Counting on Accounting?

By |2017-07-17T12:22:42-04:00July 14th, 2015|Global Market Update|

It always starts small: Photo: Petr Kratochvil. Source: Public Domain Pictures A little “fudging” on the bank statement; Overstating income to obtain a loan; Rounding errors that round the wrong way; Fixed assets that aren’t so fixed, where amortization slows to a crawl—all boosting the bottom line. These are some of the ways accounting can be distorted to serve nefarious ends. In 2007 a 100-year old law firm merged with an 80-year old firm. Former partners included Wall Street scions, Presidential candidates, and counselors [...]

Big Data, Big Issues

By |2017-07-17T12:34:15-04:00August 21st, 2014|Global Market Update|

Can Big Data be abused? Many folks are concerned about privacy when it comes to Big Data. And there are real issues. It’s a little creepy to be greeted by, “Hello, Mr. Tengdin. Did you like the shirts you bought last week?”— when I call a customer center. But that’s just efficient service. It makes sense for a retailer to know who’s calling. Most people like being greeted by name. No, our online world creates other issues. With a little ingenuity, data scientists can [...]

Good and Bad

By |2017-07-17T12:34:36-04:00November 26th, 2013|Global Market Update|

Why do good people do bad things? Recently we’ve been treated to a spate of bad behavior by otherwise successful, sensible individuals. A couple of Credit Suisse mortgage traders intentionally mis-marked their portfolios as the housing market crumbled around them. LIBOR traders systematically manufactured false readings of this key global index in order to help their firms’ derivatives desks. And then there’s Rajat Gupta, the former Chief Executive of McKinsey & Co., who served on the Goldman Sachs Board of Directors. Gupta was convicted [...]

Irreducible Complexity

By |2017-07-17T12:34:37-04:00October 30th, 2013|Global Market Update|

Is investing today too complicated? Hedge funds, ETFs, high-speed trading, flash crashes—is the market today too multifaceted and treacherous for the average investor to even understand, much less profit from? It certainly can seem that way. Because computerized exchanges have largely replaced the physical hustle and bustle of the trading floor, the market now handles far more volume at far higher speeds than it ever could before. This has opened the way for a lot of new products, some of which represent real advances [...]

SACked?

By |2013-07-26T11:01:53-04:00July 26th, 2013|Global Market Update|

Is the hedge fund industry doomed? The indictment of SAC Capital and administrative action against its founder, Steven Cohen sure could make you think that. Cohen’s company is accused of systematically using inside information to defraud the markets, and Cohen is charged with failing to supervise them. If the charges are proven, SAC is out of business, most of Cohen’s wealth is confiscated, and he will never manage money again. But Cohen’s firm was unique. It isn’t really an investment firm, it’s a trading [...]

Crossing the Line

By |2013-07-16T09:36:44-04:00July 16th, 2013|Global Market Update|

How close? How close can investors come to eliciting inside information from networks of informed insiders without crossing the line into insider information? Or how far away do they need to stay away from the line? In securities law there is a notion of insider trading known as the “mosaic theory.” This doctrine states that if an analyst compiles non-material non-public information and material-public information to derive some special insight, he or she is not guilty of insider trading. But what constitutes non-material information? [...]

Righting the Ship (Part 2)

By |2017-07-17T12:34:39-04:00June 25th, 2013|Global Market Update|

What should investors expect? When investors are buying financial products and services, their cash is paying the bills and salaries of the professionals and institutions that they’re working with. So how should they be treated? One expectation they should have is that their interests should come first, before that of the finance professionals or the companies they’re working with. That is, the investor’s welfare should be considered before the professional’s. This seems obvious, but this implies, for example, that investors need to know how [...]

Righting the Ship (Part 1)

By |2013-06-24T09:25:22-04:00June 24th, 2013|Global Market Update|

Do investors have rights? It’s a fair question. After all, it’s their money. But the financial industry is filled with fast-talking rogues who might make you think twice about that. Ponzi schemes and outright fraud are only the tip of the iceberg. There are all sorts of ways for advisors can take advantage of the folks with capital that can fall short of what’s illegal. First, investors have a right to honest, objective, competent advice. That seems like a no-brainer, but it can be [...]

Lies, Liars, and Lance

By |2013-01-22T13:14:19-04:00January 22nd, 2013|Global Market Update|

Why do people lie? Most people like to think of themselves as basically honest. When they look at themselves in the mirror, they want the respect the man or woman looking back at them. So we all tend to think of ourselves as nicer than average, better-looking than average, and more truthful than average. Only it’s not that way. Several recent studies show that if people can cheat and get away with it—just a little bit—they tend to do so. Also, if it looks [...]