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."

Strategies - Recent Errors Aside, Insiders Remain Reliable Indicators - NYTimes.com

Strategies - Recent Errors Aside, Insiders Remain Reliable Indicators - NYTimes.com:

"Professor Seyhun said that insiders were not infallible, and that their recent failures were hardly their first misreading of the market’s direction.

But since 1975, the earliest year he has studied, insiders have been correct far more often than they’ve been wrong....For the most recent 10-year period in his sample, through 2008, the comparable 50-day advantage for the insiders was 3.3 percentage points."

Some CEOs Are Selling Their Companies Short - BusinessWeek

Some CEOs Are Selling Their Companies Short - BusinessWeek:

"'There is no question these transactions should be a red flag for investors,' says Carr Bettis, the co-founder of forensic accounting firm Gradient Analytics and co-author of a recent study on hedging. 'The evidence is pretty compelling that hedges tend to be used before bad news hits the market.' Bettis' research found that in the year after executives and directors had engaged in hedging, their company's stock often dropped markedly. He also found evidence of an increase in financial restatements and shareholder lawsuits during the same period. Executives at MCI, Enron, ImClone (IMCL), Krispy Kreme—companies that suffered some of the great stock melt-downs of the last decade—hedged their shares."

How Hedges Work - BusinessWeek

How Hedges Work - BusinessWeek:

"Executives who own big chunks of their company's stock often hedge their holdings to diversify and limit risk if the stock tumbles. Critics worry such transactions weaken the incentives created by equity compensation. They also warn that executives may use privileged information to hedge their shares ahead of bad news"

U.S. airlines more cautious on '10 fuel hedges | Reuters

U.S. airlines more cautious on '10 fuel hedges | Reuters: "

Top U.S. airlines are taking a more cautious, though varied, approach to fuel hedging this year, after incurring blistering losses from hedges in 2008 when oil prices spiked then tumbled."

And then in what has been a test question, the article answers how can they hedge the downside, while benefiting if jet fuel prices fall:

" Buying some straight call options in our portfolio allows us to participate in the upside opportunity should prices fall," Mikells said."

Risky business | Penn State News | Business - Centre Daily Times

Risky business | Penn State News | Business - Centre Daily Times:

"The Nittany Lion Fund, a $4.5 million mutual fund managed by Penn State students and advised by finance professor J. Randall Woolridge, teaches students the importance of risk management, ethics and money management in a real-world environment.

Smeal Dean Jim Thomas said the college also plans to add a major in risk management. The addition will be submitted to the Faculty Senate for approval in the near future."

Lawmakers Find S.E.C.’s Short-Sale Rule Lacking - DealBook Blog - NYTimes.com

Lawmakers Find S.E.C.’s Short-Sale Rule Lacking - DealBook Blog - NYTimes.com:

"The original “uptick rule” was put in place during the Depression in the 1930s to prevent stocks on a downswing from being hammered into the ground by short-sellers. It barred traders from selling short, or betting that a stock would fall, unless there was an uptick in the price. The rule was abolished in 2007 by the S.E.C. after it concluded that advances in trading strategies rendered the old uptick rule ineffective."

The article goes on to remind us that the SEC banned short selling on many stocks during the 2008 bear market, but forgot to mention that majority of studies showed that the ban was unsuccesful.

It goes on:

"The S.E.C. ruled Wednesday to reinstate the uptick rule, but only on individual stocks that experience a one-day 10 percent decline in value. It would stay in effect for the following day, but will be lifted the day after"

One interesting point (worthy of class discussion) dealt with the rule's failure to strengthen Naked short selling regulations:

"...has some support is on beefing up the rules to prevent so-called naked shorting. That is when a trader shorts a stock without actually borrowing the shares. While the practice was banned for the most part by the S.E.C. last year, enforcement of the ban remains subject to arbitrary “reasonable belief standards,” which critics say are difficult to prove."

Bloomberg on likelihood of sovereign debt defaults

Bloomberg.com:

"Ballooning public debt is likely to force several countries to default and the U.S. to slash spending, according to Harvard University Professor Kenneth Rogoff , who in 2008 predicted the failure of big U.S. banks. "

and later

"Greece’s debt totaled 298.5 billion euros ($407 billion) at the end of 2009, according to the Finance Ministry. That’s more than five times more than Russia owed when it defaulted in 1998 and Argentina when it missed payments in 2001.

The cost of protecting Greek sovereign debt from default surged in January, then declined this month as concern eased over the country’s creditworthiness. Credit-default swaps on Greek sovereign debt have fallen to 356 basis points from 428 last month, according to CMA DataVision. That’s up from 171 at the start of December."

Bloomberg on likelihood of sovereign debt defaults

Bloomberg.com:

"Ballooning public debt is likely to force several countries to default and the U.S. to slash spending, according to Harvard University Professor Kenneth Rogoff , who in 2008 predicted the failure of big U.S. banks. "

and later

"Greece’s debt totaled 298.5 billion euros ($407 billion) at the end of 2009, according to the Finance Ministry. That’s more than five times more than Russia owed when it defaulted in 1998 and Argentina when it missed payments in 2001.

The cost of protecting Greek sovereign debt from default surged in January, then declined this month as concern eased over the country’s creditworthiness. Credit-default swaps on Greek sovereign debt have fallen to 356 basis points from 428 last month, according to CMA DataVision. That’s up from 171 at the start of December."