John Burbank on Bloomberg (video): Will There Be a Recession by Early 2013?

Thanks to Matt for passing this along.

April 3 (Bloomberg) -- John Burbank, founder of Passport Capital LLC, said he expects a U.S. economic recession by early 2013. Kelly Bit reports on Bloomberg Television's "Money Moves."

Eddie Lampert on Rainwater's Legacy

Link

The God of Gamblers: Why Las Vegas is moving to Macau - By Evan Osnos

Found via The Big Picture.

In the late summer of 2007, a fifty-year-old former barber named Siu Yun Ping began making regular visits from his village, in Hong Kong, to the city of Macau, the only Chinese territory where it is legal to gamble in a casino. Macau sits on a horn of rocky coastline, where the Pearl River washes into the South China Sea. It’s about a third the size of Manhattan, covering a tropical peninsula and a pair of islands that look, on a map, like crumbs flaking off the mainland. Chairman Mao banned gambling in China long ago, but it endures in Macau because of a wrinkle of history: the city was a Portuguese colony for nearly five hundred years, and when it returned to Chinese control, in 1999, it was entitled to retain some of the flamboyantly libertine traditions that led W. H. Auden to christen it “a weed from Catholic Europe.” The infusion of China’s new riches triggered an unprecedented surge of construction, and by 2006 Macau’s casino revenues had surpassed those of Las Vegas, until then the world’s largest gambling town. Today, the quantity of money passing through Macau exceeds that of Las Vegas five times over.

Moody's Sees Home Prices Dropping 10% in U.S.

Found via Naked Capitalism.

Sales of repossessed properties probably will rise 25 percent this year from 1 million in 2011, according to Moody’s Analytics Inc. Prices for the homes could drop as much as 10 percent because they deteriorated as they were held in reserve during investigations by state officials resolved in February, according to RealtyTrac Inc. That month, 43 percent of foreclosures were delinquent for two or more years, from a 21 percent share in 2010, according to Lender Processing Services Inc. in Jacksonville, Florida.

“The longer a foreclosed home is in the mill, the bigger the losses,” said Todd Sherer, who manages distressed mortgage investments for Dalton Investments LLC, a Los Angeles-based hedge fund that oversees $1.5 billion. “We have a bulge of these properties coming through the system.”

Homes stockpiled less than a year sell for about 35 percent below the value set by lenders, according to a March 15 report by the Federal Reserve Bank of Cleveland. At two years, the loss is close to 60 percent. A surge of cheap foreclosures may erode prices in the broader real estate market, even as the economy expands and residential building increases, said Karl Case, one of the creators of the S&P/Case-Shiller home-price index.

Steve Jobs 1996 Interview (February 1996 Issue of Wired)

Found via @farnamstreet.

Lincoln did not have a Web site at the log cabin where his parents home-schooled him, and he turned out pretty interesting. Historical precedent shows that we can turn out amazing human beings without technology. Precedent also shows that we can turn out very uninteresting human beings with technology.

It's not as simple as you think when you're in your 20s - that technology's going to change the world. In some ways it will, in some ways it won't.

…..

The Web reminds me of the early days of the PC industry. No one really knows anything. There are no experts. All the experts have been wrong. There's a tremendous open possibility to the whole thing. And it hasn't been confined, or defined, in too many ways. That's wonderful.

There's a phrase in Buddhism, "Beginner's mind." It's wonderful to have a beginner's mind.

…..

The best way to think of the Web is as a direct-to-customer distribution channel, whether it's for information or commerce. It bypasses all middlemen. And, it turns out, there are a lot of middlepersons in this society. And they generally tend to slow things down, muck things up, and make things more expensive. The elimination of them is going to be profound.

…..

Design is a funny word. Some people think design means how it looks. But of course, if you dig deeper, it's really how it works. The design of the Mac wasn't what it looked like, although that was part of it. Primarily, it was how it worked. To design something really well, you have to get it. You have to really grok what it's all about. It takes a passionate commitment to really thoroughly understand something, chew it up, not just quickly swallow it. Most people don't take the time to do that.

Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn't really do it, they just saw something. It seemed obvious to them after a while. That's because they were able to connect experiences they've had and synthesize new things. And the reason they were able to do that was that they've had more experiences or they have thought more about their experiences than other people.

Unfortunately, that's too rare a commodity. A lot of people in our industry haven't had very diverse experiences. So they don't have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one's understanding of the human experience, the better design we will have.

Nassim Taleb: Throw Out the Probability Models

Found via Farnam Street.

After the events that started in 2007 and the subsequent reactions by economists, anyone who takes the current economics establishment seriously needs to spend time in a sanatorium.

This does not mean we should write off the entire body of knowledge. By now, we can see what works and what does not work. Simply, a certain class of consequential rare events, what I’ve called “black swans,” are not predictable and their probabilities unmeasurable, so anything that relies on a computation of the probability of these events should go out of the window. Now. Such models induce fragilities and bring harm. We're better off with no model than with a defective model, something people understand intuitively, but they tend to forget when they don’t have “skin in the game.” If you are a passenger on a plane and the pilot tells you he has a faulty map, you get off the plane; you don’t stay and say “well, there is nothing better.” But in economics, particularly finance, they keep teaching these models on grounds that “there is nothing better,” causing harmful risk-taking. Why? Because the professors don’t bear the harm of the models.

GR-NEAM Reflections: 04/01/2012 - The Next Error

When savers lose because their returns are low or negative in real terms, government wins. The Taylor Rule provides a way of testing central bank policy, the results of which contain some amount of truth telling.

Financiers and Sex Trafficking – By Nicholas D. Kristof

THE biggest forum for sex trafficking of under-age girls in the United States appears to be a Web site called Backpage.com.

This emporium for girls and women — some under age or forced into prostitution — is in turn owned by an opaque private company called Village Voice Media. Until now it has been unclear who the ultimate owners are.

That mystery is solved. The owners turn out to include private equity financiers, including Goldman Sachs with a 16 percent stake.

Goldman Sachs was mortified when I began inquiring last week about its stake in America’s leading Web site for prostitution ads. It began working frantically to unload its shares, and on Friday afternoon it called to say that it had just signed an agreement to sell its stake to management.

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Related video: Kristof on CNBC

Keynes: One Mean Money Manager - By Jason Zweig

No one is a Keynesian now—at least not among money managers.

And that is a shame.

A new analysis of the investment performance of John Maynard Keynes proves that the famous economist also was one of the greatest investors of the past century. By understanding what made Keynes such a star, investors can get a firmer grasp on why so many of today's money managers seem so dim.

Regardless of how you feel about his theories on the need for governmental intervention in the economy, Keynes (1883–1946) long has had a reputation as an outstanding investor. Until now, however, no one had ever gone to the trouble of reconstructing his investment track record.

Does Central Bank Independence Frustrate the Optimal Fiscal-Monetary Policy Mix in a Liquidity Trap? – By Paul McCulley and Zoltan Pozsar

Found via Calculated Risk.

The United States and much of the developed world are in a liquidity trap. However, policymakers still have not embraced this diagnosis which is a problem as solutions to a liquidity trap require specific sets of policies. There are policies that will work, and there are policies that will not work. Correct diagnosis is necessary to prescribe the right policy medication.

A liquidity trap is a circumstance in which the private sector is deleveraging in the wake of enduring negative animal spirits caused by the bursting of joint asset price and credit bubbles that leave private sector balance sheets severely damaged. In a liquidity trap the animal spirits of the private sector cannot be revived by a reduction in short-term interest rates because there is no demand for credit. This effectively means that conventional monetary policy does not work in a liquidity trap.