Information Arbitrage

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17 Comments

    • 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.

      Roger       Sep 22 11:12 AM
    • 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 10:40 AM
    • 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 11:14 AM
    • 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.

      Roger       Aug 31 08:23 AM
    • 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.

      roger       Jul 03 10:29 PM
    • 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 06 03:01 PM
    • 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 08:58 AM
    • Did JP Morgan Overpay For Bear Stearns? [view article]
      fxtrader07, your comment is emotional, populist drivel. JPM doesn't have a put back on the deal. They are assuming it all - the good, the bad and the ugly, with a margin of safety provided by the Fed. Your value of the building comment is inane, because you can't strip out an asset from the analysis and compare it to the acquisition consideration. As I wrote in my post, it is about the true assessment of hard book value taking into account the factors mentioned. So a guarantee is not what JPM received. Repeat, not a guarantee.

      This isn't the result of a cabal; it is the work of a Fed and a Treasury that is completely at a loss about what to do. They are not acting out of malice - they are acting out of fear. I know you think you and Mr. Paul have all the answers, but I guarantee that you do not. While I am not happy with many if not most of the Fed's actions over the past six months, they can hardly be chided for trying to act quickly and decisively to stem the ripple effect of the failure of a bulge-bracket firm. With trillions of dollars of interconnected transactions in the swaps and credit derivatives markets, taking them out of the picture would leave a lot of loose ends.       Mar 17 10:37 PM
    • 8 Market Trends For the Next Few Years [view article]
      TS, it is nice that you have an opinion. I respectfully disagree with much of your theses. But thanks for commenting. Mar 09 03:30 PM
    • Microsoft's Potential Is Exponential [view article]
      Tom, bottom line, if they did what I said they'd be a screaming buy. But unless I saw evidence of that change, I'd have to agree with you. As of today, no buy. Feb 24 08:50 AM
    • Alpha Opportunities in Citi-Abu Dhabi Deal [view article]
      Veryan, very nice piece. Well-written and well-conceived. Thanks for adding your intellect to the dialogue.

      Roger       Dec 05 10:19 AM
    • Memo To Retail Investors: Smart Investing Is A Serious Business [view article]
      Memo to John, John and David S. Did I say anywhere in the piece about professional money management being the answer, or that somehow being an Institutional Investor makes you immune to the pitfalls I discussed? Answer: no. And David S., I'd like to understand your definition of arrogance. Opinionated, yes. Arrogant? I don't think so. I think you had your own agenda in mind and didn't read the words. As to your view that "Wall St. exists largely to obfuscate things," that, my friend, is an view borne of both ignorance and arrogance. I am a fan of asset allocation, indexing and using your own skills on a limited amount of your portfolio, as in my experience those who have the ability to create true alpha are few and far between. If you care, read my blog. I've been brutally consistent in my view since I started writing. So if you are so smart, congratulations, go run other people's money or run your own to great ends. But don't paint Wall St. with such a broad brush unless you really know what you are talking about. Because select scandals and idiocy to the contrary, most of Wall St. has provided the platform for the benefit of denizens the world over, yourself included. Aug 17 07:47 PM
    • Bear Stearns Investors Learn Just How Volatile Illiquid Assets Can Be [view article]
      John, in my experience, "security selection" implies a view as to whether or not an investment is cheap or dear, and the likelihood of success once a position is established. If this was ambiguous, my bad. I thought my colloquial interpretation was pretty well-established. Therefore, issues such as liquidity, sector concentration, portfolio diversification, etc. are factors which, when viewed together with security selection, help an investor size a position.

      Concerning your view of the Bear Stearns problem, I completely disagree. Is leverage a factor? Of course. Lack of diversification? Again a factor. But the driver of the melt-down is liqudity - these other factors merely exacerbate the problem, IMHO.       Jul 03 09:31 AM
    • Think Carefully Before Macro Hedging Your Life/Work/Oil Exposures [view article]
      Jordan/Josh/Malkiel, I didn't set out to prove anything. I set out to raise some very pragmatic, real-world issues as they relate to human behavior and the average retail investor. So whether or not the strategy has inherent theoretical logic is irrelevant to me. In fact, I specifically said that I thought it did right up front. But to be clear, I am not writing to the far-right tail of the investing world, i.e., the truly savvy, smart and dispassionate investor, so I didn't feel like addressing Shiller's argument from that perspective was either necessary or worthwhile. So there it is. Sorry if you are disappointed by my lack of completeness.

      John, easy there, dude. It's not tension, it's passion. And my seeds have been and are adequately spread, thank you very much.

      And finally Paul, as an old Oak Park denizen, son of a former Ford man and a product of the now-defunct Grace Hospital in Detroit (or Day-toi as we say), I've still got pride for both the Motor City and the Wolverines. Go Blue!       Jun 01 10:43 AM
    • Leopard Delay, iPhone Hype - Apple Knows What It Is Doing [view article]
      A-kid, very nice, well thought-out post. I am extremely impressed. Great job. Apr 23 10:37 PM
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