Weekend Reading – Stuff we found interesting this week

July 30th 2011.

Welcome to our weekly roundup of the stuff we read that was interesting to us and hopefully to you.

In our view we have passed the tipping point and in the midst of a paradigm shift in markets as investors all over the globe are now aware that the US is no longer the worlds “risk-free asset”.  It is one of the reasons Gold and the Swiss Franc are so high, probably the primary reason, and it is also buoying the AUD. Interesting short article from the FT here.

And here is why – its an ugly sister contest out there at the moment and the market is looking for Cinderella. Simon Johnson looks at Who Is In Worse Shape – the United States or Europe?

Currency valuations are hard to pin down. there are many different ways to do it. I’ve built and use models that take into account market based factors and fundamental indicators but one of the most fun ones is the Economists Big Mac index. This week we got an update which showed the AUD is 12% overvalued and the CNY 44% undervalued but when they adjusted for GDP per capita this undervalutaion is washed away to an over valuation of 3% – interesting stuff.

As a behaviouralist I have some big reservations about some underlying tenets of modern finance and economics. one particular bugbear is the notion that people are rational. Here is an interesting blog saying that everyone can’t be rational.

Here is a blog with 5 book recommendations for anyone who wants to know move about the behavioural side in all of us.

Here is an not unrelated article that was in the Scientific American on confirmation bias. that is the tendency, at least in economics and markets, to look for things that confirm our beliefs over those that challenge them. It’s why we try to challenge our views on the data before us.  It is important to understand we all have our bias and we make better decisions if we can take that into account.

I love the New Yorker Magazine it can take the time to do interesting and in depth articles. Here is an article on Ray Dalio who is the boss of Bridgewater which is the World’s biggest hedge fund. I’ve put this in because I have always respected the research that drives Bridgewater’s trades – any insights we may glean are worth the time to read. 

I really want rates to stay exactly where they are in AUstralia. i don’t want them to go up nor do I want them to go down. The reason for this is that if they have to go down this means the economy is deteriorating further and if they go up I think households will be further crushed. Here is Ross Gittins take on lower rates from earlier in the week.

And of course the FT’s week in review

Have a great weekend

Greg McKenna

greg@lighthousesecurities.com.au

www.twitter.com/gregorymckenna

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One Comment on “Weekend Reading – Stuff we found interesting this week”

  1. Barry Cawthorn Says:

    Recommended to me by a colleague.
    Very good site you have with excellent direct feeds to information from multiple sources

    Reply

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