Best tweets of past week

Some of the best tweets (or at least my favorites) I have seen this week (not all are finance related)

Wayne Marr is simply amazing. Has so many interesting tweets he may personally be the cause of my total lack of productivity some days. But in a good way :) A few of his tweets:

1. Was there Really a #Hawthorne Effect at the Hawthorne #Plant? An Analysis of the Original Experiments http://tinyurl.com/oznr2u
   
2. New York Fed: Dudley: A Preliminary Assessment of the TALF http://tinyurl.com/qpy8xg
3. #SSRN #HedgeFunds, #SystemicRisk, and the Financial Crisis of 2007-2008: Written Testimony, Andy Lo, MIT http://bit.ly/SiltW
4. #SSRN Miraculous #FinancialEngineering or #Toxic #Finance? The Genesis of the U.S. #Subprime #MortgageCrisis .. http://bit.ly/cNzEN
5. #SSRN - What Drives #Channel Choice in #Grocery #Shopping? http://bit.ly/Dr93A
6. #NBER - Why do #Institutions of #HigherEducation Reward #Research While Selling #Education? http://tinyurl.com/pnczbj
7. #CorporateGovernance and Market #Liquidity http://bit.ly/iL5FQ

Tweets from SimoleoneSense

1. Video: NYU Professor On Understanding The GM Bankruptcy: Its about time I posted a Charlie Rose interview. Video.. http://tinyurl.com/pot2cg
2. Attention! Listen to Miguel Barbosa Interviewed By Real Great Stories.Com: I was recently interviewed on the Rea.. http://tinyurl.com/q2f92m
3. Bank Failures & The Deposit Insurance Fund: Article on FDIC, reserve ratios, & bank failures. Click Here To .. http://tinyurl.com/lztdut
4. Weekly Wisdom Roundup #30 (Links You Don’t Want To Miss): If you like these weekly roundups Irecommend sig.. http://tinyurl.com/noar5r

Tweets that are definitely worth reading from @Mises:

1. Cars and Government: Bad Mix: The former Car Czar of Romania, writing in the WSJ, talks about his experience in .. http://tinyurl.com/neq4mj
2. Bad News for Our Money: Suppressing market interest rates to the lowest level possible seems to have become a ke.. http://tinyurl.com/qvf45r
3. Defining the Extent of the Market: the Whole Foods Case: Anyone is a monopolist if the market is defined narrowl.. http://tinyurl.com/nga79b
4. Fed Cannot Withdraw the Money: The Fed has purchased assets at above-market prices, temporarily expanding the mo.. http://tinyurl.com/loxomp

Tweets from @HarvardBiz

1. Why GM Failed http://bit.ly/19GYvu
2. Management Tip: How to Combine Creativity and Results http://bit.ly/FzjGI
3. Could GM Factories Reinvent Themselves Now as They Did in 1942? http://bit.ly/305BNc
4. The Daily Stat: An Expanded Role for Finance http://bit.ly/BlLQN
5. Do You Get Paid for Your Time? http://bit.ly/UrPJ5
6. Our Approach to Finance http://bit.ly/sxI87
7. Never Let Your Ego Stop You from Learning http://u.mavrev.com/66wm
8. How to Write a Resumé That Doesn't Annoy People http://bit.ly/qwPeD

Some Tweets from @Mashable

1. Mint Takes its Personal Finance Tools to My Yahoo http://bit.ly/Hapx9
2. Time Magazine Explains Twitter - http://bit.ly/1TquF
3. Congressman Uses Wisdom of Crowds to Redesign Website - http://bit.ly/kFbDo
4. Google Squared: Your Search Results in Spreadsheet Form - http://bit.ly/17t4gE
5. TwitDoc: Drag and Drop File Sharing for Twitter - http://bit.ly/1BOaa
6. If you're new to Twitter, our Twitter how-tos & resources section is the place to start: http://bit.ly/163Pmp

Two news items from @CanWire

1. Microsoft considers moving jobs offshore under Obama tax plan - http://tweeting.ca/0b7 (Bloomberg.com)
2. Steve Jobs returns from sick leave - http://tweeting.ca/0b8 (Telegraph Newspaper)

Assorted other tweets

• @researchpuzzler a look at $GDX versus $GLD over the last year http://tinyurl.com/m5k4w9

• @robthetechguy Tech Crunch: Google Finance Sheds Its Beta Label Three Years After Launch; Still Can’t Touch Yahoo http://bit.ly/lA72T

• @MilkenInstutute: Milken Institute proposal to fix the U.S. housing market - homeowner principal forgiveness vesting plan - FT.com http://tinyurl.com/kw9uq7

Less Finance Related

• From @economicwoman: Reading minutes, I have to wonder if UN agencies would benefit from some artificial scarcity of meetings. Maybe a system of tokens?

Wow. Great idea! I wonder if SBU (where I teach) can do the same!

• From @climateproject: climate crisis: share your solutions http://bit.ly/N5PkmBTW you can also see what others submitted here.

• From SimoleonSense: Breathtaking Videos Of Human Impact On The Planet - The Earth From Above:: Interesting video from one of the bes.. http://tinyurl.com/plslqj

• From @Lura_ForcumA great article on applying MBA skills to development work in Africa -- featuring Kelley alum Khary Dickerson: http://is.gd/PgLg

• From @velostreamPhilanthropic Cycling... catch the bug. http://bycride.org
  

and then one from me (via BonaResponds)

• @BonaResponds One of the things I like about Olean, just waited in short line of traffic. The hold up? two dogs walking down middle of the street :)

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 Overstock.com. 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 Kiplinger.com. 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?

So many interesting reads, so little time

In the spirit of the old FinanceProfessor Newsletter, here is how I am going to try and catch up:

Over at ClusterStock/BusinessInsider Joesph Weisenthal was really on a roll this week. The first article is an excellent fast look at why the Federal Government should not be active bank shareholders:

"The real question should be: Does the US having an active stake in Citigroup make it more likely that the bank will be run better for shareholders? If it does then okay, we can debate. But this seems highly unlikely, given how politicized lending can become. This is the same problem as having labor union representation on a board. The board's duty is not too look out for their sponsoring shareholders, their duty is to look out for all shareholders. But any government rep -- armed with mandates, such as "green" lending, lending to labor union-dominated companies and providing more affordable housing loans -- would have a totally separate agenda."

Weisenthal also reminds us that Fannie Mae and Freddie Mac are losing e money ($400 B to date) faster than AIG and GM combined but we hardly hear anything. He opines:

"But the news of the quarterly loss is getting hardly any attention....The problem is that the Fannie and Freddie disasters don't fit into any conventional media narrative....Fannie Mae? They help nice families get into homes. Their motto is something about helping the people who help house America. Who could be against that? Plus, the Fannie and Freddy story doesn't help explain the idea that laissez-faire deregulation is what allowed Wall Street to go crazy. Fannie and Freddy had their own freakin' regulator...."

And one more from ClusterStock. John Carney points out that a staggering 60% of subprime mortgage defaults, STARTED out as prime mortgages.

"...Mike Rotny takes a look at a recent study by the Boston Fed that devastates the subprime villain mythology. It turns out that roughly 28 percent of all mortgages defaults, and 60 percent of all subprime defaults, were mortgages that started with a prime mortgage.

"...28% of all mortgage foreclosures, and 60% of subprime foreclosures, are from people who started with a prime mortgage. Those are the Us — good credit scores, 20% down, pay the bills on time. . . .

In one we alluded to in class this week Henry Rearden probably turned in his fictional grave as 1.5 million Verizon subscribers will have to switch to AT&T as their regions (mainly rural) were sold to alleviate monopoly concerns.

"Yesterday AT&T announced that it has reached an agreement with Verizon Wireless that will see AT&T acquiring a large number of former Alltel Wireless assets and 1.5 million subscribers from Verizon for US$2.35 billion in cash. Verizon Wireless was required to divest of most of these particular markets in order to get federal approval for its acquisition of Alltel. The government required Verizon to release these Alltel markets in order to maintain competition."

Some of my favorite books ever are alternative histories. You know, the what would have happened if Day 2 of Gettysburg hadn't happened etc. In that spirit, "Big Jake" writing for Seeking Alpha has a great piece. It is just possible enough to be believeable, but just far fetched enough to be still be fiction. Definitely worth the time of reading the whole thing! The Worst Case Scenario (Someone has to say it) : (one look in at #4)

"As the government sends out additional “rebate” checks and takes ever-more drastic measures to force banks to lend, hyperinflation could take hold. However, comprehensive debt relief via a devaluation of the dollar is even more likely. This would entail the government issuing one “new” dollar for some greater number of “old” dollars—thus reducing both debts and savings simultaneously....

As there are many more debtors than savers in the U.S., the vast majority would support devaluation. The Chinese and other foreign holders of our bonds would be screaming mad, but unable to do anything"

Fast Look around

A fast look around:


Uh, really? 45% of wealth destroyed? No way. Maybe of easily traded wealth, but if speaking of overall wealth this from the CEO of Blackstone just has to be an exaggeration.
Reuters:

""Between 40 and 45 percent of the world's wealth has been destroyed in little less than a year and a half," Schwarzman told an audience at the Japan Society. "This is absolutely unprecedented in our lifetime."

Genentech (a stock that SIMM used to hold) agreed to be bought out by Roche after an 8 month battle. From CNN:

"Swiss drugmaker Roche Holding AG (ROG.VX) said Thursday it sealed a friendly deal with Genentech Inc. (DNA) to buy the 44% of the U.S. biotech company that it doesn't already own for around $46.8 billion, after raising the offer price to $95 a share....The agreement ends a nearly eight-month battle, in which Genentech repeatedly rejected Roche's offer."

Forbes reports that the world has 332 fewer Billionaires than last year. This has yet to create a call for Billionaire conservation programs, but is interesting fodder for newscasts everywhere.
Oh and Buffett is no longer the richest. That falls back to Bill Gates.

"Bill Gates lost $18 billion but regained his title as the world's richest man. Warren Buffett, last year's No. 1, saw his fortune decline $25 billion as shares of Berkshire Hathaway fell nearly 50% in 12 months. Mexican telecom titan Carlos Slim Helú maintains his spot in the top three but lost $25 billion."

Fannie Mae and Freddie Mac are disasters. The best analysis I have seen of just how bad they are comes from the BusinessInsider at ClusterStock.

" Over the years and spread across millions of home buyers, that 25 basis point savings adds up to a lot of money. With Fannie and Freddie holding or guaranteed mortgages on 31 million homes worth about $5.5 trillion at the end of 2008, borrowers would have saved over $10 billion in 2008. The numbers change from year to year. But last year Daniel Gross reported in an article for Slate that Professor White believes it could add up to more than $100 billion in current dollars over the years.

Comparing that $100 billion savings against the government's pledge of $400 billion in financial support for Fannie and Freddie raises the question of what good these companies ever did. The drawings on that pledge are still less than $60 billion--around $45 billion for Freddie and $15 billion for Fannie--but are expected to exceed $100 billion by the end of 2009. If further drawings come to pass it will mean that even using the most optimistic estimates for the interest rate savings provided by Fannie and Freddie, the companies have been huge costs for taxpayers with no net tangible benefits."

How Much Is $1 Trillion:

"If someone says they want to spend another $1 trillion on anything, just think that your taxes would have to double to pay for it. That makes the mind-boggling sum a lot clearer."

And last but not least again from ClusterStock, the Economic Crisis hits TV is a look at how the news is coming into TV shows.

The best clip is from the Simpsons:

Catching up Newsletter style

Several stories I want to point out, but will do all in one post

The mention of the NY Times podcast had some of you thinking about other finance podcasts. Here are two that were sent plus NPR's

• Knowledge@Wharton has a great list of past interviews and the like and from San Diego State Dan Siever speaks on the stimulus package.
• NPR has many many feeds.

John Mason writes at SeekingAlpha about the problems in the banking sector and concludes that regulators too deserve some of the blame:

"A liquidity crisis and a solvency crisis are not the same and should not be compared with one another. A liquidity crisis the Federal Reserve System can do something about. A solvency crisis is beyond the ability of the Fed to resolve. However, the Federal Reserve and other regulatory bodies, through their responsibility for the examination and oversight of the banking system, can help to prevent a liquidity crisis by doing a deep and thorough review of the books of financial institutions and hold these financial institutions to the standards of “good” banking practice. This effort is a first line defense against a failure of banks that could lead to a contagion amongst financial institutions"

ClusterStock reports on withdrawals from the Stanford Bank which is beginning to look eerily similar to a run on the bank after reports of fraud at the Antigua based bank.

"Depositors of Stanford Bank, the offshore bank, that may possibly be a Ponzi scheme, are pouring onto the Island of Antigua to claim their cash."

Remember the recent article from Pablo Fernandez on Equity Risk Premiums in text books? He now has another that looks at not the text books but is a survey of what financeprofessors actually use (I did fill out the survey with an answer of now use 6%, down from about 8%)

"The average Market Risk Premium (MRP) used in 2008 by professors in the USA (6.5%) was higher than the one of their colleagues in Europe (5.3%), in Canada (5.4%), in the UK (5.6%) and in Australia (5.9%). The dispersion of the MRP was high. 15% of the professors decreased their MRP in 2008 (1.5% on average) and 24% increased it (2% on average). 66% of the professors used a lower MRP in 2007 than in 2000 (22% used a higher one). The average MRP used in 2007 was 1.5% lower than the one used in 2000.

Only a week before we have a Bloomberg representative coming to class to teach a class on using the Bloomberg machine (last semester everyone in my Students in Money Management class earned their Bloomberg Certification in either Equities or Fixed Income), it seems that Bloomberg and other high end data providers are feeling the bite of the recession as well.

For now at least, Sirius seems to be financed sufficiently to avoid bankruptcy. From MarketWatch:

"Shares of Sirius XM Satellite Radio doubled Tuesday morning on news that John Malone's Liberty Media has agreed to invest a total of $530 million in the the beleaguered radio company, allowing it to avoid a Chapter 11 bankruptcy filing."

At Mises.org, Frank Shostak reminds us of the problems associated with increasing the money supply too quickly:

"It is apparent that we've learned nothing from several millennia of monetary destruction. The persistent demonstration that capital, not paper, is the basis for prosperity has fallen on deaf ears. Daily, we face the sad spectacle of government officials, pundits, and even Nobel laureates telling us that printing money is the answer to an economic downturn"

And finally, the UnknownProfessor at FinancialRounds reminds me that while teaching at a small school has many benefits, pay is definitely not one of them. He lists the AACSB report of business school professor's pay. (FTR here even finance professors are under the average for the lowest of any filed at other accredited schools. )

Catching up-Newletter style

Catching up.

There is just not enough time in the day to do all I want to do. So given that it is break (we go back tomorrow) I will try to clear a few of the articles I wanted to mention as well as give you some book ideas and some random thoughts that I wanted to put out there as well.

* NCAA March Madness is a learning/teaching opportunity to discuss the relative effectiveness of stock picking vs. passive investing. Why pick upsets? Because it is fun. Boring but generally better strategy? Pick favorites. From Forbes two years ago.

* Recently JP Morgan officials asked their competitors to not hire Bear brokers away. Uh, ok. Of course he can say it, but why would anyone listen? If it works, I suggest that the professional sports teams try the same strategy when it comes to losing free agents.

* Implied Volatility (even with its acknowledged increase with the increased leverage that accompanies stock price declines) might resolve the issue of what happened to Andersen audited firms better than just using stock prices. This issue, which I hadn’t thought about in quite a while, was brought back into the spotlight (flashlight? Lol) by a new paper by Nelson, Price and Rountree that finds that Andersen audited firms were concentrated in industries that all went down and that Andersen's reputation may not have been to blame. Oh yeah, here is a bad paper that does use implied volatility to get around this problem somewhat.

* Insider trading does not pay. Even when it is a group of finance professors (at least former finance professors) doing it. From the SEC:

"The SEC's complaint alleges that Marshall received detailed and current information regarding the highly confidential ISE-Eurex merger talks, and tipped Tucker and Larson. According to the complaint, Tucker and Larson then purchased ISE securities resulting in illegal profits totaling approximately $1.1 million and $31,000, respectively."

* I have been reading several books that are either finance oriented or at least have valuable financial lessons:

Predictably Irrational by Dan Ariely. Great for class examples of Behavioral Finance. And really fun read. I think it is better than Freakonomics (sorry Steve).

Gatekeepers: the Professions and Corporate Governance by John Coffee Jr. Almost perfect for my corporate governance recap that I do in my corporate finance classes.

Men of Fire: Ristening to this one. Yeah it is about the US Civil War, but it again shows how misaligned incentives and poor management can make a huge difference. Even in war, agency costs matter!

* We just got a Bloomberg machine. I'd be really interested to hear how some of you use it for class.

* And finally a request. If you are from the Buffalo area, we’d love to have your help in the first ever BonaResponds Buffalo Service Day. It is this Saturday! While BonaResponds has built its name on trips to the Gulf Coast, it is also very active locally and has contributed approximately a quarter of a million dollars of services since August 2006 (which is after our “big” trip) with virtually no University Funding. BonaResponds is open to everyone and a whole lot of fun in addition to doing much good. So if you are local come on out and volunteer! (if you are not local but want to help you can always donate or better yet meet us for our next trip).
http://BonaResponds.org