Are hockey fans, scalpers ready for 'dynamic' ticket prices? - Puck Daddy - NHL - Yahoo! Sports

I always like it when economics wins out! This is a perfect example of something many have been advocating for years:

Are hockey fans, scalpers ready for 'dynamic' ticket prices? - Puck Daddy - NHL - Yahoo! Sports:

"This season, the Dallas Stars are the first NHL team to implement a system called 'dynamic pricing,' which is like variable pricing only it's determined with artificial intelligence and in a constant state of flux.

Market conditions, consumer demand, the latest hockey news ... it all factors into what upper-level tickets for Stars games will cost leading up to faceoff. In some cases, that means prices with climb; in other cases, it means fans will buy ticket well below last year's face-values for less popular games."

Guest Lecture by David Swensen Yale's Chief Investment Officer

In the week that Yale reported a 30% loss of their endowment, I thought it would be interesting to look at this guest lecture from David Swensen. It is unfortunate in a way that they lost so much, since his presentation and long run record had been very good. Indeed, Swensen has done very well over longer term windows:

"The Yale endowment is led by David F. Swensen, who has advocated aggressive use of alterative investments like private equity and hedge funds. At the end of fiscal 2008, Yale continued to turn in the best 10-year performance with an average annualized gain of 16.3 percent, which was followed by Harvard with 13.8 percent."

This video was from last year.
YouTube - 9. Guest Lecture by David Swensen:

"David Swensen, Yale's Chief Investment Officer and manager of the University's endowment, discusses the tactics and tools that Yale and other endowments use to create long-term, positive investment returns. He emphasizes the importance of asset allocation and diversification and the limited effects of market timing and security selection. Also, the extraordinary returns of hedge funds, one of the more recent phenomena of portfolio management, should be looked at closely, with an eye for survivorship and back-fill biases."

YouTube - Authors@Google: Jeffrey Kluger

YouTube - Authors@Google: Jeffrey Kluger
I am almost done with his book Simplexity.

His discussions of traffic or escaping a disasters are fascinating and his whole work is a good reminder that few things are strictly linear.

The Greatest Sucker's Rally In History, Play By Play

How closely does history repeat itself?


From the Business Insider at ClusterStock: The Greatest Sucker's

Rally In History, Play By Play: "The early 1930 rally came after the market had fallen nearly 50% in the fall of 1929. That rally took the market up nearly 50% again, to a level that was only about 20% below the previous peak.




That rally, of course, was also the biggest sucker's rally in history. After the market peaked in April 1930, it crashed again, eventually ending up down 89% from the 1929 high and more than 80% from the 1930 high. The market did not reach the 1930 high again for another quarter of a century."

Just in case you weren't worrying.

Which CEOs Took a Base Pay Cut? :: The Daily Stat :: September 15, 2009 :: HarvardBusiness.org

Which CEOs Took a Base Pay Cut? :: The Daily Stat :: September 15, 2009 :: HarvardBusiness.org:

"373 U.S. public companies reduced their chief executives' base salaries between June 1, 2008 and June 18, 2009. 68 companies in the Fortune 1000 index have reduced executive officers' base salaries in the past year."

I am sort of disappointed but not sure why. I would have figured almost all did.

Wall Street’s Math Wizards Forgot a Few Variables - DealBook Blog - NYTimes.com

A look back by the NY Times at what went wrong:

Wall Street’s Math Wizards Forgot a Few Variables - DealBook Blog - NYTimes.com:

"What wasn’t recognized was the importance of a different species of risk — liquidity risk,” Stephen Figlewski, a professor of finance at the Leonard N. Stern School of Business at New York University, told The Times. “When trust in counterparties is lost, and markets freeze up so there are no prices,” he said, it “really showed how different the real world was from our models.”

In the future, experts say, models need to be opened up to accommodate more variables and more dimensions of uncertainty.

The drive to measure, model and perhaps even predict waves of group behavior is an emerging field of research that can be applied in fields well beyond finance."

Simon Johnson and James Kwak - Lehman Brothers and the Persistence of Moral Hazard - washingtonpost.com

Simon Johnson and James Kwak - Lehman Brothers and the Persistence of Moral Hazard - washingtonpost.com:

"Moral hazard already existed in the system on at least three levels.

First, bank employees and managers had asymmetric compensation structures.....

Second, shareholders had the same payoff structure. Banks are highly leveraged institutions; every dollar contributed by shareholders is magnified by 10 to 30 dollars from creditors. This meant that in good years, shareholders benefited from profits that were juiced by leverage, but should things go wrong, they could shift their potential losses to creditors.

Third, creditors had only limited incentives to watch over major banks. Ordinarily, creditors should demand high interest rates on loans to highly leveraged institutions. However, the expectation that large banks would not be allowed to fail made creditors more willing to lend to them. This is why the failure of Lehman was such a damaging blow: It shattered market expectations that the government would not let a major bank fail."

A must read for corporate or banking/institution classes.

5 lessons on how to strengthen finances and limit damage in next crisis | Ecommerce Journal-more about virtual economy|e-commerce and money news|articles|forex and stocks news|banks|investment|gambling

5 lessons on how to strengthen finances and limit damage in next crisis | Ecommerce Journal-more about virtual economy|e-commerce and money news|articles|forex and stocks news|banks|investment|gambling:

"The real problem with asset allocation isn't that it no longer works, but that people expect that it will always work. And that's just not true. The 2000-02 bear showed that even sophisticated asset allocations can't guarantee you won't lose money in a lousy market. 'That doesn't mean asset allocation is a bad idea,' says Harvard economics professor John Campbell. 'If vaccines don't work for swine flu, it doesn't mean you shouldn't vaccinate for other types of flu.'

And if you look at the numbers, you'll see that proper diversification did you considerable good in this meltdown....If you held a mix of 35% U.S. stocks, 25% foreign stocks, 10% cash, and 30% fixed income (including government and high-quality corporate bonds), you would have lost just 28% between Sept. 1, 2008, and the market's bottom of March 9. By comparison, the S&P 500 was down nearly 50%."

The other 4 lessons were good too.

Very good article. Definitely recommend for investments (including SIMM--REQUIRED)

HT: Wayne Marr

FinanceProfessor and SBU in the Globeandmail.com: September rally like white shoes after Labour Day

Globeandmail.com: September rally like white shoes after Labour Day:

"Like everyone else, investors 'give in to mood swings that lead to impulsive decisions,' says Jim Mahar, an associate finance professor at St. Bonaventure University in upstate New York. And it's why, despite our better judgment, we are still tempted to try to time the market and latch on to hot stocks, funds and trends.

'The excitement of beating the market - and getting to brag about it - leads investors to make decisions that they never would in a more sterile environment.'"

Motives and Consequences Of Financial Regulation

The short version is that regulation often helps the Regulated and harms the poor.


The Harvard Law School Forum on Corporate Governance and Financial Regulation » Motives and Consequences Of Financial Regulation:

Fascinating piece that provides evidence of what we probably already knew: regulations can often hurt those they are designed to help. How? By preventing them access to markets and by limiting competition thereby helping the regulated.

FYI this post is based on a paper that is forthcoming in the Journal of Finance by Effi Benmelech and Tobias Moskowitz entitled: The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century. However, I will also refer to the coverage of this paper by Benmelech on the Harvard Law Governance Blog

A few "look-ins" from each source:

From the paper itself

"We study the political economy of financial regulation and its consequences through the lens of usury laws in 19th century America. Usury laws are arguably the oldest form of financial regulation. Mentioned in the Bible and the Koran and dating back to ancient Rome, usury laws have long been the subject of religious and political debate

from the blog article:

"...the evidence we uncover appears most consistent with financial regulation being used by incumbents with political power for their own private interests—controlling entry and competition while lowering their own cost of capital."

from the conclusion to the paper (page 30)

"Our evidence suggests incumbents with political power prefer stringent usury laws because they impede competition from potential new entrants who are credit rationed. However, during financial crises when incumbents become credit rationed themselves, usury laws are relaxed. We also find that financial regulation is correlated with other restrictive political and economic policies adopted by the state designed to exclude other groups and protect incumbent interests."

Interestingly the authors find that how religious an area is matters when it comes to usury (from the paper itself p 28):

"....we regress the maximum legal rate on the number of church accommodations (seating capacity summed across all churches, temples, synagogues, and other religious dwellings)....More religious states adopt more strict usury laws."

and finally from the blog commenting on the importance of the laws (this is actually early in the article but I chose to conclude with it:

"... changes[ie making them more stringent] in these laws are associated with future economic growth and, importantly, that the impact on growth is concentrated exclusively among the smallest borrowers in the economy.""

I^3

Might the rating agencies be in more trouble than originally thought?

The other day I mentioned this interview with Terry McGraw of McGraw-Hill who basically said that Moody's merely had it wrong and there was no fraud.

In this response, David Eihorn suggests that this "we messed up" defense may not be enough. Now that said, he is short the stocks of rating agencies so it is ironic that he is speaking on conflicts of interest, but it does bring up some serious questions for the jury and judge to sort out.

Kahneman speaking at Georgetown graduation

Daniel Kahneman is one of the main founders of the Behavioral Economics/Finance School. This is a short (19 min if you watch it all) graduation address that we used in class (Behavioral Finance).

I recommend skipping the first section and get right to his talk on economic rationality.

In defense of markets---Thomas E. Woods, Jr. - Mises Institute

I have not mentioned the Mises Institute in a while. But this response is so thorough and so well thought out that I had to. It is a response piece to a person who does not favor free market responses. Thus, Mises plays the role of free market defender. It is a role that is played very well!

Anatomy of an Economic Ignoramus - Thomas E. Woods, Jr. - Mises Institute:

"...no free-market economist thinks the market 'always knows exactly what to do and when to do it.' If that were the case, how could free-market economists account for firms that go out of business?

The argument that free-market economists actually make is that on the free market, decisions regarding what to produce, in what quantities, using what methods, and in what locations, are made in light of satisfying the most urgent demands of consumers. Business firms find out very quickly what consumers want and what they do not want, and they adjust their production decisions accordingly."

and later in defense of profits:

"...profit is simply society's way of ratifying a firm's past production decisions. It indicates what consumers want, and (by the process of imputation) the best process for producing it. Profits attract further investment in a given line of production, until the increased supply of goods in that industry brings the rate of return there back down to the level that exists elsewhere in the economy. This is how we ensure that our limited resources are not wasted, and that the most urgently desired goods are produced."

If only more people understood this.

Paul B. Farrell: Lazy Portfolios take on the best and win, again - MarketWatch

Have you heard of the Lazy Portfolios? They run a series of tests of what are essentially passive investment strategies vs active management.

Well given behavioral finance is so hot, they decided to take on that. The result? Lazy wins again!

Paul B. Farrell: Lazy Portfolios take on the best and win, again - MarketWatch:

"Does the 'Behavioral Edge ... earn superior returns?' No!

Representing behavioral finance:

"There are two mutual funds actually managed by the Fuller & Thaler team: The JPMorgan Undiscovered Managers Behavioral Growth Fund and the Undiscovered Managers Behavioral Value Fund.

Fuller & Thaler manage roughly $1 billion, mostly institutional money."

The article then presents (on page 2) a table showing results of the Lazy Porfolios vs The Behaviorally based Fuller-Thaler funds.


The results might just nudge some back to indexing:

"Every one of the eight Lazy Portfolios beat the Fuller-Thaler Growth Fund for all three time periods, some by as much as 11 percentage points. Moreover, not only are all of our Lazy Portfolios in positive territory on a 5-year basis (while the Growth Fund's in negative territory) we're beating Growth by as much as six percentage points long-term. Same applies when we pit Lazy Portfolios against the Fuller-Thaler Value Fund on the 3-year and 5-year results. "

Now looking at two funds is not exactly scientific and if this were an academic journal it would most likely be laughed at and the paper returned without even being reviewed, but it is not so we can look at the results, but be sure to take them with some salt.

The results do remind me of the old WSJ series (many years ago now) that interviewed Thaler and Eugene Fama. In the end, both admitted their investment strategy was essentially to index. For Thaler it was because such a strategy protects us from ourselves (especially with reweighting) and for Fama it was his believe (which is backed my much data) that active management not only does not beat passive investing, but generally loses to it (especially after costs are included).