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Lisa joined FT Alphaville in September 2011 after a tour of duty through the guts of the financial industry, having worked as an analyst at a bank and for a financial data company.

Before the poor decision-making began, she enjoyed science and maths A-Levels and managed a full year as an engineering student at uni. It started to go downhill when she switched to economics, for which she was awarded a first class honours degree by the University of Durham. She’s been frustrated with people who don’t behave as rational agents ever since.

From there, Lisa travelled to the Netherlands, embarking on an inordinately long MPhil programme in Economic & Financial Research at Maastricht University. In a colossal failure of time management, she also learned Dutch even though everyone there speaks English. Wat jammer.

Upon graduation, it was off to a front office role at a Bank of America in New York City just in time for the financial system to collapse and all the deals in the pipeline to get shelved. It was, however, the biggest analyst class they’d ever had, so she got to make a lot of new (soon-to-be completely depressed) friends!

Two years and a CFA level later, she had had quite enough of not structuring anything and it was off to financial data company Markit in London. Lisa worked as a credit analyst and got to play with databases a lot which made her very happy, but not quite as happy as writing for Alphaville does!

In addition to reporting, Lisa also does a lot of behind the scenes work around the website and organises stuff, which is probably suitable for someone once described by a close friend as being about as spontaneous as a space shuttle launch.

When she’s not obsessing over details, reading finance-type things, or writing, Lisa enjoys hiking, folk music, comedy, science-y things, and has an obsession with good coffee that borders on freakish.

She also would prefer that you didn’t know she’s American, having grown up in Oregon.

Lisa has “subscribe” switched on for Facebook, so click here if you want photos of coffee and general ridiculousness showing up in your stream.

Contact Lisa Pollack

The (early) Lunch Wrap

Bove vs Bloomberg, on JPMorgan || QEnd Game || EBA delays bank stress tests || Qatar bankrolls Syrian revolt || Dell profits below expectations || US farmland prices see double-digit rise || World’s largest container shipping company downgrades view on global trade || Tony Hayward appointed chairman of Glencore Xstrata || Citigroup FX traders move away from Bloomberg Messenger || Saudi princes deny laundering claim || S&P cuts Berkshire Hathaway || Yahoo spared potential $2.7bn in legal damages || Market update Read more

Oh, my lovely Bloomberg, will we ever be the same again?

Bloomberg withdrawal (BBG wɪðˈdrɔːəl) noun.

Definition:

  1. Removal of all meaningful work space elements other than the desk, chair, phone, and headache tablets.
  2. Detachment from all those who matter in one’s work (and possibly also personal) life.
  3. Feeling of uncertainty that accompanies the suspicion that their terminal is somehow betraying them. Typically arises from reports in the media.

Unfortunately, an unusually high number of people may be suffering from the last one lately. Sorry about that.

In case you haven’t been following, there are two very separate threads to the Bloomberg kerfuffle. Read more

More money, more self-reported satisfaction, but not more happiness…

Beyond a certain point, incremental increases in income stop making a difference to someone’s satisfaction with his or her lot in life.

After obtaining a nicely stocked humidor, a couple of Bentleys, a Patek Phillipe, an account with Coutts, and membership at The Hurlingham Club, what else is there, really? Maybe there’s nothing. Maybe we should ask the miserable bankers making a million who are struggling to get by keep up with their equally wealthy peers…

But do not despair! For it turns out that more money does seem to equal higher reported life satisfaction! Even at relatively high levels of income! Even though we’re not in a position to be relived ourselves about that (media — it’s a booming industry, kids), we’re very happy for those of you who are! Read more

It’s that time of year again: the sun is shining and thousands of CFA candidates are stuck inside

With less than a month to go, several of this blogger’s mental faculties seem to have gone offline. In the space that previously housed “fear of public failure,” new tenants have arrived in the form of after-tax return equations, biases that impact investment decisions, and a multitude of currency hedging strategies.

Ego defenses down, FT Alphaville would like to draw your attention to a brilliant post by the people at the 300 hours. It’s entitled “Sh*t People Say (to CFA candidates)”. Tl;dr version available to the right.

Drumroll… Read more

Ring around the clearer, acts like a mirror. Default! default! They all fall down

What happens when one bank defaults across six CCPs? The remaining members will have to pick up the bill. Given that they are almost certainly members of the other CCPs, this will result in a default contribution bill so large it could potentially lead to their failure also.”

That’s Gary Dunn, senior manager for regulatory and risk analytics at HSBC, being quoted by Risk at Isda’s AGM last week. Given the increasing concentration of risk in central counterparties, he thinks that they would ultimately have to be bailed out by taxpayers, after the CCP’s buffers were exhausted. Read more

Further reading

Elsewhere on Friday,

- Oh, yes, it’s the shared office printer.

- The Macro Man would like to introduce you to the new one euro coin.

- Economists did a bad job predicting the crisis. How have they done since? Read more

The (early) Lunch Wrap

The backwardation of gold || The Aussie bank share bubble || Stepping towards numerical QE guidance || ECB Meeting || Chinese renminbi at record high || Shell chief exec to step down next year || Apple avoids potential $9bn tax bill with debt sale || Ad tools boost Facebook || Tablet shipments rise 142% || Google invests in lender || Transocean dividend plans || Goldman under criticism for Malaysia bond deal || IBM Lenovo deal breaks down || Kodak may emerge from bankruptcy in July || Market Update Read more

The (early) Lunch Wrap

JPMorgan’s executive re-reshuffle || Strong capital inflows into Asia increase risk, says IMF || HFT to face speed limits on EBS platform || Chat apps overtake text messages || Ark gala mothballed || Alphaville’s latest podcast || Pari passu saga || Deep thoughts on civilisation || Market update Read more

ExcelFu: as attractively cheap as it is deadly

…it was just someone using Excel on a laptop who was highlighting cells for a formula and released his index finger from the left-clicky button of his mouse too soon.

Writes Irish stand-up comedian Colm O’Regan for BBC Magazine, in his piece about “The mysterious powers of Microsoft Excel”. As you will likely have guessed, his article was inspired by spreadsheet blunders in Reinhart and Rogoff’s 2010 Growth in a Time of Debt paper.

FT Alphaville is frustrated that some commentators have used this as an(other) opportunity to crudely bash Microsoft’s ubiquitous spreadsheet software. Particularly in the Reinhart and Rogoff case, as this is like blaming a hammer when you miss the nail and flatten your thumb instead. It’s not useful or constructive if the best one can do is allude to Excel itself being a mysterious, yet all controlling, black box. Read more

Banks told to sit down and shut up or else some of them will get ice cream and others won’t, which will indeed totally suck

“One thing that I think would stand you in very good stead is to avoid lobbying – influencing policy is probably a better way to put it. We hear so much about fragmentation, but then the banks and trade associations discuss at great length trying to lower the standards.”

That’s William Coen, deputy secretary-general of the Basel Committee on Banking Supervision, as quoted by Risk on Wednesday. Read more

The (early) Lunch Wrap

How to write a AP tweet hacking story || On the virtuous circle of exporting deflation || The gold-Barca bubble || Barclays pre-tax profit falls || Apple tries to appease || Credit Suisse beats || ENRC chairman resigns || Australian central bank to invest in China || IT outsourcing companies to face toughened visa regime || Shell warns of shale delays outside US || Market update Read more

The (early) Lunch Wrap

China & Eurozone PMIs disappoint || Europe hits political limits for austerity, says EC president || EU warns on US bank ‘protectionism’ || Twitter signs biggest ever ads deal || Share of US oil imports from top suppliers rises || Tie-up in tertiary education in Brazil || Netflix beats forecasts || News Corp to reap payout on settlement || Walmart’s audit committee pay boost || Italian president warns of political deadlock || Market update Read more

The (early) Lunch Wrap

The rise of rail oil || Italy ditches promise of ratable payment to bondholders || Blackstone abandons its $25bn offer for Dell || IBM posts rare miss || Votorantim Cimentos intends to raise $5.4bn || Microsoft signals change of heart over Windows 8 || Google reports mixed results || SAP’s shortfall || Morgan Stanley suffers trading activity decrease || Markets update Read more

The (early) Lunch Wrap

Kiobel v Royal Dutch Petroleum || Mission Impossible: ECB Governing Council minion edition || Apple investors rattled || US ousts China as the top destination for Japanese exports || Fears over low rates || Brazil increases rates || Deepwater Horizon trial || Ebay’s revenue miss || Bank of America setback || Markets Update Read more

Mission Impossible: ECB Governing Council minion edition

Your mission, should you choose to accept it, is to collect seven briefing documents for a meeting of the ECB’s Governing Council. As always, should you or any of your colleagues be caught or killed, FT Alphaville will disavow any knowledge of your actions. This blog post will destruct if our servers go down. Good luck, dear readers. Read more

The (early) Lunch Wrap

Gold producers tumble || The S&P’s peak || Brent crude falls below $100 || Cargill calls for transparency in commodities || Energy Future Holdings’ creditors reject pre-packaged bankruptcy || Ergen trumps SoftBank with $25bn Sprint bid || Former Rochdale Securities trader pleads guilty to conspiracy and wire fraud || Greece on track to receive aid tranche || Gold’s fall sharpest since ’80s Read more

Don’t look down

What goes up, must come down, but most particularly the shiny yellow stuff lately. And Bitcoins. Can’t forget Bitcoins.

Anything else feeling a bit weighty lately?

 Read more

Ultimate Statistics Senator takes on US regulators’ $9.3bn foreclosure agreement

FT Alphaville does like a good Senate Banking Hearing. Especially when they feature a political body slam on proper statistical methods. And so we are proud to announce this month’s Ultimate Statistics Fighter… [dramatic pause]… is Senator Elizabeth Warren!

Warren demonstrated her moves on Thursday during a hearing on Outsourcing Accountability? Examining the Role of Independent Consultants. (Don’t let the incredibly dull title of the hearing deter you. That would be a mistake. Don’t be that person.) Read more

This is the VaR that slipped through the cracks

Mr. Hagan had never previously designed a VaR model. According to JP Morgan Chase, having an employee from a business unit design the unit’s risk model was somewhat unusual, but it did not violate bank policy…

Mr. Hagan told the Subcommittee that he was told the objective of his research was to design VaR models that, when fed into the RWA model, would produce lower RWA results for the CIO, since both he and the CIO traders viewed the bank’s standard RWA model as overstating CIO risk.948

Apologies for all the jargon there. The above is from the Senate Permanent Subcommittee on Investigations staff report on the JPMorgan “Whale trades” that lost the bank over $6bn in 2012.

While the portfolio that lost all those billions was comprised of outsized credit derivatives trades, building up such positions wouldn’t have been possible without a significant change in a key risk model that the bank was using — the Value-at-Risk (VaR) that predicts possible losses over a given time horizon. Read more

The (early) Lunch Wrap

Argentina: what is the pari passu saga? – The Video || ECB’s first Household Finance and Consumption Survey || Revisiting monetary transmission || Goldman advises to short gold || EU seeks new powers for trade probes || KPMG resigned as auditor to two US companies || AT&T vs Google on fibre optic broadband || Southeastern Asset Management on Dell || Google faces having to offer more choice || Austria and Luxembourg to revisit bank secrecy rules || Markets update & more Read more

Ten times on the board: I will not put “Optimizing regulatory capital” in the subject line of an email

Don’t. Just don’t. No “I don’t think we should treat this as regulatory arbitrage” in an email. No cc’ing your personal Yahoo account. And certainly don’t put “Optimizing regulatory capital” in the subject line.

All in, below is a really good example of what not to put in an email, courtesy of Patrick Hagan, the chief quantitative analyst at JPMorgan’s Chief Investment Office from 2007. Read more

Risk limits are made to be broken

FT Alphaville is (still) poring over (and enjoying) the staff report from the Senate Permanent Subcommittee on Investigations on the JPMorgan “whale” trades in its Chief Investment Office that lost the bank over $6bn. It takes a lot of coffee awhile to get through all 597 pages of exhibits along with the 307-page report, and all the glorious footnotes, so please kindly bear with us.

As it stands, the more we read, the more dirt we turn up. And the uglier we realise this whole episode was, the more we become concerned: if this happened at JPMorgan, where else could it happen?

The below on risk limits serves as a case in point. The tl;dr version in graphs below, but first from the staff report (emphasis ours): Read more

The (early) Lunch Wrap

“A new phase of monetary easing” in Japan || Bitcoin as fiat, and the story so far || Bundesbank investigating Deutsche Bank || QE3 could start tapering this summer, says San Francisco Fed president John Williams || Barclays should lower warped pay levels, says review || Healthcare deal in Arkansas || Goldman & JPM gain from rivals || KFC accepts mobile payments || Angry Birds sales increase || Ubiquisys acquired by Cisco  Read more

Home sweet tax shield – how the Dutch do property

Peek under the lid of the Dutch housing market. It’s awfully idiosyncratic in there. Also it’s doing rather badly and has been the subject of recent, significant tax reforms that will drastically change its shape in the coming decades.

Right into the deep end, with this chart released last week by Statistics Netherlands (CBS):

 Read more

Further reading

Elsewhere on Wednesday,

- Summarising the Sage.

- What Cyprus tells us about Germany.

- Maths test. (Only one question.) Read more

Deal with failed banks the Dutch way: rely on the ECB, deposit insurance, and the public’s faith in the government

The irony police dropped by FT Alphaville on Tuesday. They asked us to reverse back to the last European bank bailout before Cyprus: the nationalisation of Dutch financial group SNS Reaal. The government of the Netherlands, complete with a finance minister by the name of Jeroen Dijsselbloem (have you heard of him?), used their freshly minted Intervention Act to expropriate the shareholders and subordinated bondholders in order to help finance the February 1st nationalisation. Read more

Quality time with the ailing Dutch commercial real estate sector

The latest bank-sovereign crisis always gets the most attention. Despite the best of intentions, no amount of preparation can get the current flair-up ready to have its place in the limelight stolen. Once torn, salt is rubbed into the wound by means of nasty comparisons that disrespect the unique nature of one’s distress. Ireland is not Greece! Portugal is not Ireland! Italy is not Spain! And Cyprus is special because of gangsta finance and its reliance on deposits for funding…

Grow up. Everyone has problems.

That said, we’ve carved out a special place in our schedules this morning to spend some quality time with one of the middle children. Aren’t we good? And so to the Netherlands, where the government nationalised SNS Reaal, the parent company of SNS Bank, on February 1st. It used its shiny new Intervention Act and everything. Read more

“I thought, I thought that was, that was not realistic, you know, what we were doing” – The London Whale

By now, it should be well understood that the credit derivatives book in JPMorgan’s chief investment office was woefully mismarked. Worryingly, the practice of marking at the extremes of the bid-offer, giving the most favourable result, was rubber-stamped as acceptable practice by both the bank’s controller and the outside auditor.

The restatement of first quarter earnings in July 2012 only happened as a result of investigators from JPMorgan’s special Task Force discovering that the traders hadn’t supplied the marks “in good faith”. We’re not sure what place “faith” has in decent account practice. The whole Street seemingly disagreed with the marks, as demonstrated by large collateral disputes. In any case, let us examine this lack of good faith by reviewing some of the things the traders said about their marks. Read more

This is the CIO! Take your silly market-making prices and [redacted] — Part 2

There were some pretty massive collateral disputes with counterparties that should have set alarm bells ringing around JPMorgan’s chief investment office.

The biggest disputes in absolute dollar terms were with a Morgan Stanley entity (MSCS) and Bank of America (BOA), with several other counterparties out by tens of millions. Read more

This is the CIO! Take your silly market-making prices and [redacted] — Part 1

Time to start tackling the big question: how were such huge credit derivatives positions allowed to be put on by JPMorgan’s chief investment office (CIO) in a matter of mere months back at the start of 2012? Someone, or several someones, should have noticed that the synthetic credit portfolio (SCP) was headed for a disaster of epic proportions.

Weren’t there risk limits? Despite being a top of the range tool for crisis aversion, and being breached several times, the warning signs around these weren’t effectively responded to. Even worse, they were simply accommodated for. We’ll discuss that in future posts. Here, we want to talk about another tool that could have averted disaster: the marks on the book. The marks should have shown increasingly frightening losses, leading people to ask what the hell was going on. Read more

James Kane, please do email so that we know where to send swag! To: alphaville@ft.com

Comment on: CFA meme competition winners

krasqui, That's very sweet of you. I'll probably still guest post sometimes, and thank you for reading.

Swedes, Thank you. And I don't wanna make a fuss though, that would be cray-zeeee ;-)

Comment on: FT Alphaville is hiring again

iTrade :-)

nnyhave, thank you for those links. Very cool legacy of Aaron Swartz. So sad that he's no longer with us.

Comment on: Oh, my lovely Bloomberg, will we ever be the same again?

@Pharma I'm moving to another job in the FT. I'll be doing less writing, and more site development projects. AV is the best though, and I'll miss it a hell of a lot! (And will probably still post every now and then.)

Looking forward to meeting whoever the new person is :-)

Comment on: FT Alphaville is hiring again

Hi Anders! I listened to that not long after it came out and was very intrigued by it! It's worth reading a couple of follow-up blog posts, as some of the data appears to have been misleading, e.g.

http://tcf.org/blog/detail/misleading-trends-with-benefits
http://www.dailykos.com/story/2013/03/29/1197940/-How-This-American-Life-got-the-disability-story-nbsp-wrong

Comment on: Further reading

Doug Beattie, Herndon et al do critique the weighting methodology in their paper. For more on that you can click through to their paper (it's short and readable) or go to the Business Insider post written by Herndon wherein he explains the shortcomings of the RR approach by a helpful analogy using batting averages. (Also linked to in the above.)

Comment on: ExcelFu: as attractively cheap as it is deadly

Brilliant, insightful comments here. Thank you, everyone.

Electric Ray, I believe the chap who wrote that book was behind leveragedsellout.com. That site was genius.

Mutant_dog, Thank you for the spot. Have fixed. Embarrassing typo that!

Comment on: ExcelFu: as attractively cheap as it is deadly

BBB+ Apologies for the duff link! Have fixed and also here it is http://thedoghousediaries.com/5017

Comment on: Further reading

Guy_Bransford, Years ago, I had a week of training as an intern at a bank and a guy "taught" us how to read the FT. Couple "tips" I remember:

- The size and salaries of the Executive Appointments section is a leading indicator.
- Always remember a paper wouldn't sell with the headline "Markets Calm, Everything Fine".

Comment on: Don't look down

ouss, Can haz indecks hi.

Phil, Good question...

MobileGuy, Thank you. I hope it's a good vet.

bearish_forever, ohhhh, that would have been good! Perhaps with dual axes.

macduggie, #1? Freakin adorable ;-)

Comment on: Don't look down