Stocks | timiacono.com - Part 2

Here’s the chart from about half-way through a highly entertaining Ted talk (due in part to a Tennessee twang) given by hedge fund billionaire Paul Tudor Jones depicting where the U.S. stands on a measure of inequality via-a-vis social ills (go here for the entire clip).

It’s not clear how that left scale is calculated, by my guess is that the American obesity epidemic is what puts this nation off the chart.

Of course, the headlines that were generated from this talk had to do with how situations like those depicted in the chart are resolved and I’ve obliged in the title above.

Trend Following and Investment Losses

Given the relationship of the two data sets shown in graphic below that depict the fortunes (or lack thereof) of John Hussman’s Strategic Growth Fund (HSGFX) in recent years, the accompanying Wall Street Journal story ($) by Morgan Housel is surprisingly kind.

Of course, the bigger story here is really how investors chase performance and how trend following can lead to investment losses. Another important point is that Hussman is not necessarily wrong to be so bearish over the last six years – he might just be early and, over the long-haul, his approach may end up looking pretty good, as it did a decade ago.

Easing is Easy

Amid all the hoopla surrounding the Nasdaq Composite Index recapturing the 5,000 level for the first time since March 2000 and other stock indexes around the world notching fresh record highs, we are reminded that the world’s central banks have been quite busy in recent months, greasing the wheels, as detailed in this story at Bloomberg.

Not shown above, India just announced another rate cut today and, of course, Canada (also not shown, for some reason) has been slashing rates with another cut expected to come before the end of the week. Then there’s Denmark who, according to another report at Bloomberg, “can’t print money fast enough”.

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On Root Cause

My engineering background is no doubt responsible for the discomfort that is experienced when listening to others talk about root cause (i.e., in the peer reviewed world of hard sciences, you can’t just say you’ve found the root cause) and the latest example of this comes from the White House via this Friday Funny at reason.com.

Other examples in the world of economics and finance involve “the lack of aggregate demand” being the proximate cause of our recent malaise and you can take your pick of many root causes (which are highly dependent upon your world view and who signs your paycheck) for the worst financial crisis since the Great Depression that, almost uniformly, reject the view that, as so eloquently noted by Pavlina Tcherneva in this item at New Economic Perspectives, “We live in a casino economy driven by serial asset bubbles”.

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