Thursday, May 28, 2009
Wednesday, May 27, 2009
Monday, May 25, 2009
Saturday, May 23, 2009
Wednesday, May 20, 2009
My prediction has come true. George Schultze, manager of Schultze Asset Management LLC says:
Don’t lend to a company with big legacy liabilities or demand a much higher rate of interest because you may be leapfrogged in a bankruptcy.
Tuesday, May 19, 2009
Check out some examples. The option valuation and time value of money tools are just fantastic alone.
Thursday, May 14, 2009
Deviations from APR are in fact common when a lower ranked claimant is able to extract a concession from a higher claimant, but usually these are matters that occur between two private groups. By dictating the deviation in favor of the auto workers union, the Government is, in effective authorizing a wealth transfer from the bond holders to the union. Had the bond holders known that this was likely, they would have probably not lent money on the terms they did.
Going forward, this is bad policy, because any rational bond holder will be reluctant to lend to a large unionized company because of the risk that their claim will get trashed by the Government in the event of bankruptcy. For example, who is going to lend to GM in the future?
HT: My friend Jeff.
Friday, May 8, 2009
Buffett: False precision leads to Long Term Capital Management. It only happens to people with high IQs. Those of you with an IQ of 120 are safe.
Munger: Some of the worst business decisions I’ve ever seen are the consequence of complex calculations and projections. They do that in business schools because, well, they have to do something.
Some of the quotes in the article are priceless and demonstrate just how utterly clueless some of those in French academia are ...
"Competition is just a right-wing ideology - in the case of humanities, competitiveness doesn't even make any sense," says Sorbonne English Professor Barbara le Lanand
Thankfully here in the US, we have a highly competitive academic system which competes not only for the best students, but also for the best faculty and the best practices.
"We have a republican conception of universities," explains Sandra Nossik, a student who has now spent eight years in the French university system and who was demonstrating last week in a Paris train station.
"They have to be open to everyone," she added. "We don't like this neo-liberal view of knowledge... and we don't want to have to answer to the government or businesses."
Thursday, May 7, 2009
I actually participated in the survey and I think I said 6%. Of course more recently, the premium has certainly been higher, although before the credit market problems, I think it was headed lower than 6%.
If it is 6%, then what does this mean? Well, if the long term bond rate is about 3%, then the expected return on large cap stocks should be about 9%.
I have no idea whether or not 6% is the right number, but I am pretty sure about is that at current bond rates, a long term expected return on stocks of 12% (the historic nominal mean) is delusional.
The difference between 12% and 9% is massive.
$1000 per month for 30 years at 9% will grow to $1,830,743. While the same investment at 12% will grow to $3,494,964. Of course this assumes that the investment doesn't grow. The point is that if your financial plans are based on 12%, then you better hope that your kids are smart, because you're going to have to rely on them to pay for your retirement!
Wednesday, May 6, 2009
Monday, May 4, 2009
This article summarizes nicely the recent performance of various technical trading strategies...
A nice quote - technical analysis is.. "the fastest way to lose money".