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Articles for the week ending September 26th of 2009

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  • The paradox of the US dollar & interest rates (The Economist): Buttonwood touches on an issue that has been puzzling me for months. Buttonwood wonders if the US dollar is destined to decline significantly, whereas I look at it from the bond yield point of view. Namely, why are US government bond yields remaining low if all assets are rising and the US dollar is declining? Sure, it could be due to Quantitative Easing but that doesn't seem to be very large (also, haven't the central banks started reducing their QE?) It's also possible a US$ carry-trade has developed but it is hard to say.

  • (Highly Recommended) Jae Jun looks at Microsoft's Earnings Power Value (Old School Value): I am not familiar with Earnings Power Value (EPV), a method that seems to have been developed by Bruce Greenwald, but it looks interesting. Jae does an excellent job running through the analysis and I recommend that you take a look at it even if you have no interest in the EPV method.

  • (Recommended if interested in entrepreneurship) Entrepreneur - Cynthia Barcomi and her German cafe (BusinessWeek): If you are into entrepreneurship, check out this story. It's an inspirational story of a small cafe business that was started by an American woman in Germany. The business is small but I like the hard work she had to to go through... BusinessWeek has a whole bunch of stories on entrepreneurship so, if this topic interests you, check out other stories by following this link.

  • (Recommended if interested in entrepreneurship) An inside look at shoe retailer Zappos (The New Yorker): Amazon recently acquired Zappos, the online shoe retailer, and, in this timely article, Alexandra Jacobs provides us with a detailed look at Zappos. It gives us the background of serial entrepreneur Tony Hsieh who became wealthy with a technology venture in the late 90's but Zappos will probably be his lasting legacy.

  • EDCI potential liquidation (CSG; via GuruFocus): I have done zero due diligence so can't say if this is an attractive deal yet. I'll take a look when I get a chance.

  • (Recommended) Inflation vs deflation debate with Mike Shedlock (Mish's Global Economic Trend Analysis): Mike Shedlock debated Daniel Amerman on the topic of inflation vs deflation during last week's Financial Sense Newshour (MP3 audio here) and he writes up a rebuttal for Daniel Amerman's original post debunking deflation (part 1 here and part 2 here.)

  • AEI on China's boom (American Enterprise Institute; h/t Evan at GuruFocus): Always be careful with think tanks since they tend to be very opinionated. I'm not a fan of AEI but thought this publication was quite good in describing how the methodology used to measure economic performance differs between China and USA. I recommend that you read at least the first half of the article to get an idea of differences. For example, the article mentions how "China's economic statistics are based on recorded production activity, rather than being a measure of expenditure growth--defined as the sum of consumption, investment, government spending, and net exports--as U.S. data are."

  • (non-investing) The Economist's obituary of neoconservatism "founder" Irving Kristol (The Economist): Irving Kristol was one of the most powerful conservatives of the last few decades. His ideology started gaining prominence with Ronald Reagan and attained its peak with the George Bush administration, which presided over America from 2000 to 2008. Many on the left hate neoconservatives but fail to realize that Kristol and other neoconservative thinkers originally were left-leaning. My guess is that neoconservatism has died along with the passing of its main proponent. The big mystery to me is who will take control of American conservatives now.

  • Are you the worst investor out there? You can win a trip to Rome. No joke! (The Economist): LOL A company is running a promotion where the three worst investors during a select period during the crash can win a trip to Rome. Contest closes soon :)

  • Marc Faber Bloomberg video interview (Bloomberg; via GuruFocus): Lengthy interview covering some new topics.

  • CNBC Julian Robertson interview (CNBC; via GuruFocus): I don't usually follow traders, unless they were macro investors, but it's always worth listening to diverse sources.

  • (Highly Recommended) Warren Buffett's desert island indicator (Ravi Nagarajan; via GuruFocus): Warren Buffett rarely says anything new, at least for followers who have heard him talk before, but when he does, it is often highly insightful and worth thinking about. Buffett was supposedly asked what single economic measure he would look at if he were stuck on an island. He responded by saying that rail car loadings will be one of his top measures. One should probably also consider marine shipping, airborne shipping, trucking, and other similar measures. If you don't want to look at economic indicators, you can probably look at share prices of transporation companies (companies like UPS, FedEx, Canadian National, etc.) (As a side note, although many consider technical analysis to be voodoo, perhaps rightly so most of the time, some measures may have some merit. For instance, the Dow Theory looks at the Dow Jones Tranportation Average relative to the popular Dow Jones Industrial Average. The Transporation Average, which consists of shares of transportation companies, can be thought of as a rough proxy for rail car loadings, airborne shipping, marine shipping, and so on. Although share prices don't perfectly track economic indicators, they do provide a crude proxy.)

  • Slide-show: 25 highest paid female executives (Fortune): All the desperate, greedy, single men now know who to target. Women always went for wealthy men; time to reverse the roles now ;)

  • Jobless recovery in Canada? (The Globe & Mail): The job situation right now is definitely not pretty. My company isn't doing too well and my job may be cut hence I have started looking for a job. So these stories are interesting while kind of scary to me. One of the things about job losses is that it can be indiscriminate. As this story, covering several cases in Canada, illustrates, you can be a well-paid professional making $100k+ for what many would have considered an attractive industry, oil & gas, and suddenly lose your job. The surprising thing to me is the huge disconnect between the unemployment rate and the economic growth in Canada. Unlike USA, Canada's GDP did not contract very much. In fact, the recession was very short and is considerd by Bank of Canada to have been very mild. Yet the unemployment rate has risen quite a bit. In contrast, it makes sense that unemployment in USA is skyrocketing because US GDP did contract quite a bit. USA is seeing massive restructurings in industries such as financial services, construction, automobiles, and so forth. These industries are likely seeing permanent destruction of jobs.

  • (non-investing) Synthetic biology - revolutionary and kind of scary at the same time (The New Yorker): Of all the hard sciences, biology is my weakness. I was never interested in it and didn't really take many courses, either in High School or University. This also means that some topics are kind of puzzling to me. Just like how some people look at the stars and are puzzled—unlike such individuals, I like astrophysics so am not as puzzled—I wonder about biology. In particular, genetics are puzzling to me. This article in The New Yorker by Michael Specter covers a revolutionary field called synthetic biology. This is the area of biology that seems to deal with creation of new organisms. Scary and fascinating at the same time.

  • (non-investing) Review of several books on a great American president, Abraham Lincoln (New York Review of Books): A great orator and a revolutionary, Lincoln's importance to America cannot be overstated.

  • The evolving nature of news (New York Review of Books): An excellent run-down of the present newspaper situation. I like how the author, Michael Massing, details the alternative sources that are emerging and how the business models are shifting. I sincerely hope that the news media survives in some decent shape. The media provides a check on the power of government and businesses. Without it, corporations and/or governments will rule...

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