Paul Kedrosky's Infectious Greed

Long-Term US Unemployment
China’s Wealthy as Canadian Real Estate Forcing Function
“Price-Quakes” in Stock Exchanges
Twitter Digest: 2011-11-02

Long-Term US Unemployment

Posted: 02 Nov 2011 10:28 PM PDT

From a new Pew study, a graph of historical US long-term unemployment.

Lt unemployment

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China’s Wealthy as Canadian Real Estate Forcing Function

Posted: 02 Nov 2011 10:04 PM PDT

From the WSJ tonight, an article that (drive-by) makes the case for why wealthy Chinese immigration represents such an important forcing function in Canadian real estate. As the following figure shows, Canada is right behind the U.S. as the most desired location for exiting Chinese with more than $1,6m in assets.

Now, here is the important thing: Canada is only one-tenth the U.S.’s size, so the effect on Canadian real estate is immense, especially when the inbound wealth is funneled largely into two population centers, Vancouver and Toronto. And, within those two cities, most of the Chinese immigrants settle in Vancouver West and Markham/Thornhill, respectively. Incredible point mass of capital.

China emigration

“Price-Quakes” in Stock Exchanges

Posted: 02 Nov 2011 06:14 PM PDT

New PLoS paper echoing some of Didier Sornette’s work on tectoni models of stress relief in financial markets:

Price-quakes in World’s Stock Exchanges

Background

Systemic risk has received much more awareness after the excessive risk taking by major financial instituations pushed the worlds financial system into what many considered a state of near systemic failure in 2008. The IMF for example in its yearly 2009 Global Financial Stability Report acknowledged the lack of proper tools and research on the topic. Understanding how disruptions can propagate across financial markets is therefore of utmost importance.

Methodology/Principal Findings

Here, we use empirical data to show that the worlds markets have a non-linear threshold response to events, consistent with the hypothesis that traders exhibit change blindness. Change blindness is the tendency of humans to ignore small changes and to react disproportionately to large events. As we show, this may be responsible for generating cascading events—pricequakes—in the worlds markets. We propose a network model of the worlds stock exchanges that predicts how an individual stock exchange should be priced in terms of the performance of the global market of exchanges, but with change blindness included in the pricing. The model has a direct correspondence to models of earth tectonic plate movements developed in physics to describe the slip-stick movement of blocks linked via spring forces.

Conclusions/Significance

We have shown how the price dynamics of the worlds stock exchanges follows a dynamics of build-up and release of stress, similar to earthquakes. The nonlinear response allows us to classify price movements of a given stock index as either being generated internally, due to specific economic news for the country in question, or externally, by the ensemble of the worlds stock exchanges reacting together like a complex system. The model may provide new insight into the origins and thereby also prevent systemic risks in the global financial network.

via PLoS ONE: "Price-Quakes" Shaking the Worlds Stock Exchanges.

Twitter Digest: 2011-11-02

Posted: 02 Nov 2011 12:00 PM PDT

Explosive Volatility: A Model of Financial Contagion http://t.co/fECVKSDU #
What are the current odds we have military government in Greece by end of year? 20% 60%? Higher? #
Narrative fallacies, convenience sampling, etc. played role in Dutch soc psych fraud, approp enough – http://t.co/57ET3XGv #
Huge solar power plants are blooming in California's southern deserts – http://t.co/Knw3nldp #
Greece PM George Papandreu increasingly reminds me of former Newfoundland premier Clyde Wells in the Meech era, but that's just me. #
What news Americans follow, 1996-2008 http://t.co/naNnNWAA #
On my Greece military rule question, answers were trimodal: 2% / 50%/ never. Some point out military now less capable of rule than Papandreu #
RT @seb_shepard: @pkedrosky neatly broken into: gloomy Europeans / cynical N. Americans / Greeks #
Eurozone crisis: live blog http://t.co/9g0oRRMF #
Note to self: Don't leave possessions on other continents. Huge pain getting them back. #
Cognitive dissonance: Fuel economy now in top 10 factors for U.S. sports car buying for 1st time ever – http://t.co/jsM39Lde /via @drgrist #
The (r)evolution of the marathon: An unprecedented era http://t.co/ZJFgWf61 #
Good analysis: Greek referendum is coin-flip on euro exit http://t.co/MvnSHrWn #
Despondent Greeks call referendum plan blackmail – http://t.co/Uhikd7YR #
Those fall/winter/spring/summer colds are the worst. #
Recently finished Ian Kershaw's "The End", on the final days of Hitler's Germany. Smart & unrelenting. http://t.co/VWF28LaW #
Scholarships for snowboarders looking to attend mountain schools? I want to be 18 again. http://t.co/fzIdbe3W #
Got to respond to a Groupon hypothetical yesterday on @BloombergTV with "If my aunt had wheels she'd be a bicycle". My work here is done. #
I also argued yesterday on @BloombergTV that we should worry about Groupon "pundit fatigue". What will all these people do post-IPO? #
Lest anyone be in doubt that Greece's infection has moved well beyond that host, I give you Italy – http://t.co/ocfiyC0S #
Bethany McLean: Did accounting help sink Corzine's MF Global? http://t.co/jvZSeHQG /via @john_hempton #
Martin Wolf: Creditors can huff but they need debtors http://t.co/XzZ01GBc #
Love the Freudian autocorrect of European "momentary union" for "monetary union". http://t.co/9ygBDvQp #
Lake Mead's glass is no longer half empty, but 52% full – http://t.co/JYjjvaV0 #
Twenty of the world's top athletes and explorers share their dream trips – http://t.co/2ZhF5OOi #
Flipped to new Gmail UI and am very unhappy. How do I go back? #
Whew, back in old Gmail. I missed my Minimalist Gmail extension. #
Spider porn and moments of transcendence – http://t.co/rJn8Nn8a #
The never-ending Fed obsession with mortgage refinancing in U.S. is a remarkable indictment of monetary policy. #
So, we're three weeks from the US supercommitee deadline, and also 17 days from a possible govt shutdown. I see no troubles there. #
You'll either really dig this, or go WTF? A self-referential aptitude test – http://t.co/Ul3BOxaH #
Pesek: Mona Lisa Will Look Great on China's Wall – http://t.co/fB13lElT #
Lowenstein: The widespread belief that liquidity offers safety is an illusion, & a terribly dangerous one at that. http://t.co/3xHY9WW3 #
Bogleheads: How do you deal with all the economic doom & gloom? – http://t.co/ZnNNbfFP #
"I was on safari in the suburbs". — Louis Theroux, "America's Most Dangerous Pets" #
If any of you fine people get a chance to watch this new Louis Theroux BBC special on wild pets, watch it. He's like no-one else. #
Thoughtful energy outlook with data for both peak-ers and non-peak-ers – http://t.co/YWjUkVAy #
Good perspective: Tax impasse threatens US deficit progress: http://t.co/yXUDCZt0 #FT #