Daily Reading – Friday, June 10, 2011

The Big Picture: Checklist: How to Spot a Bubble in Real Time

Are the Linked In/Groupon IPOs proof we have a new bubble in Tech? Are US Treasuries a bubble? Commodities?

There have been numerous attempts by many Fed economists to argue that bubbles cannot be seen as they happen, and they we can only spot them after the fact.

I believe they are incorrect. We can spot bubbles as they happen, so long as we rely on a variety of data points.

The Big Picture: The Great QE2 Flush Out

We’ve updated our Treasury flow charts with new data from today’s release of the Federal Reserve’s Flow of Funds Accounts. The quarterly data are seasonally adjusted and annualized. They reveal quite an interesting picture.

In Q1 2011, the Fed’s QE2 purchases of Treasuries totaled $1.3 TN on a seasonally adjusted annual basis. This number far exceeds the QE2 total program and is one of the reasons why we tend to discount government statistics which have been seasonally adjusted, annualized, and sliced and diced eight ways to Sunday. It’s all we have to work with, however.

The Big Picture: Hours of Labor Required to Buy One Unit of Gold or Oil

These three charts are pretty cool (courtesy of The Chart Store) — they show many hours you need to work in order to buy one unit of each of these — Oil, Gold and the4 CRB Commodities Index.

This introduces another element to commodity pricing — relative wage gains.

Pragmatic Capitalism: Paul Krugman & Richard Koo Are Both Wrong

There’s been a bit of a spat in the last 24 hours between Paul Krugman and Richard Koo. The two have disagreed on QE since its inception with Koo saying it would do nothing and Krugman maintaining faith in the policy. This is nothing new though. This spat has been going on for decades now. Richard Koo was an early critic of QE in Japan when a young(er) American economist named Paul Krugman went over to Japan to lecture the Japanese on their policy options as deflation dug its heels in. Dr. Krugman was a very vocal advocate of the policy saying that it could alter expectations and generate positive economic growth. Koo maintained that, in a balance sheet recession, the policy would fail to generate any sort of substantive effect on the real economy. Of course, Koo ended up being right about QE in Japan and he’s now being proven right again about QE in the USA.

FT Alphaville: Doubling a losing bet, really fast

Chart via Societe Generale, and to be read in conjunction with the Troika finally admitting that Greece has failed to control its deficit as it demanded in 2011…

FT Alphaville: When algorithms fight, natgas edition

It’s not an earthquake. It’s last night’s mini-crash in natgas futures, via Zero Hedge…

FT Alphaville: The future is all about cross-asset arbitrage

What happens when computer-driven trading reaches a high-speed saturation point?

That is, when high frequency trading reaches its natural limit — it simply cannot get any faster?

The answer is multi-dimensional arbitrage.

FT BeyondBRICs: China’s skyscraper boom: next a bust?

China is on track to complete one skyscraper every five days over the next three years, in a height-obsessed construction frenzy that could presage economic trouble if the experience of other nations is anything to go by.

China will have 800 buildings taller than 152 metres by the end of 2016, more than four times as many as the United States now has, according to a report by Motiancity, a Chinese website for skyscraper enthusiasts.

Gregor.us: The World Turns to Coal

The latest BP Statistical Review was published in London this morning, and following a theme presented for years at Gregor.us, global growth in coal consumption continues to soar. Now that global oil production is flat, and is no longer able to fund new industrial expansion, coal remains the cheap BTU and of course the preferred energy source of the Developing World (non-OECD). For another year, the world has turned to coal.

Bloomberg Blogs // Paul Kedrosky: Tracking Talent Flows in Silicon Valley

Some new research from an online recruiting service allows us to track talent flows in Silicon Valley. Where are people going? Where are they coming from? You can see the hollowing-out of Yahoo, the great sucking sound of Facebook, etc.

guardian.co.uk: US universities in Africa ‘land grab’

Harvard and other major American universities are working through British hedge funds and European financial speculators to buy or lease vast areas of African farmland in deals, some of which may force many thousands of people off their land, according to a new study.

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