Thursday, December 18, 2008

Michael Schumacher

Why is Michael Schumacher in the $5m-$10m band of contributors to the Clinton Foundation?

Madoff Shmadoff

World's biggest ponzi scheme? Not even close - social security is obviously the biggest. And unusual for two reasons:

1) The promoters do not (generally) lie. Rather, they simply don't go out of their way to let investors know that current contributions funding distributions to historic participants.

2) To some extent, the promoters are actually trying to make the system somewhat legit (actuarially feasible) - rare to unique in ponzi world.

Just teasing. Sort of.

Monday, December 8, 2008

CS no FB?

Had no idea that there were even rumors that CS would get out of investment banking altogether. I thought CS was doing relatively well and so would be able to preserve an investment banking platform.

PE Secondaries

Have been thinking about PE secondary sales (Harvard, UVA, etc.). And have a thought - assuming PE returns are largely a function of vintage, and assuming now is the right time to begin putting money to work, could it be that the sellers are actually not exiting PE but rather freeing up capital to invest at the right time? For a public stock, future beliefs about the industry or asset class determine whether to hold or sell a position, regardless of prior losses. For PE limited partnership interests, different years and funds are not fungible and so investors need to make a new purchase to get exposure (can't simply hold on to old investments and ride out the volatility). So, although there may be some increase in value for 2006 vintage funds, better to get in the 2009-10 funds even at the cost of writing off a large part of the value of recent investments. Just a thought.

Thursday, December 4, 2008

saving for the future

For a long time I've wondered how to make sense of an extreme example. Assume we are all the same age. And we all save diligently for retirement. And we all retire at roughly the same age. What are those savings worth? Anything? If cash? If non-portable assets? If portable assets? I'm thinking about conversion of retirement savings into services and whether this means, if the stock of available services is roughly fixed (number of people available to provide the services), that you just see crazy inflation. Oddly, does this also mean that, if we all got uniformly poorer (for example, if all of our equity portfolios got cut by 40%), is there a more muted effect than you might expect? I don't really get it.

A hope

Price variations are generally a function of liquidity needs rather than changes in underlying value. I hope.

Monday, November 24, 2008

Islamic Finance

Because I am too lazy to do any research, how does Saudi Arabia have a benchmark interest rate? I thought sharia law did not permit interest?

Monday, November 17, 2008

Internet Pizza

Why is it that every time a new networked gizmo or feature is introduced, they include the feature - often standalone or dedicated - to order pizza? Related to this, if pizza is the best feature/killer app, the product is pretty much doomed.


Awesome word. As a potential deduction from a bonus, UBS executives may get a "malus". But, of course, I don't think it can result in a number lower than zero.

Monday, November 10, 2008

TiVo this

Why don’t broadcasters include a link on their program websites to “TiVo this”? I understand that they would prefer not to have viewers skip through commercials. But, at the same time, I think they would prefer that: (i) it be their shows that are skipped and (ii) make the televisions automatically tune into the show on the chance that the viewer is watching live. And, perhaps, they could embed in the privacy policy something that allows them to get more finegrained insights into the viewer’s habits (but still not disclosing identity, etc.).

Wednesday, November 5, 2008

honey pots

How do unprotected PCs get infected by viruses "mere seconds" after being connected to the internet? Are there computers just shooting around the internet looking for open ports? Isn't this flood somewhat obvious (and shouldn't identification of the source allow at least the zombie computer to be disconnected)? And, finally, when my firewall is down for a second (switching, as it often seems to, between Norton and Windows firewall), is my machine getting zapped?

Monday, November 3, 2008

school buses and voting machines

Just noting that both are generally of poor quality in the U.S. because both are chosen and paid for by governmental units that are often small and not professionalized (school districts and municipalities). It's a testament to the generally high level of ethics and quality in the U.S. that either of these things work at all given the handicaps in the selection process.

Wednesday, October 29, 2008

AT&T wi-fi access for iPhone owners

Finally, after several false starts, we get the formal announcement of free wi-fi for iPhone users at AT&T wi-fi hotspots. Justifying AT&T's default hijacking of my wi-fi settings to treat "attwifi" as a trusted network and breaking my 3G connection as I pass five Starbucks on the way to work.

But, of course, it's not all sunshine and light - logging in is a multi-step, daily process so I can't skip from node to node as I walk past the quintet.

Someone needs to write an app that automates the login process ASAP.

Tuesday, October 21, 2008

Break The Glass

According to this Bloomberg article, Goldman seems to have been aware of the break-the-glass plan from at least the beginning of 2008 as they already had Federal Reserve representatives on the premises in March 2008. I guess it wasn't so secret after all? And how was it shocking news when Goldman and Morgan became bank holding companies at the end of September. And, finally, why wasn't Lehman given permission when asked a few weeks earlier?

"The contingency planning to become a commercial bank had been under way since March, after the collapse of Bear Stearns Cos. sent shivers through Wall Street. That's when Federal Reserve inspectors set up camp at the firm's 85 Broad St. headquarters, a sign of things to come."

Tuesday, October 14, 2008

college isn't for everyone

NYC seems to be getting more serious about vocational education. I'm all for it as I think the focus on college is unproductive/destructive.

Friday, October 10, 2008

new model?

I wonder if the more gradual declines (relatively speaking) and absence of a capitulation day is due to investors being (somewhat) better educated and, in any event, indoctrinated with the view that a crash is the wrong time to sell?

Tuesday, October 7, 2008

Holy Mackerel

I think the Fed has just signed on to bail out all large commercial enterprises in the U.S. Because no one is financing, the Fed will now buy commercial paper.

Monday, October 6, 2008

Citi seeks $60b

Based on absolutely nothing as I haven't bothered to read the court filings - doesn't seeking $60b ($20b for compensatory damages) confirm that Citi was getting Wachovia for almost nothing ($2b)? Which is the strongest policy case for finding for Wells Fargo? And thus Citi's request indirectly supports Wells Fargo?

Developed and Emerging Markets Banks Convergence?

I think that the business model of emerging market banks has historically been collecting deposits and investing them in foreign sovereign debt (and not lending to local business except large and/or politically connected enterprises). Are we moving to the same structure in the rest of the world? At the same time the emerging markets are moving towards actual commercial lending? And, if so, does this suggest that investments as substitution for debt will become possible in the U.S.?

Spitzer's Fault?

Only half tongue in cheek, was Eliot Spitzer a proximate cause of the current economic turmoil?

Consider his weakening of the investment banks (leading them to take on riskier strategies to maintain earnings), targeting of AIG (leading to the ouster of its CEO – the one man who could keep Financial Products in line), and failure to limit mortgage lending fraud and abuses (items more appropriately with a state AG’s mandate).

And then the consequences: Lehman’s bankruptcy, Bear’s bailout, Merrill’s merger, AIG’s nationalization, and today’s frozen credit markets.

Friday, October 3, 2008

sleepless success

There seems to be a strong relationship between success and needing little sleep. The second appears to be a necessary, but not sufficient, condition.

Thursday, October 2, 2008

LBIE and Hedge Assets

This sentence from the GLG investor letter (posted on the NYT website) is difficult to understand: "Our assessment of the LBIE exposure is based upon a number of assumptions (including, that amounts LBIE was required to treat for each Fund as client money and not use in the course of its business were and are, in fact, so held and will be released upon repayment by each Fund of all its debt to LBIE)."

I would have thought that, for the most part, repayment of debt to LBIE would effectively release securities held as collateral in margin accounts and NOT cash (because cash would be credited dollar for dollar and so is a wash - no incentive to repay).

If this thought is correct, that means that GLG and its brethren have contingent liabilities equal to (x) the excess of securities held as collateral over (y) borrowings from LBIE. Assuming they were leveraged to the hilt and a meaningful portion of assets were at LBIE and they are a general unsecured creditor of LBIE...

AIG rescue terms

From the NYT website:

"The preferred shares will have an interest equivalent to 79.9 percent of the votes of A.I.G. and be entitled to receive 79.9 percent of any dividends paid by A.I.G. on A.I.G.’s common stock."

Does this mean that dividends are paid roughly 50/50 (44/56) until the preferred is converted?

Tuesday, September 23, 2008

Balanced Budget = Mistake?

I have been confused about government finances for a while (thinking especially about stadium financing). Most state and local governments have a balanced budget obligation which, I assume, means that inflows (tax revenues and fees) must balance outflows (expenditures and transfer payments). Which sounds fine and reasonable.

Stadium financing proponents often argue in favor of government subsidy by noting increases in local business revenues (which I suspect are simply made up numbers). But I have also wondered whether there should be public support even if the numbers are valid. And thought: "No. Even if the numbers are right, the tax revenues related to that increase in business will be much smaller than the expenditure, even assuming some sort of multiplier effect based on local velocity of money." But I think my reasoning was incorrect. If one thinks of government not as a separate person but rather as a collective spending pool, then an increase in revenues less than the expenditures is an appropriate use of government funds (a collective action/public good theory; ignoring Mills type issues).

Which brings me to balanced budgets. I don't think there is much alternative to balanced budgets as local governments cannot print money. But I do wonder if this limitation results in suboptimal government spending (because the wrong measures are being compared and balanced). And then the kicker - perhaps federal subsidy mitigates this problem AND federalism (at least on the budget side) is a mistake. Yikes.

Wednesday, September 10, 2008


In light of the current Fannie mess, this is intriguing: "Chief Financial Officer [of Capital One] Gary L. Perlin, a former Fannie Mae treasurer, and Chairman and Chief Executive Richard Fairbank have long looked with suspicion on the mortgage business." WSJ page B5D September 10, 2008.

Not that it requires repeating, but Fannie has been rotten to the core for years.

Tuesday, September 9, 2008

yankees and retail investors

The Yankees' ownership strikes me as similar to a retail stock investor (speculator) - always chasing (and lagging) trends, buying at the top, selling at the bottom, and abandoning shares when they hit bottom. Hope they keep Girardi and lose some of the short-term thinking.

Thursday, September 4, 2008


From this week's Economist: "Plutonium-powered thermogenerators have also been used to power lighthouses and radio beacons in isolated areas." Are these things guarded? I would think remote locations make them easier to hijack?

Monday, September 1, 2008

Apple product announcement

Perhaps "iPhone on MacBook" is more than simply an LCD touchscreen. I think it has been conspicuous that adding a WLAN to a MacBook has not been a simple "check-the-box" option. Perhaps there will REALLY be something like an iPod Touch on the new MacBooks. This would definitely affect profit margins as indicated on the recent earnings call. The touchscreen would allow an "instant-on" type of connection for medium-duty tasks. And would build in tethering (also conspicuously absent from AT&T's offerings). Pricing is tricky (if built in to all, those who don't want/need, will feel like pricing of the computer is too high - but if an option, doesn't seem as groundbreaking). But simply having the LCD touchscreen may be differentiating enough. And if they can sell an iPod Touch at $200, not that expensive to build-in to every laptop in the line.

Tuesday, August 26, 2008

human calculator

I have heard that there used to be a job description of "calculator" - people who could do arithmetic very quickly would be centrally located in an office bullpen and give answers as needed. Even if apocryphal, it is suggestive - there are skills that can become almost useless because of new technologies. I wonder if recall/memory is one of those skills.

Monday, August 25, 2008

suzlon = enron?

Just asking.

fannie freddie

Much of the discussion I've seen on Fannie and Freddie has involved wiping out the equity and/or bailing out the debt, all in the name of protecting the housing market (and the economy that relies heavily on the housing market). I don't understand why the second (protection) is so closely linked with the first. As Warren Buffet did with bond insurance, why couldn't the government set up a new entity to buy and package mortgages and let both the equity AND debt holders of Fannie and Freddie bear the pain? It's not as if no one knew the two companies weren't rotten to the core. Unless the debt is so immense and widely held that a writedown would cripple the economy.

Monday, August 18, 2008


I really must not have any understanding of the computer market. Apple has some tiny (under 10%) slice of the computer market. But it has "66% of the market for retail PCs over $1000". Which means that the retail market is mostly sub-$1000 machines and/or the retail market is nothing. I had no idea. It also explains why it seems everyone has a Mac and yet they have no market.

Tuesday, July 29, 2008

Political appointees

I don't understand the political appointee vs. career civil servant rules of the federal government (or state or local government for that matter). Is this tradition/custom or statutory? If statutory, I am embarrassed by how little I know about something so fundamental to our government.

Monday, July 21, 2008

special relationship

News that a countryman will be held in a foreign jail is often jarring - either the listener will somehow minimize the crime or feel the punishment seems too severe.

Most Americans would likely feel less conflicted about hearing of an American being held in an English prison than Mexican. I would guess that a chart showing reactions would be a good predictor of feelings regarding other places. Assuming the validity of this "kinship" test is proven, I think it could be useful in another context: Nationbuilding.

I think most Americans feel relatively (aside from the burdens of travel) indifferent between incarceration in NY or California. But this is unlikely between Basra and Tikrit for most Iraqis. A survey indicating this would be a nice, more concrete, way to show that efforts to build a single Iraq are misguided and that success is somewhere between far-away and never.

Friday, June 20, 2008

Familiarity breeds indifference?

Citi is expected to take another $10b writedown. And the stock barely moved. I assume a lot of this was priced in but still...

Wednesday, May 21, 2008

Outlet backlash

Many, if not most, consumers are unaware of the structure of outlet shopping (no longer seconds, price discrimination vehicle, illusory discount - they are simply lower tier lines and effectively are brand extensions). But when they are educated (perhaps by a segment on Oprah), I suspect there will be a real backlash that will have real effects on brands that have most cynically used outlets. Short those brands when the Oprah segment runs.

Tuesday, May 20, 2008


The D.C. Circuit court decided today that US currency discriminates against blind people. I agree that our form of cash discriminates against blind people. But, at the end of the day, life largely conspires against blind people so I hope the decision was carefully worded enough not to require a pure level playing field in all endeavours. But in the narrow case of money, it seems like the right decision -- money is important and so I think meets the standard for requiring some effort at providing access (but I wonder if it would be cheaper to hand out bill readers than to redesign the currency).

Friday, May 16, 2008

Just Asking

I recall that the initial iPhone announcement was driven, in part, because FCC rules required advance disclosure of handset details as part of the approval process. Would the 3G iPhone be subject to similar rules? Will any official statement merely be timed to match FCC issuance of details? Or have the details already been made public (I'm pretty sure not as 3G is still a "rumor"). Or is 3G similar enough to 2.5G that no new filings will be necessary?

Wednesday, May 14, 2008

Good Guy and Bad Guys

Although our government's initial response to Katrina was flawed in several (many?) ways, I think the situation in Burma is a fair example of the benefits of a government that is more answerable to the governed. I don't think the type of government matters all to much on a day-t0-day basis (failures abound in all systems) but in a disaster, you are likely to see a better medium and long-term response than you would in a country where the leadership faces few consequences for its actions.

The real reason for this post: It feels like China is not in the same camp as Burma. And I'd like to better understand how and why this is (or if I am simply naive or blind).

Tuesday, May 13, 2008


A New York Times article yesterday quoted the founder of Citadel, Kenneth Griffin, as follows:

"On top of that, many chief executives of big universal banks, the ones that combine all sorts of financial services under one roof, 'only understand a small part of the business,' Mr. Griffin said, suggesting too many of them come from sales backgrounds. Put those two things together, the traders and the chiefs, and you have the making of an outright debacle."

The primary focus of the article was Mr. Griffin's point that many relatively senior professionals have only modest experience with bad times. But I find the small mention of a sales background as a problem more interesting -- not because it seems correct (I've thought it many times and trust that Mr. Griffin is far smarter than I so even if I didn't agree, would assume it is correct) -- but because it is an indictment of many chiefs (see, for example, James Cayne).

Unfortunately, I think that the situation is unlikely to change. Sales people tend to rise to the top (both because they likely have strong personal/political skills and their performance is more easily quantified). However, the ability to sell isn't highly correlated with the intellectual skills needed to run a complex business. And sales, because usually structured as a percentage of revenue (not profits), often creates a bias towards unprofitable growth and corner cutting.

Of course, this phenomenon is not limited to financial institutions...

Tuesday, April 29, 2008

I get it

Companies flip back and forth from publicly traded to privately held status. In addition to the usual explanations (cashing out, currency for acquisitions, etc.), I think I now understand one more: the grass is always greener. Public company managers look fondly at avoiding quarterly targets and disclosure. Private company managers dream about being widely held and losing activist shareholder/directors.

But the bias is likely towards the second - the sinecure of a (widely-held) public company is very attractive to management.

Monday, April 28, 2008


"The idea to suspend the 18.4 cent federal gas tax and 24.4 cent diesel tax from Memorial Day to Labor Day was first proposed by McCain, the likely Republican presidential nominee, as a way to lessen the pain at the pump for consumers this summer.

Clinton said she would make up the lost revenue by imposing a "windfall profits tax" on oil companies."

If this is sincere, it is reprehensible. If this is disingenuous populism, it is merely ugly.

I have no idea whether or not Obama has any similarly counterproductive proposals but the fact that 2 of the 3 people who are mostly likely to be president support removing the gas tax (and perhaps to create a "windfall" profits tax) is scary.

Tuesday, April 1, 2008

The Fed's Role

When exactly did the Fed begin being responsible for and judged on the day-to-day performance of the stock market? Two thoughts related to this: (i) the Fed has historically been responsible for the overall economy (and, in my view, should only be required to maintain price stability in this regard); and (ii) I think that the broader ownership of equity (generally considered to be a good thing) has made the stock market a legitimate area for government intervention. In other words, instead of being a barometer, the market is now the weather itself.

Monday, March 24, 2008

Big state wins matter more

The argument that winning big states is more meaningful than winning small states smacks of whininess -- the nomination rules are the rules. This argument is often conflated with, for Democrats out of coincidences of geography, "wins in Democratic states are worth more than wins in Republican states". However, I wonder if the arguments are doubly flawed.

One rationale for the argument appears to be: Obama's wins in traditionally Republican states are less meaningful than Clinton's in states where Democrats can reliably win. The argument would thus seem to be: if Obama becomes the candidate, our grip on those Democratic states will be put at risk. But isn't this backwards? Isn't it the case that Obama has stronger support in states that Democrats need to win (i.e., Republican or swing states) and thus wins in those states are more valuable? Especially to the extent that his wins come from drawing independent voters that Clinton was apparently less able to draw?

The other rationale is that primary wins in big states translate into wins in the general election. For this to be true, it would require either (A) that Democrats (in this case) turn against or choose not to vote for their party candidate in the general election and/or (B) that swing or Republican voters are more likely to choose the primary winning candidate than the alternative Republican. Because A seems unlikely, I think B is left as the rationale. A shaky rationale as B's accuracy depends upon the identity of the candidate fielded by the other party. Meaning that the right test is how the Democratic candidate matches up against a specific Republican in the various contested states.

Simply said, because (i) the primary process tends to produce candidates who have successfully presented themselves as a party standard bearer (meaning less centrist) and (ii) winning the nomination doesn't give a lot of insight into how a candidate will appeal to the general population, drawing any inferences or making predictions based upon success in a type of state is stupid.

Tuesday, March 4, 2008

competition in the classroom

I've always been struck by how much more educated (meaning broadly knowledgable) many non-US educated people I've met are versus their US counterparts. Part of this comes down to selection bias (having the ambition and ability to practice law or investment banking on a global level, choosing to move to a foreign country, etc.) but I think there is more to it (I practice on those levels but do not feel similarly educated).

My guesses:

For the students at the highest levels, the university structure here pushes them to: (i) spend a lot of time getting to 99% knowledge; (ii) spend time on extracurricular activities as a resume filler; and (iii) learn some subjects (especially languages) late. The structure is the pyramidal hierarchy (and meaningful differences in outcome for different schools).

For most students, I think it comes down to weaker teachers, low expectations, and poor explanation of the reasons for education. Also, I believe that almost nothing is learned at the bulk of colleges.

Separately, I wonder how much the income disparities in the US play a role -- I'm especially wondering if teaching is closed off as an option to people who might consider it in other places with flatter income profiles.

I really have no idea but do wonder about how to improve basic and elite education.

Monday, March 3, 2008

international marketing

Why a unified global marketing campaign? I understand that there is only limited time for executives to review and approve materials but, given the importance of marketing, it seems wasteful in many cases to require a unified global campaign. I wonder if the desire is driven by the relatively uncommon travel profiles of senior executives - most customers will never see a campaign outside their home country - but senior executives are much more likely to see global brands in a variety of locations - and may be confusing their own rarefied experiences (and occasional jarring experiences where brands are positioned differently) with the everyday.

Mark your calendars

I would say the week around Monday, November 17, 2008, could be very interesting. About a week and a half before Thanksgiving. Let's see.

productivity in services

How is productivity in services (or improvements in productivity) calculated? More widgets, because of changes in quality, is already hard enough. More haircuts, difficult. But more legal work? Advertising? Software? I suspect that increases in productivity are often just increases in price (inflation). This is especially problematic when changes in GNP are attributed to increases in productivity - perhaps it's just inflation and an increase in nominal GNP? I'd look at this (from Brookings) to start - mostly because it was the first thing that popped up in Google.

spin momentum

Has the Clinton campaign successfully spun Texas and Ohio such that a loss in either by Obama will be seen as a large failure? If so, clever. Start by saying: "I must win" for a state you are likely to win. This gets transmuted into "If you lose, you have failed." Also, "If I win, I've won" even though, originally, must win meant simply to survive, not prevail. And if pre-meditated, very clever.