Why isn’t financial analysis more probabilistic? We make all these assumptions and predictions in making a financial analysis or forecast, but for all the thought that goes into that, those assumptions get buried in the model, hidden behind single value variables. We don’t build ranges right into the model (except in a sensitivity analysis, which [...]
Forget WWIII, the future is a delicate dance over mutually assured financial destruction. The New Republic has a great article (Peking Over Our Shoulder | The New Republic) about the issues and the way the game is playing be played. It looks increasingly like if the US and CHina ever come to blows, it will [...]
I have an emerging view on markets, government, and what to do moving forward, and Better Regulate Than Never | The New Republic help my tie a lot of my thoughts together.
To understand the shape of our response to the crisis, we must understand the crisis itself. We have experienced a failure [...]
If you haven’t heard of High Frequency Trading yet, you will soon. It is changing the way markets work, improving liquidity and price setting, while allowing those few with access to the requisite tools to take a lion share of the profits generated. For example:
It was July 15, and Intel, the computer chip giant, [...]
A new product called MacroShares allows investors to hedge against changes in the value of their home. The securities are issued in pairs so that every position is matched by an offsetting bet. I doubt if this will become a mainstream investment anytime soon, but it could mark the beginning of the move from looking [...]
The Japanese would have a a very different take on the story of the big bad wolf. Between tsunami’s, typhoons, and earthquakes, natural disaster’s regularly destroyed towns. Homes weren’t built to withstand anything hurled at them – they were built to work day in and day out, and to be rebuilt quickly after a disaster. [...]
The more things change, the more they stay the same. Of course, if the basic economics of the industry never changed in the first place, why should we expect anything but more of the same.
It seems investors might overestimate the ability of their peers to make sound decisions, a very convincing explanation for several of our recent economic crises. In essence, I can should pay a lot for a mortgage backed security (or dot com stock, or bankrupt investment bank) because everybody else is (and everyone else should be [...]
What’s next for US banks – The McKinsey Quarterly – What’s next for US banks – Financial Services – Banking.
McKinsey analysis of what’s happened to banking so far and what’s in store for the future. The pain may not be over…
In the aftermath of the financial crisis, the focus has been on better accounting for risk, better matching employee pay with the long term value they generate, and creating new regulations to “fix” the markets.
Arguably, better matching pay with value created is ideal, but it is also difficult to measure, which is why we [...]