John At The Center

FT Alphaville » Goodbye to the risk-free rate.

Bloomberg, which is on a mandate to move into various verticals beyond its core, has now acquired Fairfax, VA-based government data publishers Eagle Eye Publishers. Terms of the deal were not disclosed, but this is Bloomberg’s third acquisition in the last few months, after BusinessWeek (for its consumer push) and New Energy Finance, a UK-based green/energy publisher. This comes as reports about Bloomberg’s $100 million push into government news and data, through a purported portal/effort called Bgov, have been leaking out. Bloomberg also bid for CQ last year before it was bought by RollCall, but backed off after the asking price. EEP, founded in 1986, provides federal procurement data for subscription fee. Some more info here.

via Bloomberg Acquires Govt Data Firm As Part of Continued Expansion | paidContent.

So Okun’s Law, a pillar of mainstream economics, is no longer reliable, as Robert Gordon, a Northwestern University economist, explains in a recent paper.

via A Broken Economic Law – Economix Blog – NYTimes.com.

It is time to atomize Wall Street – Viewsflow.

However, restoring Glass-Steagall as it was would achieve nothing. After all, the two most serious failures of risk management in the 2008 crash were collateralized debt obligations, involving a mortgage bond market in which commercial banks’ securitization operations have always been active, and credit default swaps, a product in which commercial banks were intimately involved from the first. Conventional underwriting of corporate debt and equity securities, the activity prohibited to commercial banks by Glass-Steagall, was not the problem, as it might have been had the crash occurred with the bursting of the 1999 dot-com bubble. The principal risks involved in finance today are those incurred by traders, but those proliferate in both types of banking.

The solution to these conflicts of interest is “single capacity,” the system under which the City of London acted until the passage of the Financial Services Act of 1986, surely among the most misguided legislation in human history. Under this system brokers, who sold securities, were kept separate from jobbers, who made markets in them. Both were separate from merchant bankers who arranged financings and carried out mergers and acquisition transactions. When an underwriting took place, the merchant bank arranged the transaction and the brokers sold the underwriting to insurance companies and other large investment institutions, who earned additional income by backstopping deals in this way. “Proprietary trading” was undertaken by investment trusts, pools of money whose business was to maximize income for their investors, in a similar way to a U.S. hedge fund. As for banking, that was done by the merchant banks if complicated, but the high volume simple transactions were carried out by the clearing banks, home of the nation’s retail deposits but not known for their intellectual heavy lifting.

Panjiva faces stiff competition from established global intelligence businesses like Dunn & Bradstreet, which focuses mostly on domestic business' financial data, and Alibaba.com, which has a $1 billion investment from Yahoo (YHOO, Fortune 500) and showcases marketing information provided by overseas suppliers.

But in the beginning, Panjiva's biggest challenge wasn't facing down other companies. It was building something customers actually wanted. In 2008, after months of software development, Green and Psota were pleased with the search engine they'd built to help businesses find suppliers. But when Green put it in the hands of potential customers for a test run, the feedback was not what he expected.

via Panjiva: A search engine for global e-commerce – Feb. 19, 2010.

I’ve traded this system for years, and even though it has no fancy chaos theory, it works. Basically, if a stock falls in price for four days in a row (for instance, after a bad earnings report) chances are the selling is done. Within four days, everyone’s seen the news, everyone’s had a chance to sell and most of the sellers have probably already sold.

via EconomPic: “A Simple Way to Data Mine”.

A Communist Party directive leaked to the Chinese-language edition of the Asia Times said dollar reserves should be limited to US Treasuries or agency mortgage debt such as Freddie Mac that enjoys Washington's implicit backing.

BNP Paribas said the move has major implications for global risk assets. “The message from Beijing is that we don't like this environment,” said Hans Redeker, the bank's currency chief.

via China orders retreat from risky assets – Telegraph.

Investors are selling out of “junk” bonds at the fastest since September 2005, in the latest indication that concerns over sovereign debt are spreading to other credit markets.

In the week that ended on Wednesday, nearly $1bn was withdrawn from US funds that hold high-yield corporate bonds (junk bonds), according to Lipper FMI – the largest outflow in almost four and a half years.

Whether the outflows signalled the end of the junk bond rally depended on whether the financial problems in Greece were resolved or spread, Mr Fridson said. ”If the problem persists or worsens, it would be bad news for every ’risky’ asset out there, including high-yield bonds.”

via FT.com / Capital Markets – Investors abandon junk bonds.

Last year, Rowley said, Fortescue provided favorable ore prices to a major Chinese steel company in return for a promise of billions of dollars in investment. But the Chinese firm reneged on the promise at the last minute. He said that was a sign of things to come.

“Either the Chinese will have to learn to honor contracts or we will have to learn how to operate in a system with less clarity,” he said.

“They are an enormously powerful nation,” Rowley added, his back to the Perth skyline with its frenetic cranes and glistening new towers of glass. “The world hasn't woken up to the fact that they are going to replace America. But it's how they're going to do it that's the question.”

via Australia welcomes China’s investment, if not its influence – washingtonpost.com.

Mongolia’s leaders, some educated at Harvard and Cambridge, say they are determined to avoid this syndrome, known as “Dutch Disease” — a sudden surge in wealth that ultimately hampers expansion.

Working with the Washington-based World Bank, they are dispatching officials to nations such as Chile, which successfully harnessed its copper resources to help drive growth. They are also leveraging their democratic system to build support for policies including greater investment in transportation and a new budget law aimed at curbing the impact of volatile metals prices.

“If you go to most developing countries, they’ll tell you, ‘We’re saved; we’ve found uranium,’” said Hernando de Soto, a Peruvian free-market economist. Mongolia has “a president who says, ‘We are in grave danger because we have discovered we have a lot of natural resources.’” The fact that “they are forewarned gives you hope.”

via Mongolian Harvard Elites Aim for Wealth Without ‘Dutch Disease’ – BusinessWeek.