Archive for July, 2009

  • It’s Bernanke Day!
    , July 21st, 2009 at 10:08 am

    Today is Ben Bernanke. For one, he gives the first part of his twice annual report to Congress. Secondly, he led off the day with an editorial in the WSJ.
    Here’s his written testimony. Near the end, he addresses the audit issue:

    The Congress has recently discussed proposals to expand the audit authority of the Government Accountability Office (GAO) over the Federal Reserve. As you know, the Federal Reserve is already subject to frequent reviews by the GAO. The GAO has broad authority to audit our operations and functions. The Congress recently granted the GAO new authority to conduct audits of the credit facilities extended by the Federal Reserve to “single and specific” companies under the authority provided by section 13(3) of the Federal Reserve Act, including the loan facilities provided to, or created for, American International Group and Bear Stearns. The GAO and the Special Inspector General have the right to audit our TALF program, which uses funds from the Troubled Assets Relief Program.
    The Congress, however, purposefully–and for good reason–excluded from the scope of potential GAO reviews some highly sensitive areas, notably monetary policy deliberations and operations, including open market and discount window operations. In doing so, the Congress carefully balanced the need for public accountability with the strong public policy benefits that flow from maintaining an appropriate degree of independence for the central bank in the making and execution of monetary policy. Financial markets, in particular, likely would see a grant of review authority in these areas to the GAO as a serious weakening of monetary policy independence. Because GAO reviews may be initiated at the request of members of Congress, reviews or the threat of reviews in these areas could be seen as efforts to try to influence monetary policy decisions. A perceived loss of monetary policy independence could raise fears about future inflation, leading to higher long-term interest rates and reduced economic and financial stability. We will continue to work with the Congress to provide the information it needs to oversee our activities effectively, yet in a way that does not compromise monetary policy independence.

  • Can the Nasdaq Make it 10 in a Row?
    , July 21st, 2009 at 10:00 am

    The Nasdaq has risen for the last nine straight sessions. So far today, it’s down slightly.
    We’re nowhere close to a record. In August 1979, the Naz rose for an amazing 19 straight sessions!

  • The Black Turkey
    , July 20th, 2009 at 7:48 pm

    Check out Scott Locklin’s brutal takedown of our favorite blowhard, Nassim Taleb. The only part I disagree with it where Locklin calls Taleb a “good writer.” Here’s a sample:

    Mountebanks like Taleb sell their wares by making the regular jamoke reading his books and essays feel fiendishly intelligent for understanding the concept of fat tails at the expense of all those pointy headed Ph.D.’s in the back room with their slide rules and white laboratory jackets. I think there would be a lot of social equity in doing this, except, the dudes in the white laboratory jackets are well aware of those fat tails. As such, Taleb is merely setting himself up as some sort of heretical alpha monkey of the quants for stating the obvious, the misleading, and occasionally the gratuitously wrong-headed and untrue.

    Very true. The exact same could be said for Matt Taibbi.

  • The Mighty Potato
    , July 20th, 2009 at 11:06 am

    Paul Kedrosky points to a fascinating academic study:

    We have estimated the effect of the introduction of the potato on Old World population growth and urbanization. The nutritional and caloric superiority of the potato, and its diffusion from the New World to the Old, allows us to estimate causal effects using a difference-in-differences estimation strategy. According to our most conservative estimates, the introduction of the potato explains 22% of the observed post-1700 increase in population growth. These results show that food and nutrition matter. By increasing the nutritional carrying capacity of land they can have large effects on population.
    To the extent that urbanization serves as a measure of the shift from rural agriculture to urban manufacturing, our estimates also provide historic evidence of the importance of agricultural productivity for economic development. According to our estimates, the introduction of the potato explains 47% of the post-1700 increase in the average urbanization rate. Our estimates suggest that increased agricultural productivity can play a significant part in promoting the rise of urban centers, industry, and economic development. [Emphasis mine]

  • Barron’s on Bed, Bath & Beyond
    , July 20th, 2009 at 10:51 am

    First Time took a look at Bed, Bath & Beyond (BBBY), now Barron’s comes out with a very favorable article on BBBY.

    Shares of home-furnishings giant Bed Bath & Beyond have climbed 11% in the past year, outpacing those of retailers Target , Wal-Mart and JCPenney , each of which is down at least 10%.
    Still, investors would be foolish to bail out of Bed Bath now. The stock, which last week was at 31 and change, could climb nearly 25% in the next year, according to some savvy investors.
    That is because even in this lousy economy, Bed Bath (ticker: BBBY) is boosting its store base and earnings. Meanwhile, some competitors have gone belly-up, most notably Linens ‘N Things, which began liquidating its 500-plus stores late last year. A shake-out of the competitive landscape bodes well for Bed Bath longer-term, as it picks up market share.
    “This is a high-quality company with lots of financial flexibility,” says David Fording, co-manager of the William Blair Growth Fund (WBGSX), which has held the stock since late last year, when it was around 25. He figures the shares are worth close to 40.

    The shares are inches away from a new 52-week high.

  • The Market Has Other Ideas
    , July 20th, 2009 at 10:21 am

    Check out this headline:

    Eaton cuts guidance as profit falls 91%

    Naturally, shares of Eaton (ETN) are up 8% today.

  • S&P 500 Nears Eight-Month High
    , July 20th, 2009 at 10:13 am

    The S&P 500 is currently near its highest level in 8-1/2 months. If the market were to close right now, it would be the highest close since November, although some of the intra-day levels reached back in June were slightly higher.
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  • New York Times editorial; July 17, 1969
    , July 19th, 2009 at 9:19 pm

    A correction 49 years later:

    A Correction. On Jan. 13, 1920, “Topics of the Times,” and editorial-page feature of the The New York Times, dismissed the notion that a rocket could function in vacuum and commented on the ideas of Robert H. Goddard, the rocket pioneer, as follows:
    “That Professor Goddard, with his ‘chair’ in Clark College and the countenancing of the Smithsonian Institution, does not know the relation of action to reaction, and of the need to have something better than a vacuum against which to react – to say that would be absurd. Of course he only seems to lack the knowledge ladled out daily in high schools.”
    Further investigation and experimentation have confirmed the findings of Isaac Newton in the 17th Century and it is now definitely established that a rocket can function in a vacuum as well as in an atmosphere. The Times regrets the error.

  • Dow Rallies After Escaped Chimpanzee Rings Opening Bell
    , July 19th, 2009 at 9:15 pm

  • Anyone Remember the TED Spread?
    , July 17th, 2009 at 2:10 am

    On October 10, the infamous TED Spread peaked at 464 basis points. Now it’s down below 35 basis points.
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