Haiku - Credit Default Swap

I need insurance.
Your bonds have more default risk -
should buy CDS.

-JDW

links of the day 02-26-10

10 lessons from trading with Victor Niederhoffer (WSJ)

How safe are dollars? (Project Syndicate)

Haiku - Ron Paul

Ron Paul hates the Fed
"Tear it down, abolish it!"
populism's chief.

-JDW

links of the day 02-25-10

The stocks most held by hedge funds (marketfolly)

In defense of financial speculation (WSJ)

Haiku - Thain & Wentworth

John Thain, Designer,

redid Stan the Man's office:

1 point 2 million.

This next one needs some preface to contextualize it. There is a company, J.G. Wentworth, that pays off annuities, structured settlements, etc. in cash. I'm sure what they do is to calculate the present value and give you a discount to that for the liquidity. Instant cash. I'm not sure if it is regional where I grew up (Kentucky) or not. They have really catchy jingles that my brother and I learned by heart. "It's your cash. Use it when you need it. Call J. G. Wentworth 8-7-7 CASH NOW." I'll post a video clip if I remember when I go home. But here is the haiku:

I don't want to wait

for my stock options to vest,

call J. G. Wentworth??

links of the day 02-24-10

Interesting satirical article by Charlie Munger (Slate)

Ken Rogoff sees more sovereign defaults in the near term (naked capitalism)
-This would put enormous downward pressure on US markets. Remember what happened when the little principate of Dubai started talking default?

The psychology of a winning trader (TraderFeed)

Activist investors, even on a small scale, get good news from Mary Shapiro (TRB)

Haiku - Goldman

So rich, Goldman Sachs,

masters of the universe,

financiers to God.

-JDW

links of the day 02-23-10

Rydex market timers are bearish on conditions (The Technical Take)

Currency trading is a zero-sum game (Minyanville)

One year on, Robert Barro thinks the stimulus package was a mistake (WSJ)

Haiku - AIG

AIG did it,

almost blew up the world, with

credit default swaps.

-JDW

links of the day 02-22-10

Arthur Levitt: Risk and Regulation in the Marketplace (WSJ)

Don't chase a billionaires' last trades, they have different risk expectations and objectives (TBP)

Woman dies, leaving 2,000 living descendants (NYT)

Haiku - collateral

More collateral

You're scary, counterparty

I need room to breathe.

-JDW

links of the day 02-19-10

ETFs are gaining popularity with small investors (WSJ)

Everyone talks up their book (Abnormal Returns)

The most important bet in history - the one between Ehrlich and Simon (Paul Kedrosky)

What effect does intuition have on perceived luck? (TraderFeed)

How to be a billionaire (Forbes)

Haiku - inappropriate

Inappropriate

to name a fund company

Plunging Investments.

-JDW

Haiku - Greenspan Put

OK, to get in the right frame of mind, imagine yourself back in 1999...

Don't fear a decline

the Fed will rescue us all

It's the "Greenspan put".

-JDW

links of the day 02-16-10

Goldman's Jim O'Neill, coiner of the term "BRICs", thinks a yen re-evaluation could occur at anytime (FT)

Alan Blinder on the status of financial reform (WSJ)
- I've always thought, and agree with Blinder, that systemic risk would fall to the Fed if it weren't explicitly deemed the realm of another authority.

On college students and graduation rates (Economix)
-Stunning, in 2000-01, only 60% of first-time, full-time students completed their degrees within 6 years!!

200th post - Haiku - Bull Strategy

I guess I've been stuck in a theme lately - mixing a little advice with a little financial poetry.
The fifth installment in Dan's guide to life through the media of haiku:

Cast away your bonds

constant anger weighs you down

breathe, relax, smile.

Bullish on a stock?

Buy a call or write a put.

Up-swing? Rake profits.

-JDW

links of the day 02-12-10

Higher GDP growth does not equal higher equity market returns (FT Alphaville)

10 reasons why traders lose discipline (TraderFeed)

Which central banker makes the most? (Cheap Seats)
- I would never have guessed

Driving sign language (Slate)

Haiku - bonds

Another one of Dan's guide to living, #4:

Get off life's highway

Don't drive it with cruise control:

speed up then slow down.

And a financially motivated haiku:

Bonds work inversely

Prices move opposite rates

They're quantitative.

-JDW

links of the day 02-05-10

Regulation without politician input? Increase reserve requirements (WSJ)

If you didn't know him before, meet the Bond King (Pragmatic Capitalist)

Haiku - Dan's Lesson #3

Dan's lessons for life, through the medium of haiku, number 3 (local edition):

Moving to D.C.?

drive your U-haul by Congress

lose an afternoon.

-JDW

links of the day 02-04-10

A quick, long run view of the stock market (Crossing Wall Street)

More reasons to lift the sugar tariffs (Carpe Diem)

Microsoft's inner creative destruction (NYT)

What really motivates employees? (Harvard Business Review)

On being, and writing, funny (Ben Casnocha)
-I really agree with Ben that I don't like to be around people that aren't funny (read: smart)

Never have your lunch stolen out of the office fridge again (MR)

Haiku - Buy-write

Own a hundred shares?

sell a call to earn more cash

it's called a buy-write.

-JDW

links of the day 02-03-10

Can you trust census data? (Freakonomics)

Haiku - Game Theory Edition

Both make the best choice,

that's Nash equilibrium,

a dilemma solved.

-JDW

Investment advisors should not have bedside manner

My beautiful girlfriend and I have just gotten into the intriguingly interesting show Lost. This weekend we were watching an episode where the doctor, Jack, was explaining the risks of a procedure to a patient on the island. Another character, Hurley, says, "what's that thing where doctors can make you better just by talking to you?" When Jack responds, "bedside manner," Hurley quickly retorts, "yea, yours sucks." Lost has a way of mixing backstory with the action on the island, and the back story playing during this time revolved around Jack saving awoman who had a severe spinal cord injury. His father tells him to give her hope, because that alone can have miraculous effects on patients.

After the episode, I sat thinking about the connection between bedside manner for doctors and the investment advisory profession. There should not be any correlation. In fact, I believe the relationship should be exactly opposite. If the aim of doctors is to instill hope about a good procedural outcome by placing a positive spin on small odds then investment advisors should do the opposite - by stressing the small odds of a large drop in value. Investment advisors who ignore the small, but significant negative tail risks are doing their clients a disservice, because they are reinforcing their client's pre-existing dreams of "castles in the sky." [Advisors who shamefully boast their past results or have grand predictions for the future do so to lure in money so they can earn their management fee, or worse steal it, are irresponsible and should be avoided]. This case is different from the medical purpose of bedside manner which is to shed the patient's (again, pre-existing) stress of their medical maladies in order to positively impact their health. The difference between the two lies in the client/patient's mindset - patients are likely to dwell on the negative and investors on the positive - which is what the advisors/doctors have to countervail for them in order to achieve the best possible outcome: a happy customer.

links of the day 02-02-10

Check the spreads of ETFs before investing (WSJ)

Great blog post on the cost of foreclosure (RortyBomb)

Andrew Ross Sorkin on what bankers in Davos are thinking about Volcker rule (Dealbook)

Yale economist Robert Shiller thinks the US economy will drift sideways in the coming years (NYT)

Deficit balloons into a national security threat (WSJ)
- I think the most interesting idea in here is that large amounts of debt threatens our country's independence. It makes me wonder what the founding fathers would have thought about the situation. I'm sure they would not be OK with a one-party communist regime holding such a large percentage of our debt, giving them the power to dictate to us on policy.

Volcker's interesting (albeit long) op-ed from the weekend (NYT)

Dilbert on investment banks

Man, it is amazing how Scott Adams can sum up society's feelings in 3 panes.

links of the day 02-01-10

Stock market volume picked up with a rise in volatility (TraderFeed)

Which markets are ripe for a burst? (Focus)

ECONOMICS acrostic (Greg Mankiw)

5 myths about credit cards (Washington Post)

"A carefully guarded secret of the industry is that about a quarter of cardholders have accounted for almost two-thirds of interest and penalty-fee revenues. Nearly half of all credit card accounts do not generate finance and fee revenues."