Think You Can Exceed The Speed Limit By 5 To 10 MPH? Maybe Not - The Two-Way - Breaking News, Analysis Blog : NPR - StumbleUpon

Think You Can Exceed The Speed Limit By 5 To 10 MPH? Maybe Not - The Two-Way - Breaking News, Analysis Blog : NPR - StumbleUpon:

"...to make up for lost revenue because a weak economy has cut into tax collections, state and local governments are encouraging officers to be less forgiving.

It's not an unusual response to economic problems. And among the evidence to back up that claim is a 2009 paper published in The Journal of Law & Economics, in which researchers reported that 'significantly more tickets are issued in the year following a decline in (tax) revenue' -- and that 'the issuance of traffic tickets does not decline in years following revenue increases.'"

So much for independence of operations and financing!

Social Security Payout to Exceed Revenue This Year - NYTimes.com

Social Security Payout to Exceed Revenue This Year - NYTimes.com:

"Analysts have long tried to predict the year when Social Security would pay out more than it took in because they view it as a tipping point — the first step of a long, slow march to insolvency, unless Congress strengthens the program’s finances."

Money Brawl: Private Equity Fights Big Investors - Planet Money Blog : NPR

Money Brawl: Private Equity Fights Big Investors - Planet Money Blog : NPR:

"...WSJ reports, at least three big private equity shops have hired lawyers to see whether the pension funds are violating antitrust laws by banding together.

Sure, antitrust laws usually apply to sellers conspiring to fix prices or create monopolies. But apparently, customers (in this case, the private equity firms' investors) can be accused of antitrust behavior as well.

'When customers get together and say we can't get them to lower their prices unilaterally but can only do it collectively, that looks a lot like price fixing,' a law professor told the WSJ."

The futility of active management - Investment News

The futility of active management - Investment News:

"From 1994 through 2008, the average large-cap mutual fund that was in existence for the full 15-year period (some 400 funds) posted an annualized return of 5.61%, compared with 6.46% for the S&P 500.

And because some people claim that active managers are more valuable under the circumstances of a bear market than when the markets are trending up, Standard & Poor's looked at the percentage of mutual funds that failed to outperform their benchmarks between 2004 and 2008 during the last bear market: 66.2% of all domestic funds, 71.9% of all large-cap funds, 79.1% of all mid-cap funds and 85.5% of all small-cap funds."

The Lehman Whistleblower’s Letter - Deal Journal - WSJ

The Lehman Whistleblower’s Letter - Deal Journal - WSJ:

"In May 2008, former Lehman Senior Vice President Matthew Lee wrote a letter to senior management warning that the New York securities firm may have been masking the true risks on its balance sheet. A month later, he had been ousted.

His warning was revealed for the first time in a report by a U.S. bankruptcy-court examiner and showed that Lehman’s auditors knew of potential accounting irregularities and allegedly failed to raise the issue with Lehman’s board. Here is the letter that placed the little-known Lehman executive at the center of allegations that Lehman manipulated its numbers and misled investors."

WOW.

Environmentally Friendly Homes Attract Wariness From Banks Making Mortgage Loans - WSJ.com

Environmentally Friendly Homes Attract Wariness From Banks Making Mortgage Loans - WSJ.com:

In class we talk about specialized vs generalized assets. Today's case in point: "odd homes".

"Getting financing for unusual homes has never been easy. Near Granby, Colo., Richard Messer opted not to look for a conventional mortgage because there was nothing conventional about what's inside his walls: 50 tons of paper Coors beer packaging used as insulation. Mr. Messer got a $60,000 loan from friends to help pay for it. 'The problem for anyone trying to do a unique house is financing,' he says."

Banks Win Ban on Flyonthewall Instant News of Reports (Update4) - Bloomberg.com

Banks Win Ban on Flyonthewall Instant News of Reports (Update4) - Bloomberg.com:

"March 18 (Bloomberg) -- Theflyonthewall.com, an online financial news service, was barred from issuing immediate online reports about stock upgrades and downgrades of Barclays Plc, Bank of America Corp.’s Merrill Lynch, and Morgan Stanley."

Interesting case....imagine if the same happens with Blogs and twitter. Indeed it could be for sports etc.

“This time frame preserves incentives for the firms to create and disseminate research reports to their investor clients, while still recognizing the inevitable, fast-moving and widespread informal communication of recommendations on Wall Street,” she wrote.

via http://twitter.com/dvolatility

William Sharpe launches winning IPO, Financial Engines - USATODAY.com

William Sharpe launches winning IPO, Financial Engines - USATODAY.com

"Sharpe, an academic instrumental in creating the capital asset pricing model (CAPM) used by professional investors and for which he won the 1990 Nobel Memorial Prize in Economic Science, is co-founder of Financial Engines (FNGN), a company that Tuesday launched a successful initial public offering.

Financial Engines, a company that uses advanced mathematical algorithms to help individuals optimize their retirement investment plans, is the first IPO to price above its expected range in four months, says Richard Peterson of Standard & Poor's.

Shares of Financial Engines priced at $12 in the IPO, topping the expected $9-$11 range. Despite the higher-than-expected initial price, the shares closed up 44%"

Moody's warns nations to cut spending or risk AAA ratings - washingtonpost.com

Moody's warns nations to cut spending or risk AAA ratings - washingtonpost.com:

"...Moody's said that debt levels in the four large credit-worthy economies had reached the point at which they are at risk of being downgraded..."growth alone will not resolve an increasingly complicated debt equation. Preserving debt affordability at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion." "

Anyone who does not think this is possible is clearly looking at different data than I see. As Greece just showed us, governments can and do get into financial distress.

The Evolution Of ETFs

The Evolution Of ETFs:

"...one of the more recent financial inventions has left an indelible impact on the market and created a world of opportunity for retail investors at the same times. We're talking about the advent and the evolution of the exchange-traded fund (ETF).... Most industry followers estimate the number of ETFs available to U.S. investors will reach 1,000 sometime in 2010.

A Real Threat to Mutual Funds
One statement that investors have heard over and over again about ETFs is that they're mutual funds that trade like stocks with smaller management expense ratios. This may sound like an over-simplification, but the statement is essentially true."

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/03/15/investopedia5753.DTL#ixzz0iIv6R96m

"

Visit to Fed Shows Where Any Reform Should Start - WSJ.com

Visit to Fed Shows Where Any Reform Should Start - WSJ.com:

"And yet for all their dedication, the examiners appeared to be working with a very narrow mandate.

As Mr. Corkery pointed out, examiners are 'not auditors.' Instead they serve more as government-paid consultants, helping banks identify portfolio risks and correct them. Even after the greatest banking crisis in generations, Mr. Corkery said he is 'not sure there have been any radical changes' in how he does his job.

Michael E. Collins, the Philadelphia Fed official in charge of supervision, acknowledged that the Fed system has to change, taking into account the health of the broader banking system, rather than a bank-by bank analysis."

Lehman Brothers Hid Borrowing, Examiner Says - NYTimes.com

Image by Getty Images via Daylife

Lehman Brothers Hid Borrowing, Examiner Says - NYTimes.com:

"According to the report, Lehman used what amounted to financial engineering to temporarily shuffle $50 billion of troubled assets off its books in the months before its collapse in September 2008 to conceal its dependence on leverage, or borrowed money. Senior Lehman executives, as well as the bank’s accountants at Ernst & Young, were aware of the moves, according to Mr. Valukas, the chairman of the law firm Jenner & Block and a former federal prosecutor, who filed the report in connection with Lehman’s bankruptcy case."

Class you better read this one!

(btw if you want more on it, try the Collassal Failure of Common Sense

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• Examiner: Lehman Torpedoed Lehman (online.wsj.com)
• A Lehman Post-Mortem Points to Corporate Malfeasance (mydd.com)
• Lehman's Fuld 'Negligent' as Firm Hid Leverage, Examiner Says (businessweek.com)

SSRN-Choices About Competition: Differences by Gender and Hormonal Fluctuations, and the Role of Relative Performance Feedback by David Wozniak, William Harbaugh, Ulrich Mayr

There is a fairly large disagreement on the degree of differences in investments and other financial decisions based on risk. Many of the earlier studies showing females are more risk averse and less competitive are being brought into question when newer studies control for income, or life expectancy, etc. Here is a similar one that does so by adding a feedback loop that helps to reduce overconfidence:

SSRN-Choices About Competition: Differences by Gender and Hormonal Fluctuations, and the Role of Relative Performance Feedback by David Wozniak, William Harbaugh, Ulrich Mayr:

In experiments, women are less likely than men to choose competitive compensation mechanisms, such as tournaments. We replicate this result and show that giving feedback about relative performance makes high ability females more likely to compete, makes low ability men less likely to compete, and makes the gender difference insignificant. We then use between and within-subjects differences to show that, without relative performance feedback, women in the low-hormone phase of their menstrual cycle are less likely to enter tournaments than at other times. Relative performance feedback also eliminates these effects."

HT to WayneMarr.

Entrepreneurship by music

Ok, so Entrepreneurship is not strictly speaking finance. It is close enough to include this since the song is so good (yeah I think that is a blogging rule somewhere).





HT to Phil of Adventure Capitalist

Real World Evidence for the Laffer Curve from the Government of Washington, DC | Cato @ Liberty

From the Cato Institute:
Real World Evidence for the Laffer Curve from the Government of Washington, DC | Cato @ Liberty:

"...the Laffer Curve simply reveals that higher tax rates will lead to less taxable income (or that lower tax rates will lead to more taxable income) and that it is an empirical matter to figure out the degree to which the change in tax revenue resulting from the shift in the tax rate is offset by the change in tax revenue caused by the shift in the other direction for taxable income. This should be an uncontroversial proposition, and these three videos explain Laffer Curve theory, evidence, and revenue-estimating issues. Richard Rahn also gives a good explanation in a recent Washington Times column."

AIG to sell Alico unit to MetLife for $15.5 billion - Mar. 8, 2010

AIG to sell Alico unit to MetLife for $15.5 billion - Mar. 8, 2010:

"AIG agreed Monday to sell its American Life Insurance Co. unit to MetLife Inc. for $15.5 billion in cash and stock, in beleaguered AIG's second sale of an international unit in a week.

AIG said it will sell the unit, known as Alico, for $6.8 billion in cash and the remainder in MetLife equity."

and later:

""This sale is an important step toward repaying the government," Harvey Golub, chairman of AIG, said in a statement. "Both sales give AIG greater flexibility to move forward with our restructuring and rebuilding efforts, and focus on enhancing the value of our key insurance businesses.""

Joseph Stiglitz on Charlie Rose

Definitely worth watching. (how is it that TV has so many bad shows when stuff like this is on?)

SEC Sues Psychic For Securities Fraud - Planet Money Blog : NPR

SEC Sues Psychic For Securities Fraud - Planet Money Blog : NPR:

"Here are some of the key accusations in the SEC's lawsuit:

Morton claimed that he would use his psychic expertise to provide investment guidance to his investing team, and falsely touted his historical success in psychically predicting the various rises and falls of the market"

Simoleon Sense » Blog Archive » Defining & Identifying A Cognitive Bias

Simoleon Sense » Blog Archive » Defining & Identifying A Cognitive Bias:
Good stuff!

"1. Judgment lacks correspondence with a criterion.

2. Judgment lacks correspondence with judgments of others.

3. Judgment relies on bad information.

4. Judgment fails to use good information. "

Read the rest of it here.

James Porterfield, GSB finance professor and market expert, dead at 89

James Porterfield, GSB finance professor and market expert, dead at 89:

"Porterfield was the James Irvin Miller Professor of Finance, Emeritus, at the time of his death.

He was the author of books and articles on financial management including Investment Decisions and Capital Costs and Case Problems in Finance....


'The essence of graduate education in business should lie not in the transmission of information and techniques but rather in the development of judgment, the ability to analyze problems and skill at making decisions on the basis of incomplete data,' he said.

Porterfield was an active tennis player throughout his life. He began weightlifting in his teens, an activity he continued until this year, as a regular at the YMCA. He was also an avid football fan."