Thursday, December 29, 2011

Ron Paul's portfolio adventure

Normally there is little reason to follow Ron Paul except to see how his particular brand of wackiness fits among the Republican candidates. Last week the Wall Street Journal published a piece on Paul's investment portfolio.  To say the portfolio is an outlier is an understatement. An investment adviser is quoted as characterizing the portfolio this way:   ”This portfolio is a half-step away from a cellar-full of canned goods and nine-millimeter rounds” If Mr. Paul submitted this portfolio to my Investment Finance class he would have "a lot of  'splaining to do"
Ron Paul's portfolio

Wednesday, December 28, 2011

More interesting info about Groupon

Here is another skeptical post about the recent high profile IPO of Groupon. According to DealBook, it seems even the normally unaggressive SEC had to demonstrate a firm hand to this otherwise flighty company.
I still maintain that Groupon will be an interesting company to watch, for all the wrong reasons.

DealBook on Groupon

Sunday, December 25, 2011

What ails the U.S. economy?

Nobel laureate Joseph Stiglitz writes succinctly about factors that brought on the economic  problems in the U.S. and some sobering prescriptions for the way forward. The careful reader will see similarities with another Nobel winner, Paul Krugman.
To Cure the Economy

Monday, December 19, 2011

Rational beings systematically maximizing their utility

Yes, that has been the fundamental economic assumption for the past 50 years or so. But over 300 years of bubbles, manias and irrational exuberance argues against the basic assumption. Prof. Robert Schiller of Yale, who famously warned against the U.S. real estate bubble well before it burst,writes about the new field of neuroeconomics. Worth reading.
The neuroeconomic revolution

Tuesday, December 13, 2011

Who do you trust?

Results from a recent Gallup poll:



Now who are those 7%?

Financial obesity: Survival of the fattest

Recently Richard Fisher, President of the Federal Reserve Bank of Dallas, gave a speech at Columbia University about the sorry state of many U.S. banks, particularly the biggest ones. The ones that have been considered to-big-to-fail. Fisher makes many interesting points. However he seems to rely on the implementation of follow-on regulation from Dodd-Frank to occur. That seems optimistic.
This is a good read.
Richard Fisher speech

Monday, December 12, 2011

Now it's Newt's turn

Candidate attrition brings Newt Gringrich as the new front runner for the Republican nomination. Even cursory looks at the field has revealed the other candidates' lack of bona fides. Newt may be a bit different. Such a target-rich person may bring some interesting fireworks before self destructing rather than the former fast fades. Should be interesting to watch.
 G.O.P debate Dec 9

Thursday, December 8, 2011

A very interesting discussion about the economy among some heavy hitters

The other day four columnists/op-ed writers for the NY Times sat down for a discussion of the state of the U.S. economy, how we got here and where we may be headed. Moderated by Thomas Friedman the discussants are Carmen Reinhart, Paul Krugman and Joe Nocera. The A team. The video is long (1 1/2 hours) but worth your time to watch.
NY Times forum

Tuesday, December 6, 2011

Colbert's adieu to Cain

If you haven't seen it, Stephen Colbert gave the final farewell to candidate Cain.
Colbert Nation
Remember though, Cain suspended his campaign he did not end it. He will still be able to raise campaign contributions. Hmmm.

Monday, December 5, 2011

When Newt met Trump

If it wasn't a true story it would be farce. But then again politics makes strange bedfellows.
No two are stranger than Newt Gingrich and Donald Trump. These two legends in their own minds met today at the Trump Tower in New York. (Unconfirmed rumor has it that furniture was moved out to make room for the two oversized egos.

The meeting

Sunday, December 4, 2011

The Feds "secret" loans

This story is a few days old but it warrants notice. While most of our attention was focused on TARP back in the critical days of fourth quarter 2008, that wasn't where the really big money was transacted. While TARP was the controversial $700 billion rescue package put forward by the U.S. Treasury Dept. the Federal Reserve was providing copious amounts of liquidity into the market.


Thanks to a hard fought Freedom of Information Act victory Bloomberg reported this past week that the Fed provided as much as $1.2 trillion of loans to financial institutions. Secret Fed Loans The rate on these loans was effectively zero allowing the banks to generate income of approximately $13 billion according to Bloomberg.

There is a higher order question though. The market knew that the Fed was providing significant funding to the market during the crisis but it was only through a FIA lawsuit that the info was made available. Hence a dilemma: was the Fed appropriate to keep its efforts secrets? By going public with its aggressive funding the Fed may have undermined confidence in the nations biggest financial institutions.  Is withholding the truth ever justified? Were the big banks anything more than  obfuscating when they reported Q4 2008 and Q1 2009 results?

I see a future Senior Seminar "Taking Sides" debate here!

Friday, December 2, 2011

Junkie assumption

OK, maybe I'm being too pedantic here. But a piece called "Junkie Math" written by the normally reliable FactCheck.org jumped out at me.
Junkie Math
The first sentence gives us the false assumption that everyone agrees that the U.S. deficit is too high.
Simply untrue.
For example, 2008 economics Nobel Laureate Paul Krugman would disagree saying more government stimulus is needed. Deficits come down when the economy is growing. Get the economy growing and then manage down the deficit.

FactCheck seems to need to check its facts. Beware the false assumption.

Tuesday, November 29, 2011

Interesting story

After a few days away because of illness, I'm back with this interesting story from the NY Times. Interesting because at its core the story is about a simple contract dispute between two prominent financial players. Perhaps more interesting is the wider issue which goes well beyond finance into a test of test of will between the willful. Hmmm. OWS may actually have something.
A test of wills

Wednesday, November 23, 2011

Groupon

My earlier posts were very skeptical of Groupon.. Yes, Groupon's IPO did get off. But investors may now be taking a more sober look at the company and its business model.
Wouldn't touch this one with a barge pole.
Investors flee Groupon from DealBook

Tuesday, November 22, 2011

The supercommittee

Anyone else see the irony in the self designated "supercommittee"? (See next post.)

Again Captain Renault  comes to mind when speaking of the U.S. Congress; "I'm shocked, shocked that congress could not pass deficit reduction legislation"

Relatedly, students in my Investment Finance course will hopefully remember the EMH (Efficient Market Hypothesis). Now think about it, the S&P 500 dropped 2% Thursday on the news of the supercommittee's failed debt reduction effort. That would indicate the market anticipated a real outcome from the committee.
Maybe the market isn't so efficient!


More streets to occupy

The Occupy Wall Street folks may have a sound basic concept (growing income inequality)  but the lack of a coherent message makes the movement  look like a scruffy bunch of Howard Beales. Here's an idea; occupy a couple of other pieces of real estate before trying to take on Wall Street.

Step One, Occupy Madison Avenue.
Retain some Don Draper to help focus your message. Just drumming won't get you far. Even someone as off putting as Newt Gingrich has a point about OWS.

Step Two, Occupy Washington.
Once the movement has an actual message, take it to Washington. It should be easy to enlist recruits to rail against an inept Congress With favorable ratings below 10% Washington would seem an easier  target. And Congress is the entity that could actually effect change on Wall Street, at least theoretically.

Tahrir Square is protest. Zuccotti Park is a mess.

Thursday, November 17, 2011

A Euro skeptic

Another voice awaiting the Euro's demise is described in a piece from the NY Times:

A Euro doomsayer

Mr. Connolly's main points can be found at 10:00 for about ten minutes. The whole video is much longer
It's All Greek to Me

Wednesday, November 16, 2011

A post mortem for the Euro

Students may remember that I have been a Euro skeptic, thinking the challenges of a coordinated Europe allowing for a single currency are too great. Paul Krugman, economics professor at Princeton, thinks similarly and has written a pre post mortem for the Euro. Worth reading.

Krugman's Ledgends of the Fail
from the NY Times

Tuesday, November 15, 2011

Anyone?

No one has responded to the extra credit question found in the Nov. 10 post: Who popularized the expression -" Malefactors of great wealth"?
Anyone?
The winner will be the envy of the blog and earn a great big "Bully".
Extra kudos if you don't Google for the answer.

Sunday, November 13, 2011

Taking sides

Students who took Senior Seminar with me remember (hopefully) the segments named "Taking Sides" where a significant, current business or economics issue was debated in class. Today's New York Times contains two articles, apparently written independently, that make an outstanding point/counterpoint of progressive and "conservative" politics. Notable is the context each writer provides.
Columbia University's Jeffrey Sachs' position

George Mason Univ.'s Tyler Cowen's position


Thursday, November 10, 2011

Banks promise to never, never, never do it again. Right

If you wonder if Occupy Wall Street protestors have something to protest then you may find this NY Times article interesting. After committing financial crimes such as fraud, malefactors of great wealth on Wall Street normally are required by the SEC to pay a fine and agree to never do it again. The article below describes how well that strategy has been working out.
http://www.nytimes.com/2011/11/08/business/in-sec-fraud-cases-banks-make-and-break-promises.html?_r=1&scp=1&sq=promises%20made&st=cse

PS: For extra credit, who popularized the term malefactors of great wealth?

Wednesday, November 9, 2011

The demise of MF Global

The dramatic failure of MF Global reflects not only the fragility of the financial markets but how, again, lessons were not learned from the financial crisis started in 2008. A good review of the former comes from the Financial Times http://www.ft.com/intl/cms/s/0/2882d766-06fb-11e1-90de-00144feabdc0.html#axzz1dGXkhSpf
and the latter by the Daily Show http://dealbook.nytimes.com/2011/11/09/the-daily-show-addresses-the-walking-debt/

Oh the irony!