The Big Picture

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• Planningness 2011: How to Design a Business
• LDL: “Let’s Discuss Live”
• Jim Chanos: “I might not be bearish enough on China RE
• Tuesday Reading List
• Larry Lessig: On laws that choke creativity
• Global Search Volume By Language
• CDS: Have You Seen the Little PIIGies . . .
• A Look at Volatility Index (VIX) Since QE2 Began
• Washington Post: “Five Disciplines To Be A Great Investor”
• Economic data

Planningness 2011: How to Design a Business Posted: 24 May 2011 05:30 PM PDT Planningness 2011 View more presentations from Colin Raney

LDL: “Let’s Discuss Live” Posted: 24 May 2011 04:59 PM PDT “LDL” is my new favorite acronym. Call it Wall Street prosecution arcana:  To avoid putting into email any damaging info — especially about insider trading — some of the recent expert networks thought they might avoid prosecutions by using the acronym “LDL.” It is strewn throughout their emails, and informs the reciever that they are getting close to sensitive information that should best be discussed without a paper trail. Hence, LDL — “Let’s Discuss Live.” It is the Wall Street equivalent of the teenage POS — “Parents Over Shoulder” — only in this case, it was more accurate to say “Prosecutors Over Shoulder” ! Dealbook used this example on April 28, 2010: “Even at a disadvantage, not all clients were easy to convince. Goldman e-mails show how the bank backed up its sales team as they sought to unload bets they thought might one day go sour. In one exchange, a Goldman employee refers to a mortgage investment as "as a way to distribute junk that nobody was dumb enough to take first time around." The response of Jonathon Egol, a colleague of Mr. Tourre's who designed some of the mortgage trades, was "LDL," or "let's discuss live," effectively moving the discussion off record.” How is it possible that in 2010, otherwise intelligent people still fail to understand that they are creating a permanent email trail? Did they actually think no one would know what that meant? The next time I hear anyone say “Goldman Sachs is the smartest shop on the street,” in my mind I will be hearing “He’s the smartest kid on the short bus.” All I can say is thank goodness for stupidity. It makes prosecution so much easier!

Jim Chanos: “I might not be bearish enough on China RE Posted: 24 May 2011 03:24 PM PDT Bloomberg: Hedge-fund manager Jim Chanos said investors concerned that U.S. technology stocks such as LinkedIn Corp. are overvalued should turn their attention to China. Chanos, the president and founder of Kynikos Associates LP, said his "dramatic" bet against Chinese real estate may not be sufficient. While LinkedIn, the first social-media company to go public in the U.S., traded as high as 31 times sales last week, overvaluation is more widespread in China, he said. Bloomberg, May 24, 2011

Tuesday Reading List Posted: 24 May 2011 01:00 PM PDT Some interesting links for your reading pleasure: • Lessons from a difficult year of trading (Peter Brandt) • Forefront:  The Inflation Issue (Cleveland Fed) • Prosecutors Faulted on Failure to Charge 'Bandits' in U.S. Market Collapse (Bloomberg) • Hedge-fund secrets to beat the market  (Marketwatch) • Oil stock buybacks stoke tax debate (Chron) • Terry Smith doesn't like ETFs (FT.com) • How our debt happened (Washington Post) • The Elephant in the Green Room (NY Mag) • How to De-Crapify Your Home: A Start-to-Finish Guide (Lifehacker) • “We Are Crossing the Boundary Between Knowledge and Belief” (The European) What are you reading?

Larry Lessig: On laws that choke creativity Posted: 24 May 2011 11:57 AM PDT Bob R writes: “Your item yesterday reminded me of Larry Lessig’s March, 2007 TED.com talk, “Larry Lessig on laws that choke creativity”. Larry Lessig, the Net's most celebrated lawyer, cites John Philip Sousa, celestial copyrights and the “ASCAP cartel” in his argument for reviving our creative culture.

Global Search Volume By Language Posted: 24 May 2011 11:30 AM PDT Play with the Search Globe here. You will need a modern browser and probably a non-sucky computer. Perhaps the best thing that came out of this announcement is the discovery that Google has a Data Arts Team. Source: (Flowing Data)

CDS: Have You Seen the Little PIIGies . . . Posted: 24 May 2011 10:00 AM PDT . . .  crawling in the dirt, and for all the little piggies, life  is getting worse !  Credit Default Swaps of the Portugal, Ireland, Italy, Greece and Spain: > click for larger piig chart Courtesy of Bianco Research

A Look at Volatility Index (VIX) Since QE2 Began Posted: 24 May 2011 09:00 AM PDT Since QE2, Volatility has been falling. As the fascinating chart below from Ron Griess shows, the volatility of markets, post Flash Crash was drifiting lower until the modest sell off in March 2011 sent the VIX spiking. > click for larger chart

Washington Post: “Five Disciplines To Be A Great Investor” Posted: 24 May 2011 07:30 AM PDT > How did I forget to mention this yesterday? My Sunday Washington Post column on the varied skills required to become a better investor was published. Its called The many hats of great investors. Here is an excerpt: “Great investors are savvy generalists. I can think of five fields that are hugely helpful to asset management. If you were to study these disciplines, your understanding of how markets work would greatly improve. And you would be a better investor. How? You will generate better risk-adjusted returns; meaning, you will get the most bang for the bucks you are putting at risk. You will suffer less from volatility — the stomach-churning ups and downs in the markets that are one part risk, one part opportunity. And you will avoid the typical mistakes that most investors make.” The five disciplines that help you become a better investor: Historian, Psychiatrist, Trial lawyer, Mathematician/statistician, Accountant. (The full column at the Washington Post) > Source: The many hats of great investors Barry Ritholtz Washington Post, May 22, 2011, Page G6 http://www.washingtonpost.com/business/on-investing-the-many-hats-of-great-investors/2011/05/17/AFN02c8G_story.html

Economic data Posted: 24 May 2011 06:53 AM PDT Following much weaker than expected NY and Philly Fed manufacturing surveys, the Richmond region reported an outright contraction as their index fell to -6 from +10, the 1st negative reading since Sept. This area covers mfr’s in DC, Maryland, Virginia and West Virginia and New Orders went to -15 from +10 and Backlogs fell to -19 from -1. Positively, even with the broad weakness, the Employment component remained unchanged at 14 but the average workweek fell to zero from 7 and wages were down to 6 from 22. While current conditions softened, the outlook remains still upbeat. Bottom line, the Richmond survey is never market moving as its not widely followed but its another piece in the anecdotal puzzle of the moderation seen in manufacturing in May with the obvious hope that its just a midcycle misstep before the next acceleration. The ISM national number is out next week. Continuing the trend of bouncing along the bottom, New Home Sales totaled 323k annualized, 23k more than expected and is up from 301k last week. While it’s off the 50+ yr low of 274k in Aug, its well down from the bubble peak of 1.389mm. Because the absolute number of homes for sale fell by 5k to 175k, the lowest since at least 1963, months supply fell to 6.5 from 7.2, a one year low. Due to the competition from a still large amount of existing homes, where many are selling below replacement cost and in foreclosure, home builders still have a bumpy ride ahead but that’s not new news to any of us. The best response on the part of builders is to shoot themselves in the foot for as long as they can financially stand so the market can more quickly absorb the excess inventory of existing homes which make up most of the overall market.

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