Happy Friday! There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are seven fascinating ones I read this week.
The Wall Street Journal writes about Canada's increasingly precarious economic state:
Canadians [are] some of the most leveraged consumers in the world, at a time when their counterparts in other heavily indebted countries -- such as the U.S. -- are digging out. Household debt is now 163.4% of disposable income in Canada, close to the U.S. level at the height of the subprime crisis.
The next boom
Bloomberg discusses a new way for the U.S. to exploit its resurgence in energy production: exports.
By greenlighting exports of liquefied natural gas, Obama can hasten production of an abundant U.S. resource and open a new avenue of international trade. The president can also give growth a much needed jolt: Liquid natural gas exports could add billions to the U.S. economy, create tens of thousands of long-term jobs and help narrow the trade gap. Demand for liquefied natural gas is high in Europe and Asia, where the fuel costs $10 to $16 per million British thermal units -- far more than the $3.70 it fetches in the U.S.
Jason Zweig of The Wall Street Journal writes about the new trend of tactical funds that attempt to jump in and out of the market at opportune times. Turns out, they're terrible at it:
In fact, you'd have a hard time finding a more hapless bunch of wrong-way Corrigans than professional fund managers. Data from the Investment Company Institute show that funds have an uncanny tendency to cut their exposure to stocks just as the stock market is about to take off -- and then to pile back into stocks right before the market crashes.
In both 1989 and 1990, for example, stock-fund managers held at least 10% of assets in cash and thus got caught flat-footed as stocks returned 30.5% in 1991 and went on a tear for the rest of the 1990s. Then, in 1999, the managers finally cut their cash to just 4% -- meaning that 96% of their investors' assets were swept up in the market crash of 2000 to 2002.
The simple answer for almost everything
Derek Thompson of The Atlantic has a smart take on demographics:
What's behind health care prices? First, look at demographics: An aging world is driving medical inflation around the globe, in health care systems of all varieties. Why have the last three recoveries been so slow? First, look at demographics: Since women maxed out their own labor-force participation rate, our overall worker-participation ratio has gone flat and started to fall, which hurt our ability to recover quickly from downturns.
Hostess with the mostess
James Surowiecki of The New Yorker gives an alternative view to Twinkie parent Hostess' demise:
Management, of course, blames the company's demise on the greedy, unreasonable unions. But, while the strike may well have sent Hostess over the edge, the hard truth is that it probably should have gone out of business a long time ago. The company has been steadily losing money, and market share, for years. And its core problem has not been excessively high compensation costs or pension contributions. Its core problem has been that the market for its products changed, but it did not. Twinkies and Ding Dongs obviously aren't anyone's idea of the perfect twenty-first-century snack food. More important, the theoretical flagship of Hostess's product line, Wonder Bread, has gone from being a key part of the archetypical American diet to a tired also-ran.
About that skills gap
A few weeks ago, a reader of an article penned by Microsoft (NASDAQ:MSFT) general counsel Brad Smith discussed how the alleged "skill shortage" in America's labor force was mostly due to inadequate wages. Adam Davidson of The New York Times has a similar take:
Eric Isbister, the C.E.O. of GenMet, a metal-fabricating manufacturer outside Milwaukee, told me that he would hire as many skilled workers as show up at his door. ... At GenMet, the starting pay is $10 an hour. Those with an associate degree can make $15, which can rise to $18 an hour after several years of good performance. From what I understand, a new shift manager at a nearby McDonald's (NYSE:MCD) can earn around $14 an hour.
Paid for performance, huh?
Asset International has the numbers of hedge fund performance and pay. They're ugly:
In aggregate, hedge funds have returned nearly 11% less than the S&P 500 in the year to September 26, according to a Bank of America Merrill Lynch report. The roughly 8,300 active hedge funds have returned an average of 3.04% for the same period, according to the report, lagging far behind major public equities indexes. The S&P 500, for instance, has gained 13.97% in the same period. This is the third worst-performing year since a pre-merger Bank of America began tracking hedge fund performances in 1994.
Nevertheless, pay packets for hedge fund employees and owners at all levels have only grown year-on-year. Those at "mid-performing, mid-sized firms" earned an average $1.3 million in compensation, according to the report, while top performers at larger firms got more than double that amount.
Enjoy your weekend.