Happy New Year to you all

Education, education, education

Consider three recent news items. We begin with France: Sarkozy unveils €35bn ‘big loan’ boost for French universities and museums Then two from the UK. First Peter Mandelson cuts higher education funding by £500M and proposes shorter, cheaper ‘degrees’. (The original letter can be found here.) And — Call for universities to charge well-off students […]

Choosing Rita

There were some treats from the BBC this Christmas: one of my favourites was a delightful production of Willy Russell’s Educating Rita on Radio 4, with Bill Nighy and Laura Dos Santos. Much of the dialogue is great, but one section particularly resonated with me. Rita is talking about her husband: He thinks we’ve got […]

How much for that Coco in the window?

An interesting observation from Financial Crookery about the Lloyds Cocos: the 15% ECNs were indicated at 122/123 on minimal volumes, compared to 110/112 for the previous 13% series. Absent the EU-mandated 2 year coupon pass for the 13% security for “burden sharing”, the 13% notes would have been trading around 132/133, so credit markets value […]

10 predictions to end the year

Posting will probably be somewhere between light and non-existent from here to year end, so here are few predictions to mull on. They are in the tradition of Saxo Bank’s 10 Outrageous Predictions for 2010, although some of them are a little less far into the tail. I don’t expect any of them to come […]

Audit Goldman every day

This is a lovely idea from Naked Capitalism. First the build up, originally in the Independent: Goldman Sachs has threatened the UK Treasury with plans to move up to 20 per cent of its London-based staff to Spain in a standoff over tax and bonuses. Now the punchline: The Bank of England has indicated that […]

Indeterminate cheer from Basel

The market’s reaction to the latest Basel committee document was swift and severe: bank share prices fell significantly. However, a close reading of the proposals suggests that those falls might be overdone. Here’s the good news/bad news skinny: (where I’ve used ‘good’ to mean ‘good for the banks’ – the skeptical might well take that […]

The simplest risk management error

Financial risk is the risk of loss. That implies that you know the current value of your portfolio. After all, saying that you might lose $10M from market moves is not that helpful if the portfolio is already worth $20M less than you think it is. Valuation, then, is absolutely fundamental to financial risk management. […]

Happy Christmas from the Basel Committee…

…now get more capital. That seems to be the message anyway. The press release is here, with links to two consultative papers. Full analysis follows next week, but on first glance there does not seem to be anything particularly unexpected in the document: leverage ratios, countercyclical capital requirements, high standards of liquidity risk management, and […]

Monoline sues bank: home owners wonder if they can boo both sides

MBIA, once one of the most important monoline insurers, is sueing Credit Suisse for pervasive and material misrepresentation of the risk that they insured on RMBS. From Bloomberg via FT alphaville: A Credit Suisse Group AG unit was accused in a lawsuit by MBIA Insurance Corp. of making fraudulent misrepresentations about mortgage-backed securities… [in a] […]

Recovering your anger, fixing the system

This table, from Yahoo via the Big Picture, might well at least do the first part. These are just stock holdings, not total wealth. One should probably assume that the people who run Goldman have some level of financial sophistication and understand the importance of diversification, so their whole wealth is unlikely to be in […]

A second

Parachutists sometimes count “A thousand and one, a thousand and two, …” since it takes roughly a second for each increment: it provides, apparently, a reasonably accurate measure of how fast the ground is rushing up towards you. So, this is post number a thousand and one, and thus by the peculiar analogising that you […]

Kilopost: looking back, looking forward

This is post one thousand on Deus Ex Macchiato. Moreover, it is the traditional time of the year for reviews and previews. So let’s take a longer perspective, at least for today. The loose – at times so loose as to be completely invisible – thread holding the blog together was how the rules of […]

Northern Rock equity is worth nothing

The tax payer can thank the Gods that we have the right result. According to the FT: Andrew Caldwell, a partner at BDO Stoy Hayward, the accountancy group, who was appointed by the Treasury last year to determine whether investors should qualify for a pay-out, said there was no value in Northern Rock’s shares.

The coming crisis in your Christmas reading

Paul Kedrosky provides me with a good opportunity to do something my publisher has patently failed to do with any diligence – promote my book. He points out that: There has been an explosion in books published about the ongoing financial crisis. From just two books published per month back in June of 2008 we […]

The Too Big To Fail Premium

A few weeks ago, I discussed the idea that we could reduce both moral hazard and the profitability of banking by charging banks for the cost of the option the bank has to be rescued by the state. In related work, Elijah Brewer and Julapa Jagatiani at the Philadelpha FED have attempted to estimate how […]

Being Balanced

In Sunday’s Observer, Will Hutton makes some poignant observations: The City of London is now too big and too risky for a country our size. It is not just that bailing it out has cost £850bn, as the National Audit Office reported, and that the recession it imposed has led to the biggest ever increase […]

Boasting about your lack of interest in your job

Why do both Felix Salmon and Paul Krugman think that it is OK to say thank bank regulation is boring? Aren’t these people actually paid to take an interest in it? If supposed experts can’t rouse any interest in the most fundamental topic in finance right now, what hope is there? Update. The Epicurean Dealmaker, […]

Bonus post

The vexed topic of bonuses is provoking lots of people: see for instance here for a news story about windfall taxes, or here for Alistair Darling’s latest. A lot of ink has been split and a lot of pixels lit on this topic. So just two thoughts from me. First, if banks did not make […]

Dodd gets it

From Naked Capitalism: in a sudden and uncharacteristic burst of courage, Connecticut Senator Chris Dodd has proposed a federal subsidy for vampire hunting. “Nothing brings a community together like a vampire hunt,” commented Senator Dodd. “Moreover, a vampire hunt requires serious tools. You don’t want to break into that crypt with a cheap stake that […]