February 2009
29 posts
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“The worst place you can be in this market is out of money and without a plan....”
– A Time For Assessing “Strategic Opportunities”
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US Home Prices 26.7% Below Peak
From Reuters today:
In a separate index, home prices depreciated at a 18.2 percent pace in the fourth quarter from a year earlier, for the largest drop since the series began 21 years ago, it said. From the housing market peak in the second quarter of 2006, home prices have plummeted 26.7 percent, it said.
… and they are still above 2004 levels. Whereas stocks are at 1997 levels. If,...
Ideas Are Overrated
A 1998 Wired article surfaced today on Hacker News celebrating the disruptive idea that led Sabeer Bhatia to found Hotmail.
This idea was so inspirational because it seemed like an idea anyone could have. It sent the message and CC’d the entire world: To make it here in Silicon Valley, you just have to come up with the right idea. You don’t have to know the right people. You...
“Once you’re married, it’s not about whom you want to go on vacation with; it’s...”
– Marry Him! - The Atlantic
(March 2008)
Game Theory and The Eligible Bachelor Paradox
I love when darwinism and game theory can explain human behavior, especially mating: Game theory explains dinner-party dates
WatchAndreessen on Charlie Rose: “I Am Creating A Fund.” (Full Video)
“Realtime is the new crack”
– Steve Gillmore
“While it was not his intention, the reality is that Mr. Geithner is going to...”
– Richardson and Roubini Say There’s Virtue In Treasury Secretary Timothy Geithner’s Bank Plan - WSJ.com
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The World Is Spiky
Here’s a great article by Richard Florida on The Altantic on how the recession will reshape the US.
He also links to a previous paper on how our interconnected world has actually increased concentration of economic output, talent and innovation: The World Is Spiky (pdf).
My take is that stronger connections and communication networks increase the impact of power laws and positive feedback...
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Finally Found A Countercyclical Business
Dinner + fun at home is cheaper than going out … Condom sales rise through credit crunch.
“Authenticity, for me, is doing what you promise, not “being who you...”
– Seth’s Blog: Authenticity
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Rotten Bits
I previously wrote about the ephemeral nature of bits of information being generated at an unprecedented pace and how hard it will be to preserve it for future generations.
“Internet Father” Vint Cerf at SMX conference (via ReadWriteWeb) voiced his concerns:
“I visited the library of Alexandria in January this year in Egypt,” Cerf said, “and inside that library are...
Simon Johnson on US Oligarchs
My MIT Sloan G-Lab professor and former chief economist at IMF Simon Johnson speaks about the arrogance of US bank oligarchs in a video interview with Bill Moyers.
Simon also co-authors an interesting blog at The Baseline Scenario.
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Market Failure. Or Not?
The meltdown of our financial system that started in the summer of 2007 and then accelerated in September 2008 after Lehman Brother’s default, has been taken by many commentators and politicians as evidence to confidently state that free markets have failed. My point of view on this matter is rather different.
First, the market is not a time-independent stateless mechanism. It does not give...
“The United States banking system is effectively insolvent”
– Nouriel Roubini
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How to Call The Top
It always surprises me how newspapers are able to unknowingly mark the top of any bubble with top stories talking about fortunes to be made, staggering growth and bright future.
It happened with oil at $150 last july and now again with Dubai.
Here’s what New York Magazine said less than three months ago, right at the top: Escape to Dubai.
Here’s the sad reality coming up now:...
“What’s wrong with foreclosures?” some of these folks asked. “The historical...”
– Philip Greenspun’s Weblog » The Audacity of Doing Nothing
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My Favorites on Video
Dr. Doom and the Black Swan give a twin interview on CNBC and are asked some smartass questions.
We are not there yet?! What? We are just at the beginning.
It's About Monopoly
The price we pay for a traditional newspaper doesn’t even cover the expense of raw paper. The internet and its low distribution costs could represent an opportunity to save costs and thus improve profitability, wouldn’t it be for a small detail …
Digital information broke the pillar of the newspaper business model: local monopoly.
Michael Kinley explains it much better at You...
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Key Figures of Euro Area Public Debt
Some macro figures from The Economist on the Euro area’s troubles:
Public debt to be raised by Euro-area countries, Britain and Switzerland in 2009: €2 trillion or 17% of their GDP
Public debt to be raised by Italy alone: €377 billion or 23% of GDP. Yet, Italy can borrow for 10 years at 4.6% a year
Public debt to be raised by Ireland alone: €47 billion or 24% of GDP
10-year government...
“The difference between Ireland and Iceland, so the current joke goes, is one...”
– The Economist
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PIGS
Niels Jensen of Absolute Return Partners has yet another great macroeconomics paper on Euro, the “rogue countries” Portugal Italy Greece Spain (“PIGS”), unit labor costs, currency unions, sovereign debt, Zimbabwe-model (“quantitative easing”) vs Japan-model (fiscal discipline): Can the Euro survive?.
I have the impression that it will be hard for Italy to get...
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Derivatives, Velocity and Deflation
Just re-read that the notional value of derivatives held by US institutions is $175.8 trillion. That’s over 12x the US economy and 3.5x the world economy. As that notional value comes down, so do velocity of money and thus inflation.
I think that the deflationary period we are entering into will be longer than people expect.
Paulson's Year-End Letter
Paulson’s hedge funds placed the right bet and returned over 37% in 2008. At the bottom of this NY Times article, you can find the fund’s year-end report with a few interesting insights.
Most holders of the securities do not have the ability to analyze the underlying collateral and bought the bonds mainly due to their AAA rating. Fortunately, we are very familiar with these...