John At The Center

Good piece in Foreign Policy making a case that I do regularly, which is that there are striking similarities between the U.S. circa 1929 and China today. Both were/are creditor nations with massive trade surpluses, and both sit/sat astride the decline of the prior world power, which was the U.K. in 1929 and is the U.S. today. Most importantly, however, the U.S. in 1929 had an opportunity, as does China today, to use its economic power to drive the financial system to a new post-crisis place.

via Is China 2009 = U.S. 1929?.

Regulators and accountants could require firms that are net sellers of credit default swaps to translate those positions into bond holdings and put these synthetic bonds on their balance sheets. My guess is that had such a policy been in place in 2000, the CDS market would not have taken off.

via One Easy CDS Fix – Finance Blog – Felix Salmon – Market Movers – Portfolio.com.

As I’ve written before, this is really a debate about tactics, not basic questions of finance and economics. The debate involving basic questions of finance and economics is the one that’s just getting started about how we regulate the financial sector.

They’re not totally unconnected, of course: Johnson has an article in the May Atlantic arguing that a recalcitrant financial oligarchy is standing in the way of solutions on both fronts. But I don’t get why we keep having this misleading back and forth on whether to nationalize the banks or not. I don’t get why the Obamanites keep using that we’re-not-Sweden line, and I don’t get why the Krugmanites are so unwilling to see any of the administration’s moves as laying the groundwork for possible future nationalizations.

via Newsweek on Krugman and the nationalization non-debate :: The Curious Capitalist – TIME.com.

Many funds have negative capital gains exposure of more than 50%. That means that they would have to appreciate about 50% before they start distributing capital gains. (Technically, it varies based on flows and how tax-savvy the managers are.) Thus, for a change, someone starting out a fund portfolio today has a major advantage over someone beginning a stock portfolio.

via These Funds Offer You a Break on Taxes – Morningstar – Fund Spy.

ETFs fail to mirror their underlying index because of fees and expenses, intentional “optimization” by fund managers and changes in the index itself. In some cases, compliance is a problem.

“The SEC diversification rule mandates that certain funds can have no more than 25% of their assets in one security,” says Maister.

via ETFs Behaving Badly – Forbes.com.

reduce exposure to the downside. This is a ti

via dshort.com: Diversification Works…Until It Doesn’t.

What are professional money managers thinking these days? A new poll by Russell Investments offers an answer. Among the highlights:

• 67% of managers are now bullish on corporate bonds

• 61% are bullish on high-yield bonds

via The Capital Spectator: WHAT ARE MONEY MANAGERS THINKING?.

They often sandpaper over the names and file off the registry numbers, doing their best to render the boats, and themselves, untraceable. Then they casually ditch the vessels in the middle of busy harbors, beach them at low tide on the banks of creeks or occasionally scuttle them outright.

The bad economy is creating a flotilla of forsaken boats.

via Too Costly to Keep, Boats Become Castaways – NYTimes.com.

those changes may undermine a larger U.S. Treasury plan to rid the banks of those same assets, bankers and accounting experts say.

via Move to Ease ‘Mark’ Rule May Subvert Treasury Plan – WSJ.com.

The retreat by recession-battered farmers — the broadest in two decades — is helping to set the stage for more volatility in prices of the crops used for everything from packaged food and biofuels to fattening livestock.

via Crop Cutbacks by Farmers Spell Higher Food Prices – WSJ.com.