“The crisis takes a much longer time coming than you think and then it happens much faster than you would have thought.” – Rudiger Dornbusch.

Greece is at the moment of truth.

• There is no longer a functioning government.
• The ability to continue austerity is in doubt, and with it the ability to meet the conditions which the EU has set in exchange for funding the balance of payments.
• Numerous commentators have openly questioned whether Greece can stay in the euro.

Once there is substantial doubt about remaining in the euro, it’s game over very quickly. Every spare euro gets moved from Greek banks to German banks, as depositors fear waking up to find their money forcibly converted to drachma at an unfavorable rate. The Greek banks then have to rely on the Greek central bank for emergency funding. The Greek central bank can only provide it to them by getting credit from the ECB system. (Although I’ve wondered what controls are in place to prevent the Greeks from printing up a few extra notes at their national printer.)

The ECB will never get the money back in the event of a Greek default and euro exit. So the question becomes, are the ECB and EU willing to fully backstop the Greek banks and make them a ward of the state?

Either the ECB is effectively willing to write a blank check loan to the Greek financial system, or the Greek banks fail, the financial system collapses, and Greece defaults and departs the euro.

Then the question is whether similar bank runs begin in the rest of the PIIGS.

The only surprise is that it’s taken this long.

The guy to read is Krugman, whatever you think of him. He gets it and doesn’t pull punches too much. Unlike the bankers and politicians, he doesn’t have skin in the game, and unlike the journalists, he doesn’t have to lend false credence to an absurd government party line in exchange for access.

It appears to me that the ECB’s choice is to either write the blank check, or trigger Greece’s default and euro exit, and then backstop Italy, Spain, Portugal etc. with a blank check.

On the one hand, having a bad situation in Greece would be a strong incentive for the remaining countries to do whatever Germany and the ECB require to remain in the euro.

On the other hand, the geopolitical consequences are hard to predict, such as an extremist government in Greece, Russian and other interests getting a foothold.

If I had to guess, the ECB will write the blank check to Greece. If two trucks are playing a game of chicken, driving at each other on a one-lane highway to see who swerves first, the one who acts craziest and throws the steering wheel out the window usually wins.

But worth remembering that with 29 sufficiently large dominos, you could topple the Empire State Building.

Nick Bilton points to the lack of revenue at startups as signs of a bubble.

Now, I’m not going to say that things don’t look a little bubbleicious right now, with $1b valuations and acquisitions of tiny startups with no revenue.

But to some degree Bilton is channeling Eduardo Saverin, who famously pushed for early revenue at Facebook, clashed with Zuckerberg, and got squeezed out with a mere $2 billion or so for his trouble.

Another example is YouTube. By all accounts, it’s doing pretty well for Google now, with more intrusive pre-roll video ads and popups during videos. Google also gets strategic benefits, good placement on iPhones, a better seat at the table for its so far not very successful TV products.

If YouTube had started off with those annoying ads, would it have seen off the competition? (Not to mention pushing for traffic through less than totally legit non-user-generated content and relatively modest anti-piracy measures)

A lot of digital startups are in winner-take-all markets. The conventional wisdom is, push for revenue if it helps you deliver a better product, through revenue relationships that also bring content, users, and lock out competitors.

If the market doesn’t value revenue, but values users and the aura of hypergrowth and the next big thing, and it can be fatal to allow space for imitators and competitors, entrepreneurs are being strategic and rational to push for growth at all costs.

It’s a perfectly valid strategy to build an innovative product that may be a proverbially two-legged horse that doesn’t stand on its own, seize a dominant position, and sell to one of the massively cash-generating platform companies, Google, Apple, Facebook, Amazon, Microsoft, that need to maintain their position.

If you’re lucky, that’s how Facebook and Amazon became platform companies. Where would Facebook be today if Zuck had pushed for revenue and organic growth, instead of charging for growth and dominance at all costs?

And that hothouse atmosphere is why the US startup ecosystem is dynamic, and beats competitors around the world flat.

At Linkfest.com, we love linkfests so much we named our website after them. When a knowledgeable professional is dedicated enough to get up at an ungodly hour to make an up-to-the-minute reading list for us, that just shows true love for the craft of investing, the game, and the readers. It just makes us warm and fuzzy. We salute Web linkfest all-stars like:

The Reformed Broker
Abnormal Returns
Naked Capitalism
The Big Picture
Crossing Wall Street
Economist’s View
Dealbreaker
Credit Writedowns

Putting together a great linkfest is tougher than it looks. This post is an attempt to put together a meta-linkfest of best practices for linkfest creators. If it saves the brave early-morning soldiers a few extra minutes with loved ones, or Mr. Sandman, it will worthwhile.

Step 1 – First, it’s all about the content – see our recent post on fine-tuning your info-diet. The point I would single out for busy linkfesters is a Web extension like Linkclump or Multi Links that will let you go to a headline page and open a bunch of tabs with one click.

Step 2 – The most annoying part of assembling a linkfest is the cut-and-paste grind. So let’s try to simplify it with Diigo or Instapaper and RSS. Get the Diigo or Instapaper bookmarklet on your toolbar. When you find something to reblog, use the bookmarklet to save it.

I’m more partial to Diigo. They offer multiple ways to integrate with your browser. For linkfesters, I suggest the Simple Bookmarklet, or Firefox toolbar, with one-click bookmarking. The features of Diigo, and the RSS feed, are more extensive than Instapaper’s. In particular Instapaper’s RSS feed only sends the last 10 items, which is limiting.

Step 3 – Like me, you may be in the habit of using Google Reader and starring items. One of the beauties of Google Reader is that you can star items from your iPhone or iPad with Byline, Flipboard etc. Then you can review your starred items when creating a linkfest. But then you might have to review bookmarks in multiple places. ifttt is a Web workflow automation service, short for ‘if this, then that.’ It has numerous recipes to automate your linkfest.

Google Reader to Diigo recipe will automatically take everything you star, and add it to Diigo, with a lag of 15 minutes or so. Likewise Google Reader to Instapaper will send everything you star over to Instapaper. (See important security note¹)

Step 4 – The awesome power of Diigo and Instapaper is that they let you download your bookmarks as RSS XML, taking the pain out of cutting and pasting and formatting. For an example, go to http://www.linkfest.com/linkfester . You can see it take my Diigo feed and format it as HTML or markdown. You can put in your own feed by substituting your Diigo username. Or go to your Instapaper feed and look for the link to your RSS feed at the bottom to get the Instapaper link.

There are probably other ways to do it without the Linkfester tool, by subscribing to your Diigo/Instapaper feed in a feedreader and copying the HTML, or editor macros of various kinds operating on the RSS XML. But I couldn’t figure how to do it easily with Google Reader, there’s too much cruft, so I thought it was easier to make a tool.

Step 5 – You can copy the Linkfester-generated HTML to your blog editor screen. But what I find even more awesome is Mou, the HTML/markdown editor for OS X Lion. The beauty of Mou is you get a two-pane view with HTML on one side, and the Web view on the other, with all formatting and working links. It also supports Markdown, which is a simplified HTML that is even easier to edit.

When you’re happy with the results, option-command-C copies the HTML to your clipboard and you can paste it to your blog.

That’s it! Good use of a bookmarking tool and publishing tools can save valuable time. If you have good linkfest practices, we’d love to hear them in the comments, and find ways to make it even easier.

(¹Important security note: Ifttt needs your passwords to do this. Please use basic password security. Don’t re-use passwords, turn on Google 2-factor authentication, and give ifttt an application-specific password. This way, if the passwords get compromised, the worst that can happen is some goofball can post to your bookmarks / starred items, not read your email and reset your banking passwords. You can do complicated workflows with ifttt, like automatically posting bookmarks to Twitter or your blog, but think carefully about the implications if they go awry, and use caution.)

Image via Wikipedia

Irving Fisher is mostly remembered, a bit unfortunately, for writing that stock prices were at a permanently high plateau…right before the Great Crash of 1929. He also invented the Rolodex, pioneered early economic statistics-gathering, wrote of the Fisher money equation PY=MV and the Fisher debt-deflation cycle. (See Sylvia Nasar’s Grand Pursuit – interesting but wouldn’t consider it must-read.)

For a while, he paid his employees in real wages. When his statistics showed the cost of living went up, their wages went up automatically. This made them very happy and think he was a great guy to work for. But then the price index went down and wages dropped. They weren’t happy about that at all and thought they were worse off.

People clearly aren’t able to make a month-to-month calculation in their head about where their wages stand relative to the economy’s overall price level. If you deem this a blinding glimpse of the obvious, you may not be fit to be an economist. Lots of economic models assume that people do all their thinking in real terms.

It’s all the more astounding that economists think ordinary people can do this, when economists themselves can’t even agree on what price measures to use for different purposes… should the Fed target CPI, the GDP fixed-weight deflator, the PCE chain-weight deflator? And the assumptions that have to go into those about imputed rent, hedonic adjustment, are pretty complicated and at least partly subjective (although they are necessary and smart people do the best they can).  

If you’re an economist, you talk about people’s anchored expectations about prices as ‘money illusion,’ as if the actual greenbacks you’re forking over are the illusion, and the ‘real’ numbers analysts conjure up are substantial.
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The History of every major Galactic Civilization tends to pass through three distinct and recognizable phases, those of Survival, Inquiry and Sophistication, otherwise known as the How, Why, and Where phases. For instance, the first phase is characterized by the question ‘How can we eat?’ the second by the question ‘Why do we eat?’ and the third by the question ‘Where shall we have lunch?” – Douglas Adams

A complete and well balanced information diet is a must for market survival. I talk to investors and Wall Street pros who are vaguely aware that social networking is changing the information ecosystem and the investment food chain, but aren’t sure where to start. They go to Twitter and open an account and ask, “What’s the big deal? Now what?”

The beauty is, you can build an incredible real-time customized information filter from social network tools and their Web 2.0 predecessors like blogs, but it takes a little bit of work.

So this post is meant as a primer for those who might still be on a mostly paleolithic diet of mainstream market news services. If you’re already plugged into a great information firehose, you might pick up a best practice or two, and I’d love to hear yours in comments.
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Finally got around to reading the Steve Jobs bio by Walter Isaacson. It’s must read for anyone involved in the tech business. Some slightly less charitable takes: John Gruber is all I Am Disappoint there aren’t more insights into the products and strategy. Self-described underemployed writer Maureen Tkacik notes that Jobs was a Machiavellian liar, exploiter, and control freak.

There’s truth to both of those, but the book is a rollicking good read and creditable first draft of history, with some good details about the creation of the iPad, iPhone, iPod. So if that’s the sort of thing you’re into, you’ll be into this.

Jobs could have picked a lot of other people, but he picked Isaacson, a non-tech, non-business writer. Maybe he wanted someone to just tell the story, not the strategy or product vision.

Isaacson not only doesn’t know the technology or the tech business, but I didn’t even get a sense he likes them, or liked Steve Jobs. He was so afraid of getting snookered that if Steve Jobs had said the sky was blue, Isaacson wouldn’t have quoted it without the confirmations and qualifications of colleagues and competitors. It’s the mark of a true professional to write a good book when he’s not really interested in the topic.

Maybe Jobs picked the wrong guy. Maybe Jobs ended up running out of time to give a real memoir and insights into all dimensions of his legacy.

Or maybe Jobs was a control freak and just didn’t want to give them. He wanted to get everyone to read a somewhat shallow but presumptively authoritative treatment, sucking all the air out of the market for books about him.
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Warren Buffett contributed a Fortune article with his customary paean to the virtues of stocks over the long term. There is some worthy discussion from John Hempton and the pseudonymous Kid Dynamite.
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Since everyone else is playing the Facebook valuation parlor game, here is a stab at it.
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Last week, we looked at gold as part of a long-term asset allocation.

I was curious about how stable those relationships would be over time, so I ran the same plots, starting from different inflection points.
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If you want to frustrate someone for a day, give them a program. If you want to frustrate them for a lifetime, teach them how to program.

A brief overview of how to use R to generate the analysis and plots in the most recent post, Gold as Part of a Long-Run Asset Allocation, using R, and code shared at Systematic Investor.
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