Diary of a Financier

Top Newsstuffs (September 17-23)

In Bookshelf on Sun 23 Sep 2012 at 05:51

Some news for your Sunday brunch…

La Longue Duree: The Waning of the Modern Ages | Counterpunch
According to World-Systems Analysis, capitalism’s arc is 600 years long (1500-2100). Having evolved from commercial to industrial to financial capital (money created by money itself), its profit-model success will be its failure.
Vested interests (i.e. oligarchs) are thwarting a natural transition to a “new civilizational paradigm.” The focus needs to be on building a sustainable shadow system to focus on the long-term while running alongside capitalism, eventually succeeding it.
[The successor model could be the Spanish Basque region’s Mondragon Corporation, a cooperative community.]

China’s shifting demographics and their impact | Sober Look
Not only is Chinese labor force shrinking henceforth, but birth rates are too. All troublesome considering the population will unavoidably age over coming decades.

Main Street’s “Benefits” from QEternity | Bill Gross (PIMCO)
“Fed buys Mtges but banks fail to pass through lower yields to future home buyers.”
[I agree with the bank cartel & QE subsidy, but mortgage rates had dropped due to QE3 expectations, so give it some time.]

Tax Credit in Doubt, Wind Power Industry on Verge of Collapse | New York Times
Having been extended twice by bipartisan vote, a $1B federal tax credit may expire at YE12 as Congress’ Republicans now oppose. It subsidizes US wind electricity (~2.2 cents/kWh) to help competition with other electricity resources. The industry has also suffered from predatory Chinese pricing.

What [potential] investors want to hear in a meeting with their manager | HedgeWorld
List compiled from interviews with investors, who explain the pitfalls for managers pitching their funds, e.g.: tell investors what makes your strategy unique; don’t just tell them what you did right last year, tell them what you’re going to do in being right this year.

Video: The Entitlement Society- Chaos on Bullshit Mountain | Jon Stewart (The Daily Show)
In response to right-wing celebration of Mitt Romney’s “47% of Americans dependent on the government,” Mr. Stewart goes on a rant. He notes big oil, telecomm, ag & banks who have all received government subsidies. “If they had success, they built it; if they failed, the government ruined it; if they get a break, they deserved it; if you get a break, it’s a handout.”
[Brilliant shot of realism. It’s worth repeating that something’s gone deeply awry in an economy with so little self-sufficience. The welfare state is and always has been a necessary evil–oft abused, but a hallmark for a high standard of living.]

Rail Traffic Weekly: Growth Decelerating in Coordination with FedEx & Norfolk Southern Profit Warnings | Association of American Railroads (AAR)
Carloads -2.4% and Intermodal +3.7 (cumulative ytd volume); -2.9 and +3.9 respectively (vs. this week last year).
9 of 20 carload groups posted gains: Petroleum products +46.3%, Stone/sand/gravel +10.8 & Food +10.3; Farm products -22.7%, Metallic ores -21.3, Waste metals -19.5%.
[The expansion continues, but it’s decelerating in sync with FDX & NSC forecast warnings earlier in the week.]

Why The ‘Clinton’ Recovery Is Unrepeatable | Michael Cembalest (JP Morgan)
1990s recovery was a product of exogenous factors like business cycle & monetary policy. A repeat would require a centrist President to raise taxes on the wealthy, cut military spending, deregulate business, cut entitlements (including encouraging a private sector healthcare solution) & promote free trade.

A Flaw in the QE Expectational Transmission Mechanism | Pragmatic Capitalism
Short-term inflation can be guided by expectations (i.e. increased consumer spending), but that can only be maintained long-term by an increase of wages. QE doesn’t accomplish this follow-through, hence it enriches corporations via a one-off spending spike.

Math isn’t an edge | Nicholas Colas (ConvergEx)
Analysts & PMs love citing fundamental data and valuation multiples, but the whole Street knows that stuff. A consistently successful investor has an edge–something noone else knows/does.

David Byrne on How Music and Creativity Work | Brain Pickings
From his new book, How Music Works, the Talking Heads’ founder discusses “Creation in Reverse,” in that creativity comes from context–as opposed to creators who find context to predicate creativity.

Japan’s Slow-Motion Tsunami: Demographics Will Pop Debt Bubble | Wolf Richter (testosteronepit)
95% of its 240% gross Debt/GDP (~$14T) is owned domestically; 50% by Japanese individuals. Having to pay for entitlements, younger generations are less wealthy and unlikely to absorb national debt.

‘Three-parent baby’ fertility technique could be made legal | The UK Telegraph
Families with genetic risk of incurable conditions may be allowed to use third-party DNA to spawn “healthy” children. Britain’s health secretary will determine legality as early as next year.

Second-Hand Software Sales Set to Soar on European Union’s Ruling in Oracle Case | Bloomberg
EU’s high court ruled that developers can’t forbid resale of programs & updates downloaded from internet, expanding earlier case law permitting the sale of second-hand software delivered on disk. Resale often requires a notary’s certification testifying that the programs have been deleted from the seller’s computer(s).

Video: Ray Dalio (Bridgewater) on how the “economic machine” works | Council on Foreign Relations
Discussion includes: “Beautiful deleveraging” is a perfect balance when enough government stimulus offsets writedowns/austerity such that Nominal GDP exceeds inflation; too often monetary policy focuses on inflation & growth when it needs to focus on sustainability (debt/income growth).
[Mr. Dalio misunderstands the monetary system though, because he thinks QE is “printing money,” when it’s really just an asset swap between the central bank & private sector.]


  1. […] overleveraged default, leading to deflation, recession & central bank loosening (5-8 years) [Previously] […]

  2. […] or M&A, no dividends to external shareholders, and no disproportionate bonuses/salaries. [Previously] #Economic […]


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