Friday, May 22, 2009

Catching up Newsletter style

Catching up with some articles I had saved on Desktop...

Bloomberg (with the help of NYU's Thomas Pilippon has an interesting article on how lost Wall Street jobs impact "Main Street".
"The biggest Wall Street crisis since the Great Depression isn’t just a setback for New York or bankers. The finance industry’s contraction may wipe out $185 billion in wages and profits, or $600 for every man, woman and child in the U.S., according to Thomas Philippon, a finance professor at New York University’s Stern School of Business. The trail of reduced income affects car mechanics, waiters, sports teams, hair stylists, jewelers, housecleaners and watch repair shops."

The WSJ reported recently on Jim Cramer. Or more specifically on another study of Cramers' performance this one by Bolster and Trahan. As with other studies, the gist is that he does not outperform.
"“If we adjust for his market risk, we come up with an excess return that is essentially zero,” Bolster said, adding that “zero,” in this case, means his returns are roughly in line with the risk he’s taking on. “He’s pulling his own weight with respect to the risks that his picks represent,” Bolster said. In the paper, Bolster and fellow finance professor Trahan conclude that “we find inconsistent evidence of Cramer’s ability to add value through security selection.”"
WhiteCollarFraud (I am not kidding, that is the name of the blog, and it is by a convicted felon (and former CPA ) no less!) reports on the uh, irregular accounting practices at I won't go into the details (essentially accounting irregularties that even introductory accounting students would probably pick up on), but found that earnings management and changing of audit firms interesting.

SSRN-Green Jobs Myths by Andrew Morriss, William Bogart, Andrew Dorchak, Roger Meiners:
"Myth: Green jobs promote employment growth.

Reality: By promoting more jobs instead of more productivity, the green jobs described in the literature encourage low-paying jobs in less desirable conditions. Economic growth cannot be ordered by Congress or by the United Nations. Government interference - such as restricting successful technologies in favor of speculative technologies favored by special interests - will generate stagnation.

Myth: The world economy can be remade by reducing trade and relying on local production and reduced consumption without dramatically decreasing our standard of living.

Reality: History shows that nations cannot produce everything their citizens need or desire. People and firms have talents that allow specialization that make goods and services ever more efficient and lower-cost, thereby enriching society.

Myth: Government mandates are a substitute for free markets.

Reality: Companies react more swiftly and efficiently to the demands of their customers and markets, than to cumbersome government mandates."

A scary article from Why scary? Because it reminds we that there are people out there who think like this.
"...hedge funds, in my opinion, haven't received nearly as much blame as they deserve, both for helping to trigger the financial crisis and, subsequently, for making it much worse than it might otherwise have been.

As we all know now, derivatives were a root cause of the mortgage crisis that led to the housing and financial-system collapse. Wall Street's financial whizzes assembled these esoteric securities from slices of subprime mortgages, and investment bankers then sold them all over the world, often to clueless buyers. Much of the demand for what Warren Buffett years ago termed "financial weapons of mass destruction" came from hedge funds.
Scary, and DANGEROUS stuff indeed. Not hedge funds, the article. Should we disallow risk taking? Entrepreneurship in general? Where do we stop?

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