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 […]

Daniel Henninger has an interesting column in The Wall Street Journal today.  It is entitled America Needs Its Frontier Spirit.
Although we don’t entirely agree with it, we do like his sentence: “The great danger now is that a depressed and angry people will allow the risk-taking American baby to be thrown out with the toxic-securities bathwater.”
Perhaps he should […]

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 […]

If you haven’t read it, For the Vix, 40 Looks Like It’s the New 20 in today’s The Wall Street Journal please know that is a decent column.
We particularly like the paragraph:
“Volatility may not return to its highs, but it isn’t clear when it will get back to normal, either. Volatility breeds fear, which breeds more volatility. There […]

The Curious Case of Robert Rubin
The weekend edition of The Wall Street Journal has a front page interview with Robert Rubin: Rubin, Under Fire, Defends His Role at Citi.
We’ve criticized Citi’s board in the (recent) past, and we’re still particularly fixated on the fact that few directors had financial industry experience.  That seems neither wise nor even prudent for a financial […]

This post greatly expands upon a comment we made about regulation in Even A Perfect Bailout Will Fail and possibly elsewhere.
Regulators as wise monkeys.
Today’s The Wall Street Journal has an article entitled, Bank Examiners Are Told to Step Up Sanctions on Lenders.
The first sentence of the article says it all: “The U.S. government’s armies of bank examiners have been ordered to […]

Note: We’ll likely expand and edit this post in the morning, but wanted to circulate the idea before bedtime.
We’re rather diligent—but not obsessed— about keeping up with financial new.1  We’ve heard many financial firms announce lay-offs and have read how at a few, like Goldman, senior managers have decided to forgo bonuses.
As we recall, most banks have […]