Musings

Occasionally we find ourselves with a number of topics which are all important, but do not provide the basis for a full column.  These "musings" are still highly recommended for your consideration.

• James Hamilton at Econbrowser takes a look at the unusual movements in InTrade’s prediction market contract for a recession in 2008.  He correctly notes the thin trading, and the recent and temporary price decline.  This is exactly our viewpoint.  These markets may show quick moves when someone sweeps through all of the extant bids or offers, but then other players join.  It is price discovery, and the process is not unlike what we see in the housing market.  The political and economic markets have nothing like the liquidity in the sports markets on their sister site, TradeSports.com.  Prof. Hamilton wisely notes the difference between the NBER definition of a recession and that used to settle the InTrade contract.
• There is another good take on prediction markets by Eddy Elfenbein, who correctly notes that they set odds.  The actual outcome does not mean that the odds were incorrect.
• Scott Rothbort, one of our most valued sources, has established a new web site, TheFinanceProfessor.com.  Scott is a money manager, an adjunct professor at Seton Hall, and a valued colleague on RealMoney.  Most importantly, he shares with us the desire to educate investors, helping them to achieve their goals.  His new site has many educational features and is geared to draw content from readers.  Please check it out and visit regularly as we plan to do.  His blog has also been moved, so we have updated our featured listing.
• Thanks to Bill Rempel for reminding us about his earlier work on comparing home price methodologies.  Thanks also to David Merkel, Tim Plaehn, and VennData for their typically constructive comments in response to the question we raised.  We encourage readers to check out the useful and educational discussion on this topic, and follow the links, starting here.
• Turley Muller at Financial Alchemist has a nice series on Apple Computer, Inc. (AAPL), which we own in both institutional and individual accounts.  After hours traders sent the stock as low as 155 and as high as 170 while we were watching.  We shall see tomorrow.  We sold some very juiced May 170 calls against our positions, expecting to profit from the post-earnings reduction in volatility.
• Abnormal Returns has an excellent article on diversification and the benefit of considering additional asset classes.  We have done this in our TCA-ETF portfolio, but we are always looking for new candidates.  The article is a great source both for ideas and general approach.
• Dr. Brett Steenbarger has a free Webinar session on "Reading the Psychology of the Market."  It is after the market close on Thursday.  We know from our personal experience that any chance to learn from Brett is time well spent.

These are all good sources on important issues, of benefit to investors and traders alike.