Interesting points.
http://docs.edhec-risk.com/mrk/090210_Publication/EDHEC_PP_Madoff_Riot_of_Red_Flags.pdf
Tuesday, February 10, 2009
Jeremy Grantham: Whats Wrong with Economic Policy
Here's a link to an interesting article that quotes Jeremy Grantham, a well respected institutional investor. It's a great synopsis of what is wrong with the economic paradigms and mathamatical models that the dominant economic theorists subscribe.
http://www.fa-mag.com/blog1/evan-simonoff/3793-grantham-2009-will-be-the-worst-year-of-our-lives.html
Below is a quote from Grantham from the link above:
"In their desire for mathematical order and elegant models, the economic establishment played down the inconveniently large role of bad behavior, career risk management, and flat-out bursts of irrationality. The dominant economic theorists so valued orderliness and rationality that they actually grew to believe it, and this false conviction became increasingly dangerous. It was why Greenspan and Bernanke were not sure that bubbles —outbursts of serious irrationality—could even exist. It was why Bernanke, who had studied the bubble of 1929, could still not see it as proof of irrationality and could still view the Depression (à la Milton Friedman) as a mere consequence of incredibly bad, easily avoidable policy measures. Of more recent importance, it was why Bernanke could dismiss a dangerous 100-year bubble in U.S. housing as being nonexistent. It was why Hyman Minsky was marginalized as an economist despite his brilliant insight of the “near inevitability” of periodic financial crises. It was why the suggestion in academic circles of stock market inefficiencies, let alone major dysfunctionality, was considered a heresy. It was why Burton Malkiel could rationalize the 1987 crash as being an efficient response to 12 or so triggers. These triggers, however, had a trivial weakness: seasoned portfolio managers at the time had never even heard of most of them. Never underestimate the power of a dominant academic idea to choke off competing ideas, and never underestimate the unwillingness of academics to change their views in the face of evidence. They have decades of their research and their academic standing to defend. The incredibly inaccurate efficient market theory was believed in totality by many of our financial leaders, and believed in part by almost all. It left our economic and governmental establishment sitting by confidently, even as a lethally dangerous combination of asset bubbles, lax controls, pernicious incentives, and wickedly complicated instruments led to our current plight. “Surely none of this could happen in a rational, efficient world,” they seemed to be thinking. And the absolutely worst aspect of this belief set was that it led to a chronic underestimation of the dangers of asset bubbles breaking—the very severe loss of perceived wealth and the stranded debt that comes with a savage write-down of assets. Well, it’s nice to get that off my chest once again!"
Here is also a link for info on Mr. Grantham: http://en.wikipedia.org/wiki/Jeremy_Grantham
http://www.fa-mag.com/blog1/evan-simonoff/3793-grantham-2009-will-be-the-worst-year-of-our-lives.html
Below is a quote from Grantham from the link above:
"In their desire for mathematical order and elegant models, the economic establishment played down the inconveniently large role of bad behavior, career risk management, and flat-out bursts of irrationality. The dominant economic theorists so valued orderliness and rationality that they actually grew to believe it, and this false conviction became increasingly dangerous. It was why Greenspan and Bernanke were not sure that bubbles —outbursts of serious irrationality—could even exist. It was why Bernanke, who had studied the bubble of 1929, could still not see it as proof of irrationality and could still view the Depression (à la Milton Friedman) as a mere consequence of incredibly bad, easily avoidable policy measures. Of more recent importance, it was why Bernanke could dismiss a dangerous 100-year bubble in U.S. housing as being nonexistent. It was why Hyman Minsky was marginalized as an economist despite his brilliant insight of the “near inevitability” of periodic financial crises. It was why the suggestion in academic circles of stock market inefficiencies, let alone major dysfunctionality, was considered a heresy. It was why Burton Malkiel could rationalize the 1987 crash as being an efficient response to 12 or so triggers. These triggers, however, had a trivial weakness: seasoned portfolio managers at the time had never even heard of most of them. Never underestimate the power of a dominant academic idea to choke off competing ideas, and never underestimate the unwillingness of academics to change their views in the face of evidence. They have decades of their research and their academic standing to defend. The incredibly inaccurate efficient market theory was believed in totality by many of our financial leaders, and believed in part by almost all. It left our economic and governmental establishment sitting by confidently, even as a lethally dangerous combination of asset bubbles, lax controls, pernicious incentives, and wickedly complicated instruments led to our current plight. “Surely none of this could happen in a rational, efficient world,” they seemed to be thinking. And the absolutely worst aspect of this belief set was that it led to a chronic underestimation of the dangers of asset bubbles breaking—the very severe loss of perceived wealth and the stranded debt that comes with a savage write-down of assets. Well, it’s nice to get that off my chest once again!"
Here is also a link for info on Mr. Grantham: http://en.wikipedia.org/wiki/Jeremy_Grantham
Saturday, February 7, 2009
internship opportunity
Half-time intern (unpaid) wanted with Excel and statistical package experience and interest in the investment industry.
Based in lower Manhattan, the company is a fast-growing provider of quantitative financial health data output by our proprietary and predictive models. We are seeking a bright and energetic person with Excel and stat package expertise and interest in the investment industry who is willing to work on an unpaid basis for a three-month period. Duties will include a combination of research, data collection, and marketing support with statistical analysis and testing. The company has no policy against providing references and does not preclude the possiblity of paid employment in the future. Please contact Herb Blank at 646-233-4598 or herbert.blank@rapidratings.com if you have an interest.
Based in lower Manhattan, the company is a fast-growing provider of quantitative financial health data output by our proprietary and predictive models. We are seeking a bright and energetic person with Excel and stat package expertise and interest in the investment industry who is willing to work on an unpaid basis for a three-month period. Duties will include a combination of research, data collection, and marketing support with statistical analysis and testing. The company has no policy against providing references and does not preclude the possiblity of paid employment in the future. Please contact Herb Blank at 646-233-4598 or herbert.blank@rapidratings.com if you have an interest.
Wednesday, January 28, 2009
When: Wednesday, February 11, 2009
Time:
• 7:45AM – Registration
• 8:00AM – Breakfast Briefing, courtesy of Capgemini Financial Services SBU
Where:
Marriott Marquis Hotel, 5th floor foyer
1535 Broadway, NY, NY 10036
Speaker: Shane McGriff, Vice President, Enterprise Risk Services, Capgemini Financial Services SBU
Topic: How Leading Global Financial Institutions are Harnessing Enterprise Risk Data for Competitive Advantage
Synopsis: • The Enterprise Risk Framework
• The Centralized Risk Dictionary and Model
• Risk Data Quality
• Risk Intelligence Applications
• Counterparty Exposure, Stress Testing and other critical solutions
Fee: Free
Note: You must be a member of GARP in order to register. Please click here to join our organization, free of charge.
Click here to register for the event.
This Breakfast Briefing is part of GARP’s Annual Convention. GARP’s 2009 Convention is the risk management event of the year, featuring some of the world’s leading professionals, with attendees from across the world. Join the global, leading risk specialists to discovering the latest revival techniques on our road to recovery. With 10 Tracks, 4 Workshops and 1 Forum, GARP 2009 has something for everyone track that is specifically tailored to you.
Click here to learn more about GARP’s 10th Annual Risk Management Convention.
Time:
• 7:45AM – Registration
• 8:00AM – Breakfast Briefing, courtesy of Capgemini Financial Services SBU
Where:
Marriott Marquis Hotel, 5th floor foyer
1535 Broadway, NY, NY 10036
Speaker: Shane McGriff, Vice President, Enterprise Risk Services, Capgemini Financial Services SBU
Topic: How Leading Global Financial Institutions are Harnessing Enterprise Risk Data for Competitive Advantage
Synopsis: • The Enterprise Risk Framework
• The Centralized Risk Dictionary and Model
• Risk Data Quality
• Risk Intelligence Applications
• Counterparty Exposure, Stress Testing and other critical solutions
Fee: Free
Note: You must be a member of GARP in order to register. Please click here to join our organization, free of charge.
Click here to register for the event.
This Breakfast Briefing is part of GARP’s Annual Convention. GARP’s 2009 Convention is the risk management event of the year, featuring some of the world’s leading professionals, with attendees from across the world. Join the global, leading risk specialists to discovering the latest revival techniques on our road to recovery. With 10 Tracks, 4 Workshops and 1 Forum, GARP 2009 has something for everyone track that is specifically tailored to you.
Click here to learn more about GARP’s 10th Annual Risk Management Convention.
Citi sale of Smith Barney
Selling 51% of Smith Barney only makes sense if Citigroup is going to sell 100% of Citibank (i.e., the rest of the firm) as well.We know, or at least think we know the following.
Citi isn't desperate for capital. They just got a huge chunk from us taxpayers.
They aren't getting much cash in this deal, reportedly less than $3 billion. A pittance in the scheme of Citigroup.
1)This doesn't unload any troubled assets.
2)Smith Barney is a reliable earnings producer.
3)Selling Smith Barney doesn't solve any of their problems. It neither raises any capital to speak of, nor does it unload bad assets.
And why sell now? Supposedly they are going to book some $10 billion in gains on the sale, but so what? No one is fooled into thinking that's real capital right? Valuation on the brokerage unit is got to be at all-time lows!
In fact, by selling Smith Barney, Citi is giving away deposits. Many Smith Barney clients use Citibank deposit accounts as a sweep vehicle. I haven't seen numbers on this, but a friend of mine who works confirms this is very common.
Citigroup isn't doing this to focus on its classic banking division, because Citi has been more of a investment and commercial bank than a retail bank for at least 15 years. This would be reversing a generation's worth of "progress" toward transforming Citibank. Citi doesn't have the branch network to suddenly become a serious competitor with Bank of America or Wells Fargo.
But it all starts to make sense if you assume that the rest of Citi is also for sale. Say the buyer is Goldman Sachs, who doesn't want Smith Barney's 14,000 brokers or their back office or their compliance headaches, etc. Goldman just wants the big fat bank and its deposit base to give them secure funding. To me I'd rather see Goldman buy up smaller banks with less baggage, but maybe Goldman expects some government help?
I just have the feeling there is more going on here than just Smith Barney.
Citi isn't desperate for capital. They just got a huge chunk from us taxpayers.
They aren't getting much cash in this deal, reportedly less than $3 billion. A pittance in the scheme of Citigroup.
1)This doesn't unload any troubled assets.
2)Smith Barney is a reliable earnings producer.
3)Selling Smith Barney doesn't solve any of their problems. It neither raises any capital to speak of, nor does it unload bad assets.
And why sell now? Supposedly they are going to book some $10 billion in gains on the sale, but so what? No one is fooled into thinking that's real capital right? Valuation on the brokerage unit is got to be at all-time lows!
In fact, by selling Smith Barney, Citi is giving away deposits. Many Smith Barney clients use Citibank deposit accounts as a sweep vehicle. I haven't seen numbers on this, but a friend of mine who works confirms this is very common.
Citigroup isn't doing this to focus on its classic banking division, because Citi has been more of a investment and commercial bank than a retail bank for at least 15 years. This would be reversing a generation's worth of "progress" toward transforming Citibank. Citi doesn't have the branch network to suddenly become a serious competitor with Bank of America or Wells Fargo.
But it all starts to make sense if you assume that the rest of Citi is also for sale. Say the buyer is Goldman Sachs, who doesn't want Smith Barney's 14,000 brokers or their back office or their compliance headaches, etc. Goldman just wants the big fat bank and its deposit base to give them secure funding. To me I'd rather see Goldman buy up smaller banks with less baggage, but maybe Goldman expects some government help?
I just have the feeling there is more going on here than just Smith Barney.
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