mahoney

Financial Blog Watch: Don't Believe Everything You Read

Excellent discussion of arbitrage, and a welcome critique of the critiques. Surely TD and Denninger will be the first to admit if/when they are wrong, or else logically demonstrate why they are not.

As for the ETF-underlying arbitrage, it seems you are right: as long as the two assets are fungible by virtue of the instruments themselves, then the arbitrage risk is independent of their market valuations.

I don't find the ETF "funding efficiency" theory particularly clear, however. But I'm just learning here. :-)

We Need to Break the Banks

Good article. The financial crisis would have been much attenuated if the investment banks weren't 'too big to fail.' No bank should be allowed to achieve that status again.