June 2010
1 post
7 tags
Why Buffett is Wrong
Today, when I heard Warren Buffett’s comments today about the role rating agencies played in stoking the flames of our financial failure, I was markedly disappointed. Buffett has been a great inspiration to me personally, both as an investor and human being, and I expected more honest rebuttal on the part of agencies such as Moody’s, Standard & Poor’s and Fitch. When given the...
May 2010
2 posts
German Folly
On March 21st (Euronity - The Antonym of Unity) I wrote about the increasing necessity of a quick bailout for Greece and the dangers for the European Union if they did not act decisively and cohesively. They failed to provide that unified front quickly enough, and as a result the reputation and market measurement of the implied strength of the EU suffered badly. This, I believe, has contributed...
Bring on the Reform
Financial reform, at the most fundamental level, is designed to keep the markets from imploding in both the long and short term. Hopefully we can all agree that after the hardships of the last two years, any reasonable cost to lower the risk of future catastrophe is worth it. Enter from stage left and right the two versions of financial regulatory reform that have been sculpted by our esteemed...
April 2010
2 posts
9 tags
The Problem With Financial Reform
Today President Obama addressed the titans of Wall Street and asked them to join hands and take preemptive measures to avoiding another financial collapse. As usual, the delivery was eloquent and the message was clear; if you aren’t going to support this reform, then you must be doing something you don’t want regulators to see.
This fails to address the main concerns of many financial minds....
A Case Against Inflation
Popular opinion is that the United States will experience some violent inflation over the coming decade as punishment for the reckless borrowing, irresponsible budgeting and rabid consumption that has taken place in the US over the last twenty five years. However, in order for inflation to truly take place, one of these things usually happens: the money supply has to increase rapidly, demand must...
March 2010
4 posts
8 tags
The China Tango
There is a stark difference between the financial landscape of the late 20th century and the one facing the United States today. Twice in the last ten years markets of the United States have fell victim to massive bubbles (dot-com, housing) that were largely inflated by greed and overzealous capitalism. Now, the world is more apprehensive towards open markets, globalization, capitalism and...
Thoughts on Health Care Reform
Most people probably breathed a sigh of relief when they heard that a health care reform (HCR) bill has been passed by the House. Despite any political conflict, at the very least it will be nice to see congressional action for a change. Now, that bulging stack of papers can be sent by FedEx or UPS (depending on which stock you own) to President Obama’s desk to be signed into law.
As with...
Euro-nity (the antonym of unity)
Greece is navigating dire straits as it attempts to undo some of the damage done from some irresponsible financial decisions. They have already made huge budget concessions (euro 16 million / $22 million) and received harsh judgment from their citizens in the form of protests and riots. The next chapter in this story will be integral in determining if the European Union can truly withstand the...
Waah, waah, yuan!
Most currencies in the world trade at their market value. This fluctuates due to political/fiscal policies, budgets, relative strength of the domestic economy and many other factors. Sometimes, it is healthy for an emerging market to peg their currency to a stronger currency like the dollar. This saves them the hardship of inflation and investor speculation until they can raise their industries...
January 2010
1 post
6 tags
Q4 Outpaces Analyst Estimates
The United States economy grew at an annualized rate of 5.7% according to the numbers released yesterday. While this certainly will be reviewed and revised between now and March, it is still a positive sign for an otherwise sputtering economy.
However, these numbers are coupled with a caveat. With the unemployment rate hitting 10% and looking to stay at that level during 2010, consumer...
December 2009
1 post
The Failure of Value at Risk
One of the most pressing matters facing the world of finance today is finding a way to measure and hedge risk. Previously, numbers and statistics was used to attempt to quantify risk into a single number or variable. This method has been exposed as inadequate. One of the culprits behind this inadequacy is Var.
The risk measure that most banks used, is referred to as Value at Risk (Var). Var has...
November 2009
3 posts
Is This a Recovery? Consumer Sentiment Sends Mixed...
These aren’t your father’s financial markets. Information, as it has with everything else in the world, is changing the face of finance forever. The power of the consumer has never been more apparent than during the recent economic downturn. During the holiday season, consumer confidence and spending will be analyzed as never before, as analysts attempt to figure out whether our...
The Path to Recovery: Changes to the MBS
The mortgage backed security (MBS) was, at the time of its conception, a brilliant way to create a new asset class while extending more credit for home buying. The originate-to-distribute model means that banks issue MBS securities with the intent to distribute them to investors, as opposed to taking on the risk themselves. Distributing MBS securities takes the risk away from the banks and spreads...
12 tags
Bear Stearns: The Catalyst for Calamity
“There isn’t such a thing as reality when dealing with the global economy. There’s no vault under Madison Avenue. [Even if it was] adequately capitalized, that didn’t matter once the momentum began, the downward perception spiral became reality. It’s a classic run on the bank, via the Internet.” Although history will have the final say, the fall of Bear Stearns may have marked the beginning of one...