On Financial Intermediation
I appreciate Steve Randy Waldman, who writes the excellent blog Interfluidity. Even before I started blogging, while I was at RealMoney, we interacted over CPDOs, along with Alea, and several others that were onto the scam. That was a fun time, because aside from the Canadian rating agency Dominion, there was no one else questioning...
Goodbye 2011
I tried to think of a post where I would bring out the best of 2011 economically, but the best I could some up with was, “It could have been worse.” That doesn’t convey much fondness. 2011 was characterized by using debt to “solve” debt problems. Avoid default, extend the loan. Or, let a public...
A Large Middle Class Isn’t Necessarily Normal
This is not likely to be a popular post. Just warning you. I have a bias that modernity is more fragile than commonly believed. One aspect of that is income/wealth distributions. Inequality was far more pronounced in the past, and was fairly stable in being so. So why should the last 150 or so years...
The Foul Deed of the SEC in 2004
It started with reading Abnormal Returns, something I do daily, and innocent enough. But the article mentioned at SSRN was significant, and far more than a set of book reviews. It cited a GAO study and a speech given by SEC Director Erik R. Sirri, which showed that the SEC did not materially modify its...
On Penny Stocks (2)
Yesterday, I received a pitch in the mail for a penny stock. They should put a big red X over my address, but alas, they don’t. Now for all of my prior penny stocks that I have been written about, all have done horribly. Bonanza Gold GTX Corp Bioneutral Uniontown Energy Inc. Obscene Jeans Corp...
Book Review: Saving Capitalism from Short-Termism
This book was surprisingly good, and ambitious. It takes on the short-term nature of our business culture in many areas: The nature of the problem is that the owners no longer work for the corporations, and so managers run companies for shorter term objectives. Owners would care more about the survival and long run profitability...
Hypocritical Buffett
Computer-wise, things haven’t been going my way lately. My laptop seemingly died this evening, and my Gmail account has hacked by Chinese hackers last week. Apologies to those who got spammed by my Gmail account as a result. But that doesn’t mean I can’t keep going. I backed up all of my files on Saturday,...
The Rules, Part XXIII
A Ponzi scheme needs an ever-increasing flow of money to survive. Same for a market bubble. When the flow’s growth begins to slow, the bubble will wobble. When it stops, it will pop. When it goes negative, it is too late. Here’s how a Ponzi scheme works for the promoter: Prior Net Assets + Receipts...
The Costs of Illiquidity
Liquidity is underrated. What’s that, you say? You are earning nothing on your slack cash balances? Well, welcome to the club. I am earning nothing there as well. To earn money on short duration assets in this environment means taking risks, like Pimco does with its ETF with the ticker MINT. Now, many will offer...
The Costs of Illiquidity
Liquidity is underrated. What’s that, you say? You are earning nothing on your slack cash balances? Well, welcome to the club. I am earning nothing there as well. To earn money on short duration assets in this environment means taking risks, like Pimco does with its ETF with the ticker MINT. Now, many will offer...
Enduring Ponzi
Why did Madoff’s Ponzi scheme last so long? He didn’t take that much from it. If the gross exposure was $60 billion, he took only 1/2% of it — $300 million. The growth rate was high enough to attract investors but slow enough to not exhaust cash rapidly. The SEC was clueless, with little expertise...
