Two thirds of a fine horse?

Not really. But the assets in Whistlejacket, the defaulted SIV sponsored by Standard Chartered, were liquidated yesterday, and reached an average price of 67.1 cents on the dollar according to Bloomberg. That means that anything more than 2 to 1 leverage in an off balance sheet funding vehicle is too much…

How much capital does a bank need?

Probably the best answer is the least amount that gives comfort and confidence to debt holders, regulators, and other stake holders. But that is a moving target. Over the last twenty years people like me have spent a lot of time trying to construct and improve capital models. At its simplest, a capital model uses […]

Two down, one to go

Jacqui Smith, possibly the least competent Home Secretary since Henry Brooke (although there in Blunkett to consider for that title too, and that is pretty tough competition), has already announced that she will not be going ahead with a massive snoop project (although she wants the same functionality provided privately). The cancellation of the id […]

Copula counterfactual

How different would the world be if David Li had written about a variety of different copulas rather than just the Gaussian one? (Do read the excellent Sam Jones piece that the link points to.)


A recent Bloomberg story reminded me that it has been months since I discussed the markets with a view to position taking. Sorry. So… It seems obvious that high quality corporate credit (ex Financials) is a good place to be, especially with the decline of the Libor/govy spread. I tend to view medium durations, around […]

Competence and the consumer

I had a nasty shock the other day. There is a snake’s head fritillary on my balcony that was looking rather nice, and I took a picture of it. The image was out of focus. Now, my digital camera is both sophisticated and perfectly capable of handling the conditions, so I wasn’t pleased. But I […]

Protect the worker, not the job

Jonathan Hopkin has a couple of good posts on job security, welfare, and the labour market here and here. He discusses the Danish solution to the problem that: Countries with flexible labour markets tend to grow faster, but Flexible labour markets produce large amounts of individual unhappiness when jobs are lost. They also tend to […]

Becoming French

Matthew Lynn, in a typically opinionated and wrong-headed piece on Bloomberg, thinks The British economy is becoming increasingly French. Why which he means It will have a huge tax burden to carry, a state that is the dominant actor in the economy, and a system whose resources are managed more by some kind of national […]

Darling, darling man

He’s actually done it. Top rate tax to rise to 50%. Well done Alistair. Update. OK, the continuation of any tax relief at all for pension contributions from higher earners is a disappointment, as is the pale green nature of what little he did do for the environment. Still, the budget is more bold than […]

More on models

From Daniel Kahneman, via A group of Swiss soldiers who set out on a long navigation exercise in the Alps. The weather was severe and they got lost. After several days, with their desperation mounting, one of the men suddenly realized he had a map of the region. They followed the map and managed […]

Quant funds and the field approximation

It has come to general attention recently that many quant funds have had a terrible few months: see here for more details. Specifically the momentum following funds have suffered badly from the crap rally of the last little while. What is going wrong? One way to see the issue is to consider a technique that […]

Payment for failure, German edition

From Bloomberg: Dresdner Bank AG, the unprofitable lender acquired by Commerzbank AG, was sued by the former head of capital markets at its investment banking unit over his severance pay… Dresdner in-house lawyer Matthias Woldter told the Labor Court that Neumann can’t seek the severance payment because his unit contributed 5.7 billion euros to the […]

Nuclear No Nos

Nuclear Power is not the answer. Two stories explain why. First, there is the waste. We simply do not know how to deal with it, how expensive that will be, or even if we will ultimately be successful. This story in the Guardian provides some more context: I was interested to learn that the most […]

Regulating small firms

The current furore over FSA regulation of building societies is interesting. A whistle-blower alleges that A culture of apathy and complacency marked the FSA in the period of its nadir, with anyone standing up against light-touch official policy criticised for rocking the boat and branded a troublemaker. I have no idea of the truth of […]

Population and the future

Population is a hugely emotive topic. It seems that few people want to be told that they should not have many children as they wish. And certainly the history of population control is littered with oppression. But, as David Attenborough points out The growth in human numbers is frightening. I’ve seen wildlife under mounting human […]

Reading Wells’ disclosures

Jonathan Weil has been over them carefully. Frankly, reading his article, one wonders (a) why the accounts were signed off and, (b) why anyone would want to buy any of the bank’s securities given these tricks.

Systems thinking in the Crunch

Edmund Phelps has a very good article in the FT which harmonises with many of the preoccupations of this blog. In countries operating a largely capitalist system, there does not appear to be a wide understanding among its actors and overseers of either its advantages or its hazards… Capitalism is not the “free market” or […]

Being Boring

I saw the Severn Bore over the Bank Holiday. It wasn’t a particularly big bore, as these things go, but it was still impressive. The oddest thing of all, though, was that the cows in the field we were in all lined up to look at it.

Strained, but not entirely silly banking system metaphor no. 152

Happy Easter to all. Deus Ex will return on Monday or thereabouts.

Taleb – 3/10 (and that is being generous)

Let’s score Nassim Taleb’s latest set of ex cathedra pronouncements: 1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Fair point. Score one. 2. No socialisation of losses and privatisation of gains. Exactly. Otherwise moral hazard is enormous and banking is profitable with little […]