John At The Center

Greg Mankiw’s Blog: Ricardian Equivalence.

I read this briefly and am not tracking very closely:

Izabella Kaminska has a gloriously geeky 2,300-word blog entry on what she calls the “passive self-propelled pyramidization” caused by the structure of the USO fund:

Oil market participants win precisely because they can play the contango trade effectively and predictably. Retail investors just lose and will continue to do so until either the contango disappears or the oil price shoots up beyond the rate of their losses. Yet many analysts agree the oil price is unlikley to ascend much higher while the contango is in place, and as Schork highlights, the contango is unlikely to disappear while the market can continue to benefit from its structure.

via Winners and Losers from Oil Contango – Finance Blog – Felix Salmon – Market Movers – Portfolio.com.

It’s interesting that whenever anybody proposes a debtor-friendly piece of legislation, a thousand bank flacks’ knees jerk at once, and suddenly we journalists are deluged by people saying that it’s a dreadful idea, because banks will simply stop lending and/or raise interest rates as a result. Well, the California mortgage market is living disproof of that notion: it’s incredibly debtor-friendly, but would-be homeowners never had any more difficulty getting a mortgage there than they did anywhere else.

via The Truth About Mortgages – Finance Blog – Felix Salmon – Market Movers – Portfolio.com.

Treasury Secretary Timothy Geithner, in an interview with PBS’s Jim Lehrer to air Wednesday evening, offered the Obama administration’s strongest declaration yet knocking down talk of nationalizing banks.

…People are hoarding capital and liquidity. And the best way to break that and arrest it is to try to ahead of that and get these institutions to look forward at again the range of — they might face as we go forward and critically to make sure they’ve got the cushion of resources. You can think of this as a form of insurance from the government that they can get through that.”

via Real Time Economics : Geithner: Nationalization Is “The Wrong Strategy”.

Social Leverage LLC was founded in 2009 (yep we are new), to provide capital, help syndicate and offer strategic guidance to emerging web businesses. We are located in Phoenix, New York City and Los Angeles. The partners of Social Leverage LLC have invested in over 30 early stage web businesses and have served as founders and executives of numerous companies. Our passion is helping entrepreneurs build great companies. We do like to earn a living while we do it.

via Social Leverage, LLC.

via FT Alphaville » Blog Archive » Another scam… CFTC charges individuals over $1.3bn commodity market fraud.

It’s the old “guns don’t kill people” debate. I’ve received quite a lot of emails over the past few days saying that guns (like the Gaussian copula function) don’t kill a financial system, it’s people who kill a financial system. Waldmann, deliciously, takes the “guns don’t kill people, bullets kill people” approach. Which might be technically defensible, but does seem to rather miss the bigger picture.

via Copulas, Efficient Markets, and Liquidity – Finance Blog – Felix Salmon – Market Movers – Portfolio.com.

From comments:

I agree that Siegel is stretching credulity with this, but I do think there is a valid point here. Much of the decline in S&P earnings is attributable to bank losses. These are writeoffs of past profits booked. If you don’t own banks (which I don’t), the earnings of the companies in your portfolio have probably not fallen as far as S&P earnings. That’s the problem with talking in general terms about “the market”.

PK reply:

Fair enough. I can go along with making the valuation ex- certain sectors, but that’s not new and didn’t require Siegel to write a semi-related OpEd.

via Paul Kedrosky: Jeremy Siegel Reinvents S&P 500 — Declares it Cheap.

Now, the market seems to be fixated on the relationship between a bank’s tangible common equity, or TCE, to its total assets. This ratio essentially shows what common shareholders would receive if the company were ever dissolved.

Breakingviews’ spreadsheet lets a user choose the target TCE ratio and the percentage discount that the government would pay to the banks’ share price on Feb. 9. Using some basic assumptions, the document calculates how much of the banks’ common equity that the government would need to own.

via Bank Nationalization, by the Numbers – DealBook Blog – NYTimes.com.

Cash-strapped investors have put more than $540m (€420m) of private equity and hedge fund stakes up for sale on a new platform launched Tuesday, aiming to draw out possible buyers for the otherwise illiquid holdings.

The platform introduced by newcomers SecondMarket is a bold move to break the log-jam in markets for second-hand private equity and hedge fund stakes, where prices have plunged to record lows as sellers have far outweighed buyers.

via FT.com / Companies / Financial Services – Private equity investors flock to sale platform.