Monthly Archives: December 2011

The Rules, Part XXVII, and, Seeming Cheapness vs Margin of Safety

The market takes action against firms that carry positions bigger than their funding base can handle.  Temporarily, things may look good as the position is established, because the price rises as the position shifts from being a marginal part of the market to a structural part of the market.  After that happens, valuation-motivated sellers appear […]

Returns on Equity Amid the Financial Crisis, Response

I appreciate constructive criticism.  I particularly appreciate comments at this blog, regarding my long article on how return on equity changed during the financial crisis. The reviewer said, In a world in which I didn’t have only 20 minutes to read, analyze and write about this paper, I’d like to think through his model choices. […]

Risk-Based Liquidity

When there is financial failure, it comes as a result of illiquidity.  Now, truly, these parties are insolvent, because they took the risk of not being able to pay cash when it was due.  Illiquidity and insolvency are really the same thing, though many obfuscate. If you can’t pay cash, it doesn’t matter what your […]

Returns on Equity Amid the Financial Crisis

I wrote the following for the 2012 Baltimore Business Review.  When it is publicly available on the web, I will highlight it.  For now, I will offer you the unedited version of my paper that will be published there: -==-=-=-=-=-=-=-=–==-=–=-=-=-==–==-=–=-=-==-=-=-=-=-=-=-=-=-=-=-=-=- Returns on Equity amid the Financial Crisis   Abstract From 2005-2010, the change in public […]