Flashman Letters

Why Are Women So 'Bitchy' to Each Other?

Vaillancourt has studied women’s aggression techniques for several years; in a 2011 study hilariously titled “Intolerance of Sexy Peers,” she and her research partner Anachal Sharma recorded college-aged women’s reactions when they unexpectedly encountered a thin, blond woman in khakis and a plain t-shirt and then again when the same woman wore a mini-skirt, low-cut top, and tall black boots. Then they showed the footage to a group of other women and asked them to rate the level of “bitchiness” in each reaction. (The term “bitchy” is used in the study.) As Vaillancourt explains, “when we called it ‘indirect aggression,’ none of our subjects knew what we were talking about. With ‘bitchy,’ we didn’t even have to explain it.”

The women did not like their sexy peers. Eighty-five percent of them gave her “a critical once-over,” as Vaillancourt puts it, “and then when she left the room, they made derogative comments about her outfit. One woman looked her up and down and said— right to her face—”What the f––– is that?”

via www.businessweek.com

Just in case.... Good economy, poor returns? | The Economist

It seems common-sensical to say that a strong economy should be good news for equities, since profits are linked to GDP, and a weak economy should be bad for the stockmarket (think of the 1930s). But history suggests there is very little correlation between GDP growth and equity returns over the long run (see this paper from Jay Ritter, for example). One reason is that the stockmarket is not an exact representation of the domestic economy (some sectors are in government, or family-run hands; the biggest companies are multinational). And a second reason, oft forgotten, is that the key driver of returns is the starting valuation.

This point is explored in a recent Financial Analysts Journal paper by William Bernstein (you need to be a CFA to read it, or pay a fee) called "The Paradox of Wealth". Mr Bernstein asserts that

in the very long run, an increase in societal wealth and well-being carries a paradoxical cost, namely, a reduction in the expected return on both risky and riskless assets

The Gordon growth model, which this post has emphasised in the past, suggests that equity returns are equal to the dividend yield plus dividend growth, plus or minus any change in the rating. When an economy grows fast, compnaies are raising capital to fund that expansion; existing shareholders find themselves diluted by this new issuance. Mr Bernstein writes that

The empirical data suggest that rapid economic growth results in an even faster rise in the number of shares than in aggregate earnings
and dividends, and so it actually decreases g (dividend growth) and thus—with a constant dividend payout—returns as well.

In the fast-growing Asian nations, this dilution factor may be almost a third of dividend growth. Mr Berstein adds that

Perhaps the greatest period of technological advance in human history occurred during the second quarter of the 19th century,
when the steam engine and steam locomotive increased the speed of transport and the telegraph increased the speed of communication by
one and three orders of magnitude, respectively. Extremely fragmentary data suggest that security returns were also less than spectacular in that earlier era

Another way of looking at the issue is that primtive societies have very high interest rates because of the risks involved. As societies develop, the risks fall (properrty rights are established, risk-sharing vehicles are created etc) and rates fall. Low rates encourage more businessmen to borrow, and boost capital growth in a virtuous circle. But the corollary is that the returns to the owners of capital decline.

The effect is disguised in the short term by the effect of yields on capital values; a fall in the dividend yield from 4% to 2% doubles share prices (other things being equal). But this effect is likely to come to an end eventually.* Part of the reason why equity returns were so strong in the second half of the 20th century was a boost from the valuation effect. But that stopped in 2000.

via www.economist.com

A brilliant Twitter exchange: Read from top to bottom - Does improve thinking baout regulation in general

1. Justin Wolfers ‏@JustinWolfers 8h

   If you think market forces unrestrained by regulation work well, then try dealing with car salesman, who will likely convince you otherwise.

    

    
2. tylercowen ‏@tylercowen 8h

   @JustinWolfers Yet it is a regulated activity, https://www.google.com/#q=regulation+used+car+sales …, new regulatory skeptic born every moment!

    

    
3. Justin Wolfers ‏@JustinWolfers 7h

   @tylercowen This one has been a real lesson!

   1. Justin Wolfers ‏@JustinWolfers 7h

      So perhaps the problem with car salesmen is bad regulation. MT @withinepsilon: Auto sales are heavily regulated. http://www.npr.org/blogs/money/2013/02/19/172402376/why-buying-a-car-never-changes …

   2. Erik Brynjolfsson ‏@erikbryn 7h

      @JustinWolfers @withinepsilon @tylercowen Badly functioning markets attract regulation, so they will tend to be correlated

       

      tylercowen ‏@tylercowen 7h

      @JustinWolfers @withinepsilon Often "good regulation" is hard or impossible to do...

Wow

 

JFK, 50 years on: Face it: Oswald did it | The Economist

http://www.economist.com/news/united-states/21590361-face-it-oswaldne-did-it

FIFTY years ago this week President John Kennedy was assassinated by Lee Harvey Oswald, a Castro-supporting communist who had learned to shoot straight while in the US Marines. Books such as Gerald Posner’s “Case Closed” have painstakingly debunked the various alternative theories: that he fell victim to multiple gunmen, elaborate plots involving the CIA, the Mafia and who knows what other shadowy groups. The “magic bullet”, modern ballistics show, behaved normally. There was no second gunman. Nothing interesting happened on the grassy knoll. And the idea that Dallas, the “city of hate”, was somehow collectively to blame, is absurd.

Yet still the conspiracy theories live on, inspired by popular books such as Mark Lane’s “Rush to Judgment”, by Oliver Stone’s preposterous movie “JFK”, and by endless speculation online. Was Lyndon Johnson involved in a dastardly coup d’état, as Mr Stone hints? Of course not. But half a century later, 61% of Americans believe in a conspiracy. Amazingly, this is the lowest level since the late 1960s.

Pettis: When Are Markets “Rational”?

http://www.nakedcapitalism.com/2013/11/pettis.html

Investors in Chinese markets must be speculators if they expect to be profitable. As long as this is the case, investors will not behave in a way that promotes the most productive capital allocation mechanism in the market, and such efforts as bringing in foreigners will have no meaningful impact.

What China must do is something radically different. It must downgrade the importance of speculative trading by reducing the impact of non-economic behavior from government agencies, manipulators, and insiders. It must improve corporate transparency. It must continue efforts to raise the quality of both corporate reporting and national economic data. Finally, it must deregulate interest rates and open up local markets to permit arbitragers to enforce pricing consistency and to allow better estimates of appropriate discount rates.

If done correctly, these changes would be enough to spur a major transformation in the way Chinese investors behave by permitting them to make long-term investment decisions. It would reduce the profitability of speculative trading and increase the profitability of arbitrage and value investing, and so encourage a better mix of investors. If China follows this path, it would spontaneously develop the domestic investors that channel capital to the most productive enterprise. Until then, China’s capital markets, like those of many countries in Latin America and Asia, will be poor at allocating capital.

When efficient markets become inefficient

But this is not just an issue for China. In the US there have been times when markets seemed efficient and rational, and times when they clearly were not. Of course this cannot be explained by the disappearance of the tools needed by value investors – for example the market for internet stocks seemed rational in the early 1990s and clearly became irrational by the late 1990s, but this did not occur, I would argue, because fundamental investors were suddenly deprived of their analytical tools.

What happened instead, I would argue, is that conditions that led to a too-rapid expansion of liquidity at excessively low interest rates changed the environment in which fundamental investors could operate. As excess liquidity forced up asset prices, the likes of Warren Buffet found themselves unable to justify buying assets and so they dropped out of the market. As they did, the mix of investment strategies shifted until the market became dominated by speculators, and when this happened what drove prices was no longer the capital allocation decision of value investors but rather than short-term expectations of changes in demand and supply factors that characterize a highly speculative market.

This, I would argue, made the US stock market of the late 1990s (and perhaps today, too) “irrational”, not because they are fundamentally irrational or inefficient but rather because they can only function efficiently with the right mix of investment strategies. When the mix was altered – and this can happen when liquidity is too abundant, or when a sudden shock undermines the confidence value investors have in their ability to analyze data, or when a political event cause uncertainty to rise so high that value investors are priced out of the market, or for a number of other reasons – the markets stopped functioning as they should.

Perhaps what I am saying is intuitively obvious to most traders or investors, but it seems to me that it suggests that the argument about whether markets are efficient or not misses the point. There are certain conditions under which markets are efficient because the tools needed for each of the various investment strategies are widely available and ate credible. When those conditions are not met, because the tools are not available, or when they are temporarily overwhelmed by exogenous events, perhaps because the credibility of those tools are temporarily undermined, or when excess liquidity causes fundamental investors to drop out, markets cannot be efficient.

But the Bouzouki clubs are ful.l.....

Based on a sample of 16,000 households, the research found that 60% faced food insecurity, while 23% were experiencing food insecurity accompanied by hunger last year.

The results of the research, conducted by the Stavros Niarchos Foundation, show that the issue of hungry schoolchildren – dismissed by some commentators as cheap propaganda – is a very real one for thousands of families.

via www.enetenglish.gr

And they do not even understand that this would suck.....Facebook Building Its Own Small Town So You Can Live at Work

The social network said this week it is working with a local developer to build a $120 million, 394-unit housing community within walking distance of its offices. Called Anton Menlo, the 630,000 square-foot rental property will include everything from a sports bar to a doggy day care.

via valleywag.gawker.com

Quote of the Day: It seems like the primary objective of "Social" is solving the problem of "how can I extend my adolecense into my mid 30s?" - G Groditi

It seems like the primary objective of "Social" is solving the problem of "how can I extend my adolecense into my mid 30s?"

El túnel del crédito bancario | Mercados | Cinco Días

http://cincodias.com/cincodias/2013/11/19/mercados/1384870571_553119.html

Centrando la atención en las pymes españolas, el 23% manifiesta que el acceso a la financiación es el segundo de los problemas a los que se enfrentan, solo superado y por muy poca distancia por el de encontrar clientes (27%). Este porcentaje ya es de por sí ilustrativo de las mayores restricciones financieras a las que se enfrentan las empresas españolas, ya que se sitúa 7 puntos porcentuales (pp) por encima de las pymes de la eurozona, muy alejado del 8% de Alemania y sólo por debajo de Grecia (32%).
A pesar de que la falta de financiación es un problema más importante en España, la situación ha mejorado en los últimos seis meses al menos en términos de la disponibilidad de crédito bancario, si bien todavía es mayor el porcentaje de empresas que cree que la situación se ha deteriorado respecto a la que opina que ha mejorado. Frente a un 15% de pymes españolas que cree que hay más crédito, el 22% opina lo contrario, habiendo mejorado la situación respecto a la anterior encuesta del BCE.
Una de las preguntas de la encuesta que aporta información más rica es la de las condiciones de la financiación, tanto en cantidad como en precio. En el caso del tipo de interés, las pymes españolas encabezan el ranking europeo de mayor encarecimiento del coste de la financiación, ya que la diferencia entre el porcentaje que declara que el tipo ha subido y que el declara que ha caído es del 58 pp, muy por encima de los 19 pp de media en la eurozona y en las antípodas de los valores negativos de -21 y -12 pp de Alemania y Francia, respectivamente. El dato de España es incluso peor que el de Grecia e Irlanda (+50 pp). Aún más preocupante es saber que más de las dos terceras partes de las pymes españolas opina que el tipo de interés del préstamo ha aumentado y solo el 9% declara lo contrario.
El 23% manifiesta que el acceso a la financiación es el segundo de los problemas a los que se enfrentan
Pero además de encabezar el ranking europeo en términos de subida del tipo de interés, España también tiene el deshonor de encabezar la clasificación en términos de encarecimiento de otros costes de la financiación, como pueden ser las comisiones que pagan a los bancos. El 72% de las pymes españolas manifiesta que la banca ha subido esos costes y solo el 3% declara lo contrario, siendo el porcentaje neto de respuestas 25 pp superior a las pymes de la eurozona y casi seis veces superior al de las alemana