Category Archives: Investment management

Time to Rethink a Broken Market

Yves here. Readers are likely to assume that the “broken market” of the headline is US housing related, say the private mortgage securitization market, but the subject is what once was the gold standard of trading markets, equities.

Index Universe has cited a study by the Tabb Group that finds that investor confidence in stock markets is even lower than in the period immediately following the flash crash of 2010. Back then, 53% of respondents had high or very high confidence in the markets, and only 15% weak or very weak confidence. As of its August 2012 survey, the number with positive views and negative views were equal, at 34%. This interview with Chris Sparrow, an expert on high frequency trading, describes why he thinks the market is now fundamentally flawed and what can be done to reform it.

Quelle Surprise! SEC Plans to Make the World Safer for Fraudsters, Push Through JOBS Act Con-Artist-Friendly Solicitation Rules

If you merely looked at the SEC’s record on enforcement, you’d conclude that it suffered from a Keystone Kops-like inability to get out of its own way. The question remains whether that outcome is the result of unmotivated leadership (ex in the safe realm of insider trading cases) and long-term budget starvation leading to serious skills atrophy, or whether the SEC really, truly, is so deeply intellectually captured by the financial services industry that it thinks industry members don’t engage in fraud, they only make “mistakes”?

It’s sure looking like the latter.

Lynn Parramore: Revealed – Romney Campaign’s Attempts to Deny Paul Ryan’s Insider Trading Don’t Add Up

By Lynn Parramore, a contributing editor at Alternet. Cross posted from Alternet.

Team Romney wants you to believe Ryan didn’t really profit from privileged information. Don’t buy it.

Rajiv Sethi: Market Overreaction – A Case Study

Yves here. While this post by Rajiv Sethi contains some important observations about valuation, I’d like to quibble with the notion that there is such a thing as a correct price for as vague a promise as a stock (by contrast, for derivatives, it is possible to determine a theoretical price in relationship to an actively traded underlying instrument, so even though the underlying may be misvalued, the derivative’s proper value given the current price and other parameters can be ascertained).

JP Morgan Treated Its Retail Investors as Stuffees, Accused of Lying in Marketing Materials

It appears that, to the extent Jamie Dimon’s “fortress balance sheet” claims are valid, some of strength results from taking liberties with customers in ways that even other big financial firms shun.

Bank of America Settlement on Customer Overbilling Proves Bank Crime Pays

Here’s the Bloomberg story on one of today’s regulatory theater announcements:

UK Fund Manager Challenges Deutsche Bank on Executive Pay

It’s taken a few years, but the revolt against extractive pay in banking is getting traction.

Goldman Ex-Prop Traders Flopping on Their Own

John Whitehead is being proven right.

Adrift in a Sea of Economic Data

Yves here. This post from MacroBusiness provides a good point of departure, and I’ll provide some comments further down.

By Sell on News, a global macro equities analyst. Cross posted from MacroBusiness

A little known fact about John Maynard Keynes, detailed in Jane Gleeson-White’s book “Double Entry” is that he was responsible for the development of national economic statistics and that he expected them to be aggregated only on a temporary basis.

It was being done for the war effort, and would, he reasoned, not be necessary afterwards. This certainly puts “Keynesianism” in a different perspective, and poses the intriguing question: where would we be without economic statistics?
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Izabella Kaminska: Why MMT is Like an Autostereogram

Yves here. As someone who does not see in three dimensions, the headline metaphor breaks down for me, but it is still a good attention-getter.

By Izabella Kaminska, a former banker who writes for FT Alphaville. Cross posted from FT Alphaville via New Economic Perspectives

We’ve discussed MMT’s recent foray into the mainstream, and the confusion it has consequently courted.

But that’s the funny thing about the theory. It is naturally divisive because most of the time it fails to communicate its message succinctly. Which is weird, since the premise is actually fairly simple to understand.

Can Rep. Bachus and His Money-Crazed Congressional Colleagues Be Stopped from Insider Trading?

By Lynn Parramore. Cross posted from Alternet.

Back in the Gilded Age, venality was the rule in Congress. Bribes were as common as tobacco pipes. Lawmakers fattened their bank accounts through insider deals, with the needs of ordinary people an afterthought. Nelson Aldrich, a powerful Republican who served in the Senate from 1881 to 1911, was that corrupt era’s political poster boy, serving on the Finance Committee and using his position to invest in railroads, sugar, rubber and banking deals that made him rich.

Sound familiar? It should. We’re well on our way to repeating that money-crazed chapter in American history as a growing list of legislators use their office to play the game, “Who Wants to Be a Multi-millionaire?”

Philip Pilkington: What Has Bill Gross Been Reading?

By Philip Pilkington, a writer and journalist based in Dublin, Ireland

Question: what on earth has Bill Gross been reading? Gross has long been an acolyte of Hyman Minsky, or so he says. But his recent piece in the Financial Times entitled ‘Zero-Based Money Risks Trapping Recovery’ has a lot of people scratching their noodles.

Exponential Finance

Yves here. As much as the overall thrust of this guest post has merit, I’m always leery of forecasts that amount to “trees grow to the sky.”