Our financial system is crumbling this week.

[Radbird]

From an old college buddy who married into money and is now a muli-millionaire through no fault of his own...

Friends & Family,
Happy 2012 , this song will help start 2012 for you all . May this year bring the "change " we desire.

http://capoliticalnews.com/2011/09/21/v ... m-hawkins/

[longhornbaseball]

European investors are now willing to pay Germany more than a million euros to ensure they receive a million euros 6 months from now.

http://ftalphaville.ft.com/blog/2012/01 ... e-of-buba/

Germany appears to have had a successful auction of six-month debt on Monday.

That said, there is a caveat. The auction for €3.9bn worth of paper achieved a bid-to-cover ratio of 1.8 versus a previous bid-to-cover of 3.8. The average yield was a negative 0.0122 per cent — a bit of an auction first.

Interestingly, it comes to FT Alphaville’s attention (H/T Gustavo Baratta) that this may be related to the fact that the Bundesbank has made a small change to how German bund auctions are conducted. According to the central bank, as of Monday it finally became possible to submit bids in price terms rather than yield, opening the door to negative yield bidding.

And it seems traders did not waste time in making that possibility a reality.

[heyzeus]

Employment rising for 6 months, unemployment rate drops to 8.5%

[AdmiralKird]

European investors are now willing to pay Germany more than a million euros to ensure they receive a million euros 6 months from now.

http://ftalphaville.ft.com/blog/2012/01 ... e-of-buba/

Germany appears to have had a successful auction of six-month debt on Monday.

That said, there is a caveat. The auction for €3.9bn worth of paper achieved a bid-to-cover ratio of 1.8 versus a previous bid-to-cover of 3.8. The average yield was a negative 0.0122 per cent — a bit of an auction first.

Interestingly, it comes to FT Alphaville’s attention (H/T Gustavo Baratta) that this may be related to the fact that the Bundesbank has made a small change to how German bund auctions are conducted. According to the central bank, as of Monday it finally became possible to submit bids in price terms rather than yield, opening the door to negative yield bidding.

And it seems traders did not waste time in making that possibility a reality.

The WSJ has a more readable version:
http://online.wsj.com/article/SB1000142 ... 96748.html

I guess when you have hundreds of millions of dollars to trade investors can't just withdraw it from the bank and place it under their mattress, so you have to keep it somewhere 'safe.' I guess you could build a reinforced bunker and hide it in there and hire security guards, but I guess that's more risky and costly than just investing in a negative yield.

[Hungary Jack]

I have never seen a negative bond yield in my lifetime.

[longhornbaseball]

I have never seen a negative bond yield in my lifetime.

You've also never seen a monetary union as warped as the EMU. Still, wouldn't France or Belgium or Finland or whoever be a much better buy for such a short maturity issue. It's not like you have to worry about capital losses over 6 months. I assume most of the buyers will be holding until maturity. There's a lot of understated risk in German treasuries right now. There's no way an instrument with credit risk should be trading at parity with legitimately risk free securities (US and UK bonds). I suppose Euro holders have to buy something, though.

[AdmiralKird]

I have never seen a negative bond yield in my lifetime.

You've also never seen a monetary union as warped as the EMU. Still, wouldn't France or Belgium or Finland or whoever be a much better buy for such a short maturity issue. It's not like you have to worry about capital losses over 6 months. I assume most of the buyers will be holding until maturity. There's a lot of understated risk in German treasuries right now. There's no way an instrument with credit risk should be trading at parity with legitimately risk free securities (US and UK bonds). I suppose Euro holders have to buy something, though.

Efficient Markets Hypothesis FTW. Maybe the contractual agreements with their clients necessitate the investment firms invest the 'risk free' portions of their clients' portfolio within Germany.

[longhornbaseball]

Efficient Markets Hypothesis FTW.

DAMN YOU MICHAEL ALDERSON!!! YOU LIED TO ME!!!!!

[AdmiralKird]

Efficient Markets Hypothesis FTW.

DAMN YOU MICHAEL ALDERSON!!! YOU LIED TO ME!!!!!

LOL. That would be a first. He might have also told you a story about a guy who did poorly in the class, named Andrew B., came up to him and talked about it with him, then put his mind to it and got an A for the semester, and later became a 2nd Lt. in the Army.

I was friends from German class with the guy and hung out with him many times. I asked him about that story the day of and he said it was complete and total BS.

Another Alderson story:

Dr. Betker, who I knew pretty well from APM, wasn't able to be at my graduation to hand out diplomas, so Alderson got appointed the position. I saw him at the gym a couple hours before graduation but didn't say hi to him that day. Anyway I go up to get my diploma and he's all happy and asked "You have a good workout today?!?" and I was like "Yup, sure did!" Meanwhile my dad is loudly singling the Halleluiah Chorus from the balcony and the entire auditorium is laughing, way more so than any jokes during the speeches.

Back to the EMH though, and I'm not talking about this guy:

[SHOW]

You would think if the markets were truly efficient at the very basics of investing there would be no way for a bubble to take place. Investors should be always recognize unrealistic returns of the dot-com bubble or the housing bubble and short them enough to keep the market always at equilibrium.

Also for one job interview for a financial planning firm I recall saying something about how there was still some debate if value stocks were more risky than growth stocks, and his response was "well we believe that they are, and that the data is pretty conclusive." And I was just thinking, well then why the heck did value stocks weather the financial meltdown better, significantly less loses, than growth stocks across the board. If they were more risky wouldn't they be hit significantly harder? The data is anything but conclusive...

I think its psychologically naive to believe markets are completely, almost without fault, efficient when they are run by emotional, non-omniscient human beings with limited capital resources per entity. I'M LOOKING AT YOU BANSAL. I mean, the logic exhibited by some successful financial professors and business people is to me more reminiscent of a jury member of OJ's murder trial than an educated individual. And wouldn't an outstanding belief that the markets are efficient encourage people to look less for exploitable holes causing increased inefficiency? Even if you believe markets are totally efficient you should teach that they aren't to keep the markets efficient.

I just don't get it.

Unless they're teaching that its efficient to preserve exploitable opportunities for themselves...

[Freed Roger]

Seems like half of Perryville has knocked on our door trying sell us firewood this fall/winter, with amped up persistence. All the storms last year may play a role, not just economy. We weren't going to get any, since we don't use the indoor fireplace much anymore, and I can usually forage enough sticks and scraps for the outside pit. But then they dropped it down to $40 for the load we normally pay $80. It was like a hillbilly groupon.

Misanthrope.