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Roger Ehrenberg  

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  • The Case for Derivatives [View article]
    Please come over the blog directly to comment. Given the lack of Disqus functionality I can't directly respond. This is a lousy format with which to have a dialogue.
    Nov 11, 2008. 10:05 AM | Likes Like |Link to Comment
  • Insights from a Derivatives Salesman [View article]
    There are, without question, powerful and prudent uses of derivatives. It is only a lack of understanding that renders people afraid of their use, and this makes sense. But with an exchange-based approach to the use of these tools, the risks borne by banks, hedgers and speculators would be transparent, quantifiable and protected by margin. Ergo, had such a regime been in place we wouldn't have the derivatives-related problems we are experiencing today. See the comments over at my blog Information Arbitrage through the Disqus feed informationarbitrage.d.../.
    Nov 9, 2008. 09:42 PM | 1 Like Like |Link to Comment
  • Nassim Taleb: Renegade Trader with Renegade Ideas - That Work [View article]
    Guys, bottom line, is that Taleb's fund is a good part of a diversified portfolio. Under most conditions Taleb's strategy hemmorages "theta" (time value), and generates a steady stream of losses. However, when volatility explodes his ownership of the "tails" pays off in spades. His strategy has similar properties to CTAs/trend followers, who tend to do poorly in low-volatility environments but do well when uncertainty spikes and trends are more pronounced. So analyzing Taleb's approach in a vacuum doesn't make much sense, as to hold his fund stand-alone is neither practical nor rewarding. However, as part of a diversified book, his strategy actually reduces portfolio volatility and increases return.
    Nov 9, 2008. 02:32 PM | Likes Like |Link to Comment
  • A Few Guiding Principles for President-Elect Obama [View article]
    Mafeking, I don't know what happened to you, but you are one angry dude. Sorry, the majority in this country agree with me on the issue of hope in light of a much-needed regime change. You don't see it that way, fine. It is the current administration that has dug us into a deep, deep hole, and I'm not confident that Senator McCain could have gotten us out of it. Will Obama? Not sure. But I think he has a better shot at it than McCain would have.

    Abdullah, you and I simply disagree. I think Obama will lead from the center and will do so with open-mindedness, intelligence and common sense, three things that were sorely lacking over the past eight years. So I take issue with the very premise of your comment. Oh well, two people can respectfully disagree.

    G. Johnson, you are reading a blog. if you don't care what people think, lock yourself in a room, turn off the computer and TV and go to sleep. In short, you go away. I further have no idea who "You" and "your buddies" are, so I really don't understand where you are coming from, except that you are plainly hostile.
    Nov 6, 2008. 11:40 AM | Likes Like |Link to Comment
  • 7 Steps To Restore Functioning Markets [View article]
    petyaczar, if you'd like to engage in a spirited but respectful dialogue then i am happy to do so. but if you want to engage in name-calling and petty bs then don't waste my time.

    yes, there are differences of opinion over the mtm issue. the fact that the eu and several economists (and i know many of them) agree with your viewpoint doesn't make either them or you right. mtm doesn't reduce ballast - lousy investments that are improperly financed does. spend some time reading my blog on the topic. i've given a lot of thought to the issue of mtm and transparency and actually think i've got some pretty good support for why a funding-based mtm framework is superior than anything we've got today.

    as it relates to sarbox, i have felt it has been poorly implemented and applied as well. i do take issue with viewing it as a catalyst for the market meltdown, but i agree that it was poorly conceived and even more poorly enacted.
    Oct 27, 2008. 12:43 PM | Likes Like |Link to Comment
  • 7 Steps To Restore Functioning Markets [View article]
    petyaczar, in a world where you have simple stocks and bonds, maybe one could handle the classic "Lower of Cost or Market" (LOCOM) accounting regime. The problem is that is not what we have today. There is a bunch of crappy, ultra-illiquid, difficult-to-analyze paper on bank and corporate balance sheets (not to mention trillions in opaque off-balance sheet obligations) that without additional transparency cannot and will not be funded. This is fact. Your comment is emotional and not rational. It was not mark-to-market accounting that sank the banks - it was poor risk management, financing policies and compensation regimes that sank them. Sorry, but it's true.
    Oct 27, 2008. 08:27 AM | Likes Like |Link to Comment
  • Bailed-Out Banker Compensation: A PR Disaster in the Making? [View article]
    Johnc you raise exactly the point I was making in the last paragraph. I think this is a foundation issue not just for the markets but for our society. Boards need to do a better job incentivizing managers for long-term performance. Investors need to see the value of focusing on long-term value creation as opposed to quarterly earnings manipulation. If certain companies implement my changes and other do not, those that resist focusing on long-term value should be punished in the capital markets. If they're not, then nothing will change. Those that tried to do the right thing will go back to their old ways and all will have been for naught. Unless, of course, the Government gets involved, which would be a true disaster.

    I truly believe that what I am proposing is right for "expanding the pie" - creating the greatest value for all - and promoting fairness and pay for performance. But unless there is fundamental buy-in from those controlling the levers of power - Boards of Directors and institutional fiduciaries - nothing of substance will change.
    Oct 23, 2008. 10:26 AM | Likes Like |Link to Comment
  • Surviving the Financial Nuclear Winter [View article]
    Thanks for all the comments. Just a few thoughts. Firstly, Curbs-In, I am entitled to an opinion like anyone else. I am humble in saying that neither myself nor anyone else can predict the future, but I don't think my input really requires one to predict. It is pretty basic, straight-forward stuff.

    I'd like to share a response to an issue someone raised directly on my blog to this post.

    The issue: "I think the viewpoint here is of the very affluent. Sure, everyone should sit on several years of cash because the market could continue to plummet. This is a bit circular. Similarly, if everyone ran a grocery store, we wouldn't have to worry about food supplies. The real question is how to allocate resources, and this is basically saying "stash your cash if you are really affluent."

    My response: "...point taken, but the points are directionally similar regardless of how much money you have. The points are (1) conserve cash; (2) have an asset allocation you can psychologically live with during difficult, volatile times; and (3) being forward-looking in your financial planning to factor this into your cash conservation and asset allocation decisions. Is this elitist, and only applicable to the affluent? I don't think so. From an asset allocation standpoint, if you have little cushion and a portfolio of stocks outside of an IRA or 401k, then I'd see them to build a cash cushion. If you are fortunate enough to have 2+ years of cash, then I'd suggest your asset allocation outside of your cushion could be in other asset types like stocks. But if you have less than two years of cash, then I personally can't see why an individual would hold a long stock portfolio outside of a retirement account. Hopefully this gives you the specificity you were looking for."

    I hope you find this helpful.

    Oct 8, 2008. 10:46 AM | Likes Like |Link to Comment
  • Robin Hood in Reverse: In Defense of the U.S. Taxpayer [View article]
    Remarkl, I have no idea what you are talking about. Read my historical blog posts in order to get a longitudinal view of what I think. I support Government intervention, and everyone who reads my blog knows that. My issue is how it's done. I don't disagree in substance with much of what you say, but your language is inappropriate, your characterization of my views inaccurate, and your overall tone hostile. Not a way to achieve a higher level of understanding or discourse.

    Sep 22, 2008. 11:12 AM | Likes Like |Link to Comment
  • BofA, Lehman, AIG: The New Financial Realities [View article]
    Squashnut, good bank/bad bank is the right structure. it was dependent upon them raising the capital necessary to capitalize the bad bank. They didn't. Fuld waited too long. I'm well aware that what I write is out there for all, forever. That is why I do it. I don't trade single stocks, I don't make money off of my blog. I do it because I enjoy sharing my thoughts. I never have claimed to be an oracle.
    Sep 15, 2008. 10:40 AM | Likes Like |Link to Comment
  • Lehman Follows Good Bank/Bad Bank to Redemption [View article]
    Squashnut, if they've got to write down $50 billion then better to do so in a way that doesn't kill the rest of the company. The remaining business will then be attractive for either taking additional investment or being sold.

    Thowze, it's all about knowing what you are investing in. I don't think most of Lehman is near dead. I think it's doing really well. Some really, really stupid decisions were made in an asset class that is killing the entire firm. Better to hive it off, face facts and move on. Your point about credit derivatives is fair, and actually gets to the fraudulent conveyance issue Squashnut raised earlier. Lehman can't simply walk away from their counterparty exposure by transferring contracts to a less credit-worthy entity. This is a non-starter. I can't imaging they'd be stupid or aggressive enough to try this. They would be vilified.
    Aug 31, 2008. 11:14 AM | Likes Like |Link to Comment
  • Lehman Follows Good Bank/Bad Bank to Redemption [View article]
    Squashnut, the question is: do you know what fraudulent conveyance is? That concept has nothing to do with what is going on here. What you are doing is taking a pool of illiquid assets, creating a liquid market for them, and allowing the more liquid assets to stop being taxed by the burdens associated with uncertainty surrounding the liquid pool. This isn't Marriott/Host Marriott where legacy bondholders were handed a sharp downgrade simply due to the restructuring. So I really don't understand your comment.

    Richard, I didn't forget to tell you anything; I simply don't agree with your thesis. It's not as if the real estate assets are simply vanishing. Either existing shareholders will benefit from fresh cash being injected into Lehman, or they will receive another share of stock representing their proportionate ownership interest in the spun-out entity. My contention is that under either of these scenarios, an investor will be better off because of increased transparency associated with the core franchise and the ability to tap into a larger pool of investors for the real estate assets. So I don't actually see value destruction here - I see value creation.

    Aug 31, 2008. 08:23 AM | Likes Like |Link to Comment
  • FAS 157: Blackstone and Its Banker Buddies Have It Wrong [View article]
    mgv11 - quite true. there are no easy answers in accounting. the best you can do is to emphasize transparency and market-based measures, apply the rules consistently and let managers design their capital structures accordingly.

    left coast rick - i wrote my post the way i did for a reason. if you didn't like it, ok. i think the fas 157 rules are pretty clear and your framing of the interpretation issue makes you sound like steve schwartzman. i don't agree.

    goodbadandugly - if the income producing properties are so attractive, then fund them so you can hold them. if you can't, you are stupid and deserve to incur whatever wrath the market wishes to bring upon you.

    user 219640 - all i read is how it difficult it is to specifically identify mortgages wtihin these securitized portfolios. while theoretically you may be right, the issue still remains that you should be prepared to fund the mortgages if they can't be moved. otherwise, you are subject to the short-term funding whims of the market, which are clearly pretty ugly at present. the liquidity issue is separate and apart from valuation. if you can hold something valued at zero until it becomes non-zero, then you have addressed the most pressing part of the problem.

    Jul 3, 2008. 10:29 PM | Likes Like |Link to Comment
  • Microsoft/Yahoo Deal: It's Time to Get Serious, Steve [View article]
    I wholly agree that this deal is stupid from MSFT's perspective. But there are two issues at hand: (1) whether the deal makes sense (it does not); and (2) how to execute the deal, regardless of its stupidity. I have clearly posted on 1 (the ill-logic of the deal), and 2 (that MSFT should stick to their guns and announce a tender offer, and, in fact, should have done this after YHOO's initial reluctance to negotiate). But yes, MSFT paying a larger dividend sure would make a lot of sense than sqandering shareholders' billions on ill-fated projects and acquisitions.
    Apr 6, 2008. 03:01 PM | Likes Like |Link to Comment
  • Have Recent Crises Blown a Hole Through Modern Financial Theory? [View article]
    Fractals, I didn't say that they were unique to this market. Read the last paragraph. What I said is that changes in market structure and security design, among other things, have exacerbated the trend towards discontinuity over the past 30 years. I agree with you comment.
    Mar 27, 2008. 08:58 AM | Likes Like |Link to Comment