The Stingy News Weekly (01/20/2013)
Aswath Damodaran compiles global stock data
"For the last two decades, I have dedicated the first two weeks of each new year to a ritual. I obtain/collect/download data on all publicly traded companies listed globally, using a variety of data sources, and then analyze and present the data, aggregated at a number of different levels: by country, by region (US, Europe, Emerging Markets, Japan, Australia and Canada) and by industry. I report on measures of operations (profit margins, turnover ratios, working capital), measures of leverage (debt ratios), measures of risk (beta, standard deviation, equity risk premiums, country risk premiums) and pricing measures (earnings multiples, book value multiples, revenue multiples). I just completed my 2013 update and you can find it by clicking here."
Are leveraged ETFs the new portfolio insurers?
"This paper studies Leveraged and Inverse Exchange Traded Funds (LETFs) from a financial stability perspective and emphasizes their similarities with portfolio insurers of the 1980s. Mechanical positive-feedback rebalancing of LETFs resembles the portfolio insurance strategies, which contributed to the stock market crash of October 19, 1987 (Brady Report, 1988). I show that a 1% increase in broad stock-market indexes induces LETFs to originate rebalancing flows equivalent to $1.04 billion worth of stock. Price-insensitive rebalancing of LETFs results in price reaction and extra volatility in underlying stocks. Although LETFs are not as large as portfolio insurers of the 1980s and have not been proven to disrupt stock market activity, implied price impact calculations suggest that their effect could reach a tipping point after a large market move in periods of high volatility."
High yield market is out of control
"I find it interesting: Many many people realize the market is heavily overvalued in terms of compensation of return versus risk, but they still are buying."
Fewer, richer, greener
"The world has been going to hell in a handbasket for as long as anyone can remember, but it never quite seems to get there. In fact, according to just about any objective measure you choose, the health and wealth of the human race has been improving rapidly and almost continuously for at least the last 200 years."
Is sitting like smoking?
"As we work, we sit more than we do anything else. We're averaging 9.3 hours a day, compared to 7.7 hours of sleeping. Sitting is so prevalent and so pervasive that we don't even question how much we're doing it. And, everyone else is doing it also, so it doesn't even occur to us that it's not okay. In that way, I've come to see that sitting is the smoking of our generation."
National balance sheets
"But Morgan Stanley reckons the shortfalls are so large (between 800% and 1,000% of GDP in the US and UK) that the situation is hopeless. In effect, the public sector must impose a burden on the private sector but the only question is how."
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