I am watching "The Ascent of Money" on PBS right now. If you missed the show there is a website where you can watch the program online. It's marginally interesting and provides some general snippets of information. But frankly, it's a very unfocused show that bounces from one random finance topic to another, and doesn't provide very much detail or depth. Overall, not that good. But if you've got nothing better to do you might check it out.
Update 11pm - The show has just finished. On second thoughts don't bother watching - it's not worth it - just an hour of mindless rambling.
Tuesday, January 13, 2009
The problems with rating agencies...
Craig Newmark agrees that rating agencies are due a good amount of the blame...this article from seeking alpha describes some of the problems.
Monday, January 12, 2009
Shouldn't the premium on a US Gov CDS be zero?
Felix Salmon over at Portfolio.com notes that the CDS (credit default swap) premium on US Government bonds is around 50bp. This means that you can buy "insurance" on your US Gov Bonds for about half a percent a year. The question he poses is why is this not zero?
Its an interesting article and well worth a read.
Its an interesting article and well worth a read.
Friday, January 9, 2009
Contango in the oil market
Bloomberg reports that Investment Banks (I thought that they were extinct) are looking to rent super tankers to store oil for future delivery. They want to take advantage of the contango in the futures market for oil. Contango is the amount a futures price exceeds the spot price.
Ordinarily, you shouldn't be able to buy the oil today and sell a futures contract for future delivery and then make money by storing the oil. But apparently, because traders are worried about a severe cut in OPEC supply in the future, the futures price is much higher.
An interesting data point from the article reveals that it costs about 80-90 cents per month to store a barrel of oil on a super tanker. So, given that:
Ordinarily, you shouldn't be able to buy the oil today and sell a futures contract for future delivery and then make money by storing the oil. But apparently, because traders are worried about a severe cut in OPEC supply in the future, the futures price is much higher.
An interesting data point from the article reveals that it costs about 80-90 cents per month to store a barrel of oil on a super tanker. So, given that:
West Texas Intermediate crude oil futures for March delivery are trading at $45.98 a barrel, about $4.78 more than the February contract.This means that you could make well over $4 a barrel just storing Oil in March. An example of a supertanker mentioned in the article holds a million barrels. Of course there is also the cost of borrowing to pay for the oil up front, but with interest rates as low as they are, this shouldn't be too significant.
How forecasts are made
(Thanks to my colleague Ed)
It was autumn, and an indigenous tribal group asked their Chief if the winter was going to be cold or mild. Since he was a Chief in a modern society, he had never been taught the old secrets, and when he looked at the sky, he couldn't tell what the heck the weather was going to be.
Nevertheless, to be on the safe side, he replied to his tribal group that the winter was indeed going to be cold and that the members of the village should collect wood to be prepared.
But also being a practical leader, after several days he got an idea. He went to the phone booth,called the National Weather Service and asked, "Is the coming winter going to be cold?"
"It looks like this winter is going to be quite cold indeed," the Meteorologist at the weather service responded.
So the Chief went back to his people and told them to collect even more wood in order to be prepared.
One week later he called the National Weather Service< again.
"Is it going to be a very cold winter?" he asked. "Yes," the man at National Weather Service again replied, "it's going to be a very cold winter."
The Chief again went back to his people and ordered them to collect every scrap of wood they could find. Two weeks later he called the National Weather Service again.
"Are you absolutely sure that the winter is going to be very cold?"
"Absolutely," the man replied. "It looks like it's going to be one of the coldest winters ever."
"How can you be so sure?" the Chief asked.
The weatherman replied, "The indigenous people are collecting firewood like crazy."
There's an analogy here somewhere....
It was autumn, and an indigenous tribal group asked their Chief if the winter was going to be cold or mild. Since he was a Chief in a modern society, he had never been taught the old secrets, and when he looked at the sky, he couldn't tell what the heck the weather was going to be.
Nevertheless, to be on the safe side, he replied to his tribal group that the winter was indeed going to be cold and that the members of the village should collect wood to be prepared.
But also being a practical leader, after several days he got an idea. He went to the phone booth,called the National Weather Service and asked, "Is the coming winter going to be cold?"
"It looks like this winter is going to be quite cold indeed," the Meteorologist at the weather service responded.
So the Chief went back to his people and told them to collect even more wood in order to be prepared.
One week later he called the National Weather Service< again.
"Is it going to be a very cold winter?" he asked. "Yes," the man at National Weather Service again replied, "it's going to be a very cold winter."
The Chief again went back to his people and ordered them to collect every scrap of wood they could find. Two weeks later he called the National Weather Service again.
"Are you absolutely sure that the winter is going to be very cold?"
"Absolutely," the man replied. "It looks like it's going to be one of the coldest winters ever."
"How can you be so sure?" the Chief asked.
The weatherman replied, "The indigenous people are collecting firewood like crazy."
There's an analogy here somewhere....
Stocks are yielding more than bonds..
Thursday, January 8, 2009
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