Archive | April 2015


Seven Lean Years? Done in Seven Minutes


In Genesis (41:27), Joseph interprets Pharaoh’s dream of 7 fat cows followed by 7 lean (and apparently, ugly) cows, as foretelling the coming feast and then famine, enabling Egypt to prepare for the coming 7 lean years by stockpiling reserves. Yesterday, the 10-year German bund leaped 12 basis points (see Graph below), along with a surging euro following the weak US GDP report. Now, 12 basis points is a big move, but we’ve seen bond yields move by that magnitude before. What is different about this time is that there is no yield to begin with, so yesterday’s move in Read More




Most observers would agree that equities are rich (expensive, overpriced, etc.). Corporate profits are at record highs, and the forward price-to-(optimistic) earnings multiple on the S&P 500, at 17x, is the highest since 2004. A favorite counterargument is a relative one: stocks may be expensive, but bonds are way more overvalued. With a 2% yield, the 10-year Treasury has a P/E multiple of 50x (taking the inverse of its yield). Of course, German bunds have an infinite P/E (with its negative yield). So stocks are the cheapest house in an expensive neighborhood. That may be true, but this counterargument isn’t Read More


Sine Aqua


The Ancient Mariner violated Nature by killing an albatross for sport, thus condemning his boat and crew to the purgatory of the open sea where, one by one, each of crew dies. Lamenting his fate, the Mariner cries, “Water, Water, everywhere, Nor any drop to drink.” The Mariner realizes his sin, and wears the albatross around his neck as penance (hence the origin of the phrase “albatross around one’s neck”). His boat eventually returns to England, but the Ancient Mariner is condemned to wander the earth, recounting his tale (“rime” in the old English of Coleridge’s day) as a precaution Read More


California Dreamin’


Well, maybe not dreaming, but some thoughts. Below, my graph shows the unemployment rates for California and the US since 1976. California was generally better than the country in the 1980s, and has trailed ever since. By my calculations, the US unemployment rate averaged 6.5% over the past 40 years, while the California unemployment rate averaged 7.5%, a full percentage point higher (on average, every year, for 40 years!). That is an enormous (many millions of people) cumulative shortfall in employment. The graph raises two questions for me: what changed in 1990? and why has the job deficit persisted? The Read More

New Owners


A few years, I was at a conference, standing in a buffet line. I must have become fixated on extracting the blueberries from the fruit platter (I really like blueberries, and those cheap tongs at hotels are not well suited for the task of small fruit extraction…but I digress). In an attempt to position myself better, I bumped into a tall, skinny man of my age (but looked much older than me), which caused my blueberries to scatter. Of course, I was embarrassed, and apologized profusely, and not knowing what to do next, introduced myself. He said his name was Read More