An informative article in the current Economist on the dangers and economic distortion created by the carry trade, a topic we’ve discussed. On a massive scale, investors, typically hedge funds, are borrowing in yen, a currency with very low borrowing costs, and investing in currencies where the interest rates are high, like the New Zealand […]
Read more...There’s an old saying in poker: if you are playing the game and you don’t know who the mark is, that means it’s you. Given that investment banks like to recruit successful poker and blackjack players as traders, one has to imagine that the ability to play a chump is a useful skill in both […]
Read more...An excellent post by Mark Thoma in his Economist’s View, which although it was prompted by a post about Ayn Rand, could just have easily been in response to the New York Times’ lead story today, “In Washington, Contractors Play Biggest Role Ever.” Thoma discusses what markets are good for (efficiency, not equity), and what […]
Read more...So says this post in AllAboutAlpha which cites a report by James Montier, a Kleinwort Benson economist, which in turn cites a good deal of impressive academic work from folks like Eugene Fama (a University of Chicago professor and one of the luminaries of modern finance). Now why is this important? Well, much of how […]
Read more...This informative commentary in today’s Financial Times, by Jerome Guillet, an investment banker specializing in the energy sector, makes the observation that the energy projects that get built are the ones that are cheapest to get financed, but in the end, are often not the cheapest to operate. Utilities, which can obtain government guaranteed financing, […]
Read more...The Housing Bubble Blog put the question more neutrally in its post headline, “When Did Lending Standards Start Charging So Much?,” but the responses all point in one direction: Readers suggested a topic on when loan standards changed. “Here’s my question for the gang – when did lending standards start changing so much? I was […]
Read more...We have pointed out various signs of complacency in financial markets regarding risk: declining credit spreads (January 16), a lack of concern about systemically high use of leverage (previous post plus January 18), and technical indications that suggest we are near a stock market peak (January 22). Yet there is an almost irrationally high level […]
Read more...Harvard is famous for attracting the best and the brightest, particularly in its own fund management operations (its endowment is currently over $22 billion). Mohamed El-Erian, the president and CEO of Harvard Management Company and a Harvard Business School faculty member, made these observations today in a Financial Times article, “Complex finance and the brave […]
Read more...What a difference a year makes. Global warming had been dismissed in the business press as the creation of tree-huggers, liberals, and other enemies of free enterprise. Suddenly, it’s a hot cause (no pun intended). Monday, the CEOs of nine blue chip companies, including General Electric, Alcoa, Lehman Brothers, and Duke Power, joined in the […]
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