Articles for a rainy August 22nd of 2010

The weather depends on where you are but it is raining in Toronto today. Although nothing appears to have happened in the last few months, with stock prices barely below how they started the year, I believe some major changes have occurred. US Treasuries have rallied way beyond what they were an year ago. In fact, depending on the bond you look at, they have declined below any point, except the late-2008/early-2009 crisis period.

September is often one of the most volatile months for stocks—both up or down—so it remains to be seen if we are in for a big move in either direction.

Not many articles this week...
  • Differences between Canadian and American poison pills (DealBook, The New York Times): Mining super-giant BHP Billiton made a proposal to Canada-based Potash Corporation's management. The offer was rejected and Potash enacted a poison pill. This article talks about some major differences between Canada and USA. Risk arbitrage investors who invest in Canada should check out the article. The impression I get is that Canadian laws are more favourable to bidders while American poison pill laws seem to favour management and takeover target... I don't know much about either of these companies but my cursory opinion is that BHP is probably overpaying for Potash. This is a commodity business and unless you expect potash prices to skyrocket permanently—the risk with commodity prices is not that they won't go up, but that they won't stay there—this is a costly ego trip for BHP.
  • Does income inequality lead to financial crises? (The New York Times): Hard to say with inconclusive evidence so far. The big one that supports the thesis is the 1929 vs 2007 one: "Income disparities before that crisis [1929] and before the recent one were the greatest in approximately the last 100 years. In 1928, the top 10 percent of earners received 49.29 percent of total income. In 2007, the top 10 percent earned a strikingly similar percentage: 49.74 percent. In 1928, the top 1 percent received 23.94 percent of income. In 2007, those earners received 23.5 percent. Mr. Moss and his colleagues want to know if huge gaps in income create perverse incentives that put the financial system at risk."
  • An inside look at a fake shoe-making factory in China (The New York Times Magazine): A detailed look at the counterfeiting business.
  • Slideshow: The trades that made these 14 investors (Business Insider; h/t Financial Post): Mostly covering short-term investments by traders
  • Slideshow: Worst trades of all time (Business Insider): I'm sure there are even worse trades
  • Slideshow: 20 ways to become rich (Bloomberg Businessweek): Well, pick one... ;)
  • Slideshow: Popularity of various items around the world (Bloomberg Businessweek): If you have time to kill, check out some of the popular brands in various countries.

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