The Law of Competition

And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department. -Andrew Carnegie

Japan Exports fall....

Japan’s exports fell the most since the aftermath of last year’s earthquake as a global slowdown, the yen’s strength and a dispute with China increase the odds of a contraction in the world’s third-largest economy.

Living In An Ivory Tower

“You can’t live in an ivory tower in New York and think the rest of the world can burn and it won’t affect you,” says Nwanze, 66. “The world has become a global village. When you look back at what happened during the food-price crisis in 2007 and 2008, it was a wake-up call. It resulted in food riots in 40 cities across the world. It brought down governments. When people are hungry and angry in rural areas, it results in political instability.”

So How Many Casualties Did Greenspan Leave behind?

The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake. --
Alan Greenspan

Leadership or Luck?

Mr. Chávez has trumpeted his programs to help the poor, and has pointed to a sharp reduction in the number of people living in poverty. But he has governed during a phenomenal rise in oil prices, which have soared from $10 in 1998, the year before he took office, to more than $100 in recent years and the high $80s now, pouring huge amounts of revenue into Venezuela. Mr. Capriles, who has served as a legislator, mayor and governor, campaigned almost nonstop, seeking to contrast his energetic style with the reduced schedule of Mr. Chávez, who received a diagnosis of cancer in 2011.

Chavez is doing a great job?

Venezuela is mired in problems, including out-of-control violent crime, crumbling roads and bridges, and power blackouts that regularly plague much of the country outside the capital. Oil production, the country's mainstay, has plateaued in recent years, and other exports have not picked up the slack. The overall economy grew this year, largely because of a huge pre-election boost in government spending, but clouds loom. A devaluation of the Venezuelan currency, the bolívar, is widely seen as inevitable, and inflation remains stubbornly high.

Annual Return

Annual return is the de facto method for comparing the performance of investments with liquidity, which includes stocks, bonds, funds, commodities and some types of derivatives. Different asset classes are considered to have different strata of annual returns.

What is the common hurdle rate?

Most companies use a 12% hurdle rate, which is based on the fact that the S&P 500 typically yields returns somewhere between 8% and 11% (annualized). Companies operating in industries with more volatile markets might use a slightly higher rate in order to offset risk and attract investors.

The Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, the riskier the project, the higher the hurdle rate.

In the hedge fund world, hurdle rate refers to the rate of return that the fund manager must beat before collecting incentive fees.

How about quitting a failed currency regime?

"Here's leadership: Rajoy’s Cabinet approved a new tax on lottery winnings and a cut in ministries’ spending to shrink the euro area’s third- biggest budget deficit."

How about quitting a failed currency regime?

iphone demand

Gene Munster, an analyst at Piper Jaffray Cos. (PJC), had predicted Apple would sell as many as 10 million of the iPhone 5 during the opening weekend. Brian Marshall, an analyst at ISI Group, had anticipated sales of 6 million to 8 million phones.
Apple’s figure includes sales from wireless carriers, retail outlets, Apple stores and online orders that customers have received, Marshall said. It excludes early orders from Apple’s online store that haven’t been delivered, he said.5 million units of the iPhone 5 were sold in the first three days, surpassing a record set last year by the previous model, the iPhone 4S, Cupertino, California-based Apple said today in a statement. Demand for the new handset exceeded the initial supply, Apple said.

Marshall on Classical Economics

Marshall thought classical economics attempted to explain prices by the cost of production. He asserted that earlier marginalists went too far in correcting this imbalance by overemphasizing utility and demand. Marshall thought that "We might as reasonably dispute whether it is the upper or the under blade of a pair of scissors that cuts a piece of paper, as whether value is governed by utility or cost of production".

Rational Choice Theory

Rational choice theory uses a specific and narrower definition of "rationality" simply to mean that an individual acts as if balancing costs against benefits to arrive at action that maximizes personal advantage

What is Wrong with This?

What is wrong with this?

We don’t have high unemployment because Americans don’t want to work, and we don’t have high unemployment because workers lack the right skills. Instead, willing and able workers can’t find jobs because employers can’t sell enough to justify hiring them. And the solution is to find some way to increase overall spending so that the nation can get back to work.

Free Markets in Petroleum?

Norwegian oil professionals have annual pay checks averaging $180,300 -- more than double the global average, according to a study published by Hays Oil & Gas. A strike over pay and pensions at the end of June and beginning of July was ended by the government through forced arbitration as a total shutdown loomed. The strike disrupted 15 percent of oil production and 7 percent of gas output, according to Norway’s Oil Industry Association.

Class Conflict

Class conflict, frequently referred to as class warfare or class struggle, is the tension or antagonism which exists in society due to competing socioeconomic interests between people of different classes.

Class conflict can take many different forms: direct violence, such as wars fought for resources and cheap labor; indirect violence, such as deaths from poverty, starvation, illness or unsafe working conditions; coercion, such as the threat of losing a job or pulling an important investment; or ideology, either intentionally (as with books and articles promoting capitalism) or unintentionally (as with the promotion of consumerism through advertising). Additionally, political forms of class conflict exist; legally or illegally lobbying or bribing government leaders for passage of partisan desirable legislation including labor laws, tax codes, consumer laws, acts of congress or other sanction, injunction or tariff. The conflict can be open, as with a lockout aimed at destroying a labor union, or hidden, as with an informal slowdown in production protesting wages or perceived unfair labor practices.

Adam Smith

Adam Smith developed and published The Wealth of Nations, the starting point of modern economics. This famous study, which had an immediate impact on British economic policy, still frames 21st century discussions on globalisation and tariffs.

Dirigisme

Dirigisme is an economy in which the government exerts strong directive influence. It designates a mainly capitalist economy with strong directive, as opposed to merely regulatory, economic participation by the state.

Men, love to reap where they never sowed...

As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.--
Adam Smith

Regulations

There are tons of regulations that are supposed to protect the consumer/citizen; the myth is this is driven by the govt. The reality is it is driven by multinationals.

The Sucker Rally

A sucker rally occurs with little fundamental information to back the movement in price. This rally may continue just long enough for the "suckers" to get on board, after which the market or specific stock falls.

Apple and Twitter Valuation

While Apple has been hugely successful in selling phones and tablets, it has little traction in social networking, which has become a major engine of activity on the Web and on mobile devices. Social media are increasingly influencing how people spend their time and money — an important consideration for Apple, which also sells applications, games, music and movies.

Apple has considered an investment in the hundreds of millions of dollars, one that could value Twitter at more than $10 billion, up from an $8.4 billion valuation last year, these people said. They declined to be named because the discussions were private.

Subterfuge

What are the costs of subterfuge to the good life?

Santos

Santos last week urged policy makers to consider lower borrowing costs and to step up daily dollar purchases.
“I have asked the central bank to study a cut in interest rates, and evaluate a more aggressive purchase of dollars to increase our international reserves,” Santos said in a July 20 speech to mark Colombian Independence Day. “This will also help us confront the phenomenon of revaluation.”
Colombia’s central bank has often ignored advice from Santos and his predecessor, Alvaro Uribe. In June, policy makers kept their daily dollar purchases unchanged at $20 million, even after Santos urged them to increase the amount.
In January, the central bank raised its benchmark interest rate a quarter point, after Santos said such a move wouldn’t be “appropriate.”

The Scope of LIBOR

The LIBOR is widely used as a reference rate for many financial instruments, such as:

forward rate agreements
short-term-interest-rate futures contracts
interest rate swaps
inflation swaps
floating rate notes
syndicated loans
variable rate mortgages
currencies, especially the US dollar
They, thus, provide the basis for some of the world's most liquid and active interest-rate markets.

For the euro, however, the usual reference rates are the Euribor rates compiled by the European Banking Federation, from a larger bank panel. A euro Libor does exist, but mainly for continuity purposes in swap contracts dating back to pre-EMU times. LIBOR is an estimate and not interred in the legally binding contracts of an LLC. It is, however, specifically mentioned as a reference rate in the market standard International Swaps and Derivatives Association documentation, which are used by parties wishing to transact in over-the-counter interest rate derivatives.

The Libor is used by the Swiss National Bank as their reference rate for monetary policy. In the United States in 2008, around 60 percent of prime adjustable rate mortgages and nearly all subprime mortgages were indexed as to the Libor. In 2012, around 45 percent of prime rate|prime adjustable rate mortgages and more than 80 percent of subprime mortgages were indexed to the Libor. American municipalities also borrowed around 75 percent of their money through financial products that were linked to the Libor.In the UK, the three-month GBP Libor is used for some mortgages—especially for those with adverse credit history.

Policy Makers sit on the sidelines?

The San Bernardino and Stockton episodes are representative of a national crisis: Crippling household-debt burdens and foreclosures have been dragging down the economy for the past five years. Renegotiation of underwater mortgages by the private sector has been almost nonexistent. Despite strong evidence that frictions related to securitized mortgages are preventing the efficient restructuring of household-debt burdens, policy makers have largely sat on the sidelines.

Long Bond Sale

The long bonds were sold on July 12 at a yield of 2.580 percent, down from the previous mark of 2.72 percent at a June 14 sale. The 10-year note auction the day before drew a yield of 1.459 percent, compared with the previous low of 1.622 percent set last month.

Stocks Pessimism Posts Longest Streak Since 2011 Market Bottom

Stocks Pessimism Posts Longest Streak Since 2011 Market Bottom

Bearish sentiment in a survey of individual investors has surpassed the historical average for the longest stretch since October, when stocks began a rally that lifted the Standard & Poor’s 500 Index (SPX) 24 percent.

A poll by the American Association of Individual Investors showed 44.4 percent of respondents say American stocks will fall over the next six months. That’s the eighth consecutive week that pessimism stayed above the 25-year average of 30 percent.

Concern Europe’s debt crisis will deepen and the recovery weaken have erased as much as $1.8 trillion from U.S. equities since March. The last time the proportion of bears topped the average for this long was in the 14 weeks through Oct. 20, 2011, just after the S&P 500 bottomed at 1,099.23. The benchmark measure for U.S. stocks went on to surge as much as 29 percent, reaching a four-year high of 1,419.04 on April 2.

“Individual investors tend to get in when the markets are red hot and they tend to get out when the markets are at the bottom,” Robert Carey, who helps oversee $53 billion as chief investment officer of Wheaton, Illinois-based First Trust Portfolios, said in a telephone interview. “It’s been one series of issues after another, but, ultimately, fundamentals will weigh out and overwhelm any sentiment that people have.”

The S&P 500’s price-earnings ratio slid to a two-year low of 11.9 times annual profit on Oct. 3 before the level of bearishness by individual investors climbed above its historical average. The multiple has since rebounded 16 percent and is trading at 13.8 times profits in the past year.

Record High

The reading reached an all-time high of 70.3 percent on March 5, 2009, four days before the S&P 500 bottomed at a 12- year low of 676.53. The benchmark stocks index has since surged 102 percent as corporate profits exceeded analysts’ estimates and the Federal Reserve carried out two rounds of bond purchases known as quantitative easing.

That shows pessimism may increase before it becomes a signal to buy, according to Jeffrey Coons, president of Manning & Napier Advisors Inc. in Fairport, New York, which manages $44 billion.

“We’re not in an extreme environment of fear where you have readings you could look at in a contrarian way,” Coons said in a phone interview. “This low level of bullishness is another example of that pent-up demand for stocks. But we don’t really have the types of extremes that could give you that catalyst for fear reversal.”

‘Three Corrections’

The AAII’s weekly survey showed 28.7 percent of respondents were bullish on equities in the week ended June 27, the 13th consecutive time that optimism stayed below its historical average of 39 percent. The survey, which had 293 participants, has been conducted since July 1987.

The last time the percent of bulls was below average for this long was in the 14 weeks from December 2007 through March 2008. The S&P 500 went on to lose 38 percent that year.

“We’ve had three corrections since the second quarter of 2010, and each time we’ve asked whether we’re going to relive 2008 and it’s never happened,” Carey said. “It’s not that we can’t have more selling and short-term downdrafts, but for investors with a longer-term horizon, there are a lot of bargains in the market.”

Respondents in the AAII survey said the thing most likely to change their outlook on stocks would be resolution to the European sovereign debt crisis. Other events that would potentially damp pessimism included stronger U.S. economic growth and Congress addressing the so-called fiscal cliff, or the scheduled expiration of tax cuts and implementation of spending cuts at the end of this year.

Negative Catalysts

Potential negative catalysts were Europe’s crisis worsening and slower expansion in either the U.S. or China, the world’s two largest economies, the survey showed.

While bearish sentiment by individual investors has climbed, Wall Street strategists left their forecasts untouched for seven straight weeks through June 27. The average projection for the benchmark stocks measure at the end of this year slipped by 0.5 percent to 1,391 from the prior week, according to the average projection of 13 forecasters surveyed by Bloomberg on July 2.

Investors should bet on companies that have sales around the world, according to Kate Moore, the New York-based senior global equity strategist at Bank of America Corp. She listed Priceline.com Inc. (PCLN), Cairn Energy Plc (CNE) and Bank of China Ltd. (3988) as some of the firm’s recommended stocks.

“Investors are incredibly reluctant to take equity risk,” Moore said in a television interview on July 28 on Bloomberg Television’s “In the Loop” with Deirdre Bolton. “You have to be able to be an investor and not a trader, because the trading environment is going to be very rough for the next couple of weeks.”

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

Economic Statistics or Wall Street pundits never give a clear picture?

Stock markets can soar or falter in an instant. One day the European debt crisis is receding, the next day the region’s on the brink of disaster. Economic statistics never give investors the whole picture.

End of Banker Immunity?

Simon Jenkins, columnist for the Guardian:

"There seems no end to the immunity -- moral, political, fiscal and possibly legal -- claimed by the present masters of the universe, the bankers. ... There must surely be a reckoning one day for loss and agony that the credit crunch has inflicted -- and is still inflicting -- on millions of innocent victims. But as we seek out the guilty men, we should know that as long as banking retains its stranglehold on policy, the disaster will continue."
This headline, for a column in the Telegraph by Jeremy Warner, takes the cake: "After Barclays, the Golden Age of Finance Is Dead." (It was still alive only a few days ago? Who knew?) Warner writes:
"Just when you thought bankers could sink no lower in public regard, they’ve done it. News that Barclays has been found guilty of repeatedly falsifying the interbank rate –- sometimes for the personal gain of traders, sometimes to make the bank itself seem more creditworthy than it really was –- tops off another calamitous week in the seemingly never-ending litany of banking misdemeanors.
"Coming hard on the heels of the chaos surrounding an IT breakdown at Royal Bank of Scotland, it is as if bankers are actively out to confirm their reputation for recklessness, incompetence and self-enriching disregard for the interests of customers and the wider economy.
"At a time when the political and regulatory backlash against finance is already at fever pitch, much of it ill-thought out, counterproductive and economically harmful, there could scarcely have been a more spectacular own goal."
And here I thought Occupy Wall Street's criticisms of bankers were tough. Hell hath no fury like a financial columnist scorned.

Ill Informed Banker Bashing

William Wright, columnist for Financial News:
"In more than 15 years of writing about the financial markets, I have regularly tried to defend the industry against often ill-informed banker-bashing. Attacks on bonuses have deliberately inflated the numbers and neglected the fact that pay is coming down faster than it looks. Synthetic outrage from politicians has sought to disguise their own failings. And wilder claims that the banks are uniquely responsible for the crisis ignore the willing role played by everyone from investors and regulators to governments and individuals who were swept up in a collective debt-fueled euphoria."

"But in this instance, it is impossible to defend the indefensible. This breach too far will have devastating consequences not only for Barclays, but for the rest of the industry and its increasingly eroded relations with regulators and politicians as they rewrite the rules of the global financial system."

Banks Antitrust

Antitrust Concerns
The five biggest U.S. banks accounted for 52 percent of the industry’s assets in 2010, up from 17 percent in 1970, according to a report this year by the Dallas Fed. Four banks account for 93 percent of the notional derivatives holdings in the U.S. banking system, according to the Office of the Comptroller of the Currency. Wells Fargo, the fourth-biggest U.S. bank, made 33.9 percent of the mortgage loans originated in the first quarter, the highest share ever recorded and more than triple its closest competitor, according to Inside Mortgage Finance.

Soros-- Do you agree?

“There is a disagreement on the fiscal side,” Soros, 81, said in an interview with Bloomberg Television’s Francine Lacqua at his home in London. “Unless that is resolved in the next three days, then I am afraid the summit could turn out to be a fiasco. That could actually be fatal.”

Math and Achieving Your Dreams:

If a person invested $500,000 15 months ago with my firm they would have 40% gain in their account. The total value of your account would now be over $700,000? If you think we are risk taking you are wrong. My clients are extremely happy.

What is your time and your entire life savings worth to you?

Do you love money or people?

Are you sincere about achieving your dreams or you avoiding the pain that comes with change?

Is your love of security really a life of fear?

Is your home your home your castle or your cave?

If you have a financial advisor who has returns that exceed 20% a year you already know there is a shortage of people that are capable of this kind of performance?

You say you care about your life but in financial terms but your portfolio says otherwise? Where is the growth? You can be a poor saver and still be better off with outstanding investment performance.

Sell Microsoft Stock...

The last time Microsoft opted to make its own hardware because its partners weren’t gaining traction against Apple, the company produced the Zune music player. It didn’t fare any better against the iPod, and Microsoft discontinued the product last year.

Spanish Yields

Spain, which has asked euro-region governments for as much as 100 billion euros to help shore up its banks, reported yesterday that bad loans jumped in April to 8.72 percent of total lending, the highest since 1994. The 10-year Spanish yield surged above 7 percent. Group of 20 nations are discussing a mix of measures, including deficit reduction for some countries and pledges for additional stimulus by others with sounder finances, a Canadian official said as leaders prepare for a two-day summit in Mexico.

Do You Agree with Krugman on Greece?

Greece as Victim Greece as Victim

Household Wealth and Median Income Fell

This week, the Federal Reserve dropped two bombshells—the news that from 2007 to 2010 household wealth dropped 39% to a level last seen in 1992 and the smaller but perhaps more fraught headline that median income fell 8% in those three years.

The fall of median family net worth to $77,300 from $126,400 is mostly a real estate phenomenon; homeowners certainly feel less wealthy and the statistic reminds Americans that happy days have yet to return.

Major Shock

‘Major Shock’
Canada faces a “major shock,” and global financial conditions could deteriorate significantly if Europe’s crisis worsens, the country’s central bank said yesterday. Bank of Japan (8301) Governor Masaaki Shirakawa said June 13 that the euro area poses the biggest challenge to the world’s No. 3 economy. The BOJ today kept monetary policy unchanged, while saying it will be giving “particular” attention to global market developments.

Euro Warning

Central banks intensified warnings that Europe’s failure to tame its debt crisis threatens to roil the world’s financial markets and economy as Greece’s election in two days looms as the next flashpoint for investors.

We Told You So

We told you so, economists say of euro zone

Euro Zone

We told you so, economists say of euro zone /via @globeandmail http://m.theglobeandmail.com/report-on-business/economy/euro-crisis/we-told-you-so-economists-say-of-euro-zone/article4247717/?utm_source=twitter.com&utm_medium=Referrer:+Social+Network+/+Media&utm_campaign=Shared+Web+Article+Links

Does Trickle Down Work?

http://www.huffingtonpost.com/mobileweb/2012/06/13/robert-reich-defends-rais_n_1593427.html

Really? Keep dreaming....

Goldman Sachs Group Inc. (GS) predicted a 29 percent return over the next year from the Standard & Poor’s GSCI Enhanced Commodity Index, led by energy and industrial- metals investments.

Merrill Lynch

Merrill Lynch ads on Bloomberg TV say their financial advisors will help you reach your financial goals? Are you closer to your financial goals?

My guess is are getting further away from your goals? What you can do is find those that are making money?

Idea

You want the idea so bad you are willing to pay any price.

Double Squeeze

Pension funds across the U.S. are facing an unprecedented double squeeze: Baby boomers entering retirement are placing growing demands on resources, while investment returns during the past decade have dropped. Nationwide, public pensions faced more than $4 trillion in unfunded liabilities as of October, according to Joshua Rauh of Northwestern University.

Gold Bear Market

In October, Bank of America forecast $2,000 by early 2012. Goldman predicted in December that gold would reach $1,840 by early June. Barclays and Morgan Stanley said in January that it would average $1,850 and $1,810 this quarter. The metal actually averaged $1,619 since the end of March. Goldman now expects prices to reach $1,940 in 12 months. Barclays predicts an average of $1,790 in the fourth quarter, and Morgan Stanley forecasts $2,000 in the final three months.

Gold fell 19 percent by May 16 from its closing high of $1,891.90 in August, within 1 percentage point of the common definition of a bear market. Prices then touched a five-month low of $1,523.90 on Dec. 29. After rallying 3.7 percent on June 1, the metal is now up 4.5 percent since the start of January to $1,637.20 today, extending an 11-year bull market.

Hubris and Legacy

Most of Merrill Lynch's and the Wealth Management industry's strategy is centered on the hubris of leaving wealth to your children and their experience (without any track record.) They have totally forgotten how to invest. All you have to do is look at BlackRock returns. What a joke!!!

Loser Leaves with Tail Between His Legs

I was asked by a manager at Merrill Lynch if I thought I was smarter than Bob Doll of BlackRock? Why don't you ask my clients how they are doing?


Doll, known for his bullish stance on stocks, said in January that U.S. equities would produce double-digit returns in 2012. The benchmark Standard & Poor’s 500 Index advanced 1.6 percent this year through June 4. Fink, who co-founded BlackRock in 1988, has been touting equities while warning about the dangers of staying in cash-like products and focusing on short- term investing.

Options on Interest Rates

“Everybody had been using options over the last six months to position for higher rates with almost nobody buying them to hedge lower rates,” said Piyush Goyal, a fixed-income strategist in New York at Barclays Plc, in a telephone interview on May 29. “All of that has changed.”

Airlines Need to Adapt

Why U.S. Airlines Need to Adapt to a Slow-Growth Future

As the economy recovers and fuel prices ease, U.S. airlines are doing better. Prospects for the summer and the rest of 2012 look brighter, particularly because there are fewer carriers after the mergers of the last five years.

Yet U.S. airlines face a long-term challenge that should concern industry executives as well as investors. That impediment isn’t wages, fuel prices or a stagnant economy. It’s growth in demand for air travel, which has been anemic at best for more than a decade, even when the economy was expanding.

Steadily dropping fares are the only reason traffic has grown at all since 2000. And without substantive cost-cutting innovation in the industry, that pace isn’t sustainable. Coca- Cola Co. can’t increase its business through constant price cutting, and neither can airlines. If inflation-adjusted fares hadn’t dropped 17 percent from 2000 to 2010, my research suggests that domestic travel would have declined.

To understand why this is happening, just think about the last time you flew. It’s a fair guess that the trip took longer than the same journey would have taken 30 years ago and was less comfortable. In-flight entertainment is better today -- TVs and Wi-Fi -- but almost everything else is worse: less leg room, less food, less service, more-crowded planes and more time wasted getting through the airport.

Commuting Time

You might think air travel is like other luxury goods in that people will want more of it as they get richer. That’s not necessarily true because consuming air travel takes time, and that is something we aren’t getting more of. Among experts who study commuting, there is a rule of thumb that in any society the average commute to work -- whether by foot, donkey or automobile -- is about 20 to 30 minutes. The explanation is that financial budgets might expand, but we still only get 24 hours each day.

As a person moves from poor to middle class, they probably will want to travel more. This is why air travel is growing rapidly in the developing world. But as a person’s wealth continues to increase, they probably won’t want to spend more time in airports and on airplanes. Life is too short.

The same goes for business travel. As a company grows, it doesn’t retain all its workers in one location and require them to travel more. Instead, it opens up satellite offices closer to its customers. Why? Because flying is expensive downtime.

Airlines (UAL) find themselves in this dead end because there has been almost no industry innovation in decades that has improved the customer experience. That’s why airlines can still fly airplanes that were manufactured 30 or more years ago. (Safety is better than it was in 1980, but it was actually quite good then, and few people were deterred from flying by safety concerns.)

If airlines are going to overcome the time barrier to growth in demand, air travel has to take less time or be less unpleasant.

Sadly, the prospects for increasing flying speeds aren’t good. The only commercial airliner ever to fly faster than sound, the Concorde, was grounded almost a decade ago. There are no imminent plans to bring back supersonic transport, partly because it requires much more expensive technology and is even less spacious than standard jetliners. In any case, the sonic booms they created meant they couldn’t fly faster than sound over populated areas.

The only real hope for shrinking travel time is on the ground. Security screening may improve, allowing you to get to the gate more quickly. And air-traffic control may finally adopt modern technology -- a slightly higher-tech version of the global positioning system available in automobiles -- that reduces congestion and keeps more flights on time. But even in the best-case scenario, the flying and airport time from New York to Los Angeles will be about the same as it was in 1980.

Less Painful

The airlines are trying to make travel time less painful, but so far the results aren’t too impressive. Wi-Fi and TVs are nice, but the real barrier to making travel time more fun or productive is space. Squeezed between two strangers, wondering when the seatback you are facing will suddenly slam into your knees (or into your laptop), isn’t a good environment for relaxation or getting work done. The newest major airlines -- JetBlue Airways Corp. (JBLU) and Virgin America Inc. -- seem to recognize this. They are increasing leg room and leading innovation in in-flight entertainment.

For the most part, the legacy airlines are just giving up on domestic-demand growth and focusing instead on international travel, where prospects are better, at least for now. One U.S. airline chief executive officer recently told me that his company merely hoped to break even on service within the U.S., which he regarded as a tool to feed lucrative international flights.

That strategy is problematic because U.S. carriers only have the right to fly to and from the U.S., not within or between other countries. And even on those routes, there are strong home-country carrier biases: Americans prefer U.S. airlines on a trip to Korea, and Korean travelers tilt toward their own jetliners when coming to the U.S. So, with American travel demand closer to saturation, the biggest growth will be among the markets and customers most difficult for U.S. carriers to reach. Growth prospects may be better than inside the U.S., but they are still not great.

This doesn’t mean U.S. carriers can’t make money. Many companies earn a good living in low-growth markets by focusing on serving existing customers, with higher quality and at lower cost. Those companies don’t get the thrill, or the earnings growth, of being out in front to catch the next demand spike. Still, that’s likely to be the slow-growth environment of the future for the U.S. airline business.

(Severin Borenstein is E.T. Grether professor of business administration and public policy at the Haas School of Business at the University of California, Berkeley. He is a contributor to Business Class. The opinions expressed are his own.)

Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View columns, editorials and op-ed articles.

Today’s highlights: the View editors on smarter, lighter cars and smarter health spending; Albert R. Hunt on the virtues of Dwight D. Eisenhower; William D. Cohan on delusional Facebook investors; David Crane on politicians and unions; A. Gary Shilling on Japan’s strong currency and weak economy; Marc Joffe and Anthony Randazzo on mortgage investors.

To contact the writer of this article: Severin Borenstein at borenste@haas.berkeley.edu

To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net

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Copper Futures

Copper futures fell 3.9 percent last week, touching $3.30 a pound on the Comex in New York, the lowest for a most-active contract since Dec. 20. The metal has dropped 19 percent in the past year. Speculators more than doubled their bets on lower copper prices last week to 6,757 contracts, the most bearish since Nov. 29, CFTC data showed.

@TylerInvestment Predicted Deflation

Twenty of the materials tracked by the S&P GSCI declined last week. Crude oil tumbled 8.4 percent and reached the lowest price in almost eight months, while cotton slumped to a 27-month low. Nickel led the declines in base metals, dropping 5.6 percent. Wheat dropped 10 percent even as hedge funds became the most bullish since June 2011. Crude extended its slump today, falling 0.9 percent to $82.48 a barrel.

The S&P 500 has declined 9.9 percent since reaching a four- year high of 1,419.04 on April 2

The S&P 500 has declined 9.9 percent since reaching a four- year high of 1,419.04 on April 2, trimming its advance since last year’s low on Oct. 3 to 16 percent. That compares with a 14 percent drop in the Stoxx Europe 600 Index (SXXP) since its 2012 peak, a retreat that cut the advance since its low of 214.89 in September to 9.4 percent.
Changing Tone

Anger at Westminister

George Parker, Financial Times political editor:
"The anger at Westminster is raw. In what may come to be seen as a defining moment in relations between the British parliament and the City, Barclays's attempt to rig interest rates has tipped the political mood from resentment to outright contempt.

The Question is who is a Wealth Creator?

If you don't really care about the truth than this what kind of thinking you get:

“I’ve been banging my head against the wall,” said Stanley in Stamford, Connecticut, a former researcher at the Federal Reserve Bank of Richmond, who had predicted an interest- rate increase as early as last year and now says the Fed probably will tighten in the middle of next year. “They’re willing to let things run for longer and let inflation accelerate more than historically.”

What is Investment?

Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time. In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling. As such, those shareholders who fail to thoroughly analyze their stock purchases, such as owners of mutual funds, could well be called speculators. Indeed, given the efficient market hypothesis, which implies that a thorough analysis of stock data is irrational, all rational shareholders are, by definition, not investors, but speculators.

Investment is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments.

To avoid speculation an investment must be either directly backed by the pledge of sufficient collateral or insured by sufficient assets pledged by a third party.[original research?] A thoroughly analyzed loan of money backed by collateral with greater immediate value than the loan amount may be considered an investment. A financial instrument that is insured by the pledge of assets from a third party, such as a deposit in a financial institution insured by a government agency may be considered an investment. Examples of these agencies include, in the United States, the Securities Investor Protection Corporation, Federal Deposit Insurance Corporation, or National Credit Union Administration, or in Canada, the Canada Deposit Insurance Corporation.

Promoters of and news sources that report on speculative financial transactions such as stocks, mutual funds, real estate, oil and gas leases, commodities, and futures often inaccurately or misleadingly describe speculative schemes as investment.

Shilling Talks about The Stock Market Bubble?

Stocks have been volatile:

http://www.bloomberg.com/news/2012-04-12/will-u-s-avoid-a-recession-in-2012-part-4-.html

Dead Wrong

So either I’m dead wrong, or investors are ignoring reality as they emphasize “risk-on” trades. Stocks (ICJ) have been strong, with the exception of defensive dividend payers, such as utilities, that investors have ignored. Until very recently, Treasury yields surged and prices plunged as investors switched to riskier securities.

The Recession

-- Fed action: In his March 26 speech to business economists, Federal Reserve Chairman Ben S. Bernanke concentrated on the weak employment picture and said further reductions in joblessness would require “more rapid expansion of production and demand from consumers and business, a process that can be supported by continued accommodative policies.”

Investors read this as suggesting the economy might be weak enough in future quarters to require another round of quantitative easing via Fed purchases of Treasuries and mortgage-backed securities. They seem to believe that the negative effect a weak economy would have on corporate profits and dividends pales in comparison with the impact of the money received directly by sellers of securities to the Fed.

Stocks took off after Bernanke’s remarks: The Dow Jones Industrial Average closed out its best first quarter since 1998; the Standard & Poor’s 500 Index (SPX) ended the quarter above the 1,400-point mark for the first time in almost four years; and the Nasdaq Composite Index topped the 3,000 level for the first time in more than 11 years.

Beyond the money received directly by sellers of securities to the Fed, investors certainly can’t expect any multiplier effect from the member banks’ reserves created by the central bank’s policies. The two rounds of quantitative easing helped pile up those reserves, which now exceed requirements by about $1.5 trillion. Banks will lend only to the most creditworthy, and are so loaded with cash they don’t need to borrow much.

Given the recent euphoria, stocks might rally if the economy strengthens, and the prospect of more quantitative easing disappears. Can you have it both ways? This reminds me of the ad published by the National Association of Realtors in the Wall Street Journal several years ago when house prices were collapsing. In screaming headlines across the top of the page, it read, “Now Is a Great Time to Buy a House!” and in identically large print at the bottom, it read, “Now Is a Great Time to Sell a House!”

-- Congressional action: In addition to a possible QE3 by the Fed, rising unemployment and increasingly negative economic data could also spur a push for stimulus in Congress before the November elections. The payroll-tax cut, along with the Bush-era income-tax cuts, are set to expire at the end of this year. Meanwhile, unemployment benefits are scheduled to plunge, at a moment of what I believe will be rising joblessness. This fiscal drag would knock 3 percent to 4 percent off GDP. Representatives and senators seeking re-election -- of both parties -- don’t want to face opponents’ charges that they did nothing as the economy tanked.

Some renewal of the earlier tax cuts and extension of unemployment benefits seems almost certain. But with gridlock in Washington, how will it play out? Congress and the administration will no doubt act before the election if the economy is in bad shape. Otherwise, they could come back for a so-called lame-duck session in December. Or, as they did this year, they could act after the new Congress is installed in January and make the renewed tax cuts retroactive to the beginning of 2013. Continuing uncertainty over eventual congressional action will only further depress the confidence and spending of U.S. consumers and business.

Meanwhile, a number of economic indicators are pointing in the direction of a faltering economy. The Economic Cycle Research Institute index remains in recession territory. The ratio of coincident to lagging economic indicators, often a better leading indicator than the leading indicator index itself, is declining. Electricity generation, though influenced by the warm winter, is falling rapidly.

In Part 4, I will look at the recent hunger for stocks despite the increasing reasons for caution and recent volatility.

The Recession

-- Fed action: In his March 26 speech to business economists, Federal Reserve Chairman Ben S. Bernanke concentrated on the weak employment picture and said further reductions in joblessness would require “more rapid expansion of production and demand from consumers and business, a process that can be supported by continued accommodative policies.”

Investors read this as suggesting the economy might be weak enough in future quarters to require another round of quantitative easing via Fed purchases of Treasuries and mortgage-backed securities. They seem to believe that the negative effect a weak economy would have on corporate profits and dividends pales in comparison with the impact of the money received directly by sellers of securities to the Fed.

Stocks took off after Bernanke’s remarks: The Dow Jones Industrial Average closed out its best first quarter since 1998; the Standard & Poor’s 500 Index (SPX) ended the quarter above the 1,400-point mark for the first time in almost four years; and the Nasdaq Composite Index topped the 3,000 level for the first time in more than 11 years.

Beyond the money received directly by sellers of securities to the Fed, investors certainly can’t expect any multiplier effect from the member banks’ reserves created by the central bank’s policies. The two rounds of quantitative easing helped pile up those reserves, which now exceed requirements by about $1.5 trillion. Banks will lend only to the most creditworthy, and are so loaded with cash they don’t need to borrow much.

Given the recent euphoria, stocks might rally if the economy strengthens, and the prospect of more quantitative easing disappears. Can you have it both ways? This reminds me of the ad published by the National Association of Realtors in the Wall Street Journal several years ago when house prices were collapsing. In screaming headlines across the top of the page, it read, “Now Is a Great Time to Buy a House!” and in identically large print at the bottom, it read, “Now Is a Great Time to Sell a House!”

-- Congressional action: In addition to a possible QE3 by the Fed, rising unemployment and increasingly negative economic data could also spur a push for stimulus in Congress before the November elections. The payroll-tax cut, along with the Bush-era income-tax cuts, are set to expire at the end of this year. Meanwhile, unemployment benefits are scheduled to plunge, at a moment of what I believe will be rising joblessness. This fiscal drag would knock 3 percent to 4 percent off GDP. Representatives and senators seeking re-election -- of both parties -- don’t want to face opponents’ charges that they did nothing as the economy tanked.

Some renewal of the earlier tax cuts and extension of unemployment benefits seems almost certain. But with gridlock in Washington, how will it play out? Congress and the administration will no doubt act before the election if the economy is in bad shape. Otherwise, they could come back for a so-called lame-duck session in December. Or, as they did this year, they could act after the new Congress is installed in January and make the renewed tax cuts retroactive to the beginning of 2013. Continuing uncertainty over eventual congressional action will only further depress the confidence and spending of U.S. consumers and business.

Meanwhile, a number of economic indicators are pointing in the direction of a faltering economy. The Economic Cycle Research Institute index remains in recession territory. The ratio of coincident to lagging economic indicators, often a better leading indicator than the leading indicator index itself, is declining. Electricity generation, though influenced by the warm winter, is falling rapidly.

In Part 4, I will look at the recent hunger for stocks despite the increasing reasons for caution and recent volatility.

The Profitable Idea

The profitable idea involves being in the right place at the right time. A discontinuity between what was and what will be.

Wall Street?

The future is denied to those who have been cynical and calloused and self-deceiving enough to rejoice in the present ordering and are unable to grieve about the ruin toward which the status quo is headed.

Is Bank of América a Criminal Organization?

This is the article Bloomberg and The Financial Times are supposed to be writing:

http://ow.ly/1Jreif

The Validity of a Hypothesis

The only relevant test of the validity of a hypothesis is comparison of prediction with experience.--
Milton Friedman

The Black Market

The black market was a way of getting around government controls. It was a way of enabling the free market to work. It was a way of opening up, enabling people.--Milton Friedman

Protection From The Government

Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.--Milton Friedman

Get Rid of the Money Center Banks

You don't have to take it from the left or the right, or even me. Take it from the Dallas Fed: "Achieving an economy relatively free from financial crises requires us to have the fortitude to break up the giant banks."

—Al Lewis is a columnist for Dow Jones

Nature Does Not Leap- Natura non facit saltus

The principle expresses the idea that natural things and properties change gradually, rather than suddenly

Natura non facit saltus (Latin for "nature does not make jumps") has been a principle of natural philosophy since at least Aristotle's time.It appears as an axiom in the works of Gottfried Leibniz (New Essays, IV, 16) and Isaac Newton, the co-inventors of the infinitesimal calculus,see Law of Continuity. It is also an essential element of Charles Darwin's treatment of natural selection in his Origin of Species.The phrase comes from Linnaeus' Philosophia Botanica.

It is also true in economics. Change is gradual and slow in economic behavior.

A Client wrote this about HP.

I used to buy HP PC’s, but no more, not professionally nor for personal use. They sent their support to India, causing their service to be aweful. They used to be #1 rated in customer support.

The last PC I bought from them had to have the motherboard replaced twice & the problems took 5 months to resolve. During this time I was dealing with multiple support techs from India, wasting hours & hours of my time. It would have been much more economical for me to have thrown my brand new computer in the trash and bought another from someone else.

Get Your Yield while You Can

Some investors still haven't figured out we are going to see interest rates at Japanese levels at the low end. Get your yield while you can.

The Solvable Problem

No matter what the financial problem it is solvable. The world is not going to end and life will go on. History is filled with financial bubbles and mankind has moved on.

Investment Performance

Our performance is so high I chuckle when I read this, but it should be remembered that we paid the price in hard work, patience and superior research.-@TylerInvestment


Buffett made a bet in 2008 with the money managers who own Protege Partners LLC. The winner will be able to donate at least $1 million in the charity of their choice at the end.
The latest results were reported first Wednesday by Fortune magazine. Buffett did not immediately respond to a message.

Buffett's chosen low-cost S&P 500 fund gained 2.08 percent in 2011 to beat the five portfolios of hedge funds Protege chose, which were down 1.86 percent.

Through four years, the hedge funds are down 5.89 percent. Buffett's index fund is down 6.27 percent.

Both sides of the wager performed poorly in the first year when the stock market collapsed in 2008. But the portfolio of hedge funds fell 23.9 percent, while the Vanguard S&P 500 index fund Buffett chose plummeted 37 percent.

Buffett has said that most investors will do better over time with a low-cost index fund than by paying steep fees to investment managers. In the past, Buffett has devoted parts of his annual letters to Berkshire shareholders to highlighting the perils of paying hefty fees.

Sent from my iPhone

Noise Trader

In reality, most people are considered to be noise traders, as very few actually make investment decisions solely using fundamental analysis. Furthermore, technical analysis is considered to be a part of noise trading because the data is unrelated to the fundamentals of a company.

Are You Rational?

In reality, most people are considered to be noise traders, as very few actually make investment decisions solely using fundamental analysis. Furthermore, technical analysis is considered to be a part of noise trading because the data is unrelated to the fundamentals of a company.

Toil

Are you distracted by outward cares? Then allow yourself a place of quiet, wherein you can add to your knowledge of the good and learn to curb your restlessness. Guard against another kind of error: the folly of those who weary their days in much business, but lack any aim which their whole effort, even their whole thought is focused.-Aurelius