FURTHER FURTHER READING
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This guest post, from Brian Reid, chief economist of the Investment Company Institute, is a response to this speech in April by the Bank of England’s chief economist, Andrew Haldane…
As banks learn to live under tighter post-crisis constraints, central bankers around the world are worrying about financial risks that could move from banks to capital markets and perhaps trigger the next great crisis. After the experience of 2007–08, regulators rightly should be on guard for sources of weakness in the financial system.
Unfortunately, in their vigour, many regulators are seeing ‘systemic risk’—threats to the stability of the financial system—when the issue at hand is investment risk. Investment risk is a necessary part of a well-functioning economy, attracting investors willing to take known risks in hopes of gaining a reward. Systemic risk occurs when the financial system itself breaks down and is unable to perform its normal functions of matching savings to investment opportunities or facilitating economic activity. Read more
So, Bill Ackman cried on Tuesday at the end of a presentation the showman investor had said will define his career. He remains committed as ever to what he first trailed as “the patriotic short”. For better or worse the reputation of his hedge fund, Pershing Square, will be hard to disentangle from this campaign to shut down Herbalife, the multi-level marketing company he has said is a fraud.
What did we learn, then, in 250 slides over the course of three hours?
Actually quite a lot about the way a pyramid scheme targeting the very poor can work. Read more
Not so Whitney Tilson, Buffett-watcher, value investor, friend of Ackman and now one of Herbalife’s biggest bears.
In fact, Tilson says he is more confident in his short now than before he settled in for the three-and-a-half hour event. Read more
Live markets commentary from FT.com
Japan trading houses look to sell coal assets || Metro bank attracts deposits || Iberdrola hit by energy reforms || Calstrs calls for Trian seat at Pepsi || Flights to Tel Aviv halted || Stocks up Read more
We routinely use our smart phones without realizing the research and development that produced it: the transistor, integrated circuits, wireless communication, the laser and optical communication, the internet, the Unix operating system, and so on. None of these existed during World War II. But four decades of post-war research created the foundation for today’s products (as Mariana Mazzucato has shown in her book The Entrepreneurial State).
Can we learn any principles about research and how it should be funded as a result of this example? Read more
Markets: Asia-Pacific equities climbed to fresh six-year highs as investors continued to place geopolitical concerns on the back burner. The upward moves followed an overnight session that saw global equities rally, in part because sales of previously owned homes in the US rose to their highest since October. The S&P 500 touched a record intraday high but then pared gains, ending up 0.5 per cent at 1,983.5. Volatility, as measured by the CBOE Vix index, fell 6.8 per cent. Even Russia’s Micex snapped a six-day run of losses, gaining 1.6 per cent. (FT’s Global Markets Overview) Read more