Bailout

Economics without mathematics

Posted on April 01, 2010
Justin Fox sums up the overwhelming majority of economics papers in one sentence:

Counterparties

Posted on March 31, 2010
A great introduction to the sleazy AFA Press by Nick Lyne -- Qorreo

The economics of Netflix

Posted on March 31, 2010
How come Netflix has a market capitalization of $4 billion, on 2009 net income of just $116 million? That's about $325 per subscriber, even as each subscriber generates on average about $145 in revenue and $10 in net income per year.

Adventures in revolving doors

Posted on March 31, 2010
Gary Weiss reads the SEC inspector general's report into its behavior with respect to Allied Capital and David Einhorn, and finds this startling nugget:

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John Dugan?s CFPA U-turn

Posted on March 31, 2010
Remember OCC head John Dugan's email to to Cheyenne Hopkins? He told her -- and since the article was only published yesterday, I'm assuming it was in the last few days -- that a consumer agency could conflict with safety and soundness concerns. "a consumer agency might think that down payments on house purchases should be limited to 5% to promote homeownership," he wrote, "while a safety and soundness regulator might believe a higher minimum could be needed to ensure lenders don't make loans that won't be repaid".

What?s a syndicated bond?

Posted on March 31, 2010
The term has been around for a little while now, but only recently has the concept of a syndicated bond been commonplace in news stories, and it seems to have arrived without anybody explaining what it is.

Prosecuting insider trading in CDS

Posted on March 31, 2010
It's now been three and a half years since Bloomberg's Shannon Harrington and John Glover showed that there was a very strong pattern of CDS spreads gapping out in advance of debt issuance by large corporates which came as a surprise to everybody else...

The sovereign exit strategy for bank shareholdings

Posted on March 30, 2010
There are very few investors for whom a 0% return is just another arbitrary point on the real-number spectrum. In theory, the difference between a +10% return and a +15% return is the same as the difference between a -3% return and a +2% return. But in practice, the latter is much more important, because it spans the crucial zero bound: it's the difference between making money and losing money.

Why wine isn?t an investment

Posted on March 30, 2010
Swiss researchers Philippe Masset and Jean-Philippe Weisskopf have a new paper out claiming to demonstrate that if you add wine to a portfolio of financial assets, that decreases your risk, increases your returns, and helps you out (if you care about such things) on the skewness and kurtosis fronts as well...

John Dugan, protector of predators

Posted on March 30, 2010
In the wake of Andrew Martin's searing profile of him last week, the last thing John Dugan needed was to be quoted in the American Banker looking like even more of a banking-industry shill. Yet here's the quote he gave Cheyenne Hopkins for her (sadly firewalled) article on whether safety and soundness conflicts with consumer protection:

The economics of non-profit newspapers

Posted on March 30, 2010
Alan Mutter is a genuine expert on newspaper economics, which is one reason why his bizarre blog entry today on the economics of non-profit newspapers is so puzzling. This has to be one of the most innumerate things he's ever written:

Counterparties

Posted on March 29, 2010
Mark Roe expands his excellent FT column on derivatives superpriority into a fully-fledged paper -- SSRN

Trading Citigroup

Posted on March 29, 2010
With trading in Citi accounting for 25% of the volume on the NYSE, there's only one game in town for stock traders -- even if the price of the stock ended the day within 13 cents of where it started it. Zero Hedge puts it pungently, noting that trade is being increasingly concentrated in Citi, BofA, and the QQQQ Nasdaq index fund:

Setting rules for capital and liquidity

Posted on March 29, 2010
Kevin Drum and I had a thrilling discussion about liquidity risk and capital ratios over lunch on Friday. He sums up:

Where?s the Politico of finance?

Posted on March 29, 2010
Add another name to the list of naive editorial-side people without business-side experience: John Harris, the editor-in-chief of Politico.

When bloggers examine the Treasury market

Posted on March 29, 2010
This is how the blogosphere glosses the news: first the WSJ runs a slightly overheated article about the most recent Treasury auctions, talking in the headline about "Debt Fears" in the market for US government bonds. It's one of those spectacularly meaningless headlines onto which all manner of rank speculation can be piled: a market went down, so you can talk about "fear" (although for some reason when a market goes up you get many fewer headlines about "greed"), and yes, it's a debt market, so you can talk about "debt fear".

Blogonomics: Monetizing readers

Posted on March 28, 2010
At this point, even I'm bored of the Salmon vs Blodget wars. But Henry has decided to grossly misrepresent my views, so it's worth explaining in a bit more detail what I actually think about blog content and how it can and should be turned into money.

Blogonomics: Revenue per page

Posted on March 26, 2010
In the wake of the debate we had earlier today, Henry Blodget took to Twitter to explain the numbers behind ad-supported blogs. The most interesting tweets, to me, were these:

What kind of image should a community bank project?

Posted on March 26, 2010
I'm very happy that the Lower East Side People's Federal Credit Union made it into the photomontage the NYT used to illustrate an article on switching bank accounts -- even if there was no mention of credit unions in the article itself. I'm on the board of LESPFCU, and we'll take all the publicity we can get.

Beware those S&P 500 benchmarks

Posted on March 26, 2010
Next time a fund manager brags of outperforming the S&P 500, remember this:

The negative bag-check fee

Posted on March 26, 2010
Back in September, Joe Brancatelli made a compelling case that bag-check fees at major airlines were actually losing them money, rather than making money. And that was before Southwest airlines embarked on a major marketing campaign touting the fact that they check bags for free -- a campaign that Eric Joiner calls "pure marketing genius".

Shia LeBoeuf vs the short-sellers

Posted on March 26, 2010
May I present to you Shia LeBoeuf, momentum trader:

Student loans and fiscal policy

Posted on March 26, 2010
I don't even pretend to understand the parliamentary mechanism by which the long-overdue overhaul of the student loan system was pushed through inside a health-care reconciliation fix. Certainly that says a lot about how dysfunctional Congress is.

Counterparties

Posted on March 25, 2010
How climate change is affecting Latin America's coffee crop -- NPR

E&Y tries to defend itself

Posted on March 25, 2010
Contrarian Pundit has a letter being sent out by Ernst & Young "to address certain media coverage and commentary on the Examiner's Report that has at times been inaccurate, if not misleading".

Why mortgage principal reduction isn?t happening

Posted on March 25, 2010
BofA's "earned principal forgiveness" program looks very similar to the Responsible Homeowner Reward plan of Loan Value Group that I wrote about yesterday. In both cases, homeowners staying current on their mortgage payments get a reward after a certain number of years -- a principal write-down on their mortgage in the first case, and an old-fashioned cash payment in the second.

Goldman?s outperforming mortgage CDOs

Posted on March 25, 2010
I'm a bit late to this, but Stephen Gandel had an interesting post this weekend about the now-famous Harvard thesis upon which Michael Lewis based a lot of his latest book, and whether it partially exonerates Goldman Sachs from the charge of deliberately building CDOs which were designed to go bad, to the profit of Goldman Sachs.

Blodget fires Carney

Posted on March 24, 2010
Why did Henry Blodget fire John Carney? I suspect that Carney himself will tell us soon enough. But the broad narrative of Foster Kamer's post today rings true: it's the age-old tension between the popular and the high-quality.

The US default-risk meme

Posted on March 24, 2010
There's a constant drumbeat of stories about how the price of credit protection on the USA says little if anything about America's creditworthiness: Dan Gross had one just last week. I've written much the same story myself, but at least I tried to explain what was actually going on in that market; what I'm still waiting for is a journalist who can find someone who's actually buying or selling these things, so that we can find out from the horse's mouth why they're doing so.

Iowa cracks down on Ben Stein?s sleazy paymasters

Posted on March 24, 2010
Ben Stein has a bit of free time on his hands these days, now that his odorous association with FreeScore.com and its sleazy owners Vertrue means that he's no longer writing a column for the NYT. So he might be interested in reading the blistering 62-page ruling that Judge Robert Hutchison has just handed down in Iowa, which goes into great detail about how Vertrue has violated all manner of laws in that state with its unfair and deceptive practices.

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