→ Rajiv Sethi In a recent paper on financial innovation and fragility, Gennaioli, Shleifer and Vishny argue that investors (and often also financial intermediaries) are hobbled by certain systematic cognitive biases that cause them to neglect unlikely events when assessing asset values. They argue that such “local thinking” results in the creation and excessive issuance […]
Read more...Andy Grove, who lead Intel to dominance of an extremely competitive, risky industry, has a very important opinion piece at Bloomberg (several readers pointed to it, including John M, dr, Crocodile Chuck). He makes a series of points that are the polar opposite of the de facto US industrial policy, of the naive view that […]
Read more...This is a wonderful short video by RSAnimate based on a talk by radical, as in Marxist, sociologist David Walker. For those who recoil, Marx was the first to take note of the propensity of capitalism towards instability. By contrast, neoclassical economics, which has dominated policymaking in advanced economies, posits that economies have a propensity […]
Read more...Well, the BP disaster, in particular the intense press coverage of this week, appears to have provided the Administration with some very useful air cover, by diverting public attention from the final rounds in the battle to reform Wall Street. One of the common arguments against the need to create mechanisms to moderate corporate and […]
Read more...This post appeared as an op-ed in Mint, India’s second largest business newspaper. The financial market upheaval that started in May is a stark reminder that the conditions that produced the global financial crisis of 2007-08 have not been resolved. The sucking sound of deflation emanating from Europe and the creaking of bank balance sheets […]
Read more...A $200 million market is so small as to be beneath most readers’ notice, except when its has the potential to escalate frictions between the US and China. The US has been selectively investigating markets where the Chinese are purported to be engaging in anti-competitive practices and taking action. The first salvo occurred last September, […]
Read more...I must confess that I am only now reading John Brook’s classic Once in Golconda, which is a history of Wall Street from the 1920 to 1938. It’s a heady mix of lush and leisurely narrative with keen attention to financial tradecraft. Of course, any tale that involves market manipulation, no matter how far in […]
Read more...A sudden bout of semi-candor from BP suggests the top brass of the miscreant oil company recognized that it is in such deep doo-doo that the normal corporate PR playbook is no longer operative. Companies and governments often refuse to admit error or blame it on circumstances out of their control as a way to […]
Read more...Just when you thought financial firm accounting couldn’t get more dubious…it gets worse. Deux Ex Macchiato (hat tip FT Alphaville) tells of the disconcerting changes to what was formerly called FAS Rule 157, which brought us Level 1, 2, and 3 accounting. A brief recap: Readers may recall that the Financial Standards Accounting Board implemented […]
Read more...Just because you are paranoid does not mean they are not out to get you. And just because skepticism of Eurozone salvage operations is warranted does not mean that all of the criticisms should be taken at face value. Andrew Dittmer pointed out a speech he correctly deemed to be “surprising” by Lorenzo Bini Smaghi, […]
Read more...A lot of people are still feeling very bruised by last Friday’s market actions (Felix Salmon went as far as ordering all retail investors to get out of the pool). A message from a reader with ample trading desk experience: BTW, hope you didn’t have any sell-stops yesterday, WTF was that?!?!? I covered my SPY […]
Read more...By Richard Smith, a London-based capital markets IT specialist Here’s someone with his head screwed on, back in April 2007, who proves singlehandedly that “hoocoodanode” was no defense for failing to anticipate the implosion of the shadow banking system (more on this prescient analyst in due course): For several years now, we have marvelled at […]
Read more...By Richard Alford, a former economist at the New York Fed. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side. The recent financial crisis has shown that the legal and regulatory steps that have been taken to provide information […]
Read more...By Richard Alford, a former economist at the New York Fed. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side. Economists have joined the debate about the merits of requiring the downsizing of too big to fail (“TBTF”) financial […]
Read more...By Tom Adams, an attorney and former monoline executive, and Yves Smith Despite extensive credit crisis post mortems, many of the widely accepted explanations of what happened are at odds with facts on the ground. These superficial explanations are hard to dislodge because they tally with widely held beliefs about how the real estate and […]
Read more...