With the ever increasing number of black swans hitting the world, there is a rapid increase of critique with regards to different models the financial industry uses in determining risk and how to hedge IT. Must read by James Montier on the subject.
The National Rifle Association is well-known for its slogan “Guns don’t kill people; people kill people.” This sentimenthas a long history and echoes the words of Seneca the Younger that “A sword never kills anybody; it is a tool in the killer’s hand.”
I have often heard fans of finanancial modelling use a similar line of defence. However, one of my favourite comedians, Eddie Izzard, has a rebuttal that I find most compelling. He points out that “Guns don’t kill people; people kill people, but so do monkeys if you give them guns.” This is akin to my view of financial models. Give a monkey a value at risk (VaR) model or the capital asset pricing model (CAPM) and you’ve got a potential financial disaster on your hands.
Renewed Hope that Jon Corzine, President Obama’s Top Tier Campaign Bundler, Will Face Criminal Charges-Tavakoli
Up until now, President Obama’s campaign has given the appearance of an endorsement of Jon Corzine, the former CEO of MF Global, a former New Jersey governor, a former New Jersey U.S. senator and major campaign contribution bundler for President Obama. At least this is the interpretation of many who viewed the list (as of April 30, 2012) of President Obama’s money raisers through the first quarter of 2012. With no clarification or footnote, Jon Corzine is shown as having raised more than $500 thousand in the roster of 2012 Volunteer Fundraisers. The re-election campaign has not disclosed the exact number. I requested further information from the campaign and received this response:
“Corzine’s money was returned but the money he raised a year ago was not and thus it qualifies him to be on the bundler list. He is not part of the campaign any longer, this [Obama for America and Obama Victory Fund 2012 Volunteer Fundraisers] list is cumulative.”
That may be. The campaign responded it told the press this in January, and the press has forgotten. Really? It told the press in January and now the campaign is blaming the press for its interpretation of a list released in April titled “2012 Volunteer Fundraisers.” If the campaign wants to eliminate ambiguity, it can put it’s assertion that Corzine “is not a part of the campaign any longer” on the list in writing for all to see. But that would make it clear it is distancing itself from Corzine. It seems to me that President Obama’s campaign is trying to have it both ways: deniability as it gives the appearance of support for Jon Corzine. Both President Obama and Vice President Biden have publicly praised Corzine during Corzine’s previous campaigns:
If you are going to read one piece this weekend, read this (somewhat old) article. Must read from nymag;
On Wall Street, bonus season is a sacred ritual. It is the annual rite where net worth and self-worth get elegantly reduced to a single number. During the 25-year boom that abruptly ended in 2008, the only principle that really mattered come bonus time was how you ranked against the guys to your right and left. The system was governed by a kind of atavistic justice: You eat what you kill. From the outside, the seven- and eight-figure payouts that star bankers earned could seem obscene, immoral even. But on the inside, the outlandish compensation reflected a strict, almost moral logic. “Wall Street is a meritocracy, for the most part,” as a senior Citigroup executive put it to me recently. “If someone has a bonus, it’s because they created value for their institution.” The sanctity of the bonus was built on the idea that Wall Street pay was simply the natural order of capitalism.
The World is changing fast. Latest on the big geopolitical and economic trends. From Stratfor.
There are periods when the international system undergoes radical shifts in a short time. The last such period was 1989-1991. During that time, the Soviet empire collapsed. The Japanese economic miracle ended. The Maastricht Treaty creating contemporary Europe was signed. Tiananmen Square defined China as a market economy dominated by an unchallenged Communist Party, and so on. Fundamental components of the international system shifted radically, changing the rules for the next 20 years.
We are in a similar cycle, one that began in 2008 and is still playing out. In this period, the European Union has stopped functioning as it did five years ago and has yet to see its new form defined. China has moved into a difficult social and economic phase, with the global recession severely affecting its export-oriented economy and its products increasingly uncompetitive due to inflation. The U.S. withdrawal from Iraq has created opportunities for an Iranian assertion of power that could change the balance of power in the region. The simultaneous shifts in Europe, China and the Middle East open the door to a new international framework replacing the one created in 1989-1991.
Das on the transformation of Banking, derivatives, finance and the future. Videos to enjoy for the holidays.
Guest Post by Sturdyblog;
“This isn’t how a great nation was built. Britannia didn’t rule the waves with arm-bands on.” David Cameron 5 October 2011
Brilliant stuff, right? Evocative, inspiring, witty. Also, inaccurate.
I apologise for robbing you, dear reader, of this romantic illusion, but Britannia was wearing arm-bands; great big ones. On her left arm she was buoyed by slavery and the oppression of the working classes at home; on her right the exploitation of subjugated colonies abroad.
And, ultimately, this is what Cameron’s blueprint for our future requires a return to. He said recently in Europe “Some of my fellow leaders complain that it’s all about markets and speculators, but none of us are proposing to change the market system.” But that system can only function when sitting on a cushion of human misery. Cameron’s ideas do not look to the future. They sigh with nostalgia towards a Dickensian past.
Don’t believe me? Read on.