Osbourne the loser

The occasion of completely expected but nonetheless dismal news on the state of the UK economy makes me wonder how the oik Osbourne fares compared with his peers. So without ado, here’s my (utterly objective and indisputable) chancellor comparison table from 1970 to today: Name From To Marks (/10) Anthony Barber 25 July 1970 28 […]

The manager as deity

Aditya Chakrabortty writing in the Guardian rightly points out the dangerous tendency for CEOs to act more like cult leaders than managers. He gives Steve Jobs as the architypical example of this tendency: Jobs is part of a widespread trend among chief executives to put themselves forward not as managers, but as leaders. Follow the […]

The price of Knightian uncertainty…

… is paid in lost growth. Here’s my take on the balance sheet recession vs. recalc theories of the US jobless recovery. First, the background (HT Rortybomb): The balance sheet recession view] fails to recognize that for every debtor there must be a creditor. Thus, for every debtor who is cutting back on spending in […]

Why Spurs must win

It pains me to write that title, but in this particular case (and probably only in this case), they should. Their bid for the olympic stadium is worth far more than West Ham’s. In this era of austerity, and without any need for — or ability to fill — a huge athletics stadium, we should […]

The cost of now

From a speech by President Eisenhower (ht Felix Salmon): Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms in not spending money alone. It is spending […]

Out of the winter of ignorance…

…with Charlie Munger: Berkshire’s whole record has been achieved without paying one ounce of attention to the efficient market theory in its hard form. And not one ounce of attention to the descendants of that idea, which came out of academic economics and went into corporate finance and morphed into such obscenities as the capital […]

Why (UK) clearing members should be simple

Very roughly, in the US they have a agent based model of derivatives clearing with the FCM acting as agent for the client, while in Europe we have a principal based model. This is partly for historical reasons: only principal to principal transactions achieved the desired netting in the UK. If you combine this, though, […]

What do you do if people don’t want the risk?

Laurence Kotlikoff writing for Bloomberg has a suggestion for reform of the US mortgage market: Step 1: Set up a new government agency — the Federal Financial Authority. The FFA would hire companies to verify, rate, appraise and disclose mortgage applications. These contractors would work exclusively for the FFA, eliminating any conflict of interest. Liar […]


I promise to address the comments to the repo collateral post shortly but meanwhile, I wanted to share this lovely illustration of the convexity of income inequality from the New York magazine. Take Brad Pitt. Compared to your average schlub, Brad Pitt appears totally rich. He was No. 30 on Forbes’s list of the highest-paid […]

The summer will come, won’t it?

Reverse converts do what they say on the tin

Yep, they reverse profit into loss for the investor, or so Bloomberg reports. Now admittedly with reverse converts the key issue is selecting the strike, given the smile for the stock: get that wrong, and the product will suck. Sadly it seems that that happened all too often.

Money multipliers and collateral

Repeat after me, the only entity that can create money is the central bank. OK, that is a bit of a generalisation, but it is close enough and certainly a lot closer than the misguided notion that repo somehow involves a money multiplier. Let me explain. Suppose I have a bond worth $100 and which […]

Is growth the only answer?

It is a common trope of thrillers that the baddy hates humanity. If the thriller is also science fiction, then the baddy might well try to kill absolutely everyone. Well trodden paths include time travelling back to eliminate the earliest humans or genetically engineering something to take the whole species out. What we are meant […]

Secret seizure

The Washington Post helpfully points out something in Dodd-Frank that I had not focussed on: The Treasury can petition federal district courts to seize not only banks that enjoy government support but any non-bank financial institution that the government thinks is in danger of default and could, in turn, pose a risk to U.S. financial […]

Five conviction trades for 2011

It is the time of year for this kind of things so here’s my amateur global macro picks for 2011. 1. Eurozone fears are overdone. Many market participants are in my view overestimating the likelihood of Eurozone breakup, especially in the short to medium term. Long the Spain/Germany spread. 2. The developed equity markets are […]

Blow them out

Bloomberg tells us that: Warren Buffett’s Berkshire Hathaway Inc. sold $1.5 billion of mostly fixed-rate debt to retire floating-rate notes at a time when government bond yields are rising and the U.S. is showing signs of economic improvement. As so often, Warren is right. It seems likely that rates are only going one way this […]

Happy New Year

Best wishes to you where ever you journey in 2011.