Posts Tagged ‘conflicts of interest’

Charles Ferguson: MIT Brunel Lecture on Economics and the Financial Crisis

Courtesy of Jesse’s Americain Cafe

See Charles Ferguson’s documentary Inside Job when you have the opportunity.  I understand that the DVD may be released sometime around March 2011.

Ferguson starts his presentation at about 7 minutes in.

I was glad to hear him admit that he was wrong, honestly wrong, about his assessment of Japan Inc. and the Japan asset bubble. He also goes on to make a rather pointed observation about economics which needs to be heard dispassionately by related institutions in particular, whose own credibility and integrity is at risk. 

"It is one thing to be honestly correct or not correct about something; it’s another thing for an academic discipline to have a systemic corruption problem. And that’s what I will be talking about in part later, because the economics discipline in my view does have that problem."

In Charles’ defense he is only saying publicly what is being said privately amongst academic scientists and mathematicians about the inordinate effect of power and money on the integrity of economic opinions and research.

As you may recall Alan Greenspan was caught up in the Keating Five S&L scandal. The point of this is that the ‘empirical objectivity’ of the Federal Reserve in setting policy is a myth as egregious as the trickle down theory and the efficient markets hypothesis. 

At the heart of the current financial crisis is the weakening and even corruption of a number of institutions, both public and private. And their reform and restoration to a fully functional state remains to be accomplished. Reforms risks disclosure, and coverups protect the status quoagainst such the effects of such a disclosure. This is why reform from within is problematic.

Yes, there is always the need for some discretion and privacy in executive decisions. But it must be limited and exceptional, subject to overview by a more relatively impartial third party, always. 

The Fed, and particularly the New York Fed, is a largely private institution making decisions not only about its own industry, but is taking actions with public funds that approach and sometimes become de facto public policy decisions with far reaching effects, and is doing so largely in secret. It is therefore highly vulnerable to insider dealing and conflicts of interest. Excessive secrecy is inimical to a free society, for wherever secrecy and power exist, corruption quickly follows. …
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Article Shows That Sell Side Analysts Still Suck

Article Shows That Sell Side Analysts Still Suck

conflict of interestCourtesy of Eric J. Fox at Stock Market Prognosticator

An article entitled "Behavioural Bias and Conflicts of Interest in Analyst Stock Recommendations" published in the Journal of Business Finance & Accounting examines these issues:

"Whether sell-side analysts are prone to behavioural errors when making stock recommendations as well as the impact of investment banking relationships on their judgments. In particular, we analyse their report narratives for evidence of cognitive bias."

The conclusions:

"New buy recommendations on average have no investment value."

I think everyone already knew that, although I would add that in the short term they can drive the price of a stock up.

"Whereas new sell recommendations do, and take time to be assimilated by the market."

Again, fairly logical since sell side sell recommendations are fairly rare, they are likely to be more noticed.

"We also show that new buy recommendations are distinguished from new sells both by the level of analyst optimism and representativeness bias as well as with increased conflicts of interest."

Just as a review, representativeness bias refers to "A cognitive strategy for quickly estimating the probability that a given instance is a member of a particular category. We use it to judge the likelihood that something or someone belongs to a specific category."

"Successful new buy recommendations are characterised by lower prior returns, value stock status, smaller firms and weaker investment banking relationships."

Small Cap Value stocks with little or no analyst coverage rule.

So what does this all prove? That sell side analysts are humans just like the rest of us and suffer from deviant investment behavior despite what is arguably a higher formal education.

[Source: Mokoaleli-Mokoteli, Thabang, Taffler, Richard J. and Agarwal, Vineet, Behavioural Bias and Conflicts of Interest in Analyst Stock Recommendations. Journal of Business Finance & Accounting, Vol. 36, Nos. 3-4, pp. 384-418, April/May 2009.]

 

 


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Phil's Favorites

Why stock splits disappeared from our lives

 

Why stock splits disappeared from our lives

Courtesy of 

Apple is splitting its stock 4-for-1 in two weeks. What does it mean for you? What might it mean for the broader market? And why have stock split announcements become so scarce in recent years? Did something change?

The peak of the stock split era was from 1995 through 2000. Investors were buying stocks specifically because they were about to split. It was one of the dopiest aspects of an ...



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Zero Hedge

39% Of Younger Millennials Return Home Amid Crushing Recession 

Courtesy of ZeroHedge View original post here.

The virus-induced recession has abruptly upended younger millennials (ages 24 to 29) from living on their own, have now moved back home, according to a new survey.

The new survey, commissioned by TD Ameritrade (seen by CNBC), found that out of the 2,000 young millennials surveyed, about 39% are in the process or have already moved back home because of the c...



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The Technical Traders

Melt-Up Continues While Metals Warn of Risks

Courtesy of Technical Traders

What a week for Metals and the markets, folks. The Transportation Index is up nearly 4% for the week.  The Dow Jones Industrial Average is up over 3% for the week.  Silver is up over 14% and reached a peak near $30 (over 23%).  Gold is up over 2.5% and trading above $2025 right now – with a peak price level near $2090.  If you were not paying attention this week, there were some really big moves taking place.

MELT-UP WITH HIGH RISKS – PAY ATTENTION

Overall, our research team believes the current “melt-up” price action is likely to continue as global investors continue to believe the US Fed will do everything possible to save the...



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Digital Currencies

Raoul Pal: "It May Not Be Worth Owning Any Asset Other Than Bitcoin"

Courtesy of ZeroHedge View original post here.

Authored by Turner Wright via CoinTelegraph.com,

Raoul Pal, CEO and founder of Real Vision, says Bitcoin may soon become his only asset for long-term investments.

image courtesy of CoinTelegraph ...



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ValueWalk

Ubben Helping Investors Steer Away From Activist Investing With Inclusive Capital

By ActivistInsight. Originally published at ValueWalk.

Our profile in this month’s issue of Activist Insight Monthly is with Jeff Ubben, who recently shocked the activist community by taking his environmental and socially-focused Spring Fund outside of ValueAct Capital Partners, the firm he founded two decades ago. Under a new banner – that of Inclusive Capital Partners – he will have plenty of surprises up his sleeve and may face a few himself as he battles to change the way investors think about valuing companies and steer them away from short-term ac...



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Kimble Charting Solutions

Silver Headed Back To $50, Top Of The Cup & Handle Pattern?

Courtesy of Chris Kimble

Could Silver be creating a multi-decade bullish “Cup & Handle” pattern? Possible!

Did a retest of a handle breakout take place in March at (1), where Silver created one of the largest bullish reversals in decades? Possible!

Could Silver be creating a 40-year bullish pattern? Anything is possible! I humbly have to say share this; I’ve been in the business for 40-years and I haven’t seen anything like this.

Silver looks to have double topped back in 2011 at $50, which was the 1980 highs. After double topping, Silver ...



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Biotech/COVID-19

What the huge COVID-19 testing undercount in the US means

 

What the huge COVID-19 testing undercount in the US means

Health care workers use a nasal swab to test a person for COVID-19 in Pembroke Park, Florida. Joe Raedle / Getty Images News

Courtesy of Melissa Hawkins, American University

Researchers from the Centers for Disease Control and Prevention and other institutions recently published a study which estimated that the true number of people infected by COVID-19 could be six to 24 times high...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.



Date Found: Sunday, 29 March 2020, 07:00:37 PM

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Comment: Silver Shorts Are In a Bind | Ted Butler youtu.be/qQc0AoJp-Q8



Date Found: Monday, 30 March 2020, 05:21:45 PM

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Comment: 5 Questions From You for Luke Gromen youtu.be/nVZD_fuxbQE


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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

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Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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