• Ella Fitzgerald – Summertime
    Posted by on October 8th, 2010 at 9:02 pm

  • Taleb Says Investors Should Sue Nobel for Crisis
    Posted by on October 8th, 2010 at 2:45 pm

    I’ve long argued that Nassim Nicholas Taleb is a crackpot and that his books are subliterate garbage. I’ve felt like I’ve been in a tiny minority, but slowly, it seems like others are finally catching on.

    Nassim Nicholas Taleb, author of “The Black Swan,” said investors who lost money in the financial crisis should sue the Swedish Central Bank for awarding the Nobel Prize to economists whose theories he said brought down the global economy.

    “I want to make the Nobel accountable,” Taleb said today in an interview in London. “Citizens should sue if they lost their job or business owing to the breakdown in the financial system.”

    Taleb said that the Nobel Prize for Economics has conferred legitimacy on risk models that caused investors’ losses and taxpayer-funded bailouts. Sweden’s central bank will announce the winner of this year’s award on Oct. 11.

    Taleb singled out the Nobel award to Harry Markowitz, Merton Miller and William Sharpe in 1990 for their work on portfolio theory and asset-pricing models.

    “People are using Sharpe theory that vastly underestimates the risks they’re taking and overexposes them to equities,” Taleb said. “I’m not blaming them for coming up with the idea, but I’m blaming the Nobel for giving them legitimacy. No one would have taken Markowitz seriously without the Nobel stamp.”

    Sharpe, a professor of finance, emeritus, at the Graduate School of Business at Stanford University, and Markowitz, a professor of finance at the Rady School of Management at the University of California, San Diego, didn’t return phone calls seeking comment. Miller, who was a professor at the University of Chicago, died in 2000 at the age of 77.

    In his 2007 bestseller “The Black Swan: The Impact of the Highly Improbable,” Taleb described how unforeseen events can roil markets. He warned that bankers were relying too much on probability models and disregarding the potential for unexpected catastrophes.

    ‘I Will’

    “If no one else sues them, I will,” said Taleb, who declined to say where or on what basis a lawsuit could be brought. (Well done Bloomberg, well done – Eddy)

    The Nobel prizes in physics, chemistry, medicine, peace and literature were established in the will of Alfred Nobel, the Swedish inventor of dynamite who died in 1896. The first awards were handed out 1901. The Swedish Central Bank founded the economics award in 1968 in memory of Nobel. Previous winners of that prize include Milton Friedman, Amartya Sen, Paul Krugman, Robert Merton and Myron Scholes.

    A former derivatives trader, Taleb is a professor of risk engineering at New York University and advises Universa Investments LP, a Santa Monica, California-based fund that bets on extreme market moves.

    What a peerless buffoon he is.

  • Dow Breaks 11,000
    Posted by on October 8th, 2010 at 12:16 pm

    This headline also could have worked on May 3, 1999. At the time, gold was at $285.

  • 95,000 Jobs Go Bye-Bye Last Month
    Posted by on October 8th, 2010 at 10:16 am

    The economy lost 95,000 jobs last month. Unemployment held steady at 9.6%. The real jobless rate, however, jumped to 17.1%.

    The steep drop was far worse than economists had been predicting. Most estimates expected a loss of only a few thousand jobs.

    “September’s U.S. payroll report adds to the evidence that the recovery is losing what little forward momentum it had,” said Paul Ashworth, senior United States economist at Capital Economics.

    While total government jobs fell by 159,000, private sector companies added 64,000 jobs last month. The unemployment rate, which measures the percentage of workers who are actively looking for but unable to find jobs, stayed flat at 9.6 percent.

    A broader measure of unemployment, which includes people who are working part-time because they cannot find full-time jobs and people who have given up looking for work, rose to 17.1 percent from 16.7 percent in August.

    Of the loss in government jobs, 77,000 were temporary Census Bureau employees while 76,000 worked for local governments. State governments lost 7,000 jobs, as well.

    Splitting out the decimals, the unemployment rate dropped from from 9.642% to 9.579%.

  • Morning News: October 8, 2010
    Posted by on October 8th, 2010 at 7:47 am

    Prepper Mania: Retail Behemoth Costco Offers Survival Food Packages

    Universal Travel Group: The Auditor Resigns Edition

    Told Ya So: The Currency Volume Bubble in Full Bloom

    How Speed Traders Are Changing Wall Street

    Gold Hits Our $1350 Target; Now What?

    Summary of Third Quarter EPS for S&P 500 Stocks by Sectors

    Wall Street Futures Mixed Ahead of Jobs Report

    UAE Says BlackBerry Dispute Resolved Before Deadline

    Technology Replaces Banks as Better Dividend Bet for Investors

    Japan’s Cabinet OKs $61 Billion Economic Stimulus

    U.S. Companies Buy Back Stock in Droves as they Hold Record Levels of Cash

    CHiPs Star Charged by SEC for Kickback Scheme

  • In Tarpum Memoriam
    Posted by on October 8th, 2010 at 12:07 am

    Now that the spigot phase of TARP has come to an end, Felix Salmon has some wise words. Personally, I have conflicting feelings about TARP. It was an awful thing to do and I hate, hate, hate how it was done, but ultimately…yes…it was necessary and the right thing to do.

    Felix writes:

    TARP might have arrested the global panic for long enough that Bernanke’s policies had time to start working, but that’s about it.

    That’s about it? I think that was TARP’s most important accomplishment—it gave us time. The ballgame changed once people knew there was some sort of backstop even if it was a dysfunctional one.

    Let’s take a step back and remember that it wasn’t until 30 years after the Great Depression that Milton Friedman untangled what really happened. Policy makers have to move a lot faster than that. To paraphrase Donald Rumsfeld, you save the banking system with the policy makers you have.

    The key yardstick to measure the effectiveness of the TARP program is, in my opinion, the TED spread—and make no mistake, that improved dramatically. Yes, I fully understand that the improved TED spread may have simply correlated with TARP and not have been caused by it. I get that.

    The problem is that we don’t have a petri dish to run the economy through 5,000 different scenarios. Perhaps at some point in the distant future, some young economist will put all the pieces together and conclude that TARP was a terrible mistake. Until that happens, I see TARP as being 1 for 1.

    I’m surprised at much of the outrage that people have about TARP. Not that it isn’t outrageous, but what the hell did they expect? When the market crashes, why do we expect policy makers to behave more reasonably? Of course they’re going to be craven and inefficient! That’s why they’re policy makers.

    Felix blames TARP for “generating a broad-based mistrust of institutions: the government and the financial-services industry certainly, and the judicial system possibly as well.” Well…in my book, that’s a good thing.

    The most recent estimate is that TARP will cost the taxpayers $29 billion. Let’s remember that last year, Goldman Sachs (GS) paid taxes of $6.4 billon, plus they kicked in another $2.5 billion so far this year. Should that be included in TARP costs? I don’t know; maybe, maybe not. But I do know that Goldman and many other banks are still in business, employing people and paying taxes. Without TARP, it’s quite possible they wouldn’t be.

    In the end, I hope we never, ever have to do another TARP. But I’m pretty sure that my hopes won’t be the deciding factor.

  • When Is the Best Time of Day to Buy Stocks?
    Posted by on October 7th, 2010 at 4:43 pm

    Here’s a quick quiz for all investors: What’s the best time of day to buy stocks?

    Ha! It’s a trick question, the best time isn’t during the day. Believe it or not, the stock market, in aggregate, has done horribly during the trading day over the past 18 years.

    This is one of the most stunning statistics about investing: the market’s entire gain—and then some—has come when the exchange is closed (the difference from the closing bell and the next day’s opening bell).

    Obviously the transaction costs of buying and selling each day would eat your shorts, but the moral of the story is clear.

    The great MarketSci blog has the deets and this chart:

  • Coolest Stock Chart You’ll See All Day
    Posted by on October 7th, 2010 at 2:21 pm

    Over the last 30 years, Eaton Vance (EV) has beaten the S&P 500 so badly that the latter looks like a flat line in comparison.

    Thirty years ago, you could have bought one share of EV for four cents. That’s adjusted for a 128-for-1 split. Before the financial crisis hit, the stock got as high as $50 per share. Today it’s around $30.

  • More on the Gold Model
    Posted by on October 7th, 2010 at 12:20 pm

    I want to thank everyone who has responded to my post yesterday on gold. One of the things I heard most often was a desire to see a longer-term chart. Fortunately, Jake at EconomPicData has taken the model and made a very long-term chart.

  • The Onion: Something About Tax Cuts Or Earnings Or Money Or Something In Recent Economic News
    Posted by on October 7th, 2010 at 11:59 am

    The Onion has the story:

    WASHINGTON—Some sort of tax cut or earnings or money or something was reported in economic news this week in further evidence that a lot of financial- related things have been going on lately.

    According to numerous articles and economics segments from major media outlets, experts on banks and such have become increasingly concerned over a new extension or rates or a proposal or compromise that could signal fewer investments, and dollars, and so on.

    The experts confirmed that the stimulus has played a role.

    “This is a clear sign of a changing cycle,” some top guy at one of the big banks in New York said of purchasing power parity or possibly rate of return during a recent interview on CNN. “Which isn’t to say that a sustained drop in wages couldn’t still occur, even if the interest paid on reserves is lowered.”

    “In short, it’s possible but not probable that growth could outpace our initial expectations,” added the banking guy, who went on to say other money things, too. “It depends on investor sentiment.”

    The man, who also apparently mentioned the Nasdaq, the Dow, and the Japan one at some point or another, talked for a really long time about credit or reductions or possibly all these figures, which somehow relate to China.

    Greece was also involved.

    An analyst from Citigroup or Citibank announced on Monday that the Federal Reserve System is doing too much, while the Fed has failed to accomplish its goals to increase inflation or interest, which are different things. In addition, he was critical of the Fed’s efforts to regulate the Bernanke.

    “There might be a light at the end of the tunnel, but right now the markets are still struggling,” the man who was wearing a blue suit and red tie said about some special money tunnel. “At this point, though, it’s too early to say.”

    The head Treasury person, whose name sounds like Guyver or Meisner, appeared on every major network this week, either to assure Americans that everything was better or was going to get better or was never going to get better. Some other guy argued that it has never been that good. During interviews, the Treasury guy was observed on several occasions smiling or wincing.

    According to a recent issue of The Wall Street Journal, there are currently a bunch of columns filled with a wide variety of numbers, letters, and symbols.

    Geithner—that is the Treasury guy’s name.

    Another expert, Lawrence Kudlow, who hosts the CNBC program The Kudlow Report, was upbeat over the amount of points available in the industrial average or pleased with where the percentages were at.

    “It’s simple, actually, because the current dividend yield is equivalent to the most recent full-year dividend divided by the current share price,” Kudlow said really quickly. “And that’s basically the situation we’re in now, for better or worse.”

    Paul Krugman, New York Times columnist and 2008 winner of the Nobel Prize for something in one of those economics categories, acknowledged in an editorial this week that the SEC must work closely with the stock market, Wall Street, and the New York Stock Exchange to maintain the bulls, bears, and opening bells. Krugman also said something could spur lending or trading or budgetary measures.

    Although it has not been totally determined whether Krugman agrees with leading experts on assets or retail sales data or other fiscal things, reliable sources have confirmed that he has a beard.

    Time or Newsweek recently published a cover story on the recession or the government debt or incomes or GDP or something similar to that, but kind of focused on how it’s the fault of the rich, the middle class, and the poor.

    In addition, mutual funds, probably.