Archive for April, 2010

  • Thought for the Day
    , April 5th, 2010 at 11:06 am

    From Arnold Kling:

    My take on the mortgage finance boom/bust, TARP, the stimulus, health care reform, and the global warming crusade is that they represent a series of ruling-class mistakes. From my perspective, these mistakes are in the tradition of such ruling-class mistakes as World War I and Vietnam.
    I attach paramount importance to resisting the ruling class at this time. I view ethnic and cultural controversies as devices used by the ruling class to keep the resistance divided. The ruling class wants you to think that if you don’t support their entrenched power, the country will be over-run by a bunch of anti-intellectual racists and homophobes. I call baloney sandwich on that one.

    If there were a stock or ETF tied to the public policy of “libertarianism for the rich/paternalism for the poor,” I’d rate it a very strong long-term buy.

  • Freakonomist Keeps Close Eye On GE Stock Versus Height Of Mexican Weightlifters
    , April 5th, 2010 at 10:53 am

    The Onion:

    CHICAGO—A University of Chicago freakonomics professor told General Electric investors Monday to keep a close eye on recent fluctuations in the heights of competitive powerlifters from Mexico. “Usually we can count on a stable average of 5 feet 8 inches, but last month’s quarter-inch drop in height among Mexican dead-lift competitors in the middle-heavyweight division could spell disaster for GE’s aviation and software subsidiaries,” freakonomist James Duncan said. “But, like anything else, a shrewd investor must always ask himself one thing: How many hot dogs did I eat last year?” Duncan previously gained recognition for tracking first-time home ownership and teenage mothers’ gum purchases against the Times Tom Jones Is Played Per Day Index.

  • The Buy List Is Now Up Over 10% YTD
    , April 5th, 2010 at 10:23 am

    The day is still young, but the CWS Buy List officially crossed the 10% line for the year. This is why I don’t try to time the market. I never would have said that we’d make 10% in a little over one quarter. Joey Banks (JOSB) is at another new high.

  • Vanity Fair’s Awful Interview With Erin Burnett
    , April 5th, 2010 at 9:52 am

    Vanity Fair just published an awful interview with CNBC’s Erin Burnett. I’m not exaggerating when I say that the interview is most about the interviewer. The interview is apparently about Mr. Eric Spitznagel’s momentous event of interviewing Burnett, and she’s somehow in the way.
    Here’s one example:

    If you watch enough cable news, it starts to seem like if AIG or Citibank goes under, we’re all going to be like Charlton Heston in Planet of the Apes, staring up in disbelief at the disembodied head of the Statue of Liberty and screaming “You blew it up! Damn you! Damn you all to heeeeeelll!” If we don’t save those companies from bankruptcy, are we headed towards an ape-run dystopia?
    (Long pause.) I don’t know. I would say no, but banks and availability of credit are the most basic and important things for an economy. What if the banks had failed? Nobody keeps cash anymore. We think society moves forward, generation after generation, ahead and ahead and ahead. We don’t realize maybe how reliant we are on things that are far from hunting and gathering.

    I counted the words. Erin won but the margin was less than 2-to-1.
    (One more thing — it wasn’t the disembodied head, but you can clearly see much of the torso.)

  • March ISM = 59.6, Best Since 2004
    , April 1st, 2010 at 10:02 am

    More good news for the economy. The Institute for Supply Management released its index this morning and the reading was 59.6. This was better than economists’ expectations. It’s also the best number in close to six years. Last month’s ISM was 56.5.
    As I explained recently, the ISM is one of the best indicators of how well the economy is doing. Anytime the ISM is 44 or less, it’s almost certain that we’re in a recession.
    Now the problem is jobs and that report comes out tomorrow. Goldman just lowered its NFP estimates from 275,000 to 200,000. I’ll be happy with any positive number.

  • Exactly What Is the Spot Price of Gold?
    , April 1st, 2010 at 9:09 am

    Jesse’s Cafe American has a good post on how the gold market works:

    When you ask even a relatively experienced and sophisticated precious metals trader “what is the spot price of gold or silver?’ you will generally hear a pause, and then they will come back with a price after checking their computer screen for the latest spot price from some ubiquitous and reliable provider of such quotes, or one of the lesser known, diverse providers of this information.
    But when you say, “No what I was asking is ‘what is the spot price, where does it come from, who sets it?'” you will most often hear that this is the last physical trade, or the current market price of physical bullion.
    Well, is it?
    Actually despite what you might think or what you might have heard, it is not.
    The reason for this is that there is no centralized and efficient market for the sale of physical bullion in the US at anything resembling a ‘spot price.’ What is their number, where are their prices and trades posted? Who is buying and selling what, TODAY, with the real delivery of bullion as the primary objective?

    Read the whole thing.

  • What the Steep Yield Curve Means
    , April 1st, 2010 at 7:38 am

    Paul Krugman has a confusing post on the steep yield curve, at least it’s confusing to me. My rule is if I can’t follow what a Nobel laureate’s saying, then it’s a pretty good bet that it’s my fault.
    Still, as I read Krugman he says that when he earlier discussed the yield curve, people thought it was “proof that the economy would recover soon,” but now people think it’s over “fears of default.” Yet Krugman writes that the reason for the steep curve “has nothing to do with either explanation.” But he essentially says that it’s the first reason—hopes for a recovery.
    That’s only mildly confusing but where I really lose Krugman is when he seems to imply that the steep yield curve is the result of nominal short rates being near zero. I have no problem accepting that the curve should be positive but I don’t get how that ought to impact its unusual steepness. After all, the two-ten spread recently hit an all-time record.
    I agree with Krugman’s view that we’ve become too inflation-phobic. When you have 15 million people out of work, it’s best to err on the side of higher inflation. I also agree that long-term inflation expectations are nothing to worry about. The ten-year TIPs spread is still mild. But I do believe the very steep yield curve is a result of higher inflation expectations. The hitch is that those expectations don’t say that inflation will go from a normal level to a danger level; they say that inflation will go from a dangerously low level to a normal level. The steep curve doesn’t merely reflect the future—half the variables are the present and the present ain’t normal.
    The other issue I wanted to mention is that we shouldn’t focus on the 10-year TIPs spread. We should look at the TIPs curve leading up to ten years. It’s the expected forward inflation rate that I like to follow. Yet even when we do, I’m still in Krugman’s camp—inflation isn’t an important concern right now. (BTW, Krugman was very worried about inflation seven years ago.)