Weekend reading

Good reads from around the Web.

Anyone who gets all their financial information from Monevator – hi mum! – won’t know that the US Federal Reserve decided not to dial back QE3 this week.

I didn’t write a post about it beforehand. I didn’t write a post about it afterwards. I haven’t even included articles about it in our Weekend Reading roundups for the past few months.

Now that might not sound to you like a shocking dereliction of duty. Who cares if some Central Banker buys $10 billion fewer bonds a month in a multi-trillion dollar economy?

To which I say:

1) Congratulations, you’ve just said something more sensible than 90% of financial pundits on the subject.

2) You obviously haven’t watched CNBC or Bloomberg since May.

Since late May, the financial media and markets have ceaselessly speculated about “the taper” – not the Barry Manilow-snouted beast of South America, but the extent to which the Fed’s quantitative easing would be scaled back, and how this would effect financial markets.

I can hardly exaggerate the amount of coverage it has got. I wouldn’t be surprised to learn that 50% of CNBC’s daytime output was devoted to taper-talk.

Admittedly that’s like castigating EastEnders for focussing on Albert Square, not Syria. CNBC is about entertainment, not what matters most in markets and investing.

But even so, it’s sidesplittingly hilarious to me that after all that speculation, Bernanke didn’t taper.

Nearly everyone was wrong. What a waste of time and breath!

For the professional pundit of course, no news is good news. They can just re-run all their taper talk for another three months. It sure beats truly educating people about investing, or even companies.1

But I wouldn’t look for a volte-face from me, nor any sudden explosion of taper speculation here on Monevator. Here’s why:

  • Low US interest rates matter much more than Fed bond buying. The Fed funds rate is going to stay low for years, because it’s explicitly linked to an unemployment rate trigger that’s far, far away.
  • Even the part of QE3 that does matter – mortgage-backed security buying, which is mildly helping the US housing market – isn’t as important as core rates.
  • Market rates – such as the 10-year Treasury yield – had approached 3% just on speculation about tapering. The rise did what Bernanke wanted without him doing anything, in my opinion.
  • But my opinion on this isn’t worth any more than all those talking heads on CNBC, so I won’t be sharing it here much.
  • They nearly all got it wrong. So who exactly am I going to be quoting?
  • Whatever we do or say, you and I aren’t likely to outthink the US bond markets, which is one of the most liquid markets in the world.

Finally:

  • The 90% of financial bloggers and commentators who’ll tell you the US and UK bull markets are a fantasy built entirely on easy money from the Federal Reserve are wrong. They are guys with hammers looking for nails. Of course low rates have been crucial triage for the banks, and for steadying the underlying economy, but it’s not magic or trickery, it’s what always happens. It’s a price our future selves pay for less pain today. Read some market history. Pundits always say the same things. Somehow we push on, make more products, boost productivity, have kids who want houses…

Here end-eth the macro post of the month.

I’ll try and do another one before 2014. Just to show willing to the big boys.

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

  • Fossil fuel divestment and the carbon bubble – UK Value Investor
  • A bull on the cover of TIME can be bullish [Graphic]Ticker Sense
  • Dart’s growth leads to uncertainty [Read the comments]Beddard/iii
  • The US deep value stocks are all played out [Graph] – Mebane Faber

Other articles

Product of the week: A 3.05% rate is enough to get Leeds Building Society back at the top of the best buy tables with its five-year No Access ISA, reports The Telegraph.

Mainstream media money

Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.2

Passive investing

Active investing

  • How to use investment trusts [Search result]FT
  • We’re in a “What, me worry?” stock market – MarketWatch
  • The dubious logic of an acquisitive CEO – The Value Perspective
  • US homebuilders are still worth buying – Fortune
  • Even the BOE agrees that trading FX is for mugs – MoneyBeat

Other stuff worth reading

  • Degrees of hardship for students [Told you so!] [Search result]FT
  • Lessons from a life well lived – MoneyWatch
  • The collapse in banker’s self-esteem – Peston/BBC
  • Half his pension lost to high fees – Telegraph
  • Buying is “£900 a year cheaper” than renting – Telegraph
  • The cost of dying intestate [i.e. Without a will]Guardian
  • 9/10 of the world’s biggest firms are American (once more) – Economist

Book of the week: As author and ex-hedge fund manager Lars Kroijer is whisking me a copy of his latest book, the index tracker touting Investing Demystified, I feel a replug is in order. I hope to have more from Lars in coming weeks, too.

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  1. Slight exception made for the daytime Fast Money, which is by far the best of CNBC’s output, although it’s only for active traders.
  2. Reader Ken notes that: “FT articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”.”

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