Peter drinks coffee, plays chess, teaches finance, and does some fun econometrics time-series stuff. He also cooks dinners, detrends return series, and supports various political causes. He abuses the English language with love and affliction, but believes that officer Crabtree still beats him with a few horselengths. He is a reformed Molskinista, an avid Marxist (of the Grouchoian kind), and a fan of 1980s Britcoms.
voluntaryXchange lists the questions Mike Wallace should have asked Ahmadinejad. BTW, Ahmadinejad rather long and frightfully rambling blog can be enjoyed in English as well.
DJIA fell 36.42 points to 11345.05 Monday following last week’s five-day run, hurt by rising oil prices and Lowe’s profit warning. Gold prices rose more than $10 an ounce. Friendster is receiving $10 million from investors hoping to revive the social-networking firm.
The Securities and Exchange Commission on Monday filed a civil suit in an effort to freeze the assets of a group of New Yorkers accused of selling at least $1.6 million of fraudulent investments to at least 64 unsuspecting investors, many of them elderly.
Wells Fargo said it would buy Barrington Associates, a Los Angeles-based boutique investment banking firm. Wells Fargo, which is based in San Francisco, said Barrington would keep its name and become the lender’s main unit handling middle-market megers and acquisitions.
Interesting article at Marketwatch advises you how to spot a Fund Manager that is not being forthcoming as to his performance. According to Chuck Jaffe, too many fund managers “get it wrong when they get things wrong.” If their money-management mistakes lead to poor excuses, or indifference, oroverreactions — then you may have a bigger problem than an underperfomring fund — you have a bum manager.
Intuit announced that their special committee had reached the end of its examination of the firm’s stock option accounting practices. Their examination covered the period from Aug. 1, 1997 to the present. Their conclusion: the coast is clear. No issues found. No restatement required.
According to the NYT, TSA searches faces as well as carry-ons. “Taking a page from Israeli airport security, the transportation agency
has been experimenting with this new squad, whose members do not look
for bombs, guns or knives. Instead, the assignment is to find anyone
with evil intent.” A test for understanding and recognizing facial emotions.
Mutual fund cash levels are increasing, suggesting increasing uncertainty.
A deep analyis what the CPI vs PPI numbers can tell us about the future.
Oil has dropped at its lowest level since June. .As economic growth in the US is weakening, the demand for gasoline is declining. And of course, with schools starting in the next couple of week – were did summer go? – the summer driving season is coming to its end.
Stocks rose. On the New York Stock Exchange Tuesday, 2,513 stocks advanced and 782 declined on volume of 1.2 billion shares.
Bonds advanced. The 10-year note rose 13/32, or $4.06 for every $1,000 invested, to yield 4.885% Wednesday, and the 30-year note was up 21/32 to yield 5.006%.
The dollar weakened. The euro was at $1.2852 from $1.2785 late Tuesday, while the dollar was at 115.79 yen from 116.10 yen.
The lower reading on consumer inflation raised hopes that the Federal Reserve’s rate-lifting campaign has ended; the DJIA had climbed to within 81 points of its all-time high. The Labor Department’s consumer price index increased by 0.4% in July, up from a 0.2% increase in June. This is in line with analyst expectations. The less volatile core CPI grew 0.2% last month. Thus, without the influence of volatile food and energy, the core CPI grew below expectations. On a yearly basis, the core CPI is up 2.7%. Additionally, the wholesale inflation also showed moderating inflation pressures.
The housing prices show signs of some well-neededmoderation.
Just a couple of interesting blogs…
Greg Mankiw enters into the ongoing debate between Jeremy Siegel and John Bogle on passive investing in NYT. The core point is Siegel’s recently advanced idea of fundamental investing – creating indexes that reflect fundamental or value directed valuation ratios, capitalizing on systematic mispricing in the markets and the inability of active managers to reap value. Mankiw sides with Bogle. And it is easy to see why from an efficient market perspective.
On the happiness front, there is a small piece on Money and Happiness in the Wall Street Journal. My point is that I would rather cry 0n the backseat of a Bentley than a Hyundai.
In other PA political news, Hazleton, PA, faces a lawsuit. Recently, mayor Lou Barletta and Hazelton council members passed a controversial legistlation that was to punish those who hire or rent to illegal immigrants. Landlords would be fined $1000 per illegal immigrant. This act also made the English the town’s official language. This is a sad infringement on civil liberties. I do not support any sides of the current illegal immigration debate. Any legislation on any level attempting to change the status quo would make the situation worse – nothing Pareto optimal here. What worries me is that other communities across the United States have requested information on this proposal for use in their own municipalities
The debate on what colleges do for a living continues. I am a strong believer in the objective certification model of eduction, an approach recently suggested by the federal Commission on the Future of Higher Education. Already and unexpectedly, there is some tension brewing. There is a crisis in higher education and the sooner we solve it, the better for the students.
As the US.consumer prices increasing at their slowest pace in five months, the Federal Reserve’s assertion that interest rates are high enough to slow the economy and tame inflation become more and more valid. Producer prices – excluding food and energy – fell unexpectedly last month. Consumer spending remains strong. From Bloomberg.
Today’s WSJ offers a critical view on ETFs, particularly the components in these widely used investment vehicles. Since there is no official or even widely accepted definition of what constitutes a certain industry stock – be it technology, health care or even energy – investors need to look closely at what they buy. These ETFs might contain stocoks that do not really fit in the segment or the index. The diversification benefits of ETFs diminish and investors could end up with a portfolio that is only nominally reflecting the performance of an underlying – poorly – defined benchmark. This is a problem that is common in the highly specialized index sphere – particularly in the thinly traded microcap and international equity sphere.
One of the benefits of roughing it at the beach, is the complete isolation from electronic media, includng the internets. Cybercafes in this nearly thirld world country are long and far between, and my goal of being native assumes fans, al fresco showers and mom-and-pop stores. Four Seanons’ are nice as long as I do not live there or there are not on the island. Thus, wireless internets and other assumed luxuries of modern life do not exist. This explains the infrequent postings. This Saturday morning, I was able to hitch a ride on a truck into town to read email and get the essential groceries and other necessities – getting back to the cottage will be rather simple – and I stumbled across a small dimly lit deserted cybercafe which seemingly is related to cybercafes by having access to one slow – pre 2000 desktop with a cranck generator and an internet connection performing in bytes and not kBs. And there is enough -cheap – liquor to fuel a fraternity house for an entire year … You get the picture.
While reading trough briefly my sage booklets and all the news that I saw fit to miss, I started reading the Economist, which in this week’s issue discussess the invisible hand on the keyboad. And Brad deLong goes after it. Clearly, there is a demand for economists blogging by sharing – quality – information. My posts are not at par with DeLongs, Mankiws, Becker-Posners, and the other academic economic luminati, nor do I aspire to achieve the same status. Nevertheless, I believe that somewhere in the dissemnination of information, the easier access to ideas, analyses, and various, often contradictory opinions, leveling the playing field in the general economic and financial debate – insert your favorite overused metaphore here – there is a benefit to examine ideas.
Do I create value? Yes, I do. Using data from Technorati which is inspired by research from Tristan Louis, a week ago, my blog was valued at roughly $1,100 and not I am at roughly $1,700. Thus in less than one week, I have created $600 in value – roughly $100 per day, which would be a nice compensation for the time I spend. And I was off on this tropical paradise with my wife for half of it.
How do other economic blogs stick up to this value?
SEC’s Cox plans to look further into protecting Baby Boomer assets, which is a good idea considering the assets Baby Boomers have amassed during the last 50 to 60 years.
In his first speech since becoming Treasury Secretary, Henry Paulson voiced support for a strong dollar and said America “must welcome competition, not run away from it” if the country wants to maintain a competitive advantage. He also argued for the overhaul of the social security system and warned for the foreign energy dependence. He seems to follow the general GOP dogma.
In the political arena, Charlie Cook sees November rout and Al Sharpton blasts Lieberman.
Sadly, the Swiftboaters have set sights on Murtha. Clearly, truth has nothing to do in politics any more and there are many who have sold their integrity to the lowest bidder for scraps. At least Dr. Faustus sold his for eternal life and not a few cheap and meaningless political points.
Integrity seems to be ebbing all around in PA. Republicans have financed a Green Party candidate’s entrance into the Senate race, hoping to syphon off voters from Casey. Green Party candidate Carl Romanelli, making his first bid for statewide elective office, acknowledged Monday that Republican contributors probably supplied most of the $100,000 that he said he spent gathering signatures to qualify for the Nov. 7 ballot. Santorum must be very, very and very afraid. He is running one of the weakest Senate campaigns in this cycle.
Nothing more about Joementum this afternoon, but I can tell you that there will be more news about him.
It is unbelievably hot here in Central PA and the temperature is expected to hit 100F.
WSJ and BBC both report that Fidel Castro undergoes surgery. Castro is 79 years old and transfers power to his 75 year old younger brother, Raul. This is not surprising, he has been in bad health lately. The question now becomes, when can I smoke a Cuban legally. I am willing to take bets.
Jomentum is cool. Both the Daily Kos and Wonkette sacrifice serious binary resources into the analysis of Joementum, or rather the lack of it. If the Colbert Report is discussing Joementum, clearly there is something to talk about. BTW, Mitt Romney is out. No link’s necessary …
CNN is taking on www.youtube.com and allows now users to post content. The White House is updating its pressroom, which originally was built atop a filled in swimming pool. These new changes will help the pressroom to communicate more drama.
Smut stinks. Howard Stern is not working out for Sirius. It posts wider loss, but the subscriber base is increasing. According to Sirius it added 600,460 subscribers; it has 4.7 million at the end of the quarter. The company expects to have 6.3
million subscribers by the end of 2006. Previously it expected 6.2 million. Last week, XM posted a wider loss for Q2 and cut their subscriber estimate. XM, which has seven million subscribers, expects to end the year with between 7.7 million and 8.2 million.
The appeal of ETFs is shifting to Main Street. This is a positive and very interesting development, which in the long run changes the structure of both the mutual fund and the private financial advisor industries.
The question of maturity is always relative. New web-start ups lure executives away from eBay and Yahoo. Only 7 years ago, staid old economy companies – GE, IBM, CA – lured lost people to the upstarts. Does this new development mean that eBay and Yahoo are both old economy companies now?
And the Beirut stock market reopened for trade today. One of Beirut’s main indexes, the BLOM, closed 4.1% lower at 1,230.22.
Blogosphere
Political Calculations discusses Greg Mankiw’s perspective on the Federal Funds Rate. Mankiw’s method is attractive in that it incorporates two of the economic factors that the Fed is chartered to influence through monetary policy: the rate of inflation (measured as 12-month change in the Consumer Price Index for Urban consumers, less food and energy) and the rate of unemployment.
Voluntary exchange discussess the economics of World War I. A book edited by Stephen Broadberry and Mark Harrison for specialists and folks interested in history discussess the economic factors behind the war. The reviews are interesting here and here.
In today’s WSJ report on a report by the GAO. According to the GAO, when baby-boomers retire and sell their assets, a sharp and sudden decline in financial-asset prices is unlikely. “The bottom line is a market meltdown is unlikely,” said Barbara Bovbjerg, director for education, work force and income security at the GAO. “Assets are fairly concentrated among the very high earners.” For the interested, the US Census Wealth Distribution data is fascinating reading. The latest data is from 2000 when there were twice as many households with zero or negative net worth than households with a net worth exceeding $500,000. A helpful report explains.
Stocks ended July down, burdened by the ongoing conflict in Lebanon, the uncertainty of direction of market interest rate, and the general direction of the economy. July 31 ended
On the New York Stock Exchange, 646 stocks advanced and 1,639 declined. The volume was 2.3 billion shares. DJIA was up 0.3% for the month and is 4.4% year-to-date.The S&P 500 finished July with a 0.5% gain. The Nasdaq ends the month with a 3.7% loss.
The 10-year note saw a decline in yield to 4.967% Monday, and the 30-year note dropped to yield 5.070%.
The euro was at $1.2774 from $1.2751 late Friday, while the dollar was at 114.65 yen from 114.77 yen.
Light, sweet crude rose to $74.40 a barrel on the NYMEX .
The market seems to fear the Fed meeting coming Tuesday; weak economic data in GDP for 2Q 2006 seem to reduce odds for another increase. According to the fed-futures contracts, the probability of increase is 35%. Of course, there are opposing views. But the weakness is tangible and the decline in real estate prices coupled with the high energy prices clearly have put a damper on economic growth.
With all the news, we seem to have forgotten that one of the greatest newsmakers of the late 1990s, Bernie Ebbers of WorldCom fame, has come closer to serve his 25 years sentece for securities fraud, conspiracy and false filings with securities regulators. [Wall Street Journal, New York Times]
Ebbers is the former chairman and CEO of WorldCom. He became very wealthy from the rising price of his holdings in WorldCom’s stock. By late 2000, WorldCom’s stock was declining and Ebbers came under increasing pressure from banks to cover margin calls on his WorldCom stock that was used to finance his other businesses (timber and yachting, among others). During 2001, Ebbers persuaded WorldCom’s board of directors to provide him corporate loans and guarantees in excess of $400 million to cover his margin calls, but this strategy ultimately failed and Ebbers was ousted as CEO in April 2002.
After the ouster of Ebbers, WorldCom’s internal audit department uncovered approximately $3.8 billion of the accounting fraud during a routine examination of capital expenditures and alerted the company’s new auditors, KPMG (who had replaced Arthur Andersen, WorldCom’s external auditors during the fraud). Shortly thereafter in June 2002 , the company’s audit committee and board of directors were notified of the fraud and acted swiftly: The U.S. Securities and Exchange Commission (SEC) launched an investigation into these matters on June 26, 2002 . By the end of 2003, it was estimated that the company’s total assets had been inflated by around $11 billion. The company went from being one of the biggest stock-market stars of the 1990s to being the largest case of accounting fraud in U.S. history. The collapse wiped out shares with a market capitalization of $115 billion.
On March 15, 2005 Bernard Ebbers was convicted on fraud, conspiracy and filing false documents with regulators. All these are related to the $11 billion accounting scandal at WorldCom. His defense was called the “Aw Shucks” defense. Ebbers relied on a defense of ignorance of the financial crimes committed at WorldCom, the telecommunications company he had built up. It failed miserably. On July 13, 2005 Bernard Ebbers received a sentence that would keep him in prison (potentially Yazoo City in Mississippi) for 25 years. At the time of the sentence Ebbers was 63 years old. He may potentially be let out of prison at the age of 83 on terms of good behavior.
While I was surfing for material for this post, I was somewhat surprised to find that many of the websites that emerged in the wake of the corporate scandals in 2001 – 2002, have been discontinued. Things do change …
The data is in. The economy grew at a slower pace in the 2nd quarter this year. Energy costs are clearly blamed. In the Commerce Department report, there was an interesting piece of information about the state of the real estate market in the US. Real residential investment decreased by 6.3%. Ouch. I do not want to sit on an unsold, flip-ready, condo in Miami or Lost Wages for that matter.
Treasuries rally and S&P500 is up. Life is grand …
BP, Shell, ConocoPhillips and all the other major players have reported impressive profits with gas prices well above $3.00. A few weeks ago, I was in Berkeley and I was surprised to find gas being cheaper in the Bay Area than in Lycoming or Union county in central PA.
Econobrower blog had a pretty good review of the economics of oil companies last year. A post really worth reading.
Exxon Mobil said its earnings surged 36% during the second quarter to a whopping $10.36 billion or $1.72 a share. This is the second largest quarterly profit ever recorded by a publicly traded U.S. company (Exxon also owns the top spot for the $10.71 billion it raked in during last year’s fourth quarter). Exxon’s sales were nothing to sneeze at, either, totaling $99.03 billion, well up from the $88.57 billion at the same time a year ago. The company chalked up its impressive gain in per-share profit to its stock-buyback push, higher refining margins and higher realized prices for crude oil and natural gas.
Royal Dutch Shell reported a 40% profit surge as the benefits of high oil prices dwarfed production headaches in Nigeria and legal costs.
Luckily for oil companies and unfortunately for consumers and energy-thirsty businesses, energy prices have showed no hint of settling down. Crude-oil futures have been trading well north of $70 a barrel for several weeks now on the New York Mercantile Exchange — today, crude was moving higher again, pushing above $74 a barrel near midday — and the national average retail price for a gallon of unleaded gasoline is hovering near $3 a gallon.
Over at the Capital Spectator, the analysis of the fundamental pricing relationships in the commodity markets reflects the commonly and widely held belief that this is not a blip on a radar screen. High prices are here to stay and it is time to act accordingly. Econbrowser looks at the impact of $80 barrel price.
Nobody is bearish on the oil price; this is a bubble. Again.
Jomentum is cool. Both the 
With all the news, we seem to have forgotten that one of the greatest newsmakers of the late 1990s, Bernie Ebbers of WorldCom fame, has come closer to serve his