Dear Readers...I’m very interested in growing the readership of this weekly column. I appreciate you sending this to your friends and family.
Happy Holidays,
Miguel – Founder of SimoleonSense
http://www.simoleonsense.com/
P.S. It takes considerable energy to put this together, if you post these articles on your website(s) I ask that you kindly include a reference to this post. Thanks
PPS.Attention! New Section- Finance
Send us your thoughts on the weekly review to miguel [at ] simoleonsense [dot] com
Weekly Cartoon: (Via Econossuer)

Weekly Joke: (Via True/Slant)
Q: How many Austrian economists does it take to screw in a lightbulb?
(answer below the fold)
A: You can’t make quantitative predictions.
I’ll be here all night, folks.
Favorite Piece Of The Week:
Consumer Behavior: Restaurants & Menu Mind Games- h/t Julie – Via NYMag – In his new book, Priceless: The Myth of Fair Value (and How to Take Advantage of It), author William Poundstone dissects the marketing tricks built into menus—for example, how something as simple as typography can drive you toward or away from that $39 steak. Puzzles, anchors, stars, and plowhorses; those are a few of the terms consultants now use when assembling a menu (which is as much an advertisement as anything else). “A star is a popular, high-profit item—in other words, an item for which customers are willing to pay a good deal more than it costs to make,” Poundstone explains. “A puzzle is high-profit but unpopular; a plowhorse is the opposite, popular yet unprofitable. Consultants try to turn puzzles into stars, nudge customers away from plowhorses, and convince everyone that the prices on the menu are more reasonable than they look.” Poundstone uses Balthazar’s menu to illustrate these ideas.
Miguel’s Weekly Favorites:
My Friend Eric King Interviews John Williams of Shadow Stats – Via King World News
[url=http://www.nytimes.com/projects/magazine/ideas/2009/]
9th Annual Year In Ideas[/url] – Via NYT Magazine – The Times Magazine looks back on the past year from our favored perch: ideas. Like a magpie building its nest, we have hunted eclectically, though not without discrimination, for noteworthy notions of 2009 — the twigs and sticks and shiny paper scraps of human ingenuity, which, when collected and woven together, form a sort of cognitive shelter, in which the curious mind can incubate, hatch and feather. Unlike birds, we can also alphabetize. And so we hereby present, from A to Z, the most clever, important, silly and just plain weird innovations we carried back from all corners of the thinking world. To offer a nonalphabetical option for navigating the entries, this year we have attached tags to each item indicating subject matter. We hope you enjoy.
Understanding scam victims: seven principles for systems security - Via cl.cam.ac.uk – The success of many attacks on computer systems can be traced back to the security engineers not understanding the psychology of the system users they meant to protect. We examine a variety of scams and “short cons” that were investigated, documented and recreated for the BBC TV programme The Real Hustle and we extract from them some general principles about the recurring behavioural patterns of victims that hustlers have learnt to exploit. We argue that an understanding of these inherent “human factors” vulnerabilities, and the necessity to take them into account during design rather than naïvely shifting the blame onto the “gullible users”, is a fundamental paradigm shift for the security engineer which, if adopted, will lead to stronger and more resilient systems security.
The Encyclopedia of Counterintuitive Thought- Via NYMag – In the aughts, the shocking hidden side of everything became the only side of anything worthy of magazine covers and book deals. Social scientists applied their techniques to the problem of climate change; liberals who wanted to be taken seriously had to come up with arguments for conservative policies and vice versa. Everywhere in the media, the former creators of mass consensus devoted themselves to contradicting the conventional wisdom. Here, a selection of the most unlikely ideas in a decade that was always looking to blow your mind.
Multitasking, the Effects: A Culture Less Thoughtful, Less Productive, Less Creative- Via Britannica – Are we stuck on the surface of the digital age? Surely, our lives have been enriched by our newfound access to oceans of information, the extraordinary expansion of our visual world, our global mobility and social connectivity. But the digital age is also a distracted age, and many of the new ways in which we think and work may be undermining our ability to go deeply in thought and relations. That sets the stage for the kind of short-term, shallow decision-making that played a role in the economic meltdown – and could hobble our recovery.
Multitasking, the Solution: Understanding and Re-cultivating the Virtues of Attention - Via Britannica – If you ask a neuroscientist about the crucial human faculty of attention, they immediately begin speaking in the plural. Attention is not a single entity. It’s now considered to be an organ system, like circulation or digestion, with its own anatomy, physiology, and chemistry. And it’s made up of three “networks” or types of attention: awareness or sensitivity to our surroundings; focus, or the “spotlight” of the mind, and executive judgment, a package of higher-order skills related to planning and judgment.
Over-confidence in self-control leads us to temptation – Via Research Digest Blog – The researchers first demonstrated this in relation to mental fatigue. One group of students performed an easy two-minute memory task whilst a second group completed an arduous twenty-minute version. The group who’d completed the easy version subsequently rated their ability to overcome mental fatigue more highly than the group who’d performed the arduous task. What’s more, the easy group said they planned to leave more of their coursework until the last week of term, consistent with their inflated belief in their ability to work through fatigue.
Free Book: Belief Attitude, Intention, & Behavior – An Introduction To Theory & Research - Via Umass
Exclusive Features (The Must Reads):
“Financial Reform, or, Rearranging Chairs on the Titanic” - Via Naked Capitalism – Is there an alternative to the ineffective and wimpy Congressional “reforms”? Sure. Forget about reforming derivatives markets, ratings agency behavior, or too big to fail doctrine. Here are three easy steps to real reform.
How buying a home is gambling - Via Felix Salmon – The problem here is that no one ever buys a house with their eyes that wide open, fully cognizant that they are taking a calculated risk in which they know full well that there’s a non-trivial probability that the consequences of their “investment” will be foreclosure, bankruptcy, and homelessness. Investments don’t work like that: if you’ve laboriously saved up enough money to scrape together a downpayment on a home, that’s money you’re not going to gamble. The number of people genuinely comfortable with taking that kind of downside risk is basically zero, as it should be. (Remember that most homeowners have families to support: they’re not just gambling their own livelihood, but that of their family too.)
When regulators can’t do math: gas pipeline edition – Via Bronte Capital – The Federal Regulatory Energy Commission (the FERC) is charged – amongst other things – with regulating the rate of return on interstate natural gas pipelines. Rates on these pipelines are by-and-large regulated so as to achieve a targeted return on equity. Quite of its own volition the FERC has called for a judicial review of on three Midwestern gas pipelines including Natural Gas Pipelines of America (NGPL). In its last rate case (1996), NGPL’s target rate of return was set at 12 percent.
Video: John Bogle interview with Nell Minow- Via Bogle Blog – Mr. Bogle was interviewed recently by the Corporate Library’s Nell Minow. You may watch the interview by clicking here.
[url=http://harbaugh.uoregon.edu/Papers/EndowmentInChildren.pdf]
Are Adults Better Behaved Than Children? Age, Experience, and the Endowment Effect.[/url]– Via UOregon – We find that large increases in age do not reduce the endowment effect, supporting the hypothesis that people have reference-dependent preferences which are not changed by repeated
experience getting and giving up goods.
Sam Zell On Hammer Talks
Features:
The Financial Times: Trading Room – Video Interviews With Top Traders & Financial Participants - Via FT
Inflating Away U.S. Debt – Real Time Economics – WSJ:– Via Finance Professor – Some fear that inflating the nation’s debt away is the path of least resistance for political leaders who can’t make the hard choices on taxation and spending….
Africa builds as Beijing scrambles to invest – Via FT – A few years ago, Lukas Lundin, a mining executive, rode his motorbike 8,000 miles from Cairo to Cape Town. His journey, which took just five weeks, meandered through 10 countries, including Sudan, Ethiopia, Malawi, Zambia and Botswana. He was amazed to discover that 85 per cent of the roads he travelled were tarred and of high quality. Many had been built by Chinese companies.
Elizabeth Warren Reining in, and Reigning Over, Wall St - Via Newsweek – Conservative Joe Scarborough thinks she should be treasury secretary. Lefty Matt Taibbi thinks she should run for president. Wherever you sit on the political spectrum, it’s clear that Elizabeth Warren, the Harvard Law professor charged with overseeing the government rescue of the financial system, has struck a nerve with her plain-spoken populism. She took time from preparing her students for their final exams to critique the Obama administration’s efforts to stop foreclosures and to tell NEWSWEEK what she thinks is the real solution to our financial mess. Hint: it’s not breaking up big banks.
What the wealth of nations is really built upon - Via FT – It is an old question: why are some countries rich and others poor? Sir Partha Dasgupta, a hugely accomplished economist, born in Dhaka and educated in Delhi and Cambridge, is as well qualified as anyone to come up with an answer – which he did, delivering this year’s Royal Economic Society public lecture.
Why is “real” unemployment skyrocketing?– Via stone – At this point in the economic cycle, people typically say: “Sure, the unemployment rate is x, but what about all those people who have stopped looking? If we counted them, the unemployment rate would be y.” You know, people ask the same question in every economic cycle. And the answer is: “the ‘real’ unemployment rate is always proportionately higher than the unemployment rate.”
[url=http://www.sciencedaily.com/releases/2009/12/091210125924.htm]
Brainstorming Works Best in Less Specialized Efforts, Study Finds [/url]- Via ScienceDaily — Applying brainstorming techniques to new product development works best when the collaboration employs participants from varied specialties gathering to develop a less complex product, according to the Management Insights feature in the current issue of Management Science, the flagship journal of the Institute for Operations Research and the Management Sciences (INFORMS®).
The New Bubble in the Barbarous Relic that Is Gold - Via RGE Montior – In recent months gold prices have risen dramatically, first breaching the US$1000 barrier, then jumping another 20% in the past few weeks, surpassing US$1200 before correcting downward again to around US$1100. Some gold-bug bulls say the gold price could eclipse US$2000 in the next couple years. Is that possible? Is the recent rise of gold prices justified by fundamentals? An analysis of the facts suggests that a good part of this rise in gold prices is driven by a bubble.
Finance & Investing:
Convera Corp - Via Alex Bossert On Value Investing – Convera is a liquidation play. Convera is trading for $.22 and the company estimates investors will receive $.26 per share in cash in the next 12 months and an additional $.11- $.19 after intellectual property is sold. The trading volume on Convera shares is small with around 150,000 shares traded a day.
Intrinsic Value as described in Security Analysis – using Concept Visuals – Via Indian Investor – So I got around to reading and learning the book in a different way, using Concept Visuals(a technique invented by a friend of mine, Sanjay Vyas). I made a Concept Visual about Intrinsic Value as described by them in the book…(do let me know your feedback after viewing it.)
Women Hedge Fund Managers Outperform Men: – Via Finance Professor – “Women also, apparently, make better money managers according to another study by two professors at UC Davis [3]. That study found that overconfidence caused men to trade stocks 45 percent more often than women, thus lowering their net portfolio returns by 2.65 percent per year (compared with 1.72 percent lower returns for women traders). Moreover, several studies show a link between profit and gender. Companies with several high-ranking women at either officer or director levels tend to have higher earnings per share, return on equity and stock prices than competitors with few or no senior women.”
Caution With Dividend Paying Stocks - Via WSJ – The whole point of holding bonds and cash is to provide income and safety to temper the risks elsewhere in your portfolio, like the risks of owning stocks. No matter how fat a dividend they offer, utilities and other high-yielding stocks are still stocks. Preferred stocks, convertible bonds and junk bonds behave like stocks.
A closer look at the “High Minus Low” strategy: Component returns (Part 1) & (Part 2) – Via Greenbackd -In yesterday’s post we discussed some informal analysis I’ve undertaken on the returns to the quantitative investment strategy known as “High Minus Low” or HML. The first step was an analysis of HML’s components, high and low BM stocks. I described the HML strategy in some detail and analysed the long-term diminution in the returns to those components. I think that the returns to both high BM and low BM stocks have been attenuating significantly over time. The phenomenon persisted over whichever recent period I analysed (since 1926 to the present day, or over the last 25, 20, 15 or 10 years). This suggested that it’s got harder over time to earn excess returns as a value investor employing a high BM strategy.
[url=http://www.nytimes.com/2009/12/06/business/06stra.html]
When the Performance Looks a Little Too Good [/url]- Via NYT – But the performance gap between the weak and the strong has rarely been as pronounced as it has been since March’s market lows. The extreme outperformance of the more speculative stocks could make them vulnerable to another market shock.
Finreg I: Bank capital and original sin- Via Interfluidity – Banks are not financial intermediaries. Their role is not, as the storybooks pretend, to serve as a nexus between savers with capital and entrepreneurs in need of capital for economically valuable projects. Savers do transfer funds to banks, and banks do transfer funds to borrowers. But transfers of funds are related to the provision of capital like nightfall is related to lovemaking. Passion and moonlight are often found together, yes, and there are reasons for that. But the two are very distinct phenomena. They are connected more by coincidence than essence.
Videos of The Week:
30 Minutes With Niall Ferguson
Happy Holidays,
Miguel – Founder of SimoleonSense
http://www.simoleonsense.com/
P.S. It takes considerable energy to put this together, if you post these articles on your website(s) I ask that you kindly include a reference to this post. Thanks
PPS.Attention! New Section- Finance
Send us your thoughts on the weekly review to miguel [at ] simoleonsense [dot] com
Weekly Cartoon: (Via Econossuer)

Weekly Joke: (Via True/Slant)
Q: How many Austrian economists does it take to screw in a lightbulb?
(answer below the fold)
A: You can’t make quantitative predictions.
I’ll be here all night, folks.
Favorite Piece Of The Week:
Consumer Behavior: Restaurants & Menu Mind Games- h/t Julie – Via NYMag – In his new book, Priceless: The Myth of Fair Value (and How to Take Advantage of It), author William Poundstone dissects the marketing tricks built into menus—for example, how something as simple as typography can drive you toward or away from that $39 steak. Puzzles, anchors, stars, and plowhorses; those are a few of the terms consultants now use when assembling a menu (which is as much an advertisement as anything else). “A star is a popular, high-profit item—in other words, an item for which customers are willing to pay a good deal more than it costs to make,” Poundstone explains. “A puzzle is high-profit but unpopular; a plowhorse is the opposite, popular yet unprofitable. Consultants try to turn puzzles into stars, nudge customers away from plowhorses, and convince everyone that the prices on the menu are more reasonable than they look.” Poundstone uses Balthazar’s menu to illustrate these ideas.
Miguel’s Weekly Favorites:
My Friend Eric King Interviews John Williams of Shadow Stats – Via King World News
[url=http://www.nytimes.com/projects/magazine/ideas/2009/]
9th Annual Year In Ideas[/url] – Via NYT Magazine – The Times Magazine looks back on the past year from our favored perch: ideas. Like a magpie building its nest, we have hunted eclectically, though not without discrimination, for noteworthy notions of 2009 — the twigs and sticks and shiny paper scraps of human ingenuity, which, when collected and woven together, form a sort of cognitive shelter, in which the curious mind can incubate, hatch and feather. Unlike birds, we can also alphabetize. And so we hereby present, from A to Z, the most clever, important, silly and just plain weird innovations we carried back from all corners of the thinking world. To offer a nonalphabetical option for navigating the entries, this year we have attached tags to each item indicating subject matter. We hope you enjoy.
Understanding scam victims: seven principles for systems security - Via cl.cam.ac.uk – The success of many attacks on computer systems can be traced back to the security engineers not understanding the psychology of the system users they meant to protect. We examine a variety of scams and “short cons” that were investigated, documented and recreated for the BBC TV programme The Real Hustle and we extract from them some general principles about the recurring behavioural patterns of victims that hustlers have learnt to exploit. We argue that an understanding of these inherent “human factors” vulnerabilities, and the necessity to take them into account during design rather than naïvely shifting the blame onto the “gullible users”, is a fundamental paradigm shift for the security engineer which, if adopted, will lead to stronger and more resilient systems security.
The Encyclopedia of Counterintuitive Thought- Via NYMag – In the aughts, the shocking hidden side of everything became the only side of anything worthy of magazine covers and book deals. Social scientists applied their techniques to the problem of climate change; liberals who wanted to be taken seriously had to come up with arguments for conservative policies and vice versa. Everywhere in the media, the former creators of mass consensus devoted themselves to contradicting the conventional wisdom. Here, a selection of the most unlikely ideas in a decade that was always looking to blow your mind.
Multitasking, the Effects: A Culture Less Thoughtful, Less Productive, Less Creative- Via Britannica – Are we stuck on the surface of the digital age? Surely, our lives have been enriched by our newfound access to oceans of information, the extraordinary expansion of our visual world, our global mobility and social connectivity. But the digital age is also a distracted age, and many of the new ways in which we think and work may be undermining our ability to go deeply in thought and relations. That sets the stage for the kind of short-term, shallow decision-making that played a role in the economic meltdown – and could hobble our recovery.
Multitasking, the Solution: Understanding and Re-cultivating the Virtues of Attention - Via Britannica – If you ask a neuroscientist about the crucial human faculty of attention, they immediately begin speaking in the plural. Attention is not a single entity. It’s now considered to be an organ system, like circulation or digestion, with its own anatomy, physiology, and chemistry. And it’s made up of three “networks” or types of attention: awareness or sensitivity to our surroundings; focus, or the “spotlight” of the mind, and executive judgment, a package of higher-order skills related to planning and judgment.
Over-confidence in self-control leads us to temptation – Via Research Digest Blog – The researchers first demonstrated this in relation to mental fatigue. One group of students performed an easy two-minute memory task whilst a second group completed an arduous twenty-minute version. The group who’d completed the easy version subsequently rated their ability to overcome mental fatigue more highly than the group who’d performed the arduous task. What’s more, the easy group said they planned to leave more of their coursework until the last week of term, consistent with their inflated belief in their ability to work through fatigue.
Free Book: Belief Attitude, Intention, & Behavior – An Introduction To Theory & Research - Via Umass
Exclusive Features (The Must Reads):
“Financial Reform, or, Rearranging Chairs on the Titanic” - Via Naked Capitalism – Is there an alternative to the ineffective and wimpy Congressional “reforms”? Sure. Forget about reforming derivatives markets, ratings agency behavior, or too big to fail doctrine. Here are three easy steps to real reform.
How buying a home is gambling - Via Felix Salmon – The problem here is that no one ever buys a house with their eyes that wide open, fully cognizant that they are taking a calculated risk in which they know full well that there’s a non-trivial probability that the consequences of their “investment” will be foreclosure, bankruptcy, and homelessness. Investments don’t work like that: if you’ve laboriously saved up enough money to scrape together a downpayment on a home, that’s money you’re not going to gamble. The number of people genuinely comfortable with taking that kind of downside risk is basically zero, as it should be. (Remember that most homeowners have families to support: they’re not just gambling their own livelihood, but that of their family too.)
When regulators can’t do math: gas pipeline edition – Via Bronte Capital – The Federal Regulatory Energy Commission (the FERC) is charged – amongst other things – with regulating the rate of return on interstate natural gas pipelines. Rates on these pipelines are by-and-large regulated so as to achieve a targeted return on equity. Quite of its own volition the FERC has called for a judicial review of on three Midwestern gas pipelines including Natural Gas Pipelines of America (NGPL). In its last rate case (1996), NGPL’s target rate of return was set at 12 percent.
Video: John Bogle interview with Nell Minow- Via Bogle Blog – Mr. Bogle was interviewed recently by the Corporate Library’s Nell Minow. You may watch the interview by clicking here.
[url=http://harbaugh.uoregon.edu/Papers/EndowmentInChildren.pdf]
Are Adults Better Behaved Than Children? Age, Experience, and the Endowment Effect.[/url]– Via UOregon – We find that large increases in age do not reduce the endowment effect, supporting the hypothesis that people have reference-dependent preferences which are not changed by repeated
experience getting and giving up goods.
Sam Zell On Hammer Talks
Features:
The Financial Times: Trading Room – Video Interviews With Top Traders & Financial Participants - Via FT
Inflating Away U.S. Debt – Real Time Economics – WSJ:– Via Finance Professor – Some fear that inflating the nation’s debt away is the path of least resistance for political leaders who can’t make the hard choices on taxation and spending….
Africa builds as Beijing scrambles to invest – Via FT – A few years ago, Lukas Lundin, a mining executive, rode his motorbike 8,000 miles from Cairo to Cape Town. His journey, which took just five weeks, meandered through 10 countries, including Sudan, Ethiopia, Malawi, Zambia and Botswana. He was amazed to discover that 85 per cent of the roads he travelled were tarred and of high quality. Many had been built by Chinese companies.
Elizabeth Warren Reining in, and Reigning Over, Wall St - Via Newsweek – Conservative Joe Scarborough thinks she should be treasury secretary. Lefty Matt Taibbi thinks she should run for president. Wherever you sit on the political spectrum, it’s clear that Elizabeth Warren, the Harvard Law professor charged with overseeing the government rescue of the financial system, has struck a nerve with her plain-spoken populism. She took time from preparing her students for their final exams to critique the Obama administration’s efforts to stop foreclosures and to tell NEWSWEEK what she thinks is the real solution to our financial mess. Hint: it’s not breaking up big banks.
What the wealth of nations is really built upon - Via FT – It is an old question: why are some countries rich and others poor? Sir Partha Dasgupta, a hugely accomplished economist, born in Dhaka and educated in Delhi and Cambridge, is as well qualified as anyone to come up with an answer – which he did, delivering this year’s Royal Economic Society public lecture.
Why is “real” unemployment skyrocketing?– Via stone – At this point in the economic cycle, people typically say: “Sure, the unemployment rate is x, but what about all those people who have stopped looking? If we counted them, the unemployment rate would be y.” You know, people ask the same question in every economic cycle. And the answer is: “the ‘real’ unemployment rate is always proportionately higher than the unemployment rate.”
[url=http://www.sciencedaily.com/releases/2009/12/091210125924.htm]
Brainstorming Works Best in Less Specialized Efforts, Study Finds [/url]- Via ScienceDaily — Applying brainstorming techniques to new product development works best when the collaboration employs participants from varied specialties gathering to develop a less complex product, according to the Management Insights feature in the current issue of Management Science, the flagship journal of the Institute for Operations Research and the Management Sciences (INFORMS®).
The New Bubble in the Barbarous Relic that Is Gold - Via RGE Montior – In recent months gold prices have risen dramatically, first breaching the US$1000 barrier, then jumping another 20% in the past few weeks, surpassing US$1200 before correcting downward again to around US$1100. Some gold-bug bulls say the gold price could eclipse US$2000 in the next couple years. Is that possible? Is the recent rise of gold prices justified by fundamentals? An analysis of the facts suggests that a good part of this rise in gold prices is driven by a bubble.
Finance & Investing:
Convera Corp - Via Alex Bossert On Value Investing – Convera is a liquidation play. Convera is trading for $.22 and the company estimates investors will receive $.26 per share in cash in the next 12 months and an additional $.11- $.19 after intellectual property is sold. The trading volume on Convera shares is small with around 150,000 shares traded a day.
Intrinsic Value as described in Security Analysis – using Concept Visuals – Via Indian Investor – So I got around to reading and learning the book in a different way, using Concept Visuals(a technique invented by a friend of mine, Sanjay Vyas). I made a Concept Visual about Intrinsic Value as described by them in the book…(do let me know your feedback after viewing it.)
Women Hedge Fund Managers Outperform Men: – Via Finance Professor – “Women also, apparently, make better money managers according to another study by two professors at UC Davis [3]. That study found that overconfidence caused men to trade stocks 45 percent more often than women, thus lowering their net portfolio returns by 2.65 percent per year (compared with 1.72 percent lower returns for women traders). Moreover, several studies show a link between profit and gender. Companies with several high-ranking women at either officer or director levels tend to have higher earnings per share, return on equity and stock prices than competitors with few or no senior women.”
Caution With Dividend Paying Stocks - Via WSJ – The whole point of holding bonds and cash is to provide income and safety to temper the risks elsewhere in your portfolio, like the risks of owning stocks. No matter how fat a dividend they offer, utilities and other high-yielding stocks are still stocks. Preferred stocks, convertible bonds and junk bonds behave like stocks.
A closer look at the “High Minus Low” strategy: Component returns (Part 1) & (Part 2) – Via Greenbackd -In yesterday’s post we discussed some informal analysis I’ve undertaken on the returns to the quantitative investment strategy known as “High Minus Low” or HML. The first step was an analysis of HML’s components, high and low BM stocks. I described the HML strategy in some detail and analysed the long-term diminution in the returns to those components. I think that the returns to both high BM and low BM stocks have been attenuating significantly over time. The phenomenon persisted over whichever recent period I analysed (since 1926 to the present day, or over the last 25, 20, 15 or 10 years). This suggested that it’s got harder over time to earn excess returns as a value investor employing a high BM strategy.
[url=http://www.nytimes.com/2009/12/06/business/06stra.html]
When the Performance Looks a Little Too Good [/url]- Via NYT – But the performance gap between the weak and the strong has rarely been as pronounced as it has been since March’s market lows. The extreme outperformance of the more speculative stocks could make them vulnerable to another market shock.
Finreg I: Bank capital and original sin- Via Interfluidity – Banks are not financial intermediaries. Their role is not, as the storybooks pretend, to serve as a nexus between savers with capital and entrepreneurs in need of capital for economically valuable projects. Savers do transfer funds to banks, and banks do transfer funds to borrowers. But transfers of funds are related to the provision of capital like nightfall is related to lovemaking. Passion and moonlight are often found together, yes, and there are reasons for that. But the two are very distinct phenomena. They are connected more by coincidence than essence.
Videos of The Week:
30 Minutes With Niall Ferguson