The best kind of hedge is the one like Agustín Carstens put on in Mexico: he locked in high oil prices, and made billions when the price of oil fell. Sometimes, of course, hedges don’t work out nearly so well. Larry Summers, for instance, thought he was locking in low interest rates, but then saw rates fall even lower, and ended up losing billions of Harvard’s dollars.
I like Taunter’s idea of splitting the financial services industry into highly-regulated Boring and largely-unregulated Exciting parts, and making it very clear that the Exciting bits could never get bailed out by the federal government. I disagree however with this:
This chart comes from John Caddell, and it shows the cost of attending Rensselaer Polytechnic Institute as a percentage of US median income. Scary stuff. But not as scary as David Leonhardt’s column today, which demonstrates a nasty ghettoization effect at state colleges, many of which are turning into failure factories:
How dysfunctional was Bank of America around the time of the Merrill Lynch acquisition? Dysfunctional enough that it felt the need not only to fire its own general counsel at the very point at which the acquisition was at its messiest, but also to do so in the most abrupt and inexplicable manner. The lawyer in question, Timothy Mayopoulos, is now the general counsel of Fannie Mae: he seemed to get that job quite easily in the wake of his high-profile defenestration. It’s all very odd, and even Andrew Cuomo, armed with subpoenas, seems to be incapable of getting to the bottom of what exactly happened and why.