The Big Picture

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• Gun Homicide Rate Down 49% Since 1993 Peak
• 10 Tuesday PM Reads
• Equity Risk Premium is High (this is bullish)
• 10 Tuesday AM Reads
• Appaloosa’s Tepper Bullish on Stocks (Still)
• Most Human Males Never Retired (they just died)
• The Next iPhone OS
• Crises Before and After the Creation of the Fed

Gun Homicide Rate Down 49% Since 1993 Peak Posted: 14 May 2013 04:30 PM PDT Click to enlarge Source: Pew Research   I frequently find most of the arguments used by the pro gun side against standard background checks or reduced size magazines to be mostly silly and emotional. There are numerous simple things we can do to reduce deaths, accidental or otherwise. There are no legitimate arguments, only paranoid ravings of the deluded. However, this data point via Pew Research is quite astonishing — I’d imagine that most of the public on both sides of the gun control/21nd Amendment debate are mostly unaware: • Violence plunged through the 1990s, but has declined less dramatically since 2000. • Compared with 1993, the peak of U.S. gun homicides, the firearm homicide rate was 49% lower in 2010, and there were fewer deaths, even though the nation's population grew. • The victimization rate for other violent crimes with a firearm—assaults, robberies and sex crimes—was 75% lower in 2011 than in 1993. • The rate appears to be higher in 2011 compared with 2008, but the increase is not statistically significant. • According to a new Pew Research Center survey, today 56% of Americans believe gun crime is higher than 20 years ago and only 12% think it is lower. • Bureau of Justice Statistics review notes homicides that claimed at least three lives accounted for less than 1% of all homicide deaths from 1980 to 2008. Quite fascinating. The takeaway to me is that we as a society all should be doing more of what works to make all of us safer, freer, healthier — and continuously looking for ways to improve on that. ~~~ Discuss.

10 Tuesday PM Reads Posted: 14 May 2013 01:30 PM PDT My afternoon traffic court reads: • Markets and Memory Banks: Why Investors Can't Imagine a Collapse of the Bond Market (Total Return) • This Time It's Different, Really (Money Beat) • Don’t just do something, sit there! In Soccer and Investing, Bias Is Toward Action (Bucks) • How the Case for Austerity Has Crumbled (New York Review of Books) • One British Hedge Funds Secret? Cutting its fees! (DealBook) • These financial advisers needed advisers (MarketWatch) • Boring, Diversified, And (Still) Tough To Beat (Capital Spectator) • IRS Was Wrong to Single Out Tea Parties, But Many Political Groups Should Not be Tax-Exempt (TaxVox) see also Congress WTF? Put Pressure on IRS to Investigate Conservative Tax-Exempt Groups (Atlantic) • 29 Rules for College Graduates (WSJ) • Photographer camped in -37C temperatures for three months to capture the Northern Lights over Rocky Mountains (Daily Mail) What are you reading?   Debt Distribution Source: WSJ

Equity Risk Premium is High (this is bullish) Posted: 14 May 2013 09:00 AM PDT   Last week, I posted the above chart from the NY Fed’s Liberty Street Economics. This morning on Squawk Box, David Tepper of Appaloosa discussed it — and his comments reversed the futures from negative to positive. Here is a brief explanation of what this chart — a compilation of 29 valuation models — means: The equity risk premium is the expected future return of stocks minus the risk-free rate over some investment horizon. Because we don't directly observe market expectations of future returns, we need a way to figure them out indirectly. That's where the models come in. In this post, we analyze twenty-nine of the most popular and widely used models to compute the equity risk premium over the last fifty years. They include surveys, dividend-discount models, cross-sectional regressions, and time-series regressions, which together use more than thirty different variables as predictors, ranging from price-dividend ratios to inflation. Our calculations rely on real-time information to avoid any look-ahead bias. So, to compute the equity risk premium in, say, January 1970, we only use data that was available in December 1969. If you look at the chart, we are at levels that are similar to 1975 and 1982. An emailer last week asked me why I “waste space” occasionally publishing Fed research, academic papers and other such works. Now you know why . . .   Previously: Are Stocks Cheap? A Review of the Evidence (May 9th, 2013) Appaloosa's Tepper Bullish on Stocks (Still) (May 14th, 2013)

10 Tuesday AM Reads Posted: 14 May 2013 06:45 AM PDT My morning reads: • Is stocks’ recent run start of second leg of bull? (USAToday) • Of course “hedge funds” lose money (Noahpinion) • Using Geography to Predict Stock Market Returns (MoneyBeat) • What Does Japan Mean For The Rest of the World? (Tim Duy’s Fed Watch) see also A new type of growth is emerging (FT Alphaville) • The Facebook Flop (Stratechery) • Why have so few bankers gone to jail? (Economist) see also Credit-rating agencies poised to avoid overhaul (Washington Post) • Navy Catches the Drone Bug (WSJ) • Here’s The Real Reason People Bash Bernanke And Keynes When They’re On Stage At Conferences (Business Insider) see also In Praise of Econowonkery (NYT) • The Tesla Model S Is The Best Car We’ve Ever Seen (CONSUMER REPORTS) • Meet Marc Maron: the Comedic Podcast Giant on His New IFC Show & More (Daily Beast) What are you reading?   Junk Yields Less Than Treasuries Five Years Ago Source: Bespoke

Appaloosa’s Tepper Bullish on Stocks (Still) Posted: 14 May 2013 06:00 AM PDT click for Video Source: CNBC

Most Human Males Never Retired (they just died) Posted: 14 May 2013 04:58 AM PDT Click to enlarge Source: The Motley Fool   “The entire concept of retirement is unique to the late-20th century. Before World War II, most Americans worked until they died.”   The quote above is from Morgan Housel. He has become the most consistently interesting writer on Motley Fool (a site I never really grokked). I was reminded of this over the weekend when I finally got around to reading a post of his on the flight back from the West Coast. The chart above is from a longer piece on savings for retirement — and we all know all the usual memes on that subject all to well. But here is the crazy thing we often forget: Throughout history, most people never really got to retired. Men typically were working at age 65 and beyond. In 1880, 78% of Men over the age of 65 were still working. Most men worked til they dropped. Only recently — since the 1940s — have less than a majority of over 65 year old men not been employed in some capacity. That is an astonishing data point. Retirement as we know it today is a less than century old phenomena. The truth of the matter is that most Humans (particularly males) never had the opportunity to retire. They simply worked until they died. You could not work, but then you wouldn’t eat — leading to the same resolution. The combination of Social Security, private pension funds, IRAs and 401(ks) are the funding mechanisms. They are quite imperfect, but what they require is tweaking, not undoing. Raise the FICA cap on Social Security, and that becomes financially sound. In IRAs and 401(k)s, you can replace high cost under-performing active funds with low cost passive ETFs and see an immediate improvement in returns. There are simple fixes for what are essentially actuarial issues. One last thing: Note that after 120 years of the labor force participation rate dropping for the over 65 male, it has begun ticking up again. The key question is whether this is merely a post-crisis catch up caused by 3 crashes — Stocks, houses & stocks again — or whether it represents a fundamental change in society. We probably won’t know for another 5 years or so, but it is worth watching closely.     Source: The Biggest Retirement Myth Ever Told Morgan Housel Motley Fool May 2, 2013  http://www.fool.com/investing/general/2013/05/02/the-biggest-retirement-myth-ever-told.aspx

The Next iPhone OS Posted: 14 May 2013 04:00 AM PDT Simply Zesty rounded up assorted rumors of what the next iPhone OS might be, and created a surprising video. Here it is:   Video after the jump Concept designs for iOS 7 , Created by our Art Director Philip Joyce and Motion Designer Denes Farkas, they wanted to offer a new vision for Apple, believing that its current designs have become stale, and so created this.

Crises Before and After the Creation of the Fed Posted: 14 May 2013 02:30 AM PDT

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