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Showing posts from May, 2009

Why is Small Beautiful?

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I was reading something on microsatellites which got me thinking about how in the new era of investing, bigger does not always mean better.

When I was looking for work in Montreal, I stumbled across a group of prop traders that really impressed me. They work for themselves, put up their own capital and trade in and out of futures contracts all day long.

A few of these guys are extremely successful at this style of trading. When I inquired as to how they trade, they told me they move ahead of the big hedgies and big institutions and are able to be nimble and pick their spots.

It's not foolproof and they don't always make money but they got me thinking. I could never trade the way they do and their strategy is not very scalable for institutions to replicate. Moreover, I find it excruciatingly boring going in and out of the futures market hundreds of times a day.

But if you understand the constraints of prop traders, portfolio managers, hedge fund managers and institutional investors…

Street Fighters and Their Pension Clients

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Please take the time to read my update at the end of my last comment on CPPIB as the backlash is building to give back those outrageous bonuses.

One word of advice to the politicians in Ottawa. I know how hard it is to be a politician because my stepfather survived over 20 years in Quebec politics. It's easy to be cynical but being a politician is no barrel of fun, especially in difficult economic times like these.

But I hope politicians will stick to their principles and share some of the moral outrage that is being voiced out there concerning the payment of these bonuses. It's utterly ridiculous to pay anyone millions based on some four-year rolling return (which is based on questionable benchmarks) after a fund loses $24 billion in one year.

I know they will tell you to attract and retain "the best and brightest" we need to compensate them or else they will go to the private sector. I say let them go to the private sector because I guarantee you they will never find …

The Incredibly Uneven Recovery?

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The Dow Jones industrial average fell almost 175 points Wednesday, erasing most of the previous day's rally as a jump in government bond yields fanned concerns that higher interest rates will sap strength from the economy:
A steep drop in the price of the benchmark 10-year Treasury note pushed its yield up to 3.75 percent from 3.55 percent late Tuesday and to the highest level since November. Bond investors were selling on concerns that the huge amount of debt the government is selling to fund its bailout programs will ultimately keep Treasury prices down.Along with increasing borrowing costs for the government, rising yields on Treasury debt could hamper an economic recovery since they are used as benchmarks for home mortgages and other kinds of loans. Higher mortgage rates could delay a recovery in the battered housing market."The equity market is getting worried about the 'green shoots.' I think the deer have nipped off a few and I think a few turned out to be weeds…

Liquidity Drowning the Meaning of Inflation?

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On Monday, Sheldon Filger wrote an article in the London Telegraph stating that the U.S. economy risks the dire prospect of hyperinflation:... though not downgrading the danger of deflation, I believe policymakers are ignoring other factors regarding this economic and financial condition. Furthermore, the U.S. government and Federal Reserve in particular, are taking steps to "cure" deflation that will inevitably lead to hyperinflation, which in the long-term may prove far more destructive to the long-term health of the U.S. economy. History demonstrates that deflation is not a permanent condition. Market forces, unencumbered by fiscal and monetary intervention, eventually restore pricing equilibrium. At a certain point prices of major durables such as homes are low enough to encourage new categories of consumers to enter the marketplace. As demand is restored, prices stabilize and then resume their upward ascent. It is all a question of time. However, key decision-makers in…

Pension Terminators?

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I just came back from the movies where I saw Terminator Salvation. Not bad, but nowhere near as good as Terminator 2 - Judgment Day, which was a classic in this series.

But far away from Hollywood, real life pension terminators are hard at work. Canadian Auto Workers (CAW) members voted 86 percent in favor of a cost-cutting deal with General Motors Corp.'s Canadian unit as the automaker bids to qualify for more government loans and assure its future in Canada:
According to the CAW, the tentative deal with GM Canada provides that the starting pay rate for new hires will be 70 percent of the established rate with increases of 5 percent per year for six years. New hires will be entitled to the same retiree health benefits, funded either through a new Health Care Trust or by the company.The deal freezes pensions until 2015, eliminates semi-private hospital coverage and ends tuition assistance for workers joining the company after Jan. 1, 2010. The CAW also said a $3,500 vacation compens…

On the Inherent Unpredictability of Life

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Federal Reserve Chairman, Ben S. Bernanke, addressed graduates at the the 2009 commencement of the Boston College School of Law on Friday:
I am very pleased to have the opportunity to address the graduates of the Boston College Law School today. I realized with some chagrin that this is the third year in a row that I have given a commencement address here in the First Federal Reserve District, which is headquartered at the Federal Reserve Bank of Boston. This part of the country certainly has a remarkable number of fine universities. I will have to make it up to the other 11 Districts somehow.Along those lines, last spring I was nearby in Cambridge, speaking at Harvard University's Class Day. The speaker at the main event, the Harvard graduation the next day, was J. K. Rowling, author of the Harry Potter books. Before my remarks, the student who introduced me took note of the fact that the senior class had chosen as their speakers Ben Bernanke and J. K. Rowling, or, as he put it, &…