The Big Picture

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• Reputation and Liquidity Traps
• Succinct Summations of Week Events 7.25.14
• Marijuana Laws by State in USA
• 10 Friday AM Reads
• Cognitive Dissonance Is Hurting Your Returns
• Top 50 S&P 500 Companies’ 401(k)s
• Rolls Royce Wraith: High Tech Luxury for $400,000

Reputation and Liquidity Traps Posted: 26 Jul 2014 02:00 AM PDT

Succinct Summations of Week Events 7.25.14 Posted: 25 Jul 2014 01:00 PM PDT Succinct Summations week ending July 25th 2014 Positives: 1. S&P 500 made a new all-time highs. 2. US Initial jobless claims came in at 284k well below the 307k expected and the lowest reading since February '06. 3. Existing home sales came in at 5.04M annualized, better than expected. May numbers were also revised higher. 4. European July manufacturing rose to 54, a 3-month high and above expectations. 5. AAII showed the fewest bulls since early May, healthy to shake out the weak hands. 6. June CPI rose .3% core rose .1%, in line with expectations. 7. German consumer confidence rose to the highest levels since '06; Spain unemployment fell to a 2-year low, still a ridiculously high 24.5%; 8. China HSBC manufacturing came in at 52, an eighteen month high. Negatives: 1. June New Home Sales came in at 406k, well below the 475k expected. May #s were revised down to just 442k vs the initial read of 504k. 2. Markit ISM manufacturing index fell to 56.3, a three month low. 3. French business confidence came in at the lowest levels since summer '13. 4. Japan July manufacturing PMI fell to 50.8, from 51.5 previously. 5. Japanese exports fell 2% y/o/y vs an expected 1% gain. 6. Geopolitical tumult continues unabated

Marijuana Laws by State in USA Posted: 25 Jul 2014 10:30 AM PDT Source: Vox

10 Friday AM Reads Posted: 25 Jul 2014 07:30 AM PDT My morning train reads (continues here): • Charts that leave you no choice but to feel optimistic about the US economy (Quartz) • Corn farmers face a cash crunch (WSJ) but see Why is chocolate getting so expensive? (Slate) • Why Do Americans Stink at Math? (NY Times) see also Deficit scolds are the most crazed ideologues in America (The Week) • Corporatism not capitalism is to blame for inequality (FT) Continues here

Cognitive Dissonance Is Hurting Your Returns Posted: 25 Jul 2014 06:00 AM PDT Regular readers know I enjoy discussing behavioral aspects of investing. The reasons for this are twofold: First, we can’t control the markets, but we can control our own reactions to it (at least we can try). And second, many studies have shown that investors suffer from a behavior gap between what they should garner in returns and what they actually get. Of all of the failings of human wetware, the one I find most intriguing is cognitive dissonance. You can find technical definitions at Changing Minds, The Skeptics Dictionary or any number of other reference books. In the context of economics and investing, my preferred definition is as follows: Cognitive dissonance occurs in the mind of an individual when a theoretical belief system is confronted by factual evidence demonstrating outcomes contrary to what theories dictate should occur. Stated more plainly, when facts conflict with beliefs people find ways to ignore those facts, rationalizing them in a way that allows the disproven ideas to survive. John Kenneth Galbraith famously referenced cognitive dissonance before it was even called that, stating "Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof." I was reminded of this recently courtesy of several seemingly disparate but cognitively-related articles.  Continues here

Top 50 S&P 500 Companies’ 401(k)s Posted: 25 Jul 2014 04:00 AM PDT   Click for the interactive version.   Source: Bloomberg Visual Data

Rolls Royce Wraith: High Tech Luxury for $400,000 Posted: 25 Jul 2014 03:00 AM PDT I dont know who the buyers of this beastie might be at 400 large, with its 612 HP 6.6L V12, but it looks like quite the vehicle. What is worth noting for the rest of us of ordinary means is how the technology in these ultra luxe cars eventually works its way down market. Consider such Auto-tech as ABS, GPS, Adaptive Cruise Control, Collision Crumple Zones, Auto-tightening Restraints, Airbags, etc., all started as luxury options on high priced cars. Perhaps the GPS assisted lighting/suspension will work its way down the food chain. As to that Starry Night Skyliner, I am going to guess not . . .   Source: Bloomberg, July 21 2014   Rolls Royces are known for their luxurious features. The $400,000 Rolls Royce Wraith is also one of the most technologically advanced cars on the market today. Bloomberg’s Matt Miller took one for a spin to see how Rolls is keeping connected.

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