Miscellaneous articles for the week ending December 6th, 2008

Some items I found interesting, in no particular order:

• How did the rating agencies mess up so badly? (The New York Times): An article looking into Moody's and how it was culpable (incompetent?) in the credit meltdown.
  
• Review of the book, Dubai: Vulnerability of Success by Christopher Davidson (The New York Times): Long-time readers of this blog may notice that I have an interest in Dubai so I tend to read articles related to it. NYT reviews a book that raises the serious issues that Dubai needs to overcome if it is to succed in the future. It seems that this book does not touch on the greatest threat to Dubai, the real estate bubble, and, instead, touches on social and political issues that are far more important in the long run: "He warns of possible laborers’ protests against low wages and unsafe work sites, a potential backlash against the flowing alcohol, the gambling, the low attendance at mosques and a declining use of Arabic without full fluency in English. He also treats of smuggling, shady arms dealing, money laundering and human trafficking of girls and women from around Asia. International pressures, Mr. Davidson writes, have led the U.A.E. to pass new laws and tighten regulations. Still, these issues are generally overlooked in the gleaming Dubai brand cultivated by the emirate’s boosters. For Mr. Davidson, Dubai’s greatest weakness lies in its autocratic governing system."
  
• Will oil keep falling? (The Economist): The Economist has the dubious distinction of asking if are drowning in oil right near the bottom (Drowing in Oil? March 4, 1999) so it's somewhat humourous to see it asking if oil will decline even if OPEC keeps cutting production. Unlike the 1999 oil call, when I wasn't really investing and it wouldn't have been contrarian to be asking if oil can drop further when it was trading at multi-decade lows, I am tempted to think it may be onto something this time. I have no strong opinion of whether oil will fall further but there is little to convince me that oil prices will rise materially in the future (actually there is one bullish justification for commodites that I have seen and it comes from some radical view of Jeremy Grantham and I'll write a future post about it.) Anyway, the collapse is oil prices is having a massively positive impact on the world's economies, except the oil producers of course (net-net it's a positive.) If you think the GDP numbers coming out of USA, Canada, China, and others, are very bad, imagine if oil was still $140.
  
• America and The Downside of Privatized Healthcare (The New York Times): This is just a news story and isn't investing-related. The linked story talks about people losing their healthcare due to job losses. This is one of the big downsides of America's healthcare system, which is essentially privatized (although it still pays a big chunk in certain conditions.) If you lose your job, you are toast; and I remember reading somewhere that a very large number of people who default on their homes do so due to healthcare affordability issues (note that this is a general comment and probably doesn't apply to the current housing situaiton which is abnormal.) I don't know the exact rules but various governments in the US do provide healthcare coverage for those that cannot afford it. I'm not sure what the rules are but I suspect it doesn't cover the middle class (I remember reading some stories (this pertains to the legal system; not healthcare) about how, some middle class citizens in Canada were being bankrupted by the legal system due to the extremely high costs; but if you were poor or working poor, you did fine because the government would pay the bills.) I don't have a strong opinion of whether socialied healthcare is necessarily better but one of the benefits is that citizens can act independently and don't have to depend on their jobs.
  
• Warren Buffett's four famous market calls in 1974, 1979, 1999, 2008 (Contrarian Investing Blog; original source: Tilson Funds): The 1999 article is a must-read in order to understand Buffett's macro thinking. He rarely makes macro calls and isn't very good at it but he knows when valuations are extreme. The 1979 article is also worth checking out.
  
• Learning from mistakes with financial statement analysis (Old School Value): As you may know by now, I'm way more macro-oriented and hence is not a clasic value investor. When I do look at financials I take a cursory glance and simplify as much as possible. However, becoming an expert on financial statments is a more surer path towards wealth. Jae Jun goes over a mistake he made with one of his investments in this blog entry.
  
• Tanta of CalculatedRisk passes away due to ovarian cancer (Calculated Risk): It's always sad to see such a talented person pass away at a young age :( For those not familiar, Tanta, an extremely talented blogger, was a contributor to the excellent and, bearish-oriented, Calculated Risk blog. She had been battling cancer for a while and, even through that ordeal, wrote numerous detailed articles about housing. I don't think Calculated Risk will ever be the same... Tanta will be immortalized with her famous words: We're all subprime now.