Must-Reads From This Past Week

22 Jan

Below is a list of mostly longer works that I’ve been collecting throughout the past week, but haven’t had the time to read in their entirety, although I have read enough that its profoundly clear I have to finish, and I suggest you all do the same.

The Economist Special Report on Global readers: The Rise & Rise of the Cognitive Elite provides a pretty well-balanced discussion of the drivers behind observed income inequality and also points out that correlations observed between income inequality and other factors often cited by (liberal) economists/media aren’t as strong or definitive as claimed.

Hedge Fund manager David Einhorn’s last letter from Market Folly.  As always, worth the read.

Goldman Sachs’ doesn’t seem to think unemployment benefits contribute much – if at all – to continued high unemployment, from HuffPo. I think their analysis lacks intellectual/academic rigor which results in an incomplete (at best) conclusion,  What do you think?

Sometimes I wish Simon Johnson would shut up, but other times, I’m glad he doesn’t.  This is one of those times I’m glad he’s still out there talking (er writing, as it were). As “the poor” increasingly account for less and less of GDP/spending/etc, it’s getting increasingly hard to make a well-reasoned argument that they were materially to blame for the crisis.

NYU’s Damodaran on herding behavior in hedgistan.  As HF’s increasingly dominate global trading this is worth reading for anyone who even dips a toe into markets.

New York State’s FAQ on how the property tax works. For non-muni pro’s this may help explain some of the issues going on in muni-land (for GO bonds, at least).  I think it’s curious NY State says properties “should be assessed at market value under normal conditions,” unfortunately, I’m not so sure municipalities consider these normal times, and are thus taxing homes at inflated assessed values relative to market…

Yea, grossly oversimplified binary mortgage grading is the answer. Not.  This is honestly one of the dumbest solutions to mortgage underwriting standards I’ve read in quite some time, just an example of the kind of moronthink that seems disturbingly prevalent in the residential real estate/mortgage industry.

The SEC did something good, yay progress!? BNY Mellon & trader get serious punishment for screwing customers on NBBO, etc.

Felix Salmon on algorithmic trading and market structure tail risks.

Harvard Business Review: “Why Do Smart People Do Such Dumb Things.”  Not sure this provides the definitive answer(s) but its certain a question worth tackling.

Argh! Too soon to call it a turn-around, the SEC is still an unmitigated disaster! Un-posted reports from SEC Inspector General show all sorts of misconduct. Sigh…

Center on Budget & Policy Priorities: Misunderstandings Regarding State Debt, Pensions, and Retiree Health Costs Create Unnecessary Alarm; Misconceptions Also Divert Attention from Needed Structural Reforms.

The Economist: Bargaining for Unemployment: Union Power & the Jobless Recovery. This really says it all right here (excerpt, emphasis mine): “Of course, union enthusiasts don’t want the bad stuff restored. They just want workers’ bargaining power restored…The argument advocates for restored union power need to make, then, is that under current conditions increased union bargaining power would have no deleterious effects (would maybe even have positive effects) on the ability of employers and consumers to thrive, or that the cost to productivity and growth, and the cost to consumers from cutting into their current share of the gains from trade, are more than offset by the benefits of reduced volatility in employment and a more equitable distribution of income and wealth. I take it that the scholarly evidence in this regard is, shall we say, mixed.

 

I think Mebane Faber is pretty sharp, and this hedge fund analyst checklist is at the very least a great starting point for any investor.

I’ve been hawking this for years (not that I’m the only nor the first one of course!) but its about damn time we weened ourselves off of relying on Ratings Agencies and removed them from investment screening and from our laws and regulations.  This is a good discussion from Donald R van Deventer of Kamkura on how to craft a Ratings-Neutral Investment Policy.  Donald’s recommendation is simple, straightforward, and relatively risk-averse.  Compare to CalPERS Investment & Risk Management policies, which are unnecessarily complex and almost entirely reliant on ratings.

The Atlantic: “The Rise of the New Global Elite.”  Not sure I agree with everything here but worth the read regardless.

The Atlantic: “What Really Happened to 15 Million Jobs?”  Some solid points made (especially on page 3 in my opinion) about where these “lost” jobs have gone and why.  Anyone who wants to talk about inequality, job “creation” etc should read this article.

Retail Info Systems News on Top 10 Retail Industry Predictions for 2011 from AlixPartners.  I think like most lists for the new year this one still has an optimistic if not downright unrealistic bend but anyone who covers or trades retail/apparel should read this anyway.

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4 Responses to “Must-Reads From This Past Week”

  1. LCR January 22, 2011 at 1:07 pm #

    some good stuff here – you manage to read an incredible amount of content…

    re that HBR article, my take is that when one’s risk-adjusted expected return can be perceived to be great enough (whether this analysis is done consciously or otherwise), then a smart person can do dumb things. That is, typically the system within which one functions creates such pockets of stupidity.

    • The Analyst January 22, 2011 at 1:31 pm #

      Thanks! I spend more time reading/writing/number crunching these days than I did sometimes in my last job, actually.

      I think you’ve made a good point; managers (corporate, investment, whatever it matters not) have a serial propensity to under-estimate risk and over-estimate their skill/ability to deliver positive outcomes/returns.

      Perhaps HBS should teach a class in the value of humility…

Trackbacks/Pingbacks

  1. Tweets that mention Must-Reads From This Past Week « Stone Street Advisors -- Topsy.com - January 22, 2011

    […] This post was mentioned on Twitter by Ultimate Financier, The Anal_yst. The Anal_yst said: Must-Reads From This Past Week: http://wp.me/pOYGU-fH […]

  2. 1/24/2011 Bond Buybacks & Auctions « Stone Street Advisors - January 24, 2011

    […] case you missed it, The_Anal_yst has put together a fairly comprehensive list of readings from this past weekend. Also, I highly recommend GeorgetownJack’s interesting observations regarding the recovery in […]

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