Weekly Roundup 14: A Curated Linkfest For The Smartest People On The Web
Attention: I appreciate your patience. Normal programming will resume tomorrow. Thanks again and I hope these links will hold you over until tomorrow.
Here are some links to articles that didn’t make our front page. Several of the articles are very insightful I highly recommend reading them. As always, the articles are from different fields but should make you a more well rounded investor. Take Care. (Click on the titles to access the articles)
1. The No Stats All Star – Via NYT- He had more or less admitted to me that this part of his job left him cold. ‘It’s the same thing every day,’ he said, as he struggled to explain how a man on the receiving end of the raging love of 18,557 people in a darkened arena could feel nothing. “If you had filet mignon every single night, you’d stop tasting it. To him the only pleasure in these sounds — the name of his beloved alma mater, the roar of the crowd — was that they marked the end of the worst part of his game day: the 11 minutes between the end of warm-ups and the introductions. Eleven minutes of horsing around and making small talk with players on the other team. All those players making exaggerated gestures of affection toward one another before the game, who don’t actually know one another, or even want to. “I hate being out on the floor wasting that time,” he said. “I used to try to talk to people, but then I figured out no one actually liked me very much.” Instead of engaging in the pretense that these other professional basketball players actually know and like him, he slips away into the locker room.
2. Andrew Carnegie Documentary And Research – Via PBS
3. Performing Transparency : A Long View – Via Socializing Finance – Transparency, transparency, transparency: Obama wants it in government (he says), mortgage back securities didn’t seems to have enough of it, and many are yet to be convinced that the various bailouts will deliver it. As one recent sociological text on the subject puts it (in what, in light of the current context, now reads as something of an understatement), transparency is: ‘a concept that has gained increasing currency and favour as an organising principle and administrative goal’  (you can also download a version of Fabian Muniesa, Emiliano Grossman and Emilio Luque’s excellent paper on the topic from the same book here). In relation to my own research into consumer credit, the attempts to perform transparency (as with many other financial products) have to somehow manage and contain the inherent uncertainty and opacity of the unknowable future. In other words, consumer credit has to contain mechanisms that in some way render the future a little less opaque, even if achieving complete transparency is, by definition, impossible.
4. To Predict It Is Necessary To Know History – Via Adam Smith’s Lost Legacy – Professor of Political Economy at Harvard University’s John F Kennedy School of Government, writes in the Business Standard (India)“Those who predict capitalism’s demise overlook its historical malleability.” “Capitalism is in the throes of its most severe crisis in many decades. A combination of deep recession, global economic dislocations, and effective nationalization of large swathes of the financial sector in the world’s advanced economies has deeply unsettled the balance between markets and states. Where the new balance will be struck is anybody’s guess.
5. Selfishness Is Never A Smithian Value – Via Adam Smith’s Lost Legacy – Smith didn’t ever get confused on this matter. Those authors – sad to say, many of them economists – who do so, confuse Adam Smith with a predecessor, Bernard Mandeville (1734), whom Smith criticised in Moral Sentiments as ‘licentious’, and they exhibit the ignorance of the Hollywood script writer who had Gordon Gecko mouth the savage words, ‘greed is good’, or perhaps, like Alan Greenspan of the Ayn Rand school of selfishness, misread what Adam Smith Ayn to be authentic. actually wrote, perhaps relying on Ayn to be authentic.
6. The Mysteries Of Textbook Economies – Via Crooked Timber – I received a free copy in the mail of an introductory statistics textbook. I showed the book to Yu-Sung and he said: Wow, it’s pretty fancy. I bet it costs $150. I didn’t believe him, but we checked on Amazon and lo! it really does retail for that much. What the . . . ? I asked around and, indeed, it’s commonplace for students to pay well over $100 for introductory textbooks. Well. I’m planning to write an introductory textbook of my own and I’d like to charge $10 for it. Maybe this isn’t possible, but I think $40 should be doable. And why would anybody require their students to pay $150 for a statistics book when something better is available at less than 1/3 the price?
7. Hedge Fund Trasparency – Via Economic Policy Review – On January 29, Senators Grassley and Levin introduced The Hedge Fund Transparency Act, a revision to Grassley’s previously proposed legislation – Hedge Fund Registration Act of 2007 (S.1402). The 2009 Act calls for an amendment to the Investment Company Act of 1940. While titled a ‘transparency’ act, the proposed bill effectively broadens the regulatory authority of the SEC. The Act of 1940 defines an investment company and details the regulation set forth by U.S. Securities and Exchange Commission (SEC), primarily overseeing traditional mutual funds and closed-end funds. The act as currently written allows hedge funds to avoid being listed as investment companies because they are not open to the general public and often via pooled entities have fewer than 15 investors. Hedge Funds are only open to “qualified purchasers” or sophisticated investors (pension funds, endowments, wealthy individuals, etc) and thus are allowed to engage in higher risk, higher reward investments without the regulatory burden of the SEC.
8. Social Insecurity – Via Economists View – The financial crisis comes right at a time when major reforms to social security systems around the world are evolving. These reforms were primarily initiated to tackle demographic transitions and resolve resulting fiscal imbalances. Measures taken or planned include strengthening employer-based, fully funded occupational pension schemes and full or partial privatisation of social security, often even including subsistence-level provisions. The reforms include more individual choice and greater individual risk. In many countries, majorities of the populations are directly affected by the turbulence on the capital markets, even those who do not or did not privately own shares, at least in part due to a shift to more funded schemes. The world’s pension funds have lost up to 30% or more of the value of their assets. Of the people in funded plans, the financial crisis hit those insured with individual schemes worst. While the older covered by collectively organised systems (such as those in the Netherlands and Switzerland) will feel little impact – perhaps even too little – many people with individual accounts have considerably less pension capital than they did the year before.
9. How To Make TARP II Work – Via SSRN – Treasury Secretary Geithner announced a plan, which the Treasury is willing to finance with up to $1 trillion of public funds, to partner with private capital to buy banks’ troubled assets. The Treasury has not yet settled on the plan’s design, and its announcement has encountered substantial skepticism as to whether an effective plan for a public-private partnership in buying troubled assets can be worked out. This paper argues that, yes, it can. The paper also analyzes how the plan should be designed to contribute most to restarting the market for troubled assets at the least cost to taxpayers. The government’s plan should focus on establishing a significant number of competing funds that will be privately managed and dedicated to buying troubled assets – not on creating one, large public-private aggregator bank. Establishing competing funds, I show, is necessary both to securing a well-functioning market for troubled assets and to keeping costs to taxpayers at a minimum.
10. Asset Price Bounds And Bubbles – Via Economists – The … idea of Alan Greenspan … that monetary and regulatory policy cannot prick asset price bubbles but should deal with the consequences when the bubble has burst – now looks dangerously quaint. …The intellectual justification… – articulated by Ben Bernanke… – was that identifying equilibrium levels of asset prices is difficult; and policy tools to prick or limit bubbles are limited. The unmentioned but perhaps real rationale is a kind of implicit market fundamentalism: markets value assets best, and even if markets make mistakes, policymakers can never be sure in advance whether and to what extent mistakes have been made.
11. Liquidity Insurance For Systemic Crises – Via Voxeu- Most financial system reform proposals rely on better managed, anti-cyclical capital requirements, or some sort of insurance. This column argues that mandatory liquidity insurance would be more effective. The insurance premiums – linked to maturity mismatch and term structure – would essentially be pre-payment for the cost of future financial crises and held in an Emergency Liquidity Insurance Fund.
12. Luxury or Necessity – Via NYT – What products can’t you live without? Chances are, your answer to that question in 1973 would be very different from your answer today.
13. Here Comes Inflation – Via Cafe Hayek – Greg Mankiw notes that deflation worries have subsided and points to this chart showing that inflation-adjusted Treasuries (blue line) no longer have a higher yield (anticipating deflation) than unadjusted Treasuries.
14. Behavioral Economics At Odds With Freedom– Via Peter Ubel has written an informative and useful book, but not entirely for the reasons he thinks. He presents a very well written and easy-to-understand account of behavioral economics; in doing so, he illustrates, contrary to his intention, the dangers that this movement poses to our freedom.
15.Paul Krugman: Failure To Rise – Via NYT – By any normal political standards, this week’s Congressional agreement on an economic stimulus package was a great victory for President Obama. He got more or less what he asked for: almost $800 billion to rescue the economy, with most of the money allocated to spending rather than tax cuts. Break out the Champagne!
16. Another Sign That Volcker Maybe Marginalized – Via Naked Capitalism – Last week. Bloomberg reported that Volcker, who many regard as the best asset on Obama’s economics team, is sorely underutilized: Paul Volcker has grown increasingly frustrated over delays in setting up the economic advisory group President Barack Obama picked the former Federal Reserve chairman to lead… Volcker, 81, blames Obama’s National Economic Council Director Lawrence Summers for slowing down the effort to organize the panel of outside advisers….Summers isn’t regularly inviting Volcker to White House meetings and hasn’t shown interest in collaborating on policy or sharing potential solutions to the economic crisis,