A Sigh is Just A Sigh

I was talking to a graduate student the other day, and he referred me to the “fundamental theorem of finance”.Isn’t it strange? I thought later, that finance should have a fundamental theorem (and that I wasn’t quite sure what it was). Axiomatic systems have theorems. If you google “the fundamental theory of chemistry” you won’t find much because chemistry isn’t about axioms. Here is what you find if you google “fundamental theorem of arithmetic/algebra/calculus/finance”.

Oh. Boy. Another. Mishandled. Appointee.

I guess Daschle will have to go back to consulting and lobbying.In that respect, there is an interesting article by Christian Caryl in the NYR of Books at http://www.nybooks.com/articles/22277 about Edward Lucas’s book “The New Cold War: Putin’s Russia and the Threat to the West”, which I haven’t read. The review quotes several excerpts from the book on capitalism which I reproduce below.

Diagnostic and Statistical Manual of Mental Disorders: 312.31

Just in time to help the struggling financial industry comes Dr Ari Kiev, who, where others see only difficulties, sees an opportunity, and so should you.

NEW YORK, Jan. 7 /PRNewswire/ — Psychiatrist, trading coach and author Ari Kiev, M.D. announced that he has launched Kiev Consulting, a consulting firm specializing in peak performance coaching for hedge funds and institutional investors and traders. Regarded as one of the top trading coaches, he has worked with some of the most prominent hedge funds in the country for more than 16 years. Kiev said he is expanding the services he provides to hedge funds and other investment firms to include the assessment of new portfolio managers, teambuilding and leadership training.

Water Water Everywhere

I keep thinking about TARP and I’m persuaded that Chapter 11 is better.

Maybe it’s time to stop the trick-le of bailout money to the moribund. Put all failing banks and companies into Chapter 11. The bankruptcy laws are adequate: equity holders, who took risk knowingly, get zero; bondholders get the company, which then restructures and can go about its business. Replace many of the people at the top: these guys are already too distracted with trying to save their own skins and reputations to do a good job. They’ve been burned and can’t forget it soon. New people and a clean start is the right capitalist solution — take risk, suffer the consequences. Then the government can help the new equity holders go about their business of creating credit again.

A Riddle I Heard Today

As I was going to the Street I met some firms that felt the heat Every firm could no more borrow Now TARP has come and eased their sorrow Their equity’s good until tomorrow Tomorrow, sorrow, borrow and heat What’s a solution with less deceit? ——— Answer: Chapter 11 Originally published at Wilmott and reproduced […]

“I am in the station assisting customers. You’ll recognize me by my burgundy blazer/vest.”

I used to be against the bailouts. I thought that if financial firms get the benefits of taking risk, then they should get the malefits too.Then I was persuaded that this was merely Schadenfreude, and that for the greater good of us all it was better not to punish a few people at the cost of destroying the entire system.

The Financial Modelers’ Manifesto

Preface

A spectre is haunting Markets – the spectre of illiquidity, frozen credit, and the failure of financial models.

Beginning with the 2007 collapse in subprime mortgages, financial markets have shifted to new regimes characterized by violent movements, epidemics of contagion from market to market, and almost unimaginable anomalies (who would have ever thought that swap spreads to Treasuries could go negative?). Familiar valuation models have become increasingly unreliable. Where is the risk manager that has not ascribed his losses to a once-in-a-century tsunami?

To this end, we have assembled in New York City and written the following manifesto.