The Stingy News Weekly (04/24/2011)
On being wrong
"Most of us will do anything to avoid being wrong. But what if we're wrong about that? 'Wrongologist' Kathryn Schulz makes a compelling case for not just admitting but embracing our fallibility."
Dead Suit Walking
"In New York City, men in the 35-to-54 kill zone have lost jobs faster than any other group, including teenage girls, according to new data from the Fiscal Policy Institute."
Buffett’s Profit on GE
"In the financial crisis, Warren Buffett loaned out his halo of respectability to prop up sentiment about Goldman Sachs Group, Dow Chemical, General Electric and other blue-chip companies. Those bets came with some heavy costs for the companies, and produced handsome profits for the Oracle of Omaha."
Systemic risks of ETFs
"Crisis experience has shown that as the financial intermediation chain lengthens, it becomes complicated to assess the risks of financial products due to a lack of transparency as to how risks are managed at different levels of the intermediation chain. Exchange-traded funds, which have become popular among investors seeking exposure to a diversified portfolio of assets, share this characteristic, especially when their returns are replicated using derivative products. As the volume of such products grows, such replication strategies can lead to a build-up of systemic risks in the financial system. This article examines the operational frameworks of exchange-traded funds and identifies potential channels through which risks to financial stability can materialise."
Owning Loses Appeal
"The median U.S. home price tumbled 32 percent from a 2006 peak to a nine-year low in February, data from the Realtors show. The retreat surpassed the 27 percent drop seen in the first five years of the Great Depression, according to Stan Humphries, chief economist of Zillow Inc., a Seattle-based real estate information company."
Losing 84 Cents on Dollar
"Stephen Street, the state inspector general who led the investigation with U.S. authorities, says that criminal law fell short of addressing all of the police pension system’s shortcomings. “Randy Zinna is a symptom of a larger problem over there, which is a lack of oversight, a lack of accountability,” Street says. “You can’t conclude anything other than that.”"
Negative Outlook on U.S. AAA Rating
"Standard and Poor’s put a “negative” outlook on the U.S. AAA credit rating, citing rising budget deficits and debt."
Will Canada be going Dutch?
"Once the current commodity boom ends the loonie will plunge, the economy will stumble badly, wages will fall and complacent policy makers will find out what happens when there isn’t enough growth to compensate for a lack of fiscal prudence."
Does DALBAR really calculate investor returns?
"To give credit where it’s due, DALBAR deserves kudos for having begun its annual QAIB studies as far back as the mid-1980s. But for nearly a decade, I have suspected that DALBAR’s methodology was flawed. I contacted DALBAR recently in an effort to confirm my understanding of the finer points of their calculations. Their lack of response left me with my original interpretation of DALBAR’s 2001 QAIB report, the only full version I’ve reviewed. And it reveals what may be a questionable methodology. I suspect that DALBAR calculates what it calls investor returns by applying dollar-weighted fund redemption rates to benchmark returns – rather than applying a DWRR calculation directly to the funds. And if they’re doing that, they’re not calculating investor returns."
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