A very good post by Roger Ehrenberg at Seeking Alpha, “OTC Derivatives: Risks and Rewards,” which explains that the over the counter derivatives business poses a risk, perhaps a significant risk, to the Wall Street community. For the benefit of readers, over the counter derivatives are those that are not traded on an exchange. Recognize […]
Read more...Today I read the hot-off-the-presses Alpha Magazine ranking of the 100 largest hedge funds. Since hedge funds are a secretive lot, it’s admittedly difficult to come up with good information on them. However, I am hardly a hedge fund industry expert, yet I know of two hedge funds that are well above the size of […]
Read more...As I have mentioned before, this blog relies a bit more than I’d like on the Financial Times because its writers have a greater understanding of the inner workings of the financial markets and take a jaundiced view of recent developments. One has to wonder if the two traits are linked: if you have a […]
Read more...Unlike its US counterparts, the Financial Times has consistently been on top of the various unsavory elements of the credit market bubble: the near disappearance of risk premia, the growth of leverage on leverage, the lack of investor sophistication. A piece by John Plender does a very good job of connecting some of the dots […]
Read more...Although it’s the Dow’s new highs that get the headlines, the really speculative action is taking place in the debt markets. As we have discussed in past posts, lenders and bondholders have abandoned their customary caution and are accepting yields that many feel are inadequate for the risks involved, and are also waiving customary covenants, […]
Read more...The Financial Times appears to have scooped the Wall Street Journal, Bloomberg, and the New York Times on a Bank of International Settlements report due out today, which says that investment banks are too cozy with hedge funds and that isn’t very good for the financial system. The BIS report calls for greater disclosure of […]
Read more...The question of systemic risk, that is, the possibility of a generalized failure of the financial system, such as a stock market crash, is something that regulators think about a great deal and quite deliberately discuss a good bit less, since fear becomes a driving element in any market panic. The reason for the heightened […]
Read more...John Whitehead, former co-chairman of Goldman, who with John Weinberg, presided over the firm when it went from being a commercial paper dealer and institutional equity broker to a top investment bank, decried Wall Street compensation levels in a Bloomberg interview: “I’m appalled at the salaries,” the retired co-chairman of the securities industry’s most profitable […]
Read more...Oddly, this story, which runs in today’s Financial Times, does not seem to have been reported in the Wall Street Journal or the New York Times (and perhaps not on Bloomberg either, but I am less certain since its search tools for the great unwashed aren’t foolproof). The findings, at least for the Fed, are […]
Read more...In today’s op-ed piece, “Gilded Once More,” Paul Krugman picks a few factoids to show how our Gilded Age compares to the 19th century original. He finds that even though ours has a kinder face (due no doubt to the proliferation of TVs, fast food, and other creature comforts that make modern poverty look more […]
Read more...Ha. We were suspicious in back in 2005 when Edhec-Risk, an asset management research company, issued a report, “Hedge fund industry: is there a capacity effect?” which examined whether various hedge fund strategies were becoming too crowded for the managers for the managers to earn excess returns. And excess return (meaning earning more than the […]
Read more...As we’ve pointed out, if one is the worrying sort, hedge funds give plenty of reason to concentrate the mind. It’s not just that they are highly leveraged, unregulated, big, and getting bigger. The Fed has also admitted it doesn’t know what they are up to, which means their reassurances aren’t fact based (how can […]
Read more...Anyone who doubts that the top 1% is getting wealthier needs to consider the factoids from this CNN Money story, “Richest hedge fund managers get richer.” John Arnold earned $1.5 to $2 billion for having bet correctly on oil prices. Four other hedge fund managers were estimated to have earned over $1 billion. The average […]
Read more...The Financial Times today reports on an open letter from Charles Dallara, the head of the lobbying group representing the world’s largest financial institutions, to Gordon Brown, the UK chancellor and chairman of the IMF’s governing council, on the risks to growth. What is fascinating, and worrisome, is that the letter doesn’t talk about the […]
Read more...A good post by Thomas Palley on the not-sufficiently-discussed role of Japan in global economic imbalances (code for “nations with high savings funding our consumption”), which we found courtesy Economist’s View. One quibble: he talks about the carry trade as if it was strictly an international phenomenon, that is, foreigners borrowing in yen and then […]
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