Greg Mankiw's Blog: An Impossible Task

I am embarrassed that I have read so few of them! I guess I know what I better do this year!Greg Mankiw's Blog: An Impossible Task: "For those blog readers who might be interested in what the seminar will be reading, here is the list of books: * The Worldly Philosophers, by Robert Heilbroner * Spin-Free Economics, by Nariman Behravesh * Capitalism and Freedom, by Milton Friedman *

Greg Mankiw's Blog: An Impossible Task

I am embarrassed that I have read so few of them! I guess I know what I better do this year!Greg Mankiw's Blog: An Impossible Task: "For those blog readers who might be interested in what the seminar will be reading, here is the list of books: * The Worldly Philosophers, by Robert Heilbroner * Spin-Free Economics, by Nariman Behravesh * Capitalism and Freedom, by Milton Friedman *

Stalking Horse Bid

Here is a new term for many of you: "Stalking Horse Bid".What is a stalking horse bid? It is used in bankruptcies when there is a buyer has placed a bid to purchase in advance of a public auction. The purchase is contingent on not getting a higher bid in the auction. So in essence the stalking horse bid is just the first bid that sets the lowest price the sale will generate. From a

As Biggest Banks Repay Bailout Money, the U.S. Sees a Profit - NYTimes.com

As Biggest Banks Repay Bailout Money, the U.S. Sees a Profit - NYTimes.com: "The government has taken profits of about $1.4 billion on its investment in Goldman Sachs, $1.3 billion on Morgan Stanley and $414 million on American Express. The five other banks that repaid the government — Northern Trust, Bank of New York Mellon, State Street, U.S. Bancorp and BB&T — each brought in $100 million to

The Next Step for Microfinance: Taking Deposits - TIME

The Next Step for Microfinance: Taking Deposits - TIME: "Early adopters of what's sometimes called savings-led microfinance find that the demand for savings accounts far outstrips the demand for loans. Bank Rakyat in Indonesia, for instance, has 10 savers for every one borrower. 'Low-income people need a variety of financial services,' says Bob Christen, director of the financial services group

Baylor University || Marketing & Communications || News

Congratulations to James Garven!Baylor University || Marketing & Communications || News: "What sets Dr. Garven apart is his unique teaching methods and genuine care and concern for his students,' said Katie Emler, a 2009 Baylor graduate who earned her BBA in risk management and insurance. 'Rumors had circulated about Garven being the hardest professor in the business school, and others that

Lucian Bebchuk: Bonus Guarantees Can Fuel Risky Moves - WSJ.com

Lucian Bebchuk: Bonus Guarantees Can Fuel Risky Moves - WSJ.com: "Guaranteed bonuses create perverse incentives to take excessive risks, and they consequently could well be worse for incentives than straight salary.Introducing a guarantee into a bonus plan eliminates some downside risk but leaves the bonus compensation sensitive to performance on the upside."In effect these guaranteed bonus plans

Aer Lingus, Ailing, Open to Another Ryanair Bid - NYTimes.com

Short version: Aer Lingus said "no" to two takeovers, now saying "maybe" when they find that they are not doing as well as they had hoped.Aer Lingus, Ailing, Open to Another Ryanair Bid - NYTimes.com: "Rapidly using its cash and unable to stem a decline in revenue, Ireland’s former flag carrier Aer Lingus softened its stance on Thursday toward a possible deal with Ryanair, the discount airline

Interesting interview on Behavioral Finance from The Economist

Online video and audio: programmes and multimedia | The Economist

The Economics of Doing What You Love - Freakonomics Blog - NYTimes.com

The Economics of Doing What You Love - Freakonomics Blog - NYTimes.com: "...despite this cost, running is still worth it. Why? There are many other choices that non-economists make that come with an even worse cost-benefit ratio. The true advantage of thinking like an economist is that it can help you make better decisions"Of course...there is no other way to thing! EVERYONE should take

FDIC List of Problem Banks Surges, Putting Reserve Fund at Risk - Bloomberg.com

Something else to worry about? Probably not.FDIC List of Problem Banks Surges, Putting Reserve Fund at Risk - Bloomberg.com: "The U.S. added 111 lenders to its list of “problem banks,” a jump that suggests rising bank failures may force the Federal Deposit Insurance Corp. to deplete a reserve fund that shrank 40 percent this year."Of course the Treasury would bail them out if necessary, but for

The Economics of Loneliness - Economix Blog - NYTimes.com

The Economics of Loneliness - Economix Blog - NYTimes.com: " Harvard's Edward Glaeser has a good piece in a recent NY Times that looks how people's interaction is not forgotten by (financial) economists."Economists are not believers in the virtues of lone wolves. Economics should be seen as a discipline that has spent centuries chronicling the enormous gains that come from people connecting with

ABC's John Stossel Destroys/Pulverizes/Crushes Obama's anti-American 'Health Care' Plan

I thought long and hard about touching this very political issue, but given that it is so important, I opted to make some enemies. Remember there is an important reason profit driven organizations excel! This is not to say that it is perfect, but wow we can't throw the baby with the wash.YouTube - ABC's John Stossel Destroys/Pulverizes/Crushes Obama's anti-American 'Health Care' PlanHT to

Bernanke Is Nominated for Second Term as Fed Chief (Update2) - Bloomberg.com

Well it is official:Bernanke Is Nominated for Second Term as Fed Chief (Update2) - Bloomberg.com: "“Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and out-of-the box thinking that has helped put the brakes on our economic freefall,” Obama said in Martha’s Vineyard, Massachusetts, with Bernanke at his side.Bernanke’s nomination for a second

Angry Pitcher Becomes Hedgie

Angry Pitcher Becomes Hedgie: "Former major league pitcher Todd Stottlemyre -- an ex-member of the Toronto Blue Jays, Oakland Athletics, St. Louis Cardinals, Texas Rangers and Arizona Diamondbacks -- recently launched Desert Shores Capital, a hedge fund focusing on fast-paced momentum trading:"

The Psy-Fi Blog: The Special Theory of Behavioural Finance

While this maybe a bit strong, the piece will definitely be required reading for my Behavioral Finance Class this semester.The Psy-Fi Blog: The Special Theory of Behavioural Finance: "The Efficient Market Hypothesis (EMH) enshrines the spurious quest for precision...The beauty of classical financial economics is that it allows just this sort of modelling – once you've made the necessary

Google’s I.P.O., Five Years Later - DealBook Blog - NYTimes.com

Google’s I.P.O., Five Years Later - DealBook Blog - NYTimes.com: "Five years ago today, Google sold shares to the public for the first time in what was one of Silicon Valley’s most discussed, dissected and debated initial public offerings of stock. Its debut on the Nasdaq market on Aug. 19, 2004, came after numerous twists and turns, including a Playboy magazine interview with the company’s

After a 30-Year Run, Rise of the Super-Rich Hits a Wall - NYTimes.com

After a 30-Year Run, Rise of the Super-Rich Hits a Wall - NYTimes.com: "Last year, the number of Americans with a net worth of at least $30 million dropped 24 percent, according to CapGemini and Merrill Lynch Wealth Management. Monthly income from stock dividends, which is concentrated among the affluent, has fallen more than 20 percent since last summer, the biggest such decline since the

A look at Value at Risk

Funds Europe: "VaR is simply a financial weather forecast. A high VaR suggests stormy weather and the risk of big losses, while a low VaR indicates a balmy day and rain, in the form of big losses, is not likely. But VaR, using its full name, has a misleading description. ‘Value at risk’ sounds like it is communicating the maximum rainfall rather than just an idea of whether a rainstorm is likely.

Video: MBA Ethics Oath | The Daily Show | Comedy Central

Video: MBA Ethics Oath | The Daily Show | Comedy Central: "John Oliver enlists the help of a former convict to convince business students to sign an ethics oath."I apologize for the language, so watch at your own risk, but it is VERY VERY funny.The Daily Show With Jon StewartMon - Thurs 11p / 10cMBA Ethics Oathwww.thedailyshow.comDaily Show Full EpisodesPolitical HumorHealthcare Protests

A conversation with author Jim Collins

Charlie Rose - A conversation with author Jim Collins: "A conversation with author Jim Collins"For some reason I can not embed this but here is the temporary video link. I definitely recommend you watch it. Excellent and thought provoking. Collins previously has written Good to Great. If I were the author of his new one, I might have at least subtitled it: From Great to Bad.Briefly: why is it

After slow start, more IPOs predicted in 2009

The Associated Press: After slow start, more IPOs predicted in 2009:I can't quote from it since it is an AP piece, but the article quotes Jay Ritter who suggests that I{Os will pick up to about 3 per month.

The Harvard Law School Forum on Corporate Governance and Financial Regulation » Comment Letter of Eighty Professors of Law, Business, Economics, or Finance in Favor of Facilitating Shareholde

The Harvard Law School Forum on Corporate Governance and Financial Regulation » Comment Letter of Eighty Professors of Law, Business, Economics, or Finance in Favor of Facilitating Shareholde: "Lucian Bebchuk, Harvard Law School, on Tuesday August 18, 2009 at 9:18 amI submitted to the SEC yesterday a comment letter on behalf of a bi-partisan group of eighty professors of law, business, economics,

Nope, Shareholders Shouldn’t Be More Involved With Executive Pay | Investing to Wealth

This one will undoubtedly spur some good conversations in class this fall.Nope, Shareholders Shouldn’t Be More Involved With Executive Pay | Investing to Wealth: "Why don't shareholders care more? Shareholder apathy is completely rational because diversified shareholders lack an incentive to become overly familiar with the operations of individual companies. They own a diversified portfolio of

Strategies - Buy and Hold, or Buy and Fold. But Don’t Waver. - NYTimes.com

Strategies - Buy and Hold, or Buy and Fold. But Don’t Waver. - NYTimes.com: "In a liquidity crisis, as we have seen all too recently, a sudden tightening of credit sets off a vicious cycle of margin calls that lead to forced sales, which in turn cause asset prices to plunge, and so on. Invariably, the abruptness and severity of the crisis test the emotional and financial reserves of investors.In

Simoleon Sense » Blog Archive » Asset Mispricing Due to Cognitive Dissonance

Simoleon Sense » Blog Archive » Asset Mispricing Due to Cognitive Dissonance: "My favorite concept from this paper: “To alleviate cognitive dissonance, investors endogenously choose to ignore information that conflicts too much with their ex ante expectations.”"We see what we want to see.

Economics focus: In defence of the dismal science | The Economist

Economics focus: In defence of the dismal science | The Economist: "Over the years exceptions and “anomalies” have been discovered (even tiny departures are interesting if you are managing enough money) but for the purposes of macroeconomic analysis and forecasting these departures are too small to matter. The main lesson we should take away from the EMH for policymaking purposes is the futility

Wall Street bankers are still raking in billions in bonuses - USATODAY.com

Wall Street bankers are still raking in billions in bonuses - USATODAY.com: "Wall Street banks typically set aside more for compensation than other industries — about 50% of revenue to pay employees. However, the largest companies that make up the S&P 500 spend less than 22% of revenue on all indirect costs, which includes salaries, commissions and other overhead, according to a USA TODAY

Effort to Rein In Pay on Wall Street Hits New Hurdle - NYTimes.com

Isn't a guaranteed bonus, just a salary?Effort to Rein In Pay on Wall Street Hits New Hurdle - NYTimes.com: "A guaranteed bonus might strike many people as a contradiction in terms. But on Wall Street, banks have become so eager to lure and keep top deal makers and traders that they are reviving the practice of offering ironclad, multimillion-dollar payouts — guaranteed, no matter how an employee

Surprise! Analysts Can't Predict The Future

And this is a surprise, why???From Clusterstock:Surprise! Analysts Can't Predict The Future: "Most investment economic analysis is devoted to forecasting the future. Unfortunately, the evidence is in...and it's clear that people can't forecast the future."

Hedge Funds? Only if You Like Lots of Risk - You’re the Boss Blog - NYTimes.com

Great introductory (or even intermediate) article on Hedge Funds.Hedge Funds? Only if You Like Lots of Risk - You’re the Boss Blog - NYTimes.com: "Hedge funds are meant for people who know what they are doing, people accustomed to putting real money at risk. Federal law permits investment only by “accredited investors” — generally people with annual incomes of at least $200,000 for singles,

Bank Balances Shift With Rule Changes - washingtonpost.com

If you remember back in April, FASB decided firms did not need to mark their assets to market. Well it obviously allowed firms to report higher earnings than they otherwise would have. But now it seems that FASB might be having a change of heart.Bank Balances Shift With Rule Changes - washingtonpost.com: "...found that 45 financial firms reported higher first-quarter earnings because of the

Had a request about yesterday's blog entry

Had a reader ask about the "temptation is stronger than we think" blog entry of yesterday. Specifically about this part"Dan Ariely makes a big point of this in his Predictably Irrational book. Specifically chapter 5 in which he reports on various questionnaires (but not actual behavior) that were filled out under various states of, uh, arousal. (I am not going to go into details, but suffice to

Thaler on the lack of market efficiency

Nudge blog: "...if we include the earlier bubble in Japanese real estate, we have now had three enormous price distortions in recent memory. They led to misallocations of resources measured in the trillions and, in the latest bubble, a global credit meltdown. If asset prices could be relied upon to always be “right”, then these bubbles would not occur. But they have, so what are we to do?"

Runaway Train? - Freakonomics Blog - NYTimes.com

The discussion from Freakonomics is about high-speed rail ways and the fear that once we begin down the track (sorry I could not resist) we will never consider the economics of it. That said, the following quote is a perfect example of why even die-hard classical economists (Thaler's "Econs") are admitting that behavioral finance/economics does play a role in decision making.Runaway Train? -

Research shows temptation more powerful than individuals realize

Lead me not into temptation? Is the "Lord's Prayer" good for financial advice? Ok, so that is probably taking things too far, but the basic idea is that we tend to give into you temptation more than we think we will.Research shows temptation more powerful than individuals realize: "The study, led by Loran Nordgren, senior lecturer of management and organizations at the Kellogg School, examined

Fed Trifecta for University of Chicago Students - Real Time Economics - WSJ

I confess Money and Banking was not my favorite course (to take or to teach--have not taught in in the new post crisis world), but I sure would like to sit in on this one:Fed Trifecta for University of Chicago Students - Real Time Economics - WSJ: "The course will be taught by Randall Kroszner, who stepped down in January as a Fed governor. Their textbook will be one authored by Frederic Mishkin,

Scaling the Heights of Corporate Greed: Chafkin and Lo on Risk - Freakonomics Blog - NYTimes.com

Great read! You will love the analogy to the Mount Hood tragedy (and if you teach will likely use it in class).Scaling the Heights of Corporate Greed: Chafkin and Lo on Risk - Freakonomics Blog - NYTimes.com: "Much of neoclassical economics is based on the assumption that individuals act rationally and that markets fully reflect all available information, i.e., markets are informationally

Thaler vs Posner on Consumer Financial Protections

This is excellent.If you have been following the controversy about consumer Financial Protection at all you probably know that the administration has asked for simpler and safer products. This has angered many on each side.For instance (From NPR) Fed Chair Bernanke and US treasury Secretary Geithner have taken different sides in the issue:"The White House wants to create a new Consumer

TraderFeed: Trading Addiction: The Side of Trading That Few People Discuss

I have thought this before and thought we mentioned it but a quick search could not find it, so will include again. It does fit the behavior you see regularly with traders. They crave the adrenalin rush and the "fun" that comes with trading.TraderFeed: Trading Addiction: The Side of Trading That Few People Discuss: "Take the trader who loses money in a downward spiral through the day, without