Wired: The Smart List 2012

Welcome to the first Wired Smart List. We set out to discover the people who are going to make an impact on our future --by asking today's top achievers who, emerging in their field, they'd most like to have a leisurely lunch or dinner with. So we approached some of the world's brightest minds -- from Melinda Gates to Ai Weiwei -- to nominate one fresh, exciting thinker who is influencing them, someone whose ideas or experience they feel are transformative.

Some suggested names you may be aware of, others might be new. Either way, they're all people you really need to know about. And wired will be inviting all nominators and nominees to a giant dinner party...

Mice sing to impress the girls, scientists find

Male house mice produce melodious songs to attract mates, not unlike many birds, according to new research.

The ditties are too high-pitched for human hearing, but scientists at Vienna's University of Veterinary Medicine analyzed them and found they convey information about identity and kinship. The findings are published in the journal Physiology & Behavior and in the Journal of Ethology.

“It seems as though house mice might provide a new model organism for the study of song in animals,” said Dustin Penn of the university, one of the co-authors of the work. “Who would have thought that?”

Scientists knew house mice make sounds during courtship, but assumed they were just squeaks, according to the group. In reality, they said, they are complex and show characteristics of song: during slowed-down playbacks, a similarity to bird song becomes striking.

Just Don't Lose It!

More than ever, investors want advisors and money managers to preserve their capital. So how can you make your wealth grow?

When stocks recently hit a six-month high, U.S. Trust's chief investment officer, Christopher Hyzy, expected to hear from investors eager to buy more shares. Instead, calls came in from clients who wanted to know if they should take profits, or how they could protect their winnings following the Standard & Poor's 500's quick 20% jump to break through 1300.

It's not just U.S. Trust investors who are cautious. Across the country, employers are gradually adding jobs, and fears of a double-dip U.S. recession have receded momentarily—enough to propel U.S. stocks up 4.7% in January, double their gain from a year ago. Yet financial advisors and money managers are listening to the same anxious refrain from their clients: Make sure you don't lose our money! Investors may be resigned to diminished returns, what with bond yields plumbing historic depths and banks paying almost no interest, but their biggest priority remains to avoid, at all cost, a repeat of the 2008's disastrous losses.

MF Global client money feared gone

Nearly three months after MF Global Holdings collapsed, officials hunting for an estimated $1.2 billion in missing customer money increasingly believe that much of it might never be recovered, according to people familiar with the investigation.

As the sprawling probe that includes regulators, criminal and congressional investigators, and court-appointed trustees grinds on, the findings so far suggest that a "significant amount" of the money could have "vaporized" as a result of chaotic trading at MF Global during the week before the company's Oct. 31 bankruptcy filing, a person close to the investigation was cited as saying Monday.

Many officials now believe certain employees at MF Global dipped into the "customer segregated account" that the New York company was supposed to keep separate from its own assets -- and then used the money to meet demands for more collateral or to unfreeze assets at banks and other counterparties as they grew more concerned about their financial exposure to MF Global.

Investigators also are examining other scenarios that have gained traction in recent weeks, such as the possibility that MF Global suffered steep losses on investments made using customer money. Officials investigating the case have looked into whether such investments were appropriate under rules at the time.

As money poured out of MF Global, much of it likely passed through J.P. Morgan Chase and other banks where the securities firm had accounts, as well as trade-clearing partners such as Depository Trust & Clearing and LCH.Clearnet Group, people familiar with the matter said.

Hussman Weekly Market Comment: Warning: Goat Rodeo

Goat Rodeo - Appalachian slang for a chaotic, high-risk, or unmanageable scenario requiring countless things to go right in order to walk away unharmed.

Over the years, of the most frequent phrases in these weekly comments has been "on average." Most of the investment conditions we observe are associated with a mix of positive and negative outcomes, so rather than making specific forecasts about future market direction, we generally align our investment position in proportion to the average return/risk outcome, recognizing that the actual outcome may be different than that average in any particular instance.

Increasingly however, we have observed sets of conditions that are so heavily skewed toward bad outcomes that they deserve the word "warning" (see Extreme Conditions and Typical Outcomes near the 2011 peak, Don't Mess with Aunt Minnie before the 2010 market break, Expecting a Recession in late 2007, A Who's Who of Awful Times to Invest at the 2007 market peak, and our shift from a modestly constructive investment position to a Crash Warning in October of 2000). While the downturns that followed have provoked increasingly large and desperate actions of central banks to kick the can down the road by preventing debt restructuring and financial deleveraging (in some cases by violating legal constraints - see The Case Against the Fed ), the fact is that the S&P 500 has achieved a total return of just 1.2% annually over the past 12 years, as a predictable outcome of rich valuations and still-unresolved economic imbalances.

I could admittedly do better, and would certainly have captured more upside from temporary speculation, had I committed myself to the principle that central banks will act strictly to defend the bondholders of the banks they represent, even if it means trespassing into fiscal policy, subordinating public interest, empowering the worst stewards of capital, violating legal restrictions, and inviting long-term instability. Still, none of those actions improve the long-term outcome for the markets, and more importantly, none have prevented repeated and serious downturns from occurring, despite all the can-kicking.

Once again, we now have a set of market conditions that is associated almost exclusively with steeply negative outcomes. In this case, we're observing an "exhaustion" syndrome that has typically been followed by market losses on the order of 25% over the following 6-7 month period (not a typo). Worse, this is coupled with evidence from leading economic measures that continue to be associated with a very high risk of oncoming recession in the U.S. - despite a modest firming in various lagging and coincident economic indicators, at still-tepid levels. Compound this with unresolved credit strains and an effectively insolvent banking system in Europe, and we face a likely outcome aptly described as a Goat Rodeo.

My concern is that an improbably large number of things will have to go right in order to avoid a major decline in stock market value in the months ahead. We presently estimate that the S&P 500 is likely to achieve a 10-year total return (nominal) of only about 4.7% annually, which reduces the likelihood that further gains will be durable even if they persist for a while longer. In the context of present valuations and a probable Goat Rodeo in the months ahead, my impression is that the recent market advance may be a transitory gift.

Richard Dawkins at the University of Maryland

I finally got around to watching this after having on my "watch list" for months, and I think it was one of the best interviews with Dawkins I have seen. I think that anyone with even a general interest in science will find it worth his or her time.

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Jean-Marie Eveillard on King World News

Link to: Jean-Marie Eveillard on King World News

Steve Keen Interview from VAL2011

From November of last year.

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Related book: Debunking Economics - Revised and Expanded Edition: The Naked Emperor Dethroned?

Related previous post: Steve Keen: Behavioral Finance Lectures

Chris Martenson Interviews John Mauldin

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John Mauldin: The Transparency Trap

This week we take a brief pause in our series on the choices facing the developed world to look at some items that are catching my attention. We will get back to the US next week, as somehow I think we will not solve our problems between now and next Friday, and there will be plenty left for us to talk about. So today we look at the “shift” in Fed policy, and at the balance sheets of central banks, US GDP, Portugal and the ECB, the LTRO policy, and yes, there’s even a tidbit on Greece. Plenty of ground to cover, so with no “but first,” let’s get started.