Category Archives: Market inefficiencies

Vale David Hirst

Yves here. Steve Keen sent this note along with his post:

The journalist David Hirst was both one of the few to warn of the crisis, and someone who became a good friend. He died last week, as a long term consequence of internal injuries sustained about ten years ago in the USA, when he tried to stop a woman being bashed.

His spouse asked me to see if I could get the attached published on NC, which was one of his favourite sites.

If you know David’s writing, you’ll understand what a loss this is. And if you missed his prescient and incisive commentary before and during the crisis, I hope you’ll sample his work below and get a sense of what a talent he was. Either way, I trust you’ll join me in sending condolences to David’s widow and his family, as well as to Steve.

Are Flagging Productivity Gains a Sign of a Played-Out Economy?

Bloomberg flagged that productivity gains in the US are tepid, and that’s a sign of economic weakness:

New Paper Links Food Price Inflation to the Power of “Agro-Trader Nexus” (ie, Monsantos + Cargills)

Joseph Baines’s new article, “Food Price Inflation as Redistribution: Towards a New Analysis of Corporate Power in the World Food System” is a must read if you care to understand how major corporations exercise hidden influence on our daily lives.

Beware Bait and Switching WP Engine! A Case Study in Devolution

One of my side projects is keeping tabs on devolution, which I first discussed in January in Devolution: Welcome to the World Where Things Don’t Work Well.

Cathy O’Neil: Black Scholes and the normal distribution

By Cathy O’Neil, a data scientist. Cross posted from mathbabe

There have been lots of comments and confusion, especially in this post, over what people in finance do or do not assume about how the markets work. I wanted to dispel some myths (at the risk of creating more).

Pettis: China and the History of US Growth Models

Yves here. This is an important piece, in that it bucks conventional wisdom about growth and economic development in several ways.

Mirabile Dictu! Finally, Someone (Amar Bhide) Questions Benefits of Mortgage Securitization

A major intellectual blind spot in academia and among policy makers is the belief that making markets more liquid is always and ever a good thing.

Risk and Reward in High Frequency Trading

A new paper that analyzes the activities and effects of high frequency trading reaches some damning conclusions.

It’s Time for a Tax to Kill High Frequency Trading

It’s frustrating to know that there’s a simple solution to a serious problem but no one seems willing to do the obvious.

Rajiv Sethi: Of Bulls and Bair

By Rajiv Sethi, Professor of Economics, Barnard College, Columbia University & External Professor, Santa Fe Institute. Cross posted from his blog

Sheila Bair’s new book, Bull by the Horns, is both a crisis narrative and a thoughtful reflection on economic institutions and policy. The crisis narrative, with its revealing first-hand accounts of high-level meetings, high-stakes negotiations, behind-the-scenes jockeying, and clashing personalities will attract the most immediate attention. But it’s the economic analysis that will constitute the more enduring contribution.

Home Appraisers: A Market Failure?

There’s an interesting sign of homebuyer champing at the bit to lever up again with all the “housing has bottomed” talk in a New York Times article last week, “Scrutiny for Home Appraisers as the Market Struggles.” The headline signals the new complaint about appraisers: they aren’t rubber stamping deals entered into by willing buyers and sellers! They are therefore holding back the housing market!

While this frustration among housing enthusiasts is a squeaky wheel in the housing market that probably does warrant comment by the Grey Lady, there are more serious market failures in appraisal land that also deserve attention.

Why Breaking Up MegaBanks Would Help Investors

During the Microsoft antitrust case, some institutional investors were keen for Microsoft to lose, and not because they were short its stock. They felt that Microsoft being in both the operating systems business and the applications business had become a negative. They believed that separating the two businesses would not only produce higher multiples over time for each as “purer” plays, but having each new business more narrowly focused would be better for growth in the long term.

We have a similar discussion taking place regarding the big banks, and the pro-breakup case is even stronger there than for the software giant.

RealtyTrac, CoreLogic Confirm Housing Bear Thesis: 85-90% of REO Being Held Off Market, Meaning “Tight” Inventories Are Bogus

We’ve been mystified with the housing bull argument that things really are getting better. While real estate is always and ever local, and some markets may indeed be on the upswing, there are ample reasons to doubt the idea that an overall housing recovery is in. For instance, the recent FHFA inspector general report stated: