Morning Reading – Tuesday, March 15, 2011

The Big Picture: Black Swans, 100 Year Floods

Every time there is a major crisis, I get asked “What should investors do Now?

My answer is always the same:

The time to look for the emergency aisles and where the exits are located is before takeoff, not after the wings fall off the plane. You must have a plan in place to deal with unanticipated events, a just-in-case things head south scenario.

FT Alphaville: A nuclear primer from BarCap

The UK bank has enlisted the help of a former nuclear safety employee to discuss events at Fukushima Daiichi, the Japanese nuclear plant hovering on the edge of meltdown. For what it’s worth, BarCap’s energy team doesn’t think there was an operator error at the plant — the force of the earthquake combined with the effect of the tsunami “simply exceeded what the plant was designed to withstand.”

FT Alphaville: Another market overreaction?

It’s probably not the time to say this, given Tuesday’s sharp sell-off, but are some financial markets overreacting to the Japanese earthquake?

FT Alphaville: Japan’s banks already facing stock losses, CreditSights says

In addition to being big Japanese government-bond buyers, Japan’s megabanks are also (wait for it) heavily invested in equities. Though not as much as they used to be.

self-evident: The Japan Syndrome

The coverage of events in Japan, especially concerning the nuclear facilities, is starting to piss me off.

The Slope Of Hope: Potentially Golden Opportunity

I distinctly remember May 4th of last year. On that day, looking at the /ES, I thought what I was seeing was too good to be true. It was the most perfect inverted saucer top I had seen in ages. I stood up from my chair, moved to the other side of the room, and looked at the chart on my Big-Ass Monitor ™ at a distance and reached the same conclusion. I felt the market was finally going to fall and – – at long last – – over the next seven weeks it finally did.

The Slope Of Hope: What We’ve Been Waiting For

Well, it’s 4 in the morning, and I can’t sleep. The meltdown we’ve all been anticipating is finally starting to kick in (and I’d say a certain other financial blog owes me a massive apology at this point).

My belief is that we’ll claw our way back to around 1287, and then the real plunge will kick in.

Zero Hedge: Eric Sprott Debunks The Gold Bubble Myth

Based on our findings, this notion of a gold bubble is patently false. The current investment interest in gold relative to other financial assets remains surprisingly low – about where it was two decades ago. Moreover, the modest valuations of gold equities highlight the absence of unbridled investor enthusiasm for gold investments. The fact is, despite all this talk about the gold bubble, the capital flows into gold vis-à-vis other financial assets have simply not been large enough to indicate any speculative mania. Investors can rest assured that they are not participating in any speculative bubble by owning gold. They are merely protecting their wealth.

Hussman Funds: Anatomy of a Bubble

What exactly is a “bubble?” Informally, we can think of a bubble as an advance in an asset’s price to levels that are “detached from fundamentals” – essentially, the primary motive for investing ceases to be the expectation of future cash flows or consumption, and instead centers on the expectation of further increases in price. From this perspective, a bubble emerges at the point where a continual increase in the ratio of prices to fundamentals is required in order for investors to achieve satisfactory returns.

This entry was posted on Tuesday, March 15th, 2011 at 6:54 am and is filed under Daily Reading. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Comments are closed.


Get Adobe Flash player