• Buy! Buy! Buy! Wait, I Never Said Buy.
    Posted by on June 23rd, 2008 at 2:11 pm

    Oh Jim.

    (Via Felix via the tireless Don Harrold)

  • Market Failure Versus Government Failure
    Posted by on June 23rd, 2008 at 1:57 pm

    Here’s an interesting article from the Washington Post looking at the government’s ability to handle market failures.

    “How well does government do in helping the market to improve what it does?” asked Clifford Winston, an economist at the Brookings Institution and the author of the 2006 book “Market Failure Versus Government Failure.” “The research consistently finds that, in fact, government efforts to correct market failures have little effect, or actually make things worse.”
    “There is a tendency for people to say, ‘If things are safer, then I will take more risk,’ ” he added. “It does not have to involve government interventions: Drugs are developed to reduce blood pressure, so people say, ‘Okay, I can eat more, and it does not matter if I gain weight, because I can take this pill.'”

    I think people are inherently poor judges of risk.

    Previous research has shown that people drive faster in vehicles that feel safer, attempt to bike on more dangerous terrain when they wear helmets and pay less attention to infants being bathed when the children are in seats that are said to reduce the risk of drowning.
    Winston does not believe in one-size-fits-all solutions — whether interventionist approaches that liberals favor, or the hands-off strategies that conservatives prefer. Rather, he argues that solutions need to be tailored to produce measurably successful outcomes.
    He once studied the effect of installing air bags in cars at a time when automakers were offering customers the option of buying cars with and without the safety devices. Winston found that people who bought cars with air bags tended to be the safest drivers to begin with. And now, lulled into a sense of security, they tended to drive faster, effectively canceling out the safety benefits.
    The wrong lesson to draw from this is that air bags are useless. The right lesson is that air bags can improve safety when they are targeted at the riskiest drivers. As the safety devices become standard issue, for example, risky drivers are automatically protected. And as the safest drivers stop feeling they are extra safe, they may take their foot off the gas.

  • RIP: George Carlin
    Posted by on June 23rd, 2008 at 1:38 am

  • Nasdaq Composite and Long-Term Support
    Posted by on June 20th, 2008 at 11:03 am

    I’m not much of a market technician, but I’m passing along this chart because the time period is so long.
    image681.png
    In March, the Nasdaq came within 10% of hitting the long-term support line. Even though it looks close, the black line is around 2050 today, which is far below where the Nasdaq (^IXIC).

  • Doomsdays Past and Present
    Posted by on June 19th, 2008 at 4:33 pm

    RBS issues global stock and credit crash alert

    The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
    “A very nasty period is soon to be upon us – be prepared,” said Bob Janjuah, the bank’s credit strategist.
    A report by the bank’s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
    Such a slide on world bourses would amount to one of the worst bear markets over the last century.

    I love British understatement (“very nasty period”), but I think their metaphors are a bit mixed up. Chickens can’t come home to roost while the contagion spreads. Perhaps Chickenpox could spread, but certainly not roosting chickens. If the chickens were paralyzed, well…that just seems rather cruel.
    Of course, predicting crashes is a great way to get attention. It’s also not so new. Nearly 151 years ago, on June 27, 1857, the New York Herald predicted a market panic (which indeed began in August).
    The founder and publisher of the Herald, James Gordon Bennett, editorialized: “What can be the end of all this but another general collapse like that of 1837, only upon a much grander scale?”
    What did he mean by “all this”?

    Government spoilation, public defaulters, paper bubbles of all descriptions, a general scramble for Western lands and town and city sites, millions of dollars, made or borrowed, expended in fine houses and gaudy furniture; hundreds of thousands in silly rivalries of fashionable parvenus, in silks, laces, diamonds and every variety of costly frippery are only a few among the many crying evils of the day.

    Yes, we’ve always had purple prose Doomsday writers. It sells better than balanced reporting.
    By the way, 1857 is a…Fibonacci Number…dun..dun…DUNNH.

  • Krugman Misled America!!
    Posted by on June 19th, 2008 at 2:48 pm

    Five years ago, Paul Krugman wrote:

    The big rise in the stock market is definitely telling us something. Bulls think it says the economy is about to take off. But I think it’s a sign that America is still blowing bubbles — that a three-year bear market and the biggest corporate scandals in history haven’t cured investors of irrational exuberance yet.

    And.

    In short, the current surge in stocks looks like another bubble, one that will eventually burst.

    Well, there was one stock that was in a bubble.
    image680.png
    Krugman lied. Profits died.

  • Oil Prices Through the Years
    Posted by on June 18th, 2008 at 2:55 pm

    Here’s a cool chart from Forbes showing the price of oil since 1861.
    (Via: Kedrosky)

  • Oopsie!
    Posted by on June 18th, 2008 at 1:06 pm

    From Bloomberg:

    Morgan Stanley suspended a credit trader and disclosed a $120 million “negative adjustment” related to erroneous valuations of his positions, Chief Financial Officer Colm Kelleher said.
    The New York-based firm is cooperating with authorities in London after discovering the error in May, Kelleher said in an interview today. He declined to identify the trader. Joseph Eyre, a London-based spokesman for Britain’s Financial Services Authority, declined to comment.
    Morgan Stanley, the second-biggest U.S. securities firm by market value, joins at least three competitors in identifying incorrect pricing this year. Credit Suisse Group, Switzerland’s second-largest bank, announced $2.65 billion of writedowns on asset-backed securities in March after an internal review found intentional “mismarkings” by a group of traders.

    Ever notice how these mistakes, I mean, negative adjustments always negative. If they’re always mistakes, shouldn’t some be positive?

  • Was the Idea for Facebook Stolen?
    Posted by on June 18th, 2008 at 12:45 pm

    In Rolling Stone, Claire Hoffman takes a 6,300-word look at “The Battle For Facebook:”

    In a lawsuit one judge describes as a “blood feud,” three fellow Harvard students claim Zuckerberg fleeced their idea after they hired him to code a social-networking site they were creating. “We got royally screwed,” Divya Narendra, one of the students, has testified. And in April, another classmate, Aaron Greenspan, filed a petition to cancel Facebook’s trademark, claiming he invented an online facebook months before Zuckerberg. Greenspan, who has compiled reams of e-mails chronicling his months of communication with Zuckerberg, bristles at equating the Facebook prodigy with Microsoft’s founder. “Gates was shrewd, calculating and insanely competitive, bordering on autistic,” Greenspan writes in his self-published autobiography. “Mark was inarticulate and naive.”
    The legal challenges to Zuckerberg’s empire paint a curious picture of the man who has put himself in charge of our social future. One of the world’s most popular networking tool was launched by a brilliant but ostracized nerd sitting alone in a dorm room. From his days at Phillips Exeter Academy, where he was known as the prep school’s top programming impresario, Zuckerberg has drawn on a powerful combination of isolation and entitlement to surpass his peers. He is a Nietzschean superdork for the digital age — a college student who gamed the system, propelled by a primal understanding of how to program computers to serve human needs. Whatever the outcome of the legal wrangling, the battle over the origins of Facebook prompts a fundamental question: Is Mark Zuckerberg’s social-networking empire, like so many other great fortunes in history, founded on a crime?

  • RBS Predicts Gloom Followed By Doom
    Posted by on June 18th, 2008 at 10:10 am

    From the Telegraph:

    The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
    “A very nasty period is soon to be upon us – be prepared,” said Bob Janjuah, the bank’s credit strategist.
    A report by the bank’s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
    Such a slide on world bourses would amount to one of the worst bear markets over the last century.