Interesting Reading: Models; Valuation Metrics and more….

“To what extent can we believe the conclusions of a model that assumes away the fundamental features of reality as we understand it?”

Models:http://www.mises.org/daily/6018/Assuming-Away-Reality.

A good review of the principles of Austrian Economics and why it matters to rely on reality not models.

Excerpt: There are important advantages in being familiar with the Austrian theory. This theory helps one keep in mind fundamental principles such as the subjectivity of value and the incompleteness of information that form the basis for human action. This approach makes it easier to spot errors in one’s economic thinking. One of the common errors is treating economic models as normative standards for reality rather than loose metaphors and illustrations of the logical conclusions resulting from prior theoretical analysis. This error creates a temptation to “fix” the reality to fit the model. Often times the fix only makes things worse, because it was not the reality that needed fixing. It was, in fact, the economist’s model that did not capture the key features of reality.

Valuation Metrics:

Several excellent articles on what valuation metrics are useful. Good news for value investors–high EBITDA to Enterprise Value generates better returns than other metrics. Go here:www.greenbackd.com

Research papers on valuation metrics:TEV to EBITDA Research and enterprise-multiple-vs-tobins-q

A hedge fund discusses various investments (Berkshire, Iridium): http://www.tilsonfunds.com/T2pres-4-12.pdf. Note the bullish thesis for Iridium. I discussed MCX and Iridium here http://wp.me/p1PgpH-zt. When every satellite company has gone bankrupt or has been on government support, the burden of proof is on Mr. Tilson.

Valueprax

A reader provides a link to a good blog on learning how to invest: http://valueprax.wordpress.com/2012/04/12/notes-geoff-gannon-digest-1-a-compilation-of-ideas-on-investing-geoffgannon-ncav-netnet-valueinvesting/

Various links on investing:http://abnormalreturns.com/tuesday-links-radically-different-activities/

Should the U.S. be a Union? http://www.mises.org/daily/6029/Rethinking-the-American-Union

The establishment’s view (PBS) of what caused the financial crisis of 2008:http://www.pbs.org/wgbh/pages/frontline/money-power-wall-street/. Surprise! No mention of abnormally low interest rates or political intervention to force banks to make uneconomic loans in order to increase home ownership.

Inflation brewing: http://www.thedailybell.com/3846/The-Velocity-of-Money-Is-Coming-Along-With-Big-Price-Inflation

Does the U.S. Follow the Constitution? http://www.thefreemanonline.org/columns/tgif/lawless-government/

EXCERPT: Everyone pays lip service to the rule of law. Indeed I’ve never heard of anyone rejecting it as undesirable. (It has been called impossible under prevailing circumstances but that is a different point.) So why is the principle so flagrantly violated with almost no public outrage?

Take President Obama’s intervention in the Libyan civil war. Even if we grant that he could legally enter that conflict by his own unilateral decision – a big if, which we’ll explore below – the War Powers Resolution of 1973 requires him after 60 days to cease operations or ask Congress for authorization to continue. One week ago today the clock ran out on the Libyan intervention, yet Obama has neither ceased operations nor asked for authorization.

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