Category Archives: Risk and risk management

Perry Mehrling: Volcker Alliance Describes How Regulatory Silos, and Also Intellectual Silos, Hold Back Financial Reform

A report by the Volcker Alliance on financial reform is readable and meaty, and curiously dropped from media sight.

SEC Vindicates Deutsche Bank Derivatives Whistleblowers Eric Ben-Artzi and Matthew Simpson

Three SEC whistleblowers have been proven right in charging Deutsche Bank with misreporting its biggest derivatives risk,. the bank, predictably, looks to have gotten off easy.

Belvedere Management and its $16Bn: Now Looking More Like a Huge Collapsing Scam

As the regulatory actions accumulate, Belvedere Management looks less and less like a maligned fund manager, and more and more like a giant fraud. How much of the $16Bn it purported to manage is left?

Nobel Prize Winner Robert Merton Slams Fed for “Negative Wealth Effect” Policies

Nobel Prize winner Robert Merton and Arlin Muralidhar have charged ZIRP and QE happy central banks with economic malpractice.

Dubious FX Broker CWM FX Claims Sports Celebrity Scalps, but Princess Anne Remains Unmolested

The CWM FX fraud bust, a murder, Princess Anne and some groping. It’s BAU in the world of sports sponsorship.

Epic Fail for the Postal Service: The Wrong Model and the Wrong Board

How the managers of the Postal Service, in conjunction with politicians, have worked to undermine the effectiveness of a public infrastructure that is capable of producing broad economic and social benefits.

The Money Laundering Web: HSBC, Margaret Hodge, Sir Alan Duncan, Vitol…and Mossack Fonseca

Fallout from the HSBC session of the Public Accounts in which Mossack Fonseca’s name cropped up and Margaret Hodge administered a few tongue-lashings

How the Scammers Behind Virgin Gold Mining Corporation Bit Off More Than They Could Chew (I)

First in a series of posts exploring Virgin Gold, an immense ($2Bn?) pyramid scheme with a messy aftermath

Wolf Richter: Junk-Bond Bubble Implodes Beyond Energy, Deals Scuttled, Yields Soar, Suddenly “Insufficient Demand”

The year 2015 has just started, and already there have been two junk-bond casualties: the first on Thursday, and the second one yesterday. They weren’t energy companies. Energy companies don’t even try anymore.

Swiss National Bank Shock: Biggest US Retail Currency Broker’s Equity Wiped Out; Others Suffer Major Losses

Even though traders say they like volatility, their attitude is straight out of Goldilocks: : not only is too little too bad, but so is too much. The recent oil price plunge has sent rattles across financial markets around the world, with more knock-on effects expect as shale gas players start to show signs of stress.

And today’s big event was so unforeseen as to verge on being in black swan terrain. The Swiss National Bank, which had a program in place to keep the euro from falling below 1.20 to the Swiss franc.

The Swiss National Bank abruptly terminated the cap today. The currency move was brutal.

Yanis Varoufakis: How the United States Rolls (Post-Global Minotaur) – by Slavov Žižek

By Yanis Varoufakis, a professor of economics at the University of Athens. Originally published at his website. In this article, aptly subtitled It’s lonely being the global policeman, Slavoj evokes a parallelism between the age of extremes that began as the British Empire was losing its grip with the present moment in history. Now that the […]

Treasury Liquidity Freakout: Searching for a Market-Maker

As someone old enough to have done finance in the ~~Paleolithic~~ pre-personal computer era (yes, I did financial analysis using a calculator and green accountant’s ledger paper as a newbie associate at Goldman), investor expectations that market liquidity should ever and always be there seem bizarre, as well as ahistorical. Yet over the past month or two, there has been an unseemly amount of hand-wringing about liquidity in the bond market, both corporate bonds, and today, in a Financial Times story we’ll use as a point of departure, Treasuries.

These concerns appear to be prompted by worries about what happens if (as in when) bond investors get freaked out by the Fed finally signaling it is really, no really, now serious about tightening and many rush for the exits at once. The taper tantrum of summer 2013 was a not-pretty early warning and the central bank quickly lost nerve. The worry is that there might be other complicating events, like geopolitical concerns, that will impede the Fed’s efforts at soothing rattled nerves, or worse, that the bond market will gap down before the Fed can intercede (as if investors have a right to orderly price moves!).

Let’s provide some context to make sense of these pleas for ever-on liquidity.

Too Big to Be Saved: Systemic Risk Alive and Well in Europe

With the recent Global Crisis, the interest in systemic risk and the interconnection between financial institutions has increased. This column investigates the case of European financial firms, where several factors can jeopardise a firm’s financial health. Using data since 2000 to evaluate the firms’ systemic risk, the authors find that for certain countries, the cost to rescue the riskiest domestic banks is too high. They might be considered too big to be saved.

Who Wins in the Financial Casino?

I received a message last week from a savvy reader, a former McKinsey partner who has also done among other things significant pro-bono work with housing not-for-profits (as in he has more interest and experience in social justice issues than most people with his background). His query:

We both know that financialization has, among so many other things, turned large swaths of the capital markets into a casino

Here’s my thought/question: is there a house?

The common wisdom is that the ‘house wins’ in casinos.

So, who or what was really the ‘house’?