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Recommended reading, economic debates, predictions and opinions.
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broke
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Post by broke »

Watching the market can be hazardous to your health.
The sharemarket plunged nearly 100 points this afternoon after an error in a sell order effectively wiped QBE Insurance off the ASX-200 index.

A trader error in a sell order reportedly sold 500,000 QBE shares at 1/10th of a cent. Stock in QBE, which opened at $23.09, plummeted to near worthless for eight minutes on the exchange.

"Clearly this was an accident," said Australian Securities Exchange spokesman Matthew Gibbs.

The exchange's dispute committee met quickly after the plunge, he said, and cancelled all orders for QBE stock that priced it $22.20 and under.

"Because the price error was so drastic, it effectively removed the stock from the index," he said.

QBE Insurance had no comment on the market event.
:shock:
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Post by Taggart »

The Economist

Aug 3rd 2008

The long and short of it

TEN years ago, GMO, an American fund-management group, was losing clients. GMO was sceptical about the dotcom boom and thought that equities offered poor value. Its performance lagged that of other groups who appeared to be more in tune with the “new paradigm” of the late 1990s.

At the time, GMO forecasted likely future levels of returns from ten separate asset classes. Emerging-market equities came first, followed by American real-estate investment trusts, emerging-country debt, international smallcaps, index-linked Treasury bonds, American government bonds, EAFE (Europe, Australia and far east) equities, Treasury bills, overseas bonds and the S&P 500 index (American equities).

Remarkably, ten years later that prediction was proved almost entirely correct,.....
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Post by parvus »

Thanks Taggart.

Here's the graphic forecast:
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Post by broke »

Leaky toilet exposes corrupt China official
former Chinese government official has been sentenced to death after a leaky toilet led police to a stash of cash he'd collected in bribes, state media reported.
The Chinese do some things right.
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Post by parvus »

On Cramer's "Rant that Shook the World."
He was angered by the way “my people” – friends in Wall Street – were hurting, that the Fed had “no idea” how bad things were, and that Ben Bernanke was “behaving like an academic”. Moral hazard, in other words, should be put aside as the crisis was so severe.

In particular, he branded William Poole, then the head of the St Louis Fed, as “shameful”. Poole had gone public with comments that “punishment” had been “meted out to those who have done misdeeds and made bad judgments”.

The US authorities seem to have come down on the side of swallowing their concerns about moral hazard. There has been a repeating pattern of a crisis every few months, usually focusing on trouble at a single institution. Every time equity volatility, as measured by the CBOE’s Vix index, has topped 30, there has been a response from the authorities, either rate cuts, or the Bear Stearns fire sale (which inflicted pain on shareholders), or emergency loans for the mortgage agencies Fannie Mae and Freddie Mac.

Finally, Cramer wanted to pin the blame on Alan Greenspan, who had left the Federal Reserve with an impeccable reputation early in 2006. He pointed out, correctly, that Greenspan had encouraged borrowers to take out mortgages at low “teaser” rates and then proceeded to raise rates.

Those comments have become the new orthodoxy. The easy money with which the Greenspan Fed responded to the bursting of the tech bubble at the beginning of this decade is now deemed a mistake.

Finally, it is fascinating to see what prompted the rant. Wall Street was having a bad afternoon and that was because Bear Stearns executives, on a conference call, had said conditions in bond markets were the worst in 22 years.

“Keep your mouth shut during a period like this because you’re going to say something that people don’t like,” advised Cramer.

No wonder Bear Stearns found itself without friends when its crisis of confidence came seven months later.

Finally, he revealed at the end that he had been planning to suggest that viewers might invest in Washington Mutual, a big mortgage bank, to take advantage of the high yield, but “I’m just too old”.

It was just as well that he did this as WaMu turned out to be a “value trap”. If it looked cheap a year ago, it is cheaper now. Its shares have fallen 85 per cent in the interim.

This was the first crisis to afflict the YouTube generation. The “Rant That Shook The World” as CNBC called it, will be an important item in financial history years from now.
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Post by WishingWealth »

"Finally, Cramer wanted to pin the blame on Alan Greenspan, who had left the Federal Reserve with an impeccable reputation early in 2006. He pointed out, correctly, that Greenspan had encouraged borrowers to take out mortgages at low “teaser” rates and then proceeded to raise rates.
"


Good lawyerly advise; look for the one with deep pockets (in this case the Fed) and put some pressure on it.

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Post by lilbit »

The Potemkin village that the US financial and equity markets have become, is still standing in front of us...creaking, groaning, and swaying to and fro. The whole structure might be worth ten cents on the dollar...and I'm being generous.

Ed Steer, Casey Research
Good judgement comes from experience, which comes from bad judgement.
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Post by Taggart »

Harvard fund makes 7-9 pct gain on investments-WSJ

Thu Aug 7, 2008

Aug 7 (Reuters) - Harvard University's endowment fund has made a gain of 7 percent to 9 percent for the fiscal year ended June, boosted by investments in commodities, Treasuries and some strong hedge-fund performers, the Wall Street Journal said on Thursday, citing people familiar with the returns.

The returns were below the endowment's average annual return rate of 15 percent over the previous decade but in a year when the subprime crisis and plunging stock markets caused many institutional investors to post their worst performance in six years those returns still put it at the top of its class, the Journal said.
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Post by WishingWealth »

A review of: The Drunkard's Walk: How Randomness Rules Our Lives.

At guardian.co.uk: http://www.guardian.co.uk/books/2008/ju ... ianreview4

And the 41 minutes Youtube.


Note: There's a thread in Soap for funny videos but no thread for not so funny videos. :lol:

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Post by pitz »

For passive investors that like Carrie Underwood:



:)
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Post by Taggart »

How to make the most of a 'cowardly lion' market

By BRIAN MILNER
Saturday, August 16, 2008
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Post by Taggart »

Financial Times (UK)

Safest form of diversification is to avoid the herd

By Tony Jackson

Published: August 24 2008

Welcome to the Great Falling. Wherever you look these days, assets are tumbling – stocks and bonds, emerging markets, oil and gold, real estate, private equity, hedge funds, infrastructure funds. Whatever happened to diversification?

The question strikes at the heart of modern investment theory. As laid down by the Nobel economist Harry Markowitz, this says diversifying a portfolio reduces risk. So why are thoroughly modern diversified portfolios taking a battering?
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Post by Taggart »

The Wall Street Journal

It's One Thing Or the Other

By BURTON G. MALKIEL
August 27, 2008

'Successful investors have a unique ability to process an enormous amount of information and boil it down to binaries that simplify decision making." So writes Clark Winter, the director of portfolio strategy at Goldman Sachs, in "The Either/Or Investor." Mr. Winter believes that framing investment decisions as simple binaries, or dichotomies, can help investors to evaluate financial markets and to concentrate on the key facts that should inform their decisions.
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Post by parvus »

I'm not sure the book was worth bothering to review for Malkiel. :?
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Post by Taggart »

Two extremes.

Kindergarten in a developed country (Canada).

HP Canada and Lester B. Pearson School Board to Offer New Mobile Technology to Kindergarten Classes for four-year-olds

MONTREAL, Aug. 28 /CNW/ - Hewlett-Packard (Canada) Co. and Lester B.
Pearson School Board (LBPSB) today announced an agreement that will have
100 four-year-old students learning on HP Mini-Note PCs in the classroom.

------------------------------------------------

Kindergarten in a developing country (Myanmar).

Refugee gives away money given to him

From Prince Albert to Lung Kai, Min Min is paying it forward.

The 26-year-old Burmese refugee who was beaten and robbed on the riverbank last month refused to take any of the money provided to him by sympathetic Prince Albert residents. Finally, after much discussion, he accepted $130 to replace the same amount of grocery money that was taken from him and a bicycle to replace the one that was stolen.

The rest of it - about $1,200 - will soon be Myanmar-bound, used to build a kindergarten in Min Min's hometown of Lung Kai.

There's no electricity in the village and cooking is still done over an open fire. They do have a school for Grades 1 to 6. Min Min eventually wants to provide the young people of his village with several wind-up laptop computers and a library, Heppner said.

But first, he wants to build a kindergarten. With $1,200, they can easily construct a bamboo-walled, leaf-roofed building that can accommodate 50 students, Heppner said.

"There are many things they don't have in that village," Heppner said. "So (Min Min) is hoping to provide some opportunities for the children there that he didn't have when he was in the village. "
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Post by Taggart »

The Financial Times (UK)

The Big Picture: Are equities a shelter in inflationary times?

By Steve Johnson

Published: August 31 2008

Inflation can wreak havoc on an investment portfolio, but the ability of equities to withstand the worst effects of rampant price rises has long been noted.
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Post by Taggart »

Businessweek

October 2, 2008

Why You Shouldn't Bail on Stocks Now

Today's bunker mentality has the stock market looking cheaper relative to Treasury bonds than it has since 1978
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Post by Taggart »

Vanguard Founder on Making it Through the Crisis

Video: Morningstar's Christine Benz speaks with Vanguard founder Jack Bogle about how investors should manage through the credit crisis.
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Post by Taggart »

Wall Street Journal


THE INTELLIGENT INVESTOR
OCTOBER 4, 2008


Summon Your Courage and Buy Stocks

Investors Who Conquer Stock-Phobia Have an Edge Over Those Too Focused on Their Rearview Mirror

By JASON ZWEIG
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Post by parvus »

James Grant in The Washington Post:
Because there was often no market for these idiosyncratic securities, Wall Street did not have to value them at market prices. Rather, it marked them "to model." That is, it assigned them prices at which they would trade, according to one mathematical construct or another, if they could trade. Of course, these mathematical constructs tended to cast things in a cheerful, management-approved way. Only later did a telltale plunge in the value of traded mortgage indices open the eyes of the market to the full extent of the troubles.

Prices can be unwelcome pieces of information. When an especially unwelcome batch wells up after a financial collapse, governments try to quash it. So it is today. The SEC has suppressed short selling. The bailout bill will open the door to the suspension of market-value accounting. The Fed is moving heaven and earth to cheapen the value of the dollar.

Long after the crisis burst into the open, the Fed and Treasury downplayed it. It was, they insisted, "contained." Last week they asserted that, unless the House voted "yea," the wheels would come off this $14 trillion economy. President Bush himself has broadly hinted that the nation is on the cusp of disaster.

How can they be so sure? And how can they know that the unintended consequences of the radical policies they are pushing through won't be worse than the panic that they themselves are helping to foment? When the Fed insists it has no choice but to print up hundreds of billions of new dollars and when the keepers of accounting standards bend in the face of criticism that market prices hurt, what they are really saying is the that financial truth is too awful to bear. Heaven help us all if they're right.
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Post by Taggart »

Oct 12th 2008
From Economist.com

Think long

Finding a few bright spots in the gloom
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Post by Taggart »

Toronto Star

Investors ask: Where did the money go?

All the money lost in the stock market and the housing crash never really existed, economist says

Oct 13, 2008
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Post by Nemo2 »

Taggart wrote:Toronto Star

Investors ask: Where did the money go?

All the money lost in the stock market and the housing crash never really existed, economist says

Oct 13, 2008
If a one-armed blind man claps in a forest, can anyone see him?
Exit, pursued by a bear.
William Shakespeare, Stage direction in "The Winter's Tale"
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Post by Taggart »

Barron's

MONDAY, OCTOBER 13, 2008

INTERVIEW

Still Holding Back

AN INTERVIEW WITH JEREMY GRANTHAM: His warnings against risk-taking fell on deaf ears. Now he says the biggest mistake might be buying too soon.

FOR THREE YEARS, HE'S CAUTIONED INVESTORS TO AVOID RISK. Jeremy Grantham, chairman of institutional money manager GMO in Boston, was early, but eventually right.

Grantham told Barron's in February of 2006 that "housing is a classic bubble" and that "this feels like the end of a cycle." Known for his insights on global investing, Grantham, 70, co-founded GMO, which has a value framework combining quantitative and fundamental analysis. It oversees assets of about $120 billion.

For Grantham's latest views on the fallout from the financial crisis and what investment opportunities he sees, please read on.
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