Opinion

Ben Walsh

from Felix Salmon:

Counterparties: Revenge of the machines

Ben Walsh
Aug 31, 2012 21:02 UTC

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We might not have reached Skynet-like levels of disaster, but stories of technology biting back continue to pile up. Reuters' Jessica Toonkel, Lauren Tara LaCapra and Ashley Lau write that a group of Morgan Stanley advisers, including four who manage a total of $47 billion, may leave the company because "widespread technology problems have made it very difficult for them to do their jobs".

It's not just the financial workplace, the machines have taken over the stock market, and when things go wrong, they go horribly wrong – to the tune of $10 million in losses, every minute for 45 minutes. Technology companies themselves aren't immune: Facebook's IPO was delayed by faulty Nasdaq software that then caused buy and sell orders to go unfilled, while trade cancellations were ignored.

Even the now-mundane technology of email is a source of existential risk, as tech writer Mat Honan recently experienced. Hackers used shockingly lax password recovery procedures to gain access to Honan's Gmail and Mac mail accounts and proceeded to wipe his entire digital life completely and irretrievably clean.

Or take the case of Aviva, the UK's second-largest insurer. It intended to fire a single employee. Instead, it mistakenly fired all 1,300 employees of its asset management unit by email, demanding that they "hand over company property and security passes on their way out of the building, and submit all electronic passwords".

from Felix Salmon:

Counterparties: Robo-suing is the new robo-signing

Ben Walsh
Aug 13, 2012 21:56 UTC

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Of all the bad practices of the mortgage boom and collapse, robo-signing was among the worst. Unsubstantiated and at times fraudulent foreclosure documents submitted by banks affected more than a 138,000 US homeowners. Following the great series by the American Banker's Jeff Horwtiz, the NYT's Jessica Silver-Greenberg reports that some of the same tactics are being employed collecting credit card debt:

As they work through a glut of bad loans, companies like American Express, Citigroup and Discover Financial are going to court to recoup their money. But many of the lawsuits rely on erroneous documents, incomplete records and generic testimony from witnesses, according to judges who oversee the cases.

from Felix Salmon:

Counterparties: Britain’s toughest board

Ben Walsh
Aug 10, 2012 22:26 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com

Barclays has a new centurion: David Walker will take over from Marcus Agius as Barclays chairman on November 1. Walker is a former regulator who served in the UK Treasury and Bank of England. That background will give Walker's credibility as he tries to overhaul the bank's culture, operations and reputation in the wake of the Libor scandal.

As lead author of the eponymous 2009 report on corporate governance at UK banks, Walker has already committed to the standards he – and other board members – should act on:

from Felix Salmon:

Counterparties: Green shoots in the housing market

Ben Walsh
Aug 8, 2012 21:47 UTC

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It's now five years since August 2007, which means that the US is now halfway into its very own lost decade. There is, however, a bit of good news coming from the housing market, as the WSJ's Nick Timiraos reports:

Prices rose by their largest percentage in at least seven years during the second quarter, propelled by low inventories of properties for sale and high demand for bargain-priced foreclosures... Prices rose by 2.5% in June from a year ago, and by 6% from the previous quarter, said CoreLogic Inc., a Santa Ana, Calif., data firm. The quarterly jump was the largest since 2005... Separately, Freddie Mac, which uses a different methodology, said home prices during the second quarter jumped by 4.8% from the previous quarter. That was the largest jump since 2004.

from Felix Salmon:

Counterparties: Bernanke’s hedonic dabbling

Ben Walsh
Aug 7, 2012 21:58 UTC

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Five days after Businessweek gave him the Bob Dylan treatment on its cover, Ben Bernanke has gotten existential. Or at least relatively so for a former academic economist and current central banker. On Monday, he supported including well-being and quality of life in "economic measurement":

Economics as the study of the allocation of scarce resources... may indeed be the "what," but it certainly is not the "why." The ultimate purpose of economics, of course, is to understand and promote the enhancement of well-being. Economic measurement accordingly must encompass measures of well-being and its determinants...

from Felix Salmon:

Counterparties: The true cost of Amtrak’s burgers

Ben Walsh
Aug 3, 2012 21:43 UTC

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Over the last decade, Amtrak has lost $834 million selling food and drinks, its president and CEO admitted Thursday in front of the House Transportation and Infrastructure Committee. The NYT reports that those losses were "largely because of waste, employee theft and lack of proper oversight".

All of this comes on top of Amtrak’s complex status as perennial political football, anecdote fodder for pundits aiming to outdo their own previous attempts at self-parody, and of course vital national infrastructure. But never mind that: losing more than $80 million on food an beverage service a year is offensive to "anybody who's ever boarded a train hungry and been forced to cough up the better part of $20 for a burger and a beer".

from Felix Salmon:

Counterparties: A high-frequency Knightmare

Ben Walsh
Aug 2, 2012 21:44 UTC

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When your business model is to execute trades profitably, it's pretty hard to destroy your franchise more effectively than contriving to lose $10 million a minute trying to do just that on the New York Stock Exchange. That's how much Knight Capital lost yesterday morning when its electronic trading algorithms malfunctioned, causing "the firm’s computers to rapidly buy and sell millions of shares in over a hundred stocks for about 45 minutes after the markets opened".

The damage in total: about $440 million. That's more than the $289 million in revenue the company earned last quarter; it's four times its annual profit. That's 40% of tangible book value. How bad is that? With its shares down 63% on the day, and more than 75% since the error, Knight is now trading at valuations similar to Morgan Stanley, Citigroup and Bank of America. It's now exploring that most ominous of financial euphemisms, "strategic alternatives".

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