Weekly Roundup 52: A Curated Linkfest For The Smartest People On The Web

Dear Readers,

I apologize for taking so long to post this. I took the day off to celebrate the anniversary of the weekly wisdom roundup. Thanks for the great feedback, I’m happy to put this together for you.

-Miguel, Founder of SimoleonSense.com

It takes a while to put this together, if you post these articles on your website(s) I ask that you kindly include a reference to this post. Thanks

Weekly Cartoon: (Via Dilbert Website)

Dilbert.com

Percent job Losses In Post WWII Recessions (Via Calculated Risk)

Exclusive Features:

The MAOA Gene Predicts Credit Card Debt – Via SSRN – This paper presents the first evidence of a specific gene predicting real world economic behavior. Using data from the National Longitudinal Study of Adolescent Health, we show that individuals with a polymorphism of the MAOA gene that has lower transcriptional efficiency are significantly more likely to report having credit card debt. Having one or both MAOA alleles of the low efficiency type raises the average likelihood of having credit card debt by 7.8% and 15.9% respectively. About half of our population has one or both MAOA alleles of the low type. Prior research has linked this genetic variation to lack of conscientiousness, impulsivity, and addictive behavior.

Knowing Who’s Boss: Implicit Perceptions of Status From the Nonverbal Expression of Pride – Via Drop Box – Evolutionary theory suggests that the universal recognition of nonverbal expressions of emotions functions to enhance fitness. Specifically, emotion expressions may send survival-relevant messages to other social group members, who have the capacity to automatically interpret these signals. In the present research, we used 3 different implicit association methodologies to test whether the nonverbal expressionof pride sends a functional, automatically perceived signal about a social group member’s increased social status. Results suggest that the pride expression strongly signals high status, and this association cannot be accounted for by positive valence or artifacts of the expression such as expanded size due to outstretched arms. These findings suggest that the pride expression may function to uniquely communicate the high status of those who show it. Discussion focuses on the implications of these findings forsocial functions of emotion expressions and the automatic communication of status.

Dan Gilbert on Why the Brain Scares Itself – ViaSituationist- Why does the brain scare itself?  On Monday, October 19, Professor Dan Gilbert confronted this question in an event sponsored by first-year Section VI. Professor Gilbert, who wrote  the bestselling book Stumbling on Happiness, is a Professor of Psychology at Harvard University and the Director of Harvard’s Hedonic Psychology Laboratory. He opened his remarks by stating that the power of the mind to automatically make predictions by simulating outcomes is the key feature that distinguishes humans from other animals.

Von Mises – The Man Who Predicted the Depression – Via WSJ- Ludwig von Mises was snubbed by economists world-wide as he warned of a credit crisis in the 1920s. We ignore the great Austrian at our peril today.Mises’s ideas on business cycles were spelled out in his 1912 tome “Theorie des Geldes und der Umlaufsmittel” (“The Theory of Money and Credit”). Not surprisingly few people noticed, as it was published only in German and wasn’t exactly a beach read at that. Taking his cue from David Hume and David Ricardo, Mises explained how the banking system was endowed with the singular ability to expand credit and with it the money supply, and how this was magnified by government intervention. Left alone, interest rates would adjust such that only the amount of credit would be used as is voluntarily supplied and demanded. But when credit is force-fed beyond that (call it a credit gavage), grotesque things start to happen.

Baupost Annual Meeting Notes – Via Distressed Debt Investing – A number of readers have sent me notes from Baupost’s 1st Annual Meeting since the founding of the firm this past October. I have taken out information such as current portfolio weightings and other things that are not educational in the purest sense.

Interview With Alice Schroeder: One Big Misconception About Buffett – Via Fool.com- Motley Fool media maven Chris Hill recently had a chance to talk with Buffett biographer Alice Schroeder, author of The Snowball: Warren Buffett and the Business of Life.In this first of three installments, Schroeder talks about Buffett’s investing philosophy, debunks a few misconceptions, and unpacks the Buffett snowball.

Features:

The Restraint Bias: Another reason why a diet won’t work Via SocialPsychology Eye – As it happens people underestimate control over situations. Take the classic example of a student who waits until the last minute to study for a final exam because “they have it all under control”. This example is a type of bias that surprisingly is more common than expected. Another example of bias is a person who walks into a café to only get a coffee and is temped to get a tasty pastry. The phenomenon referred to is the restraint bias, or the perceived ability to have control over an impulse. Apply this concept to any vice when someone feels or is biased into perceived control and a similar conclusion is likely to occur.

Paul Tudor Jones 3rd Quarter Investment Letter– Via Scribd

Greenlight Capital founder calls for CDS ban-Via FT- When one of the world’s most renowned hedge fund investors turns 180 degrees on a key financial instrument that has been centre stage throughout the financial crisis, it is worth paying heed.David Einhorn, founder of Greenlight Capital, was one of the earliest and most prescient users of credit default swaps. Now he is calling for these instruments, in effect a form of insurance on individual firms (or governments) that pays out when the institution defaults or restructures, to be banned.

Go East, young man: if I was 25 again, this is where I’d try my luck – Via Spectator – If I was 25 years younger I’d be back out here by Christmas, hunting for a job or a business opportunity or a book or a column to write. If you’re one of those ‘recession generation’ graduates whom Matthew Lynn wrote about recently, or a thirtysomething whose City career has imploded, take my advice: just get on the plane and go, you’ll never regret it.

Deal With It, Mr. Einhorn – ViaInformation Arbitrage – David Einhorn is without question an exceptionally bright man and a very astute investor. However, the latest message being delivered from his bully pulpit, proposing a ban on credit default swaps (CDS), is misguided at best and dangerous at worst. Are his motives for putting forth this radical view pure, or perhaps informed by the complexity of being an equity investor in a world where the entire capital structure can be sliced, diced and priced? I have no idea. But banning CDSs is akin to banning Twitter. Are there some negative outcomes associated with using each of these tools? Sure. But do their overall benefits outweigh their costs? I believe so.

Reading Between The Lines Of David Einhorn’s Attack On CDS – Via ZeroHedge- The $26.5 trillion (gross notional) CDS market is under siege. Or such is the latest news from the formerly pervasive (ab)user of CDS trading strategies, David Einhorn. In an op-ed in the FT, Einhorn states “I think that trying to make safer credit default swaps is like trying to make safer asbestos,” he writes in a recent letter to investors, adding that CDSs create “large, correlated and asymmetrical risks” having “scared the authorities into spending hundreds of billions of taxpayer money to prevent speculators who made bad bets from having to pay.” His full opinion can be found here, while for an extended blame session on CDS we refer readers to his complete VIC speech we posted earlier.

Vindicating Capitalism: The Real History of the Standard Oil Company – Via ObjectiveStandard- But Rockefeller was no autocrat. The standard lesson of Rockefeller’s rise is wrong—as is the traditional story of how it happened. Rockefeller did not achieve his success through the destructive, “anticompetitive” tactics attributed to him—nor could he have under economic freedom. Rockefeller had no coercive power to banish competition or to dictate consumer prices. His sole power was his earned economic power—which was no more and no less than his ability to refine crude oil to produce kerosene and other products better, cheaper, and in greater quantity than anyone thought possible. It has been more than one hundred years since Ida Tarbell published her History of the Standard Oil Company. It is time for Americans to know the real history of that company and to learn its attendant and valuable lessons about capitalism.

What Is Fraudulent Conveyance – Via Distressed Debt Investing Blog – his week we are going to be discussing fraudulent conveyance. Section 548 of the bankruptcy code deals with transactions that are fraudulently made. While malicious transfers are also dealt with in the bankruptcy code (i.e. doing something purposefully to malign creditors), we are going to be focusing on the more “practical” kind of fraudulent conveyance.

Media (Audio, Videos, Etc):

How People Count Cash In Different Countries-Via Meta Cafe

Brain-Based Sex Differences – Via Psych Channel

The Power Of Subsidy Scope’s Screen Cast – Via Subsidy Scope -Finding detailed information on aviation, highway, transit, rail and maritime transportation spending by the federal government is easy using Subsidyscope.org Researchers, journalists and the general public are invited to search Subsidyscope’s database of over 700,000 entries on federal transportation spending. All content on Subsidyscope is part of the public domain, meaning data can be freely used and cited in other analyses.

Academic Papers:

Wage Compensation For Dangerous Work Revisited – Via Columbia – The Authors investigate the relationship between wages and the rsik of work-related death or nonfatal injury….Results cast doubt on the existence of compensating differentials for risk.

Position Sizing & The Impact On Trading – Via Pragmatic Capitalist – Non-academic literature on stock and futures trading emphasizes the importance of “money management”, here defined as “how much of available capital is to be allocated in a specific market position”, also called position size. The effect of position size was experimentally studied by letting two groups trade fictitious capital through a series of trades, with only one variable available for manipulation by the participants, that is, how much of available capital to be put at risk in each and every trade. The treatment group had received a three-hour lecture in position sizing, risk management, and psychological biases, whereas the control group did not. The results showed that participants in the treatment group lost all their money to a lesser extent (
p  < .01) than those in the control group. However, the treatment group did not gain significantly higher profits than the control group. Traders being able to gain money over the long run were taking smaller positions than losing and bankrupt traders were ( p  < .0001). By receiving a theoretical education, without any practical training, the risk for a  trader of going bankrupt when trading simulated stocks wasdecreased to a tenth

When Experts Disagree Via JHU- Alvin Goldman has criticized the idea that, when evaluating the opinions of experts who disagree, a novice should “go by the numbers”. Although Goldman is right that this is often a bad idea, his argument involves an appeal to a principle, which I call the non-independence principle, which is not in general true. Goldman’s formal argument for this principle depends on an illegitimate assumption, and the examples he uses to make it seem intuitively plausible are not convincing. The failure of this principle has significant implications, not only for the issue Goldman is directly addressing, but also for the epistemology of rumors, and for our understanding of the value of epistemic independence. I conclude by using the economics literature on information cascades to highlight an important truth which Goldman’s principle gestures toward, and by mounting a qualified defense of the practice of going by the numbers.

Other Very Interesting Items:

What are the behavioral implications of a value added tax? – Via Nudge Blog – Establishing a value added tax (VAT) in the United States is a topic of considerable debate and controversy. Such a tax, which would add a fixed percentage to every product or service, is standard in many European countries. There has been discussion about whether to add a VAT on top of existing taxes, or whether to reduce income taxes and offset the revenue losses with a VAT. Ted Gayer, Co-Director of Brooking’s Economic Studies, wonders what the behavioral implications of such a tax would be.

Infographic: Recovery Mapping – Via Chart Porn  Recovery.org has an interactive map that lets you track where the spending is going (down to the street level).

Is it the end of Wikipedia? – Via Boston Review – Can you trust Wikipedia? Most of us have stopped asking and simply bookmarked it. That makes sense when you consider the alternatives: you can explore the first dozen or so Google search results, or you can go straight to the occasionally erroneous Wikipedia entry, typically culled from the very same search results. If you are looking for fast, up-to-date information, it is Wikipedia or Google (not Wikipedia or Britannica), and Wikipedia wins on speed.

Infrographic: Government Expenses Worldwide by GDP – Via Credit Loan

Infographic: The Unemployment Rate Vs Broader Total Unemployted – Via Economic Pic

Infographic: Are we Coming out of the Recession? – Via Mint.com

Weekly Joke:Top10 Economist Valentines

10. YOU RAISE MY INTEREST RATE THIRTY BASIS POINTS WITHOUT A CORRESPONDING DROP OFF IN CONSUMER ENTHUSIASM
9. DESPITE A DECADE OF INFLATION, I STILL DIG YOUR SUPPLY CURVE
8. WHAT DO YOU SAY WE RE-MEASURE OUR CROSS-ELASTICITY
7. YOU BRING THE BUTTER, I’LL BRING THE GUN
6. LET’S RAISE HOUSING STARTS TOGETHER
5. FURTHER STIMULUS COULD RESULT IN UNCONTROLLED EXPANSION
4. TELL ME WHETHER MY EXPECTATIONS ARE RATIONAL
3. LET’S ASSUME A RITZY HOTEL ROOM AND A BOTTLE OF DOM
2. YOU STOKE THE ANIMAL SPIRITS OF MY MARKET
1. A LOAF OF BREAD, A JUG OF WINE, AND THOU BESIDE ME WATCHING RUKEYSER

About Miguel Barbosa

I run this site.

08. November 2003 by Miguel Barbosa
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