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Archive for Valuation

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 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

Good (Late) News from the SEC

Andy Spero | January 25, 2010 | 0 Comment(s) |

We Missed It a Few Months Ago

On the front page of the The ‘Money & Investing’ section of today’s edition of The Wall Street Journal, there is an article entitled, At SEC a Scholar Who Saw It Coming.

The article is about Henry Hu, who manages the newly-formed Risk, Strategy and Financial Innovation division at the SEC.

Though he sounds like a good guy, we don’t know much about Mr. Hu, but that’s not why we’re writing. It also mentions that in November, Mr. Wu hired Richard Bookstaber… Read the rest

Where’s the Science?

Andy Spero | August 19, 2009 | 0 Comment(s) |

Here’s a great sports- and science-related article in today’s edition of The Wall Street Journal: The Africans Are Hearing Footsteps. We think it’s great because it exposes what claims to be a “scientific” approach to long-distance training as something that seems to be quite the opposite, i.e., something that seems to be quite non-empirical.

The article describes how American long-distance, Kara Goucher, is successfully using “African” methods–which were, in fact, used by most Americans prior to the 1980′s–to train for marathons. As described, her method seems to focus more on… Read the rest

Wisdom in the Stock Market Crowd? Really?

Andy Spero | May 18, 2009 | 0 Comment(s) |

Every Monday, L. Gordon Crovitz publishes his Information Age column in The Wall Street Journal.

We’ve mentioned his column several times–sometimes agreeing with him, but usually chiding and criticizing him.

We do like his intentions, which seem to be to introduce and describe new theories as they pertain to information and economics. Unfortunately, usually he isn’t able to write knowledgeably about these topics. By that we mean that he seems to have a journalist’s, or MBA’s, or pop-science reader’s depth (more precisely, shallowness) of understanding. So, he is often insufficiently uncritical–i.e.,… Read the rest

The Banks' Mark-to-market Gains on Debt

Andy Spero | May 15, 2009 | 0 Comment(s) |

How Much Have They “Gained” From Becoming Worth Less?

Since the beginning of April, when many large banks reported unexpected (or unexpectedly large) first-quarter profits, we’ve wondered what percentage of those profits could be attributed to the accounting rule that lets them recognize a gain because their own liabilities have become worth less. (We think “worth less” is the correct form, but for the extreme cases, it should indeed be “worthless.”)

We wrote about this issue of recognizing gains from losses in mid-December in our post Read the rest

Today's WSJ Reporting Errors per the Bank Stress Tests

Andy Spero | May 8, 2009 | 0 Comment(s) |

Is that Really the Worst-Case?

Today’s front-page article in the The Wall Street Journal, Fed Sees Up to $599 Billion in Bank Losses, is subtitled “Worst-Case Capital Shortfall of $75 Billion at 10 Banks Is Less Than Many Feared; Some Shares Rise on Hopes Crisis Is Easing.”

While it is the worst of the two cases analyzed by the regulators, it is not the worst, reasonable case that could be imagined. Perhaps that’s why the shortfall was “Less Than Many Feared.”

It’s reasonably possible for the downturn to be deeper

… Read the rest

SCAP, The Government's Naive Stress Testing Exercise

Andy Spero | May 5, 2009 | 0 Comment(s) |

Or, Is It the Naive Government’s Stress Testing Exercise?

More Lack of Planning and Insight from Our Regulators and Government Officials

About one month ago–on April 7, to be precise–we asked, Where Will the Bank Stress Testing Exercise Lead?

In that post, we wrote that the tests could be designed one of three ways: (1) with a positive bias to ensure that all or almost all of the banks could pass the tests, (2) with no bias to get… Read the rest

Swine Flu and Bank Stress Tests

Andy Spero | May 5, 2009 | 0 Comment(s) |

Last week we wrote two related posts: A New Influenza Stress Test and Influenza Pandemic Stress Test, Part II. Both posts discuss the need for banks to perform stress tests/scenario analyses that incorporate the possible negative economic effects of a flu pandemic in additional to consideration of possible additional structural weaknesses (and shrinkage) in the economy.

In the second post, we mentioned a government study from a few years ago that estimated a five percent contraction in GDP if the USA faced a severe… Read the rest

Business Schools, Incentives, Uncertainty, and the Financial Crisis

Andy Spero | April 30, 2009 | 0 Comment(s) |

What Should It Mean to Earn a Master’s Degree?

We don’t answer that question here, but shouldn’t one be required to master something?

It Was a Matter of Time

Since early October, we’ve wondered when we’d see the first editorial criticizing MBAs and business schools for their role in the ongoing financial crisis.¹ In our mind, much of the blame should be shared between business types, i.e., MBAs, and so-called “quants,” with the majority of the blame placed on senior managers who permitted lax controls and misaligned incentives to… Read the rest

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