Why is it that in finance, nothing succeeds like failure? Witness LTCM’s John Meriwether’s ability to raise a new hedge fund after the biggest financial blow-up in history, or Geoff Boisi and Vikram Pandit’s ability to sell not-hugely-successful funds to banks, then perform unspectacularly in management roles (although in fairness, Boisi had been a leader […]
Read more...Free Exchange, in Guts or PhD?, contends that that having a PhD in economics is crucial for modern central bankers: When Paul Volcker, Stan Fischer, Jacob Frenkel and Jean-Pierre Roth discussed what central bankers and academics learn from each other at a conference last month, the line that stayed with me was Mr Fischer’s comment […]
Read more...Reader Richard Kline is providing a mini-series that was prompted by an anonymous reader who had observed that a complex systems theory view might raise doubts about regulatory policy. Financial overseers believe that liquidity is always and ever good, but that view may be naive: Perhaps a lesson to be learned here is that liquidity […]
Read more...Below is a provocative line of thought from an anonymous reader. It supports a gut feeling that I have been unable to prove, namely, that lowering of boundaries between markets (ranging from the large number of global macro hedge funds to the large number of retail currency speculators in Japan) is destabilizing. I’ve found the […]
Read more...A short piece in the Financial Times suggests that imbalances in the credit default swaps market are likely to continue, and those problems redound to the cash bond markets, distorting the prices at which companies can raise funds. Admittedly, due to reduced anxiety in the funding markets, credit default swaps prices have generally improved. However, […]
Read more...Consider this example: In 1997, British Petroleum decided to lower its carbon emissions below the 1990 level by 2010. It achieved the goal in 3 years rather than 13 at a cost of $20 million. Oh, and it happened to save $650 million. With that sort of calculus, you’d think that every big corporation would […]
Read more...Two loosely related and thoughtful posts today point up some of the ways that the fundamental frameworks of how participants think about and relate to financial markets are breaking down. Note that this development is separate from the fact that financial institutions look pretty wobbly. Instead, these two writers, Roger Ehrenberg and Cassandra, highlight two […]
Read more...All About Alpha, which is a fine site for all things hedge fund related, has an excellent piece today by Dr. William Shadwick of Omega Analysis. Shadwick has the unusual distinction of being a serious mathematician (he established Fields Institute for Research in Mathematical Sciences) who writes well. He also entered the finance industry relatively […]
Read more...A comment in today’s Financial Times, “The fall of a financial model,” by Jean-Louis Beffa, chairman of Saint Gobain and Xavier Ragot of the Paris School of Economics argues that the approach to financial capitalism in operation for the last decade is coming to an end. They define the model as giving a primary to […]
Read more...Readers may have noticed that this site has gotten what one can most politely call visually busy. I’m not happy with the awkward adolescent ad-cluttered look. That in turn leads to a broader discussion of aesthetics, not just in terms of appearance but also positioning. The visual issue is pretty obvious: I’d like this to […]
Read more...Readers may have noticed that this site has gotten what one can most politely call visually busy. I’m not happy with the awkward adolescent ad-cluttered look. That in turn leads to a broader discussion of aesthetics, not just in terms of appearance but also positioning. The visual issue is pretty obvious: I’d like this to […]
Read more...Steve Cecchetti, Professor of Global Finance at Brandeis, has a nice post at Vox EU, “The Art of Crisis Management: Auctions and Swaps.” The title’s misleading; Cecchetti describes it as a FAQ on the central bank actions of last week to try to close the unusually high and troubling spread between interbank rates like Libor […]
Read more...Nassim Nicholas Taleb, seasoned trader and risk manager, and author of the provocative and well regarded book Black Swans, today in the Financial Times takes on the high priesthood of modern finance. He argues that modern portfolio theory and many of its offspring, such as the Black-Scholes option pricing model and the capital asset pricing […]
Read more...A wry and informative article, “Slicing and dicing risk rebounds on banks,” by John Dizard at the Financial Times tells us that newfangled investment vehicles considered to be a good thing because it moved risk assumption away from large banks (and therefore ultimately central banks) to the wealthy. But Dizard explains the rich were too […]
Read more...A story in today’s New York Times, “Buyers Pounce as Homes Go on the Block.” shows that true belief in housing as an investment is far from dead. And the belief that auction = bargain quickens the pulse. While some local markets will have shallow (if any) price declines and fast rebounds, and Minnesota, the […]
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