Saturday, April 29, 2006

Power Lines, Leukemia and Houses.

Tim Worstall raises an interesting point. Why should houses close to power lines fall in value if the government bans building close to lines. Tim Worstall: Power Lines, leukemia and Houses.

We already have the information on the correlation between power lines and leukemia. Does the government ban provide the data with more authority? Is this a case of market inefficiency?

Thursday, April 27, 2006

US fears firms listing overseas

BBC on the way that the high cost of regulation can eventually lead to a loss of business. US fears firms listing overseas:
"Business organisations, including the New York Stock Exchange, have voiced fears to the US Congress about global companies leaving the US to float. Business organisations, including the New York Stock Exchange, have voiced fears to the US Congress about global companies leaving the US to float. "

Saturday, April 22, 2006


Rather than blowing up, credit spreads have gone lower and lower.

"But the issue that has most hurt credit-derivatives buyers, analysts say, is an arcane and technical one. A few companies have unexpectedly tendered for their own bonds. Because buy-backs eliminate the risk of default, the consequences for the price of CDS contracts written on these bonds have been uniformly brutal."

After serveral years of banging on about risk

The hidden dangers of structured fiance

Structured finance can bring unstructured losses

I guess it will come right one day and then they will be shouting "I told you so!"

Thursday, April 20, 2006

Pension liability

Does it make sense to make firms responsible for pensions? After all, most of them do not last this long. Pension deficit sinks historic firm:

"THE 329-year-old Birmingham company that made the buttons on Lord Nelson’s uniforms has been put into administration after the £2 million deficit in its pension fund scared off potential buyers"

Wednesday, April 19, 2006

Money where your mouth is!

James Altucher looks at the future of research and says turn the research department into the proprietory trading group. Turn research departments into hedge funds and stop the rot:
"The best research now comes not from banks but from the 13D filings filed by activist hedge funds where they give their valuation reasons for an investment. Not only that, they give their banking suggestions for what should be done to unlock value."

The ills of the modern world

There is no time in this day and age to sit and talk to people. The modern world demands constant work with modern technology keeping us in touch with the office at all times. This is undermining the family and our health. If only we could go back 400 years to a time when the world moved slowly and there was a moment to connect to our parents. Pepys' Diary: Friday 17 April 1663:
"So home and to my office till night, and so home to talk with my father, and supper and to bed, I have not had yet one quarter of an hour’s leisure to sit down and talk with him since he came to town, nor do I know till the holidays when I shall."

Monday, April 17, 2006

Complex or simple

How do people sift through all the information that is available.
"In his book, Six Impossible Things Before Breakfast: The Evolutionary Origins of Belief, Professor Lewis Wolpert postulates that it is mankind’s use of tools that may have led to its belief structures

Philip Coggan in the FT points to some simple rules that follow market fashions. "Hard to keep a clear head: "But the key is always that the price of the chosen asset is going up. That movement gives investors the essential confidence to believe in the story and indeed attracts others who fear they are missing the bus. The price movement “proves” they are right and the sceptics wrong."

There are many other methods that try to distill the complexity into something as solid and simple as gold.

Tuesday, April 11, 2006

Regime change

How do we tell when the regime changes? Can we create a model that tells us that attention in the market is about to shift from a focus on interest rate differentials to a focus on structural imbalances? The FT suggests that such a shift is about to take place.

Market Insight: Dollar could suffer for US imbalances

It could be right, but can we look for systematic factors that signal a change. The low focus on the current account appeared to come to an end in December 2004. At this point, US interest rates moved above those in the euro area and it started to cost money to bet against the US dollar. With expectations all one way....

I need to look to see if there are factors that suggest that we have a current account focus (how do we define this...) or an interest rate focus. Can we idenfify news that affect bilateral exchange rates. Consequence of trade or interest rate news. Is is significantly different? Does it change?

Are jobs contestable

Are jobs contestable?  Is this a craft that where the price is set by negotiation or is this a commodity that is priced in the international market?

Ed Learner Link here reviews The World is Flat by Thomas Friedman and asks a lot of questions on the way.  

Hit bottom line - is the computer like a fork-lift truck or a microphone. The fork-lift will make me as strong as you; the microphone cannot make me sing like Paverotti. However, the micrphone will allow Paverottie to reach many more people and comand a much higher return.

Thursday, April 06, 2006

The nature of innovation

Malcolm Gladwell builds on on David Galenson work on the creative process. He suggests two types of innovation from conceptual creation of big ideas to incremental adaption. Gladwell suggests that US auto makers have great conceptual ideas in their creation of SUVs and other major styles. Japanese creation of the hybrid car is an incremental change that is not really valued in a world where venture capitalists want an immediate payback.

David Galenson home page
A video of Malcolm Gladwell's speech

Wednesday, April 05, 2006

Stiglitz on Growth and poverty

Foreign Affairs - The Ethical Economist - Joseph E. Stiglitz

Stiglitz reviews The Moral Consequences of Economic Benjamin Friedman. He looks at the issues of inequality, the measurement of poverty and financial de-regulation. He also looks more closely at the issue of measuring inequality with inprecise statistics.

The Mystery of Economic Growth

Very good overview of the existing research. Essentially, this says that there are four important factors: the accumulation of physical and human capital, and the interaction with technological change; the importance of knowledge accumulation and the way that this affects total factor productivity; global linkages and the way that these allow knowledge to be dispersed; and the importance of institutions.

Elhanan Helpman, The Mystery of Economic Growth, Harvard University Press, Cambridge, MA (2004).


Corporate governance, shareholder rights and firm diversification: An empirical analysis

Does diversification improve the firm through operating efficiency, internal capital markets, capacity to take debt and reduction in taxes? Does agency theory give some insight into the diversification premium or discount?

There is evidence here that when shareholders' rights are weak, there is more likely to be industrial diversification. Managers take advantage of shareholder weakness to diversify unwisely and to reduce the value of the firm. The evidence on international diversification is more ambiguous. There is no relationship between shareholder rights and the propensity to diversify internationally.