Congress is supposed to start its review of the SEC today, January 5.
In the spirit of inquiry, we’re wondering—only half jokingly—had Mr. Madoff admitted only to losing vast sums of money in September, would the government have provided bailout money to him?
Why not? At the point regulators had investigated his firm eight times over 16 years, and […]

We were at Williams-Sonoma this past weekend and saw a beautiful copper, KitchenAid mixer for $899.95.  (Its twin is made of nickel, and we have no idea of how prices of that metal have changed, but we doubt that they have gone up since the summer.)
The nearly $900 seemed a bit expensive for a mixer; so, we joked […]

It Doesn’t Add Up.
According to The Wall Street Journal, today S&P Cut Ratings on 11 Banks.
Depending upon each institution’s accounting policies, individuals at those firms may have cheered their firm’s respective downgrade because that action may have reduce the value of the firm’s outstanding debt thereby allowing the firm to recognize an unrealized gain on its income statement.  (Yeah, it is […]

My fickle friend, the summer wind.
A few weeks ago, Harvard announced that its endowment fund lost about $8,000,000,000 (since July 1).
This week, Yale announced that its endowment was down about 25% for the year.  That’s about $5,900,000,000.  (Their fiscal year started July 1.)
Likewise, according to yesterday’s Wall Street Journal, CALPERS, the California Public Employees’ Retirement System, has lost about […]

Back on May Day, when oil was about $120 per barrel, we speculated in Commodity Bubbles? Yeah, Probably, that the price could be $40 per barrel by year end.  (We weren’t very specific about which kind of oil and when it was to be delivered, but such is life.)
We don’t keep track of all of our […]

Implied Under the Assumption of Risk Neutrality
We have several posts related to the calculation of price-implied default rates under the assumption of risk neutrality and several posts related to simple CDS calculations.
Those posts have involved discrete, single-period problems, where there are only two dates of interest: today and a future date where an uncertain claim or cash flow will […]

The Wall Street Journal has an article today entitled, Mack and Thain Lose ‘08 Bonuses.
We’re neither sympathetic nor antagonistic towards Mr. Thain, who has only been in his position for a year; so, we take no glee in his being shut-out.  Hopefully, he’ll be able to make-do with his $750,000 salary, $15-$20 million signing bonus from […]

We were searching our hard drive for a paper, and found a very interesting article that we had saved about the perils of excessive leverage.  It is As Funds Leverage Up, Fears of Reckoning Rise from the April 30, 2007, edition of The Wall Street Journal.  It is subtitled: Fed and SEC Question Wall Street […]

A Variety of Risk & Incentive Ideas All in One Post!
There is an article in The Wall Street Journal today entitled, Citadel’s Losses Add to Mr. Griffin’s Pain.
We’re rather indifferent to Mr. Griffin’s pain as we’re sure that he is to ours, but that’s not why we are writing.
We mention the article because it relates to earlier postings and provides […]

Our site’s statistics program keeps track of the search terms used to arrive at our humble little venue, and this morning we noticed a hit from the query, “How to trade CMBS?”
That, as they say, struck us kind of funny. 
We thought: given the ongoing and (we would guess) accelerating problems in commercial real-estate such a question could come from […]

The Wall Street Journal reports today that Obama Keeps His Distance From Treasury on TARP.  It seems the Mr. Obama and his representatives are not providing the Bush administration officials with specifics about their mortgage and liquidity crises-related plans.
We say: what’s wrong with that? 
Whether Mr. Obama and his staff are seriously deliberating and contemplating specific plans or actions or […]

The on-line version of The Wall Street Journal reports today that Harvard Endowment Loses About $8 Billion.  As we read that article and the actual letter from Harvard it seems that endowment is down about 30% since June 30.  (The university’s administration is not quite sure how much because the value of externally-managed private equity and real estate […]

Music for Our Times
The turbulence in the financial markets shows no sign of ending.  Commodities buyers, including food companies and airlines, suffer large losses from ”hedging” programs as prices plummet.  “Hedge” funds suffer losses that are exacerbated by the high leverage applied during calmer days; redemptions are limited.  Industries and unions beg for our tax dollars.  State governments beg for our other […]

In early October, we wrote So Much for the ‘Hedge’ Part of Hedge Funds.  In that post, we noted that many equity funds were suffering like the rest of us.
A month earlier, way back on 9/11, in Speculators, Hedge Funds and Lehman Brothers, we disagreed with a subtitle from an article in the previous day’s edition of The Wall […]

Update: December 12, 2008.  While none of our analysis or calculations was incorrect, we did have a minor error in the penultimate paragraph. We should of said “first” not “last.” To make amends, here is a multi-period problem, Multi-period Bond Price Implied Default Rates and CDS, but it won’t make sense without reading this one first. We also added […]