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’Crisis banks were partying like it’s 1998
Do US banks learn from experience?
Answer A: Yes, like lab rats and jilted lovers, they adapt and do better next time.
Answer B: No, like Einstein’s take on insanity, they just keep trying the same (bad) thing.
The calm before the (volatility) storm
We ♥ this note from Bank of America Merrill Lynch’s Ruslan Bikbov and Priya Misra.
It’s on a subject dear to our own hearts here on FT Alphaville — the curious case of persistently low volatility and the idea that it might be masking systemic risk.
Through an efficient market glass, darkly
When they write a history of the Great Moderation, as it looks like the early noughties may come to be known, one thing that might be noted, was all the mistakes people made in the trading/banking fraternity,
Citigroup calls in Stuckey; Merrill’s search team meets Fink
Citigroup has selected one of the executives who handled the rescue of LTCM to head a new unit to manage the bank’s subprime mortgage-linked assets. Richard Stuckey was one of the six Wall St executives put in to bring the hedge fund back from the brink of collapse in 1998.
When they tell you not to worry, worry
While not wishing to add to the unease hitting markets around the world, it may be worth noting that when you see headlines like this one running on AFP: “World leaders urge calm amid fresh stock turmoil”,
Leverage re-rears its ugly head
The lessons of LTCM appear to have been short-lived, says Gillian Tett in her Friday column. In fact, she’s having a bout of déja vu.
Once again, hefty levels of leverage have been provided. And — yet again — some big investment banks seem to have asked surprisingly few questions about how this money was being used.
LTCM, panic and rational behaviour
There’s a slight whiff of delusion around some of Professor Robert Merton’s comment in his interview with the FT.
With the greatest respect to the Nobel prize-winner, some of his comments seem a little strange to us mere mortals.
Robert Merton and the appliance of financial science
Derivatives, says Professor Robert Merton in an interview with Gillian Tett in the FT, are grossly misunderstood.
The co-creator of the Black-Scholes formula argues that most companies have been extraordinarily inefficient in their use of capital,
Money for Meriwether – the winners in the markets’ rout
While most investors are crying into their keyboards, a few will be dancing a jig. Every market rout creates a handful of victorious investors as well as leaving numerous vanquished in its wake.
The Wall Street Journal reports that one household name did rather well out of Tuesday’s market plunge.