ETFnerd

27 Comments

    • Ignore Stock Market Volatility [view article]
      If you believe in the mean-variance asset pricing model or any other multi-factor model that includes mean and variance, as most people do, then vol has to be a determinant of stock prices. Period. Aug 25 09:37 AM
    • Merrill CDO Deal: How Can It Book a 'Sale'? [view article]
      SFAS 140 is dead. Also MER is not securitizing its CDO portfolio. Jul 29 01:28 PM
    • The Dead Cat Returns to Earth [view article]
      MikeB, are you kidding?

      According to the Census Bureau's 2005 Current Population Survey (CPS), there were 45.8 million uninsured individuals in 2004, or 15.7% of the civilian non-institutionalized population.

      aspe.hhs.gov/health/re...

      I guess to some 45.8 million people is very very few people in the U.S.       Jul 25 01:42 PM
    • Overselling the Case for Indexing [view article]
      google: "The Arithmetic of Active Management
      William F. Sharpe"       Jul 15 12:39 PM
    • Overselling the Case for Indexing [view article]
      sorry, can't get the link to show up correctly. Jul 15 12:38 PM
    • Overselling the Case for Indexing [view article]
      stanford.edu/~wfsharpe/art/active/... Jul 15 12:38 PM
    • Overselling the Case for Indexing [view article]
      "www.stanford.edu/~wfsharpe/art/active/... Jul 15 12:37 PM
    • Overselling the Case for Indexing [view article]
      www.stanford.edu/~wfsharpe/art/active/... Jul 15 12:37 PM
    • Overselling the Case for Indexing [view article]
      najdorf, I don't know what you are talking about. What is an active option?

      I think that you completely misunderstand my post. There can be no indexing if there is no active management. Active managers in modern economies perform the asset allocation function. Individual active managers can underperform or outperform the market. So what? In aggregate they must return the market rate of return.

      Without them you'd be left with technical analysts, speculators and market timers, so how would they allocate capital properly in the economy without doing fundamental research.

      Read Bill Sharpe's article here if you still don't understand:
      www.stanford.edu/~wfsharpe/art/active/...       Jul 15 12:35 PM
    • Time to Exempt Mortgage Securities from Mark-to-Market Rules [view article]
      Jason, if you have an illiquid asset it makes sense to find its fair value and then to take a liquidity DISCOUNT if it is illiquid. That should write the asset down further, not write it up to a fantasy book value number.

      If short sellers are successful, it is because they correctly assess that the asset is overvalued in the books.

      The argument that does make sense is that valuation models are sensitive to inputs/assumptions which give a fairly wide range of valuations. Different numbers can be justified, but the market, not an accrual accounting rule, should determine the value of a company's assets.

      Finally I hope you will realize that it is unfair to blame every economic problem on the Fed, the SEC, and the Treasury Secretary, etc. These are convenient scapegoats, but usually they are people working hard to ensure the best outcome for the economy, with a few exceptions. Blaming them is like blaming the police for murders while ignoring the role of the murderers. I don't recall the SEC underwriting any loans, nor underwriting them so badly that it drove all the buyers out of the market.       Jul 15 10:34 AM
    • Overselling the Case for Indexing [view article]
      Active managers performs an important asset allocation function in modern economies. Buy side analysts and portfolio managers along with other market participants digest market information and translate it into the impetus behind the invisible hand of the market. Indexing is a free-riding mechanism that misallocates the true cost of the necessary asset allocation function.

      I agree that it is not efficient to have every member of society repeating the same investment analysis in every home and workplace. However indexers are not paying their fair share of the significant cost of producing the actionable results of investment analysis. Its a free lunch in that they get the answers to the exam from the inherent transparency in security prices without having to study or pay for it.

      Indexing is good or not based on the quality of aggregate market knowledge.

      The balance in the mix of information producers and free-riding indexers has been affected to a great extent by information technology and the resultant cost of information.

      If 100% indexing was the case, then asset allocation would be random. Try running a business making random decisions.       Jul 15 09:25 AM
    • Clock is Ticking for Banks With Asset Quality Issues (Part II) [view article]
      Banks are in a world of hurt and will continue in that place for a while. Because investors in the market decided to close their eyes to being sold garbage because they were making money doing so, banks and unregulated lenders threw their underwriting standards out the window in order to churn out garbage in ever increasing quantities. The result is that investors don't trust the banks' underwriting any longer and refuse to buy any more garbage. In fact the baby gets thrown out with the bathwater, and investors refuse to buy regardless of whether the product is garbage or not. Thus we have the current liquidity crisis.

      I think the question is not whether the banks have little time to right their business. That is only a concern for investment bankers like yourself wanting to sell these services to these banks so that they may be able to survive even if in moribund fashion. The real question is when will the banks regain their credibility with the buyers of their wholesale products. That ship is sunk and it's time to build a new one from scratch.       Jul 09 10:31 AM
    • Is Bernanke Hinting Something About the Fed's Rate Plans? [view article]
      Reinko said: "This is also one of the ways to avoid down writings; when it is temporary gone as collateral and is on the balances of the FED, it is not marked to market value."

      Collateral does not leave the balance sheet when it is pledged to a lender. When collateral is pledged on an overnight (or a 28 day) borrowing, you'd better believe that it is mtm daily. In the case of the tri-party repos when the Fed is borrowing, the third party prices the collateral and make margin calls on deficiencies.

      www.newyorkfed.org/abo...

      There are two main types of settlement methods for repos: triparty and “delivery vs payment” or DVP. Fed repos are done via triparty settlement, which means that the Fed and the primary dealers use a triparty agent to manage the collateral. In a triparty repo, both parties to the repo must have cash and collateral accounts at the same triparty agent, which is by definition also a clearing bank. The triparty agent will ensure that collateral pledged is sufficient and meets eligibility requirements, and all parties agree to use collateral prices supplied by the triparty agent.

      The Desk selects winning propositions on a competitive basis. Each dealer is requested to present the rates they are willing to pay for the agreements versus various types of collateral. The three types of general collateral, or GC, the Fed accepts are marketable U.S. Treasury securities (including STRIPS and TIPS), certain direct U.S. agency obligations, and certain agency “pass-throughs” (or Mortgage Backed Securities, often called MBS).

      The significance of the “GC” designation on the collateral is that GC collateral is fungible. That is, the Fed is not looking for specific securities; rather it is looking for any of the eligible securities that do not have scarcity value. As such there are a number of securities that would satisfy the requirements, and neither the dealer nor the Fed needs to know which specific security or securities are going to ultimately be pledged to a winning proposition. The Desk establishes relative values across the three collateral types, and then uses these values to selects the best bids presented.

      The New York Fed makes payment for the securities by crediting the reserve account of the dealer's triparty agent, a commercial bank. This act of crediting the bank's account actually creates reserve balances. When the repo matures, the dealer returns the loan plus interest, and the Fed returns the collateral. The return of funds to the Fed extinguishes the reserves that were originally created by the repo.
      Jul 08 02:44 PM
    • The Dow In Euros [view article]
      I'm not convinced. Can you chart the value of the Dow in corn flakes? That certainly provides a better valuation metric for the Dow because corn flakes, as you well know, are yummy! :) Jul 03 03:07 PM
    • Constructing a Portfolio from the Top Down [view article]
      To the disciple of the "Oh, that sounds like a good idea" school of investment thought:

      I guess 164 words would constitute a lengthy reply if you are not used to reading. If you object to what I posted so much, why not try to disprove it by arguing cogently that Mr. Nusbaum's article is not fluff? Tell us what great insights you garnered from his article.

      Instead of huffing and puffing for criticizing Mr. Nusbaum, why not reflect on why you are such an eager consumer of his cowpies?

      Information without dissent is not information, it's propaganda. Now take off your benito mussolini hat and realize that we have a first amendment in this country that allows views other than your own.       Jun 10 12:33 PM
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