Merrill Lynch and Lehman buyouts, 3 years later.

New York Times discusses how a couple of marriages from the financial crisis are working out.

High fees aren't just a problem for small investors

There are two things individual investors can control: how much money they put in their retirement portfolio and the fees that they pay.  They should maximize the first and minimize the second.

High fees will destroy your wealth.  But individual investors aren't the only ones who can end up paying too much for investment services.  Consider the case of the Libyan Investment Authority.   You'd think that these guys would be able to get a pretty good beak on the fees paid.   Not so as the FT reports. In some cases the fees paid were approaching 10% of the fund's asset value.

So remember, it doesn't matter whether you are just an ordinary investor or a crazy dictator of an oil rich nation, you need to watch out how much you are paying in fees.

Correlations are up again

A year ago I posted about correlations between major asset classes and stocks being higher than they had been in the past.  In reality what was going on was that the portion of the stock's risk that is due to the market was higher relative to the portion of a stock's risk due to firm specific factors.   For my MBA students, this should all be familiar as we've just covered the single index model in class.  Anyhow, apparently we're back to high correlations again as this article in the FT reports. Movement of big US shares harks back to Black Monday

Is social security a ponzi scheme?

Rick Perry recently stated that social security is a ponzi scheme.  Marginal revolution has a good analysis starting with Paul Samuelson who once said that social security was a ponzi scheme that worked.

Finance Theater

This post is mostly for folks living in and around Raleigh - the Burning Coal Company is putting on the play "Enron" by Lucy Prebble.  The play has been well received in London and New York.  The play will run from September 8-25 at the Murphey School in Raleigh.   Check out their website for details.

I plan on going. As the Artistic Director of the theater company told me, the play is "Music, Dance and Derivatives".  Sounds like a fun night out.

The birth of the index fund

From Marginal Revolution - a great article about the birth of the index fund.  The full article is hidden behind the WSJ's paywall but the MR summary is good.

A triple A subprime mortgage bond.

Felix Salmon discusses a new triple A subprime bond.  He's not impressed and neither am I - I would have thought Standard and Poor's would have learned at least something from the ratings debacle of a couple of years back.