Can Turtles Fly?

Most of the world celebrates Labour Day on May 1st but in Canada and America it's the first Monday of September. Labour Day is going to be quite ironic and possibly unfortunate for me and I'll briefly mention why next week. In any case, on to investing... Here are some articles you may find worth checking out... (Recommended) Andy Grove of Intel, a legend (The Economist): The Economist published its Technology Quarterly —you can purchase a printable PDF for $4.95 if you wish—which is always interesting for the stories it picks up on cutting-edge technology. The linked article profiles one of the giants of the computer industry, former CEO of Intel, and probably employee #3, Andy Grove. Gordon Moore will always be thought of as the #1 techie at Intel but Andy Grove is, and will be, more famous for his business vision. He is definitely one of the top American businessmen in history. Interesting thought in this article well worth reading. (Recommended) Potential liquidation of ...

Like most liberals, I'm a fan of Paul Krugman. However, I think he is a bit over-rated on some issues and investors shouldn't blindly follow any economist. He is very good with international macroeconomics but I'm not so sure about his opinion of capital markets. He called the housing bubble but his concern for high commodity prices in 2008 turned out to be incorrect. He is one of the few true Keynesians around (contrary to some mistaken views, Keynesianism is not about high government spending and, no, George Bush is not a Keynesian.) Paul Krugman visited the London School of Economics last week and gave three lectures. Here are the videos of those lectures, along with some related articles. Lecture - The Return of Depression Economics Part 1: The sum of all fears Slides Part 2: The eschatology of lost decades Slides Part 3: The night they reread Minsky Slides For the videos, visit this link and check out the June 8th, 2009 to June 10th, 2009 lectures by Paul Krugman . If ...

Some articles that you may find interesting, in no particular order: Which economic indicators are important? (The Globe & Mail): A nice article that speculates on economic indicators that are useful, and those that may not be so. Even though I'm macro-oriented, I don't really pay regular attention to economic indicators. I think they are only useful in developing a rough idea of whether the world, or a country, or an industry is "good", "bad", or whatever. As for timing, or trying to pick sectors or stocks, they confuse me more than anything. David Rosenberg Q & A (The Globe & Mail): David Rosenberg was the senior economist at Merril Lynch who recently moved to a firm in Canada. I used to have access to his reports through my discount broker (HSBC) but not anymore. He was pretty good IMO. He was mildly bearish—but not superbearish like Stephen Roach at Morgan Stanley—throughout the last few years and I'm sure he saved his clients some mone...

Congratulations to Paul Krugman for winning the Nobel prize in economics . Strictly speaking, there isn't a Nobel prize in economices but the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel is considered to be the unofficial Nobel prize in this field. I'm not an economist and don't really understand or agree with much of it but here is what he is being cited for: The Royal Swedish Academy of Sciences has decided to award The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008 to Paul Krugman (Princeton University, NJ, USA) for his analysis of trade patterns and location of economic activity. Patterns of trade and location have always been key issues in the economic debate. What are the effects of free trade and globalization? What are the driving forces behind worldwide urbanization? Paul Krugman has formulated a new theory to answer these questions. He has thereby integrated the previously disparate research fields of int...

Several key central banks of the world cut interest rates today in a co-ordinated move, attempting to combat the financial crisis. Central banks in Canada, the United States, Britain, the European Union, Sweden and Switzerland cut key lending rates by half a percentage point. China's central bank joined in by cutting its key interest rates 27 basis points as of Thursday. Only Japan, among the major central banks, opted out, since its rates are already at a rock bottom 0.5 per cent. This is a mistake in my opinion. EU and several others can cut rates (they haven't cut much in the last year and are thought to be running a somewhat tight policy) but the FedRes and the Canadian central bank should not be cutting. Paul Krugman approves of the cut--I don't--but still mentions how commercial paper rates have not moved much in the last year even though short-term central bank rates are much lower. This basically means that the rates aren't really flowing through to the end-us...

I remember Jim Grant being one of the first ones to point out how the FedRes balance sheet was turning into a disaster but it looks like Paul Krugman shares similar views on his blog as Grant: Third world America? One thing I learned way back in grad school was that there was a big difference between the assets of first-world, mature-country central banks and those in rickety developing economies. The Fed and its peers had clean balance sheets, with basically nothing but Treasury bills on the asset side. Third world central banks, on the other hand, did a lot of direct lending to the private sector, and had all sorts of dodgy assets on their books. Now the Fed is in the business of directly buying commercial paper, in some cases unsecured. Wow. Apart from agreeing on the above point, the difference between Grant, a follower of Austrian Economics, and Krguman, a follower of Keynesian economics, is that Grant thinks the FedRes shouldn't be undertaking these actions whereas Krugman s...

The bailout will likely pass in one form or another, now that presidential candidates John McCain and Barack Obama are asking for it to be supported . Some, such as Paul Krugman and John Hussman have argued that the Paulson plan misses the most important need: a need to provide additional capital to financial institutions. The linked article from John Hussman explains in clear layperson language why this bailout does not help the institutions in question, unless the government purposely overpays them. If the government does purposely overpay, it will raise ethical issues regarding who actually gets to make the decisions, who profits (or minimizes losses,) and so forth. A lot of left-leaning individuals, including me (I'm in Canada though,) have little faith the Bush administration. It already took the country on a totally ficticious war, fired attorneys that it did not like, formulated environmental policy in secret meetings influenced by industry, awarded very expensive military...

(Note: I'm not an American so this comment is simply my opinion of my neighbour to the South :) ) Ignoring the fact that I don't think the $700 billion US bailout plan is going to have much impact, I don't like the immense power being given to the Treasury. I'm not a fan of the Bush administration and we all know how much it loves to seize power. The bogus Iraqi war, started under complete lies is an example; another is the passing of the Patriot Act, which probably stripped more rights from Americans than the terrorists or the Nazis or anyone else that they faced before (fortunately, though, the Supreme Court isn't going alone.) Congress and Senate also play crucial roles in voting but the presidential administration is what sets the strategy. I think the government needs to be really careful about giving too much power to the Bush administration (and the subsequent one after that.) Preliminary drafts of the proposal seem to give the Treasury, being run by Henry Pa...

No, this is a different kind of knowledge. Paul Krugman has a quite humourous post on his blog about acronymns that have been floating around in the investment world lately: So, OFHEO got out of line with PCE, leading to a plunge in CDOs backed by RMBS, at least according to ABX. CRE looks similar, according to CMBX, and ABI suggests bad stuff ahead. Meanwhile, both the TED spread and A2P2 are flashing red, not to mention ABCP and ARS, which have just gone away. (Nobody even remembers MLEC.) HELOCs are being cut. Can TAF and TSLF save the day? (source: Paul Krugman, The Conscience of a Liberal blog, March 19, 2008) So how well did you understand all that? If you knew the terms, you are probably a bad investor ;) It probably means that you made bad investment decisions and ended up being in the middle of the biggest financial crisis to hit Wall Street in over 25 years. I know all the terms except ABI and A2P2. If I didn't make my disastrous investment in Ambac, I probably wouldn...

I ran across an excellent opinion piece in Fortune that talked about the problems with investment banks (on a side note, there is also an interview with Paul Krugman , an economist, who thinks the housing mess can get much worse). Written by Shawn Tully, the article, titled The end of Wall Street as we know it , points out three root problems at Wall Street firms. Everyone should consider the three issues that I quote below before investing in any investment banks. I think the article is very good at identifying why investment banks are often better at enriching employees than shareholders. The three big weaknesses of Wall Street are deeply embedded in its culture. First, firms rely far too heavily on trading as opposed to solid, reliable fee-based businesses favored by big commercial banks. As we'll see, one type of Wall Street trading is consistently lucrative. The rub is that firms always blow it on the risky trading. Second, firms embrace leverage levels so dangerous that even...

Paul Krugman, who has been bearish the US$ for ages, is of the opinion that it isn't so bad. He makes an entry in his blog about this. The US economy is going to suffer from housing, but apart from that, I also share some of Paul Krugman's views. I don't see how a weak US$ is bad for USA per se. The weak US$ should reduce the current account deficit, by increasing exports and weakening imports. We have actually seen this for the last year or so, with current account deficit declining. All throughout the 90's, the Canadian dollar declined quite a bit yet the economy was doing well. I think USA will end up in a similar situation. This is one reason that, although I'm bullish on Japan, I am not too sold on their exporters. The market is bearish on Japan (in fact the Nikkei is the worst performing major index, with negative returns this year) but those that do like Japanese stocks tend to favour the exporters like Toyota, Sony, Nintendo, and so forth. If the Yen carry ...

Am I Ever Going to Stop Talking About Housing? I don't think I'm going to stop talking about housing until... oh... late 2008. On top of it impacting the economy, it also presents potential opportunities. Housing-related sectors are some of the most contrarian sectors out there. Paul Krugman of New York Times recently summarized some key housing charts in his blog entry. The charts easily illustrate the high-level view of what is unfolding. Check out the link to get a quick overview of the unprecedented boom in housing, and the inevitable unprecedented collapse that is unfolding. All the charts that were referenced by Paul Krugman are important but the one that contrarians may want to pay attention to is the one on defaults by mortgage origination year. The key insight, to me, is that securitizations before 1995 were fairly good--even for subprime. But anything after 1995 (or thereabouts) is highly questionable. I am thinking of investing in Ambac (ABK) (I reviewed it yesterd...