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Monthly Archives: November 2007
How Lucrative Are Repos?
As 130/30 funds and other long-short plays become increasingly popular, the quantity of short-selling going on in the stock market is only likely to increase. That, in turn, means that the amount of stock lending (repos) going on is going … Continue reading
Brad DeLong Solves the Balls in the Hat Game
Brad DeLong has solved the balls in the hat game, and in his comments section provides the solution, which is a psychologically horrible one: you basically have to run your losses and cut your winnings. Keep playing until you get … Continue reading
The Broken State of US White-Collar Criminal Prosecutions
The case of the "NatWest 3" has been all a staple of the UK press all year, but never seems to have got much traction on this side of the pond. In a nutshell, three UK bankers were extradited to … Continue reading
Posted in law
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Fed Rate Cuts Might be Here to Stay
Ben Bernanke speaks pretty clearly, for a Fed chairman, and what he said yesterday left few people in any doubt that he’s minded to cut interest rates again at the next FOMC meeting. This is fabulous for equity markets, since … Continue reading
Posted in fiscal and monetary policy
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Trade the FX Markets for Fun and Losses!
Online poker, it’s a bitch, what with being illegal and all. What we really need is a legal way to lose lots of money online, using an addictive videogame-style interface. Enter eToro: where Reuters 3000 meets Nintendo Wii! There’s some … Continue reading
Posted in foreign exchange
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Treasury’s Subprime Plan and the Danger of Tactical Delinquencies
Of all the ideas floated to help solve the subprime mess, I never really believed that Sheila Bair’s plan to simply lock in teaser rates would be the one to gain traction. As I said when it was first mooted, … Continue reading
Posted in housing
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The Real Problem with Securitization
One of the more annoying memes spreading virulently during this subprime-mortgage crisis is the idea that securitization itself is a ridiculous idea. Subprime borrowers have higher default rates, that’s obvious, and so anybody who honestly thought he owned a AAA-rated … Continue reading
Posted in bonds and loans
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Chandelier Bidding in Padua
The New Yorker’s Mary Norris went to Padua for an auction run by Coys of Kensington, auctioneers of vintage motorcars. She accompanied Giuseppe Favia, who was selling a 1959 Mercedes-Benz 190 D with literally sainted provenance. The auction itself, however, … Continue reading
When Corporate Treasury is a Profit Center
Two newspapers, two countries, two industries, one story. In the NYT, it’s Southwest, whose oil-price hedges are now worth $2 billion. In the FT, it’s Porsche, whose currency hedges have made $371 million this year, and whose stock-market hedges, linked … Continue reading
Posted in derivatives
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Extra Credit, Friday Edition
Speech by SEC director Erik Sirri: "In retrospect, the super senior ABS CDO was nearly a perfect structure to lull even sophisticated traders and risk managers into a state approaching complacency — and blind them at least temporarily to fundamental … Continue reading
Posted in remainders
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Do Stock Prices Reflect Economic Growth?
What would Nouriel Roubini do if he was faced with the choice between writing something short and writing something bullish? Today he spends almost 5,000 words wondering what will happen to stocks if the US economy goes into a recession. … Continue reading
Happy Daniel Davies Day!
Brad DeLong has declared today to be Daniel Davies Day (dcubed, I guess), and the most entertaining celebration thereof is happening over in the comments section of Marginal Revolution, where Tyler Cowen attacks Davies’s attack on Milton Friedman. Cowen’s commenters … Continue reading
Posted in Media
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The X Factor in Terra Firma’s EMI Acquisition
Terra Firma’s investment in EMI doesn’t seem to be working out so well, according to Lina Saigol. But why did Terra Firma’s Guy Hands make the "impulsive acquisition" in the first place? Saigol has a normal-and-boring explanation: Mr Hands wanted … Continue reading
Posted in private equity
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At Google, Shareholders Have No Clout
Robert Cyran is unimpressed with Google’s push into clean energy: The company risks spreading itself too thin — chasing everything from personalized biotechnology to space flight. Its shareholders probably don’t want Mr. Page and other executives spending their time, or … Continue reading
Posted in governance, stocks, technology
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Why China’s Wealth Fund is Right to Invest Domestically
Keith Bradsher reports that China’s $200 billion sovereign wealth fund will be investing mainly in China, its much-ballyhooed stake in Blackstone notwithstanding. This is a smart and sensible decision. As Sudip Roy says in this month’s Euromoney, it can often … Continue reading
Posted in economics
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Blogonomics: Why Blogs Won’t Make Lots of Money for Millionaires
Scott Adams, the multimillionaire creator of the Dilbert comic strip, doesn’t like doing anything which doesn’t make him money. This conflicted with his blogging, the income from which was very small. Yes, we’ve been here before. But this time it’s … Continue reading
Posted in blogonomics
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The Strategy of Capital Injection
At the risk of repeating the mistake I made with the Bank of America – Countrywide deal, I have to say I like this Citadel – E*Trade deal a lot. The total cash infusion of $2.5 billion is actually larger … Continue reading
Posted in banking
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And You Thought Bear Stearns Was Looking Cheap
Ah, those storied names. Dillon Read. SG Warburg. PaineWebber. Pactual. The reputations, the brands, the cashflow. Priceless. Literally. According to Credit Suisse (which admittedly might not be the most impartial arbiter in such matters), the value that the market is … Continue reading
Posted in banking
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Extra Credit, Thursday Edition
Wall Street Rumor: Paulson leaving Treasury to run Citigroup The Liquidity Crunch Deepens: 2-month Euribor hits new highs. Loan Radar: Syndie loan bankers revert to type: "This month has seen BHP Billiton informally line up a $70bn loan, Rio Tinto … Continue reading
Posted in remainders
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Blogonomics: How a New Blog is Born
Some of the blogs linking to Andrew Clavell since I wrote about his Citigroup analysis yesterday afternoon: Paul Kedrosky, FT Alphaville, Fintag, peHUB, DealBreaker, Tim Price. There’s even a chap in India. The main effect of all this attention seems … Continue reading
Posted in blogonomics
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RPX: The Housing Futures Market With a Transaction Count
After posting my entry about house-price futures yesterday, a loyal reader tipped me off to another entity dealing in such things here in the US: Radar Logic’s RPX. Again, I have no idea how liquid these things are, but the … Continue reading
Posted in housing
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Thought Experiment of the Day
Ranjan Bhaduri sets up the "balls in the hat game": The game consists of a hat that contains 6 black balls and 4 white balls. The player picks balls from the hat and gains $1 for each white ball, and … Continue reading
Posted in economics
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Sovereign Wealth Fund Datapoints of the Day
More from the December Euromoney, this time from Sudip Roy’s cover story on sovereign wealth funds. Two datapoints jumped out at me: "For all of the headlines being generated by the investments in the US and Europe, it’s a fraction … Continue reading
Posted in geopolitics, investing
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John Reed for Citigroup CEO!
Things are pretty bad at Citigroup right now: its tier 1 capital, while above the federally-mandated level of 6%, is below its own internal target of 7.5%. But things were much worse in 1990, when that same ratio was just … Continue reading
Posted in banking
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In Praise of Cutting Dividends
What is the relationship between a stock’s dividend and its price? Complicated, obviously. The best-performing stocks and companies often have no dividend at all – Microsoft paid out $0 from the date of its IPO all the way through to … Continue reading
Posted in stocks
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