With a full news cycle now having been and gone since the Basel III accord was announced, a few things have come into more focus.
Last week, Justin Lahart presented an interesting thesis in the WSJ:
For American business, it has become a two-track economy.
While global players like industrial conglomerate 3M Co. and burger giant McDonald’s Corp. are getting ever-bigger boosts from their operations in fast-growing economies like China and Brazil, companies dependent on the U.S. market are hemmed in by recession-scarred consumers who are hesitant to spend.
Gretchen Morgenson is absolutely right, in the words of her headline, that “Housing Doesn’t Need a Crash. It Needs Bold Ideas.” The problem is that the bold idea she’s pushing is not the kind of bold idea that housing needs. Meanwhile, she sidles up to a genuinely good, if not particularly bold, idea, but fails to connect her own dots:
Chart of the day comes from the Bank of England’s Andrew Haldane:
What you’re seeing here is the result of two different investing strategies. The red line is momentum: every month, you do one of two things. You go long the market when the market rose the previous month; or you go short the market if it fell the previous month. The blue line, by contrast, is value: you use a dividend discount model, and buy the market when it’s cheap, and sell it when it’s expensive.