Including… – DeLong on why Keynes wrote “In the Long Run We Are All Dead” – A WSJ series on passive vs active investing. – John Cassidy on HRC’s plans to squeeze the ultra-rich. – And somewhat awkwardly on how Democrats killed their populist soul.
Including… – How Merrill Lynch sold some stocks too fast. – Want to punch Martin Shkreli in the face for a good cause? You could get a chance. – “These days, working at a big bank must feel like Stalin’s Russia, only without the warm and fuzzy feelings of happiness and security.” – Your Rosie O’Donnell stock market bubble, and Trump vs the Fed. – On presidential debates, social media, Neil Postman and Marshall McLuhan. – Roger Farmer on the liquidity trap and how to escape it. – And how another “significant source of stupidity in firms we came across was a deep faith in leadership.”
Anyone who hasn’t read the Securities and Exchange Commission’s complaint against Leon Cooperman and his hedge funds should do so ASAP, because it is a heckuva story. Here’s a quick summary of the allegations, which Cooperman and his funds categorically deny:
People tend to get worked up about the idea of Wall Street mining the trails of data we all leave on the internet for investment ideas. The first and most obvious reason is that privacy issues are always contentious. You’d think it’d be a windfall for hedge funds if MasterCard or Visa started selling them data on trends in customer purchases (while the card providers sell some data, hedge funds haven’t cracked that yet, as far as we know). While the information obtained in data-mining isn’t supposed to be traceable to individuals, how would a company fully scrub that of any signs of consumers’ identities?
Brexit was one of the biggest events of 2016, and has naturally triggered a fair bit of contemplation in the hedge fund industry, where money managers are now pondering the short and long term implications. Here is a selection of some of the Brexit points made in the second-quarter letters sent to investors by a batch of hedge funds. Most were sent out in July, but many of their thoughts remain very current.
Elsewhere on Friday, - ‘It took on a life of its own’: how one rogue tweet led Syrians to Germany. - Teenage hedge fund manager Jacob Wohl — nicknamed “Wohl of Wall Street” — had his first run-in with a regulator. - Why do we talk about helicopter money? - The US Treasury just declared tax war on Europe.
Imagine you lent a friend £2000 for three years at a 25 per cent yearly interest rate. That would be a nice little earner for you and, sure, it’s not a cheap loan as far your friend is concerned. But he’s not that good of a friend anyway and rent-seeking is easier than working. The first nine months pass and your friend pays up every month, right on time. But then he misses a payment. When you call his mobile, you get his answering machine and when you ask around, people shuffle their feet and mumble stuff like “I dunno maybe he’s like at the gym or something”.
As an investment strategy grows more popular, the probability of a comparison involving Marxism apparently approaches 1
Is there a Godwin’s Law equivalent for Marxism? Do we need one since the Law basically means that the longer an argument goes on the more likely we are to reach for extreme examples while in attack or in defence? So, you know, this kind of thing is already covered?
Sorry, we’re *so* late to this, but some things are too important to ignore. Here’s a snippet of wisdom from the second quarter letter of hedge fund manager Dan Loeb, sent to his Third Point investors at the end of July (ht to our FT colleague Robin Wigglesworth, who flagged it in his newsletter):
The decade-long legal war between Argentina and a bunch of US hedge funds led by Elliott Management ended in a lucrative victory for the latter earlier this year. But the potential implications continue to reverberate. Some observers – including Joe Stiglitz, the International Monetary Fund, the Vatican and the United Nations – fret that Elliott’s triumph will upset the delicate balance of sovereign debt restructuring. Here’s what the Nobel laureate told the FT earlier this year.
Lending Club released its second-quarter results yesterday. Besides the updates on repairs after its scandals earlier in the year, executives provided an insight into some broader shifts that have been bubbling under the surface for some time. Let’s start with this interesting comment from outgoing chief financial officer, Carrie Dolan, during the call with analysts (our emphasis):
Elsewhere on Wednesday, - Andrew Ross Sorkin on the (potential, and most probably just partial) return of Glass-Steagall. - How does this hedge fund manager make so much money? He haz spreasheetz. Obviously. - Also… Bridgewater, sex, fear, and video surveillance. - Musings on the implications of a higher dollar Libor.
Herbalife, the nutritional shake multi-level marketing enterprise involved in a three-year battle over the legitimacy of its business model, has agreed to change the way it does business as part of a settlement with the Federal Trade Commission announced Friday. The Los Angeles-based group also agreed to pay $200m compensation to customers to settle a complaint that it, among other things, caused substantial injury to customers through an unfair compensation scheme in which the only true way to profit was through recruitment. There was no mention of the term pyramid scheme, but keep in mind that a multi-level marketing enterprise is at heart nothing more then a product and a compensation scheme. Messy legalities about what makes one operation legitimate and the other illegitimate have shifted for the benefit of those exploited.
Elsewhere on Friday, - Possible names for EU exits for all members of the EU. We were going to make this a Brexit free zone, but we’re allowing ourselves one. - Also, ok, this one on why sense will prevail in the EU and the markets. - Hedge fund still wants its tax-avoidance profits.
This guest post is by Gudmundur Arnason, Permanent Secretary, Ministry of Finance and Economic Affairs of Iceland, in response to “Iceland’s selective default?”, another guest post, by Arturo Porzecanski. Allow me to offer a brief comment on Arturo Porzecanski’s Guest Post of June 14 (“Iceland’s selective default?”).
- Anne Case on mortality and morbidity in the 21st Century
- An all-media Alphachat episode
- Robert Cialdini on how persuasion works in business and politics (transcript)
- Adaptive markets, and the lessons of an infamous call to sell
- How economics has evolved since the crisis
- Erica Grieder on the Texas model
- An experiment in Kenya
- Sebastian Edwards on why economic populism always disappoints
- Newly conceivable ideas in economics
- The brief history of Airbnb, and what’s next
Alphachat is available on Acast, iTunes and Stitcher.
- Our chat with Sebastian Mallaby on Alan Greenspan
- Brad DeLong on Hamiltonian economics and US economic history
- Charles Kenny on trade adjustment, deindustrialisation, development and more (full transcript)
- Inside the Washington Post: a chat with Marty Baron and Shailesh Prakash (plus transcript)
- Clay Shirky and Emily Parker on Xiaomi, technology and information flows in China (updated with transcript)
- Simon Kuper’s panel on the cultural forces of football
- Claudia Goldin on the history of women in the workplace (updated with transcript)
- Our podcast chat with Reihan Salam
- Our chat with Esther Duflo — now with transcript
- Our chat with Esther Duflo
This episode is a two-part chat with Paul Volcker. In the first part we discuss his intellectual influences and early career, during which he shuffled between the New York Fed, Chase Manhattan, and the US Treasury department. We end with his under-appreciated role in the conclusion of the Bretton Woods monetary system during his time as Treasury undersecretary for monetary affairs in the early 1970s.
Here’s an odd argument the Bank of England is somehow to blame for BHS’s massive pension hole. This is the key bit: The investment environment fundamentally changed post-2008. To keep the UK economy liquid in the crisis, between August 2008 and March 2009, the Bank of England cut the base interest rate from 5% to a record low of 0.5%, where it has stayed ever since…The problem arises in the difference between the amount of money set aside to cover eventual pensions and the obligations. The entire DB scheme is a bet that today’s investments will always come good, forever, and cover tomorrow’s guaranteed payments. Schemes had been banking on annual returns from their investments of at least 5%. Suddenly, with low interest rates, and stocks going through the post-crisis trough, it’s down to 0.5% as a base. That means they have to put up a lot more new money to get the returns they need. Contrary to what’s implied in the piece, it’s quite simple to manage a defined-benefit pension properly — especially if most of the beneficiaries are already retired. The level of interest rates only matters if you’re doing it wrong.
Wirecard has issued it’s Q1 results. Turnover at the German payments group jumped from €160m in the first quarter last year to €210m in the first three months of 2016. The results follow a well attended investor day this month, more on which below. While down 2 per cent on Thursday morning, the share price is back above the €40 level it traded at before Zatarra Research & Investigations began publishing on the subject of the company in February. Note too the proportion of shares sold short remains close to a quarter of the market capitalisation, with 12 declared short positions of more than 0.5 per cent even after the annual cost of borrowing stock has touched 20 per cent in recent weeks. The sceptics appear committed to their positions.