A nation of outlaws, by Stephen Mihm

Professor Mihm offers some “much-needed perspective.”

“What’s happening halfway around the world may be disturbing, even disgraceful, but it’s hardly foreign. A century and a half ago, another fast-growing nation had a reputation for sacrificing standards to its pursuit of profit, and it was the United States.

As with China and Harry Potter, America was a hotbed of literary piracy; like China’s poisonous pet-food makers, American factories turned out adulterated foods and willfully mislabeled products. Indeed, to see China today is to glimpse, in a distant mirror, the 19th-century American economy in all its corner-cutting, fraudulent glory.”

Here are the top five most read stories on the Bloomberg in the last day with selected excerpts (and my comments, if any, in italics).

As of 28-Aug-2007 at 9:23:10 (Beijing time):

1. U.S. Stocks Fall, Led by Financials; Countrywide, Lennar Drop

“… the glut of unsold homes rose to a 16-year high last month … Fifteen of 16 homebuilders in S&P indexes slid.”

2. Oral-Sex Cancer Link Suggests Boys Need Merck Vaccine

“Changing sexual practices such as more frequent oral sex in adolescents and young adults could contribute to an increase in oncogenic HPV-associated oropharyngeal cancers.”

Oral sex is something new among young adults? Is this true?

3. As Bernanke Retreats to Wyoming, Critics Ask Is He Prime Time

(Still #3)

4. Fed May Kill Long Bond Rally With Switch From Inflation Focus

(Previously #1)

5. U.S. Economy: Home Sales Drop, Inventories Increase

“‘Unfortunately, worse news lies ahead,’ said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. Stricter borrowing rules mean more foreclosures and fewer qualified buyers, which will be ‘adding up to lower home sales and lower prices. It is hard to see a bottom before mid-2008.’”

You usually don’t “see the bottom” until it’s long past.

Selling all day long… a little rally attempted at 2 PM but it didn’t last long, reversed and closed weakly.

Notable New Lows: St. Joe (JOE), US Natural Gas (UNG), and Neurochem (NRMX).

Notable New Highs: China SPDR (GXC), China Southern Air (ZNH), Yazhou Coal (YZC), Morgan Stanley China (CAF), China Unicom (CHU), China Mobile (CHL), FTSE/Xinhua China 25 (FXI), China Life (LFC), Aluminum Corp of China (ACH) — I’m beginning to sense a theme here — NVIDIA (NVDA), Onyx Pharma (ONXX), and Superconductor Tech (SCON), which is up a little bit in the past five days (from $1.54 to $5.94).

I’ll feature a weekly chart of the Morgan Stanley China A closed-end fund (CAF), which I first mentioned back in April. I’ve shut up about China stocks being overvalued and quit trying to pick a top, so the end may well be nigh. (See, I can’t help myself.)

A typically good piece (over 8,000 words but worth it) from Michael Lewis on the “culture of catastrophe.”

“John Seo thinks that much of the academic literature about finance is nonsense…. ‘These academics couldn’t understand the fact that they couldn’t beat the markets,’ he says. ‘So they just said it was efficient. And, ‘Oh, by the way, here’s a ton of math you don’t understand.'’ He notes that smart risk-takers with no gift for theory often end up with smart solutions to taking extreme financial risk — answers that often violate the academic theories. (’The markets are usually way ahead of the math.’) He prides himself on his ability to square book smarts with horse sense. As one of his former bosses puts it, ‘John was known as the man who could price anything, and his pricing felt right to people who didn’t understand his math.’”

- via kedrosky.com -

A reminder that the Most Read news (in the last day) on Monday morning (Beijing time) really captures the most read stuff over the weekend, so sports stories like the Gay one show up.

Here are the top five most read stories on the Bloomberg in the last day with selected excerpts (and my comments, if any, in italics).

As of 27-Aug-2007 at 9:23:01 (Beijing time):

1. Fed May Kill Long Bond Rally With Switch From Inflation Focus

“Federal fund futures on the Chicago Board of Trade show traders are certain central bankers will cut the target rate for overnight loans between banks at their monetary policy meeting next month.”

“Certain”ly be interesting to see what happens if they *don’t* cut the Fed Funds rate.

2. Credit Suisse Hires Rob Jesudason to Head Asia Financial Group
3. As Bernanke Retreats to Wyoming, Critics Ask Is He Prime Time

“‘What the Fed did was too slow, and maybe it’s because they’re too cloistered,’ Martha Seger, 75, a Fed governor from 1984 to 1991, said in an interview.’They’re out of touch with what’s going on in the real world. The problems that are out there go way beyond Wall Street.’”

I feel for Ben, having to please all of these conflicting, and highly political, interests.

4. Gay Cements Status as World’s Fastest Man With Help From Mom

“U.K. bookmaker installed Gay as the 5-4 favorite to win the Olympic 100 meters title in Beijing next year ahead of Atkins and Powell, who is yet to win a major championship gold.”

In Beijing they’ll be wheezing for the 100 meters title.

5. Insiders’ Buying at Banks, Insurers Rises to 12-Year High as Shares Fall

“‘You’ve got very negative sentiment, the public is frightened, a lot of hedge funds have sold out, and now there’s insider buying,’ said George Muzea, founder and president of Reno, Nevada-based Muzea Insider Consulting. ‘If you can’t make money at this point in time, you can’t make money.’ Muzea charges as much as $500,000 a year for his service and wrote a book on insider buying and selling called ‘The Vital Few Vs. the Trivial Many: Invest With the Insiders, Not the Masses.’”

I’m not an insider, but anyone who can read a financial statement understands how deeply undervalued many financial stocks are now, especially these ten.

I decided to widen the body of the blog and stop accommodating the readers whose screen resolutions are below 1000 px wide. As you can see from my Google Analytics stats, these top ten resolutions represent around 95% of the total, and only 4.46% of my readers are looking at 800×600 screens — to them I bid good-bye.

Good, solid, strong day of buying.

Notable New Lows: Sonic Solutions (SNIC), China Sunenergy (CSUN), US Natural Gas (UNG), and Beacon Roofing Supply (BECN).

Notable New Highs: FTSE/Xinhua China ETF (FXI), China Life (LFC), Aluminum Corp of China (ACH), China Mobile (CHL), TJX (TJX), Gamestop (GME), Blue Coat Sys. (BCSI), and Biogen (BIIB).

I’ll feature a monthly chart of Gamestop (GME) since it came public in February 2002. I never play video games, but apparently others do. ;-)

(Another in the TGIF series)

Is anybody reading these posts? They seem to generate very few comments.

Here are the top five most read stories on the Bloomberg in the last day with selected excerpts (and my comments, if any, in italics).

As of 24-Aug-2007 at 9:54:38 (Beijing time):

1. Bank of America’s Countrywide Purchase Boosts Stocks

“Bank of America gets shares that yield 7.25 percent and can be converted into common stock at a price of $18. While the shares are convertible at any time, Bank of America will be subject to trading restrictions for 18 months. [This] will increase Countrywide’s shares by 19 percent, diluting earnings for holders of common stock, and add $145 million annually in preferred dividends. Converting the preferred stock would give Bank of America 111 million common shares, or a 16 percent stake in Countrywide.”

Smart move on BofA’s part

2. Goldman Global Equity Hedge Fund Rises 12% After Cash Infusion
   

“‘Usually such behavior causes first pain and then opportunity.’” — James Simons

Right, but the pained are usually in no position to grab the opportunity even if they recognize it (unless you’re Goldman).

3. Commercial Paper Has Biggest Weekly Drop Since 2000

“‘The commercial paper market, in terms of the asset-backed commercial paper market, is basically history.’” — Bill(ionaire) Gross

4. Joe Montana’s Firm Says Fund Declined 12% in August

“‘What changed in August was the apparent de-leveraging of quantitative equity market neutral funds as a source of greatest liquidity when there was none to be had in equity portfolios.’”

Say whaaaaa?

5. U.S. Stocks Fall, Led by Materials Producers; Home Depot Drops

“‘The crisis is far from over, but I think, related to Countrywide, we’re in better shape today than we were yesterday.’” — Angelo Mozilo

I’m chuckling, Angie. What about tomorrow?

Negative from the get-go which is surprising given the Countrywide news (CFC popped and dropped badly on ~150,000 trades) … mild selling during the day but clearly a negative bias.

Notable New Lows: Children’s Place (PLCE), Flamel (FLML), and New York & Co. (NWY).

Notable New Highs: priceline.com (PCLN), Omnivision (OVTI), China Mobile (CHL), Blue Coat Sys. (BCSI), and Gamestop (GME).

I’ll feature a 15-minute all-sessions chart of Countrywide (CFC) to show how the market digested the BofA news — ugly.