When Steven Rattner led Team Auto—the taskforce charged with saving General Motors and Chrysler—he brought to the table his restructuring and private equity experience from his prior jobs as deputy chair at Lazard Freres and managing principal of Quadrangle Group. But, more importantly for the readers of his book, Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry, Rattner has also retained the writing skills from his early days as a New York Times journalist. The result is a graphic account, almost hour-by-hour record of the largest industrial restructuring ever. This book can serve as a lesson for financial professionals interested in this type of financing, and a cautionary tale about the ever-increasing role of government.
Continue reading "Book Review: Overhaul" »
The condition is easily diagnosed. Over the last half century, the rise of the investment industry has created overwhelming incentives for investors to follow one another into risks they often do not understand. As a result, world markets are hopelessly synchronized. This obstructs rational pricing and, in a capitalist world that relies on markets to set prices, endangers our prosperity. Finding a cure, however, is more difficult.
Continue reading "Excerpt: The Fearful Rise of Markets, 2010 and After" »
In October 2008, on one of the most volatile days in market history, I stepped to the podium during a program at the New York Society of Security Analysts. Looking out at the audience, I saw the eyes of deer in headlights. My listeners’ faces showed the stress that had been palpable in the room all evening. I felt much the same.
With seismic transformations underway in the economy and markets, with many having lost their jobs, and with many more suffering anxiety about the security of their careers and their futures, we’re all feeling the need for practical, sage advice. For that I turned to Dr. Stuart Schneiderman and Dr. Brett Steenbarger.
Continue reading "Confidence Men: Talking with Brett Steenbarger and Stuart Schneiderman" »
Vulcan Materials Company, the nation’s largest producer of construction aggregates, will be presenting at NYSSA’s fifth annual Construction Materials Conference on September 29. We recently spoke with Mark Warren, Vulcan’s director of investor relations, about the outlook for the industry. Warren also described Vulcan’s sustainability and corporate social responsibility initiatives, which have been critical to its ability to maintain and grow its business.
Continue reading "Mark Warren of Vulcan Materials Talks About the Outlook for the Construction Materials Sector" »
Sometime in the late 1980s there was a young man from the outer boroughs. His father was a laborer and worked for the company for his entire career, and he had a mentor and folks who helped him along the way. He’d almost gone in another direction career-wise, but was ultimately drawn to the excitement of Wall Street. He took a job at one of the largest and most successful firms on Wall Street hoping to “bag the elephant.”
You know the story, but...
Continue reading "Interview with Anthony Scaramucci, Author of "Goodbye Gordon Gekko"" »
The current global financial crisis and the US government’s response to it—bailouts of too-big-to-fail banks, tax-financed props for an ailing auto industry, mortgage-rescue plans for overextended households—have upset the public’s sense of fair play. Citizens have also had to struggle with their attempts to link the fragile, ethereal, economic construct revealed by recent events to the concrete realities of food on their tables and roofs over their heads. And they don’t want to have to study the intricacies of monetary policy, public debt management, and international capital flows to maintain their faith in capitalism.
Continue reading "Micro-origins of the Financial Crisis" »
About a decade ago, in the advent of the Internet era, Wall Street was consumed with the “paradigm shift” occurring in the “New Economy,” where earnings no longer mattered and all that counted were “eyeballs.” Remember that drivel? Based on this flimsy, overweening logic, many investment bankers managed to convince successive waves of investors to buy the IPOs of companies that were little more than a few recent college graduates holed up in quasi-loft spaces south of San Francisco’s Market Street or in the shadow of Manhattan’s Flatiron building. Who can forget such spectacular flameouts as Globe.com and Pets.com? For a while, though, the ruse worked and many people got rich.
Continue reading "Tails, I Win; Heads, You Lose" »
INDEX: MONGOLIAN EQUITIES | CURRENCY: THE TÖGRÖG (TUGRIK) | INTEREST RATES | SUMMARY
This article follows Worldview’s earlier report on Mongolia and presents the recent performance of Mongolian equities, currency, and interest rates. One of the challenges of investing in Mongolia is that data is harder to come by than for many other emerging markets, and so this presentation will not be able to perform the full sets of analysis that have traditionally been a part of Worldview articles. For example, MSCI does not keep an index, total return or otherwise, on the Mongolian market. We do, however, take what data is available use it in the most meaningful ways available.
Continue reading "Mongolia, Part II: Should One Tempt the Wrath of Khan?" »
Just when you thought it was safe to trust European banks again, the Wall Street Journal analyzed recent EU bank stress tests and found that a number of banks underreported their sovereign debt liabilities. Many investors, and EU regulators, were hoping to put the Greek debt crisis in firmly in the rear view mirror, but given the spotty nature of the bank’s disclosures, this may heighten concerns, rather than put them to rest.
Continue reading "EU Banks Sovereign Debt Mystery Deepens" »
I thought I’d save two birds with one blog post. A reader of mine kindly suggested that I write more about options, so I’m going to do that with reference to the WSJ article entitled “Coffee-Futures Prices Are Near a 13-Year High.” From the article:
“Coffee futures remain close to a 13-year high, as tight supplies and the prospect of dry weather hurting next year’s Brazilian crop have sent roasters scrambling to secure beans.”
So if we are at multiyear highs, you might be bullish but are scared to enter the market at these levels. One of the ways you can be bullish and limit your downside is with options.
Continue reading "Michael Martin on Trading Coffee Option Spreads" »
“An ethic, ecologically, is a limitation on freedom of action in the struggle for existence. An ethic, philosophically, is a differentiation of social from anti-social conduct. These are two definitions of one thing. The thing has its origin in the tendency of interdependent individuals or groups to evolve modes of co-operation.
“The ecologist calls these symbioses. Politics and economics are advanced symbioses in which the original free-for-all competition has been replaced, in part, by co-operative mechanisms with an ethical content.
Continue reading "Commentary: Toward a Finance Ethic" »
“Are Vanguard’s ETFs Cannibalizing the Firm’s Index Funds?” The Journal of Index Investing (Summer 2010). Anna Agapova.
Existing literature on ETFs and conventional index mutual funds suggests that the two fund types are substitutes for each other in terms of attracting investors’ money. Vanguard is an industry-leading index fund provider that offers both conventional index mutual funds and ETFs. The question is whether Vanguard experiences a substitution effect between its index funds and ETFs to the same degree as is observed in the industry in general. The examination of the substitutability of the two fund types can help explain Vanguard’s decision to offer ETFs that could cannibalize the firm’s existing products. Results of the article show that contrary to the initial expectations, Vanguard’s ETFs and corresponding index funds are not substitutes but rather complements. The flows of ETFs and index funds positively affect each other. Positive spillover effects, such as ETF tax efficiency, may help explain the synergy between Vanguard index products. The results can help fund families take advantage of similar efficiency spillover effects when structuring new products.
Continue reading "Recent Research: Highlights from September 2010" »
The impact of the recent financial crisis on alternative investments has called into question investors’ wisdom in persuing them so aggressively. This group of investments had reached a high degree of acceptance and was viewed by many as the new frontier of superior returns. The above-average management fees, plus incentive compensation, made them a favorite vehicle of investment firms. Today some universities and other institutions are struggling to recover from the losses incurred. Despite this, the alternative investment category retains a lot of interest from institutions and financial professionals. This is partly driven by the very low yields from prime quality fixed-income securities. And in a period of intense cost pressures and price competition, financial firms will put a lot of effort into the high margin parts of their businesses.
Continue reading "Book Review: Alternative Assets and Strategic Allocation" »
What does a US investor stand to gain from international portfolio diversification? This analysis discovers that diversification benefits would have made it beneficial for an investor with any risk profile to include emerging Latin American market indexes in a US portfolio from 1992 to 2006, rather than investing solely in S&P.
Although several studies exist on the benefits of international diversification (e.g., Grubel 1968; Levy and Sarnat 1970; Lessard 1973; Odier and Solnik 1993; and Eun and Resnick 1994), the benefits to the foreign investor in emerging Latin American markets are still under-researched. In addition to the question of whether it’s worthwhile for US investors to include emerging Latin American market equities in their portfolios, there is also the issue of what the optimal portfolio mix for such investors would be.
Continue reading "Free Lunch in Emerging Markets: Evidence from Latin America" »
If the global institutions and alignments created after World War II were looking a bit long in the tooth at the dawn of the 21st century, the economic crisis has pushed them one step closer toward irrelevance, if not extinction. Up-and-coming powers like China and India, no longer content with a subsidiary role on the global stage, are clamoring for more power, and the financial crisis is giving them the opportunity to explode the political and economic status quo.
Continue reading "One Big Happy Family: The Global Crisis Tests Postwar Alignments" »
INDEX: MONGOLIA IN COMPARATIVE CONTEXT | GEOGRAPHIC CONSTRAINTS AND ECONOMIC VULNERABILITIES | HISTORICAL BACKGROUND | ECONOMIC GROWTH AND STRUCTURE | ECONOMIC RISKS | SUMMARY
Mention Mongolia, and most people will conjure images of horse-mounted hordes rushing across the Asian steppes, building the largest land empire the world has ever seen. While Mongolians are understandably proud of their heritage, which has included ruling three present-day BRICs (China, India, Russia), much of the Middle East and parts of Eastern Europe, the Mongolia of today is a much smaller affair, consisting of just over three million people—approximately the population of Jamaica—scattered across an area roughly the size of Iran.
Continue reading "Mongolia: BRIC-ing Up is Hard to Do" »
The Finance Professionals' Post spoke with Jack Kasprzak, managing director of Equity Research at BB&T Capital, for his outlook on the three principal sectors of the construction materials sector—public works, housing, and commercial building—in the run-up to NYSSA’s Fifth Annual Construction & Materials Conference, to be held on September 29.
Continue reading "Construction Materials Outlook: Some Hope on the Far Horizon" »