Infrastructure Madness: Jack Shafer on the meaninglessness of crumbling-infrastructure statistics.
From Jesse Eisinger’s profile of Bill Ackman:
In 2007, he set up a special fund to invest in a single stock in a highly leveraged way. In a sign of how frothy the markets were, he raised $2 billion from start to finish in a week, about two-thirds of which came from other hedge funds. Investors knew the outlines of the investment but not that it would be in Target.
Craig Pirrong weighs in with a very long post on the question of whether credit default swaps make bankruptcies tougher. He has a perfectly good way of looking at the problem, but comes to the wrong conclusion, I think because he has a very skewed idea of the costs and benefits involved in the transactions:
Greg Mankiw had an unorthodox idea on Sunday:
Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.
This is unhelpful in the extreme. As you probably know, Stanford International Bank, an Antigua-based financial institution, turns out to have been an $8 billion Ponzi scheme, and now the receivers in both Antigua and the US are trying to pick up the pieces and return whatever money they might be able to find to Stanford’s depositors. Except instead of cooperating, they’re bickering, nastily:
A Central Clearing House Doesn’t Reduce CDS Risk: It’s talking about this paper. I think the key point here is that most non-CDS derivatives are traded over the counter, rather than through clearing houses. And as a result, a CDS clearing house might not result in as much of a reduction in counterparty risk as you might think.