finance
razib | September 13, 2009I'm reading Justin Fox's The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street, which is on many "To Read" lists because of its topical relevance. I think it is especially illuminating when examined in light of another work, Toward Rational Exuberance: The Evolution of the Modern Stock Market by B. Mark Smith. As made clear by the title Fox's stance is generally skeptical of the efficient-market hypothesis (though Fox does often distinguish between weak and strong forms of the hypothesis, and is naturally not as hostile to the former as the latter). In…
razib | September 12, 2009Keep reading stuff like this, A Year After a Cataclysm, Little Change on Wall St.:
Simon Johnson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology and former chief economist of the International Monetary Fund, said that the seeds of another collapse had already sprouted. If major banks are allowed to keep making bets that are ultimately backed by taxpayer guarantees, they will return to the practices that led them to underwrite trillions of dollars in bad loans, Professor Johnson said.
This isn't really an ideological issue. Arnold Kling (who opposed…
pontiff | September 11, 2009Krugman clarifies:I've been getting some comments from people who think my magazine piece was an attack on the use of mathematics in economics. It wasn't...So by all means let's have math in economics -- but as our servant, not our master.
Word.
(Of course the point I was trying to make was that I read the end of his article as suggesting that because economics must deal with the irrational and unpredictable behavior of humans, that it must therefor be messy and beyond elegant mathematical description. I don't buy this line of reasoning, as I think it is unknown whether the conclusion is…
razib | August 17, 2009Matthew Stewart in The Big Money, How To Become a Management Guru in Five Easy Steps:
The industry that Tom Peters founded succeeded largely by sticking to the formula devised by America's pioneering preachers. In a sense, Peters brought management theory back home, by reuniting it with a much broader and deeper spiritual tradition that dates from the earliest days of the American republic. To be sure, the management theory before Peters had always had religion, but its religion was a hieratic one. It came down from a priesthood on high--from popelike figures such as Frederick Winslow Taylor…
dgmacarthur | August 12, 2009The announcement of the Helicos genome sequence (which I've already discussed in detail) engendered a huge amount of media interest, sometimes for the wrong reasons.
Having the media attention directed elsewhere in the third-generation sequencing space was clearly an unwelcome experience for Helicos competitors Pacific Biosciences, who have responded with a press release announcing the successful raising of $68M to finance further development of their single-molecule real-time (SMRT) sequencing platform.
To be fair, raising that sort of capital in the current economic climate is no mean…
dgmacarthur | August 11, 2009A reader pointed me to this press release on the dire financial state of Icelandic biotech deCODE Genetics.
The slow financial train-wreck that is deCODE has been sliding off the rails for years (see stock price chart below), but things look set to reach their final resolution one way or another within the next few months: the company currently has $3.8 million in cash reserves, but is bleeding out $12 million per quarter, and "believes it has sufficient resources to fund operations only into the latter half of the third quarter".
Where to from here? In the press release, deCODE CEO Kari…
pontiff | July 22, 2009Two notes from Caltech of interest:
Michael L. Roukes' group at Caltech has produced a NEMS (nanoelectromechanical system) device which can (almost) measure the mass of a single molecule (as opposed to the many tens of thousands (is this the correct amount?) needed in mass spectrometry.) Build a 2 micrometer by 100 nanometer NEMS resonator. Drop a molecule on it. The frequency of vibration of the NEMS resonator changes. Detect this frequency change. Of course vibration frequency also depends on where the molecule lands. So run the experiment about 500 times to get good estimate of the…
razib | July 20, 2009Felix Salmon has been at the center of a discussion on the merits and value-add of financial innovation. He notes:
Then there's the more purely financial innovation. There are good things here too -- fractional reserve banking, factoring, common-stock limited-liability companies, tradable fungible bonds, stock-market index funds, that sort of thing. But on this front I think the low-hanging fruit was plucked decades if not centuries ago, and that we've long since entered a world of diminishing returns when it comes to the positive developments. Meanwhile, the negative developments, from…
razib | July 13, 2009Interesting Q & A on the "shadow banking" system over at The Atlantic. The last answer is illustrative of a major distinction between physical and social systems:
I use the term "Credit Insurer of Last Resort." And here's the idea: The Bagehot Rule - lend freely, at a high rate, in a crisis - dates from 1873. That was a good enough rule for the 19th century British economy, an economy that ran on short term commercial bills of exchange, 90-day paper. You can see for the new capital markets banking system we have a problem. We have 30-year mortgages that are the underlying asset that are…
pontiff | June 30, 2009Summer doesn't officially start here in Seattle until the fourth of July, but the summer vibe is definitely here. Which means no teaching, so it's all research all the time. But a man cannot live by his own research alone, which leads me to the vast brain dump that is the internet.
Things found...
The Innsbruck group has a new paper out on a very cool way to shuffle ions in a trap: arXiv:0906.5335
The info processor points to a review of power laws in finance/economics
Via the one honest man a strangely mesmerizing history of yield curve spreads:
It looks like a group has finally gotten to…
razib | May 29, 2009Felix Salmon pointed me to The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street today. There really is a boom in these sorts of books recently! Are we overdoing the "irrationality" bit? Probably. Mike offers up some skepticism about the creeping of irrationality as an explanation for everything.
razib | May 22, 2009Megan McArdle posts Edmund Andrews' response to her revelation of his wife's bankruptcies. Megan concludes:
On a very broad note, I don't see this as a story about the goodness or badness of Andrews or Barreiro--and I've been dismayed by some of the nastiness about her in comments here and elsewhere. Rather, I think this matters because the story Andrews told was basically about the subprime crisis, and the book casts him as a sort of everyman, lured in by cheap credit and a likeable scoundrel of a mortgage broker. That may be what happened to many, or most people in the mortgage crisis--…
razib | May 20, 2009Check out this Felix Salmon's interview (video) with Gillian Tett, author of Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe (the reference to "Tribe" is a wink to Tett's background as an anthropologist). Also, she was recently on NPR.
pontiff | May 12, 2009The other day I ran into a good friend from Tlön, who told me the most fascinating story about his discovery of a new theory of games.
I owe my discovery of the nature of equilibrium in card games to an odd conjunction of mirrors and an encyclopedia. The mirror was in our library, and the encyclopedia was called Encyclopedia Equilibria (London, 1942, Enlarged ed. 1983). The mirror was an abomination, for in its reflection, one could see their opponents cards, and thus it led me to a crisis in belief. The encyclopedia, however, was even more of an anomaly, containing a fallaciously named…
pontiff | May 6, 2009Via MarketSci blog, Eric Rosenfeld talks about the collapse of LTCM at MIT. Funny I can't find in any MIT literature an advertisement for the fact that 2/3s of LTCM had MIT roots? (Caltech, snarky snark snark)
pontiff | May 4, 2009Personally I'm very skeptical of technical analysis, but that's just because I am skeptical of easy answers. But try to parse this article over at bloomberg titled "Stock Charts Fail Forecast Test in Complete S&P Miss."
We begin withEver since the Standard & Poor's 500 Index peaked in October 2007, six of eight strategies -- which are supposed to make money whether stocks rise or fall -- failed, according to back-testing data compiled by Bloomberg. As the bear market erased $11 trillion from the value of U.S. equities, buy and sell signals from those six technical indicators…
razib | May 2, 2009Calculated Risk has a great chart showing GDP fluctuations which puts into perspective just how big a downtown the Great Depression represented, and how it compares to the current one. For the population ~30 and under the current downswing is already 3 times more extreme from the peak than any recession they have memory of. In fact, we're already approaching the biggest downswing since World War II and the recession will certainly be the longest as well. On the other hand, we're as far from the commonly accepted definition of a Depression of a 10% decline in GDP as the 1991 one recession was…
razib | April 26, 2009Fortune has a massive profile of Bernie Madoff's life, career and scam. Some new material too.
razib | April 11, 2009Who's manning the TARP desk?:
Less than half a dozen people are responsible for making the final decisions about which banks get part of the $700 billion in bailout money available through the Troubled Asset Relief Program, according to Department of Treasury officials. In response to a Freedom of Information Act request made by the Sunlight Foundation in January for the members of the TARP Investment Committee, a FOIA officer recently responded with just four names, including Assistant Secretary, Neel Kashkari; Chief Investment Officer, James Lambright; Acting Assistant Secretary for…
razib | April 1, 2009Check out the introductory post. I had thought Felix was a more traditional financial journalist, but looks like he took a rather unorthodox route. Not that there's anything wrong with that!