Readings

  • Reaching new heights: How have Europeans grown so tall? (Source)
  • Where on earth is everybody? Global migration 1960-2000 (Source)
  • An historical view on government defaults: Lessons from the 17th century  (Source)
  • The global saving glut will hold bond yields down (Source)
  • The world runs out of options (Source)
  • Lost Angeles (Source)

Sovereign Ratings ‘r’ Us

Couldn’t bear to write more here about ratings agencies — I’ve written about what cock-ups they are many times — so I didn’t. Having said that, I don’t disagree with the downgrade, which mostly tells me some European downgrades better follow quickly.

Here is a chart

0808 POST 1 US Ratings

via Reuters

Twitter Digest: 2011-08-07

  • The wisdom of working alone: The five solo shorts who popped a China bubble http://t.co/Opbp8aW ->
  • The Second Death of Keynesianism and How to Recover http://t.co/XkYo03S ->
  • And so it begins … RT @BloombergNow: Gold Futures Surge to Record on Haven Demand http://bloom.bg/pTjy3z ->
  • Whistling past the graveyard: "Underlying all of this we still have attractive equity valuations and good old fashioned profit growth." ->
  • The Nixon Shock: How Nixon stopped backing the dollar with gold and changed global finance http://buswk.co/nG9eCL ->
  • Cultural Evolution and the Impending Singularity: The Movie http://goo.gl/fb/0fXDR ->
  • Tech and the San Francisco Apartment Rental Bubble -http://goo.gl/ZkjsH ->

QotD: Money Good vs Bad Money

From QBAMCO in a note tonight:

We think Treasury obligations today and always will be money-good, but principal and interest will be repaid with bad money.

Detection of Crashes and Rebounds in Major Equity Markets

New paper:

Detection of Crashes and Rebounds in Major Equity Markets

Financial markets are well known for their dramatic dynamics and consequences that affect much of the worlds population. Consequently, much research has aimed at understanding, identifying and forecasting crashes and rebounds in financial markets. The Johansen-Ledoit-Sornette JLS model provides an operational framework to understand and diagnose financial bubbles from rational expectations and was recently extended to negative bubbles and rebounds. Using the JLS model, we develop an alarm index based on an advanced pattern recognition method with the aim of detecting bubbles and performing forecasts of market crashes and rebounds. Testing our methodology on 10 major global equity markets, we show quantitatively that our developed alarm performs much better than chance in forecasting market crashes and rebounds. We use the derived signal to develop elementary trading strategies that produce statistically better performances than a simple buy and hold strategy.

via [1108.0077] Detection of Crashes and Rebounds in Major Equity Markets.

Twitter Digest: 2011-08-06

Barry Schwartz: Practical Wisdom & the Choices that Matter

Paul’s DIY Rumor Builder

On weeks like this in capital markets it’s no fun if you can’t play along. So, here you go: Paul’s DIY Rumor Builder.

I’m hearing _____ is _____. How long can it be before _____ starts ____. Otherwise _____ is ______.

Twitter Digest: 2011-08-04

  • FT reporting tonight that John Paulson's main fund — of billions-betting-against-subprime fame — is down huge 21.6% ytd. ->
  • Drudge goes apeshit on days like this, with headlines like DOW PLUMMETS 512 followed by OBAMA HAS BBQ COOKOUT. What about OBAMA USING VERBS? ->
  • Given BNY Mellon's new fees on people wanting to deposit large amounts of cash, does anyone have good data on recent cash flows? ->
  • For those of you looking for good news, especially on the havens front, S&P just raised Fiji to a B sovereign rating. ->

QotD: Barton Biggs — I Want to Go Home

Fun day on the markets today, with the only semi-stiched world coming apart at the seams for a host of reasons, not least of which is simple distrust of … everything financial. As a result, we got  whoosh downward, the likes of which we haven’t seen in some time. It elicited quotes like this one, from Barton Biggs:

I do not know where the bottom is. I am basically 50% net long. I covered a little bit yesterday. I am now 60% net long and I wish I was not. I wish I was 10% or 20% net long.

More here.