Monday, October 31, 2011

America's Other 87 Deficits

As always, Stephen Roach delivers:
China-bashing in the US speaks to a corrosive shift in the American psyche. It deflects attention away from those truly responsible for perpetuating the greatest saving shortfall in history. Washington has been seduced by the political economy of false prosperity. That seduction has encouraged America to squander its savings and live beyond its means for nearly two decades. Now the game is up.
The likes of Chuck Schumer needs to put an end to this China bashing thing. It is definitely more political posturing under the guise of "protecting the jobs of Americans". All this claim about predatory pricing is rubbish. As Roach says, China accounts for ONLY 42% of the 2010 trade deficit. The other 58% comes from 87 other countries that the US has deficits with. I would venture to say that none of them practice "predatory pricing". So what explains that trade gap?

You can read here for more on why this China bashing crap needs to stop. The US-China trade deficit is a howler and exaggerated. The iPhone case proves it.

Being John Lennon

Some say John Lennon is a genius, along with Paul McCartney and the Beatles crew. I've always liked the Beatles. They are simply timeless. I am not sure if I would call them geniuses, but John Lennon himself most certainly thinks so. Here is what he said:
“People like me are aware of their so-called genius at ten, eight, nine...I always wondered, 'Why has nobody discovered me?' In school, didn't they see that I'm cleverer than anybody in this school? That the teachers are stupid, too? That all they had was information that I didn't need? I got fuckin' lost in being at high school.  
I used to say to me auntie 'You throw my fuckin' poetry out, and you'll regret it when I'm famous,' and she threw the bastard stuff out. I never forgave her for not treating me like a fuckin' genius or whatever I was, when I was a child. It was obvious to me. Why didn't they put me in art school? Why didn't they train me? Why would they keep forcing me to be a fuckin' cowboy like the rest of them? I was different. I was always different.  
Why didn't anybody notice me? A couple of teachers would notice me, encourage me to be something or other, to draw or to paint - express myself. But most of the time they were trying to beat me into being a fuckin' dentist or a teacher" 
Just the other day, I saw this floating around Facebook, so I lifted it. Kudos to whoever made it:

After that, I decided to do some research on my own on John Lennon's other quotes. Here are some of the more interesting ones:
“Time you enjoy wasting, was not wasted.”  
“As usual, there is a great woman behind every idiot.”  
“The more I see, the less I know for sure.”  
“I believe in God, but not as one thing, not as an old man in the sky. I believe that what people call God is something in all of us. I believe that what Jesus and Mohammed and Buddha and all the rest said was right. It's just that the translations have gone wrong.”  
“God is a concept by which we measure our pain.” 
“How can I go forward when I don't know which way I'm facing?”   
“It's weird not to be weird.”  
“You don't need anybody to tell you who you are or what you are. You are what you are!”  
“We live in a world where we have to hide to make love, while violence is practiced in broad daylight.” 
“Avant-garde is French for bullshit” 
Love the last one.

HT: Goodreads

Even CNN Is A Sham

Here is why we all need to be nice to people from the media.

Just last week, CNN sparked a controversy regarding a supposed racial ignorance of the founder and former CEO of TechCrunch, Michael Arrington. Apparently, they had selectively aired footage of an interview with Arrington which portrayed him as a racist. Read more here.

This is exactly why having control of the media is so important. The media has great power and it can make or break you. Yet, when they are wrong, nothing much is ever going to happen to them. What has become of media reporting today is that they are selling news instead of reporting it. What is the difference? Well, reporting facts and doing investigative journalism is just too hard. It is probably just short of doing an analysts job.

It is simply easier to print (or publish) what people want to read. One of these must-reads are juicy controversies. The more controversial are your views, the more readers you will get. A quick browse through the statistics of The Main Streeter easily shows me which one of the posts are the most read and all evidence point towards that.

All this just shows that I should probably be more careful when I criticize some of the news portals and newspapers in Malaysia. In fact, at pixel time, it is regarded as the most popular post in recent weeks:

But then again, I am only a small fish in a really big ocean. They won't even bother with the trouble of discrediting me.

Sunday, October 30, 2011

Volume 3 Issue 44: Two-Cent Economics

Price of Women's Underwear

Simply amazed the kind of data you can get on the Internet. I don't know what this chart tells us exactly, but it is certainly interesting to note:

As you can see, the price of women's underwear has shot through the roof. It has far exceeded the price of outerwear and even the headline CPI, which includes the prices of fuel etc. It begs the question, why the heck are women's underwear so expensive? Well, breaking it down to supply and demand, I think it is safe to say that it is not due to the lack of supply. So, it must be due to higher demand.

So, what caused this higher demand? Well, we most certainly cannot attribute it to women's knack for shopping because the price of women's outerwear has pretty much stayed where it was. Here are my guesses based on principles learnt in Economics 101 (although I never actually took that class).

1. Price of related goods
I don't really know what are complements to women's underwear. Not sure what the substitutes are either. But the Business Insider guesses that it is possibly due to the increase in the prices of other luxury goods. For example, a cheap luxury handbag is still cheaper than an expensive bra. This is possible, but I don't think it is that likely. But women, if you are reading this, please let me know if I am wrong.

2. Personal disposable income
I also don't think personal disposable income has increased in the last four years, especially during a recession.

3. Consumer expectations about future prices and income
This suggests that women buy more underwear if they expect the prices of underwear to go higher in the future. It would seem a bit absurd. This would mean that they would be treating underwear like a stock. But then again, who am I to judge the female mind?

4. Tastes and preferences
This is the most likely scenario. Though, I think its a modification of that. I wouldn't say I have done extensive research into the variety of women's underwear, but I would venture that there is an increasing variety of exotic women's underwear. These days, you can find all kinds of visually enhancing, physically enhancing and emotionally enhancing underwear. If you think "emotionally enhancing" sounds a bit far-fetched, let me remind you of the advertisements that tell women that they can now "feel confident" by wearing a certain kind of bra. Not only that, now, there is now an increasing number of purposes for women's underwear, i.e. sports (remember Anna Kournikova's "only the ball should bounce" commercial?), bedroom sports, Halloween (!?) etc. With increased variety comes increased product differentiation. This allows certain companies to carve out a niche market (i.e. Victoria Secret).

5. New market?
This is not really one of the reasons given in Economics 101. What do I mean by new market? While e-commerce has been around for a really long time, I think previously, shopping online for clothing was usually a women's thing. I am being stereotypical, but men in general do not like shopping. In fact, I seriously doubt men would even shop for women's underwear. But e-commerce has facilitated that. Many men feel embarrassed about walking into a lingerie shop and picking out lingerie for their partners, mistresses and whatnot. But now, they can not only browse online, but make purchases discreetly. I don't know much about men who wear women's underwear, but I think it is increasingly popular that men buy underwear for their female partners. I guess the reason is that they buy what they would like to see their partners in. Kinda like women picking out shirts and pants for men. So, there is an entirely new market out there, but I really don't know if this is enough to boost the price up that high.

Another thing about shopping is that men do not know the actual price of these things. In fact, I would venture to say that men would even pay a premium for something that they like. Getting the best bargains is not really men's forte. Also, there really is a lack of alternative. As mentioned above, men generally shy away from walking into a lingerie store and grabbing something for their partners.

All in all, I think it is a combination of a few of the factors mentioned above. This is just an exercise and an application of economic knowledge in the real world. Please enlighten me if you find something that I missed out.

Perhaps, it could be as simple as the fact that women's underwear have been undervalued for a really long time and is only starting to realize its value.

HT: Business Insider

Saturday, October 29, 2011

The Mootness Of Rating Agencies

I have always wondered about this. But here is a great article about how "rating agencies are incentivized by incentives":
“Credit-rating inflation is correlated with the asset classes that generate the most revenue for the raters,” said Jess Cornaggia, who has presented research at the SEC and the Commodity Futures Trading Commission. …

I always knew there was something wrong with the incentive structures of credit rating agencies. In fact, I also think there are possible issues with the incentive structure for auditors as well.

Nominal GDP Targeting

Here is a pretty balanced piece on nominal GDP targeting.

I suppose this post is more for me than for anyone else. The link contains many good links on NGDP targeting. It's a very interesting idea especially since we learnt in Economics 101 (or any other beginner Economics course) that the role of the central bank is to maintain price stability and low unemployment.

The appeal of NGDP targeting is that it is a single target that can do both, much like killing two birds with one stone. Although, I am not much for killing birds with stones.

Volume 3 Issue 44: Intelligent Investing

Groupon Is A Disaster

Can't really say I didn't see this coming. Here is an earlier post on Groupon. In short, this is what I said:
A strong profitable company will still be around 5-10 years from now. It also does not need to make up a way to measure its own profitability. In other words, let the numbers speak for themselves.
It still holds true now. Read this:
Adding to growing customer discontent, Groupon, which was initially seen by small mom-and-pop shops as a way to drum up new business, was losing favor with some of them. Merchants began to do the cruel math on the daily deals. 
Restaurants offering $50 of food for just $25 only collect $12.50 -- not even enough to cover the cost of the food. Some businesses also complain that the deals for new customers anger long-time patrons. And some say that the bargains attract high-maintenance types who don't turn into loyal customers. 
"Your restaurants are full packed with people who aren't making you any money," says Paul Evans, a Kansas City marketing executive who advises clients against using Groupon. 
Take Jessie Burke, for instance, Last year, the owner of Portland's Posies CafA(copyright) offered a $13 coupon for $6. The cafA(copyright) was deluged with customers and Burke ended up having to take $8,000 out of personal savings to cover payroll. 
"It the single worst decision I have ever made as a business owner," Burke said in a blog post that quickly went viral. 
Andres Arango, founder of natural jewelry company, had a similar experience. He sold 80 coupons -- $35 of jewelry for $15 -- in two days. But of that $15, he only got $7.50. And he still had to dole out $35 worth of jewelry. 
As far as customers? "They never came back," Arango said.
HT: Business Insider

Friday, October 28, 2011

No Pay Rise?!

I think for a lot of Malaysians, it is hard to imagine what it is like to have no pay raise for many years on end. In fact, many Malaysians have come to the assumption that salary adjustments can only mean the upward kind. This attitude is so prevalent that it is ingrained into the minds of many fresh graduates today. Pay increments are now taken for granted. In fact, people expect bonuses even without working beyond what is expected of them. It is called BONUS for a reason. BONUS is paid to people who do what is BEYOND the requirements. One of the reasons I am bringing this up is the 2010 Auditor General Report that showed many of the GLCs paying out 1-2 month bonuses despite making losses year after year. One has got to ask, what are they being rewarded for? Exceptional consistency in loss-making?

Here is what I really wanted to share

This is what the average income per person in Italy looks like in the past three decades or so. More importantly, look at the last 10 years (starting from 2000). Not only has it rarely budged from the USD34-36,000 range (in real terms), it has fallen to about USD33,000 after the recent financial crisis. Can you imagine no salary increases for 10 consecutive years? Can you imagine taking a pay cut after 8 years of no pay increases?

Remember that there is no room for poor attitude and nothing comes for free. Take nothing for granted.

HT: Marginal Revolution

Thursday, October 27, 2011

Banker's Ex-Girlfriend

This is pretty interesting account of a banker's ex-girlfriend. Here is an excerpt:
"I remember the first time on a Sunday morning he told me he'd have to go into the office. I was appalled. Then I thought, wait, this is his way of telling me it's over. Turned out, quite the contrary. For him it was completely natural that if his work summoned him, he'd go. 
"This is what wrecked our relationship in the end. He was married to his work, not to me. He was working for a big investment firm, running a kind of a hedge fund. I'd tell him, just quit. You have made enough for us to live on for years to come. What's stopping you? We can travel. You are destroying your health, you can't sleep without sleeping pills any more, then in the morning you need more pills to get going. 
"And he'd say, I know you're right, this job is taking over everything, I am losing you. Give me 10 more years and I'll never have to work another day in my life, I'll never have to go back. 
"We both knew that he would never quit, He loves his job, it's his life, his identity. He'd call me up from New York, all cheery that his company put him in a double suite two floors higher than his peer which meant they'd spent $200 more than on him. Then he'd tell me it was foggy and the higher up you were in that hotel, the worse it got. "I am in a fucking cloud!" he'd say, and I'd go, "that's your karma", and we'd laugh.
Sometimes, it makes you wonder if it is all worth it. What if living the life you love meant giving up the love of your life?

HT: Joris Luyendijk

Tuesday, October 25, 2011

The Real Reason Why Manchester City Is A Contender

After the trashing of Manchester United over the last weekend, some people are beginning to believe that Manchester City are going to be contenders of the title.

I have always been skeptical of one off results. Not because I am a Manchester United fan. Because I am not. Those of you who know me long enough will know. Frankly, after seeing the results of the game, I remember thinking, "These upstarts are going to let the result get to their head and their season will crumble after Christmas".

I have been watching or following the Premier League for a really long time. And if there's one thing that I can take away from every season, it is this simple fact: "Whatever happens before Christmas does not matter". I have seen Kevin Keegan's Newcastle United blow away a 12-point lead in 1995/96.

But what I read today shows some promise:
"“This is only one game,” Mancini (picture) told a news conference. “I think United is one yard above us still ... we can change this only if we win (the title) in the end. After maybe it is different but now United is better than us.”"

This comes from a manager with pure class. After trashing his opponents (the defending champion, no less) with a score of 6-1, he still insists that the opponents are better. This is also reinforced by the fact that Mancini is able to keep Balotelli in check.

This is an example. Balotelli is a double-edged sword. He is super-talented and full of flair. But he is unpredictable and very often overdoes it. This is the huge danger that Manchester City faces. They were in danger of becoming like Balotelli when they beat Manchester United 6-1. But after what Mancini said above, I am inclined to think otherwise. 

Ridiculous Logic?

Below is the an excerpt of the story of the girl who was run over by a truck in China. It includes the reason given by the driver who knocked her down:
China wonders if, in the rush of life, it has lost its soul | Firstpost: "After the footage was aired on Chinese and international news channels, the entire grim episode has triggered an intense outpouring of outrage and angst over what many see as the wholesale collapse of ethical and moral standards in fast-changing China.

The minivan driver who knocked Wang down, and then ran over her deliberately, has since surrendered to the police, but offered a curious explanation for his action. He said he had been talking on his mobile phone when he hit the girl, but decided to run her over because it would have cost him less to pay off a dead girl’s parents than to pay for her hospital expenses.

“If she had died, I would have been required to pay only about 20,000 yuan (about Rs 1.5 lakh) in compensation, but if she were injured, it would cost me hundreds of thousands of yuan in hospital expenses,” he said.

Saturday, October 22, 2011

Volume 3 Issue 43: Two-Cent Economics

Chuck Schumer, The Big Fat Bully

Another great piece from Scott Sumner. If you have been keeping up to date with the currency debate, Chuck Schumer would be a familiar name to you. He is one of the strongest proponents of China being a currency manipulator. He has brought it up so many times since 2004 that I can't even remember. It is always some lame excuse with no backing whatsoever.

Scott Sumner calls him the big bully in high school:
If only it were true. There really isn’t any “problem” at all, but the perception is that the yuan is getting increasingly undervalued. Back in 2005, Chuck Schumer said the yuan was 27.5% undervalued, and he demanded a revaluation. China has more than complied with this request; the yuan has increased by nearly 30% in nominal terms and more than 50% in real terms. So is Chuck Schumer happy now? Not quite. He now insists the yuan is 32.5% undervalued, and demands another massive revaluation. All this despite the fact that the previous revaluation didn’t reduce the deficit by 1 cent; indeed the deficit got bigger. 
Remember the high school bully that would pick on the nerdy kid? You know, the one that would promise to stop beating him up if he just did what the bully wanted. Then when the victim complied, the bully would just issue more demands, and keep picking on the poor boy. That’s Chuck Schumer.

Talking The Walk

As opposed to walking the talk. On one hand, Najib is saying all the "right" things but the reality is quite different:
“What we can do is change our ways and by promoting cleaner technology and reducing fossil fuel emissions, start to reverse the damage that has already been done,” he said in his keynote address at the opening ceremony of expo in which Malaysia is the “country of honour”.
You can talk about fossil fuel emissions and reversing the damage. But the very fact is, while the world is taxing carbon emissions, Malaysia is still very much subsidizing it. Just a classic case of talking the walk. No walking involved.

HT: Hisham

Wednesday, October 19, 2011

Qatar’s Source of Arab Springs

I think the paragraph below is incentive enough for you to read the article:
Qatar’s Source of Arab Springs - Khaled Hroub - Project Syndicate: "There’s a joke making the rounds in the Middle East these days: three of Egypt’s former presidents, Gamal Abdel Nasser, Anwar el-Sadat, and Hosni Mubarak, meet in hell and ask each other how they fell. Nasser replies “poison”; Sadat says “assassination”; and Mubarak answers “Al Jazeera.”"

Dropbox: The Inside Story Of Tech's Hottest Startup

I have a Dropbox account but I rarely use it. I am one of those Google groupies that has his life dictated by almost every single one of its products. Yes, the person who sends me email the most is myself. That is just how I store my stuff. But here is the story of Dropbox and why they are one of the hottest startups now:
Dropbox: The Inside Story Of Tech's Hottest Startup - Forbes: "In December 2009 Jobs beckoned Houston (pronounced like the New York City street, not the Texas city) and his partner, Arash Ferdowsi, for a meeting at his Cupertino office. “I mean, Steve friggin’ Jobs,” remembers Houston, now 28. “How do you even prepare for that?” When Houston whipped out his laptop for a demo, Jobs, in his signature jeans and black turtleneck, coolly waved him away: “I know what you do.”"
Maybe I wouldn't consider them a success yet, but I think they are not very far from it. But the story of Dropbox struck a little chord with me in exemplifying what it takes to achieve "success":
Houston and Ferdowsi spent the next year pulling all-nighters. They were perfectionists. One time Houston had to track down a copy of Windows XP for Sweden because it had a unique coding quirk that was stalling Dropbox slightly. Ferdowsi had a designer spend hours tweaking the shade of Dropbox’s button inside the file system on a Mac. It was a touch darker than the Apple buttons, and it drove him “crazy” for weeks. “I am the gatekeeper here,” says Ferdowsi. “Everything has to be just so.” 
Dropbox stayed lean, which enabled it to sail through the meltdown. In 2008 it had nine employees and 200,000 customers. Two and a half years later it had added five workers. Users rose tenfold. 
Houston and Ferdowsi moved offices again and often just slept at work. They were getting every customer service e-mail and ignoring messages from their VCs. They toyed with advertising. “That’s what you’re supposed to do: hire a marketing guy, buy Google AdWords,” says Houston. “We sucked at it.” It was costing them $300 to hook one sign-up. Their challenge was marketing a product to solve a problem people didn’t realize they had and weren’t searching for. Ferdowsi from the start insisted Dropbox’s home page be a simple stick-figure video showing what the product does. No table of features and pricing; instead, a story about a guy who loses stuff and goes on a trip to Africa.
Basically, it is just as Steve Jobs had said so many years ago at the Stanford commencement:
You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.

Calvin and Hobbes - The Malaysian/US Dilemma? (repost)

I saw this again this morning but it was used to explain the US economy. When I posted this, I used it to exemplify the Malaysian dilemma. Apparently, it also describes the US banking industry. How about that?

Tuesday, October 18, 2011

Malaysians react like dicks to BN and pussies to PR

Some of you may remember that I linked Zewt before. Here he is again with his epicly accurate portrayals:
As Zewt As It Gets: Malaysians react like dicks to BN and pussies to PR: "It doesn’t matter how much BN has screwed up the country, but just some sweeteners… hmmm, steam already. Take the recent agreement to form some committee to review the electoral process… wah, check out the reaction in facebook… all dicks got hard. I even saw a comment saying BN has finally woken up and will reform. No need to know the details, just one announcement is enough to make you steam. See now what entailed out of it…
It doesn’t matter whether they spent MYR1.8b in a facebook page or wasted MYR12b+ in PKFZ or going to spend MYR5b on a mega structure (is this still going on?) or blew the budget in building the palace and a whole fucking long list of fucked-ups. Just announced that there will be no toll during Hari Raya… steam! Everyone happy…"

iPhone App Finds Wife With Another Man

It's Apple's fault:
Your Cheating Heart: iPhone App Finds Wife With Another Man: "Saturday night on MacRumors, a man saying he lived in New York City posted this:
"Divorcing wife. Thanks iPhone 4s and Find My Friends. 
"I got my wife a new 4s and loaded up find my friends without her knowing. She told me she was at her friends house in the east village. I've had suspicions about her meeting this guy who live uptown. Lo and behold, Find my Friends has her right there. 
"I just texted her asking where she was and the dumb b---- said she was on 10th Street!! Thank you Apple, thank you App Store, thank you all. These beautiful treasure trove of screen shots [sic] going to play well when I meet her ... at the lawyer's office in a few weeks. 
"thankfully, she's the rich one.""

BlackBerry Cuts Made Roads Safer

This is crazy:
"ABU DHABI // A dramatic fall in traffic accidents this week has been directly linked to the three-day disruption in BlackBerry services. 
In Dubai, traffic accidents fell 20 per cent from average rates on the days BlackBerry users were unable to use its messaging service. In Abu Dhabi, the number of accidents this week fell 40 per cent and there were no fatal accidents."
HT: Marginal Revolution

Monday, October 17, 2011

Volume 3 Issue 43: Intelligent Investing

Investing In Blue Chips or Bull Shit?

Nowadays, I have noticed some "pundits" who keep calling for the market to drop further just to show that they are smart. While they think that "normal" people would not want the market to drop, they think that they are "smarter" by wanting the market to drop further so that "good opportunities" present themselves. This is because their underlying mentality is that they want to "Buy Low, Sell High".

However, the question that is rarely answered is, "What to buy?". Sometimes, the market is just so low that they will tell you, "Just buy anything la...". This is very scary. Let me just show you a bunch of examples. Before the 2008 financial crisis, companies like Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, Bear Stearns, Merill Lynch, etc are considered "the best" of their lot. I mean, in the financial industries, if you didn't know any of those names, you would be considered ignorant. So if you had purchased any one of those companies in 2007 in the midst of the "Buy anything la..." period, this is how much poorer you will look like today:

Investors in Goldman Sachs would have lost more than 50% of their money

Goldman Sachs
Investors in Morgan Stanley would have lost more than 75% of their money

Morgan Stanley
Investors in Bank of America would have lost 85% of their money

Bank of America
Investors in Citigroup would have lost 93% of their money!!!!

Investors in Bear Stearns, Lehman Brothers and Merill Lynch would have lost more than 90% of their money as well.

Now, many of these stocks are considered "blue chips" prior to the financial crisis. So, most people would not think twice about investing in them if I were to just bring up their names.  Sad to say, there is no such thing as "Just buy anything la...".

If you want to be in the stock market, you need to do your homework. There are no two ways about this. Just to illustrate how burnt you would be if you invested in Citigroup (once considered the largest bank in the world), if you invested USD100,000 in Citigroup in 2007, you would have lost 90% and be left with USD10,000. Not only that, to break even and get back what you lost, you would need to make 1,000%. That's right.

How hard is 1,000%? Well, assuming you can make 10% per year consistently, it would take you more than 24 years to break even. Yup, what you lost in one year can take you 24 years to make back. By that time, you would have sworn to stay away from the stock market forever.

HT: Brad DeLong

Volume 3 Issue 42: Two-Cent Economics

Mark Cuban Talks Sense About Occupy Wall Street

Pretty good read throughout. Slightly long article, but worth it. Here's one of the interesting ideas that I like:

2.  Push to Make All Financial Institutions Partnerships
We should make all investment banks become reporting partnerships (meaning they still have the same reporting requirements they have today ). I would have no problem with our government loaning money to the partners of Goldman Sachs and Morgan Stanley and other Too Big To Fail Institutions so that they can buy back all public shares of their stock. Of course all those  partners would become personally liable for repaying that money back to the government.  It would probably be about 120B dollars in total to take these 2 companies private. That is far, far less than a possible bailout would cost. 
Those personal guarantees would change EVERYTHING in the banking industry. It would change the decision making process across the board.   There would be a moral hazard to every decision. Today , a wrong decision and they vacation on their yacht. As a partner,  the wrong decision and they are protesting right next to the OWS crowd as a 99pct er.  It would be the definition of having “skin in the game”.
Yup, make those bankers liable.

Volume 3 Issue 42: Intelligent Investing

Why Bill Gross Is Fat

The simple reason is because he ate 500 basis points:
…introspective mea culpas are perhaps cleansing but somewhat suspicious in nature. The purpose and even the author’s subjective assessment can always be legitimately questioned. But suspicions aside, let me begin by stating this: There is no “quit” in me or anyone else on the PIMCO premises. The early morning and even midnight hours have gone up, not down, to match the increasing complexity of the global financial markets. The competitive fire burns even hotter. I/ we respect our competition but we want to squash them each and every day. You the client have 100% of our attention as always, as do your portfolios…So where do we go from here? Our internal growth forecast for developed economies is now 0% over the coming several quarters and the portfolio more accurately reflects this posture. Yet even so, can the golden glove regain its magic? Well, as I’ve indicated,we’re showing up early every day at the ballpark – in this case for a little fielding practice.
For someone who takes millions in salary, I would expect nothing less of him. But that's what world class really means. Some of you may talk trash about his poor performance this year (below the benchmark), but he is still managing the largest bond fund in the world. This shows that he is still world class.

And he is right. The global financial markets are getting more and more complex. The financial crises is going to wait for no one. As analysts (we are all analysts, in on way or another, as long as we try to think about this), we can't wait "until we are free" to begin analyzing what's going on. This means we have to make sacrifices.

In the case of Bill Gross, he even has to sacrifice is health. It may or may not be worth it, depending on which school of thought you are coming from. But I think I can relate to that a little bit. Of course I am far from being world class, but I can certainly relate to the "fatness" part because of the amount of hours I put in.

Wednesday, October 12, 2011

Data To Prove Increase In Accounting Fraud?

Pretty neat tool to show the decrease in the reliability of accounting data of US firms. It's called Benford's Law. Basically, this is what it says:
A second earth-shattering fact is that there are more numbers in the universe that begin with the digit 1 than 2, or 3, or 4, or 5, or 6, or 7, or 8, or 9. And more numbers that begin with 2 than 3, or 4, and so on. This relationship holds for the lengths of rivers, the populations of cities, molecular weights of chemicals, and any number of other categories. What a blow to any of us who purport to have mastered the basic facts of the world around us!

Why You Should Just Be A Banker...

'Nuff said.

Full article here.

Roubini Global Economics For Sale?

Even Roubini Global Economics is losing money. I guess I must say that it is not much of a surprise. When you make a billion predictions a year, you tend to get a few correct. But at the end of the day, the quality of your advice still matters. This is not to belittle the Nobel prize won by Roubini (edit: he didn't win shit), but some of his predictions are simply outrageous.

As my professor told me in my final year at university:
If you must forecast, forecast often. If you ever get it right, never let them forget it. 
In this case, Roubini is pretty much only remembered for "accurately" forecasting the 2008 financial crisis. I guess that's something no one is going to forget?

Monday, October 10, 2011

Body Fat Correlated with TV Thickness?

I guess this proves it. Body fat is negatively correlated with the thickness of your TV.

Volume 3 Issue 41: Intelligent Investing

Can Google Predict Stock Prices?

Well, this story is pretty crazy:
A recent study in the Journal of Finance by Zhi Da and Paul Gao of the University of Notre Dame shows that data from public Google searches can be used to beat the stock market by up to ten percentage points per year. Similar findings were released last month by researchers at the University of Kansas.
Anyone care to try it?

Sunday, October 09, 2011

Volume 3 Issue 41: Two-Cent Economics

Scott Sumner Pwns Paul Krugman

The entire post is really long. Basically, Krugman has returned to his China-bashing ways with this article and personally, I don't see how a Nobel laureate can get it so wrong. As a result, Scott Sumner just bashes Krugman into the ground with his reply. Here are some excerpts:
But how do we know the yuan is undervalued? Its current value is not out of line with predictions of the Balassa-Samuelson Theorem, which predicts that countries with higher per capita GDPs will have higher real exchange rates. Krugman points to the huge Chinese trade surplus. But is their surplus actually all that large? After all, China is a very big country. As I pointed out earlier, the Germanic/Nordic current account surplus is vastly larger, despite the fact that the countries lying between Switzerland and Norway have a combined population only a tenth as large as China’s. The smaller East Asian countries also have vastly bigger surpluses on a per capita basis. So why focus on China?
What bothers me the most is Krugman’s assertion that China is “standing in the way” of an increase in US aggregate demand. This makes the Chinese seem like some sort of enemy of the US, even though the private actions of those thrifty Nordics are doing us far more harm, according to Krugman’s model. Even worse, it suggests that we are helpless victims, whereas even Krugman admits that the fundamental problem is that we don’t use monetary and fiscal policy to boost our own aggregate demand (AD.) So the “harm” being done is only harmful if our policymakers ignore textbook advice to keep AD at an adequate level. Yes, we are ignoring that textbook advice, but I’m having trouble seeing how that’s China’s fault. Again, I’m not arguing that there is any logical inconsistency there, but I can’t imagine that many of Krugman’s readers will connect the dots as I have. Most will assume that China really is “standing in the way,” not that we could offset any harm with the flip of a switch.
You can read the rest on your own. Personally, I think it is this finger-pointing that has got America into where it is right now. America is like a big bully in high school, or a jock, if you will. They have pretty much had things the way they wanted their whole lives and now, something doesn't go their way, they just can't get their heads around it. America needs to do a lot of soul-searching and accept a little bit of bitter medicine in the form of humility and understand that they themselves are the problem.

As Scott Sumner aptly puts it at the end of his piece:
The worst mistake the world could make right now is to descend into nationalistic posturing. We can all see what’s going on in Europe, and we all know how nationalism can end up hurting everyone. The last thing we should be doing right now is pointing fingers at foreigners.

We have the ability to solve our own AD problem; now we need to get on with doing it. If the Senate wants to do something constructive, give the Fed a mandate consistent with what the Senate wants the Fed to accomplish. If the Senate wants more AD, don’t try to take it out of the pockets of Chinese workers. Let’s do it the way economics textbooks say it should be done, with Federal Reserve targeting of prices or NGDP.
Don’t make policy based on zero sum thinking. The world needs growth, not trade wars. 

Saturday, October 08, 2011

What Was Steve Jobs' Contribution?

When you think about it, a lot of people give a lot of credit to Steve Jobs for the things that he "invented". But when I ask, what did Steve Jobs really invent? I think many of us would struggle to find an answer because he didn't invent anything tangible like the telephone, or the computer, or instant noodles, or the internet, or anything of that sort. He did not discover the cure to cancer, or invented the wheel, or discovered how to make fire.

So what did he really contribute? I read an interesting article by Stephen Fry, which shows more about things that I didn't know about Steve Jobs. So here is how Steve really contributed:

Henry Ford didn’t invent the motor car, Rockefeller didn’t discover how to crack crude oil into petrol, Disney didn’t invent animation, the Macdonald brothers didn’t invent the hamburger, Martin Luther King didn’t invent oratory, neither Jane Austen, Tolstoy nor Flaubert invented the novel and D. W. Griffith, the Warner Brothers, Irving Thalberg and Steven Spielberg didn’t invent film-making. Steve Jobs didn’t invent computers and he didn’t invent packet switching or the mouse. But he saw that there were no limits to the power that creative combinations of technology and design could accomplish.
HT: Stephen Fry

Zombie Economics

Awesome :) I like Krugman's title better: In the Long Run, We Are Undead.

Hat tip: Paul Krugman, Cezmi Dispinar

Friday, October 07, 2011

The Complaints Choir of Singapore

What the heck!? There is a Complaints Choir of Singapore

Steve Jobs: The Man Who Knew What Mattered

Many of us search for fulfillment and satisfaction in life. Some of us chase after leisure, material gains, etc. This very often leads to us going to work on Monday and looking forward to the weekend. We do this week in and week out, hoping to earn that extra dollar that would finally allow us to exit this rat race.

What many of us are not aware is that we entered the race as soon as we were born. Our society has conditioned us to chase after success. However, because success is hard to measure tangibly, and even harder to represent visually or verbally, we were given the most convenient representation of all, the visual kind. If you ask any 12 year-old, what they want to become when they grow up and why, chances are, they would reply that they want to make lots of money. Granted, they may be too young to realize, but very often society equates success and money. Big houses, big cars, beautiful wives. These are the things that are often equated with success.

In fact, many of us still long after these things. We have an entire wishlist of things that we desire. And why not? We are taught in economics that "more is better". For me, I think that is precisely the problem. As human animals, that is our instinct. We always crave what we can't have. We are destined to chase after what is not available to us our whole lives. Or are we?

I think Steve Jobs realized at a very  young age that none of this mattered. That is because he started with nothing. When you have nothing, it is a lot easier to appreciate the things around you. I seriously doubt that Steve was after money or any material gains throughout his career. He simply did what he thought was meaningful, and did his best in it.

The past few days, I have read many a tribute for Steve, and most of what I see are just quotes that I have read before, listened to, and many of them are from the Stanford commencement speech. Here are some of the rarer ones, with hopes that all of us can transcend beyond material desires and find that wonderful something, just as Steve had. Steve may have died young, but I think he died without regrets.
“Being the richest man in the cemetery doesn’t matter to me… Going to bed at night saying we’ve done something wonderful… that’s what matters to me.”

“Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.”

“The only problem with Microsoft is they just have no taste. They have absolutely no taste. And I don’t mean that in a small way, I mean that in a big way, in the sense that they don’t think of original ideas, and they don’t bring much culture into their products.”

“My job is to not be easy on people. My job is to make them better.”

“We don’t get a chance to do that many things, and every one should be really excellent. Because this is our life. Life is brief, and then you die, you know? And we’ve all chosen to do this with our lives. So it better be damn good. It better be worth it.”

“Almost everything–all external expectations, all pride, all fear of embarrassment or failure–these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.”
Hat tip to Salvatore Dali.

Wednesday, October 05, 2011

Volume 3 Issue 40: Intelligent Investing

The Main Streeter Portfolio (31 Sep 2011)

6 Jul 2011
Final Dividend: RM0.18 per share less 25% tax
Dividend Received: RM540.00

20 Sep 2011
Interim Dividend RM0.50 per share less 25% tax
Dividend Received: RM1,500.00

30 Sep 2011
Current Market Price: RM3.05
Cash Balance: RM90,048.48
NAV per share: RM1.0225

This portfolio will be updated whenever there is a transaction or every quarter ending 31 March, 30 June, 30 September and 31 December.

Disclaimer: All company analyses, including the paper portfolio that appear in this newsletter are derived from facts gathered from various sources and the contributors' personal opinions and for education purposes. It is NOT an invitation to deal in securities, and especially not a recommendation for buying or selling any stock. The contributor(s) do not guarantee the accuracy of the facts being presented. The accuracy of such facts are only as reliable as the sources that they are obtained from. Please consult your investment advisers before acting on any information provided by the analyses here. The authors most likely have interests in the stocks that are discussed in this website. 

Creativity (Calvin & Hobbes Style)

The Logic Of Politicians

I don't know which is worse. I'd like to think that our politicians have the ability to think logically but that could only mean that they have the intention to hoodwink us. Here is an example:
“It should be mentioned that the EC has proven its credentials in the past 12 general elections. This includes the March 2008 election which saw the opposition winning 82 of the 222 parliamentary seats contested. 
"In addition, it also gained control of four states as well as remained ruling Kelantan. Of the total 16 by-elections held after the 12th general election, eight were won by the opposition. 
"All of this ensures credible election - free and fair. The election results were accepted as legitimate by all parties, be it the government or opposition. This led to the formation of a recognised government,” said Nazri.
If you were not careful, you would have agreed that, yeah, if the elections were not fair, how could the Pakatan win "so many" seats. But if I turn it into an analogy that everyone can understand, I think you would realize that you have just been a victim of logical fallacy. Here goes:

In a football match, your team manages to score 2 goals but the referee awards seven dubious penalty kicks to the opposing team, which eventually led to a 7-2 defeat for your team. Now, after the match, if you accuse the referee for being biased, the FA comes in and says, well, you managed to score 2 goals. That ensures that the match is fair. Otherwise, you would not have scored any goals. It doesn't take a genius to know that such an argument is stupid.

I just wonder why Nazri thinks he can get by with such a weak argument. It makes me worried that he is the de facto law minister. I really don't know if I should be worried that he can't think logically, or if he thinks we can't think logically.