The Big Picture

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• The Response of Stock Market Volatility to Futures-Based Measures of Monetary Policy Shocks
• Amazon ‘Targeting’ Hachette Writers
• Comparo: iPhone 6 Plus vs. Samsung Galaxy S5
• What I Learned After 30,000 Blog Posts . . .
• 10 Sunday Reads
• Turkey and Islamic State

The Response of Stock Market Volatility to Futures-Based Measures of Monetary Policy Shocks Posted: 22 Sep 2014 02:00 AM PDT

Amazon ‘Targeting’ Hachette Writers Posted: 21 Sep 2014 06:00 PM PDT Roxana Robinson, president of the Authors Guild, and Bloomberg Contributing Editor Paul Kedrosky, talk about the dispute between Hachette Book Group and Amazon Inc. over e-book pricing and distribution. Source: Bloomberg, Sept. 16 2014

Comparo: iPhone 6 Plus vs. Samsung Galaxy S5 Posted: 21 Sep 2014 12:30 PM PDT From the inimitable Onion:   click for larger graphic Source: The Onion:

What I Learned After 30,000 Blog Posts . . . Posted: 21 Sep 2014 06:30 AM PDT >   My Sunday Washington Post Business Section column is out. On the anniversary on my 30,000th blog post, I looked back at what I learned. That is a lot of posts over the past dozen years — The Big Picture blog was begun back in 2003. Here’s an excerpt from the column: “After more than a decade of getting up before the crack of dawn to write a daily journal about all things financial, here is what I've learned: Writing is a good way to figure out what you think. To quote Daniel Boorstin, the former librarian of Congress, "I write to discover what I think . . . After all, the bars aren't open that early." The act of putting pen to paper, or in my case, spilling pixels on a screen, requires thought. Thinking about context and working out how different elements interact in a complex system like the markets is a contemplative process. Often, I have no idea what I thought about a subject until I begin to write about. Once you research an idea, you begin to develop a perspective. Writing about anything in public, often in real time, has helped fashion my views. (Note: It also helps if you have something of interest to say).” There are nine other bullet points that describe what blogging has taught me. Some of you have had some very nice things to say about this on Twitter (see e.g., this, this, this, this, this and this). Those comments are deeply appreciated.     Source: After 30,000 posts, Big Picture blogger has figured a few things out Barry Ritholtz Washington Post, September 21 2014 http://wapo.st/1wOFwMD

10 Sunday Reads Posted: 21 Sep 2014 04:00 AM PDT Good Sunday morning. Pour yourself a tall cup of hot black coffee, and start your SUNday — the day before MOONday — with these quality reads: • 7 Fascinating Insights Into Why Scotland Voted Against Independence (Buzzfeed) • Mutual Funds From Good to Great (A Wealth of Common Sense) • Be like Calpers: Dump your hedge funds (MarketWatch) see also CalPERS Names Ted Eliopoulous as CIO (Chief Investment Officer) • What we didn’t learn from the economic crisis  (Vox) • The Fed Is Boring Again.  That’s a Relief. (The Upshot) • Prosecutors Are Still Chasing Billions in Uncollected Debts (WSJ) see also SEC Judgement Against Raider Paul Bilzerian: $62 Million. Collected: $3.7 Million. (WSJ) • A Fireside Chat With Charlie Munger (MoneyBeat) • The Fate of Galt’s Gulch (The Daily Bell) see also Ayn Rand's capitalist paradise lost: The inside story of a libertarian scam (Salon) • The Moral Bankruptcy of California Ballot Initiatives (Pricenomics) • The Twisted World of Sexual Organs: How Evolution Solved the Problem of Conception (BBC) What’s for brunch?     ~~~~ Boom in Energy Spurs Industry in the Rust Belt Source: NYT

Turkey and Islamic State Posted: 21 Sep 2014 02:30 AM PDT Turkey and Islamic State David R. Kotok September 20, 2014     While we watch the war unfolding against the Islamic State (IS) in Syria and Iraq, it is critical to keep an eye on neighboring Turkey. There is a lot at stake; Turkey holds a key position. The news reports today are replete with commentary about Turkey as it takes a very soft role in fighting IS. Turkey was worried about 49 Turkish diplomats and their families. They were hostages of IS. Their rescue or release or escape is being reported this morning.  There are also accounts of 31 Turkish truck drivers taken hostage by IS. Their whereabouts are still unknown.  Reports of the Turkish hostage takings started this month. Turkey's government is trying to walk a fine line between (1) not alienating IS to the point where Turks have to witness the beheading of a Turkish citizen on the one hand and (2) maintaining some forms of security internally and with its NATO alliance on the other. Meanwhile Turkey has a high-risk, porous border with Syria and Iraq. In other words, Turkish leaders are trying to walk a line between two difficult masters. Turkish internal politics and demographics make this a very risky venture. It is important to note that Turkey is a NATO member with a strong military. It has the largest Air Force among the NATO countries with the exception of the United States. That air force has not been reported to be engaged in airstrikes.  Perhaps the IS holding of hostages restrained the Turkish government.  We have no way to know about these internal Turkish decisions. Turkey is looking to upgrade its Air Force from F-16 fighters to newer versions. Further, according to Capital Alpha briefing report, a "senior commander of the Turkish Air Force" has confirmed in a presentation that Turkey "is developing its own precision-guided weapons as well as satellites." Meanwhile, Turkey's largest export customer is Germany, a country that is dealing with its own energy supply problems caused by the Russia-Ukraine tensions. Turkey's second largest export market is Iraq. That country is in a downward spiral. Turkey's credit ratings are falling. Fitch has taken Turkey to a BBB-, which is the lowest level of investment grade. Other rating models point to downgrades. The Turkish president, Recep Tayyip Erdoğan, has threatened to cut ties with the rating agencies. The president may not like what the rating agencies say, but Turkey has a current account deficit of over 6% of GDP and growing. The country's debts are rising, and its foreign exchange reserves are under pressure. Its currency is falling against the US dollar. The complexity of its situation is exacerbated by reports of internal IS recruitment. There are reports that discuss IS offices in Turkish cities. There has been a German report that IS has made Turkey an official recruiting location. That report also notes that prospective IS fighters from poorer neighborhoods in Turkey can find their way to an office in Istanbul. There are other reports of "Jihadist gift shops" and IS branded T-shirts. Newsweek reporters Alev Scott and Alexander Christie-Miller have described IS recruitments of young men from Sunni Muslim districts "plagued by poverty and drug addiction." Some Turkish officials have estimated that more than 1,000 Turkish citizens are fighting for IS. At Cumberland Advisors, we do not own any Turkish investment exposure with the exception of a broad-based exchange-traded fund (ETF) that has a very small Turkish component (0.7%) as part of the full index. We avoid risks associated with this deteriorating situation on the Turkish border with Syria and Iraq. We think risks are rising in the neighborhood. American policy against IS has only limited chances of success if Turkey is passive. Our investment position is to manage risks where we can assess them. The risk in this region is impossible to measure. It is driven by news flow that rapidly impacts risk premia. In some cases, one can identify risks such as oil flows through Turkey, Turkish debts and stocks, or other types of risks such as the Mosul Dam. In other cases, there are secondary effects that are difficult to measure. In any event, we avoid Turkey. And to counter risk, we have a cash reserve in most of our separately managed ETF accounts. We follow reports as closely as we can. Turkey belongs on everyone's radar. ~~~ David R. Kotok, Chairman and Chief Investment Officer, Cumberland Advisors

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