Tuesday, July 8, 2014

Some noontime noos

Here's some reading for today.

Calculated Risk - Tim Duy on inflation hysteria. I wouldn't call it inflation "hysteria", but rather just an informed awareness that slack has been taken up and the next topic for the market is going to be reflation to normalcy. However, Duy does make the good point that betting on increased inflation means betting against the Fed.

Tim Harford - on volatility. Quote:
No matter what the indicator, the story is similar: low volatility, low uncertainty and low dispersion are what happens in good economic times. Recessions are high-volatility, high-uncertainty and high-dispersion events. Low levels of uncertainty may breed complacency but they are also what the economy seems to need.
Or, more simply, $VIX is low because things are improving and the market is going up, dumbasses. Genius, eh? So where's my free fucking plug, Ritholtz?

NYT Upshot - the everything boom. Quote:
In this sense, high global asset prices could be the result of a world in which there is simply too much savings floating around relative to the desire or ability of businesses and others to invest that savings productively. It is a reassertion of a phenomenon that the former Federal Reserve chairman Ben Bernanke (among others) described a decade ago as a “global savings glut.”
Which I agree with totally.
But to call it that may not get things quite right either. What if the problem is not too much savings, but a shortage of good investment opportunities to deploy that savings? For example, businesses may feel that capital expenditures are unwise because they won’t pay off.
If there's a shortage of good investment opportunities, it's because Big Capital has spent the last 12 years seeking rent (or simply hiding in tax havens) instead of investing in productivity improvements. Which kinda sounds like the endgame at the end of a secular bear market, no? I guess you kinda need that at the end of a secular bear before you can start to see capital move into productivity improvements to drive a secular bull, no? Does that not make sense?

FT beyond brics - pragmatism likely to prevail in India's budget. Geez, with all this speculation, there's a lot of room for disappointment, no?


  1. Lick Lool chats with the eminently lickable Vanessa Collette. "Think about the economics of dilution" says our boyish billionaire. Yeah, that's what I think about when I'm sitting across from Vanessa.

  2. Well, if we don't have inflation, the economy probably isn't growing. Just don't want it to get too hot.

    I imagine the Fed's target rate (2-3%) will be exceeded initially and then hopefully settle when they tap the brakes.