Archive for the ‘Uncategorized’ Category

So Barry Ritholtz has also noticed the rising trend of economists who embarrass their profession via “provocative” “studies” which fly in the face of real world experience.

Much of investing relates to mathematics and the application of statistics. Markets are statistical data generating machines, and that data can be sliced and diced in a myriad of ways. We always pay close attention whenever we see an interesting application — or misapplication — of quantitative data that may be instructive or applicable to investing.

So I was particularly intrigued by a study in today’s NYTime’s OP-ED page that purported to look at the impact of steroids on the performance of Baseball players, based on the Mitchell Report. They asked the question: “In a complex team sport like baseball, do the drugs make a difference sufficient to be detected in the players’ performance records?”

Their conclusion? The authors of More Juice, Less Punch found that Steroids, Human Growth Hormone and the like do not have a net benefit to major league players. Based on their review of pre- and post- steroidal usage, the overall impact on players stats was de minimus. (sic)

I remain unconvinced.

Ever since Freakonomics became a runaway economics best seller, there seems to be increasing attempts by “rogue economists” and others to discover the hidden, counter-intuitive side of everything.

Remember that by far the main reason Freakonomics was cited in the media was the “strong causality” Levitt inferred between Romanian abortion and crime rates. I’m sorry, but anybody who thinks they can infer any hidden causality between two society-wide effects 15-20 years apart is just being an idiot.

I am getting so sick of “startling” academic studies. Seriously, these people believe that steroids offer “no net benefit” to the baseball players. Intelligent, vaguely streetwise academics need to start tearing this garbage apart instead of letting some publicity hounds tarnish the profession.

Read Full Post »

The widening of the Ted spread appears to have instigated, or at least preceded once again, exponentially more chaos in the European and Asian debt markets.

In Europe, the “Latin European” economies — Spain, France, Italy and Greece (coincidentally, the losers of the current euro arrangement) have seen tiny sovereign debt spreads over German bonds widen into a gaping maw. Belgian bonds have apparently been clocked as well, because of the country’s large and powerful secessionist movement, as well as an onerous national debt.

Yields on Italian 10-year bonds rocketed to 40 basis points over comparable German Bunds today as the flight to safety gathered pace. The spread had been stable at around the mid 20s for several years until this month.

The scramble to dump riskier bonds hit all the southern European countries, as well as Ireland and Slovenia.

While the markets have not begun to discount a possible break-up of the eurozone, they are clearly pricing in an ominous rift between the Latin and Germanic halves of the monetary system.

The spreads rose to 37 basis points (bp) for Greece, 18bp for Spain, and 14bp for France. Both France and Spain enjoyed spreads as low as 4bp until May, before the global credit bubble began to burst. Italy and Greece both have national debts above 100pc of GDP – far above the 60pc limit set by the Maastricht Treaty.

Asia has seen its own stampede to quality, too.

Yields on three-month deposits in China and Korea have plummeted to near 1pc in a spectacular fall over recent days, caused by panic withdrawls from money market funds and credit derivatives.

“This is a severe warning sign,” said Hans Redeker, currency chief at BNP Paribas. “Asia ignored the credit crunch in August but now we’re seeing the poison beginning to paralyse the whole global economy,” he said.

Korean and Chinese three-month yields have fallen from 4pc to 1pc in a matter of days in a eerie replay of events on Wall Street in late August when flight from banks and the US commercial paper markets caused yields on three-month Treasuries to falls at the fastest rate ever recorded. Asian investors appear to be opting for deposit accounts with government guarantees.

Stateside, GM just announced that it has “no further obligation” to fund GMAC. Given GMAC’s shambolic accounting sheet, and even worse rumored losses, and the terrible credibility of GM–GMAC was originally walled off from GM to prevent a GM bankruptcy from destroying GMAC–I don’t see how that isn’t a bankruptcy warning. Another massive credit originator is headed for the dustbin.Regardless of what happens to GM, whoever made the call to dump 51 percent of GMAC onto Cerberus cut a brilliant deal–although GM’s survival is also in doubt, and its credit default swaps rose to 860bp after the announcement. Beyond the high-profile implosions at Citigroup, Northern Rock, and the other high-profile banks are private equity consortia which are also choking to death.

Read Full Post »

It took a lot longer yesterday, but the markets ultimately obeyed the direction of EUR-JPY.

Especially gold. (wow.)

And the dollar didn’t even weaken, except relative to the yen (and everything else weakened vs. the yen.)

Dollar sentiment has been so glum for so long that you’d expect a rally to happen, but when you game out the incoming marginal information, there’s very little reason for optimism. It seems that the prevailing attitude is, “I’ll wait for the dollar to rally before I short it.” Which means it will just continue sliding.

Especially now that The Market (i.e. somebody with a Bloomberg reporter’s number) is not happy at all over the Fed’s indications that it’s done cutting rates.

This is a disconcerting replay of what preceded the Fed’s 50-50 cut at the end of August. The Fed tried to signal that it was done cutting. The Market was unhappy. The Fed did some more signaling. More fund managers started wondering aloud to Bloomberg “if Bernanke was prime time.” Bernanke capitulated.

Now the Fed is trying to be hawkish again, probably freaked out by OPEC’s saber-rattling. And US speculators are freaking out. Again. With just a little more hand-wringing on Bloomberg’s front page, a slew of additional Fed cuts should be in the offing.

Read Full Post »

To poo is glorious

Deng Xiaoping inaugurated China’s “kai fang gai ge” (era of openness and reform) with the slogan, “To be rich is glorious.” Although he has not lived to see the day, I am sure he is smiling somewhere:

In one of the most extreme signs of China’s modern grasp of entrepreneurial possibilities, gold panners are striking deals with jewellery factories to buy the contents of their septic tanks.

The price of precious metals has soared to such record highs on the world’s markets that sifting the tanks’ contents for scrapings and offcuts has become a profitable business.

A reporter from a Chinese newspaper found a new breed of waste collectors touring the jewellery factories near Daluotang, a township near the city of Guangzhou.

They told him that small processing factories had discovered gold and silver filings in the septic tanks that had either washed off workers’ hands and faces or been ingested accidentally.

The collectors were paid to deliver the contents of septic tanks from factories and dormitory compounds. Processors would then sift, pan and finally recycle the tanks.

Contracts depended on the volume of effluent — one building sold the rights to its sewage for 140,000 yuan a year (about £9,000).

A smaller tank fetched 40,000 yuan (£2,500). …

Read Full Post »