The Big Picture

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• Do Extended Unemployment Benefits Lengthen Unemployment Spells?
• Solar Powered Window Socket
• NY/NJ/CT Congressional Delegation Should Demand Apology from Oklahoma Senators Inhofe and Coburn
• 10 Tuesday PM Reads
• Apple’s International Tax Structure
• Recommendations for Equitable Allocation of Trades in High Frequency Trading Environments
• 18th Century Debt (UK Consols to 1742)
• 10 Tuesday AM Reads
• GMAMX: Goldman Sach’s Muppet Fund of Funds
• The Job Market of 2045

Do Extended Unemployment Benefits Lengthen Unemployment Spells? Posted: 22 May 2013 02:00 AM PDT

Solar Powered Window Socket Posted: 22 May 2013 01:00 AM PDT Source: Reflection Of Me

NY/NJ/CT Congressional Delegation Should Demand Apology from Oklahoma Senators Inhofe and Coburn Posted: 21 May 2013 04:00 PM PDT A brief reminder: Hurricane Sandy was the deadliest and most destructive hurricane in decades. It caused 285 total fatalities and was the second-costliest hurricane in United States history. During the immediate aftermath of this act of Nature, these 2 dimwits were among many who decided to use the disaster as a political platform. They voted against a full FEMA / Army Corp of Engineer reconstruction, and repeatedly delayed votes to fund any for of rescue. The claim that the rescue bill was any more pork laden than anything else that comes out of the sewer that is Washington D.C. was specious at best. Do a search for “Hurricane Sandy Pork” — what comes up are the same wingnut articles repeated over and over in various partisan outlets. Media Matters noted in January that claims of money for “climate change for the EPA”  was actually money for wastewater treatment in damaged areas (Fox News’ Bogus Hunt For Pork In Sandy Bill Continues). Even Forbes called foul — they noted that the "pork" came from having to bribe red state Republicans — including Texas — in order to get the package passed over their filibuster” (Pork Holding Up Senate Sandy Relief Bill Funneled Into The Troughs Of GOP Deficit Hawks? You Betcha). The hypocrisy reached a point of such absurdity that the Republican Governor of New Jersey, a Conservative favorite, went postal against the GOP House members as well as these two Oklahoma Senators. Which brings me to the recent tragedy in Oklahoma: Now that the disaster is on the other foot, the Oklahoma Senators/deficit hawks are claiming Tornado aid 'totally different' from Hurricane Sandy aid. Want to know how its different? A big chunk of the Sandy emergency package replenished FEMA, which had been underfunded by the usual suspects. The Sandy relief package replenished its coffers. The votes in favor of Sandy Aid ironically funded FEMA, and it is helping with the rescue and clean up efforts in Oklahoma. I would suggest that the entire NY/NJ/CT Congressional Delegation, regardless of party, as well as Governors Christie, Cuomo, and Malloy should demand an apology from Senators Inhofe and Coburn. These two geniuses were voting against funding an agency that is now helping out their electorate.

10 Tuesday PM Reads Posted: 21 May 2013 01:30 PM PDT My afternoon train reading: • S&P 500 Returns to Record While U.S. Treasuries Advance (Bloomberg) but see S&P 500 Revenues Disappoint (Dr.Ed’s Blog) • I Was Wrong: Doug Kass Gives Mea Culpa on Bearish Views (Moneybeat) • The New Buyers of ETFs (Wealth Management) • Alternative Marketing for Alternative Investments (Social Science Research Network) • Interview With Estimize Founder Leigh Drogen (See It Market) • Federal Rulings Could Make 5 Years Of Non-Judicial Foreclosures Unconstitutional (Mortgage Fraud Investigations ) • How to Humble a Wing Nut (Bloomberg) • Is This Why TED Talks Seem So Convincing? (priceonomics) • Why Rational People Buy Into Conspiracy Theories (NYT) • Change Agents: Walter De Brouwer’s magical tricorder (lohud) What are you reading?   Wall Street Giants Try a New Business Model Source: WSJ

Apple’s International Tax Structure Posted: 21 May 2013 12:30 PM PDT Click to enlarge Source: NYT   Unbelievable chutzpah: “Thanks to what lawmakers called "gimmicks" and "schemes," Apple was able to largely sidestep taxes on tens of billions of dollars it earned outside the United States in recent years. Last year, international operations accounted for 61 percent of Apple's total revenue. Investigators have not accused Apple of breaking any laws and the company is hardly the only American multinational to face scrutiny for using complex corporate structures and tax havens to sidestep taxes. In recent months, revelations from European authorities about the tax avoidance strategies used by Google, Starbucks and Amazon have all stirred public anger and spurred several European governments, as well as the Organization for Economic Cooperation and Development, a Paris-based research organization for the world's richest countries, to discuss measures to close the loopholes. Still, the findings about Apple were remarkable both for the enormous amount of money involved and the audaciousness of the company's assertion that its subsidiaries are beyond the reach of any taxing authority. "There is a technical term economists like to use for behavior like this," said Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former staff director at the Congressional Joint Committee on Taxation. "Unbelievable chutzpah."     Source: Apple's Web of Tax Shelters Saved It Billions, Panel Finds NELSON D. SCHWARTZ and CHARLES DUHIGG NYT, May 20, 2013 http://www.nytimes.com/2013/05/21/business/apple-avoided-billions-in-taxes-congressional-panel-says.html

Recommendations for Equitable Allocation of Trades in High Frequency Trading Environments Posted: 21 May 2013 11:30 AM PDT From the Federal Reserve Bank of Chicago: Source: Federal Reserve Bank of Chicago

18th Century Debt (UK Consols to 1742) Posted: 21 May 2013 08:30 AM PDT   “In 1752, Prime Minister Henry Pelham converted the entire outstanding stock of British debt into consolidated annuities that would become known as consols. The consols paid interest on an annual basis just like regular bonds, but with no requirement that the government ever redeem them by repaying the face value.” -Slate   Today we look at the Consol, an 18th century debt issuance. Indeed, it is one of the earliest known debt issuances in recorded history. Originally called consolidated annuities, the Consol is one of the earliest forms of government bonds. Primitive compared to the modern day 10 year bond, it had no maturity, and paid a coupon in perpetuity. It requires an act of the British Parliament to redeem them (likely not gonna happen with rates this low). Originally issued with a coupon rate of 3.5%, the rates have been lowered throughout the 1800's. In fact, it wasn't until 1903 under the terms of the National Debt Conversion Act of 1888 that they lowered it to where it stands today at 2.5% (Parliament can redeem the debt at par). They still trade today, but represent a tiny fraction of the UK’s total debt. Since 1958, the Brits moved to a traditional 10yr bond as their flagship debt instrument. Consol's currently have a 200 basis point spread from the UK 10yr and trade at around 4.4%, paying a coupon four times a year.   UK 2.5% Consol Yield vs the Great Britain Governmental Debt to 1742 click for ginormous chart Source: Global Financial Data   Here is a snapshot from the newspaper reporting the financial data on the Consol's, original source, circa 1838:   Thanks to Ralph Dillon of Global Financial Data for charts.   Source: Ralph Dillon Global Financial Data, May 20, 2013 http://www.globalfinancialdata.com/ rdillon@globalfinancialdata.com

10 Tuesday AM Reads Posted: 21 May 2013 07:00 AM PDT My morning reads: • Kudlow: Has Bernanke Gotten the Story Right? (National Review) • Are Market Valuations too High? (Turnkey Analyst) see also Equity Risk Premiums (ERP) and Stocks: Bullish or Bearish Indicator (Musings on Markets) • As rich gain optimism, lawmakers lose economic urgency (Washington Post) • Japan's New Optimism Has Name: Abenomics (NYT) see also Fed Will Fuel Dollar Rally With More Confidence (Moneybeat) • On Whose Research is the Case for Austerity Mistakenly Based? (Jeff Frankels Blog) • Wall Street’s Giants Try ‘Flow Monster’ Formula (WSJ) • The One-Person Product (Marco) see also A better, brighter Flickr (flickr) • How the IRS's Nonprofit Division Got So Dysfunctional (ProPublica) • How to buy happiness (Los Angeles Times) • 2013 National Geographic Traveler Photo Contest (Atlantic) What are you reading?   Gold Making a Double Bottom? Source: Bespoke

GMAMX: Goldman Sach’s Muppet Fund of Funds Posted: 21 May 2013 04:15 AM PDT In our day job, we have a Fiduciary relationship with our clients. A Fiduciary has a legal obligation where all actions are performed for the benefit of the client. It is a much higher duty of care than the typical “Suitability” standard, which essentially says you cannot sell Facebook IPO shares to Grandma. We sit on the same side of the table as our investors, as opposed to adversaries looking to “monetize” clients. So you can imagine our amusement when the prospectus for this fund made its way to our attention yesterday: Goldman Sachs Multi-Manager Alternatives Fund (GMAMX) It is a mutual fund of hedge funds, with all the layers of fees costs and taxes you might imagine. According to a prospectus, the fund gives investors “exposure to common trading strategies of hedge funds including: • Long-short-equity • Event driven investments • Relative value trading • Opportunistic credit trading. The managers of the fund have already selected a number of hedge funds — Ares Capital Management, Brigade Capital Management, GAM International Management, Karsch Capital Management and Lateef Investment Management as the initial run of hedgie managers. No surprise here: All of the “Costs to execute those strategies will be borne by the fund’s investors.” These costs include management fees, plus the use of leverage, derivatives and (up to 15%) illiquid investments. (Sounds awesome). Annual fees for the fund may reach as high at 3.3% for some classes of shares — not counting the A shares, which start off with a 5.5% upfront fee. Source: Fund Pospectus   You only need $1,000 to get into this Goldman fund (Yay!). Why you would want to is another question entirely. In addition to the enormous drag high fees impose, there is the performance issue. As TheStreet.com noted, “According to the HFRX Global Hedge Fund Index, hedge funds returned just 3.5% in 2012, significantly underperforming a 16% gain posted by the S&P 500 Index. Over five years, the hedge fund index has lost about 13.6%, while the S&P gained 8.6%, as of year-end 2012.” As Fiduciaries, we are always seeking ways to reduce cost and risk for clients’ without compromising performance. That means making sure that muppet investments like this will not be finding its way into any of our portfolios . . . ~~~ Prospectus, Factsheet, and more details on etc, can be found at GSAM

The Job Market of 2045 Posted: 21 May 2013 03:00 AM PDT What will we do when machines do all the work? Source: The Job Market of 2045 What will we do when machines do all the work? This posting includes an audio/video/photo media file: Download Now

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