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Paper: A Simple Model of Bubbles and Crashes

This paper generates bubbles and crashes in a simple linear asset pricing model with adaptive learning. The existence of recurrent bubbles in a model with adaptive learning has been an open question in macroeconomics. Our central insight is that in an environment in which traders are risk averse and boundedly rational, in the sense that they know the reduced form of the actual law of motion governing prices but not the parameters, then they must forecast both the conditional mean and the conditional variance of stock returns.
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8 March, 2008| Economy | Comments (0) @ 23:13

Ambac (ABK) Insiders Make Big Share Purchases, Nice Return

At the end of the week, Ambac (NYSE: ABK) raised $1.5 billion and was able to keep it “Aaa” rating, essential for the company and the bonds it insures. The capital may have solved some of Ambac’s short term problems, but the number of shares sold to bring in the money caused huge dilution for existing shareholders. According to MarketWatch “The bond insurer had to sell more than 180 million new shares to raise what it needed to satisfy the rating agencies, almost tripling the total outstanding.” Company insiders made relatively large investments on their own, a sign that they…
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8 March, 2008| Economy | Comments (0) @ 22:37

As Boeing (NYSE: BA) And Airbus Battle, China Walks In A Side Door

Boeing (NYSE: BA) and Airbus go toe to tor for almost very major commercial airline contract in the world. They haul each other into court over international trade practice questions. For pure blood sport, the competition can hardly be matched. Over the course of the last week, the battle between the two companies moved up a notch as the Air Force gave a $35 billion tanker program to Northrop Grumman (NYSE: NOC) and EADS, the parent of Airbus. Members of Congress may try to keep the deal with Boeing and the issue should be messy for several months. While Boeing…
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8 March, 2008| Economy | Comments (0) @ 22:18

Review of LIC Health Plus - It’s reasonably healthy

By Vipin Agnihotri Life Insurance Corporation, with its big data bank has come up with a health related unit linked policy, Health Plus, that gives you number of advantages. Even better, it is reasonably priced. It is worth mentioning in this regard that Health Plus offers a lump sum payment in case if the policyholder has to undergo surgery for critical diseases. Furthermore, the sum assured is capped at Rs 5 lakh. …
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8 March, 2008| Economy | Comments (0) @ 22:16

Stock Market Technical Analysis Video

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8 March, 2008| Economy | Comments (0) admin @ 22:11

Delphi’s Troubles Prick GM (GM) Balance Sheet

GM (NYSE: GM) would rather not put money into its former parts operations which is now a separate company and in Chapter 11. Because of tight credit markets, the large auto company has agreed to offer up $2.8 billion in loans as part of a $6.1 billion package to get Delphi out of bankruptcy. Some of the other investors in Delphi, led by Appaloosa Management, do not want GM to make the investment unless they can approve the terms. According to Reuters “Jack Butler, a lawyer for Delphi, told U.S. Bankruptcy Judge Robert Drain that there is nothing in the…
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8 March, 2008| Economy | Comments (0) @ 22:02

Why the Fed’s Interventions Aren’t Working

If you’re a bank and you need to shore up your capital base, you have the option of raising new equity, by selling shares to the public or to your friendly local sovereign wealth fund. There are other options, too. One is to raise what’s known as "tier 2" capital by issuing subordinated debt which has such a long maturity and is junior enough to all other debt that the bank regulators consider it to be tantamount to equity. But if you issue short-maturity, senior debt - that can’t be considered equity. Or can it?
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8 March, 2008| Economy | Comments (0) @ 21:52

This week on Stockhouse March 3 – 7

Another unstable week had the Dow and the TSX down most of the week on continuing credit concerns and a darker U.S. economic outlook. Despite closing slightly higher Wednesday, stocks on both sides of the border couldn’t recover from last week’s fall as the Dow spent most of the week down on a weak construction sector, further credit market concerns, and lowered consumer confidence. Trouble at the banks and worries about the U.S. economy kept the TSX on a sharp decline through the week.
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8 March, 2008| Economy | Comments (0) @ 21:45

China Watch Mail Bag: One for the Bears

addslashes(China Watch Mail Bag: One for the Bears

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8 March, 2008| Economy | Comments (0) admin @ 19:27

Saturday Reading on Credit Risk

Three great, interlocking reads on the changing role of the Fed as lender of last resort: What’s Ben doing? (Krugman) Fed repurchase agreement and the Fed as pawnbroker (Waldman) How the Fed is conducting monetary policy on the asset side of the balance sheet (H…
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8 March, 2008| Economy | Comments (0) @ 18:59

U.S. Economic Preview: March 10-14

Little doubt remains that a recession is underway….
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8 March, 2008| Economy | Comments (0) @ 18:00

U.S. Chartbook: Rewinding the Economy

Financial institutions are retrenching. Will they speed or slow the recovery?…
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8 March, 2008| Economy | Comments (0) @ 17:30

Extra Credit, Weekend Edition

WaMu rewrites execs’ bonus plan to dodge subprime damage
Remember the Alamo: The Epicurean Dealmaker on Carlyle Capital.
Download Whitney Tilson’s slide show "Why We Are Still in the Early Innings of the Bursting of the Housing and Credit Bubbles".R…
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8 March, 2008| Economy | Comments (0) @ 16:53

Google (GOOG) At $350?

Fred Hickey, the editor of HIgh Tech Strategist, is saying Google (NASDAQ: GOOG) will have a very large earnings miss this quarter followed by “more disappointments to come,” according to Barron’s. What happens then? The fall-out from weaker earnings is likely to lower P/E multiple, dropping from 25 to, perhars, 20. At that level, Google could fall below $350, and it could happen fast. Google may have ended its run as Wall St.’s darling. Douglas A. McIntyre
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8 March, 2008| Economy | Comments (0) @ 16:49

The Real Story Wrap, Mar. 6

addslashes(The Real Story Wrap, Mar. 6

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8 March, 2008| Economy | Comments (0) admin @ 15:52

3 Stocks I Saw On TV

addslashes(3 Stocks I Saw On TV

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8 March, 2008| Economy | Comments (0) admin @ 15:52

$325 Billion “Systemic Margin Call” for Banks

Via Reuters:
Wall Street banks are facing a “systemic margin call” that may deplete banks of $325 billion of capital due to deteriorating subprime U.S. mortgages, JPMorgan Chase & Co , said in a report.
JPMorgan, which sent a default notice to Thornburg Mortgage Inc. after the lender missed a $28 million margin call, said more default notices and margin calls were likely. The Carlyle Group’s mortgage fund also failed to meet $37 million in margin calls this week.
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8 March, 2008| Economy | Comments (0) @ 15:15

Blackstone Earnings & Private Equity Outlook (BX, PSP)

Shares of The Blackstone Group, L.P. (NYSE: BX) have seen their share of pain since coming public in 2007. The private equity giant will report earnings Monday, and this may further set the tone for at least the public anticipation of private equity firms for the months ahead. Much of that should already be known as the days of the giant club-deals are dead and as many private equity firms have had to focus on smaller deals that are in-line with more historic trends of deals being in the hundreds-of-millions of dollars or in the few-Billion dollar range. Much of…
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8 March, 2008| Economy | Comments (0) @ 15:09

Banks May Face $325 Billion Margin Call

The Fed may need to get ready to put another $300 billion into the banking system, trading cash for paper that is clearly not worth a hundred cents on the dollar. According to a report from Morgan Stanley (NYSE: MS) “A systemic credit crunch is underway, driven primarily by bank writedowns for subprime mortgages,” according to the report co-authored by analyst Christopher Flanagan. “We would characterize this situation as a systemic margin call,” according to Reuters. The report is based on subprime-related home prices falling a total of 30%. The private markets do not have the capital to solve a…
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8 March, 2008| Economy | Comments (0) @ 15:02

Time to Boot Alcoa From the Dow

addslashes(Time to Boot Alcoa From the Dow

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8 March, 2008| Economy | Comments (0) admin @ 15:01

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