The 2005 IgNobel Prizes

The winners of the 2005 IgNobel Prizes have been announced. My personal favorites are:

MEDICINE: Gregg A. Miller of Oak Grove, Missouri, for inventing Neuticles -- artificial replacement testicles for dogs, which are available in three sizes, and three degrees of firmness.

PEACE: Claire Rind and Peter Simmons of Newcastle University, in the U.K., for electrically monitoring the activity of a brain cell in a locust while that locust was watching selected highlights from the movie "Star Wars."

ECONOMICS: Gauri Nanda of the Massachusetts Institute of Technology, for inventing an alarm clock that runs away and hides, repeatedly, thus ensuring that people DO get out of bed, and thus theoretically adding many productive hours to the workday.

Click here for the link. Hat tip to David Tufte at VoluntaryXchange for the link.

And just to show that economics applies to everything, David has also written a piece on the economics of neuticles. It's all about asymmetric information (or, inquiring minds want to know).

Hissssssss (from Marginal Revolution)

This piece from Marginal Revolution gives some indicators that the housing bubble may be slowing:

Lots of evidence that the housing market is slowing; prices are not rising as quickly as in the past, inventory is building and perhaps most tellingly insiders are selling shares of home building firms at record pace.

Click here for the whole thing.

Insider trading is a good example of a "costly signal" sent by managers. However, while trading patterns of insiders provide information, a lot of research has shown that insider sales are typically much less informative than insider purchases. This is because insider purchases result from an insider "putting their money where their mouth is". In contrast, insider sales can occur for either information-based or non-information based reasons (it could be just that the manager's son just wrapped the Porshe around a tree, and the manager needs money). This is further complicated by the general trend that insider sales have increased in recent years due to the increasingly common use of equity and option-based compensation.

As an aside, I'd be interest in seeing if insider purchases at home building firms have also tailed off. If so, that would add more credence to the insider signal.

Truth Laid Bear Gives Me the Bird!

Tuesdays are my long teaching day - I leave the house at 8 a.m., teach my first class at 9:30 a.m., and don't get back home until 9:30 at night. Hey, it's still better than the everyday hours for some folks, but I typically don't look forward to this day of the week.

At least I started with some good news - I've evolved to a big flappy bird. Now if I can only stay there.

Update: since the original posting on the 4th, my number of links on TTLB has dropped from 27 to 12, but my rank has jumped from the mid 7000's to 4736 (an "adorable rodent"). I have no idea why. Anyone have any clues?

And yes, I've probably heard the rat jokes before.

This Week's Carnival Of The Capitalists

This week's COTC is up at Drakeview. It's the 104th COTC, and there are lots of good pieces this week. As usual, here are my picks.

There's been a lot of talk about inflation lately. The Watchful Investor, Jim Waddell answers investors concerns in What is inflation?. His post covers a lot of other ground, too, like money, gold standard, democracy, price and Subarus.

Warren Meyer at Coyote Blog discusses governments and markets in Water: The Only Market the Government Screws Up Worse than Oil.

Joseph Weisenthal at The Stalwart, examines recent IPO activity in Metcalfe's Law, Reed's Law Revisited; Question New Valuation Models.

We just discussed EVA (Economic Value Added) in my Advanced Corporate Finance class. Here's an application -- Frank Scavo suggests that CIOs start Using Economic Value Added (EVA) to justify IT investments.

Moneywise covers investing at The Real Returns with some yield information for various investment classes in Reverse Valuations of Stocks and Bonds.

David Foster of Photon Courier has a nice piece on the relations between bond prices and interest rates in The Bare Bond Basics.

Brian at Financial Reference talks about Superfund, a new hedge fund being marketed to middle income investors in 2 and 20. Maybe it's just me, but I'd be leery of naming an investment after a toxic waste cleanup program...

Phil Town at Rule #1 Blog: Phil Town on Investing writes Why Speculation is a Bad Idea. I think the title says enough. Read it.

Sandeep Srinivasa at Datum writes on prediction markets in Prediction markets: real life psychohistory?

Finally, since a week doesn't go by at Financial Rounds without taking a shot at Sarbanes-Oxley, we have Barbara of Trying to Catch Up. She writes Sarbanes-Oxley Sucks (Really),. It's all about the bureaucracy.

Like I said, there are a lot this week. These are only a smattering of the pieces, but they're the ones that caught my eye.

Oh Boy! $9 1/2 Million!

Thought this was humorous. What makes it funny is that it came to my "unknownprofessor@hotmail.com" address. I added bold type for emphasis.

ATTN:FROM THE DESK OF:ALEXANDER OLAWALE
Alexander Olawale & Associates
No. 54 Broad Street, Lagos.

Hello,

I am Barrister Alex Olawale a solicitor at law.The personal attorney to a late foriegn expatriate who hails from your country and shares the same last name with you.This is an urgent and very confidential business proposition.

On the 6th of May, 2002 it was reported to us that my Client, his wife and their only daughter were involved in a Local Plane Crash at Kano state,enroute Abuja (The Capital City) all occupants in the Plane lost their lives,unfortunately on this same flight were other dignitaries like the Sports Minister and a host of others.

Since then I have made several enquiries to your embassy to locate any of my clients extended relatives this has also proved unsuccessful.After these several unsuccessful attempts, I decided to track his last name over the Internet, to locate any member of his family hence I contacted you.

I contacted you to assist in claiming this fund from the finance house where he deposited it before his untimely death.

The finance company where t he deceased had an account valued at about USD$9.5million dollars has issued me a notice to provide the next of kin or have the account confisicated within the next ten official working days.

Since I have been unsuccesfull in locating the relatives for over 3years now I seek your consent to present you as the next of kin of the deceased since you have the same last name so that the proceeds of this account valued at USD$9.5 million dollars can be paid to you as the next of kin.

All I need is your full maximum suport and cooperation to enable us achieve this transaction within 10 working days and I guarantee that this will be executed under a legitimate arrangement that will protect
you from any breach of the law.
If you are interested in this transaction, kindly furnish me with your full name, address, private telephone and fax numbers to enable us commence immediately.

Best regards,
Barrister Alexander Olawale.

Does that mean that there was someone with the last name "Professor"?

Since I'm making fun of it, I guess it means I won't get my money. However, I'm willing to sell my right to the money to any interested party for a reasonable offer.

New Additions to the Blogroll

It's been a while, so I finally added some new links to the blogroll:

The Analyst's Accounting Observer is run by a CPA and financial analyst named Jack Ciesielski. In his own words, "The Analyst's Accounting Observer is a research service published by R.G. Associates, Inc., that, simply put, provides "remedial accounting lessons" for institutional investors who should know better". It's not updated all that frequently, but when it is, it's good.

Tick Marks is the blog of Dan Meyer, an Accounting Prof in Tennessee. It's mostly on financial accounting and taxation, but occasionally touches on personal finance. I'm a big supporter of Academic blogs, and this one looks pretty good.

The Real Returns is an investment oriented blog. It spends a lot of time on mutual funds, but also touches on real estate and a fairly wide variety of other investment vehicles. Unlike a lot of other investment oriented blogs, he's not pushing products or a trading system.

The Financial Page is a newer blog (it started in mid-August). It describes itself as being mostly about indexing, primarily with Vanguard Funds. However, it also covers a lot of other investing related topics. As a Finance Professor who believes in efficient markets, I'm a big fan of index fund investing, so give it a read.

All four blogs seem like they're even-handed, informative, and don't have an axe to grind or a product to push. Give them a try and let me know what you think.

f you're using an RSS reader, add these to your list. They're worth it. If not, let me recommend Bloglines. I've been using it for a while, and it's easy and usable from any computer with an internet connection without needing any aditional software.

More On Frist and Insider Trading

Here's some interesting news from the Saturday Wall Street Journal Online:

Senate Majority Leader Bill Frist began exploring ways to sell his shares in HCA Inc. on April 29, more than two months before a July 13 earnings warning caused the stock to fall, according to documents reviewed by The Wall Street Journal.

The timing of his communications about the sales will likely be a key defense for Mr. Frist, who is under investigation for potential insider trading by the Securities and Exchange Commission and the Department of Justice. Mr. Frist's shares weren't sold until July 1 and July 8, just several days before HCA's warning caused the stock to fall 9%. But the timing could help Mr. Frist, since it suggests he started the process long before HCA knew of its financial problems.

Click here for the whole thing (note: subscription required).

While a violation of insider trading laws requires a number of criteria to be met (and I'm sure Steve Bainbridge could go on at length about this), at the minimum it requires that an insider initiate the trades due to his possession of "material non-public information". This is one of the reasons that insider trade volume goes up following earnings announcements and management forecasts. If an insider trades after shortly after an information event like this, it's less likely that they have a huge information advantage.

If Frist initiated started the trading process this far in advance, it's less likely that it was due to information about earnings shortfalls (not impossible, just less likely). However, the article says more:

Investigators are looking at whether Mr. Frist received any inside information between the time he initiated the sale and when it was completed. If Mr. Frist had received inside information about problems, he was obligated to halt any pending sales, even if he had begun the process to sell months earlier, these people said. The scrutiny stems in part from the fact that six HCA insiders sold shares in early June, just weeks before the earnings warning. The SEC is also investigating those sales.

HCA insiders were selling shares throughout the first six months of 2005, including large sales in April, before Mr. Frist registered his interest in selling.

I didn't think this was the case. Stay tuned to Bainbridge's website - I'm sure he'll be commenting on this (or at least I hope so).

Update: welcome to all the visitors from Angry Bear. Come on in and browse a while.