Author Archive

  • The Real Bubble
    , November 3rd, 2008 at 10:09 am

    Arnold Kling spots the real bubble. It’s not finance, but in macroeconomics:

    I would not be surprised to see unorthodox theories of control gain traction. Perhaps, to justify current policy trends, a theory that socialized investment is necessary for stability.
    To me. the logical thing for the economics profession to do is admit that we are nowhere near understanding what is happening. However, taking that position will not get you invited to panels.
    I think that there are two questions. First, what are the generic causes and consequences of bubbles? Second, why did the specific bubble in real estate and mortgage finance occur? The first question is harder. But I would say that 99 percent of the economics profession cannot even correctly answer the second.

  • The 28th Amendment
    , October 31st, 2008 at 10:43 pm

    How large should a representative assembly be relative to its population? My idea is that it should be the pi root of the population. I figure that since the Greeks invented democracy, it should have some connection to the ancients.

    Personally, I’d like to see this as a constitutional amendment (called the Elfenbein Amendment) that will formally determine the size of the U.S. House of Representatives, although I don’t believe it’s required. I think a simple law will do.

    I ran the idea passed John Derbyshire, and he had the best response—pi is appropriate given that the place is irrational.

    I’ve attached a spreadsheet showing what the historical root has been, and it’s often hovered around 3.14.

  • Voting During a Recession
    , October 31st, 2008 at 9:53 pm

    This will be the first time Americans will be voting for president during a recession in 48 years. The National Bureau of Economic Research hasn’t officially declared this a recession, but I’m assuming they’re mark the beginning of this current recession as starting sometime in the second quarter. If I had to guess, I’d say May or June.
    NBER has the dates of recessions going back to 1854 and this is the longest stretch without a recession election.
    Here are the previous recession elections:
    1860
    1876
    1884
    1896
    1900
    1920
    1932
    1948
    1960
    Several of those are now viewed as pretty historic elections. Notice how often there was a change of parties. It’s also pretty amazing how Harry Truman pulled it off 60 years ago.

  • The Nouriel Roubini Halloween Facemask
    , October 31st, 2008 at 12:46 pm

    Be afraid.
    Be very afraid.

  • Charlie Gasparino Gets Philosophical…I Think
    , October 30th, 2008 at 8:44 pm

  • The First Trading Day of the Month
    , October 30th, 2008 at 7:59 pm

    As we get set for the weekend, I’ll remind you the first trading day of the month has performed very well. Over the last 13 years, the S&P 500 is up 64.1%, but the combined return of the first trading day is up 68.6%. The first day of the month makes up slightly less than 5% of trading days.
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  • Slowest Eight-Year Economic Growth Rate in 50 Years
    , October 30th, 2008 at 1:03 pm

    With today’s third-quarter GDP report, the trailing 32-quarter GDP growth rate is 19.1% which is annualized at 2.2%. That’s the lowest since the quarterly records start in 1947.
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  • Headlines You Don’t See
    , October 30th, 2008 at 12:55 pm

    Market Watch Reports:

    Exxon Mobil breaks record with $14.8 billion profit

    Or another way of phrasing it:

    Exxon Mobil breaks record with $11.3 billion tax bill

  • Bear Market Rallies
    , October 29th, 2008 at 11:15 am

    Since the market broke one year ago, the Dow hasn’t been able to sustain one single bear market rally. The largest so far was an 11.2% gain from March 10 to May 2. With yesterday’s 10.9% gain, we might able to break that today.
    Bear market rallies are very typical in long down markets. The Dow lost 89% from September 1929 to July 1932, however it was anything but a straight line. There were five separate rallies of 23% or more. By “separate rally,” I mean that Dow lost everything it gained from the rally and went on to make a new lower. Think about that—each one was a false signal that the bad times were over.
    When the Nasdaq dropped 78% in the early part of this decade, there were four separate rallies of 24% or more. Three of the rallies were over 35%.
    Just a friendly warning for you.

  • WR Berkley and Fiserv’s Earnings
    , October 29th, 2008 at 8:55 am

    I have two recent earnings reports to pass along:
    WR Berkley (WRB) yesterday reported third-quarter operating earnings of 73 cents a share. That was two cents more than Wall Street was expecting. Unfortunately, it was down from the 93 cents a share it made in last year’s third quarter. This has been a difficult time for the entire insurance industry, but WRB is still going for less than eight times next year’s earnings.
    Fiserv (FISV) reported earnings after charges of 81 cents a share, which was two cents below Street estimates. Despite the miss, it’s an impressive increase over the 72 cents a share from last year’s third quarter. Fiserv’s stock is down very sharply in the past few weeks and it’s also going for just eight times earnings.