• From of course.


    Sell-Side Research Analysts Are Destroying America, Apparently

    Here’s sort of a pleasing paper on equity research analysts. The background is basically that there’s this constellation of questions that reduce to “do public markets make companies Bad?,” and one of the main mechanisms by which that might happen would be if markets make companies focus on short-term earnings and shareholder distributions rather than […]

    / Jun 28, 2013 at 3:54 PM
  • You have underestimated me for the last time.


    Apparently Some People Pay Attention To Ratings Agencies

    Would you have predicted this? This paper investigates the impact of credit rating changes on the sovereign spreads in the European Union and investigates the macro and financial factors that account for the time varying effects of a given credit rating change. We find that changes of ratings are informative, economically important and highly statistically […]

    / Jun 17, 2013 at 9:41 AM
  • It's been too long, Googly-Eyed Pile Of Money.

    Banks, News

    Who Would You Rather Trust: Bankers Or Regulators?

    A simple model of banking regulation and, like, counter-regulation goes something like this: Regulators are conservative and dumb, and want to safeguard banks from bad risks even at the cost of preventing good risks, Bankers are aggressive and smart, and want to take lots of good risks even at the cost of taking some bad […]

    / May 7, 2013 at 12:11 PM
  • This is one of those where there's no particularly appropriate picture so we can at least look at Raj Rajaratnam in happier times.


    Sell-Side Research Analysts Use Their Networking Skills For Good

    Yesterday’s delightful insider trading settlement with Richard Moore, the CIBC banker who deduced the identity of a buyout target through sheer clingyness, is a good reminder that insider trading is weird. Nobody told Moore any material nonpublic information, but he got in trouble anyway. It’s also a good reminder of this new-ish (March 2013) paper […]

    / Apr 17, 2013 at 10:46 AM
  • The units are weird I guess? They're "pre-crisis standard deviations," meaning the standard deviation of each statistic measured up to 2007.


    Senate Bill May Solve Too-Big-To-Fail By Shrinking Banks By 70%

    The Brown-Vitter bill, which two senators plan to introduce in an effort to dramatically raise bank capital requirements, has caused a range of fairly predictable reactions, and a few strange ones. Here, for instance, is a lobbyist complaining about “raising required capital to comically high levels,” but the comedy is perhaps elusive. But one stylized […]

    / Apr 8, 2013 at 3:20 PM
  • I dunno. Michael Dell. He's a guy.


    Short-Term Shareholders Aren’t Looking Out For The Long Term, And Vice Versa

    Yesterday we talked a little about Dell and its vague desire to escape the short-term obsessions of the public equity market yesterday. Today I came upon this new paper by Harvard Law professor Jesse Fried, about how long-term shareholders are really just as bad as the short-term ones. The argument is: companies like to talk […]

    / Mar 28, 2013 at 1:07 PM
  • give them to me


    Apple Not The First Company To Think It Can Make Better Use Of Its Money Than David Einhorn

    So there’s this fight over what Apple should do with its money and I think it boils down to: Lots of people think that Apple is undervalued, Some of those people say: “so, since the market undervalues you, a dollar in your hands is valued less than a dollar in shareholders’ hands, and since you […]

    / Feb 13, 2013 at 12:51 PM
  • Figure 4


    Banks May Have Manipulated Euribor Out Of Modesty

    The Libor scandal’s little brother, the Euribor scandal, is different from the Libor scandal in one important way. With Libor, banks are asked where they can borrow, and so if they can borrow at 2.5% and submit 2.4% then they’re lying. With Euribor, banks are asked where a prime bank can borrow, and so if […]

    / Feb 1, 2013 at 12:12 PM
  • He & the dog may just have to be my pictorial shorthand for crappy corporate governance, like Bob Diamond is for Libor manipulation.


    Earnings-Manipulating Managers Just Want To Make Shareholders Happy

    I’m generally fond of companies that find creative ways to access the public equity markets while not giving away all the “rights” that traditionally go to “owners” of “companies.” I mean, you want money, you ask people for money, you give them the terms that you need to give them to get the money: what […]

    / Dec 18, 2012 at 2:05 PM
  • Gray = TAF-time


    Receiving Government TAF Funding Was Just The Wakeup Call Banks Needed To Get Their Acts Together

    While we’re celebrating successful bailouts I suppose it’s worth looking at this VoxEU post and related paper from two Swiss economists about the Fed’s Term Auction Facility, which provided short-term secured funding to U.S. banks who might otherwise have trouble getting such funding between December 2007 and March 2010. The authors ask the questions that […]

    / Dec 12, 2012 at 9:55 AM
  • Also, just, is this good or bad? Like on the one hand 5% up-front(ish) for something where you have no(ish) more risk is pretty good. On the other hand 5% edge on a 30-year product where you do a lot of underwriting work and retain some risk for, like, ever, isn't *that* amazing is it?


    Banks Making Up For Bad Old Mortgages By Charging More For Good New Ones

    There are lots of things to worry about in the world and somewhere on the list is the fact that, while yields on agency mortgage-backed securities are really really really low, the rate you’ll pay for a new mortgage is only really low, so a couple of reallys have fallen off a truck somewhere. This […]

    / Dec 3, 2012 at 11:50 AM
  • The color use is not especially aesthetically pleasing but it *works*, no? Red is bad, easy.


    Ben Bernanke Got To Hear About Adorable, Though Hypothetical, Dogs At Jackson Hole

    Ben Bernanke gave another Augustinian give-us-QEn-but-not-yet* speech at Jackson Hole today and you could go read it but honestly why would you, you know what it says, which is “everything is bad, but not as bad as it could be, and we want to make it a bit better, but only once it’s gotten a […]

    / Aug 31, 2012 at 1:48 PM
  • I submit to you that this chart is staggering. The higher the price, the more stock you buy, in a near-perfect buy high - sell low. Also the repurchases are % of market cap, meaning that this is something of an understatement: at higher prices not only do you buy more shares but you spend more per share.


    Shocking Theory Suggests That Companies Buy Low, Sell High When Trading Their Own Stocks

    A thing I used to do was go to companies and try to convince them to do various exotic flavors of share repurchase. This is in outline a thing that all bankers try to do – go to companies and (1) try to get them to do things and (2) if that’s going well, upsell […]

    / Aug 24, 2012 at 4:23 PM
  • This is a graph of "Bank Total Risk" as measured by "6-Months Rolling Risk Measures." You could have questions about these measures, which are a combination of (1) stock market measures (basically the vol of a bank's stock) and (2) balance sheet measures like Z-scores. So you could ask yourself "does this reflect the bank's risk-taking, or the market's perception of the bank's risk, and are those meaningfully different things to measure?" ANYWAY. Up is riskier.


    Don’t Rely On Rating Agencies To Tell You Who Will Get A Bailout

    A thing I sometimes enjoy is reading research papers examining questions like: if you are a bank, and you are likely to be bailed out, do you take more risks than a bank all on its lonesome, and once you’ve been bailed out, what then? We’ve looked at a BIS paper on international banks, which […]

    / Aug 21, 2012 at 12:09 PM
  • Buffett vs. Robo-Buffett. This is Figure 3, Panel B, of the paper, *ever-so-slightly* modified.


    Cliff Asness’s Staff Built Him A Robot Warren Buffett

    Do you want to invest like Warren Buffett? Sure you do. You know who will tell you how? Strangely, some guys at AQR:* [W]e create a portfolio that tracks Buffett’s market exposure and active stock-selection themes, leveraged to the same active risk as Berkshire. We find that this systematic Buffett-style portfolio performs comparably to Berkshire […]

    / Aug 20, 2012 at 6:02 PM
  • It's certainly *possible* that one or more of these people is a mutual fund manager, and/or dapper.


    Mutual Fund Managers Get Paid For Picking Good Stocks Only When It’s Worth It

    Mutual funds are kind of weird in that they basically aren’t allowed to get paid for performance, so they charge investors a flat percentage of assets under management, so for mutual fund managers looking dapper on CNBC is often more profitable than sitting in your office researching stocks. Still – and perhaps perversely – performance […]

    / Aug 16, 2012 at 5:09 PM
  • Banks, News

    Bailed-Out Banks Were, Are, Will Always Be Riskier Than Non-Bailed-Out Banks

    The banking system is a machine to transform risk: people put their money into a bunch of risk-free-ish-or-so-they-think banks, and those banks lend that money to risky businesses, and the banks make money on their ability to price that risk appropriately and/or on their ability to get a government bailout when they price it inappropriately. […]

    / Aug 1, 2012 at 10:00 AM
  • News

    Mutual Fund Managers Have The Wrong Skills

    We’ve talked a bit before about how there’s a booming academic business in papers finding that investment managers do or do not add value versus non-managed alternatives like passive indexing or keeping your money under your pillow and just burning a constant percentage of it every month. Part of why that’s a thing is that […]

    / Jun 25, 2012 at 12:56 PM

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