John At The Center

The conflict came to a head in 1983, when Glucksman walked into the office of Lehman CEO Pete Peterson, a distinguished old-school investment banker who’d served in the Nixon administration and, in his spare time, wrote for the New York Review of Books, and told him to leave. “I’m talking about running the business now,” Glucksman said. Peterson, who’d made Glucksman his co-CEO only eight weeks earlier, knew that his partners understood that the power had tilted—at Lehman, money had talked. Peterson didn’t put up a fight. And just like that, the traders were in charge.

http://www.printthis.clickability.com/pt/cpt?action=cpt&title=Burning+Down+His+House&expire=&urlID=32766438&fb=Y&url=http%3A//nymag.com/news/business/52603/&partnerID=73272

What would you call a group of economists who are skeptical of regulating mortgage markets, who think unemployment insurance and unions increase unemployment, who say that tax hikes retard economic growth, and who believe that the recovery from the Great Depression was a monetary phenomenon rather than the result of New Deal fiscal policy?

No, it is not a right-wing cabal. It’s Team Obama.

All points well taken. Indeed, quotations like these make me pleased with recent economic appointments. I just hope that the above lessons make their way into the President-elect’s briefing memos and that he is persuaded by them.

http://gregmankiw.blogspot.com/2008/11/next-team.html

The lesson of the Depression and of Japan’s “lost decade,” Mr. Summers says, is that governments facing a credit squeeze are usually too meek. If you wait to take radical action, like the new $800 billion program to promote lending, until it seems unavoidable, you have usually waited too long.

http://www.nytimes.com/2008/11/26/business/economy/26leonhardt.html?hp

Calling a share trading facility a “dark pool” may have seemed like a smart idea a few years ago when these special types of trading facility started growing in popularity.

But the phrase – referring to a facility that allows the anonymous trading of large blocks of shares – appears to have become something of a liability.

Regulators, and some politicians in Europe, are starting to scrutinise how they work due to a heightened focus on market transparency amid the ongoing financial crisis.

http://www.ft.com/cms/s/0/1f99cb80-bbfb-11dd-80e9-0000779fd18c.html

The SEC says there are 32 dark pools in the US, making up nearly half the list of 68 alternative trading systems in the US, most of which are in equities.

Concerns in the market centre on the ability of traders to use dark pools to manipulate prices on the public markets by “gaming” other traders in the anonymous dark pools.

A gamer enters a dark pool with a small order to discover if there is significant volume on the opposite side of the trade with the intention of exploiting the information to push up the price of the stock in the public markets.

John O’Brien:

What’s needed is a groundbreaking approach that prevents foreclosures and increases the affordability of the existing housing stock, thus increasing housing demand. Both of these issues can be addressed with a simple, yet radical, innovation: fractional homeownership.

The biggest question here is the appetite for the new securities that John proposes:

Institutional investors, such as those who manage pension and endowment funds are interested in HEFIs to achieve diversification beyond stocks and bonds.

Do they really want exposure to that asset class right now?  Not likely.

John O’Brien is codirector of the Center for Innovative Financial Technology and faculty director of the Master’s in Financial Engineering Program at the University of California Berkeley’s Haas School of Business. He’s also managing partner at Home Equity Securities LLC.

Randall Forsyth of Barrons pointed out that the dividend yield on the SPX has surpassed the yield on the 10 year, and asked a few people what this might mean.

http://www.ritholtz.com/blog/2008/11/spxdivyield-vs-10-year/

Good news on the CDS front: Markit and Creditex are quietly and efficiently netting out contracts, bringing down notional amounts in single names alone by more than $1 trillion at this point.

http://www.portfolio.com/views/blogs/market-movers/2008/11/25/shrinking-outstanding-cds?tid=true

In order to get a long term perspective on the current bear market, I used the date provided by Robert Shiller for the S&P 500 Index (ex-dividend) and starting in 1900, calculated for every month, the rolling 10 year return.

http://www.tradersnarrative.com/why-long-term-investors-should-consider-buying-2099.html

efforts to lower the London Interbank Offered Rate, or Libor. This rate has fallen, but remains far above its historical difference with Treasurys, and the declines in Libor have been ineffectual in terms of jump-starting interbank lending, making this market largely a Fed-driven market.

http://blogs.wsj.com/marketbeat/2008/11/25/maybe-the-fed-is-figuring-it-out/

I would modify this to: The wester financial system is in serious risk of collapsing.

That’s why Bernanke and Paulson are willing to throw so much at it to fix it.  If it completely collapses, the cost of that to society will be much worse than say increased inflation for the foreseeable future, increased debt, etc.

http://www.nakedcapitalism.com/2008/11/western-financial-system-we-knew-has.html