Submitted by Rolfe Winkler, publisher of OptionARMageddon In an interview with Charlie Rose on Tuesday, Tim Geithner admitted the bubble was caused by Greenspan’s easy money policy. Unfortunately, Charlie didn’t ask the obvious follow-up: “why will this time be different? Why will Bernanke’s easy money policy lead to different results?” Here was the crucial exchange: […]
Read more...Full disclosure: I am normally a fan of the Financial Times’ Gillian Tett, but her latest piece reveals she has been co-opted by the industry she covers. While there are matters of substance I take issue with (we’ll get to those soon), the whopper is the positioning. How can Tett possibly depict Gordon Gekko as […]
Read more...I am puzzled by some recent market anomalies, which are breakdowns of established patterns: 1. Long dated Treasuries rising (a deflation signal) as stocks stage a dramatic rally 2. Dollar weakening while long dated Treasuries rise (the dollar and bonds usually go together) 3. Oil stocks rallying more than the S&P (28% versus 18%) when […]
Read more...Reader Dwight sent along this tidbit from OptionMONSTER ($) and I must confess it piqued my interest. As you will see, the trade described in this story makes sense only if you believe the acquisition of Merrill by Bank of America will not close, or will appear to be in serious doubt. That seems like […]
Read more...Economist Paul De Grauwe, who has been an astute and harsh critic of central bank’s models and priorities, makes a very simple point and draw a conclusion. Banks are not lending to each other out of mistrust. Various measures to increase liquidity and backstop banks have not made them look any more favorably upon their […]
Read more...With the financial system on the exam table, it has been more than a bit troubling, that certain questions are neglected in serious academic/policy debates. The discussion of possible remedies focuses on regulatory solutions, everything from requiring mortgage brokers to be licensed to increasing financial institution capital requirements and having much greater harmonisation, as the […]
Read more...It’s gratifying when someone takes on a topic I had wanted to address and does a better job than I could have. Various readers have explained how prices are formed in oil markets, most importantly, how for the vast majority of oil sold, prices are specified in long-term supply contracts and the benchmark is not […]
Read more...Why is it that in finance, nothing succeeds like failure? Witness LTCM’s John Meriwether’s ability to raise a new hedge fund after the biggest financial blow-up in history, or Geoff Boisi and Vikram Pandit’s ability to sell not-hugely-successful funds to banks, then perform unspectacularly in management roles (although in fairness, Boisi had been a leader […]
Read more...Free Exchange, in Guts or PhD?, contends that that having a PhD in economics is crucial for modern central bankers: When Paul Volcker, Stan Fischer, Jacob Frenkel and Jean-Pierre Roth discussed what central bankers and academics learn from each other at a conference last month, the line that stayed with me was Mr Fischer’s comment […]
Read more...Reader Richard Kline is providing a mini-series that was prompted by an anonymous reader who had observed that a complex systems theory view might raise doubts about regulatory policy. Financial overseers believe that liquidity is always and ever good, but that view may be naive: Perhaps a lesson to be learned here is that liquidity […]
Read more...Below is a provocative line of thought from an anonymous reader. It supports a gut feeling that I have been unable to prove, namely, that lowering of boundaries between markets (ranging from the large number of global macro hedge funds to the large number of retail currency speculators in Japan) is destabilizing. I’ve found the […]
Read more...A short piece in the Financial Times suggests that imbalances in the credit default swaps market are likely to continue, and those problems redound to the cash bond markets, distorting the prices at which companies can raise funds. Admittedly, due to reduced anxiety in the funding markets, credit default swaps prices have generally improved. However, […]
Read more...Consider this example: In 1997, British Petroleum decided to lower its carbon emissions below the 1990 level by 2010. It achieved the goal in 3 years rather than 13 at a cost of $20 million. Oh, and it happened to save $650 million. With that sort of calculus, you’d think that every big corporation would […]
Read more...Two loosely related and thoughtful posts today point up some of the ways that the fundamental frameworks of how participants think about and relate to financial markets are breaking down. Note that this development is separate from the fact that financial institutions look pretty wobbly. Instead, these two writers, Roger Ehrenberg and Cassandra, highlight two […]
Read more...All About Alpha, which is a fine site for all things hedge fund related, has an excellent piece today by Dr. William Shadwick of Omega Analysis. Shadwick has the unusual distinction of being a serious mathematician (he established Fields Institute for Research in Mathematical Sciences) who writes well. He also entered the finance industry relatively […]
Read more...