Facts and Figures

  • In 1900, American farmers needed an average of three hours of labor to produce 1 kg of wheat. In 2000, they needed 1-2 seconds.
    • In 1900, about 40% of the American labor force was employed in agriculture. In 2000, the share had fallen to less than 2%. (Source: Vaclav Smil)
  • Equity in U.S. household real estate peaked at $13.3 trillion in 1Q06 and reached a new (recent) low of $5.5 trillion in 3Q11.
    • Household debt followed a similar path (129% of disposable income in 4Q07 to 113% by 3Q11).
    • And, thanks to the added tailwind of low rates, household financial obligations (i.e., debt service and other required outlays such as insurance and property taxes) have fallen as a percent of disposable income to a level not seen since 1993-94. (Source: a good paper on household debt and deleveraging from the Richmond Fed)

Attached

  • “Debt and deleveraging: Uneven progress on the path to growth” — an update to a report first published by the McKinsey Global Institute two years ago. Similar to the Rogoff/Reinhart book in laying out the data produced by economies in the midst of a major deleveraging.


Links


Books

  • Contrarian Investment Strategies: The Psychological Edge by David Dreman. This just came out and I haven’t read it yet, but I’ve read the old edition and thought it was pretty good. The new edition — along with Dreman’s view that stocks are at their cheapest levels since 1982 — discussed here in an interview with Steve Forbes.


Further Reading

  • “Are Pension Forecasts Way Too Sunny?” — a recent column from Jason Zweig points out a major problem looming for both corporate and state/local pension funds. The return assumptions have been completely unrealistic for the better part of a decade now, and with each passing day/month/year the problem just compounds.
  • “Stop the Presses, Dr. Doom is Turning Bullish” — this is a great example of the absurdity of this kind of forecasting. More nonsense here.
  • “Why Stocks Beat Bonds and Gold” — an excerpt from Warren Buffett’s upcoming letter to shareholders in which he again beats the equity drum and highlights the many risks of putting money in gold and bonds. He’s been preaching a version of this sermon for decade (see here for a classic example with a slightly different twist from 1977).
  • “GMO investor clued up on human beings” — a good profile of James Montier and his thoughts on behavioral finance.
  • “How Companies Learn Your Secrets” — an interesting look at consumer behavior and retail marketing, with stark examples from P&G (Febreze) and Target.