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Showing posts with the label banking

George Sugihara On Early Warning Signs

Earlier this month SEED magazine published this very interesting article by George Sugihara, theoretical biologist at Scripps Institution of Oceanography, on how deep mathematical models tie the events of climat change, epileptic seizure, fishery collapses, and risk management surrounding the global financial crisis. Excerpts: [...] Economics is not typically thought of as a global systems problem. Indeed, investment banks are famous for a brand of tunnel vision that focuses risk management at the individual firm level and ignores the difficult and costlier, albeit less frequent, systemic or financial-web problem. Monitoring the ecosystem-like network of firms with interlocking balance sheets is not in the risk manager’s job description. A parallel situation exists in fisheries, where stocks are traditionally managed one species at a time. Alarm over collapsing fish stocks, however, is helping to create the current push for ecosystem-based ocean management. This is a step in the ri

Nassim Taleb on Euro

"EURO IS DOOMED AS A CONCEPT", declares the author of "The Black Swan", Nassim Taleb, at a recent interview with CNBC. Adding that "We had less debt cumulatively [two years ago], and more people employed. Today, we have more risk in the system, and a smaller tax base. [...] Banks balance sheets are just as bad as they were" two years ago when the crisis began and "the quality of the risks hasn't improved." Part I: While discussing the outlook for the global economy with Bob Long (CEO, Conversus Capital) on CNBC, Taleb says, "We have no other solution but to slash debt". Part II: "The balance sheets of banks are just as bad as they were" two years ago when the crisis began and "the quality of the risks hasn't improved," argues Nassim Taleb.

The Financial Crisis: Who Let the Dogs Out

THE DEAL.COM HAS THIS USEFUL illustration explaining at a high-level chain of events leading to the current US financial crisis. The editor chose to describe it as chain-of-fools: [Above: illustration of chain-of-events leading to the US Financial crisis.] The TIME MAGAZINE for this week features "Depression 2.0" through the following front-page across all editions worldwide. As the cover-story, economist Niall Ferguson narrates why it may not happen: [Above: A B&W photo of depression-era Free soup line in the U.S. featuring as the cover page of 13 Oct 2008 issue of the Time mag.] Update: Embedded this interesting video on the (simplified) explanation on "Crisis of Credit". The Crisis of Credit Visualized from Jonathan Jarvis . See also: Related article: Sub-prime Crisis for Dummies . Go here for WIRED.COM version of "economic explanations [of the crisis] even we could understand" targeted towards the techie community.

Lehman Bros Files for Bankruptcy Protection

THE 158 YEARS OLD INVESTMENT BANK FROM THE WALL ST. was finally 'allowed' to go bankrupt by the Federal Govt. By one observation time was against Lehman on two accounts - plenty as well as too short: on one hand, time was too short for them to find a suitable buyer and thus save filing for bankruptcy protection; on the other hand, their stakeholders were considered to have sufficient time to make appropriate arrangements and were thus considered fit to fend for themselves (and go bankrupt... Unlike in the case of Bear Stearns which was prevented from going bankrupt by being 'purchased' by JP Morgan and thus its stakeholders were rather spared). It is not perhaps how large Lehman is and the impact it would generate; the real point to ponder is - is it the first is line? and, who would be next? Also, is the market at large really ready for a new phase of consolidation? What is with the rumors of BofA and Merrill Lynch merger? And while there is enough flux in motion,

Five Lessons from Sub-prime Crisis

PHILIP J. PURCELL, FORMER CEO AND CHAIRMAN OF MORGAN STANLEY, proposed the big five lessons for bankers coming out of the current Sub-prime crisis of the US. For the record, during Mr. Purcell's tenure as CEO at Morgan Stanley for eight years the firm attained following milestones at the close of 2004: #1 in global equity trading #1 in global equity underwriting in 2004 for first time since 1982 #1 global IPO market share in 2004 #2 in global debt underwriting in 2004, with steady gains since late '90s #2 in completed global M&A in 2004 Mr. Purcell resigned from Morgan Stanley in 2005, and has since founded a private equity firm called Continental Investors LLC. Following are the 'lessons' that he recently discussed through an article in FT: i) profits matter more than revenues ( sales ) ii) compensation should be based on profits, margins and return on equity over time, not current year revenues iii) leverage works not just on the upside but on the downside

Sub-prime Crisis for Dummies

THE CLOUD OF SUB-PRIME CRISIS JUST GOT HEAVIER, DARKER AND LARGER. The New York Times reported that the Federal Government may assume direct control of the two of the biggest mortgage-finance companies in the US to bail them out: Fannie Mae and Freddie Mac. These two have nearly 45% of mortgage market share between them, and could potentially tank about USD 5 trillion if they go down. On the other hand, the bail-out of this magnitude might blow away credibility of USD, and imperilling the Fed budget. [Left: Nose-dive - from USD 70 per share last year to USD 9 per share. source:] There is a sense of politics being involved since the NYT report of "nationalization" came out earlier this week. This further took a large chip off the share prices of both and the decline continued for the whole week in spite of confident building reports from the promoters. Fannie Mae's stock, for one, has lost most of its value, swooning from peaks around $70 in August 2007 to

Ken Harvey, the "Richest" CIO

KENNETH M. HARVEY AT HSBC HAS HAD A LASTING impression of an IT leader for me. And I believe in the capacity of a corporate executive, 'richness' (see: Money ) has more to do with quality of role, thought leadership and budget at disposal. In all of these terms, one might wager, Ken Harvey indeed must be a very rich man, for him being the group CIO of the world’s largest organisation , and then having a whopping USD 5bn in terms of his annual spending budget. It always felt great to conclude my induction sessions for the newly joined Business Analysts in my team by saying, "While certain organizations (vendors) aspire to make millions every year, Ken plans to spend in billions..." It rather gave everyone, me included, a sense if you like, of having a bundle or two of "cash" from Ken's kitty into our pockets. I specifically recall Mr. Harvey’s discussion with the Gartner members where one of the panellists posed him with the question of the challe

"Fred the Shred" under the weather?

THEY CALL HIM "FRED THE SHRED...". If you count "few good men" who took the lead in the "rationalisation" of workforce in the conservative European banking and Financial services, Fred has to be in the front row. Sir Frederick Anderson Goodwin, remained in the news in Europe, mainly Britain, for his often visionary yet unorthodox methods of running Britain's second largest Banking group. After he assumed control, the RBS groups, perhaps for the first time, saw a rather American-styled cost-cutting, or Shredding as the Britons prefer to call it. Managing nearly 1000 people worldwide at the age of 32, the acumen more than the aggression made Fred the CEO of the Clydesdale Bank at the age of 36. He has been quoted as famously saying, "I have no time for cynics, spectators or dead wood". And as we speak, being with the RBS group, he is the longest serving CEO in the FTSE-100 index. (That precisely makes me wonder if the pool underneath is in