Financial topics

[John]

> I don't know why I watch CNBC, it kills me. I don't have
> bloomberg, I guess that is why.

You can watch Bloomberg online for free at:

http://www.bloomberg.com/avp/avp.htm?clipSRC=LiveBTV

But don't expect it to be any better.

Sincerely,

John

[aedens]

The world is likely to become more localized in all of this. Successful companies will emphasize long-term relationships with local customers not as choice, but any survival of scale.

History does not provide any example of capital accumulation brought about by a government.
http://www.ratical.org/ratville/CAH/war ... et.html#c2

The consumers are merciless. The corruption of the regulatory bodies does not shake his blind confidence in the infallibility and perfection of the state; it merely fills him with moral aversion to entrepreneurs and capitalists. No one should expect that any logical argument or any experience could ever shake the almost religious fervor of those who believe in salvation through spending and credit expansion. The final outcome of the credit expansion is general impoverishment.

Meanwhile, while Washington bickers, China decides it wants to dominate the world's market for electric cars. Sometimes, it just pays to be a ruthless totalitarian dictatorship.

TIANJIN, China — Chinese leaders have adopted a plan aimed at turning the country into one of the leading producers of hybrid and all-electric vehicles within three years, and making it the world leader in electric cars and buses after that.

[umoguy]

Why Do Stock Prices in Emerging Markets Move in Tandem?

Interesting article from Randall Morck, Bernard Yeung, and Wayne Yu - It explains why all of our stocks move in sync, we are now an emerging marker.... Sigh.


On a recent visit to China, we were given access to a tape of Chinese stock price data. To our great surprise, we found that nearly all of the stocks move together—called comovement—either up or down, on any given day. This is not what stock prices are supposed to do. The economic purpose of a stock market is to channel capital to companies that should grow and away from companies that should not. This is because a firm’s cost of capital falls when its stock price rises and vice versa. The efficient markets hypothesis holds that shareholders’ opinions about firms’ future prospects affect stock prices and thereby allocate capital among firms. If the prices of all companies in the economy rise and fall together, the stock market may be failing in its role as an information processor and microeconomic capital allocation device.

Subsequently, we compared the degree of stock comovement across 40 countries using weekly and biweekly stock returns data for 15,920 firms. In rich countries, on average, just over 50 percent of stocks move in the same direction. In poor countries, the fraction moving together is economically and statistically significantly higher.

In other words, comovement of stock prices is negatively correlated with per capita GDP. The result is not an artifact of market size, for the stock markets of small, rich countries, such as those of Denmark, Ireland, and New Zealand, exhibit little comovement; while the stock markets of large, less-developed countries, such as those of Brazil and India, exhibit substantial comovement. Both individually and jointly, country size, various Herfindahl indexes (measuring industrial concentration), and various macroeconomic volatility measures all fail to account for the finding. Comparing firms’ returns on assets also fails to explain why stock prices move or do not move together on the stock exchange.

In contrast, institutional development can explain stock price comovement better than per capita GDP does. In countries with more corrupt governments, stock prices have a greater tendency to move together. (Political corruption perhaps impedes information-based trading, leaving the markets to "noise" traders. They are the opposite of "rational" investors who buy securities based on accurate expectations of future returns.) Further, reduced legal protection for public investors also accompanies high comovement. These findings raise the possibility that inadequate legal and political systems may render the gathering of and trading on firm-specific information relatively unprofitable. Traders may still be willing to invest in diversified country portfolios, but see little point in picking stocks if corporate or political insiders routinely siphon off economic profits. Thus, stock prices in countries with deficient institutional structures exhibit a high degree of comovement.

We also find that a high level of legal protection for public investors is correlated with more firm-specific price variation, consistent with the view that such protection encourages the capitalization of firm-specific information into stock prices.

Our results suggest that simply establishing a stock market in a low-income country is unlikely to improve its microeconomic allocation of capital. Stock markets appear to channel capital selectively across firms only in economies that have relatively honest governments and relatively high levels of protection for public investors’ property rights over their investments.

[freddyv]

http://finance.yahoo.com/news/Meltdown- ... &ccode=TBD

I found this article on Yahoo interesting. It states,

The G-20 leaders repeated a pledge they made at their first summit last November in Washington to refrain from erecting new protectionist barriers during the current economic crisis. Economists see this commitment as critical to avoiding the mistakes that turned the downturn of 1929 into the Great Depression. Back then, country after country imposed trade barriers in an effort to protect domestic industries, only to see global trade plummet -- which left all nations harmed. The problem with this repeated pledge: By one estimate, 17 of the nations at the Washington meeting, including the United States, have already acted to protect domestic industries during the current downturn.

But does it matter? We see Asian exports falling off a cliff at a rate that I have to imagine compares to the early 1930's. This article supports that and suggests that trade is falling faster than at the start of the Great Depression - http://www.ppionline.org/ppi_ci.cfm?knl ... tid=254943

Government policy seems NOT to be that important. If the American people and others' throughout the world slow their rate of consumption then trade is going to fall which leads to unemployment which leads to less consumption which leads to less trade which leads to unemployment which leads to a very ugly downward spiral.

As an investor I always come back to two points:

1. The world economy was severly overleveraged in almost every respect. Based on history, it will take at least a decade and perhaps two to deleverage.

2. The stock market will be weak until the deleveraging is over.

--Fred
http://www.acclaiminvesting.com

[JLak]

I can't be the only one to notice the massive explosion of financial blogs. I'd say that most of the authors have no industry experience (I have none myself, so I claim no righteousness in this matter). This is hopefully a good thing because there seems to be a lot of rigorous and objective research within the melee of fuzzy logic and regurgitated opinions. What does this mean for Generational Dynamics? Will there be a great aversion to lending and borrowing as John has stated, or will it go the opposite way because millennials and beyond will understand financial systems well enough to make them an even larger part of everyday life over the next few decades?

And for financial bloggers: my humble opinion is that I'd much rather read quantitative research, especially if you do not have the very specific experience to make qualitative statements. This site may be a little different because it integrates quantitative research with prediction of geopolitical events.

[John]

For those of you still day trading on the market, you'll want to know
what I just heard on Bloomberg tv.

First quarter actual earnings will start dribbling in next week, and
flooding in the week after.

In past quarters, earnings have been unexpectedly low, and so the
market fell.

But this time, expectations are a lot lower. So if earnings match
the low expectations, then the market will go up, because earnings
didn't go lower than expected!!!!!!!!!!!!!!!!!!!

rotflmao.

John

[John]

Dear John,

> I can't be the only one to notice the massive explosion of
> financial blogs. I'd say that most of the authors have no industry
> experience (I have none myself, so I claim no righteousness in
> this matter). This is hopefully a good thing because there seems
> to be a lot of rigorous and objective research within the melee of
> fuzzy logic and regurgitated opinions. What does this mean for
> Generational Dynamics? Will there be a great aversion to lending
> and borrowing as John has stated, or will it go the opposite way
> because millennials and beyond will understand financial systems
> well enough to make them an even larger part of everyday life over
> the next few decades?

> And for financial bloggers: my humble opinion is that I'd much
> rather read quantitative research, especially if you do not have
> the very specific experience to make qualitative statements. This
> site may be a little different because it integrates quantitative
> research with prediction of geopolitical events.

I do not by any means to consider this web site to be a financial
blog. This web site applies generational theory to history and
current events.

It just so happens that the major crisis right now is financial, and
so most of the articles right now are on the financial crisis.

At other times, this has been a "Gaza blog" or "Pakistan blog" or
"Iraq blog" or "Europe blog," etc. It depends on what's going on in
the world.

Having said that, this is really a remarkable time, because the world
has gone into a sort of "wait state." For example, the Calculated
Risk blog seems to say the same thing every day -- another bank
failure, more unemployment figures, more real estate figures.
The articles seem to be the same every day.

The same is true on CNBC. All they've been discussing for the last
year is, "Are we near bottom?" Practically every day is
interchangeable with every other day.

I feel the same thing. I could write another article on Sri Lanka or
Pakistan or Gaza or Darfur, but it would just be a variation of the
last article.

However, I have claimed and still claim that there is no other web
site in the world remotely like this one. In particular, there is no
web site, journalist, analyst or politician with anything even close
to the predictive success of this web site.

At some point, the waiting will be over, and there'll be a major
crisis -- maybe financial, maybe in Pakistan or China, maybe in
Europe. When it happens, other web sites will explain it in political
terms, and how it proves that Obama is right or Obama is wrong, or
whatever.

This web site will analyze the event in terms of Generational
Dynamics theory, and this will be the only web site that explains
what's really going on, and what will happen next.

Sincerely,

John

[aedens]

I can't be the only one to notice the massive explosion of financial blogs. I'd say that most of the authors have no industry experience (I have none myself, so I claim no righteousness in this matter). This is hopefully a good thing because there seems to be a lot of rigorous and objective research within the melee of fuzzy logic and regurgitated opinions. What does this mean for Generational Dynamics? Will there be a great aversion to lending and borrowing as John has stated, or will it go the opposite way because millennials and beyond will understand financial systems well enough to make them an even larger part of everyday life over the next few decades?

And for financial bloggers: my humble opinion is that I'd much rather read quantitative research, especially if you do not have the very specific experience to make qualitative statements. This site may be a little different because it integrates quantitative research with prediction of geopolitical events.

We Work in Corporate capacity for decades and we cannot express all we can given Confidential material we are subject to.
I understand your conveyance and yes opinion is defined as not having all the fact's. We look Men in the eye as furlough's ensue
we have worked with for decades. Young man you are living history in a context more than numbers...

[JLak]

Dear John,

I can't be the only one to notice the massive explosion of financial blogs. ... This site may be a little different because it integrates quantitative research with prediction of geopolitical events.

I do not by any means to consider this web site to be a financial
blog. This web site applies generational theory to history and
current events.
...
However, I have claimed and still claim that there is no other web
site in the world remotely like this one. In particular, there is no
web site, journalist, analyst or politician with anything even close
to the predictive success of this web site.

I'm in complete agreement. You probably know that I've been coming here for years now for my first perspective on how to _survive_ the coming catastrophe, (and, for instance whether my girlfriend is safe doing her PhD research in China). I love this site, but as you so often emphasize, I don't come here for day trading tips. However, through this site and links from it, I've learned a tremendous amount of the minutia of macroecomics, especially in application to international events. This is incredibly complex quantitatively, even with a broad-brush tool like Generational Dynamics at your disposal. I didn't mean to raise an issue with this site, but if I am to raise an issue in general, it is that there are way too many copies of your opinions floating around on the internet without any further research. We need that research! In the way I see it, Generational Dynamics is a dialectic, but there is a material condition as well. You usually give us a really good start on it, but I'd really be pumped to see other people's blogs doing one step further on the quantitative side while you are busy tackling issues in another part of the globe. Regardless, I think we all owe you an enthusiastic thanks for your obsessive dedication over the years.
Thanks, -JL

[StilesBC]

Regardless, I think we all owe you an enthusiastic thanks for your obsessive dedication over the years.

+1