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Playing Chicken with Citigroup
What does "too big to fail" mean anymore? Bailing out equity-holders? Debt-holders? Depositors? Entrenched managements? Sovereign wealth funds and other large offshore investors? We need to define our terms and our goals and we need to get it righ...
Why Can't We Admit That...
...Citigroup, parent of the once-proud Citibank and Salomon Brothers, is bankrupt?...larger venture firms are fair-weather friends and lack the staying power that their prodigious committed capital balances would indicate?...venture capital and pr...
Scanning the News: Tough Times Require Decisive Action
Though I get most of my in-depth commentary on business and technology from blogs, I augment that with mainstream news headlines and alerts. I often extract the implied sentiment of headlines to get a tone of the markets and the economy, and this ...
trading the news
Inevitably one of the first ideas people have when they start thinking about how to write a trading algorithm turns out to be among the hardest: trading the news. The problems are many and in some cases not so obvious…but the natural appeal...
The Markets, Politics and Change
Throwing $25 billion at the U.S. auto sector is akin to the $25 billion thrown at Citigroup; money flushed down the toilet. With over $100 billion of legacy pension and health care costs, a lack of globally competitive, fuel efficient cars and blo...
first the Doors and now Michael Lewis
This afternoon I read by far the best and most interesting article yet on “The End” of wall st by Michael Lewis. Of course, as I was reading this engrossing tale on the inevitable failure of greed to create a perpetual money machine, ...
Why I Left Seeking Alpha
I have allowed my content to be re-published on Seeking Alpha for a long time. Since I don't care about the money of blogging, I didn't get upset that they made money off my stuff (though I know several who get completely psychotic about this appa...
The Pyramid Principle: Venture Investment in a Capital-Efficient World
Large venture firms are in trouble. The combination of too many dollars to deploy coupled with the rapidly declining costs of starting companies has largely rendered their models obsolete. While there are exceptions, e.g., Cleantech, most venture-...
Every sunken ship’s got a room full of charts
I came across this gem of a quote in a comment on the big picture and it reminded me, somewhat circuitously, of another one of the things I view as axiomatic about algorithmic trading. In The Alchemy of Finance, George Soros observed that one of h...
beyond the bull puppet
Normally I spend my design-oriented thoughts on object models - when I’m working on StratBox - or about volatility, latency, executions, &tc - when I’m working on a trading strategy. But a recent trip abroad has inspired me to co...
The Case for Derivatives
My recent post, in which I shared my experiences as a derivatives salesman, elicited very strong reactions both on this blog and on Seeking Alpha. Many of the comments equate derivatives with scandal, fraud and loss, which is an unfortunate by-pro...
Insights from a Derivatives Salesman
I spent over 10 years in derivatives, from 1993-2003. My role was a transactor in the Structuring and Origination part of the business, advising corporations on all manner of risk management strategies. During this time I saw the power - and the r...
Michigan Football and the U.S. Economy: Taking the Long View
Anybody who is a fan of Michigan football knows that this is perhaps our worst year - ever. No, even the losing 1967 squad makes the current crop look like the junior varsity. So after so many years of success why the trouble? In short, regime cha...
Congratulations, Senator. Now the Real Work Begins.
Barack Obama's historic victory has given many in this country, and across the world, hope for a brighter future. But make no mistake; the President Elect is facing a global political and economic landscape more hostile and challenging than it has...
The Plague of Short-termism
Get rich QUICK. Lose weight FAST. Fix problems NOW. Think State lotteries, the South Beach Diet and TARP (or Social Security for that matter). These are merely three examples of what appears to be the endemic short-term thinking prevalent in our s...
Why TARP Has Failed
The fact that the global financial system is in crisis is not longer up for debate. But how we solve the problems both here in the U.S. and abroad is still very much in question. The Treasury plan to make direct injections into ailing firms, and t...
In Defense of the U.S. Taxpayer: End Deferred Compensation and its Tax Subsidy
In my earlier post on bailed-out banker pay, I argued that we need a simplified compensation regime that more closely aligns corporate managements with their shareholders:The whole issue of executive compensation - both on and off Wall Street - ne...
Twitter: Monetize the Apps, not the Platform
I have spent a lot of time thinking about Twitter, and trying to figure out how it fits into the communications landscape. I've also given some thought to how it should best be monetized, and attempted to decompose the value stack associated with ...
Some Observations on Quantitative Trading
I had breakfast with a friend who happens to be a quant. A very good quant, in fact. As he began sharing his thoughts concerning his own strategies in light of today's environment, I found that they squared pretty much with my own. Clearly, a mass...
Is Volatility Embedded in the System for a Generation?
I was having a conversation with my friend Paul Kedrosky today and, as usual, it got me thinking. Our banter is usually rapid-fire, centered around the markets and technology, and generally leave me with a quizzical look on my face, a look towards...
Restoring Functioning Markets in a Broken World
Much of what has been written about the financial crisis has focused on the why, as opposed to the what now? This has led to the inevitable finger-pointing, posturing, grandstanding and the like. Personally, I'm sick of it. We're in trouble: the t...
making the spread
I’ve written here about exchange simulation in service of back-testing trading algorithms and briefly mentioned the difficulties of simulating the behavior of an order book. I just came across “A stochastic model for order book dynam...
mensch, defined
There’s an old wall st saw: “Sell Rosh Hashanah, Buy Yom Kippur” that, according to this guy at least, has had good performance since 1915. I haven’t tried to reproduce his work to confirm it, but I’m certain that any...
mensch, defined
There’s an old wall st saw: “Sell Rosh Hashanah, Buy Yom Kippur” that, according to this guy at least, has had good performance since 1915. I haven’t tried to reproduce his work to confirm it, but I’m certain that any...
entrepreneur’s inspiration
I was looking for a couple of books on amazon today and came across this offering of a hoodie (pictured above) which reads: “I helped bailout the banking system and all I got was this lousy tee shirt!” which I’d (admittedly more ...
entrepreneur’s inspiration
I was looking for a couple of books on amazon today and came across this offering of a hoodie (pictured above) which reads: “I helped bailout the banking system and all I got was this lousy tee shirt!” which I’d (admittedly more ...
more on moos
A reader, Chris P, (following up on this post) recently inquired by email about the specific rules on Market-On-Open orders. In particular, he was interested in the cut-off times for MOO orders. Market-On-Close orders have a cut-off time of 3:40...
more on moos
A reader, Chris P, (following up on this post) recently inquired by email about the specific rules on Market-On-Open orders. In particular, he was interested in the cut-off times for MOO orders. Market-On-Close orders have a cut-off time of 3:40...
Startup Depression? Nah.
Jason's missive notwithstanding, I'm seeing something distinctly different. Sure, its harder to raise money. Sure, the osmotic effect of bad feelings in the public markets and the job market challenge one's optimism and perspective. But net net, o...
Why Have Things Gone So Wrong?
Lack of transparency. Intellectual dis-honesty. Failure to read the pulse of the nation. In my adult life I have never seen a backlash so powerful or so well-timed as this. The voting public called bull#$%& on Hank Paulson, the President, Cong...
What is Hank Thinking?
It's only Monday morning and two items have already hit my BS detector: 1. The ability of the SEC to suspend mark-to-market accounting rules on a case-by-base basis. From today's New York Times:While the bill does not drop the accounting rule tha...
“… we’re here to help”
Evidently our transition to state-managed capital markets was completed last night. These worthies will now decide who the winners and losers will be. JPM seems to have done pretty swell. Lehman not so much. I guess Fuld wasn’t in with t...
“… we’re here to help”
Evidently our transition to state-managed capital markets was completed last night. These worthies will now decide who the winners and losers will be. JPM seems to have done pretty swell. Lehman not so much. I guess Fuld wasn’t in with t...
Don't Bail out Wall Street; Re-invigorate Main Street
Needless to say, Messrs. Paulson and Bernanke's $700 billion rescue package has ruffled a few feathers on Wall Street, Main Street, and the Legislative and Executive branches of the U.S. Government. Some say "Do it now or else we'll have financial...
spot the difference
A friend of mine sent me this chart and it reminded me of those spot the difference games. I guess we’re all commercial bankers now… Somewhat more poignantly, it also reminded me of this great article in the NYT a few years ago which...
spot the difference
A friend of mine sent me this chart and it reminded me of those spot the difference games. I guess we’re all commercial bankers now… Somewhat more poignantly, it also reminded me of this great article in the NYT a few years ago which...
Transparency on Trial: The Shift Towards Exchange-Traded Derivatives
Of all the lessons to be learned in the wake of the global financial crisis, I believe lesson #1 has to be:PORTFOLIO TRANSPARENCY IS ESSENTIAL; NOT OPTIONAL.Part of this has to do with enforcing more stringent disclosure rules, and consistently ap...
And on the Lighter Side of Things...
I need a little break from writing about such heavy topics such as billions for bailouts, bumbling bureaucrats and balance-sheet blow-ups. So here a few topics on the lighter side of life. Congratulations to the Soren, Howard and the StockTwits t...
On Bank Holding Companies and Bailouts
BHC or Bust The news that Goldman Sachs and Morgan Stanley are in the process of becoming Bank Holding Companies (BHCs) doesn't come as a complete surprise. If these firms were to remain independent, they had to radically reposition their balance...
Paying for the Bailout: In Defense of the U.S. Taxpayer
Avoiding "Free Riders" Exactly how the U.S. Government will pay for bolstering the calcified credit system is still up for grabs. But there is one thing for sure: if the Executive and Legislative branches are concerned with ethics, morality, and ...
From Capitalism to Socialism to ???: Crossing the Line
The U.S. Government's historic reaction to the financial crisis firmly puts us in a place not seen in generations. We have officially crossed the line from capitalism to socialism in less than a week. The Fed synthetically owns Wall Street as we s...
“market manipulation”
I went to assemble my day’s market-neutral portfolio this morning - including, of course, its fair share of shorts - when I came across this fun bit of news: “The Commission is committed to using every weapon in its arsenal to combat...
“market manipulation”
I went to assemble my day’s market-neutral portfolio this morning - including, of course, its fair share of shorts - when I came across this fun bit of news: “The Commission is committed to using every weapon in its arsenal to combat...
Investing 2.0
We are about to enter a new and scary phase, one where there are few good answers to the question: Where should I invest my money? Risk premiums and liquidity costs are skyrocketing. Short-term Treasury yields are approaching zero and could possib...
Good Bank/Bad Bank on a Grand Scale: Bringing Back the RTC
Brady, Ludwig, Volcker. Three pretty smart guys who have seen a lot in their careers and dealt with mind-boggling turmoil in the markets. Kind of like the turmoil we have today. They penned an editorial in today's Wall Street Journal that essentia...
The Paulson Doctrine: An Uncertain Prescriptive for Uncertain Times
Unwittingly or not, Treasury Secretary Paulson has effectively created the Paulson Doctrine. The doctrine states that firms that he deems too big to fail (but we're not exactly sure where the line is drawn: LEH? No. BSC? Kind of. MER? Maybe. AIG, ...
Investment Banking 2.0: Into the Future
Bear Stearns? Gone. Lehman Brothers? Gone. Merrill Lynch? Gone. What next? I had the pleasure of hearing Nouriel Roubini speak at a planning dinner for the 2009 Money:Tech Conference, and he had more than a few thoughts on the topic. I respect Nou...
BAC/MER: The Market has Spoken - Survey Says, Boooo!
On a day that the S&P is down, oh, 3-4%, BAC is down over 20%. Is it because investors fear that the bank is going bankrupt? No. Is it because investors are scared to death that Ken Lewis is going to make one deal too many (or, perhaps, two or...
Financial Reality: A few thoughts on LEH, MER and BAC
So, B of A is buying Merrill. Lehman is toast. AIG, waiting in the wings? Today, there is only one word that matters - liquidity. Without this creator of option value, of the ability to ride out the storm, not even the largest institutions are imm...