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Archive for Uncertainty

Taleb the Pundit?

Andy Spero | August 24, 2010 | 0 Comment(s) |

There is an interesting article in the Money & Investing Section of today’s edition of The Wall Street Journal, entitled Taleb’s Pessimism Lures CIC.

In it, the reporter, Jenny Strasburg, writes about Nassim Nicholas Taleb and a hedge fund, Universa, with which he is associated.

We particularly like this quote she attributes to Mr. Taleb, “Stocks are not a robust investment (sic). Make sure you have a garden that bears fruit.”

We like it because we can’t tell whether Mr. Taleb is serious, or not. We’ll explain.

If you… Read the rest

Interest Rate Swaps and Stupidity, II

Andy Spero | July 12, 2010 | 0 Comment(s) |

What Could Go Wrong? Visit the Emergency Room.

Last Thursday, The Wall Street Journal had another article about how some organizations “lost” money on interest-rate swap contracts.

The fact that someone–one of the two parties involved–lost money should come as no surprise. Unless rates evolve along very specific paths, someone–either the customer or the bank–is going to lose money on an interest rate swap.

Last week’s article, entitled Wrong-Way Financial Bets Have Hit Hard in the paper or Hospitals’ Wall Street Wounds on-line, tells how hospitals lost money on… Read the rest

Get Your Bitsmith Here!

Andy Spero | July 8, 2010 | 0 Comment(s) |

Expert Subject & Information System Knowledge

We occasionally get comments (from folks that don’t know us very well) that our consulting practices seem broad and unrelated. Their (unsolicited) advice is usually that we should “focus.”

In those situations, our verbal response is simply, “thanks.” However, it is quite possible to be an expert in more than one field, especially if those fields are (1) related at a more basic level and (2) support each other.

More importantly, for knowledge workers, cross-field expertise applied to substantial and/or… Read the rest

Managerial Control & Risk Management

Andy Spero | July 6, 2010 | 0 Comment(s) |

We have a new page that describes our risk management services for industrial organizations. The practice is actually broader than industrial firms and encompasses all non-financial firms.

Histogram generated from Monte Carlo Analysis

Managers at many such firms realize that they do not (currently) have the expertise to employ hedging tactics, including the purchase of futures or forwards contracts or derivatives contracts, and they may not know where to start.

Others may realize that they do not have the expertise to negotiate with sophisticated trading firms or banks that who serve as counter-parties to… Read the rest

It’s the Uncertainty, Stupid.

Andy Spero | June 22, 2010 | 0 Comment(s) |

We’re a couple days late in mentioning it, but if you haven’t seen the excerpt of the new book, Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis, by Anatole Kaletsky, we suggest that you read it. The excerpt, The Benefits of the Bust, was published in this past Saturday’s edition of The Wall Street Journal.

Much of it deals with the inadequacy of economics as a science, including economists inability to say anything relevant about the financial crisis and the implications about various proposed solutions… Read the rest

Financial-overhaul, Bank Ratings & Scenario Analysis

Andy Spero | May 24, 2010 | 0 Comment(s) |

Have Banks or Regulators Required Such Analyses?

There’s an interesting article in today’s edition of The Wall Street Journal with the title, Overhaul Puts Bank Ratings at Risk.

The article explains how the version of the financial industry regulation bill that was passed by the Senate significantly weakens implicit government support for banks that were or may still be presumed to be “too-big-to-fail.” If that version of the bill becomes law “TBTF” will have been transformed to “NTBTF,” depending upon the whims and fears of the regime in charge… Read the rest

The ‘Flash Crash’ and Deft Options Resets

Andy Spero | May 21, 2010 | 0 Comment(s) |

And Other Opportunistic Behavior

We think mini-panic/epileptic seizure in the equities markets on Thursday, May 6, was tremendously interesting and worthy of comment but haven’t had the time to write until today–more than two weeks later.

The old curse states, “may you live in interesting times.” and so these are. Actually, such times are more of a blessing than a curse if you can stand on the periphery and observe the mayhem.

Whether planned or not, waiting to comment is not always a bad things since it reduces the likelihood… Read the rest

The Silliness of Demonizing Goldman Sachs

Andy Spero | April 28, 2010 | 0 Comment(s) |

What is the world coming to when we feel sorry for managers, traders, and structurers at Goldman Sachs?

We haven’t written extensively about financial matters lately, because frankly, when considering whether to write about such topics, we feel like the weatherman, Phil Connors, in “Ground Hog Day.” It’s the same old, same old. (Now, if you folks want to pay for it, we’ll be quite happy to write more, and it would seem new and fresh and exciting. Let us know.)

However, the travesty of the SEC’s fraud case,… Read the rest

Correcting Finance Industry Misconceptions

Andy Spero | March 31, 2010 | 0 Comment(s) |

The April 5th edition of National Review has a three-article, Financial Special section, consisting of:

We Didn’t Deregulate by Veronique de Rugy (not on-line, yet)
Break Up The Banks by Arnold Kling
Resolve to Reform by Stephen Spruiell & Kevin D. Williamson (not on-line, yet)

All are worth reading but for slightly different reasons.

Ms. de Rugy does a very nice job of summarizing the misconception that there was general deregulation of financial firms in recent years. She also makes the point that certain policies and responses… Read the rest

Interest Rate Swaps and Stupidity

Andy Spero | March 22, 2010 | 0 Comment(s) |

There is a front-page article in The Wall Street Journal today, entitled, Interest-Rate Deals Sting Cities, States.

It about interest rate swaps, and provides more reasons to despise politicians. Are they stupid, willfully ignorant, or morally-challenged? Short answer: many are all three.

A Very Short Primer

All things equal, banks make variable-rate loans because they don’t want to bear the risk of interest rates changing. If a bank makes a loan at a fixed rate, and subsequent rates rise, then the loan loses value. At least for that moment,… Read the rest

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