I just received an e-mail from a student of 10 years ago. It is nice to know that my courses are remembered this far out.
Hello Professor Langbert,
Thank you.
I took your “Managing Organization and Behavior” class in Summer 2000 at NYU. I would not believe you if you said you remembered me, but I remember how much fun you made that class. I hadn’t thought about it for ages until this past weekend when I ran across the “Informational Interview” paper I wrote for the class.
I had interviewed a portfolio manager at Oppenheimer funds as my goal at the time was to be an analyst at a small investment firm. You will be happy to know that I am a healthcare analyst at Palisade Capital management.
While there were a lot of steps between that paper I wrote 10 years ago and where I am today, I don’t discount the value of the informational interview exercise. Thanks for that.
Hope you are well and still enjoying teaching.
Friday, February 5, 2010
Where Do Markets Bottom?
Five Year Gold Price courtesy Kitco.com
The above is a chart of the gold price over the last five years. The steep falls of the past week are tiny blips. But while one experiences them they are significant. The question is: where does gold bottom? The current decline like the one in fall 2008 is due to concern about financial problems, this time one in Greece and Spain that threatens the Euro; and the possibility of future Fed tightening. It is paradoxical that despite long term ill prospects for the dollar, in the short term it is viewed as a safe haven from risk assets, including gold. In fact, gold is much safer, but the short term psychology of Wall Street Keynesians leads to that thinking.
Gold has further to fall, according to my coin flip test, but not so far as in 2008. Maybe to $950, which came up heads.
Thursday, February 4, 2010
Multiple Choice Test
1. America Needs More:
(a) Politicians
(b) Welfare Mothers
(c) Wall Street Investment Bankers
(d) Auto Mechanics
(e) All of the Above
(f) a, b and c only
2. The chief problem facing America today:
(a) There are not enough hedge fund managers
(b) There are not enough people scheming to get a handout from Uncle Sam
(c) Journalists are just too honest
(d) More than half of the nation's income is diverted into government sponsored waste
3. I fear for the future because:
(a) Wall Street may not survive
(b) Government is impoverished; private affluence public squalor
(c) George Soros says that the US debt load is too low
(d) All of the above
(e) Government is spending, spending, spending and the way they're going to pay it back is an inflation that subsidizes George Soros
You have 15 minutes to complete the test. Please do not forget to sign your name.
(a) Politicians
(b) Welfare Mothers
(c) Wall Street Investment Bankers
(d) Auto Mechanics
(e) All of the Above
(f) a, b and c only
2. The chief problem facing America today:
(a) There are not enough hedge fund managers
(b) There are not enough people scheming to get a handout from Uncle Sam
(c) Journalists are just too honest
(d) More than half of the nation's income is diverted into government sponsored waste
3. I fear for the future because:
(a) Wall Street may not survive
(b) Government is impoverished; private affluence public squalor
(c) George Soros says that the US debt load is too low
(d) All of the above
(e) Government is spending, spending, spending and the way they're going to pay it back is an inflation that subsidizes George Soros
You have 15 minutes to complete the test. Please do not forget to sign your name.
China Crash?
John Derbyshire of National Review.com has an interesting post (h/t Larwyn) concerning the possibility of a China crash. Derbyshire notes that two previous times in modern history have nations run up large foreign reserve balances:
>"The first time occurred in the late 1920s when, after a decade of record-beating trade and capital account surpluses, the United States had accumulated what John Maynard Keynes worriedly described as "all the bullion in the world." . . . The second time occurred in the late 1980s, when it was Japan’s turn to combine huge trade surpluses, along with more moderate surpluses on the capital account, to accumulate a stockpile of foreign reserves only a little less than the equivalent of 5-6% of global GDP"
In May 2008 I noted that a Chinese tragedy is in the making despite the major strides that the Chinese economy has made. Like the political leadership of all managed economies, the Chinese government is subject to massive errors and missteps that are far worse than would occur under laissez-faire. I wrote then:
"Tragically, the Chinese perceived the spectacular image of large-scale development and have attempted to emulate Robert Moses's approach with large construction projects, continuing to limit the intellectual and economic freedom on which economic development depends. Equally sadly, Americans lost sight of the reason for their success, and passed laws and regulations, and imposed punitive taxes, that have inhibited entrepreneurship, slowing American economic progress, even as they have increasingly provided welfare payments to incompetent bankers, real estate developers, academics and Wall Street stock jobbers who do not produce wealth.
"This country and China have squandered resources in stupid ways. The bubble will burst as all credit bubbles do. America may have enough resources to reassess its errors. The Chinese likely do not, and many there will be hurt."
>"The first time occurred in the late 1920s when, after a decade of record-beating trade and capital account surpluses, the United States had accumulated what John Maynard Keynes worriedly described as "all the bullion in the world." . . . The second time occurred in the late 1980s, when it was Japan’s turn to combine huge trade surpluses, along with more moderate surpluses on the capital account, to accumulate a stockpile of foreign reserves only a little less than the equivalent of 5-6% of global GDP"
In May 2008 I noted that a Chinese tragedy is in the making despite the major strides that the Chinese economy has made. Like the political leadership of all managed economies, the Chinese government is subject to massive errors and missteps that are far worse than would occur under laissez-faire. I wrote then:
"Tragically, the Chinese perceived the spectacular image of large-scale development and have attempted to emulate Robert Moses's approach with large construction projects, continuing to limit the intellectual and economic freedom on which economic development depends. Equally sadly, Americans lost sight of the reason for their success, and passed laws and regulations, and imposed punitive taxes, that have inhibited entrepreneurship, slowing American economic progress, even as they have increasingly provided welfare payments to incompetent bankers, real estate developers, academics and Wall Street stock jobbers who do not produce wealth.
"This country and China have squandered resources in stupid ways. The bubble will burst as all credit bubbles do. America may have enough resources to reassess its errors. The Chinese likely do not, and many there will be hurt."
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