The Big Picture

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• The Effects of Benefits on Unemployment and Labor Force Participation
• John Bogle on the Rise of Index Funds
• 10 Tuesday PM Reads
• The Population of the Internet
• QOTD: Reorganizing Europe
• Moral Hazard and the LTCM Bailout
• 10 Tuesday AM Reads

The Effects of Benefits on Unemployment and Labor Force Participation Posted: 24 Sep 2014 02:00 AM PDT

John Bogle on the Rise of Index Funds Posted: 23 Sep 2014 05:00 PM PDT The founder of Vanguard explains why his invention is winning the battle for assets. Plus: The problem with ETFs, and why we need a transaction tax.

10 Tuesday PM Reads Posted: 23 Sep 2014 01:30 PM PDT My afternoon train reads: • Shrinking Bond Desks Populated by Journeymen as Masters Fade (Bloomberg) • Financial Elite’s Offspring Start Their Own Hedge Funds (WSJ) but see 90% Of Hedge Fund Managers Are Overpaid Relative To “True Talent” (Zero Hedge) • Time for a contrarian view: Eurozone’s economy is turning the corner (Sober Look) • Driving Muni Bond Rally: Communities Reluctant to Borrow (WSJ) • Five Takeaways: Mortgage Lending Hit Six-Year High in 2013, But …  (Real Time Economics) • The Overpaid CEO: There have been many attempts to curb exorbitant executive pay.  But we won’t fix the problem until we address the nature of the corporation. (Democracy) • New study shows that the savings from ‘tort reform’ are mythical (LA Times) • Alibaba Could Buy Yahoo for Free (Bloomberg View) • Entrepreneurs anonymous: Instead of romanticizing entrepreneurs people should understand how hard their lives can be (The Economist) • Can Graffiti Be Copyrighted? Some of the most public artists want to keep their work a bit more private. (The Atlantic) What are you reading?     Source: Deutsche Bank

The Population of the Internet Posted: 23 Sep 2014 10:30 AM PDT Source:Vox

QOTD: Reorganizing Europe Posted: 23 Sep 2014 07:30 AM PDT I have to admit I am intrigued by this advice: Reorganise Europe. Sell off France, privatise Spain and Italy, nationalise Germany, buy Switzerland, put Greece on six months performance watch, promote Poland, retire off Luxembourg  and make Belgium redundant. Source:  Polemic’s Pains   If Europe does not get its act together soon, this process might come under more serious consideration!

Moral Hazard and the LTCM Bailout Posted: 23 Sep 2014 06:00 AM PDT Today is an auspicious anniversary, though it’s one I suspect many people may not recall. On Sept. 23, 1998, former Federal Reserve Chairman Alan Greenspan and William McDonough, then president of the Federal Reserve Bank of New York, managed to orchestrate the rescue of the hedge fund Long Term Capital Management. It was a strange exercise in both herding cats and moral hazard. It wasn’t a government bailout, since no taxpayer money was involved. More than a dozen Wall Street banks, many of which had exposure to LTCM, ponied up $3.65 billion to unwind the fund’s complex leveraged bets. Still, the lesson learned was that in the event of troubles, the Fed could be counted on to lend a hand to a) avoid disruption; b) add liquidity and; c) protect the Street against catastrophic losses. In hindsight, it looks like the lessons learned were the wrong ones. Recall the summer of 1998 when Russia — a hot investment for bond underwriters — defaulted on its ruble-denominated debt. This triggered a chain reaction of losses for anyone who either held Russian debt or had assets denominated in rubles. The biggest of those suffering losses was the wildly overleveraged giant hedge fund. Continues here

10 Tuesday AM Reads Posted: 23 Sep 2014 05:00 AM PDT Welcome to Fall! Here are our first post Autumnal Equinox reads to start off the new season: • The U.S. Economy chugs along (Fidelity) • Bond Losses Wiped Out for Treasuries as Dollar Conquers All  (Bloomberg) see also What is the Dollar Saying? (Market Anthropology) • The short-sighted US buyback boom: Unless the roots of the problem are fixed, boardrooms will keep on draining their treasuries (FT) • Small Stocks May Drag Entire Market Down (Barron’s) see also 3 Reasons to Get More Cautious on Stocks (Humble student of the markets) Continues here

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