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Intellectually curious, Sr. Financial Analyst for a Fortune 500 firm with big plans for 2011 and beyond. Level III CFA candidate, MBA with a passion for investing. My investing style is value / contrarian. I also blog at where my posts primarily revolve around macro... More
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  • The More Things Change the More They Stay the Same

    I am currently reading Liar’s Poker by Michael Lewis. The book is a classic but for those that may be unaware it chronicles the author’s time in the bond unit of Salomon Brothers – the Kings of Wall Street at the time. The book takes place in the mid-eighties and you could say it describes in great and entertaining detail the dirty underbelly of Wall Street.

    Today I came across an article in the Boston Review that could have came straight out of a chapter in Liar’s Poker. The article, titled Legerdemath details Omer Rosen time on Citigroup’s corporate-derivatives team. The team’s directive was “to help companies decrease and manage their risks” but really it boiled down to making money for the bank.

    In either case, whenever possible we used our superior knowledge to manipulate the pricing of the trade in our favor.

    I learned to think we were simply smarter than the client. For unsophisticated clients, being smarter meant quoting padded rates. For the rest, a bit of “legerdemath” was required. Most brazenly, we taught clients phony math that involved settling Treasury-rate locks by referencing Treasury yields rather than prices.

    Rosen was working for Citigroup in the early 2000′s. He recently had the following conversation with a friend:

    Last year a friend in the credit-card division of one of the major banks told me that his group had received an award. “Great news,” I thought. He then explained that the group had managed to increase the rates charged on the bank’s entire portfolio of credit cards before regulation limiting such increases took effect. Does this sound like an industry that is learning?

    With incentives still completely misaligned between customers and their finance “partners” on Wall Street it is no wonder the more things change the more they stay the same.

    See the entire article here.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Feb 02 9:05 PM | Link | Comment!
  • Robert Shiller: Stocks are Overpriced
    A couple of interesting things this week from Robert Shiller. First, in an interview with The Browser he discusses how human psychology drives capitalism and its contributions to the financial crisis. Robert Shiller on Human Traits Essential to Capitalism. In the interview he recommends five books on the topic. They are:
    1. Adam Smith: The Theory of Moral Sentiments
    2. The Passions and the Interests: Political Arguments for Capitalism before Its Triumph
    3. Nudge: Improving Decisions About Health, Wealth, and Happiness
    4. Fault Lines: How Hidden Fractures Still Threaten the World Economy
    5. Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class
    Also, this week he was interviewed from Davos by CNBC. He stated that the US market, by his estimation, is overvalued in terms of fundamentals. He also said DOW 12,000 may be like DOW 1,000 in that it was a tough psychological barrier to break and that we may bounce up against it for some time. Article is here or video below. Also, in the video some interesting comment from Patrick Kron, the CEO of the French company Alstom on the "dual economy" they see and differences in demand between emerging and developed markets. [vodpod id=Groupvideo.8337231&w=450&h=325&fv=]

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 29 4:36 PM | Link | Comment!
  • The Age of De-Leveraging
    The following presentation comes to us from Seeking Delta reader Jason Leach. Jason is Director of Research and Portfolio Manager at Craven Brothers Wealth Advisors in Dallas, TX. He is also a CFA Charterholder.

    The presentation is a fabulous info-graphic on how we arrived at our current economic situation, where the economy stands today and where we may be heading in the future. Click through to my site to see the presentation.

    Jan 13 6:59 PM | Link | Comment!
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