Posts filed under “Hedge Funds”

The Fine Line Between Investment Grade and Junk

I love a capella, and enjoy a good economic parody. So how could I not love the Richter Scales ode to the 2007 credit crunch, sub-prime implosion, and hedge fund blowups on Wall Street?

Lyrics are below:

There’s a fine, fine line
between investment grade and junk
There’s a fine, fine line
between liquidity and a crunch
And you never know ’til you settle up
if the credit is benign
There’s a fine, fine line
between a gain and a painful decline

There’s a fine, fine line
between the theories and the facts
And there’s a fine, fine line
between what’s solid and what cracks
And now my holdings badly misbehave
and my losses aren’t confined
‘Cause there’s a fine, fine line
between a gain and a painful decline

For years I piled on debt
and smiled as my profits soared
(I even bought a solid gold toilet, yeah)
Now I see that I can’t
be levered this much any more
(panicking, I’m panicking, I think I’ve soiled myself)
Bernanke, please save me,
cut rates, oh I implore…
(please, even 50 bps)

There’s a fine, fine line
between a bull and a bear
And there’s a fine, fine line
between delight and despair
I’m hoping I’ll avoid the pain to come
from trades yet to unwind
But there’s a fine, fine line
between a gain
and a crippling, crushing,
mortally wounding decline
(help me)

Mixed by Tat Tong

Inspired by Avenue Q

Category: Credit, Derivatives, Federal Reserve, Financial Press, Hedge Funds, Psychology, Real Estate

Martin Feldstein on the Housing/Credit/Economic Mess

Category: Credit, Derivatives, Federal Reserve, Hedge Funds, Inflation, Psychology, Real Estate

One Way Days: Are the rules different this time ?

Category: Hedge Funds, Investing, Markets, Psychology, Quantitative, Technical Analysis, Trading

A Demon of Our Own Design

I previously mentioned A Demon of Our Own Design in a linkfest a few weeks ago. I enjoyed the book a great deal, and just about finished it over the long weekend.

The opening paragraph just reached out and grabbed me: 

Bookstaberdemon_jacket"While it is not strictly true that I caused the two great financial
crises of the late twentieth century—the 1987 stock market crash and
the Long-Term Capital Management (LTCM) hedge fund debacle 11 years
later—let’s just say I was in the vicinity. If Wall Street is the
economy’s powerhouse, I was definitely one of the guys fiddling with
the controls. My actions seemed insignificant at the time, and
certainly the consequences were unintended. You don’t deliberately
obliterate hundreds of billions of dollars of investor money. And that
is at the heart of this book—it is going to happen again. The financial
markets that we have constructed are now so complex, and the speed of
transactions so fast, that apparently isolated actions and even minor
events can have catastrophic consequences."

Terrific stuff.

Indeed, I enjoyed the rest of the book. Bookstaber was on the scene in the early days of many of derivatives now contributing to market turmoil. He rather deftly makes complex issues readily understandable, regardless of how much advanced mathematics you may have under your belt.

And, he names names. LOTS of names. All the usual suspects come under scrutiny, as well as a lot of folks who probably assumed they were not int he public eye. There will be a lot of people not very happy with his blunt, insider descriptions of the analytical errors made by major players — many of whom are still around today and in positions of authority and power. 

He also accepts a lot of responsibility for many costly errors he himself made.   

Overall, a fun, very informative read.

I was intrigued enough by the book that I contacted Bookstaber (the author) and Wiley (the publisher), and asked for their permission to reproduce the first chapter. They graciously sent me a pdf and text version, which you will find after the jump: All of chapter one, in both text form and PDF. I also included some mainstream media reviews after the chapter. 

I have pretty good relationships with many of the publishing houses — they all want to get a book or two out of me. Anyway, if it turns out you guys like this idea, perhaps we can offer up a book or two that I am reading every month in this same format. Maybe we can have an online reading group club — it could be a good place to have a full discussion. Share your thoughts.

Enjoy chapter one.

Disclosure:  No, I don’t accept money for this — it was my idea, and I approached the publisher and author about this — not vice versa. Please don’t start bombarding me with offers to promote books I am not already reading. They will be unceremoniously deleted without response.

As noted in our disclosure section, we don’t do payola here (if you click thru and buy it on Amazon, I do see some scratch).


Read More

Category: Books, Derivatives, Federal Reserve, Hedge Funds, Markets, Psychology

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“Dear Investor” — Quant Letters to Clients

Category: Hedge Funds, Psychology, Quantitative, Trading

The Quants Explain Disaster

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Open Thread: A Stealth Fed Rate Cut?

Category: Credit, Derivatives, Federal Reserve, Hedge Funds, Psychology

Subprime Credit Rot

Category: Credit, Derivatives, Hedge Funds, Psychology

How To Speak Hedgie

Category: Hedge Funds