December 27, 2010 – 3:27 pm
A NYT article by Susanne Craig spots Cantor Fitzgerald, one of the lead brokers on Wall Street, expanding into the gaming industry. They have a subsidiary, Cantor Gaming, that runs the books for sports betting operations and other activities. “Guys who trade Treasuries are doing it for basis points, and sports betting is not much [...]
December 23, 2010 – 8:50 pm
Felix Salmon of Reuters has an interesting post yesterday on the possible dynamics leading to a default on municipal debt. He was riffing on comments made by the banking analyst Meredith Whitney on 60 Minutes. What was interesting to me is how well he captured the strange dynamics behind a possible scenario in which multiple [...]
December 17, 2010 – 10:24 pm
The most recent issue of the Quarterly Journal of Economics has an interesting article by Dean Foster and Peyton Young on the gaming of compensation schemes by portfolio managers. They demonstrate that any compensation scheme based exclusively on performance, without conditioning on any information about the actual underlying investment strategy, can be gamed. It’s not [...]
December 17, 2010 – 1:28 pm
Last week we highlighted a WSJ article on the growing cash balances at companies. We pointed out that in some cases the right thing for the company to do is return that cash to shareholders. The WSJ’s Real Time Economics blog reports today on Federal Reserve data showing increased share repurchases by companies. Sadly, the [...]
December 12, 2010 – 9:55 pm
An interesting analysis of the US National Flood Insurance Program by Erwann Michel-Kerjan appeared in this Fall’s issue of the Journal of Economic Perspectives. One key issue in evaluating the program and its payouts versus premiums is assessing the probability of extreme events–always an issue in catastrophe insurance. Another key issue is incentives to game [...]
December 11, 2010 – 8:42 pm
The NYT ran a long piece by Louise Story describing how a few large banks operate to maintain their control of the OTC derivatives market against would-be competitors. It does a good job of giving the readers a feel for how difficult it can be to enter the market. But while one feels this, the [...]
December 10, 2010 – 1:06 pm
That’s the top headline in today’s WSJ, reporting on the continued growth in cash as a percentage of all corporate assets. The figure now stands at 7.4%. One obvious reason that cash is increasing is that The Great Recession makes some investment projects look less profitable. But that begs two key questions. First, the level [...]
December 8, 2010 – 9:53 pm
Wednesday’s FT has a story about the shuffling of US gas acreage among companies. Two things are happening simultaneously. First, the value of undeveloped shale properties has risen as the opportunities for profitable development become ever clearer. Second, while oil prices have climbed, natural gas prices have collapsed. Companies want to shift production to fields [...]
December 7, 2010 – 9:53 pm
Financial regulators are often in the position of attempting to proscribe or regulate certain types of trading activities. The Dodd-Frank financial reform legislation prohibits banks from proprietary trading. Futures regulators are often in the position of trying to distinguish hedging from speculating. The task of sorting the different types of activities can be difficult. Cynics [...]
December 6, 2010 – 10:44 pm
Monday’s WSJ has a story about a move by the new House Republican leadership to put pressure on state and local public-employee pension authorities. Buried inside the political fights is an important valuation question: what is the right discount rate to use when valuing the liabilities of a public pension plan? The Government Accounting Standards [...]
