Latest Stories
- Bankruptcy Filings are So 1996
- Developing Market Capital Flows, Then and Now
- Sure, Activist Investing, But Not Here.
- Links: Buffett, Paulson, Beer, Penalty Kicks, etc.
- Commercial Real Estate: Past its Prime?
November 18, 2008
Bankruptcy Filings are So 1996
Paul Kedrosky |
Discuss (...)
Good piece in the NYT on the changing nature of bankruptcy filings. A combination of fewer banks at other end of the filing, and more cash-starved hedge funds and the like, plus less debtor-in-possession financing, means that a growing number of Chapter 11 filers in the U.S. are now going straight to liquidation.
More here.
Developing Market Capital Flows, Then and Now
Paul Kedrosky | Discuss (...)
Nice OECD chart showing the massive changes in capital flows to developing markets over the last decade. A 40x increase in private creditors on a 5x increase in total flows is the sort of thing that makes you sit up and go “Whoa!”. Those latter flows are the kind that can rapidly disappear in circumstances like the present.
Sure, Activist Investing, But Not Here.
Paul Kedrosky | Discuss (...)
Interesting disconnect in a new study on activist investing:
Overall, 56% of respondents expect to see an increase in shareholder activism in the next 12 months. But only 39% of corporate respondents expect the amount of activism to grow, compared with 72% of shareholder activists responding to the survey.
Get that? Most corporate sorts don’t think we will see an upswing in activist investing in the coming year, while most activist investors – the people who actually do that sort of thing – think they’re wrong. Gosh, wonder who is right?
[via P&I]
Links: Buffett, Paulson, Beer, Penalty Kicks, etc.
Paul Kedrosky | Discuss (...)
Some links to items of interest:
- Action bias among elite soccer goalkeepers: The case of penalty kicks (RePec)
- Will Beer Be the Next Casualty of the Crisis? (USNWR)
- Hedge Fund Managers Are the Heroes of this Crisis (The Daily Beast)
- Face to Face with John Paulson (P&I)
- The Twin Curves of oil and treasuries (Gregor)
- Rising default swaps on Berkshire (Bloomberg)
- Creeping protectionism in Russia and India (BV)
- Dylan Ratigan on preventing “too big to fail” (Icahn Report)
- You might want to stop paying your mortgage (Carney)
- How a lawsuit can go IPO. Really. (P&I)
- Religion and bankruptcy during the Depression (Business History)
- Pershing Square to hold a Target webcast on Wednesday morning (Webcaster)
- Taiwan subway ridership during the SARS outbreak (arXiv)
- Current slump will be worse than Depression (Reuters)
Commercial Real Estate: Past its Prime?
Paul Kedrosky | Discuss (...)
The recent moonshot in commercial real estate default risk indices makes it seem likely that the sector is finally tumbling, as it has seemed obvious for some time it would. Check the following graph (via Markit) of the CMBX to see the recent spike upward. It’s darn impressive.
Quote du Jour: Lehman
Paul Kedrosky | Discuss (...)
Who would expect an institution that survived two world wars to go under?'
-- Dr Ahmad Magad, Singapore MP
The above delicious quote is from an article in today’s Singapore Straits Times about how various Singapore town councils have lost millions investing in structured financial products created by Lehman and others.
November 17, 2008
Credit Crunch: The Ancient Rome Version
Paul Kedrosky | Discuss (...)
A great catch of a reference to a credit crunch in ancient Rome:
Accusers were now intensely active. Their present targets were men who enriched themselves by usury, infringing laws by which the dictator Julius Caesar had controlled loans and land-ownership in Italy. Since patriotism comes second to private profits, this law had long been ignored. Money-lending is an ancient problem in Rome, and a frequent cause of disharmony and disorder. Even in an earlier, less corrupt society steps had been taken against it. At first, interest had been determined arbitrarily by the rich, but then the Twelve Tables had fixed the maximum at 10 per cent. Next, a tribune’s law had halved the rate. Finally loans on compound interest were forbidden completely. Fraudulence, attacked by repeated legislation, was ingeniously revived after each successive counter-measure.
Now, however, the praetor Sempronius Gracchus, responsible for the investigation, was compelled by the numbers of potential defendants to refer the matter to the senate. That body - being implicated to a man - nervously entreated the emperor's indulgence. It was granted. Eighteen months were allowed in which all private finances had to be brought into line with the law. The result was a shortage of money. For all debts were called in simultaneously, and the numerous convictions and sales of confiscated property had concentrated currency in the Treasury and its imperially controlled branches. To meet this situation the senate had instructed that creditors should invest two-thirds of their capital in Italy, and debtors immediately pay the same proportion of their debts.
However, creditors demanded payment in full, and debtors were morally bound to respond. The first results were importunate appeals to money-lenders. Next, the praetors’s court resounded with activity. The decree requiring land purchase and sales, envisaged as relief, had the opposite effect since when the capitalists received payment they hoarded it, to buy land at their convenience. These extensive transactions reduced prices. but large-scale debtors found it difficult to sell; so many of them were ejected from their properties, and lost not only their estates but their rank and reputation.
Then Tiberius came to the rescue. He distributed a hundred million sesterces among specially established banks, for interest-free three year state loans, against security of double the value in landed property. Credit was thus restored; and gradually private lenders, too, reappeared. However, land transactions failed to adhere to the provisions of the senatorial decree. As usual, the beginning was strict, the sequel slack.
[via Tired Fools]
Fun with Real Estate Ads: The Kuala Lumpur Edition
Paul Kedrosky | Discuss (...)
Downtown Kuala Lumpur is a veritable forest of construction cranes, with condos projects going up everywhere. Prices strike me as high, with some large complexes having units only from a million U.S. dollars and up. Similarly, on the way in from the airport to the city you see fields of ochre-roofed tract real estate developments all around, most of which are half-empty (my driver said) and had been built in the last two years.
So, is there a real estate bubble here? Most people I spoke to here assured me that there isn’t, that downpayments are hefty and people can’t play the sort of low-payment games that they can in the U.S. That was mildly reassuring, at least until I saw the following advertisement in a local paper. Check the highlighted sections.
Latest CDS Data: Next Weather. Seven Days
Paul Kedrosky | Discuss (...)
I spent a few minutes over the weekend wandering through the latest DTCC weekly credit default swap data release. I compared the current release with the prior week in terms of notional, net, and total contracts. The following table summarizes the top dozen entities in terms of increases and decreases in percentage terms in the number of outstanding CDS contracts. (The list is filtered down to those with at least 1,000 pre-existing outstanding contracts.)
November 16, 2008
Yellow Pages Buyout Bust
Paul Kedrosky | Discuss (...)
Was the 2002 yellow pages buyout boom the most awesomely mistimed private equity move ever? Okay, that’s saying a lot, but still: Buying such services for their ad revenue just as the yellow pages business blew up in the face of search (read: Google) ubiquity has turned out badly. This Internet thing turns out not to be a fad.
Check the following Google News timeline of the rise and fall of yellow pages buyout interest, and then go read this WSJ story on the subject.
Palm Oil: Up, Down, or Something
Paul Kedrosky | Discuss (...)
I’m always entranced by back-to-back headlines contradicting one another, and you could hardly have a better example than this pair from Bloomberg on the current tumble in palm oil:
The Auto Bankruptcy Teeter-Totter
Paul Kedrosky | Discuss (...)
People are neatly lining up on either side of this auto industry bailout subject, but most of them are ducking the core issues. If you’re pro or you’re con, here are some of the questions you have to answer to be credible.
- Pro. If you’re in favor of a bailout, you need to explain how the buck – literally – stops here. Why will capping salaries, for example, change diddly with respect to the U.S. auto companies’ competitiveness? Or are you merely arguing that this was a perfect storm – economic downturn, super-spike in oil, etc. – and so we should bail the auto companies out? (In which case, what about the airlines? Oh wait, they haven’t all failed yet – so much for that argument.)
- Con. If you’re in favor of letting the auto companies go bankrupt, you need to explain why we’ll be right this time about the systemic consequences when we have been wrong most of the way to this point about every other company, especially Lehman. There is no doubt that the auto companies need to restructured, consolidated, and generally folded, spindled, and mutilated, but do we know enough about the implications to let it happen during the worst downturn since the Depression?
GM, for its part, isn’t taking this lying down. It has posted a video on YouTube explaining – okay, propagandizing – the implications of letting it die. Watch it to see how the straight-to-consumer “Save us!” game is played.
November 15, 2008
Never Say Never Again
Paul Kedrosky | Discuss (...)
I really liked this quote from Howard Marks in today’s Barron’s:
One of the great lessons [of investing] is beware of platitudes, such as "There has never been a national decline in home prices." If you believe that there has never been a national decline in home prices and that there never could be, then you bid home prices up to levels that don't allow for the risk of widespread losses, because you concluded it could never happen. Then the fact that they are at those new high prices introduces, in itself, the risk of a national home-price decline.
So the actions of people relying on history change history, and that is what people lose track of.
The Rise and Fall and Rise of the “G”-Word
Paul Kedrosky | Discuss (...)
Leave the fire ashes; what survives is gold
-- Robert Browning, Rabbi Ben Ezra
It’s the “g”-word. It’s the word that everyone almost says, and then doesn’t, because saying it can make you sound like a little like a loon, or maybe more like a combination of a train spotter and a conspiracy theorist, with an Austrian economics overlay for luck. It’s “gold”, of course.
Of late, however, gold has actually provoked some thoughtful discussion, at least insofar as imagining what might be different in the current crisis if modern currencies, especially the dollar, were tied to gold (or something like it) in a fixed ratio. For a thoughtful example, check the following sent to me today by the folks at QB Partners. Agree or disagree, at least the case will have been made.
…the notion of multiple subjective global monetary policies managed by unitary policy makers seems anachronistic. Fiat currencies allow sovereign governments and their central banks to issue as much paper currency as they wish, as long as merchants, consumers and trading partners are willing to accept that paper in return for goods, services and assets. Because various nations have different growth rates, as well as differing social, economic and political agendas, it follows that subjective domestic monetary policies and the absolute and relative purchasing powers of their attendant currencies are highly unstable and, in many instances, inordinately unfair.
Maybe the US dollar – or whatever form of money the world chooses to have as its reserve currency in the twenty-first century – should revert back to the gold standard? A gold standard is a quaint idea inasmuch as the theory of relativity is a quaint idea. Nothing has changed in the current global economic environment that argues against the legitimacy, flexibility and practicality of re-adopting a currency anchor – not the size, divergent interests or sophistication of global economies, banking systems and capital markets.
The common fear that banking systems could extend only limited credit under a gold regime is fallacious. There is plenty of gold – at the right gold price – to peg paper money to it. As long as fractional reserve banking systems exist, money and credit growth would be limited only by natural economic forces – not by rigid formulae. Neither is re-anchoring currencies to gold a partisan issue, as is so often thought. The healthy tension surrounding free market control and the distribution of wealth would remain in the political sphere, to be argued by liberals and conservatives.
Within all nations, it is the peoples’ collective wealth - earned from innovation, natural resources, labor and productivity - that their central banks attempt to optimize. Central banks throughout history have spotty records of doing this. Politicians across the political spectrum are equally critical of the limitations of a subjective central banking system capable of promoting violent economic booms and busts, which may threaten the very viability of their nation. The question of fairness within an economy – the manner in which collective wealth is concentrated, distributed or re-distributed - is a separate matter with a different pathology from employing a gold peg.
Gold-backed currencies require fiscal and trade discipline among all constituent economies – not necessarily rigid mandated controls. A nation that runs a persistent trade deficit, for example, would find gold leaving its vaults for those of net-exporting nations. This would prompt one of two responses by the indulgent nation: 1) tighten domestic monetary policy which, all else equal, would lessen demand for imports and lead to a rebalancing of accounts or, 2) adjust its fixed exchange rate downward, which would hinder its relative terms of trade with other nations (the overly indulgent nation’s exports would become relatively cheaper while goods it had been importing would become more expensive). These disciplinary dynamics work naturally to rebalance trade and capital flows and to encourage domestic economic sustainability and fairness among trading partners. This is timeless theory (straight from Adam Smith) and would be very practical today.
Read the whole thing here.
Of course, nothing is truly new under the economic sun, as this piece from Time back in 1979 makes clear. Read it for more context on gold’s fashionability in crises.
Sunset in SoCal
Paul Kedrosky | Discuss (...)
Lovely sunset as I’m heading out for endless hours of pressurized tin can occupancy (i.e. airline travel). Check the following shot from a mountain top not far from my house today. The sun is blooming as it descends into the ocean, like a massive fire being suddenly doused.
Wildfires and Foreclosures, Part II
Paul Kedrosky | Discuss (...)
I’ve written about this before, but it’s worth noticing that with wildfires raging across southern California today foreclosure-heavy areas are being hit harder than most. Case in point, Yorba Linda, California, where a fire has burned dozens of homes already, and is being pushed by Santa Ana winds further southwest into Los Angeles County.
One of the main areas that is wildfire-struck is just west of the intersection of the Chino and Riverside freeways. The area is relatively recent construction, and it is, unsurprisingly, riddled with foreclosures and bank-owned properties. Check the following map, and note that the fires struck this area from the northeast and swept southwest.
[via RealtyTrac]
In general, we can expect wildfires to hit subprime- and foreclosure-struck areas more heavily than others in California. These area were built in what is euphemistically called the “wildland interface”, which is a multisyllabic way of saying near fire-prone forests and chaparral.
Godzilla, Mothra, and the G-20 Communique: The Shorter Version
Paul Kedrosky | Discuss (...)
I'm trying hard to read the entire G-20 communique -– what leaders propose to do so that global markets stop re-enacting Mothra vs. Godzilla, except with capitalism playing the part of a small island near Japan -- and it's taking years off my life while destroying my corneas. Insofar as I can tell, the shorter version is contained in these four bullet points:
- It's not you, it's me.
- If you change, I might love you more, but don't count on it.
- The IMF sucks.
- "Never" is open. How does that work for you?
And you knew this was coming, so here's the word cloud for the whole thing in its straight-outta-Brussels diplomatic-speak vagueness.
[via Wordle]
The G20 Bluffer's Guide
Paul Kedrosky | Discuss (...)
You can't tell your G20 players without a program, so, with this weekend's G20 talks underway, here are two graphics laying them out, including their economic conditions. I know I couldn't have come close to having naming 'em all.
Quote du Jour: The Trouble with Investing in Averages
Paul Kedrosky | Discuss (...)
Never forget the six-foot-tall man who drowned crossing the stream that was five feet deep, on average.
-- Howard Marks, Oaktree (quoted in Barron's)
Real-world distributions are a killer.
November 14, 2008
Letter from Iceland: A World without Money
Paul Kedrosky | Discuss (...)
A must-read piece in weekend FT by a writer in Iceland. It is wonderfully written, specific, and filled with context on what it is like to live in a first-world country teetering at the edge of solvency, and without access to trade/currency.
A drive across town later that afternoon, October 6, at first gave grounds for comfort. The roads were as full as usual for the Reykjavik rush-hour – a half-hour build-up of traffic. Aircraft flew in and out of the downtown airport, students made their way home from schools and universities – note the plural – while visitors went to hospitals and fitness fiends to sports clubs. Reykjavik showed all the outward appearances of carrying on.
But a different picture began to emerge from the hourly news bulletins on the car radio. The Icelandic krona’s freeze in the capital markets had now spilled over into the day-to-day transactions of Icelanders abroad. Holidaymakers and business travellers venturing “til Útlanda”, as it is called, found their credit cards refused, and those wishing to buy foreign currency could not find willing sellers, aside from one or two who limited their purchases to €200.
Read the whole thing.
Breakeven Oil Prices in Gulf States
Paul Kedrosky | Discuss (...)
Interesting chart from Fitch Ratings of the breakeven oil prices in Gulf States. These numbers have risen in recent years, but not with exploration and extraction costs, but with higher country-level program expenditures causing higher oil prices to be required to balance their budgets.
Note that Bahrain has the highest breakeven price of the group, followed by Saudi Arabia.
Exchange Rate Update: Back to Abnormal
Paul Kedrosky | Discuss (...)
I haven't updated this in a while, so here are the latest 90-day exchange rate trends among the major currencies worldwide. After a brief burble upwards a week ago, everything is now back to abnormal, with all currencies except the yen losing ground to the dollar:
[via Pacific]
Links: First-World Debt Restructuring, Depression Economics, etc.
Paul Kedrosky | Discuss (...)
Some quick links to items of interest:
- The fiscal woes of cities and states (The Economist)
- Iceland, Switzerland, Denmark, Sweden, Jordan and countries with banks that are too big to bail out (Bronte)
- China Can Help (WSJ.com)
- Thirty Year Bond Auction: Not a Good Result for Hank Paulson (ATC)
- China’s fiscal stimulus doesn’t necessarily mean that it will stop buying Treasuries (Setser)
- VCs are having 2001 flashbacks (Bloomberg)
- Asian economies could use their own Gordon Brown (Bloomberg)
- A federal welfare package for the U.S. auto industry is inevitable (Bloomberg)
- Canadian finance minister resorting to asset sales to avoid sudden deficit (Bloomberg)
- How likely is a sterling crisis, or is London really Reykjavik-on-Thames? (FT)
- The Obama policy mix: More pragmatic than many on both sides think (Morgan Stanley)
- Depression economics returns (NYT/Krugman)
- The inevitability of first-world sovereign debt restructuring (Marketplace)
- Good blog: Debtonation (Source)
- Bloomberg (the company) after Bloomberg (the mayor) (VanityFair)
Homage to Peter Schiff: Calling the Crisis Right from the Start
Paul Kedrosky | Discuss (...)
Say what you will about Peter Schiff –- self-promoter, etc. – but he nailed the current crisis first, best, and most lucidly. And, to his credit, he got out in public saying it over and over again, despite harsh skepticism sent his way. As PE Wire said this morning, this may just be the video of the year.
November 13, 2008
State Default Watch: Heatmap of Budget Deficits
Paul Kedrosky | Discuss (...)
Many U.S. states are set to wrong-headedly enact pro-cyclical policies –- spending cuts and tax increases -– as we head deeper into the current recession. That will almost certainly make things worse, forcing the most exposed states to the edge of default, and perhaps beyond. Only then, sadly, will we see the overdue hard choices being made about what we can and should pay for.
With the preceding in mind, here is a heat map of U.S. states compared by current deficits as a percentage of FY 2009 general revenue. California, Arizona, Nevada, and Florida are in the top five (as is Rhode Island, surprisingly), but 41 states now face rapidly growing shortfalls.
|
|  |
[Data via CBPP]
Engineers: Financial vs Real
Paul Kedrosky | Discuss (...)
Interesting chart of the growth in financial vs real engineers in the U.S. over the last few decades, as measured by graduate and post-graduate production of engineers and finance grads. Me-thinks the second chart is one that it would be nice to see invert sometime soon.
[via Andrew Lo]
Hedge Funds in the Clouds
Paul Kedrosky | Discuss (...)
Today’s Congressional testimony from various hedge fund managers, as a tag cloud (so you don’t have to watch or read):
Links: Traffic, Recession Deniers, Recovery, etc,
Paul Kedrosky | Discuss (...)
Some quick links to items of interest:
- More drive-by economics: Traffic declining in New York bridges and tunnels (NYT)
- The lame excuses peddled by recession deniers over time (Bloomberg)
- Some interesting insider comments on the auto industry (Ritholtz)
- Expect an anemic recovery in late 2009 (Morgan Stanley)
- Many more California cities will follow Vallejo into bankruptcy (S.F. Chronicle)
Quote du Jour: PBGC's Circular Insurance Stategy
Paul Kedrosky | Discuss (...)
I'm working on something longer about the troubles at pension insurer Pension Benefit Guaranty Corporation, but this P&I quote from Jeffrey Brown at the University of Urbana-Champaign was just too good not to share:
Why would an insurance company invest in the same asset that they're insuring?
Why indeed.
Fed vs Fed: The Fed is Now Fighting Itself
Paul Kedrosky | Discuss (...)
This sideshow is almost embarrassing, but you had to see it coming when the Minneapolis Fed puts out its paper of “myths” with respect to the current credit crisis:
A team at the Federal Reserve Bank of Minneapolis argues that four common claims about the sharp drop in bank lending to nonfinancial borrowers during the crisis are false, and they provide extensive data to back up this argument.
The study does not deny that the United States is suffering a financial crisis. Instead, it uses the evidence to dispute how this is spilling over the rest of the economy.
But researchers from the Boston Fed say the Minneapolis Fed's work ignores underlying loan market dynamics indicating a credit crunch, although they agree the numbers can be hard to untangle.
"Such a difference of opinion and open debate between researchers at Federal Reserve banks is both unusual and interesting, and is testimony to the difficult times in which we find ourselves," said former Atlanta Fed research head Bob Eisenbeis.
More here.
Harvard, Yale and Princeton’s Downbound Race
Paul Kedrosky | Discuss (...)
Good reminder stats from EMII on how the alt assets game has helped and then hamstrung the endowments at major schools. Could the David Swensen days be over?
Yale and Princeton universities have 70% of assets in alternatives, while Harvard University's allocation is 57%. These holdings have helped them generate strong returns over the past decade, but have been unable to offer diversification and liquidity.
Harvard, Yale and Princeton have declined to disclose their recent returns, but it is estimated that that each may be down 25% or more since June 30.
More here.
Gallows Investing Humor du Jour
Paul Kedrosky | Discuss (...)
Joke I heard today:
Q: How do I find a good small-cap fund manager?
A: Find a good large-cap fund manager, and wait.
Hedge Fund Leverage, Then and Now
Paul Kedrosky | Discuss (...)
A nice chart (from MIT’s Andrew Lo) of the growth of assets and hedge fund leverage over the last 20 years. You can plainly see the expanding leverage in the 2001-2005 period.
Links: Economic Data, Bubbles, Cities, etc.
Paul Kedrosky | Discuss (...)
Some quick links to items of interest:
- Nice new page for tracking a live and historical economic data (OANDA)
- Massive shortfall in San Diego city pension fund (SOSD)
- U.S. retail CMBS delinquencies data (ResearchRecap)
- How the credit crisis is playing out in research organizations (Nature)
- Year-end mutual fund tax bite may further drive ETF growth (Blomoberg)
- Corporations vs the market: Not the same thing (Cato)
- CalPERS housing portfolio lost 35% in a year on some dubious decisions (LAT)
- Review: Physicists on Wall Street and other essays (Nature)
November 12, 2008
Banks 2.0: Build, Not Bail?
Paul Kedrosky | Discuss (...)
My friend (and Money:Tech-er) David Leinweber has a up a provocative post over on the O'Reilly website about hacking the banking system. The root idea: Why not stop trying to bail out the current banking system, and simply build a new one instead?
Here is the nut para:
$700 billion is a huge amount of money--more than the equity book values of Goldman Sachs, Morgan Stanley, JP Morgan, Citigroup, Washington Mutual, Bank of America and Wachovia combined. This money should be used to capitalize new banks throughout the country. To be operational as quickly as possible and to preserve valuable human and operational capital, these banks will buy good operational assets from insolvent banks in FDIC receivership. To avoid a concentration of risk, the capital should be distributed amongst at least 20 new institutions. To avoid the hazards of government ownership or sponsorship, the shares of these institutions should be distributed to the American people (each bank can have 300m shares; one for every American man, woman, or child).
Rather than using taxpayer money to cushion losses of previous, bad investments, this will allow all of the capital to facilitate lending to the real economy where it will prevent the current recession from becoming a depression and expedite the recovery which would otherwise be many years away. This plan is akin to preserving the body of banks while replacing their old brains (senior management and risk management policies) and their old hearts (balance sheets).
David (and co-author Sal Khan) deal ably in the paper with some of the more obvious criticisms, so I won't raise those. Read the paper to see how they respond on CDS unwinding, etc.
My take on this wild-eyed idea? It is intriguing, and a fresh perspective on the problem. I suspect the real issues are social, however, not technical, so the likely problems are likely to be in recreating functioning organizations in a reasonable amount of time, etc. Nevertheless, this fever dream is is definitely worth mulling.
Must-See Bailout TV Tomorrow: Waxman Power Hour
Paul Kedrosky | Discuss (...)
There is some must-see bailout TV tomorrow. Hedge fund managers John Paulson, Jim Simons, George Soros, Phil Falcone, and Ken Griffin will all be testifying tomorrow before the House Oversight Committee. I genuinely hope it doesn't turn into a blame game and shouting match, but I don't have a lot of confident that it won't. The most interesting thing will likely be whatever prepared material they submit, so watch for that early tomorrow.
Here is the full list of guests on the Henry Waxman Power Hour, which should be streamed from the House site, as well as over C-Span, starting at 8:30am EST.
* John Alfred Paulson, President, Paulson & Co., Inc.
* George Soros, Chairman, Soros Fund Management, LLC
* James Simons, President, Renaissance Technologies, LLC
* Philip A. Falcone, Senior Managing Partner, Harbinger Capital Partners
* Kenneth C. Griffin, Chief Executive Officer and President, Citadel Investment Group, LLC
* Professor Andrew Lo, Director, MIT Laboratory for Financial Engineering, Massachusetts Institute of Technology, Sloan School of Management
* Professor David Ruder, Northwestern University School of Law, Former Chairman, U.S. Securities and Exchange Commission
* Professor Joseph Bankman, Stanford University Law School
* Houman Shadab, Senior Research Fellow, Mercatus Center, George Mason University
Bill Ackman on Charlie Rose
Paul Kedrosky | Discuss (...)
Good conversation with Pershing Square's Bill Ackman on Charlie Rose last night. He is a lucid and reasonable guy, perhaps to a fault, and there continues to be chatter of an Obama administration role for him.
The World in Four Presidents and Five Economic Factoids
Paul Kedrosky | Discuss (...)
Changes across four presidents in five interesting measures of the economic world as we know it:
[via PPI]
The Program Formerly Known as TARP (PFKATARP)
Paul Kedrosky | Discuss (...)
Treasury Secretary Henry Paulson has finally conceded the obvious: There is no longer a toxic asset relief program, or TARP as it was originally called. Toxic assets are not being purchased from financial services company at below market, market, above market, or even supermarket prices, for that matter. It just isn’t happening.
Why not? Partly because it wasn’t the best first thing to do anyway. While it was a cool markets uber alles exercise – we’ll let the market solve the market’s problem! – and a neat grad school thesis project, it was wildly impractical, and it never seemed any less so no matter how many times it was explained.
Instead, there is a $350-$700b Treasury slush fund for doing … stuff to get credit markets working. Mostly consumer credit. Now, that’s not a terrible idea, but it also requires immense trust in the person/people doing the spending. It also creates a very high transparency and procedural hurdle to be cleared by the those same people. After all, the opportunities for abuse and scope creep were always large, and they have now become immense and palpable.
Let’s stop talking about TARP. It doesn’t exist. Call it the PKFKATARP, at best – or if it’s to be all about consumers, maybe just CARP. Either way, it would be nice to know more about what the hell is going on and why. I’m just saying.
[Update] GE is now newly on the list of The Saved. No surprise, as this had been chattered for some time, but we really need to make clearer to people – taxpayer – what separates the saved from the damned.
Warren Buffett: Lost His Touch (Again)?
Paul Kedrosky | Discuss (...)
Various people are wandering about saying that investor Warren Buffett has lost his touch. The gist of the argument: A combination of style drift (derivatives?!), ill-timed investments, and his "long term" refrain on declining positions demonstrate that he is, at the very least, having a hard time right now, if not outright floundering, at least a little.
Doug Kass argues this in a morning post over at RealMoney. As he would concede, this isn't the first time Warren has been deemed ready for pasture, what with similar arguments having been made in 1999, which turned out to be premature.
Is this time different? Kass argues "Yes", with the Buffett no longer having as long a long term as he once did, and with his style drift particularly worrisome in the face of some ill-timed investments.
I’ve been arguing for some time that Buffett is feeling more pain than most people realize, but I’m also not convinced he has lost his touch either. Maybe it's time to open this conversation up. Other thoughts?
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