Five things I learned this week: Mar 24th 2013

I was watching the Jeremy Grantham’s interview on Charlie Rose (,p6,d0), and he had a very interesting way to put the current fascination with debt in perspective. He said, and I am paraphrasing that our obsession with debt is bizarre and it foucses so much on the accounting world, because debt is all paper, while we’re no focused on our the real world, which the quality and quantity of our people, and we’re not investing in them.

Almost everyone agrees that the Fed policies are currently one of the biggest drivers of the market, and though high profitability of corporates and relatively low multiples have helped, the market would certainly be not where it is now if it were not for the Fed. Doubleline Capital makes the case in this chart. The chart just by itself is surely a study in correlation, and by itself doesn’t prove causality (I am certain that the accompanying text and other charts did make the case). You could also say that the second-last rally is really a Draghi rally and not a Bernanke rally. But all in all, this goes to show that despite in a a zero-bound interest rate environment, the central banks have played a massive role in defining the recent up and downcycles of the market.

I was looking at the net long positions of Euro at CBoE, and the difference between the mostly long-only and hedge funds’ positions is striking to me. Long-only (shown as “asset manager”) appears to be long Euro by about 23% amongst themselves, but the hedge funds are massively short by the other of almost 50% (32.2% short vs. 20.8% long). Wonder if this is just a matter of different maturities, but still very interesting.

I read that the landlord of the HRMC’s (Her Majesty’s Revenue and Customs in United Kingdom) tax offices is actually domiciled in Bermuda since 2001 to avoid taxes. The fines paid by the large corporations in the United Kingdom for tax avoidance is 0.01% of the taxes avoided. This is on top of the leaky taxation that corporations already enjoy world-wide. I don’t know when this race to the bottom will end and when will we stop paying the top 2% (accountants and lawyers) to help the top 0.5% capture more of the world’s wealth. This is actually really depressing, and something has to give.

50 years after the publication of Feminine Mystique, the women’s participation in workforce seems to have topped out, and the recent-most cover of the New York magazine even suggested that women are willingly leaving the workforce to raise children (they do not have any statistical evidence, but it was a nice catchy feature that’d sell prints). We need to remember that the 3% annual GDP growth the United States saw over the past few decades included this once in a lifetime spurt in the workforce, and we need to realistic about the growth that we can wring out of this economy going forward.


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