JLP at All Things Financial continues his series on organizing your finances and your files. This one (part 5 in the series) covers Personal Documentation and Life Insurance
Here are the previous installments in the series:
Part I
Part II
Part III
PART IV
Short-Selling Real Estate (via The Big picture)
It's been argued that the inability to short-sell residential real estate could be one of the factors that differentiate real estate bubbles from stock market bubbles. Not any more. The Chicago Mercantile Exchange (CME) already has a letter of intent to introduce derivatives contracts based on housing price indices (they're being developed in conjunction with Macro Securities LLC, a firm associated with Robert Shiller).
However, Hedgestreet.com has already started trading contracts in this market, called "hedgelets". These contracts allow individuals to trade contracts based on housing indices in selected major metropolitan markets (at present, Chicago, New York, Los Angeles, Miami, San Diego, and San Francisco).
The two contracts are based on different indices. Other than that, I'm not sure what the differences are. Watching the development of new ways of spreading, shifting, and pricing risk management tools is always interesting, particularly when there are multiple instruments and vendors in play. Competition is an extremely important part of the process of financial innovation.
Hat tip to The Big Picture for the link.
However, Hedgestreet.com has already started trading contracts in this market, called "hedgelets". These contracts allow individuals to trade contracts based on housing indices in selected major metropolitan markets (at present, Chicago, New York, Los Angeles, Miami, San Diego, and San Francisco).
The two contracts are based on different indices. Other than that, I'm not sure what the differences are. Watching the development of new ways of spreading, shifting, and pricing risk management tools is always interesting, particularly when there are multiple instruments and vendors in play. Competition is an extremely important part of the process of financial innovation.
Hat tip to The Big Picture for the link.
Cox Nominated For Chairman of the SEC
This just in (via the Wall Street Journal Online):
WASHINGTON -- Acting quickly, President Bush named conservative Rep. Christopher Cox to lead the Securities and Exchange Commission Thursday. Mr. Cox would succeed William Donaldson, who Wednesday announced he is stepping down after 28 monthsClick here for the whole article (subscription required).
...Mr. Cox, 52, a member of the House Republican leadership, has a wide-ranging background, from foreign policy and economic issues to homeland security. He has represented California in Congress for 16 years. Before that, he was a corporate finance lawyer in private practice and served as a senior counsel in the Reagan White House.
...The SEC position is subject to Senate confirmation, a process that left Mr. Cox bruised once before. He was in line for an appointment to the U.S. Court of Appeals in 2001 when Democrats suddenly gained control of the Senate. Facing opposition from at least one of his home state's two Democratic senators, Mr. Cox realized he faced a difficult fight to win confirmation to the bench without a guarantee of success. He withdrew his name. The holder of a business and a law degree, he has voted for legislation to make it easier for companies to defend against securities fraud lawsuits.
Oxytocin and Trust (via Econolog)
Arnold Kling at Econolog points us to a very interesting experiment highlighted at Nature.com it was sparked by previous research (cited below) that indicates that receiving a "trust signal" increases the body's production of oxytocin):
I Googled "oxytocin and trust", and found out that earlier research found that oxytocin levels in subjects became elevated if they were given a signal that THEY were trusted:The researchers, led by Ernst Fehr of the University of Zurich, investigated whether this effect can be produced simply by getting people to inhale oxytocin rather than stimulating them to produce it. Such chemicals, they explain, can easily enter the brain when sniffed.
In the game, investors were allotted 12 monetary credits, each worth 40 Swiss centimes (32 US cents), and asked to decide how much to give to the trustee. The participants knew that the investment would be quadrupled, and that the trustee could then decide how much, if any, to hand back.
Investors were more willing to part with their cash when they inhaled the potion, Fehr's team reports in Nature1. Of 29 subjects given oxytocin, 13 handed over all of their cash. Only 6 of the 29 subjects given a placebo to sniff invested all 12 of their credits.
This is the first report that endogenous oxytocin in humans is related to social behaviors, which is consistent with a large animal literature. Subjects are put into a social dilemma in which absent communication, cooperative behavior can benefit both parties randomly assigned to a dyad. The dilemma arises because one participant must make a monetary sacrifice to signal the degree of trust in the other before the other's behavioral response is known. We show that receipt of a signal of trust is associated with a higher level of peripheral oxytocin than that in subjects receiving a random monetary transfer of the same average amount. Oxytocin levels were also related to trustworthy behavior (sharing a greater proportion of the monetary gains). We conclude that oxytocin may be part of the human physiology that motivates cooperation.Arnold asks, "What do you think will be the first practical application of this finding". The article referenced above indicates that it might be useful in treating conditions like autism, where social bonds are hard to make (or with economics and finance faculty, for that matter).
I could also see it being used in sales or negotiating settings (or at the singles bar...).
Hey, would I steer you wrong?
Hedge Fund Statistics (from Seeking Alpha)
David Jackson at Seeking Alpha provides some interesting statistics on hedge funds (it's from this recent Barron's article, which is (unfortunately) paid subscription only). They come from the Hennessee Group's annual survey of hedge fund managers. Among the more interesting facts:
It's also interesting to note that turnover on these funds has increased, making hedge funds less tax efficient. How much of an impact this will have for the typical hedge fund holder is not clear: if the investor is an institution or qualified plan, not at all. If not, my guess is that it still won't make too much difference. My guess (totally unbacked by data) is that hedge fund investors are focused on the either the chance of high returns or the low correlations between hedge funds and other asset classes.
- Hedge fund assets were up 27% (year over year), vs 34% in the prior year
- 28% of hedge fund capital was from funds of funds
- 33% of hedge fund managers said they turned over their portfolios between 2 and 5 times , and 25% had a turnover of more than 5x (the "turned over more than 5x" percentage was up from 20% the previous year)
- Most funds still charge a 20% performance fee, but there was a slight increase in management fees (it appears that relatively more funds charged management fees of 1.5% rather than 1%).
It's also interesting to note that turnover on these funds has increased, making hedge funds less tax efficient. How much of an impact this will have for the typical hedge fund holder is not clear: if the investor is an institution or qualified plan, not at all. If not, my guess is that it still won't make too much difference. My guess (totally unbacked by data) is that hedge fund investors are focused on the either the chance of high returns or the low correlations between hedge funds and other asset classes.
Organizing your Finances - Part 3 (From All Things Financial)
JLP at All Things Financial continues his series on organizing your finances and your files. This one lists Death and Estate Related Information you should give to whoever will be handling your affairs.
There are also a couple of previous installments in the series: here and here.
There are also a couple of previous installments in the series: here and here.
Graduation Speech (from Mr. Sun)
After Neal Boortz's The Commencement Speech You Need To Hear, this one by Mr. Sun may be the best one yet:
Click here for the whole thing. Hat tip to Joanne Jacobs for the link.
- Make a list of the things you want to do before you die. Be as open to your heart as you possibly can. Now, throw that ridiculous piece of trash away and get your ass to work. The ball is over, Cinderella:
- Contrary to what you may have heard about business, you should not think outside the box. You should get your green-as-grass self back in the box and don't come out unless it's to bring me some hot coffee and do my work so I can take credit for it. Welcome to the working world, Rookie.
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