Wealth of Nations

A friend sent me this interesting report by Credit Suisse on the global wealth.

It's impressive how having more than USD 10,000 is enough to put you ahead of 3 billion people (67.6% of the world).

Luck or Skill? Paulson & Co. edition

I've just read on the FT that John Paulson (who made billions betting on falling US housing market prices in 2008) has warned of 25% redemptions in his $30bi AUM fund, following losses of more than 40% so far this year.

My MSc. dissertation was on whether technical analysis can generate abnormal returns or it is onlu due to "luck"- i.e. out of many possible combinations you are bound to find one that will have excellent results.

I usually use Warren Buffet as an example during my classes on market efficiency but maybe Paulson will be interesting as well. Maybe his profits back in 2008 were simply luck and shouldn't be expected to persist in the future?

The Size of the Greek Problem Over Time

The image says it all:

History of Corporations

It's been ages since I posted anything. Moving to a new job in a new country while still trying to catchup with my debt to my co-authors is not easy! My apologies to all. Once I'm settled (moving date is August 1st) I hope to get back on track.

In any case, I found this very nice article on the history of corporations that I found very interesting.

More and more I believe that all MBAs should have a history-cum-law course. It would probably overlap a lot with Ethics and maybe Strategy courses but I am sometimes amazed by the lack of historical knowledge on previous crises and the inner workings of a modern corporation.

Have a nice summer!

Back to the Future

Today I was looking at some research papers on macro data to prepare for a live TV interview with the BBC and found this report by the IMF that was published this month.

It's interesting to see the predictions they made in 2009 and what has really happened.

In any case, good reading.

This is Funny

IESE's firewall issues a warning message whenever you try to access websites with keywords on their black list.

Today I was trying to put side-by-side figures on a paper that I'm writing. The problem is that the name of the language I (and most people in Finance) use is Latex.

Well, I googled "Latex side-by-side figures" and boom!

"The page you are trying to see does not adjust to our security requirements and therefore it can´t be accessed directly.

In case you are sure that there is no harmful potential you may go to the page by clicking on the " Permitir" button."

Blocked!

Primer on Hedge Funds

I just saw this paper on SSRN, written UBS's alternative investments, that has a quick intro on what are hedge funds.

If you don't know what they are, here is a good introduction. Here is the link for download:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1773947

UBS - Hedge Fund Primer

What if Charlie Sheen Was a Trader?

Very funny article on the FT about Charlie Sheen being a star-trader and negotiating his compensation package:

http://www.ft.com/cms/s/0/509be01a-4b0f-11e0-911b-00144feab49a.html#axzz1GOnY6YhE

Here is an excerpt:

"The committee then considered objective measures of Mr Sheen’s performance. These were impressive: Mr Sheen’s trading had contributed tens of millions of pounds to the bank’s bottom line over the previous year.

At this point the committee was minded to view Mr Sheen’s transgressions as a private matter, and not one over which it behoved HotShots Bank to take an excessively paternalistic line.
It was also noted that Mr Sheen, a self-pronounced “total freakin’ rock star from Mars” appeared to regard himself as very mobile. If not paid a bonus in line with his compensation expectations, he would surely quit."

Early-century performance reviews

I'm sure that if they made these kinds of comments in today's politically correct world it would be grounds for a lawsuit in many places...


http://www.economist.com/blogs/schumpeter/2011/01/performance_reviews

Sales - Music Industry

the graph below has the total sales of the music industry. Interesting how turnover peaked in 2000 and has been going down since then. Even the introduction of digital media hasn't really helped.

No wonder that with artists demanding a bigger slice of profits and internet downloading being so easy to do, their business model is in serious need of a change.

100 Years of the American Economic Review: The Top 20 Articles

Via Brad DeLong's blog, here are the top 20 articles in the AER's first 100 years.

I've read about 6-7 of them, but the one I often use on my research is the Grossman and Stiglitz's one:

Grossman, Sanford J., and Joseph E. Stiglitz. 1980. “On the Impossibility of Informationally Efficient Markets.” American Economic Review, 70(3): 393–408.

The Importance of Being Honest

This is a great article by E. Derman and Paul Wilmott on  how we should be careful with our models. Here are their suggestions at the end,

• I will remember that I didn't make the world and that it doesn't satisfy my equations.
• Though I will use models boldly to estimate value, I will not be overly impressed by mathematics.
• I will never sacrifice reality for elegance without explaining why I have done so. Nor will I give the people who use my model false comfort about its accuracy. Instead, I will make explicit its assumptions and oversights.
• I understand that my work may have enormous effects on society and the economy, many of them beyond my comprehension. 

It is so easy to get lost in the mathematics of models that we often see papers completely out of touch with reality...

Somali Pirates, Goldman Sachs and "Doing God's Work"

A colleague sent me this funny spoof story on a group of Somali's pirates being on trial and claiming that they were in fact working for Goldman.

I hope nobody believes it :)

The Importance of Entry/Exit Points when Investing

This graph on the NYT is very interesting in showing the importance of entry/exit points of investing in markets.

I wonder what investors that bought US stocks in 2010 will get in 20 years.

Brazil Definitely Needs Something Like This

I read this post on Andrew Gelman's blog  that is really cool.

Ipaidabribe.com is a not-for-profit website in India asks for people to anonymously reportany bribes they had to pay when dealing with the government. This is a cool way to guide anti-corruption efforts and see which part of the government should be better controlled.

Here is an example of what they have:

http://www.stat.columbia.edu/~cook/movabletype/archives/2011/01/bribing_statist.html