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Daniel Kahneman: How cognitive illusions blind us to reason Guardian (hat tip reader WillamAshbless. See his comment to get the links to the underlying papers)

Stavins: The Promise and Problems of Pricing Carbon Mark Thoma

An ironic Qantas victory Business Spectator

The remorseless logic and profound disdain of Alan Joyce Crikey (hat tip reader Crocodile Chuck)

Japan Intervenes on Yen to Cap Sharp Rise Wall Street Journal

Thai ‘Credibility’ at Stake as Factories Soak Bloomberg

What saves the euro will kill the union Wolfgang Munchau, Financial Times

The two halves of the eurozone are locked in a broken marriage Ambrose Evans-Pritchard, Telegraph

Full Text: European Union letter to the G20 on the Euro crisis Ed Harrison

Is there a credit channel? A Fistful of Euros

Herman Cain Sexual Harassment Accusations: GOP Presidential Candidate Denies Politico Report Huffington Post (hat tip reader Carol B)

Occupy protests: There’s an app for that Danny Schechter, Aljazeera

Weekend edition: Firing Rosa Parks for not giving up her seat on the bus John Hempton

Why America is embracing protest Edward Luce, Financial Times

Wall Street by the Book Tom Engelhardt

Good old days when bonuses were paid from profits Financial Times

Slow-Paced Recovery Feels Like a Recession Wall Street Journal

The Latest Look At The REAL Mega-Bears Clusterstock

Bombs, Bridges and Jobs Paul Krugman, New York Times

The Multistate Settlement Lottery: Bupkis Adam Levitin, Credit Slips. Money quote:

It gives meaningless relief to a meaningless number of randomly or adversely selected homeowners. It doesn’t do justice, even by halves.

Antidote du jour:

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54 comments

  1. fresno dan

    Daniel Kahneman: How cognitive illusions blind us to reason

    Do a thought experiment and substitute “voter” for “investor”

    1. Jeff

      Too bad Life Magazine didn’t have that technology
      when they faked the insertion of the rifle into
      Oswald’s hands.

    1. ambrit

      Dear skippy;
      Since I’m Erse, Scot, and Celtic Pole, I’ll dance through the fire with ye this summers end. Wassail!

      1. skippy

        I threw a bone on for ya, the tween was large, yours and I’s…bon’s, cleaning done.

        Skippy…ferocious mess, hope it took.

  2. craazyman

    @Is there a Credit Channel — No, of course not.

    @2 haves of Euro AEP Broken marriage — of course, wonder if it’ll be lawyers or guns that end it?

    @ Hempton’s Rosa Parks — yeah I thought of that too. I bet Rosa Parks wouldn’t have taken the job back though. Sometimes you just need to tell an idiot to go f&ck themselves.

    @ Good days when Bonuses paid from profits — This is complicated. Was watching Youtubes yesterday of William F. Buckely interviewing Noam Chomsky, Groucho Marx and Jack Kerouac — civil, articulate, intelligent and well-mannered all around, even though Jack was drunk. Something really strange and important is gone in our culture. Hopefully not for good. I doubt for good and OWS seems to be trying to claw it back.

    @Wall St. by the Book by Tom E. — too long to read. my attention span is too short.

    @latest look at real mega bears — it’s like finger painting. it could be genius but it’s probably just a cooincidence.

    @ behavioral finance — old watered down wine in new bottles. I think Jim Morrison said it best, something like “a little bit of fantasy is necessary for the survival of the artist” or something like that, probably stronger and briefer in the original. or in the bible “without a vision, the people parish”. why go on?

    1. ambrit

      DDear craazymaan;
      That last typo was one of the best yet; “Without a vision, the people parish.” I actually laughed out loud. Freudian slips let the hidden genius in us all shine for a minute. Thanks for a great start to my day.

    2. MyLessThanPrimeBeef

      @Wall St. by the Book by Tom E. — too long to read. my attention span is too short.

      —–

      Craazyman, it’s a sign of respect for your readers to keep things short. In case they are not interested, you don’t waste too much of their time.

  3. DP

    Angela Merkel apparently hasn’t consulted with economic genius Larry Summers, who stated last week that “debt got us into this mess and debt will get us out of it”. Summers’ solution is to write down enough debt so people can take on new debt to get the party started again. Some people are beyond ridicule and parody.

    I’m surprised there isn’t a link to the stories I’ve been reading on the banksters rapidly retreating on debit card fees. They’re all reversing at once. I wonder if it is entirely due to a mass customer exodus or if they received a behind the scenes political threat.

  4. News anchor Skip Tremblay

    Re: Occupy Protests:

    from the article:”Today much of the Main Stream media corporations are owned by the entertainment industry or those who make weapons of war. In fact, making war, movies and gossip is how these new media corporations came to be so rich.”

    If only the Occupy protestors were holding up signs in favor of starting another war, such as bombing Iran or Uruguay, or any randomly selected country for any reason whatsoever. For instance, instead of these hippies protesting against the banks and the war machine, if only they were nice, clean cut young people in favor of unlimited, unending privatized war against any (or every) country on the planet. They could hold up signs such as: “Let’s start a war in order to experiment with Lockheed’s latest weaponry” or “Let’s let’s start another war so we can develop a theme park based on war porn”, or “Let’s bomb Iran so we can have a war-based reality show on TV”, etc

    If only the protestors would shave, shower, wear suits and ties, and get behind sensible proposals such as being pro-war, then the US media would be far more sympathetic, and the occupiers could be guaranteed 100 percent favorable coverage 24/7.

  5. Jim3981

    “How cognitive illusions blind us to reason”

    Best way to improve stock picking performance is to turn OFF bloomberg TV so one can avoid the brainwashing that goes on from the news captions at the bottom of the screen….

  6. Phil

    Any serious student of history knows that
    Rosa Parks was involved with various civil rights
    groups for years as an activist and her supposedly
    spontaneous action had been planned and was
    executed with precision as part of the bus boycott.

  7. Jeff

    Sexual harassment? Shocking…who cares about something
    that is parroted in the Fluffington Host.

    What is far more important for women and men is that
    scrubbed from Cain’s official story is his long tenure as a director at a Midwest energy corporation named Aquila that, like the infamous Enron Corporation, recklessly dove into the wild west of energy trading and speculation–and ultimately screwed its employees out of tens of millions of dollars.

    He paid out $30 million in bonuses to 5 top guys, then laid off 500 workers the next day.

    He made his millions screwing regular people, now has the balls to say that if you aren’t rich it’s your own fault. I am a conservative leaning independent, and I can’t believe that anyone would consider voting for this
    businesscreature.

    full article at: http://motherjones.com/politics/2011/05/herman-cain-aquila-lawsuit-2012

    1. barrisj

      Re: da Cainster and “sexual harassment’…it’s Clarence Thomas deja vu all over again! Do you think Herm will revive “hi-tech lynching” as a response to charges? Pubic hairs in Coke cans, anyone?

      1. LucyLulu

        Not only a high-tech lynching but racism to boot. Poor cornbread, us liberal-leaning folks won’t stop picking on him.

        Without the likes of Palin, Bachmann, Perry, and Cain, what would we do for entertainment? If they’d nominate somebody half-way decent, I might just vote for them, but their field is truly pathetic. Romney may be sane but Axelod (I think it was him) nailed it when he said he had no convictions (or soul, and I’m not referring to his religious background).

  8. Jeff

    Re Carbon trading.

    If the state gives me the right to break into only
    a couple of neighbors’ homes and I then sell those
    paper rights on the open market to other burglars,
    does that raise the cost of burglary to the point
    where fewer homes get broken into?

    Corporations breaking into our lungs with the byproducts of their commercial activities are no different and
    should be treated the same way as assault and
    burglary…that is it should be prohibited.

    All these “credits”…are we to assume that these
    will be handled by some non-profit agency? Or, is
    this yet another scheme to churn profits for
    Goldman Sachs that will charge a handling fee?

  9. CB

    Interesting FT article on the good old days of partnership liability and profit bonuses, but Yves laid that out some time ago as one of the most salient losses in the financial sector.

  10. dearieme

    The Blessed Ambrose is in fine fettle. I like his discussing Greece and then turning to Portugal: “This honourable nation, which pays its debts…”. Nuff said.

    But isn’t his main point bang on the mark?

    “Italy is in crisis because it cannot compete, not because of debt. … Italy is simply in the wrong currency. It will languish in perma-slump until wage rates once again reflect global market reality.”

    There you have it.

    1. craazyman

      What’s this “can’t compete” mantra everywhere like mosquitoes?

      In competition, you win or you lose, like my ‘Skins lost yesterday 27-0 in Buffalo. You can’t have both sides win.

      Italy will never be able to compete with Germany at being Germany, so it has to be what it is and be itself. It’s like saying Raphael has to compete with Durer at drawing like Durer. Or that Verdi has to compose like Wagner. It’ll never work. How many people do you need to have a prosperous economic equilibrium? I think about that on the bus.

      I don’t know but I’d guess a few million would do it and they could have everything if the geography and nature were suitable. Controlling the imagination is the hardest part.

      In the Dead Sea scrolls theirs a part where two angel/demons — a serpent and a lord of light — are fighting over a man’s soul and he sees them in an ecstatic vision state and he asks them what they hell they’re doing and they say they’ve been given power over all mankind and that he must choose which will rule over him. The snake is DNA. and the Lord of Light is Gnosis. This is in The The Testament of Amram if anyone doubts me. (I was surprised they even answered him, frankly, but it just shows how much power you really have in your consciousness. It’s like a nuclear power plant in the n-th dimension and even the demons have to obey you).

      Italy needs to draw like Raphael with the lira, apparently, it seems. With all those millions of people, they’ll have their own ways of cooperating with each other. They don’t need anyone to bribe, they can bribe each other with lira and Europe will still have to choose who it wants to rule over it.

    1. carping demon

      Too easy to offend someone. The idea is to get people’s minds off that stuff for one or two seconds.

  11. Leviathan

    Levitan is amazing as usual. He points out that the upshot of this mulitstate/multiparty settlement will be (at best) to hand a few thousand dollars in relief to a few (perhaps 1 in 10; probably much fewer) of the underwater homeowners about whom so much virtual ink has been spilled.

    Point 1 is: it won’t be enough to save anyone.

    Point 2 is: it will save the wrong people (those who could probably make it anyway).

    Point 3 is: (and this is my own, not Levitan’s) while doing very little for very few, it will nevertheless enrage many, many people who oppose “handouts” and “bailouts” and aid of any sort for victims of the housing bubble.

    It is the worst of all possible outcomes, but then, what did we expect?

    1. LucyLulu

      Yep, agreed. And if the amounts were significant, moral hazard could become introduced as well. Also, its the shareholders who end up paying, not the culprits. This is exactly the argument I’ve been pitching to my state AG (NC) and why prosecutions of the offenders is a far better solution than monetary penalties and will act as an effective deterrent in the future.

  12. ambrit

    Friends;
    I was trolling the net and checked out the Yahoo Financials Report on housing ‘triple dip’ prospects, courtesy of CNN Money. What fun! In referring to the “robo-signing scandal,” which was sloppily mis represented to boot, the MSM writer refers to the robo-signing saga as being ‘mainly cleared up by now.’ Huh?! These people aren’t on any planet I’ve visited lately. What’s sad is that this is the (low) quality of information the generality of the populace is presented with. With bad information, one comes to bad decisions. I’ve asked it before, and I’ll ask it again; where is our Liberal/Progressive ‘Koch Foundation’?

    1. craazyman

      Isn’t that George Soros? ;)

      So they say, anyway. I can’t figure out a guy like him. If I had a few million I’d be gone to the absinthe bar & wouldn’t drag my open brain daily across the sandpaper they call “macroeconomics”.

      But I guess that’s why I don’t have them$, and he does. :)

      1. Yves Smith Post author

        Soros is a European who likes intellectuals. The Koch are street fighters, at least in the way they do politics. See the difference in results?

        1. Anonymous Jones

          That’s a very good point, though I would take it farther.

          Certain worldviews tend to naturally associate with more aggressive fighting.

          The Kochs have a delusional sense of self-importance, which is incorporated into their political worldviews. They believe that they are in control and should dictate the lives of others.

          I view myself (correctly) as a mere speck in the vast universe, infinitesimally unimportant. I would never sacrifice my time to increase my wealth or control beyond that necessary to live a mostly worry-free existence. It’s not part of my self-image or my politics.

          The Kochs are different. I would posit that the causation runs from their view of the world; they are street fighters because of their delusions. Their delusions do not just happen to coincide with their street-fighting nature.

          Short version of the comment: “Of course they are going to win. They care more.”

          [Well, they will win until everyone else has been so stripped bare that they have nothing to lose, and then they will band together and send the Koch-types to the guillotine.]

          1. aet

            Should pay less attention to what others do, and work more on what you, yourself, are doing.

            You don’t like Koch? Then don’t do any business with him. Why go on yelping about the guy?

          2. aet

            I mean, these nothing-but-money guys lose political power when other people cease paying any attention to what they have to say about how things ought to be run – or start to laugh at them and openly mock their political pretensions.

            That is to say: If enough people actually ignore what they have to say, they do eventually go away.

            But seriously, just what are they gonna do, to make people pay attention to their ideas, if people don’t want to?

            Just like anybody else, when it comes to matters which effect us all – matters of governance – they, too, must persuade other people by argument that what they propose is worthwhile and just. At least, so it is in our democracy.

            Their wealth – or lack of it – ought to make no difference in this regard.

          3. LucyLulu

            aet,
            You underestimate the influence of the Koch Brothers. I can choose to ignore them but that doesn’t mean that large portions of the population, who happen to vote, won’t be swayed by their actions. They fund the Tea Party, they fund think tanks like the Heritage Foundation and Cato Institute to run studies convincing folks that climate warming doesn’t exist and regulation is bad for business, that lowering taxes makes people hire workers, etc. They spend a fortune on lobbying that gets legislation passed that influences everybody’s lives. Look at the mayhem they managed to create in Michigan this past year with Gov. Walker. The Koch Bros. are probably the most powerful political voices in the country. Several months ago the New Yorker did an in-depth article on them that was well-worth reading if you haven’t already.

  13. barrisj

    Re: MF Global bankruptcy filing…any sellers of CDSs drawn on MFG paper have a big exposure? Is there a AIG-FP type of counterparty out there who made a wrong-way bet on swaps, by the way?

  14. scary

    “Deadly Monopolies”: Medical Ethicist Harriet Washington on How Firms are Taking Over Life Itself
    One of the major themes raised by the Occupy movement is the increasing power of large corporations over more and more aspects of our lives. We spend the hour looking into the issue of the corporate control of life itself. Our guest, Harriet Washington, is a medical ethicist and has just published a book that examines the extent to which what she calls the medical-industrial complex has come to control human life. In the past 30 years, more than 40,000 patents have been granted on genes alone—many more patents are pending. Washington argues that the biotechnology and pharmaceutical companies patenting these genes are more concerned with profit than with the health or medical needs of patients. Her new book is called “Deadly Monopolies: The Shocking Corporate Takeover of Life Itself—And the Consequences for Your Health and Our Medical Future.”

    http://www.democracynow.org/2011/10/31/deadly_monopolies_medical_ethicist_harriet_washington

    1. curlydan

      Great segment! I listened to it this morning. Democracy Now is simply the best radio program in the U.S., outclassing all others.

      1. aet

        Some helpful reading in this regard:

        http://www.justice.gov/atr/public/speeches/212266.htm

        Excerpt:

        “The undercover audio and video tapes that you will see today were recorded by U.S. Federal Bureau of Investigation (FBI) agents with the help of a cooperating witness. The tapes capture an international cartel in the act of fixing prices and carving up the worldwide market for the feed additive, lysine, a product used by farmers around the world. Worldwide sales of lysine were over $600 million annually. The tapes reveal how the world’s major lysine producers were able to secretly meet at trade association meetings around the world and agree on the exact tonnage each of them would produce and sell the next year, and then fix the price of it down to the penny in the United States and countries around the world, effective the very next day. “

  15. Mark P.

    This just in –

    “Remains Of Ancient Race Of Job Creators Found In Rust Belt”

    http://www.theonion.com/articles/remains-of-ancient-race-of-job-creators-found-in-r,26490/

    WASHINGTON—A team of leading archaeologists announced Monday they had uncovered the remains of an ancient job-creating race that, at the peak of its civilization, may have provided occupations for hundreds of thousands of humans in the American Northeast and Midwest.

    According to researchers, these long-forgotten people once flourished between western New York state and Illinois, erecting highly distinctive steel and brick structures wherever they went, including many buildings thought to have held hundreds of paid workers at a time….

    Mueller said he now believes the inhabitants of mid-20th-century North America may have built their territory—in particular, the Great Lakes region and northern Appalachia—into one of the most advanced and prosperous civilizations in the world.

    Numerous scholars told reporters the findings have challenged everything they thought they knew about the fundamental organization of human societies, calling it “staggering” and “almost unbelievable” that a culture predating our own had been able to provide work to nearly every person who sought it.

    “By today’s standards, the job creators’ society was highly unusual,” anthropologist Carla Delgado of the Smithsonian Institution said. “One of its more bizarre customs involved workers being employed at the same job at the same location day in and day out for their entire adult lives. It was grueling, perhaps, but astonishingly, some of these individuals were able to set aside part of their earnings for the future, slowly saving money with the hope of improving the prospects of their offspring.”

    “The amazing part is, this bafflingly high level of economic security went on for generations,” Delgado added.

  16. Ron

    From Bill Gross, founder and managing director of bond investment giant PIMCO: This interesting note regarding the role of rapid technology change think (software apps/computerization)and its impact on America’s structural unemployment. Growth via technology is beginning to lose its luster!!!!

    “Gross believes the lack of growth is the outcome of a rapidly changing economy that relies more on technology and less on a structured workforce. Not to mention, an aging global demographic.”

    1. aet

      “Growth via technology is beginning to lose its luster!!!!”

      Growth, maybe; but not production.

      That, on the contrary, is shining ever more lustrous, the more it displaces human toil.

  17. Typing Monkey

    The next domino after Greece…

    http://www.ft.com/cms/s/0/bc24a0c2-03b2-11e1-864e-00144feabdc0.html?ftcamp=rss#axzz1cOSPtjb0

    Portugal is to ask the European Union and International Monetary Fund for changes to its €78bn financial rescue agreement to help lift the country’s debt-stricken economy out of recession.

    Pedro Passos Coelho, prime minister, said he would seek “greater flexibility” to channel finance to companies in an effort to stimulate economic growth[...]

    The Portuguese economy is forecast to contract by 4.9 per cent over 2011 and 2012, with unemployment reaching a record 13.4 per cent, after the government introduced additional austerity measures to meet fiscal targets agreed under the bail-out programme

  18. barrisj

    Re: MF Global bankruptcy filing – It may well be that Jon Corzine is coming out of this with a $12mil parachute, according to this story on the Zero Hedge website:

    Did Jon Corzine Just Get A $12.1 Million Golden Parachute?
    http://www.zerohedge.com/news/did-jon-corzine-just-get-121-million-golden-parachute

    Wasn’t Corzine the “saviour” of this outfit when he was brought on board? A nice reward for failure, but, then again, it is exquisitely reflective of contemporary bidness standards and ethos.

  19. MichaelC

    It looks like there’s going to be a lot to digest re MF Global’s implosion.

    Three noteworthy pieces today:

    1. IMF Global Exposes Prop-Trading Risk That Volcker Wants to Curb

    http://www.businessweek.com/news/2011-10-31/mf-global-exposes-prop-trading-risk-that-volcker-wants-to-curb.html

    Bloomberg muddles it a bit here, even though they illustrate Volcker’s basic point using a nice plain vanilla (and thus a low VaR and other proposed metrics , under the radar exposure) example of the dangers of any prop trading at backstopped firms, the main danger being they are still run by complete idiots.

    ‘Jon Corzine’s risk appetite just provided Paul Volcker with a demonstration of the dangers of Wall Street proprietary trading.’

    Hmm… Perhaps. But it looks like MF Global’s error wasn’t a fancy prop trade to increase its risk appetite, but a rookie miscalculation in a plain vanilla (and widely replicated ) buy and hold trading strategy- term repo. Apparently, no one at MF ever heard of repricing events in term repo agreements.

    In this case their bet wasn’t much different than the regulatory/govt/TBTF arb opportunity PIMCO and Buffet routinely engage in, i.e that sovereigns are money good (for them).

    2. FT Alphaville’s on the case and ,as usual, looks in the right place. They highlight the endemic ‘liquidity trade’ that’s all the rage with Volcker rule and non Volcker rule institutions alike.

    MF Global and the repo-to-maturity trade

    http://ftalphaville.ft.com/blog/2011/10/31/717181/mf-global-and-the-repo-to-maturity-trade/

    The money quote for anyone still wondering if low risk trading (or even Hold to Maturity positions) should be allowable at gov’t backstopped institutions.:

    “if executed properly the trade should — at least on paper – have posed little or no risk.”

    By all appearances MF didn’t take an outsized sovereign risk exposure, They merely took a(n apparently) low risk hold to maturity position. It’s hard to imagine they are alone.

    3. NYT Dealbook coverage throws another wrench in and raises the specter that rehypothication at broker dealers, post Lehman is still a critical systemic issue.

    Regulators Investigating MF Global

    http://dealbook.nytimes.com/2011/10/31/regulators-investigating-mf-global/

    ‘regulators are examining whether MF Global diverted some customer money to support its own trades as the firm teetered on the brink of collapse.’

    It’s refreshing that these ex Golmanites, (Corzine, Thain..) trying to out-GS their alma mater make the 99% ‘s case that all these guys (under the BHC umbrella or not) are existential threats and need to be restrained, rather than bailed out, before the inevitable blowback ruins us all.

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