links for 2011-08-14

Over the past ten years investors have been battered by the dotcom bubble(off over 50%), 9/11 (off over 25%), the credit crisis bubble(off 50%), the crash of commodities(down 25%) and now the government debt downgrade together with a dire European sovereign debt crisis(down 20-25%). Nor have we ever gotten back to the all-time peak of the Dow Jones industrial average of 1410, set in October, 2007. It’s no surprise that investors are fleeing equity mutual funds and shoved $50 billion of their savings in money market funds yielding zero laast week. Zero is once again again preferable to losing money.

Funds that buy global equities suffered $3.5 billion in net withdrawals in the week ended Aug. 10, the most since the second week of October 2008, according to Cameron Brandt, director of research at Cambridge, Massachusetts-based EPFR Global. Investors removed $11.7 billion from funds that invest in U.S. equities, the most since May 2010 when investors pulled money following a one-day market crash that briefly erased $862 billion.

"Japanese production is moving to China faster than I've ever seen in the past," said Neo Material Chief Executive Constantine Karayannopoulos. "We may be witnessing a fundamental restructuring of the global rare earth supply chain."

When we’re operating in situations we’re not entirely sure about we follow a simple rule of thumb: we copy what other people are doing. So if we’re attending a fancy dinner with a place setting of sporks and splayds we’ll probably do whatever the people next to us are doing, in an attempt to look as though we understand the proper etiquette.
Which works beautifully as long as someone knows what to do, but can be disastrous if no one has a clue. Which is all the explanation we need to understand why, currently, investors are trying to eat soup with a fish knife.

Underneath the surface chatter about police brutality and parental responsibility is a deeper fear, and a not unfounded one: that a social contract's been torn up. If you accept the possibility that there are many kinds of violence — not merely physical, but emotional, economic, financial, and social, to name just a few, then perhaps the social contract being offered by today's polities goes something like this: "Some kinds of violence are more punishable than others. Blow up the financial system? Here's a state-subsidized bonus. Steal a video game? You're toast." (To be painfully clear, I don't think any form of violence is justifiable, excusable, or acceptable.)