Amaranth update

Interesting. Things could have been worse.Bloomberg.com: U.S.: "The New York Mercantile Exchange told Amaranth Advisors LLC that the hedge fund's natural gas bets were too big a month before the trades led to a $6 billion loss, said two people with knowledge of the meeting.Amaranth unwound some of its natural gas positions after the warnings, according to the people, who asked not to be named

Time to throw a penalty flag

First, the good part: Tuesday Morning QB does a great job of laying out the issue and demonstating one problem with boards setting pay . From last week's TMQ which appeared on ESPN.com: Page 2 : The five-month NFL forecast:"Much news and sports commentary focuses on the ever-larger paychecks of professional athletes. But even Peyton Manning is a day laborer compared to the modern Fortune 500

Continuing the inflation theme

Continuing the inflation theme:While inflation can obviously lead to many problems, there is an important bias that must be considered (especially when you think of inflation measured by government statisticians.) As the NY Times so aptly points out, this problem can be illustrated with the humble snow-blower.Life Is Better; It Isn't Better. Which Is It? - New York Times: "...the benefits of the

And you think the Fed has it tough?

Post WW I Germany often is the example of hyperinflation used in Money and Banking texts, but for a more timely example you may want to consider Zimbabwe.BBC NEWS | Business | Zimbabwe's inflation tops 1,200%: "Zimbabwe's annual inflation rate continues its upward surge, reaching a record high of 1,204.6% in August, and adding greater strain to the economy."Why is hyperinflation such a problem?

The sleuth who exposed backdating scandal

I always like to see finance professors in the news!Philadelphia Inquirer | 09/21/2006 | Sleuth who exposed backdating scandal:A few "look-ins":"From his second-floor office at Iowa's Tippie College of Business, [Erik] Lie spent months analyzing data to demonstrate how companies were illegally and retroactively timing, or backdating, stock option grants to fatten bonuses paid to top executives. "

Basketball superstar meets superstar investor

I'd guess it was a pretty big tip for the waitress!LeBron shoots the breeze with Letterman, Buffett - NBA - Yahoo! Sports: "A few days earlier, James had lunch in Omaha, Neb., with billionaire Warren Buffett. ...James, who signed a three-year, $60 million contract extension with the Cavaliers in July, may have been seeking some off-the-court business advice from Buffett, the self-made billionaire

HP Spy Scandal Hits New Weirdness Level: Financial News - Yahoo! Finance

This just keeps getting more bizzarre! Like I said two weeks ago, I want movie rights!HP Spy Scandal Hits New Weirdness Level: Financial News - Yahoo! Finance: "Not only did investigators impersonate board members, employees and journalists to obtain their phone records, but according to multiple reports, they also surveilled an HP director and a reporter for CNet Networks Inc....They even

Breaking Down Silos at Yale

While curriculum discussions generally bore me, this one is the exception for the size of the changes and the potential ramifications. Yale's business school has done a major facelift to its offerings. Some look-ins thanks to Business Week:Breaking Down Silos at Yale: "...not just at Yale, but at any of the curricula that you would look at any of the major business schools, they were broken

Deja vu all over again? Hedge Fund Shifts to Salvage Mode - New York Times

As Yogi Berra would say "Deja vu all over again." Amaranth's troubles may be more serious than previously thought. Indeed, they have the potential of being the next Long Term Capital Management.Hedge Fund Shifts to Salvage Mode - New York Times: "Last night, as it had been since the weekend, Amaranth was locked in negotiations...in an effort to sell its energy portfolio to try to keep the fund

FRB: Testimony, Braunstein--Non-traditional mortgage products--September 20, 2006

Sandra Braunstein is the Fed's Director of Consumer and Community Affairs. She spoke before a Senate Subcommittee today. The comments largely focued on the truth in lending law, but also discussed various "non traditional morgtage instruments and the Fed's efforts to assure that borrowers know what they are getting into. FRB: Testimony, Braunstein--Non-traditional mortgage products--September

Hedge Funds Flirt With Heresy: Going Public - New York Times

Going public allows a firm access to more funding. However, this funding comes at the cost of required SEC filings aimed at reducing transparency and secrecy.Hedge funds are famous for their desire for secrecy which makes the fact that Fortress Investment Group was considering an IPO al the more interesting. It must be that the desire to access capital trumps the desire for secrecy.From the NY

SSRN-102 Errors in Company Valuations (102 Errores en Valoraciones de Empresas) by Pablo Fernández

Want to practice your Spanish while studying Finance as well? This paper provides you the opportunity! It examines common mistakes that we tend to make in valuation. I won't try to translate it for you (I actually suprised myself as I could read most of it!) but fortunately the abstract is in English.SSRN-102 Errors in Company Valuations (102 Errores en Valoraciones de Empresas) by Pablo FernÃ

Guardian Unlimited Technology | Technology | Google to appeal, as court rules news site is illegal

Copyright protections are always a touchy topic. On one hand the creators of the information deserve to rewarded for their work. On the other hand, too strict of protections limits sharing and reduces the impact. This is playing out with Google now. Guardian Unlimited Technology | Technology | Google to appeal, as court rules news site is illegal: "The case was brought by Copiepress, an

A look at the AMEX

The american Stock Exchange came up in class last week. Thus this article from Fortune, via NY Times is pretty relevant for my classes!"...the Amex has shrunk to 427 domestic companies, 9 percent of all listed U.S. stocks. Its $565 billion in total market cap disappears in the shadows of the N.Y.S.E. ($22.6 trillion) and the Nasdaq ($3.8 trillion). An average day’s worth of trading on the Amex —

Airline Hedging

You probably have noticed that oil prices have dropped significantly over the past month. However, the Washington Post points out that many airlines are still paying the higher price because they locked in when prices were high.A look in:"Like insurance policies, hedging contracts protect against risk, allowing companies to manage damaging price swings....If the market price for oil is above a

MIght there be more oil than previously thought?

A quick look at the oil market:Saudi official: 82% of crude is untapped - The Boston Globe: "The world has tapped only 18 percent of the total global supply of crude, a leading Saudi oil executive said yesterday, challenging the notion that supplies are petering out."And from the Gulf Times:"Jum’ah’s estimates show a potential of 4.7tn barrels of oil, “or more than 140 years of supply at today’s

Bringing the news to class

Several news stories today that could easily be incorporated into various finance classes:* Nobel Prize winner Joseph Stiglitz has been in the news quite a bit over the past week. He is advocating more intevention (at least in the form of safety nets) when it comes to globalization. A look-in: "Some countries have benefited from globalisation like China and India where the economy is booming.

Advice for learning finance (and pretty much anything else)

A student emailed me the following today. I figured I would share my answer."I wondered if you might have any advice for those of us in the MBA program who have undergraduate degrees not related to business?" Of course I have advice, how effective it is may be up for debate ;) I would start by saying to think about what you already know and use it to help process what you are learning.

Math review: an application of NOT reinventing the wheel

MBA math review PDF fileWhen I first began FinanceProfessor.com (and thought it was going to mainly about class notes) I remember having a conversation where I mentioned that I did not want to reinvent the wheel but would rather serve as a directory of links where I would try to weave the best finance sites together.That conversation came rushing back to me this morning as I tried to put notes

Catching up on the news and some blogs

Catching up on mailbox and some articles I have been meaning to mention:* Add ETNs to your list of "need to know acronyms". ETN: Exchange Traded Note. From the SmartMoney: "MAKING DIFFICULT-TO-ACCESS asset classes such as oil and currencies easier to invest in has been one of the biggest developments this year for exchange-traded funds. Barclays, already the leading provider of ETFs thanks to

Executive Governance: Congressional Hearings and more

I worked at home this morning in order to watch the Senate Finance Committee's meeting on Executive Compensation. It was interesting but did not cut much new ground.Predictably, the session began with the numbers (for instance that CEOs made more than 300 times the average employee in 2004), the problems of backdating options (including the need to redo tax records), and the principle-agent

Confllicts of interest-- Take II: college football

Heisman Candidate Michael Bush's Injury Reminds Many That College Athletes Should be Paid, says Professor: "“It makes no sense that half of the players come from poverty, and their starving families get almost nothing in return,” says Watkins, who was a recent guest on ESPN’s “Quite Frankly with Stephen A. Smith”.Bush, the star running back at The University of Louisville, broke his leg in the

Conflicts of interest in the real estate market

The real estate market fascinates me. Not only is real estate often the largest holding of many people, but the lack of liquidity, lack of transparency, and vested interests of various players tells us much about people and markets.For instance, while some observers may balk at the idea that corporate managers would purposely fight transparency, we see much evidence of the same behavior by real

Blogging problems

I am not sure what setting was wrong, but appears to be fixed now. I just got a new computer and for some reason, I could not post to FinanceProfessor...oh well...it is fixed now.Classes have started here and it seems that the weather knows it and has decided to get wet and cold. I am teaching two advanced corp fin classes and two graduate introductory finance courses this semester. So it