Cliff Jumping

By | 2017-07-17T12:34:43+00:00 December 31st, 2012|Global Market Update|

It seems like we’re seeing a bubble in cliffs. Everybody knows about the fiscal cliff. That’s what’s going to happen January 1st if Congress and the President can’t put aside their differences long enough to avoid $500 billion in tax hikes and spending cuts over the next year. The combination of spending cuts and tax hikes could cause a mild recession early next year. But the metaphor has proven to be so popular that we’re now looking at a milk-price cliff, a container cliff, [...]

Changing Exchanges

By | 2017-07-17T12:34:44+00:00 December 27th, 2012|Global Market Update|

Adapt or die. That’s the lesson of the ICE/NYSE merger. The Intercontinetal Exchange—an internet-based operator of energy and commodity futures and over-the-counter contracts—has bid for the New York Stock Exchange. Unlike NASDAQ’s bid, which ran into regulatory antitrust issues, or the offer by Deutsche Bourse, which was blocked by the European Commission, the merger with ICE will likely go through. In this merger of non-equals, a tech-savvy startup with sound growth prospects and abundant cash purchases a centuries-old iconic brand mired in the past. [...]

End of the Line

By | 2014-09-09T10:16:09+00:00 December 26th, 2012|Global Market Update|

Newsweek is publishing its last printed issue. Eighty years ago Newsweek pioneered the use of global wire services and produced its first issue, which cost a dime. In 1961 the Washington Post valued the company at $100 million in today’s dollars, and bought a controlling share. Two years ago they sold the company for $1 to a private investor, who merged its operations with The Daily Beast, an internet news-aggregator with some high-profile features and op-ed pieces. The idea was to have The Daily [...]

Rationally Generous

By | 2017-07-17T12:34:44+00:00 December 21st, 2012|Global Market Update|

The Native Americans had “potlatch.” Pacific Islanders had “Aropa.” Techies today have open-source software. And most people exchange gifts at Christmas-time. But is gift-giving rational? A lot of economists say no. The look at the all the fruit cakes sent but never eaten or the ugly ties politely acknowledged and then tucked away and see nothing but a loss of hard-earned cash. One study estimates that as much as a third of the money spent on Christmas presents is wasted. They recommend people give [...]

Big Banks, Big Problems, Big Fines

By | 2014-09-09T10:12:18+00:00 December 20th, 2012|Global Market Update|

UBS is paying a fine of $1.5 billion. That’s a lot of money. As the derivatives market grew in the last decade, a number of banks used their role in the rate-setting process to artificially raise or lower rates. They were able to make bets on LIBOR, and then help set LIBOR. They were like big-league sports players betting for or against their own team. When I say that the derivatives market grew, I mean it really grew. LIBOR is now a benchmark for [...]

Bubblenomics

By | 2014-09-09T10:11:27+00:00 December 19th, 2012|Global Market Update|

In 2008 we popped the housing bubble; in 2000 it was the internet bubble; before that we had commercial real estate, biotech, the oil patch, and LDC debt. Every few years a bubble comes along. So what’s next? To foresee the next bubble, we need to understand the last. Sub-prime loans at insanely low rates enabled people to build and buy way more house than they needed or could afford. But hey, housing prices always go up, right? Cut rate margin loans allowed people [...]

The Useless Fed?

By | 2017-07-17T12:34:44+00:00 December 18th, 2012|Global Market Update|

Is the Federal Reserve irrelevant? There used to be a time when the markets would hang onto every stray word that a Fed official would utter. There used to be a time when we would wait for the outcome of Federal Reserve meetings with bated breath. There used to be a time when the Fed’s Chairman was considered the second most powerful person in the country. Not any more. For the past year or so—ever since the Fed began offering quarterly press conferences—the markets [...]

Connecticut Musings

By | 2014-09-05T21:05:32+00:00 December 17th, 2012|Uncategorized|

Sometimes we need to stop for a moment and reflect. This commentary is focused on markets and the people who make them, but circumstances require something deeper today. The horrors inflicted upon the children and adults at Sandy Hook Elementary School last Friday both are both repugnant and mesmerizing. We are repelled by the brutality, but curious about what could have motivated such cruelty. Over the weekend I found myself repeatedly drawn to the news only to turn away in disbelief and disgust. But [...]

The Fed Doubles Down

By | 2012-12-14T10:50:57+00:00 December 14th, 2012|Global Market Update|

The Fed is all-in. In his press conference Tuesday, Ben Bernanke noted that the Fed has made two changes to its policy: first, they’ve changed the end-marker for buying bonds from a date to an economic indicator; and second, they’re changing operation “Twist” from a sterilized sell-bonds/buy-bonds program to a pure bond-buying spree. With Operation Twist, they’ve been selling short-term notes and buying long-term bonds since September of last year in an attempt to flatten the yield curve and stimulate growth. It’s true that [...]

Small Beer?

By | 2017-07-17T12:34:44+00:00 December 12th, 2012|Global Market Update|

Small Beer? Did Deutsche Bank engage in dirty accounting? That's what a prominent whistleblower is saying. In the depths of the financial crisis, Eric Ben-Artzi, a former Goldman Sachs banker, claims that Deutsche fudged the valuation of some highly complex securities by $4 billion or so. If his allegation is true, it could tarnish the image of one of Europe's top financial institutions Deutsche Bank is one of Europe's largest banks and one of the few that didn't need government help during the crisis. [...]