Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control
Hello.? Sorry to anyone who is not able to read old posts in my blog.? Only the front page is working at present.? For those that have been following the small changes that I have been making, you might note that I have made some changes to my permanent pages to reflect my new employer.? Also, I have made my book reviews more prominent, because people have told me they like them.
I may be looking for a new hosting provider.? Ideas are welcome.
(with apologies to Tennessee Ernie Ford on the title… my Grandpa met him when “Eighteen Wheels” was hot.)
One thing I never thought I’d have to do in life is become a broker. (My mom, my first teacher in investments, always gave me negative impressions of brokers, calling them “order-takers.”) Yes, I am studying for the Series 7 exam. Today a 14-pound box showed up at my door, with six books inside it — study materials for the series 7 exam. Four inches thick in all. Ouch.
Then again, I have passed the actuarial (in 5 years) and CFA exams (in 3 years). Funny story: when I was taking the first CFA exam, for some reason, I was 10 years older than everyone else in the room. During a break, one of the young guys with an attitude said to me, “Hey old-timer, what are you doing here?”
I blinked and said that as an actuary, I was trying to round out my skills. He said, “But what advantage does that give you in taking these exams; you’re out of your field.”
I was a little annoyed, so I said, “I guess you’re right. I am relatively old here. But I have passed a battery of exams far tougher than these, and have expertise in test-taking, compound interest math, statistics, economics, investments, accounting, and we have our own ethics code. If you think you can run rings around me because of your youth, go ahead and try.” Now he blinked, and turned away.
As I look at the pile of books, there is a summary book and a book of practice tests, in addition to more comprehensive volumes. I’m 10% through the summary book, and once I am done there, I will take a practice test. If I score better than 85% (pass rate is 70%), I will just go and take the exam. On practice tests on the web, without study, I am at the 70% level now. But if I can’t do the 85%, I will sit down and study, learning obscure bits of the securities markets. Being the nerd that I am, that could be fun, but it wouldn’t be the best use of my time if I can avoid it.
I’ll keep you posted on how I do. 🙂
As WordPress counts, every 100 articles, I take a step back, and think about blogging.? I wasn’t sure what I was getting myself into when I started the blog.? I was unsatisfied with my work and my other writing outlets when I decided to start Alephblog up.? I wanted more creative control, and an ability to build a brand of my own.? That’s why I started the site.
So far, so good. The support from other blogs has been significant (in order): Abnormal Returns, Alea, The Big Picture, FT Alphaville, Seeking Alpha, the Kirk Report, and Naked Capitalism.? I also appreciate the overall blogging community on finance issues; it is fascinating to see the relatively high quality of opinions that get expressed on the web.? It is more than competitive with the print media (and we get paid peanuts, if anything…).
In the near term, I will be updating my blogroll.? I want it to reflect what is on my RSS reader.? I updated my “leftbar” recently.? I? did it because I wanted to highlight the books that I have reviewed, and I wanted to push the Google ads further down the page.? I don’t make that much from them; at some point I may discontinue them.
Along with that, I will be doing some blog maintenance to make the top of my blog clickable to return to the homepage, update a few of my old static pages, and turn off comments on posts older that a month.
It’s been interesting to meet new people through the blog.? I appreciate those that e-mail me, and those that comment here, though my time to reply is limited.
Finally, I haven’t run out of things to write about, and given what I wrote here and at RealMoney, this economic environment was made for me.? Volatility — what will break next?? Reminds me of 2002, and owning too many BBB bonds.? But future topics may include:
Finally, I thank my family, I thank God, and I thank my new employer, Finacorp Securities, for their support.? Let’s keep this up; I enjoy the writing and the feedback.
Apologies.? I should have put this out earlier, but I will be on Bloomberg Radio Wednesday between 8:15AM and 8:45AM Eastern.? I will see if I can’t get a transcript or a recording.? For those that can listen live, here is the link.? One thing I enjoy about my present employer is that they like my blog, getting quoted in magazines, and being on radio and television.? It builds the business.
I’ll be talking about current economic conditions.? I hope to give a nuanced view that doesn’t jump around with every monthly data point.
1) The blog was out of commission most of Saturday and Sunday, for anyone who was wondering what happened. From my hosting provider:
We experienced a service interruption affecting the Netfirms corporate websites and some of our customer hosted websites and e-mail services.
During scheduled power maintenance at our Data Centre on Saturday Feb. 23 at approximately 10:30 AM ET, the building’s backup generator system unexpectedly failed, impacting network connectivity. This affected several Internet and Hosting Providers, including Netfirms.
Ouch. Reliability is down to two nines at best for 2008. What a freak mishap.
2) Thanks to Bill Rempel for his comments on my PEG ratio piece. I did not have access to backtesting software, but now I do. I didn’t realize how much was available for free out on the web. He comes up with an interesting result, worthy of further investigation. My main result was that PEG ratio hurdles are consistent with a DDM framework within certain moderate values of P/E and discount rates. Thanks also to Josh Stern for his comments.
3) I posted a set of questions on Technical Analysis over at RealMoney, and invited the technicians to comment.
  |
|
David Merkel |
| Professionals are Overrated on Fundamental Analysis | ||
| 2/21/2008 5:19 PM EST |
I’m not here to spit at technicians. I have used my own version of technical analysis in bond trading; it can work if done right. But the same thing is true of fundamental investors, including professionals. There are very few professional investors that are capable of delivering above average returns over a long period of time. Part of it is that there are a lot of clever people in the game, and that raises the bar.
But I have known many good amateur investors that do nothing but fundamental analysis, and beat the pros. Why? 1) They can take positions in companies that are too small for the big guys to consider. 2) They can buy and hold. There is no pressure to kick out a position that is temporarily underperforming. With so many quantitative investors managing money to short time horizons, it is a real advantage to be able to invest to longer horizons amid the short-term volatility. 3) They can buy shares in companies that have been trashed, without the “looks that colleagues give you” when you propose a name that is down over 50% in the past year, even though the fundamentals haven’t deteriorated that much. 4) Individual investors avoid the “groupthink” of many professionals. 5) Individual investors can incorporate momentum into their investing without “getting funny looks from colleagues.” (A bow in the direction of technical analysis.)
When I first came to RM 4.4 years ago, I asked a question of the technicians, and, I received no response. I do have two questions for the technicians on the site, not meant to provoke a fundy/technician argument, but just to get opinions on how they view technical analysis. If one of the technicians wants to take me up on this, I’ll post the questions — hey, maybe RM would want to do a 360 on them if we get enough participation. Let me know.
Position: none
|
|
David Merkel |
| The Two Questions on Technical Analysis | ||
| 2/22/2008 12:15 AM EST |
I received some e-mails from readers asking me to post the questions that I mentioned in the CC after the close of business yesterday. Again, I’m not trying to start an argument between fundies and techies. I just want to hear the opinions of the technicians. Anyway, here goes: 1) Is there one overarching theory of technical analysis that all of the popular methods are applications of, or are there many differing forms of technical analysis that compete against each other for validity (and hopefully, profits)? If there is one overarching method, who has expressed it best? (What book do I buy to learn the theory?)
2) In quantitative investing circles, it is well known (and Eddy has written about it recently for us) that momentum works in the short run, and is often one of the most powerful return anomalies in the market. Is being a good technician just another way of trying to decide when to jump onto assets with positive price momentum for short periods of time? Can I equate technical analysis with buying momentum?
To any of you that answer, I thank you. If we get enough answers, maybe the editors will want to do a 360.
Position: none
I kinda thought this might happen, but I received zero public responses. I did receive one thoughtful private response, but I was asked to keep it private. Suffice it to say that some in TA think there is a difference between TA and chart-reading.
As for me, though I have sometimes been critical of TA, and sometimes less than cautious in my words, my guesses at the two questions are: 1) There is no common underlying theory to all TA, there are a variety of competing theories. 2) Most chart-readers are momentum players, as are most growth investors. Some TA practitioners do try to profit from turning points, but they seem to be a minority.
I’m not saying TA doesn’t work, because I have my own variations on it that I have applied mainly to bond investing. But I’m not sure how one would test if TA in general does or doesn’t work, because there may not be a commonly accepted definition of what TA would say on any specific situation.
4) One more note from RM today:
|
|
David Merkel |
| Just in Case | ||
| 2/25/2008 4:20 PM EST |
Um, after reading this article at the Financial Times, I thought it would be a good idea for me to point readers to my article that explained the 2005 Correlation Crisis. Odds are getting higher that we get a repeat. What would trigger the crisis? A rapid decline in creditworthiness for a minority of companies whose debts are referenced in the relevant credit indexes, while the rest of the companies have little decline in creditworthiness. One or two surprise defaults would really be gruesome.
Just something to watch out for, as if we don’t have enough going wrong in our debt markets now. I bumped into some my old RM articles and CC comments from 2005, and the problems that I described then are happening now.
Position: none, and there are times when I would prefer not being right. This is one of them. Few win in a bust.
There are situations that are micro-stable and macro-unstable, and await some force to come along and give it a push, knocking it out of its zone of micro-stability, and into a new regime of instability. When you write about situations like that before the fact, it is quite possible that you can end up wrong for a long time. I wrote for several years as RM about overleveraging credit, mis-hedging, yield-seeking, over-investment in residential real estate (May 2005), subprime lending (November 2006), quantitative strategies gone awry, etc. The important thing is not to put a time on the prediction because it gives a false message to readers. One can see the bubble forming, but figuring out when cash flow will be insufficient to keep the bubble financed is desperately hard.
5) This brings up another point. It’s not enough to know that an investment will eventually yield a certain outcome, for example, that a distressed tranche of an ABS deal will eventually pay off at par. One also has to understand whether an investor can handle the financing risks before receiving the eventual payoff. Will your prime broker continue to finance you on favorable terms? Will your regulator force you to put up more capital against the position? Will your investors hang around for the eventual payoff, or will they desert you, and turn you into a forced seller? Can your performance survive an asset that might be a dud for some time?
This is why the price path to the eventual payoff matters. It shakes out the weak holders, and moves assets that should be financed by equity onto strong balance sheets. It’s also a reason to be careful with your own balance sheet during boom times, and in the beginning and middle of financial crises — don’t overextend your positions, because you can’t tell how long or deep the crisis might be.
6) I agree with Caroline Baum; I don’t think that the FOMC is pushing on a string. The monetary aggregates are moving up, and nominal GDP will as well… it just takes time. The yield curve has enough slope to benefit banks that don’t face a lot of credit problems… and the yield curve will steepen further from here, particularly if the expected nadir of Fed funds drops below 2%. Now, will real GDP begin to pick up steam? Not sure, the real question is how much inflation the Fed is willing to accept in the short run as they try to reflate.
7) Now, inflation seems to be rising globally. At this point in the cycle, the FOMC is ahead of almost all major central banks in loosening policy. I think that is baked into the US dollar at present, so unless the FOMC gets even more ahead, the US Dollar should tread water here. Eventually inflation elsewhere will get imported into the US. It’s just a matter of time. That’s why I like TIPS here; eventually the level of inflation passing through the CPI will be reflected in implied inflation rates.
8 ) Okay, MBIA will split in 5 years? That is probably enough time to strike deals with most everyone that they wrote coverage for structured products, assuming the losses are not so severe that the entire holding company is imperiled. If it’s five years away, splitting is a possibility, but then are the rating agencies willing to wait that long? S&P showed that they are willing to wait today. Moody’s will probably go along, but for how long?
9) I found it interesting that AQR Capital has not been doing well in 2008. When quant funds did badly in the latter half of 2007, I suffered along with them. At present, I am certainly not suffering, but it seems that the quants are. I wonder what is different now? I suspect that there is too much money chasing the anomalies that the quant funds target, and we reached the end of the positive self-reinforcing cycle around mid-year 2007; since then, we have been in a negative self-reinforcing cycle, with clients pulling money, and the ability to carry positions shrinking.
10) Now some graphs tell a story. Sometimes the story is distorted. This graph of the spread on Fannie Mae MBS is an example. Not all of the spread is due to the creditworthiness of Fannie Mae. Those spreads have widened 30 basis points or so over the past six months for Fannie’s on-the-run 5-year corporate bond, versus 50 basis points on the graph that I referenced. So what’s the difference? Increased market volatility makes residential MBS buyers more skittish, and they demand a higher yield for bearing the negative optionality inherent in RMBS. Fannie and Freddie are facing harder times from the guarantees that they have written, and the credit difficulties at the mortgage insurers, but it would be difficult to imagine the US Government allowing Fannie or Freddie to default on senior obligations.
That’s another reason why I like agency-backed RMBS here. You’re getting paid a decent spread to bear the risks involved.
11) I would be cautious about using prics from CMBX, ABX, etc., to make judgments about the cash bonds that they reference. It is relatively difficult to borrow and short small ABS and CMBS tranches. It is comparatively easy to buy protection on the indexes, the only question is what level does it take to induce another market participant to sell protection to you. When there is a lot of pressure to short, prices overshoot on the downside, and stay well below where the cash bonds would trade.
12) One last point, this one coming via one of our dedicated readers passing on this blurb from David Rosenberg at Merrill Lynch:
A client sent this to us last week
It was a New York Times article by Louis Uchitelle in December 1990 on the housing and credit crunch. In the article, there is a quote that goes like this ? ?This is different from the experience of the Great Depression, but something related to the 1930?s is beginning to happen?. Guess who it was that said that (answer is at the bottom of the Tidbits).
?Ben Bernanke, a
My take: it is a very unusual time to have a man as Fed Chairman who is a wonk about the Great Depression. That makes him far more likely to ease. The real question is what the FOMC will do if economic weakness persists, and inflation continues to creep up. I know that they want to save the day, and then remove all policy accomodation, but that’s a pretty difficult trick to achieve. In this scenario, I don’t think the gambit will work; we will likely end up with a higher rate of price inflation.
It has been one year since I started The Aleph Blog. During that time, we have seen a lot of changes:
Pretty amazing, I think. My blog is an expression of my character in the economics/finance/investment world. I have a lot of interests, so my blog is diversified in what I write about. There is almost always someone more experienced than me writing about a given issue. I think of myself as a good number 2 (3? 5? 10?) on many issues. Because of that, my job is to look for the interactions — the second-order effects in other markets that may give us a clue as to future happenings.
If you want to see a sampling of what I felt my best articles have been, you can look here. If you have other nominations for this category, I am all ears.
Why did I start the blog? Rejection from those that I wrote for and worked with. I was frustrated, and needed an outlet for self-expression. Learning from what I wrote at RealMoney, from the first day, I followed the same ethics code, to protect those that I worked for.
What of the future? I plan on some meaty articles on inflation, the PEG ratio, some book reviews, and perhaps a series on long-term investing for children. (In addition to what I mentioned in Post 500.)
Now, I did not expect the level of acceptance that I received in my first year, and so I thank my readers. I have been quoted in a wide number of places that I would not have expected when I started this. I only ask that if you like what I write, please refer my blog to your friends, as it seems best to you.
To all of my readers, here’s to a profitable year number two. Thanks for being with me over the past year. For those that have commented here, a special thank you. To my family and church, thank you. Finally, thanks be to Jesus Christ. Woo-hoo! What a great year! 😀
It’s early morning now, after two days on the road.? It is good to be home, and it will be good to get back to “regular work” once the workday begins.? A few thoughts:
1) Here are two Fortune articles where Colin Barr quotes me regarding Buffett’s offer to reinsure the muni liabilities of the financial guarantors.? He correctly quotes my ambivalent view.? I am not willing to take Ackman’s side here, nor that of the guarantors and rating agencies.? This is one of those situations where I don’t think anyone truly knows the whole picture.? My thoughts are limited to Buffett’s offer.? He’ a bright guy, and he is hoping that one of the guarantors is desperate enough to take him up on his offer.
2) Personally, I found this note from the WSJ economics blog worrisome.? Ben Bernanke is probably a lot smarter than me, but I can’t see amelioration in the residential real estate markets in 2008.? We still have increases in delinquency and defaults at present.? Vacancy is increasing. Inventory is increasing.? The market is not close to clearing yet.
3) I like the “quants.”? Are they a big force in the stock market?? Yes.? But they are an aspect of Ben Graham’s dictum that in the short run the stock market is a voting machine, but in the long run it is a weighing machine.? “Dark pools” sound worrisome, but to long-term investors they are a modest worry at best.? Traders should be concerned, but that is part of the perpetual war between traders and market makers/specialists.
4) There are two aspects to the concept of the rise in housing prices.? One is the scarcity of desirable land near where people want to live.? The second is that financing terms got too loose.? Marginal Revolution says there is/was no housing bubble.? They are focusing on the first issue, and downplaying the second issue.? My view is that there are legitimate reasons for housing prices to rise, but we built more homes than were needed, and offered financing terms to buyers that were way too generous.? To me, that is a bubble, and we are still working through it.
5) Auction-rate securities have always seemed to me to be micro-stable, but subject to macro-instability.? What do I mean?? Small fluctuations get absorbed by the investment banks, but large ones don’t.? As an old boss of mine used to say, “liquidity is a ‘fraidy cat.”? It’s around for minor jolts, but disappears in a crisis.
6) Muni bond insurance is thought insurance.? Most municipal bonds are small.? What credit analyst wants waste time analyzing a small municipality?? With a AAA guaranty, the bonds get bought in a flash, and they are liquid (so long as the guarantor continues to be viewed positively).? So, I still view municipal guarantees as having value.? Not everyone else does.
7)? Intuitively, I can feel the dispute regarding the recycling of the current account deficit.? The two sides boil down to:
It’s a struggle.? In the short run, supporting the US Dollar makes a lot of sense, but the build-up of continual imbalances is tough.? Why should we buy into a depreciating currency in order to support our exporters?
8 ) Privatize your gains, socialize your losses.? It’s a dishonest way to live, but many press their advantage in such an area. Personally, I think that losses need to be realized by aggressive institutions.? They took the risk, let them realize the (negative) reward.
That’s all for the morning.? Trade well, and be wary of things that work in the short run, but are long run unstable.
I have never been on live television before; the only other times that I have been on any sort of television was when I taped two segments for TheStreet.com last October. We only did one take of each segment, so I guess that’s as good as live, though there was the possibility of re-taping.
So, it was interesting for me to be on Happy Hour yesterday.
What was I going to talk about? Well, that was uncertain until 2PM today. Cody wanted to talk stocks, but he also wanted to talk macroeconomics as well. I offered him seven stocks, four foreign, and three US insurers. He took the insurers. I offered him four macro topics, and he took the most topical one, Buffett’s offer to reinsure the muni business of the major financial guarantors.
As of 3PM, I had a problem, though. I hadn’t been able to connect to the internet all day long, and though I had talked with many people about Buffett’s proposal, I really did not have any in-depth knowledge of the proposal. The Waldorf Astoria’s free Wi-fi was not working for me, so I retreated to the business center for 20 minutes of catching up. That’s all it took to get the details hammered down, so I headed down to the Bull and Bear for the show.
I got there about four, and a perceptive staff member said, “Are you one of the guests? You have that look about you.” He then seated me at a nearby table and I pulled out my laptop, and wrote out my notes for what I would say. They read like this:
Guarantors:
Company that?s in trouble: sell your good business or bad business?
Buffett wants to buy the good business at what is a bargain price to him, leaving the bad business behind and less wherewithal to pay the claims, because the profit stream from the good muni business will be gone. NPV of the muni business is more than Buffett is offering. A company would only take up Buffett?s offer if they were desperate, or forced to by the regulators.
Now effect on Munis is limited, just because you might lose your guarantee doesn?t mean that the municipality can?t make payments.
Insurers:
HIG
LNC
AIZ
By the time I had written that, David Newbert, of ThePanelist.com showed up, and we began to talk. Nice guy with some heavy duty Wall Street experience. Then the Fanelli twins showed up; bright ladies.
By this point it was close to 5PM. A little powder for my face and balding pate, I am going second at about 5:13. I ask the staff for advice, and they simply tell me to be opinionated and energetic. I try to be self-effacing, but I steel myself up for the task.
The first guy completes and they go to break. I’m up! They tell me to look at Cody and Rebecca, and sooner than I can expect it, we’re off. I had committed my notes to memory, but as in war, as Cody and Rebecca interact with me, I have to deviate from what I jotted out. We talk about Buffett and the Financial Guarantors, then move to stocks. I talk about Hartford, and a little about Assurant, and then, we’re out of time! That was fast! I get to name Lincoln National at the end as an afterthought. (At one point, Cody lavishes praise on me, and I get a little embarrassed. So it goes.)
The rest of the show goes on in the crowded space of the Bull and Bear, and before you know it, it’s over. The staff efficiently shuts down, and in 10 minutes, there’s no trace of what went on before. Cody and I meet for dinner later. It’s good to re-sync in our friendship.
I hope to get a copy of the video clip to post at my blog. If so, you will see it here. I had a lot of fun, and they invited me back. Should I get back to NYC, I will be back on Happy Hour.
Full disclosure: long AIZ HIG LNC
I’m just trying to clean up old topics, so bear with me:
1) This blog is not ending because of my new job. Finacorp wants me to keep it going, and they may use the posts in PDF form for clients. Also, unlike my prior employer, Finacorp wants me to have a high degree of exposure, because it aids them. You may see me in more venues, which could include TV and radio.
2) In one sense, I had an unusually productive Saturday. I built two models — one for a critique of the PEG ratio, and one for a model of the Treasury yield curve. You will see articles on both of these, and I am really jazzed on both of them. It is not often that I get one impressive result in a day. Today I got two. I’ll give you one practical upshot for now, if you are an institutional bond investor: go long 10-year Treasuries and short 7-year. We are very near the historical wides. If you are like me, and can live with negative carry, dollar duration-weight the trade, so that you are immune to parallel yield curve shifts.
3) I didn’t read Barron’s, Forbes, or The Economist today, but I did read the Financial Analysts Journal. In it there were three articles that are worth a comment. There was an interesting article on fundamental indexation that comes close to my view on the topic. Fundamental indexation, when properly done, is nothing more than enhanced indexing with a value tilt. Will it make you more money than an ordinary index fund? Yes, it will, over a long enough period of time. Will it work every year? No. Is there one optimal way to fundamentally index? No. There is no one cofactor, or set of cofactors that optimally define value, if for no other reason than the accounting rules keep changing.
4) The second article went over the value of immediate annuities as risk reducers to retirees, something I commented on recently. The tweak here is buying annuities that start paying later in retirement, for example at 80 or 85, with the risk that if you die before then, you get nothing. Longevity insurance; a very good concept, but the execution is tough.
5) The third article was on Risk Management for Event-Driven Funds. Here’s my take: risk arb is like being a high yield bond manager. Anytime a deal is announced, you have to do a credit risk analysis:
But the portfolio manager must ask some more questions:
Risk arbs have been burned lately, with all of the deals that have been busted because financing is not available on easy terms. It’s tough but this happens. Most easy arbs tend to get overplayed before blowups happen. The lure of easy money brings out the worst in people, even institutional investors.
6) Naked Capitalism had an interesting post on GM. I made the following comment:
I took some criticism at RealMoney.com for writing things like this about GM, though the author here was a much better writer.
The thing is, there are enough levers here that GM can keep the debt ball in the air for some time, as can many of the financial guarantors, so long as they can make their interest payments.
The “Big 3” lose vitality vs. Toyota and Honda each year — in the long run GM and Ford don’t make it. Perhaps after they go through bankruptcy, and shed liabilities to the PBGC, and issue new equity to the current unsecured bondholders, they can exist as smaller companies that have focus. Maybe Ford could be a division of Magna, and GM a division of Johnson Controls. At least then there would be competent management.
7) Barry Ritholtz had a good post called, 5 Historical Economic Crises and the U.S. The paper he cited went into five recent crises in the developed world, and how the current US situation stacks up against that.? Here was my comment on one of the areas where the US situation did not seem so dire, that of the run-up in government debt:
On the last point about the increase in the debt, what is missed is that a lot of the government debt increase is hidden by the non-marketable Treasury bonds held by the entitlement programs. Add that in, and consider the unfunded promises made at the Federal, State, and municipal levels, and the debt increase on an accrual basis is staggering.
We do face real risks here.? The rest of the world will not finance us in our own currency forever.? Oh, one critical difference between the US and the 5 crises — we are the worlds reserve currency, for now.
8 )? I like Egan-Jones on corporate debt.? They have quantitative models that follow contingent claims theory, and use market based factors to estimate likelihood and severity of default.? They are now trying to do models for asset backed securities.? Very different from what they are currently doing, and their corporate models will be no help.? They will also find difficulties in getting the data, and few market-based signals that inform their corporate models.? I wish them well, but they are entering a new line of business for which they have no existing tools to help them.
9) This article from Naked Capitalism pokes at the rating agencies, and the proposed reforms from the SEC.? My view is this: the financial regulators need a model on credit risk.? They need a common platform for all credit risks.? They need one set of ratings that allow them to set capital levels for the institutions that they regulate, or they need to bar investments that cannot be rated adequately.? The problem is not the rating agencies but the regulators.? How do they properly set capital levels.? They either have to use the rating agencies, or build internal ratings themselves.? Given my experiences with the NAIC SVO, it is much better to use the rating agencies.? They are more competent.
10)? Finally, on Friday, a UBS report stirred the pot regarding non-borrowed reserves.? You can see the H.3 report here. Both Caroline Baum of Bloomberg and Real Time Economics debunked the UBS piece.? But it was simpler than that.? The Fed published its own explanation at the time they put out the H.3 report.? UBS did not include the effect of the new TAF.? Whoops.? Oh well, I make mistakes also.? It’s just better to make mistakes when one doesn’t sound so certain.
Full disclosure: long MGA, HMC
David Merkel to Join Finacorp Securities as Its Chief Economist and Director of Research
IRVINE, Calif., Feb. 8 /PRNewswire/ — In an ongoing campaign to provide targeted, value add services to its institutional client base,Finacorp Securities has hired David Merkel, formerly a Portfolio Manager for Dwight Asset Management, and an Equity Analyst for Hovde Capital Advisers. David is both a Chartered Financial Analyst, and a Fellow in theSociety of Actuaries.
Finacorp Securities today announced that David Merkel has joined as its Chief Economist and Director of Research. David has been a long time leading contributor to RealMoney.com, after being invited by Jim Cramer to write there. In addition to this he has acted as a Portfolio Manager to equity, corporate bond and structured product funds. He is also author and
owner of the popular finance weblog Alephblog.com. David’s focus has been equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues and corporate governance. As Chief Economist and Director of Research at Finacorp Securities, David’s chief responsibility will be to develop economic analysis with equity and
fixed income strategies and provide advice to the firm’s sales & trading staff and its client base.
“With the current credit crisis and ensuing market volatility we think it is imperative to offer additional support and insight to our client base. David is a proven professional that has analyzed, and created opportunities in many markets and will help do the same for our client base in this market and those in the future. David’s ability to analyze many of the complex and impaired assets in today’s marketplace including CDOs, SIVs, and Insurance Guarantors will create an immediate value add to our institutional clients. This is very much in line with our philosophy of bringing together the finest personnel in a collaborative environment,” said Ed Prado, President and CEO of Finacorp Securities.
This hiring comes after tremendous expansion by the company of personnel and infrastructure as it established a presence in: Seattle, Portland and Chicago.
About Finacorp Securities
Finacorp Securities is a full service broker/dealer focusing on servicing its institutional clients within the U.S. and select
international markets. The firm operates as a certified Minority-OwnedHispanic Broker/Dealer headquartered in California. Through a combination of its own proprietary systems and third-party partnerships, it provides seamless execution, settlement and custody to institutional fixed income and equity market participants. Finacorp has been built on a tradition of highly personalized brokerage services delivered by professionals harnessing the power of technology and strategic partnership to deliver value-driven securities execution, detailed portfolio analytics, and seamless settlement. Finacorp’s high-touch, high-tech business model represents a comprehensive set of fixed income and equity solutions for
today’s value driven, risk adverse investment professional.
SOURCE Finacorp Securities