A timely and frightening exploration of the causes and consequences of the emerging foreclosure mess. This close cousin of the earlier sub-prime mortgage debacle provides even more evidence of the financial industry’s hubris and inescapable self-interest.
As the saying goes: garbage in, garbage out…

Students of behavioral finance must have had a field day this past week. In the wake of a month of dismal economic reports, Wall Street got its risk on with a few better than expected reports on manufacturing sentiment, home sales, and employment. Hopium, it appears, is a powerful drug.

Armies of bulls and bears are camped out on either side of the great debate over the future of the global economy. Armed with the latest statistics and plenty of financial incentive, both sides are engaged in massive media campaigns to rally anyone left on the fence — principally retail investors who were either burned in the great collapse of 2008-09 or sat out the fast and furious rally over the past 14 months. As the rhetoric heats up, it becomes increasingly difficult to choose sides. A careful examination of these competing wagers provides a more holistic perspective for anyone brave enough to join the fight.

The markets whipsawed in volatile trading last week as war was waged over key technical levels in the Dow (10,000) and S&P (1050). The backdrop was bitter sweet: trouble among the perennial sick men of Europe (Portugal, Italy, Ireland, Greece and Spain) on the one hand, and upbeat earnings in Corporate America on the other. With all the uncertainty over the short-term trajectory of the economy, it would be tough to fault political leaders for at least preaching that the glass is still half full. That said, it’s almost criminal for the Secretary of the Treasury to tell the American people — on their holiest of sporting days — that America’s economy was frothing at the end of last year, …

“America’s mainstream religious denominations used to teach the faithful that they would be rewarded in the afterlife. But over the past generation, a different strain of Christian faith has proliferated—one that promises to make believers rich in the here and now. Known as the prosperity gospel, and claiming tens of millions of adherents, it fosters risk-taking and intense material optimism. It pumped air into the housing bubble. And one year into the worst downturn since the Depression, it’s still going strong.”

“Bob Farrell was a legend at Merrill Lynch & Co. for several decades. Farrell had a front-row seat to the go-go markets of the late 1960s, mid-1980s and late 1990s, the brutal bear market of 1973-74, and October 1987′s crash. He retired as chief stock market analyst at the end of 1992, but continued to occasionally publish. Rumor has it for a humongous donation to Farrell’s favorite charity, you can get on his very exclusive email list. Marketwatch gathered some of Farrell’s more famous observations, and republished them as 10 Market Rules to Remember.” – via The Big Picture

Few people will escape from this crisis with enough reputability to scream “I told you so” at the top of their lungs like hedge fund neophyte Andrew Lahde. In this epilogue to his one year experiment in asset management – during which time his fund returned 866% betting on the subprime collapse – he rails on the industry, its myopic leadership, the vice of greed, and even the virtues of a little green plant…

Words of cautious wisdom from the celebrated biographer of risk, back in November of 2007…
Crazy Little Thing Called Risk
By PETER L. BERNSTEIN
BACK when I was managing other people’s money, I had a client, a doctor, who enjoyed giving away money to his daughters. He was lucky, because an extended bull market was under way with only minor interruptions. The more he gave away, the more the market replaced what he had parted with. As generosity appeared to be a cost-free form of recreation, he considered the whole thing a riskless enterprise.

Recent reports have pegged open interest in the world’s largest IPO at nearly US$400 billion. That’s a lot of capital ready to speculate on a still unproven Chinese macroeconomy, particularly in the face of its ongoing structural woes. Could this be the end of the beginning for capitalism in China? Or perhaps the beginning of the end…
The Enduring Allure of China
by Peter Zeihan, Stratfor.com

The Industrial and Commercial Bank of China (ICBC) is expected to raise nearly $22 billion in an initial public offering (IPO) — the largest in history — after shares are made available to retail investors Oct. 27. The ICBC offering is the latest in a series of IPOs involving Chinese banks, into which Western investment firms have …

Economics is converging with everything these days, from the environment to the grocery store to the bedroom. This time, the playing field is none other than the human brain itself, and the results are less surprising than they are empirically fascinating. Contrary to conventional thinking, it turns out that people won’t always act in the own best interests, and that’s as true for investing and gambling as it is for adultery and employment…
MIND GAMES
by JOHN CASSIDY in the New Yorker

What neuroeconomics tells us about money and the brain.
Like many people who have accumulated some savings, I invest in the stock market. Most of my retirement money is invested in mutual funds, but now and again I also buy individual stocks. …

as a primer on basic investment analysis and the ongoing challenge of balancing risk and reward, this email exchange tries to demystify the increasingly lucritive but often frigtening world of “structured finance”. caveat investor…
From: [a good friend]
Sent: December 20, 2005 9:56 AM
To: [me]
Subject: Can you please look at this prospectus?
My father is interested in this but thinks it may be too good to be true. What is your opinion?
From: [me]
Sent: December 20, 2005 11:14 AM
To: [a good friend]
Subject: RE: Can you please look at this prospectus?
it’s called “structured finance”, and it happens all the time. think of the income trust as a really tasty cake. each individual layer of the cake is a different type of security, from …

In an attempt to explain the subtle but important distinction between cash flow, revenue and income, this article is the first in a series on basic investment strategy, and can serve as a primer for anyone interested in a more “rational” approach to financial research and analysis…
The first thing most people do when they hear about a new company is follow the ever-popular “share price” line of simple deductive enquiry (“Where’s it trading?” “Where was it trading?” Where will it be trading next week?”). In essence, these people are making the fairly respectable gamble that it really is “good news” that drives share prices up, and it really is “bad news” that drives them back down again. To be sure, …

Let’s play a little game i like to call “What if…”.
Today’s topic: nanotechnology, its slowly dying champion, and his robotic fountain of youth.
Meet the protagonist, futurist Ray Kurzweil. once hailed as “the restless genius” by the Wall Street Journal and “the ultimate thinking machine” by Forbes, he now dominates the growing field of commercial artificial intelligence. A recipient of the the 1999 National Medal of Technology (America’s s highest tech honor), twelve honorary doctorates, and honors from three U.S. presidents, Kurzweil may actually be remembered for none of these things, given his fantastic vision of the future. In fact, he may never be “remembered” at all.
Kurzweil’s plan: never die.