02-01-11 © Taylor Hinton

    Today's Post

    Detroit Bankruptcy: Foes Become Allies The legal environment in The United States remains averse to the sort of bold-faced repudiation of debt that Detroit attempted in the matter of its so-called Certificates of Participation (COP). Fortunately on several fronts, Detroit has decided to repudiate the repudiation.

    Detroit filed for bankruptcy court protection in July 2013. In December, challenges to its eligibility for such protection failed. The case, since then, has moved along at a rapid pace, at least by the usually-glacial standards for large complicated re-organizations. It has attracted, meanwhile, a large body of commentary and punditry, some of which I have reviewed in my personal blog. With AAA’s indulgence I’ll link interested readers there. What piques my interest again just now is the new agreement between the City and the largest hold-out counter-party, an agreement that will have the municipality turning over the site of Joe Louis Arena to a bond insurer, the Financial Guarantee Insurance Co. Turning FGIC from foe to ally is a big step for Detroit, in the eventual goal of getting out from under bankruptcy court supervision. Repudiating a Repudiation In the period of the long-ago housing derivatives boom (2005-06), and in the hope of assisting the city with its pension liabilities, Detroit Mayor Kwame Kilpatrick signed Certificate of Participation instruments (COPs), raising $1.5 billion ...

Featured Post


The Skorina Report: Another try at herding Gotham’s five-headed fund

Guest columnist Charles Skorina looks at the five-headed NYC pension system with its new leader, Scott Evans.

By Charles Skorina In July, Scott Evans reported for duty as Chief Investment Officer in New York City's Bureau of Asset Management, where he'll manage $160 billion in employee pension funds. Traditionally the city's CIO is replaced when the political wheel turns, which it did last fall. Retiring Mayor Michael Bloomberg was succeeded by William De Blasio; and Comptroller John Liu, the independently-elected custodian of the city's pension funds, was replaced by Scott Stringer. Mr. Stringer beat back a last-minute primary challenge from disgraced ...


One Ordinary Week in the Life of Climate Change


We thought it would be instructive to share with you links and the odd quote from recent press reports on the subject of climate change.  As a professional investor,  you no doubt want to be ahead of trends in the investment world.   Investment opportunities arise when there is a divergence of opinion, as is uniquely the case in the United States (unlike the other nations on Earth) on the subject of climate change.  The headlines of a few days tell ...

Guest Posts


The Skorina Report: Another try at herding Gotham’s five-headed fund
Guest columnist Charles Skorina looks at the five-headed NYC pension system with its new leader, Scott Evans.

By Charles Skorina In July, Scott Evans reported for duty as Chief Investment Officer in New York City's Bureau of Asset Management, where he'll manage $160 billion in employee pension funds. Traditionally the city's CIO is replaced when the political wheel turns, which it did last fall. Retiring Mayor Michael Bloomberg was succeeded by William De Blasio; and Comptroller John Liu, the independently-elected custodian of the city's pension funds, was replaced by Scott Stringer. Mr. Stringer beat back a last-minute primary challenge from disgraced ...


Retail Investing

Liquidity Makers and Takers: A Nobel Prize
The latest Economics Award has drawn the attention of the world briefly to a body of work that has a number of points of interest for the alt-investment community.

The Nobel Prize in Economics, formally the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel,” went this year to Jean Tirole, a French economics professor at the Toulouse School of Economics, and the chairman of the board of the Institut d’Economie Industrielle(IDEI). One somewhat unusual fact about this award: Tirole doesn’t have to share the glory or the money with anyone. In recent years, most of the economics awards have been shared among two or three economists who have done related work (last year it went to Fama, ...

Indexes

The Bubble This Time: Oil & Gas Energy Stocks?
If we look for the recent peak in Dow Jones U.S. oil & gas stocks we’ll look to the start of the summer. In June of this year the energy sector got above $850. The fall from that height puts the size of our correction in the neighborhood of 16%. It is possible these stocks are leading the rest of the market down.

Is there a bubble in oil and gas stock prices? And is it now bursting? Those are pertinent questions in the face of the leading role the energy sector played through the first full week of October in the slide of the key U.S. stock indexes. For perspective, we might remind ourselves that this doesn’t look at all like September 2008. One the other hand, the more worrisome hand, it might remind some people of the later part of 2007, when stock prices remained high, though they were trending down, and when it ...

Technology

Untangling the web of HFT
What is the real issue behind intermarket sweep orders, and the recent dust-up over an NYSE rules change? Faille answers: Privilege.

In the words of Sir Walter Scott, “Oh, what a tangled web we weave, when first we practice to deceive.” A key notion, one which it might even be fair to call a “deception,” underlying much of the regulation of the technical side of securities trading in the 21st century is the idea that regulators want to “level the playing field.” The expression, meaning nothing beyond the fragility of metaphor, may sound like it means an end to some sort of privilege or other. In fact, though, administrative action to ‘level ...

Legislation/Court rulings

Late September Bombshell from Judge Lamberth
As the editorial page of the Wall Street Journal reminded us recently, investors sometimes gamble on politics. That is their right, but good capitalist hygiene is served when, once in a while, such a bet goes badly wrong.

“It’s late September and I really should be getting back to school,” sang Rod Stewart in Maggie Mae. Fittingly, then, it was as September ended that the Hon. Royce Lamberth of the U.S. District Court for D.C. offered a scholarly tutorial to alpha-seeking funds on the one hand and to the government sponsored enterprises on which some of these funds have speculated, on the other. The funds involved, including Perry Capital, owned either preferred or common stock in the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, colloquially Fannie ...

Best Practices

Asset Managers Need to Ride the Tides
Guest columnist Diane Harrison looks at the ebb and flow of money and what it means to portfolio construction.

By Diane Harrison While reading "Swimming to Antarctica," the autobiography of Lynne Cox, a a long-distance swimmer who successfully navigated some of the world’s most challenging deep sea passages utilizing nothing more than a standard swimsuit, goggles and lanolin oil, I learned about the gravitational effect of tides, which in turn sparked a connection to the market forces that often dictate the global market movements. The physics of tidal pulls present an interesting parallel to some ...

Timely Research

A Merchant/Academic’s Thoughts about Customizing Risk Models
When should customized risk models win out over the standard sort? According to two authors of a new report, there are seven factors, starting with the time horizon.

When does it make sense for an asset manager to customize its risk model? And why? There are, after all, a lot of off-the-shelf risk models. For many purposes they suffice, and in some cases they do better than suffice: they render customization an expensive net negative. That is one of the premises of a recent paper by Zura Kakushadze and Jim Kyung-Soo Liew, who say that pension funds for example “do not require customization but standardization.” Seven ...

Hedge Fund Strategies

GFIA Ruminates on Academia and Practice
GFIA shares some ruminations about the relationship between the abundant academic work on alternative investment and the insights of practitioners. Meanwhile, the Bank of Japan seems to be engaged in some ruminations of its own, and practitioners have to await the results.

GFIA’s latest “Research Insights” begins with an essay that describes itself as “ruminative and wide-angled,” a reflection on ivory towers and practitioner-oriented data in the world of alternative investments. The essay observes that GFIA “has always tried to carry out its own primary research,” from the perspective of practitioners. GFIA is of course aware that there is a lot of academic work in the field, but it isn’t favorably impressed by much of it. Many papers ...

Regulatory

Footnote 13: Barclays Did ‘Change the Number’
The most intriguing revelation in the exchange of briefs between the State of New York and Barclays appears in a humble footnote, where Barclays seems to concede that an employee was pressured to change an internalization number. But it was just the once....

The ongoing exchange of briefs between the New York Attorney General and Barclays in a lawsuit over the HFT sharks in a dark pool throws light on a number of ancillary subjects, including for example the NYAG’s continuing desire (a desire that the incumbent of that office shares with a number of his recent precursors) to expand the scope of the Martin Act. But one of the footnotes in the latest brief from the defendant ...