• Roubini Hasn’t Been So Correct
    Posted by on October 15th, 2008 at 11:45 am

    Megan McArdle:

    If you keep predicting a recession, eventually you will be right. Every time there was the slightest downturn in the numbers, Paul Krugman predicted a recession. Eventually he was right. Do we give him credit for the one he got right, or the multiple ones he got wrong? To liberals, the answer seems obvious. Which gives credence to the conservative belief that liberals are people who cannot do basic math.
    A more interesting question is what to do about doomsayers like Nouriel Roubini, who got the magnitude of the crisis right, but has similarly been predicting a financial holocaust for five years, with changing scenarios which mostly did not come to pass. Obviously, he was right that the global financial system was shaky. On the other hand, his understanding of why the global financial system was shaky does not seem to have been strong enough to predict the source of the failure–the current account deficit and the dollar have been at best minor players, at least in the way that he was worried about way back in 2004.

    Finally, someone is criticizing Roubini. His status as a financial visionary is wholly undeserved. He’s been screaming about the downfall of capitalism for years now.
    Here’s my complaint about making predictions–there’s a lack of balance. Basically, you can call for the world to end for years, then step back and take any crisis and claim vindication. It’s like the people who said they were right about Iraq. But the disaster they saw coming was millions of Arabs rushing to Saddam’s side and a Stalingrad-like siege of Baghdad.
    Also, Robert Shiller is a similar story. He never said what people think he said about the stock market. But if you make a bullish prediction and you’re wrong, well then forget about it. Glassman will forever be linked to Dow 36,000. His mistake was being specific. In June 2003, Krugman said the stock market was in a bubble, and he was fantastically wrong. Yet that disappears down the memory hole.
    So here’s the lesson, if you ever make a forecast always be gloomy and vague.

  • Money Galore
    Posted by on October 15th, 2008 at 9:47 am

    This month’s Portfolio estimates that the James Bond franchise has generated nearly $14 billion in profits. The authors estimate that $12 billion came from the movies, $812 million from video games and $1 billion from books.

  • Pennies From Heaven
    Posted by on October 14th, 2008 at 1:42 pm

    Does the weather affect market volatility? Apparently, the answer is yes.

    The relationship between the weather and stock market returns has been well documented both empirically and theoretically. We extend this literature by considering for the first time the impact of weather conditions on stock market volatility. Specifically, we analyze historical volatility using the extensive data set of Hirshleifer and Shumway (2003) which consists of daily measures of cloudiness along with stock market index returns for 26 stock exchanges internationally between 1982 and 1997. The empirical results suggest that sunnier mornings can be associated with higher levels of time-varying market risk as approximated by the conditional daily volatility of returns from GARCH and EGARCH models. The analysis of the VIX, VXO, VXN and VXD implied volatility indices for the CBOE offers further support to this finding.

  • S&P 500 Volatility
    Posted by on October 14th, 2008 at 12:36 pm

    I’ll spare you 1,000 words and give you the picture.
    image719.png

  • Nassim Nicholas Taleb Gets Angry
    Posted by on October 14th, 2008 at 11:03 am


    I think I’m one of very few people who isn’t impressed by Nassim Nicholas Taleb. I have the suspicion that The Black Swan is one of the great unread books of modern times. I can’t prove this, but I’ve read the book and it’s one of the most arrogant and incoherent books I’ve ever read. The Black Swan is so bad that it’s nearly unreadable.
    Taleb really has one idea—that financial market returns don’t follow a normal distribution. OK, I got it. That’s all that he’s complaining about in this clip. For the record, this isn’t Taleb’s idea. A much better book is Benoit Mandelbrot’s, The Misbehavior of Markets.
    At around five minutes into the clip, the interviewer asks, “Climate change, civil liberties, do these now go out the window in the face people losing their jobs and homes?” Yes deary, that’s exactly what it means.
    Here’s a short review I did of The Black Swan.

  • J&J Beats the Street
    Posted by on October 14th, 2008 at 10:05 am

    Well, not everything is a disaster out there. Johnson & Johnson (JNJ) just reported earnings of $1.17 a share, six cents better than estimates. The company also raised its full-year guidance, which sounds more impressive than it is since there’s just one quarter left this year. But still, they’re holding out well against the Apocalypse. On Friday the stock traded as low as $52.06. Today, it’s over $65.

  • Wreck-javik
    Posted by on October 14th, 2008 at 9:53 am

    Poor little Iceland. The country is probably best described as a hedge fund with a vote in the UN. The stock exchange there was shut down for three days and it just reopened. Down 77%.

    Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf collapsed this month with debts equivalent to as much as 12 times the size of Iceland’s economy. The three banks accounted for about 76 percent of the ICEX 15 Index’s value prior to the nationalization.
    The OMX Iceland 15 Index fell 2,317.23, or 77 percent, to 687.39 as of 11:48 a.m. local time. Five of the 13 other stocks in the index didn’t trade, while the five that did account for about 7.1 percent of the index’s value.
    Trading was halted since Oct. 9 after the measure lost 30 percent in nine days as the country’s financial system collapsed. Iceland’s delegation started talks in Moscow today to secure an emergency loan of as much as 4 billion euros ($5.47 billion) from Russia.
    The country should seek aid from the IMF and later apply for European Union membership and adopt the euro, Foreign Minister Ingibjorg Solrun Gisladottir wrote in Morgunbladid on Oct. 13.

  • Financial Planner Advises Shorter Life Span
    Posted by on October 13th, 2008 at 11:52 pm

    From The Onion:

    After reviewing his client’s income, assets, and personal budget Tuesday, Morgan Stanley financial adviser Henry Dalton determined that Jason Hutchinson, 43, could make the best use of his portfolio by dropping dead at the age of 62. “Taking account of inflation and the rising cost of living versus the projected direction of the economy in the coming decade, I told Mr. Hutchinson that he could significantly reduce his spending by simply living less,” Dalton said. “After looking at his investments, I calculated that he really shouldn’t live a day over 62—or 59 if he wants a funeral.” In order to help his client plan for his financial future, Dalton presented Hutchinson with several of the company’s comprehensive suicide packages.

  • Krugman Wins Nobel Prize
    Posted by on October 13th, 2008 at 9:52 am

    Congratulations to Professor Krugman. For the record, I’ve often criticized Dr. Krugman on this blog, but not due to his work in economics. I think he’s a brilliant economist and his prize is well-earned. His political commentary, however, is often bizarre and juvenile. I think something in him snapped when George Bush became president. Perhaps the change in administration will get his political writing back on track.

  • Alec Baldwin, Stockbroker
    Posted by on October 10th, 2008 at 10:14 pm