As an exercise, I’d like to take a look at an article in today’s Observer and deconstruct the text. The journalists responsible, Heather Stewart and Nick Mathiason, don’t come out of it smelling of roses. Let’s begin near the start of their article with: Britain’s banking sector, once a bastion of financial rectitude overseen by [...]
Entirely predictably, the British Bankers Association has called for an overhaul of the banking regulatory system in the wake of the Northern Rock crisis while attacking Mervyn King. The BBA is acting here as an industry lobbying body so we should not be surprised to find some special pleading, and indeed we find the usual [...]
From Bloomberg: “Moody’s does not structure, create, design or market securitization products,” Kanef [group managing director, asset finance group, Moody's Financial Services] said. “We do not have the expertise to recommend one proposed structure over another, and we do not do so.” Update. After that confidence building statement, we have the FT reporting that a [...]
Over at the FT there is a slightly sensational article Libor’s value is called into question. Apparently it surprises the writer than an average rate like Libor is not everyone’s cost of funds. Surprise, some banks are funding significantly sub-Libor at the moment, and some way, way over. The FT raises the concern that some [...]
Over at Overcoming Bias, there is a discussion of model checking in the economics literature: One thing that bugs me is that there seems to be so little model checking done in statistics. Data-based model checking is a powerful tool for overcoming bias, and it’s frustrating to see this tool used so rarely. [...] But, [...]
If I had seen this at the time, it would have been the strongest sell signal imaginable.
Stolen more or less wholesale from Naked Capitalism: Dani Rodrik has [...] set forth the conditions that have to be in place for trade liberalization to enhance economic performance (short answer, a lot); in another [post], he reviewed the analyses that claimed that our current trading system produced large economic gains and found the logic [...]
Two comment articles from recent days focus on faith schools. First on Thursday Zoe Williams argued against the state funding of faith schools: We all [...] have the odd qualm here and there about Islamic schools, and whether they invest proper rigour in the propagation of gender equality, but Christians, we think … now they’re [...]
This is my favourite quote of the year so far. It’s in the running for quote of the decade. Man is basically lazy. Innovative and complex incentive and disincentive structures must be continually created and refined to compel any desirable behavior (including the absence [of] self-destructive behavior). Excessive gaming of the system will be employed [...]
Paul Krugman uses the term ‘Wile E. Coyote’ moment for when traders find a currency level is unsupported by fundamentals and it drops precipitously. Certainly some currencies display very fat tails: they tend to have long periods of stability, followed by one or more greater than five s.d. moves. (The interested reader may at this [...]
Melvyn might not have convinced everyone in his testimony today, but at least people aren’t publishing stuff like this about him. Funny, though, no? (From Long or short capital.)
(With apologies to Fred Brooks.) So Jose has gone. That’s hardly a surprise, although the timing is interesting. English football will be better off without his swaggering arrogance. He typifies the myth that management is the business of heroes, that the individual is all important. The boring reality is that it is teamwork that is [...]
It will be very interesting to see how bank supervisors react to the current credit crunch in the longer term. We are less than a year into the new Basel 2 Capital Accord, and already it looks flawed in a number of areas. This is hinted at in the FT today. At very least in [...]
Today the Bank of England said it will lend £10B to commercial banks in an emergency three-month auction and widen the range of securities it accepts as collateral to include mortgage backed securities. That should bring the 3 month swap spread in. The question is, why have they caved in to the banks after holding [...]
Be careful what you embrace, particularly in the area of valuation policy. According to Bloomberg: Absolute Capital Management Holdings Ltd. will stop clients from pulling money from eight hedge funds with $2.1 billion of assets after co-founder Florian Homm quit. Investors will be asked not to remove cash for a year as the firm restructures [...]
A few things have made me think about democracy recently. First the Olympic Delivery Authority are sticking to the idea that the new Olympic stadium should only be used for athletics – despite a bid from West Ham to use it as a football stadium and athletics use requiring a downsizing of the building from [...]
Here is the edifice that houses the Lutine Bell in Lloyds of London. Traditionally the bell was sounded to signal bad (or good) news in the insurance market. Talking of bad news, two Bloomberg reporters seem to have it in for Mervyn King: Two days after King, 59, told lawmakers on Sept. 12 that central [...]
Depending on exactly how you calculate it, the geographical centre of the UK is somewhere round Accrington in Lancashire. On the other hand, the political centre is London. As I was coming back into the capital on Sunday night, the idiocy of this came home to me. The entire South East is crowded, its infrastructure [...]
The BBC doth protest too much. First: Shares in one of the UK’s largest mortgage lenders, Northern Rock, have fallen 32% after it had to ask the Bank of England for emergency funding. The next paragraph however: But experts say it does not mean Northern Rock, which has £113bn in assets, is in danger of [...]
From today’s FT: Continued high overnight interest rates forced the Bank of England to offer £4.4bn additional cash to commercial banks on Thursday morning, in an effort to normalise the money markets. A decent sized conduit or SIV is £5B so the bank’s extra liquidity is less than one conduit’s worth. Is anyone else surprised [...]
I sometimes don’t mind a stylish, considerate rip-off. My shaving foils are like that. They are eye-wateringly expensive for what they are, but I put up with them because they do actually shave reasonably well, and the product doesn’t go out of its way to point out how much I am being gouged. My HP [...]
The term ‘money market’ is pretty unhelpful in current conditions. There isn’t one. There is a short term Libor market, which is decidedly interesting at the moment, and a short term govy market, which is awash with liquidity at least in some currencies. These two markets have decoupled. The FT, reporting on a speech by [...]
Today’s FT discusses the current problems for SIVs and conduits and identifies two main ones: They have been hurt as funding in short-term debt markets has seized up. Simultaneously, the values in the kinds of assets they hold have fallen as investors deserted all asset-backed bonds in repsonse to fears of contagion from the US [...]
Probably not, but it surely helps. Martin Wolf in the FT says: Good reasons can still be advanced for shifting exposure from the balance sheets of thinly capitalised banks to those of better capitalised outside investors. The theory was that risk would thus be shifted on to those best able to bear it. The practice [...]
Or perhaps it is. I’ve just got around to looking at FASB Statement 157 on Fair Value from the tail end of last year. It is remarkably sensible. The definition of fair value is more or less the same as before The price that would be received to sell an asset or paid to transfer [...]
There were some interesting remarks from James Hamilton at the FED Jackson Hole meeting. My favourite part is: The instrument of monetary policy that we tend to think of first is the time path of short-term interest rates. It’s natural to start there, because it’s easy to quantify exactly what the Fed is doing. But [...]
For a CDS on a corporate loan or bond, restructuring is often a credit event so in a CDO of corporate debt, adverse modification of the loan causes a loss which flows up the waterfall (albeit sometimes a minor one if the restructuring is purely a technical one). This is not true for a CMO [...]
Or perhaps you might. It is funny.
