Happy Monday, View fans. Here's a look at what I've been reading this morning.
Borrowing money to chase stocks can lead to nasty stuff.
This is an indicator that always seems to accompany irrational exuberance in the stock market. As the Financial Times explains: "U.S. stocks are being propelled to fresh highs by investors borrowing a record amount of money in a high stakes gamble that is raising concerns over the potential for a sharp correction in the five-year bull run." And here's why it's a potentially worrisome sign: "In past market peaks, excessive levels of margin debt exacerbated the subsequent slide in stocks, as investors were forced to quickly sell their holdings as prices fell, sparking a nasty downward spiral."
Carol Loomis writes about her friend Warren Buffett.
The longtime Fortune writer who (as the disclosure at the bottom of her article says) "is a longtime friend of Warren Buffett's, the pro bono editor of his annual letter to shareholders, and a Berkshire Hathaway shareholder," notes that the five-year stretch from the end of 2008 to the end of 2013 marked the first such period in which the S&P 500 beat Berkshire Hathaway's gain in book value per share. "Obviously there's nothing magic about a precise five years, and in his new letter Buffett in fact appends a year to the calculation," she writes. "He points out that over the entire stock market cycle -- between year-ends 2007 and 2013 -- Berkshire outperformed the S&P." So who's complaining, right? It's only a little benchmark shift.
Following up on a December article by Dune Lawrence of Bloomberg News, Francine McKenna of the blog "re: The Auditors" has a good post about the fraud at a defunct Chinese company called AgFeed, and how its auditors proved to be completely useless.
Fannie Mae's cartoonish profits
John Carney, who recently joined the Wall Street Journal's Heard on the Street staff from CNBC, explains why Fannie Mae's record earnings aren't easily replicated and in some ways are illusory.
Fed is getting just a little bit better on transparency.
This month when the Federal Reserve releases its annual stress-test findings, it will describe for the first time how rising interest rates could affect the financial condition of the biggest U.S. banks. Bloomberg had sent the Fed a Freedom of Information Act request last year seeking results for the rising-interest-rate scenario from the 2013 stress tests, but the Fed denied that request. So good going there, Fed. If you're going to have stress tests, you might as well make them useful for outsiders to read.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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