I had a fascinating conversation on Friday with Harold Bradley, the CIO of the Kauffman foundation. He’s something of an expert on high-frequency trading, quantitative strategies, and the like, and he raised an interesting question: why isn’t the SEC banning ETFs which include small, illiquid stocks?
Why are stocks yielding more than bonds? The expected 2011 earnings of U.S. stocks are more than 8% of their current price, while bonds yield much less than that. Rob Dugger has an interesting explanation: the market is looking at fiscal deficits as far as the eye can see, and trusts the US government to close the fiscal gap over the medium to long term. And doing so will inevitably mean hitting corporate profits:
I’ve been waiting for a good critical review of Sebastian Mallaby’s tome on hedge funds, and the longer that we go without one, the stronger Mallaby’s pro-hedgie case would seem to be. Now, Noam Scheiber comes along in the New Republic, and his criticisms of Mallaby are pretty unconvincing:
Remember the ShoreBank rescue, back in May? Well, it got lots of headlines at the time, but it didn’t pan out in the end, and now ShoreBank has failed. The FDIC’s deposit insurance fund is taking a $367.7 million loss, and the money which was going to be invested in ShoreBank by Goldman, JP Morgan, Citigroup and others is now going to be invested in ShoreBank’s successor institution, Urban Partnership Bank. UPB will have a whole new management team, led by former Bank One executive William Farrow — something which rather puts the lie to conspiracy theories which said that Goldman et al were only investing in ShoreBank because its CEO was a friend of Barack Obama’s.
What’s scarier than Pride and Prejudice and Zombies? That’s easy: Pride and Prejudice and Structured Finance! Which is essentially the theme of Monetizing Emma, a play which I finally got around to seeing at the New York Fringe festival last night. As playwright Felipe Ossa puts it: