'Drunken' Broker Sent Oil to 8-Month High in 2009: Report - US Business News - CNBC

'Drunken' Broker Sent Oil to 8-Month High in 2009: Report - US Business News - CNBC:

 "...an admin clerk called Perkins to ask why he had bought 7 million barrels of crude during the night. Perkins had no recollection of the transactions, and it turned out that he had made the trades during a “drunken blackout," according to the FSA."

ATM fees hit record high, free checking accounts decline - Sep. 24, 2012

ATM fees hit record high, free checking accounts decline - Sep. 24, 2012:

" McBride says that the banking industry has lost income due to an increase in regulations, and that's made free checking accounts harder to find.

"Two regulatory changes in particular have cut the legs out from free checking, he said, "one putting restrictions on overdraft charges, and the other limiting swipe fees when a consumer uses a debit card."

CEO pay in the FTSE 100

English: Differences in national income equality around the world as measured by the national Gini coefficient. The Gini coefficient is a number between 0 and 1, where 0 corresponds with perfect equality (where everyone has the same income) and 1 corresponds with perfect inequality (where one person has all the income, and everyone else has zero income). (Photo credit: Wikipedia)

CEO Pay in FTSE 100: Pay Inequality, Board Size and Performance by William Forbes :: SSRN:


Still more evidence that suggests that excessive Executive pay hurts shareholders.  Unlike previous work this looks at more executives and at non-US data. 

Too high of executive compensation negatively affects stockholders of US firms was shown by Bebchuk, Martijn, and Peyers JFE 2011) who showed

"that corporate value, as proxied by Tobin’s Q, post- earnings announcement share price responses, shareholder responses to acquisitions and executive turnover all deteriorate in the CEO pay slice rises. This suggests a high CPS may reflect something other than a reasonable re- ward for services rendered to company shareholders"    

Now Forbes and Pogue  extend the work of team Bebchuk by going beyond the pay of the top 5 executives as well as looking at UK firms.

Their Verdict? 

Excessive Executive pay is still detrimental:

"...additional evidence on the Bebchuk et al hypothesis that a higher CPS damages company performance from outside the US....While much of the debate concerning managerial “power” to set their own pay has been US based Conyon et al ( Conyon (2011)) have shown that, controlling for risk, UK and US CEO pay levels are not as different as had previously been assumed."

BTW you should definitely be aware of the Gini Measure, it looks worse than it really is (key to remember it is a measure of inequality in pay (or wealth etc in other fields).  Again quoting :

"The Gini coefficient (G) is then the ratio of the difference between the 45◦ line of absolute equality and the curve denoting the actual, unequal, distribution to the total area lying beneath the line of equality. While the Gini coefficient has various mathematical representations it turns out to be simply one half of the relative mean difference, defined as the arithmetic average of the absolute value differences, between all pairs of incomes.
nn G=(1/2n2μ)SUM SUM |yi −yj|
i=1 j=1 nn
= 1 − (1/n2 μ) 􏰀 􏰀 M in(yi , yj ) i=1 j=1
= 1 + (1/n) − (2/n2μ)[y1 + 2y2 + ..... + nyn] for y1 ≥y2 ≥....≥yn.    (1)
where μ is the average level of income across members of the group (say a company board) and n is the size of the population (or board size)."

Abstract:


"In this paper we examine the agency costs of seemingly excessive pay awards to CEO's within the FTSE 100 in the last decade. Are CEOs taking a large proportion of the total pot (a big "pay slice") more, or less, able to return value to shareholders by better management? In presenting this evidence we describe variations in whole distribution of executive pay, rather than invoking some arbitrary cut-off point (e.g. the CEO's pay as a percentage of their five highest paid peers or the CPS), to determine how changes in shareholder value match to concurrent changes in the distribution of executive pay. We ask is the impact of executive pay-inequality a function of board size, rendering the CPS measure problematic in this context? If so how does the interaction of board size and corporate performance size, as measured by shareholder returns, explain variation in the sensitivity of the pay-performance relationship for UK FTSE executives? We advance the Gini coefficient as a preferable measure of executive pay inequality in order to capture the impact of perceived inequality upon corporate performance."

 CITE:

Forbes, William Patrick, CEO Pay in FTSE 100: Pay Inequality, Board Size and Performance (September 1, 2012). Available at SSRN: http://ssrn.com/abstract=2140204

Related articles

• Growth in executive pay slows
• Measuring inequality
• Schumpeter: Bargain bosses | The Economist
• We are paid too much, say senior executives

New 'Tail Hedge' ETF Hunts Black Swans - Seeking Alpha

New 'Tail Hedge' ETF Hunts Black Swans - Seeking Alpha:

It is a little eearly in the school year for my classes to cover this, but oh well, we will anyways!  lol

" First Trust recently launched a new "Black Swan" styled ETF that pairs a tail risk hedge with equities, which will help limit an investor's downside risk.....The tail hedging strategy protects a portfolio from extreme market oscillations as a result of unpredictable, random and unexpected events, or so-called Black Swan events. The term was coined in a 2007 book by Nassim Nicholas Taleb published right before the financial crisis hit."

Mark Gongloff: Libor Fraud Was Happening In 1991, Trader Says, 17 Years Before Timothy Geithner Claims He Knew

Mark Gongloff: Libor Fraud Was Happening In 1991, Trader Says, 17 Years Before Timothy Geithner Claims He Knew:

"...the earliest time-stamp on Libor manipulation we've seen yet -- is a Financial Times op-ed by former Morgan Stanley trader Douglas Keenan. He claims that Libor, a key short-term bank lending rate that affects mortgages and other interest rates throughout the economy, was being jerked around for fun and profit as long ago as 1991."

Well then, that puts a different spin on things.

Related articles

• Tim Geithner Admits Banks (And AIG) Were Bailed Out At Rigged Libor Rates, Costing Taxpayers Billions
• Timothy Geithner pressed Mervyn King to reform Libor in 2008
• Libor design flawed says Geithner

The Agenda: A Closer Look at Middle Class Decline - NYTimes.com

The Agenda: A Closer Look at Middle Class Decline - NYTimes.com:

Interesting NYTimes Blog article:

"Since median inflation-adjusted family income peaked in 2000 at $64,232, it has fallen roughly 6 percent. You won’t find another 12-year period with an income decline since the aftermath of the Depression.

Why?  Hard to say, their attempt:

"In the simplest terms, the relatively meager gains the American economy has produced in recent years have largely flowed to a small segment of the most affluent households, leaving middle-class and poor households with slow-growing living standards."

Which does more to explain what happened and not why.  My short attempt at the "Why" in simple bullet points:

• Slow economy means less to divvy up.
• The world is flatter.  Technology, opening markets, and improving world-wide business conditions have increased competition and driven down the "excess profits" that the US grew accustomed to in the past.  (Note excess profits in an economic sense).
• The same factors that have reduced the excess profitability of firms fall especially hard on the middle and lower classes.  For instance, as technology has reduced the need for middle managers, it has reduced the wealth of the middle class.

  

Related articles

• The Decline of the Middle Class in the U.S.
• New York Times series on decline of middle class to run over next few months

ANALYSIS: Should airlines hedge their bets on fuel?

English: Chart of jet fuel prices for major US airlines. (Photo credit: Wikipedia)

ANALYSIS: Should airlines hedge their bets on fuel?:

Remember the difference between operational hedges (example Delta's purchase of an oil refinery) and financial hedging (hedging with financial derivatives).  And my prior on this is that hedging should be done and it is best to do it with financial hedging whenever possible.


From Flightglobal.com ANALYSIS: Should airlines hedge their bets on fuel?:

"When Delta Air Lines announced its intention to acquire an oil refinery earlier this year, the unusual move drew a mixed response from analysts. Some praised its innovation, arguing that its daily consumption of 210,000 barrels of jet fuel justified cutting out the middle man. Others questioned whether airlines should be in the business of refining crude oil.

But one thing no one disputed was the urgent need to offset fuel price volatility. According to IATA's latest forecast, Brent crude, the main European benchmark, is likely to average $110 a barrel this year - but in just six months spot prices have ricocheted wildly between $128 and $88."

Related articles

• Delta Airlines (DAL) Buys an Oil Refinery as the "Ultimate Fuel Hedge"

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• Hedging drives Delta Air Lines to 2Q loss

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• Hedging drives Delta Air Lines to 2Q loss

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Sandy Weill: Break up the big banks - Jul. 25, 2012

English: Sanford Weill outside Waverly Inn restaurant in New York City on December 17, 2007. (Photo credit: Wikipedia)

Sandy Weill: Break up the big banks - Jul. 25, 2012:
Reverse course?  Weill seemingly admits the repeal of Glass-Steagall was a mistake.

"The man responsible for creating Citigroup -- the world's first financial supermarket -- said Wednesday that the nation's largest banks should be broken up in order to protect taxpayers.

Former Citigroup chairman Sandy Weill -- who engineered a series of corporate takeovers and lobbying efforts to create Citigroup -- explained during an interview on CNBC why he now thinks a firewall between commercial and investment banks is needed."

Related articles

• Sandy Weill's About-Face on Big Banks

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• Former Citigroup Chairman Weill Says Banks Should Be Broken Up - Bloomberg

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• Split Up the Banks Says Sandy Weill; Yes, that Sandy Weill

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What Americans Earn : Planet Money : NPR

What Americans Earn : Planet Money : NPR:

Some takeaways: Almost one household out of every four (24.9 percent) makes less than $25,000 a year. About one in three households (30.1 percent) made between $50,000 and $100,000. One in five households (19.9 percent) made more than $100,000 a year.

Why Floundering Is Good | Psychology Today

Why Floundering Is Good | Psychology Today:


Yes!  I have ammunition now. :)  but My students may not like this but it fits exactly what I have said since even before I started teaching.     (thanks to Farnam Street for pointing this one out!

"...it’s better to let the neophytes wrestle with the material on their own for a while, refraining from giving them any assistance at the start. In a paper published earlier this year in the Journal of the Learning Sciences, Kapur and a co-author, Katerine Bielaczyc, applied the principle of productive failure to mathematical problem solving in three schools in Singapore."

and later:

"First, choose problems to work on that “challenge but do not frustrate.” Second, provide learners with opportunities to explain and elaborate on what they’re doing. Third, give learners the chance to compare and contrast good and bad solutions to the problems. And to those students and workers who protest this tough-love teaching style: you’ll thank me later."

NBA Players Forced to Save Toward Retirement for First Time - Bloomberg

English: Chicago Bulls Scottie Pippen 1995 (Photo credit: Wikipedia)

NBA Players Forced to Save Toward Retirement for First Time - Bloomberg:

To combat the near epidemic problems of professional athletes going broke after failing to safe for tehir retirement, the new NBA agreement includes a forced saving plan:

"Beginning next season, players also will surrender 5 percent to 10 percent of their salary for retirement. They automatically will be enrolled in the program and would have to opt-out to keep from participating in the plan, Klempner said."

Note how the plan makes use of defaults (lesson learned from behavioral finance!)

Didn't know lack of saving was a problem? Here from the article:

"Former NBA players Scottie Pippen, Latrell Sprewell and Antoine Walker are among retired professional athletes who have experienced financial difficulty after careers in which they earned tens of millions of dollars. Walker filed for bankruptcy after being paid more than $100 million over 12 years in the NBA.


“It’s a start,” player agent Keith Glass said in a telephone interview. “It does force you to save something, and that’s a good idea.”

Futurity.org – In tool trade, chimps reveal a quirky bias

Futurity.org – In tool trade, chimps reveal a quirky bias:

The endowment effect essentially says that you value something you own more than it is worth from an outside perspective.  Now it appears that chimps suffer the same bias:

"Drawing on prior theoretical work by Jones on the evolution of seemingly irrational behaviors, Brosnan and Jones found consistency between chimpanzees and humans with respect to the existence of the endowment effect and, more importantly, showed that variations in the prevalence of the effect could be predicted."

Related articles

• Endowment effect in chimpanzees can be turned on and off

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• Research shows endowment effect in chimpanzees can be turned on and off

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PolitiFact | Viral Facebook post on CEO-worker pay ratio has obscure past

PolitiFact | Viral Facebook post on CEO-worker pay ratio has obscure past:

Several of my facebook friends have posted this and, well, there are so many things wrong with this picture it barely deserves mention, but if it is not mentioned, people will only see one side of the discussion. 

So let's see is this true? 

Yes US CEOs are highly paid both historically (excluding late 1990s-early 2000s) and relative to their peers in other countries.  CEO pay has fallen somewhat since the high flying internet boom.  SO CEOs are paid a great deal (pun intended), BUT this is in part due to size differences (larger firms pay CEOs more), the contribution the CEO makes (example in Japan CEO plays a lesser role), and form of pay (more pay is form of options (which CEOs do not value as much as recorded value) the higher the pay.

Moreover, even the numbers (ratios) are questionable:

From PoliticalFact:

"... don’t doubt the chart’s underlying point that the ratio of CEO pay to worker pay is high in the United States, and is likely higher in our free-wheeling economy than it is in the historically more egalitarian nations of Europe.

But in its claim that the U.S. ratio is 475 to 1, the chart conveys a sense of certitude and statistical precision that simply isn't warranted -- and which is contradicted by the facts. The latest number for the U.S. is 185 to 1 in one study and 325 to 1 in another -- and those numbers were not generated by groups that might have an ideological interest in downplaying the gaps between rich and poor"

A Home in the Colonias | The New York Times

A Home in the Colonias | The New York Times

This video is about 5 years old, but it shows some the living conditions where we will be working in South Texas.    The New York Times


Here is some more:
Border Communities: The Case of Colonias in Texas by Cecilia Giusti

"Education levels are very low there. In El Cenizo, one established colonia in Webb County, only 15 per cent of people older than 25 are high-school graduates, a lower figure than the 76 per cent in the state of Texas and 80 per cent in the US as a whole. The median age of El Cenizo residents is 18.5, much younger than 32 years for Texas.  
Low income levels. Income levels are very low in these settlements. About 60 per cent of the colonia population lives below the official poverty line. In El Cenizo about 68 per cent are under the poverty threshold, much higher than in Texas (15 per cent) and the United States (12 per cent).
 
Incremental construction patterns. Construction in small steps is common. Colonia residents often work on their homes as schedules and finances permit. Houses are constantly improved and, as families grow, they expand accordingly. During construction, families continue to live in the houses and the building pace is generally slow."

I will update this more in the near future.