell you that.

 

The excuse we have long accepted is ignorance: that these leaders couldn’t have known what was happening. That doesn’t suffice. If they didn’t know, it’s an even larger sin.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zUFHLr0gHUY/story01.htm Tyler Durden

The Economist found, rather sadly, despite all the glad-handing and happy-talk, that 53% of financial services executives believed that strict adherence to ethical conduct would make career progression difficult. As this former Wall Street trader told The Guardian, “a precedent needs to be set, to slow down Wall Street’s wild behavior. A reminder that rules are there to be followed, not exploited.” The reason, among others, is summed up by the following, “if a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs.”

 

Via The Guardian,

My first year on Wall Street, 1993, I was paid 14 times more than I earned the prior year and three times more than my father’s best year. For that money, I helped my company create financial products that were disguised to look simple, but which required complex math to properly understand. That first year I was roundly applauded by my bosses, who told me I was clever, and to my surprise they gave me $20,000 bonus beyond my salary.

 

The products were sold to many investors, many who didn’t fully understand what they were buying, most of them what we called “clueless Japanese.” The profits to my company were huge – hundreds of millions of dollars huge. The main product that made my firm great money for close to five years was was called, in typically dense finance jargon, a YIF, or a Yield Indexed Forward.

 

Eventually, investors got wise, realizing what they had bought was complex, loaded with hidden leverage, and became most dangerous during moments of distress.

 

I never did meet the buyers; that was someone else’s job. I stayed behind the spreadsheets. My job was to try to extract as much value as possible through math and clever trading. Japan would send us faxes of documents from our competitors. Many were selling far weirder products and doing it in far larger volume than we were. The conversation with our Japanese customers would end with them urging us on: “We can’t fall behind.”

 

When I did ask, rather naively, if this was all kosher, I would be assured multiple times that multiple lawyers and multiple managers had approved the sales.

 

One senior trader, consoling me late at night, reminded me, “You are playing in the big leagues now. If a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs.”

 

I rationalized that our group was careful by Wall Street standards, trying to stay close to the letter of the law. We tried to abide by an unwritten “five-point rule”: never intentionally make more than five percentage points of profit from a customer.

 

Some competitors didn’t care about the rule. They were making 7% or 10% profit per trade from clients, selling exotic products loaded with hidden traps. I assumed they would eventually face legal charges, or at least public embarrassment, for pushing so clearly away from the spirit of the law.

 

They didn’t. Rather, they got paid better, were lauded as true risk takers, and offered big pay packages to manage similar businesses.

 

Being paid very well also helped ease any of my concerns. Feeling guilty, kid? Here take a big check. I was, for the first time in my life, feeling valued for my math skills – the ones I had to hide throughout my childhood, so as not be labeled a nerd or egghead. Ego and money are nice salves for any potential feeling of guilt.

 

After a few years on Wall Street it was clear to me: you could make money by gaming anyone and everything. The more clever you were, the more ingenious your ability to exploit a flaw in a law or regulation, the more lauded and celebrated you became.

 

Nobody seemed to be getting called out. No move was too audacious. It was like driving past the speed limit at 79 MPH, and watching others pass by at 100, or 110, and never seeing anyone pulled over.

 

Wall Street did nod and wave politely to regulators’ attempts to slow things down. Every employee had to complete a yearly compliance training, where he was updated on things like money laundering, collusion, insider trading, and selling our customers only financial products that were suitable to them.

 

By the early 2000s that compliance training had descended into a once-a-year farce, designed to literally just check a box. It became a one-hour lecture held in a massive hall. Everyone had to go once, listen to the rushed presentation, and then sign a form. You could look down at the audience and see row after row of blue buttoned shirts playing on their Blackberries. I reached new highs on Brick Breaker one year during compliance training. My compliance education that year was still complete.

 

By 2007 the idea of ethics education fell even further. You didn’t even need to show up to a lecture hall; you just had to log on to an online course. It was one hour of slides that you worked through, blindly pushing the “forward” button while your attention was somewhere else. Some managers, too busy for such nonsense, even paid younger employees to sit at their computers and do it for them.

 

As Wall Street grew, fueled by that unchecked culture of risk taking, traders got more and more audacious, and corruption became more and more diffused through the system. By 2006 you could open up almost any major business, look at its inside workings, and find some wrongdoing.

 

After the crash of 2008, regulators finally did exactly that. What has resulted is a wave of scandals with odd names; LIBOR fixing, FX collusion, ISDA Fix.

 

To outsiders they sound like complex acronyms that occupy the darkest corners of Wall Street, easily dismissed as anomalies. They are not. LIBOR, FX, ISDA Fix are at the very center of finance, part of the daily flow of trillions of dollars. The scandals are scarily close to what some on Wall Street believe is standard business practice, a matter of shades of grey.

 

I imagine the people who are named in the scandals are genuinely confused as to why they are being singled out. They were just doing what almost everyone else was, maybe just more aggressive, more reckless. They were doing what they had been trained to do: bending the rules, pushing as far as they could to beat competitors. They had been applauded in the past for their aggressive risk taking, no doubt. Now they are just whipping boys.

 

That’s the paradox at the core of the settlements we’re seeing: where is the real responsibility? Others were doing it, yes. Banks should be fined, yes. But somebody should be charged. Yet the people who really should be held accountable have not. They are the bosses, the managers and CEOs of the businesses. They set the standard, they shaped the culture. The Chuck Princes, Dick Fulds, and Fred Goodwins of the world. They happily shepherded and profited from a Wall Street that spun out of control.

 

A precedent needs to be set, to slow down Wall Street’s wild behavior. A reminder that rules are there to be followed, not exploited. The managers knew what was going on. Ask anyone who works at a bank and they will tell you that.

 

The excuse we have long accepted is ignorance: that these leaders couldn’t have known what was happening. That doesn’t suffice. If they didn’t know, it’s an even larger sin.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zUFHLr0gHUY/story01.htm Tyler Durden

From Abe Gulkowitz’ The Punch Line

Meager Growth but the Market Roars…

An interim deal on Iran’s nuclear program pushed oil prices lower and sent global equities higher as investors’ risk appetite rose on an easing of some Middle East tensions. As we close in to year-end and the start of a new year, one finds little evidence of serious inflationary concerns. Indeed, the opposite is feared.

Major economies face debilitating deflation pressures. In Europe, for example, the latest annual inflation statistics fell in twenty-three Member States, remained stable in one and rose in only four. The HSBC/Markit Flash China PMI came in at 50.4 in November, marking a two-month low and missing expectations. The survey still indicated that the Chinese economy is expanding but it also raised fears that growth may be tailing off in the fourth quarter. China will be lucky if it manages to hit its official target of 7.5% growth in 2013, a far cry from the double-digit rates that the country had come to expect in the 2000s.

Growth in India (around 5%), Brazil and Russia (around 2.5%) is barely half what it was at the height of the boom. In Europe, the Markit Flash Eurozone PMI fell from 51.9 to 51.5, the lowest reading for three months. The French index was particularly weak – the PMI was at its lowest level since June. Germany continued to improve but the rest of the eurozone seems to be languishing. Questions abound whether the EU risks following the path carved by the sluggish Japan in the 1990s. Yet financial assets point to a worrisome asset inflation environment. Many have written off the likelihood that the Federal Reserve would begin QE tapering this year.

As stocks hit new records and small investors—finally—return to the market, some analysts are getting worried. Risk assets have rallied to previous bubble conditions. Powered by unprecedented refinancing and recap activity, 2013 is now the most productive year ever for new-issue leveraged loans, for example. This has been great for corporations as financing and refinancing has put them on a stronger footing. Where M&A activity still lags the highs of the last boom, issuers have jumped into the opportunistic pool with both feet. And why not? Secondary prices are high and new-issue clearing yields remain low. Yet very inadequate movement has been evidenced on the hiring front.

And after all the improvement in ebitda, where do we go from here? Forward guidance will clearly be harder. One might argue that we are back in a Goldilocks fantasy world, where the economy is not so strong (as to cause inflation and trigger serious monetary tightening) or so weak (as to cause recession and a collapse in profits) but “just right”. Yet, it seems unlikely that issuers with weaker credit quality could find it so easy to sell debt without the excess liquidity created by the Fed and other central banks.

Weaning everyone off the “liquidity fix” may be tough!

The full Punchline including 17 pages of off the charts that’s fit to print below (pdf)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MlGZHzlhgNM/story01.htm Tyler Durden

To paraphrase Mark Twain, “It isn’t the stuff you don’t know that will kill you – it’s the stuff you’re sure about but is totally wrong that will do you real harm.”  As a corollary to this fateful phrase, Convergx’s Nick Colas has collected a list of market “knowledge” that is questionable at best and harmful at worst.

Via ConvergEx’s Nick Colas,
 
For years I had a pet theory about how your abilities improve over time in any given vocation.  My thought was that every year you work, you learn one critical aspect of the job. Over the first few years, the percentage improvement in your knowledge is quite impressive: 50% in the second year, 33% in the third, and so on as you pick up new and important insights.  And while years 15-20 might offer up slower growth, you also have less competition from your more junior peers.  They’ve figured out fewer points, after all.

A few examples of these critical lessons from my 20+ years analyzing stocks, markets, and the economy on both the buy side and sell side:

Rule #1: The marginal buyer and seller set prices for everything.  You may have point of view on value, but the actors setting the price don’t care about your opinion.  Seriously – they don’t.

 

Rule #2: If you don’t know what to do or say, don’t do or say anything.  Boredom is investor’s greatest enemy.  Thrashing around is for mosh pits and three year olds.

 

Rule #3: If you can’t explain your competitive advantage in three sentences, you don’t have one.  That’s true for analysts, portfolio managers, company executives, startup companies, writers, etc.

 

Rule #4: It is OK to be wrong.  Just don’t lie to yourself or anyone else about being wrong.

The second part of my imaginary rule set was that there were 20 questions that mattered to any job, so two decades of experience should get you to the end of the journey.  I can tell you that, with 22 years in the business of analyzing financial assets, this part is wrong.  And in keeping with Rule #4, I am fessing up.  The true count is probably more like 100, which is why only vampires have a shot of figuring everything out. Zombies would have a shot, too, if it weren’t for the whole mindless existence thing.

To be fair, part of the problem of harvesting those elusive 20 – 100 points from the sea of capital markets aphorisms and rules is that there are so many false leads.  At first they look useful, but like a poorly made tool they eventually shatter under heavy use.  Since I am prone to list-making, I have also kept a short collection of these false gods.

The balance of this report is a Top 10 list of those as well as a brief assessment of where and why they go off the rails. I use questions rather than statement to lead off each point.  After all, these are points that seem right but are – ultimately – misunderstood.

#1 – Why the fixation on price earnings multiples?  Say a stock trades for 10 times projected earnings.  Does that make it a better investment than one trading for 20 or 100 times?  The short answer is no.  Valuation is a three dimensional chess game of the returns a business can generate, its competitive position, and its growth prospects.  No matter how much you try to stuff the duffle bag that is P/E analysis with those bulky items, you simply aren’t going to get them all in.

 

#2 – Why do technical analysts use an arithmetic price axes instead of log scales?  Don’t get me wrong – I love good technicians. They are the shamans and storytellers of the capital markets, drawing pictures and relating price levels to events in the past. But look at the average technician’s work and you’ll see that all the price charts treat the move from $10 to $20 the same way as $90 to $100.  One is a double; the other is only an 11% move.  That could all be solved with a logarithmic scale for the Y-axis, but very few people do it that way.

 

#3 – Why do investors care about the price at which a company buys back its stock?  It isn’t the Chief Financial Officer’s job to figure out if his/her stock is over or undervalued.  That’s for investors to do; it’s pretty much the job description, actually.  Stock buybacks return money to shareholders rather than allowing the company to reinvest it in the business.  That’s it.  Now, if a company is going to blow a quarter, maybe the CFO should lighten up the repo and buy lower.  Fair enough.  But CFOs aren’t stock pickers.  So if the market tumbles and company with a repurchase plan in place happens to buy higher than current prices, don’t complain.  Stock picking is your job.

 

#4 – Why does the negative case for an investment always sound smarter than the positive one?  Remember that over the long term (really, really long term, anyway), most equities rise in value.  Short sellers therefore typically have to do more work to find the right ideas.  Their rap is, therefore, generally stronger than the “Sit tight, be right” crowd.  I think, however, that humans are generally wired to be scared by a negative story and it therefore holds our attention better.  It’s not always right, but our innate biases make us remember it.

 

#5 – Why is there a Nobel Prize in Economics?  There are only five “Real” Nobels, instituted by the old man himself: Peace, Chemistry, Physics, Medicine/Physiology, and Literature.  Alfred Nobel invented dynamite, among his +300 patents, and these prizes were essentially a way of being remembered for something other than arms dealing and the industrializing of human misery.  Unlike these awards, which started in 1901, the Economics “Nobel” is a newcomer, with the first prize given in 1969 by Swedish Central Bank.  Putting the social science of economics on par with either the hard sciences or human ideals such as peace or literature seems odd, at best.  At worst, it imbues the discipline with a notional precision that it can never attain.  If you need any further proof, consider this year’s award to Gene Fama and Robert Shiller.  One believes markets are efficient, one doesn’t.  Its sort of like the committee  is saying “You figure it out…”

 

#6 – Why is investor and social attention negatively correlated with stock market direction?  When the global equity markers were imploding in 2008-2009, cable business news channels enjoyed relatively high ratings.  Now that the U.S. equity market is hitting new highs, no one but Wall Street seems to tune in.  We’re used to equating social attention with value (the valuation of social media stocks is a great example), but with the stock market, the opposite is true.

 

#7 – What ever happened to “Growth” and “value” investing?  When I started in the business, mutual fund and other institutional managers differentiated themselves by these monikers.  The hedge funds came along, with much broader mandates.   After that, passive management with low fees and transparent trading through exchange traded funds became popular.  Managers still use the terms, to be sure, but the delineation is nowhere near as rigid as it used to be.  Most investors just want to find stock
s that go up.

 

#8 – Why does it take capital markets so long to embrace technological change in its own back yard?  Over the last 20 years, equity trading has moved from three exchanges to scores of virtual venues.  You can see the same process occurring throughout modern society.  Online shopping supplants old brick and mortar retailers.  Mobile apps replace singles bars.  You can play scrabble with a friend in another country on your smartphone.  Yet, somehow, the clever people in capital markets seem shocked that their jobs are subject to the same technological advances.  There’s no going back to the old days…  Sorry.

 

#9 – Why does anyone doubt the value of gold?  Humans have valued gold for 5,000 years. Some of the first money – coins minted in ancient Anatolia – was minted with the stuff.  The world functioned on a gold standard of sorts until 1971.  I think the reason some people dislike gold as an investment is because it reminds them that humans are the same across space and time.  We like to think we are “Better” than the ancient Romans with their gladiatorial spectacle and will never again need a portable method of transferring wealth like the European refugees of the 1940s and 1950s.  Gold was the fiscal anchor of the former and the salvation of the latter.  Are we so different?  Let’s see how the next 100 years turn out.

 

#10 – Why do humans always fight the last battle rather than focus on future challenges?  Put another way, would it be so bad if we banished the word “Bubble” from our collective consciousness for the next decade?  Humans are prone to herd behavior – we like the security of crowds.  If our ancestors had been rugged individualists they would have never made it out of Africa.  And if any of them were, they certainly succumbed to the local fauna. And their genes died with them.  Bubbles are as much a part of human behavior as breathing, and it will always be thus.  At the same time, not everything that rises quickly in value is a bubble.  Using that rubric and hearkening back to other asset price collapses is lazy, at best. 

Now – watch CNBC for an hour and check off how many of these ‘red flags’ you hear…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/1azCbH8JNqE/story01.htm Tyler Durden

Having exposed the “biggest scam in history” is Part 4 (following Part 1, Part 2, and Part 3), Mike Maloney’s fifth episode serves as an ideal primer for those waking up to the monetary matrix around them, as it clearly shows the history of true money and why it so important to our freedom. The quality of a society is directly proportional to the quality of its money. Debase a currency for long enough, and you end up with dangerous deficits, debt driven disasters, and eventually…delusional dictators. History proves this to be true.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XII_MohrkkE/story01.htm Tyler Durden

“The reality is,”Kevin Warsh exclaims, “QE policy favors those with big balance sheets, those with risk appetites, and access to free money,” while real people “are still looking around and saying what is fed policy doing for me.” The problem, he explains, is a disconnect between what markets are discounting about the future and the Fed’s credibility with regard their apparently divergent forecasts for unemployment, growth, and interest rates. In a little under 90 seconds, Warsh explains the dilemma and sums up the Fed perfectly, “they’re just talking, rather than acting.”

“The challenge for [The Fed] in December is to convince the markets that both their economic forecasts are right – that is the economy will be growing at 3.5% in 2016, the unemployment rate will be in the fives – and yet, interest rates still at zero.

 

My view is one of those has to give.

 

If the economy is roaring as much as they say, markets will not believe that the Federal Reserve will keep the Fed Funds rate at zero in that environment. The alternative is the economy is stuck at around 2% growth in which case it is possible that rates and yields stay quite low.”

90 Quick seconds of uncomfortable enlightenment…

 

 

His later comments did not entirely suggest confidence in the short-term future…

“Financial markets tend to test new chairmen. They did it to Paul Volcker. They did it to Alan Greenspan,” Warsh said. “They challenged Ben Bernanke and his new team eight years ago.”

 

“I’ve got every bit of confidence that [Yellen] is going to realize that being chairman is frankly a very different set of responsibilities … where most of us get to sort of chatter from the cheap seats. She’s got to make the tough decisions.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ahPbpPwkrJY/story01.htm Tyler Durden

“The reality is,”Kevin Warsh exclaims, “QE policy favors those with big balance sheets, those with risk appetites, and access to free money,” while real people “are still looking around and saying what is fed policy doing for me.” The problem, he explains, is a disconnect between what markets are discounting about the future and the Fed’s credibility with regard their apparently divergent forecasts for unemployment, growth, and interest rates. In a little under 90 seconds, Warsh explains the dilemma and sums up the Fed perfectly, “they’re just talking, rather than acting.”

“The challenge for [The Fed] in December is to convince the markets that both their economic forecasts are right – that is the economy will be growing at 3.5% in 2016, the unemployment rate will be in the fives – and yet, interest rates still at zero.

 

My view is one of those has to give.

 

If the economy is roaring as much as they say, markets will not believe that the Federal Reserve will keep the Fed Funds rate at zero in that environment. The alternative is the economy is stuck at around 2% growth in which case it is possible that rates and yields stay quite low.”

90 Quick seconds of uncomfortable enlightenment…

 

 

His later comments did not entirely suggest confidence in the short-term future…

“Financial markets tend to test new chairmen. They did it to Paul Volcker. They did it to Alan Greenspan,” Warsh said. “They challenged Ben Bernanke and his new team eight years ago.”

 

“I’ve got every bit of confidence that [Yellen] is going to realize that being chairman is frankly a very different set of responsibilities … where most of us get to sort of chatter from the cheap seats. She’s got to make the tough decisions.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ahPbpPwkrJY/story01.htm Tyler Durden