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 are Atlantic and Gulf coast property owners building back bigger after hurricanes?

 

Why are Atlantic and Gulf coast property owners building back bigger after hurricanes?

Surf threatens beach houses on Dauphin Island, Alabama, September 4, 2011 during Tropical Storm Lee. AP Photo/Dave Martin

Courtesy of Eli Lazarus, University of Southampton and Evan B. Goldstein, University of North Carolina – Greensboro

U.S. coastal counties are densely populated and extensivel...



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Zero Hedge

Russian And South Korean Fighter Jets Face Off In "Mid-Air Confrontation"

Courtesy of ZeroHedge. View original post here.

For the first time since the fall of the Soviet Union, Russian jets flying through South Korean airspace provoked the South Korean military into a "midair confrontation" that involved firing hundreds of warning shots. All told, South Korean jets fired 360 machine-gun rounds and at least 20 flares, Bloomberg reports.

Three Russian military planes (two Tu-95 bombers and one A-50 airborne early warning and control aircraf...



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Insider Scoop

The Daily Biotech Pulse: Acadia Schizophrenia Drug Fails, Viveve Plummets, Eisai Gets Breakthrough Therapy Designation

Courtesy of Benzinga.

Here's a roundup of top developments in the biotech space over the last 24 hours.

Scaling The Peaks

(Biotech stocks hitting 52-week highs on July 22)

  • Acasti Pharma Inc (NASDAQ: ACST)
  • Apellis Pharmaceuticals Inc (NASDAQ: APLS)
  • Arcturus...


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Kimble Charting Solutions

Is Crude Oil Sending a Bearish Message to the Stock Market?

Courtesy of Chris Kimble.

Crude Oil (NYSEARCA: USO) and the S&P 500 Index (INDEXSP: .INX) have peaked and bottomed together several times in the past 9 months. See points (1) and (2) on the chart above.

In summary, the correlation between Oil and the stock market has been quite interesting and demands investors attention.

Crude Oil has been creating lower highs of late and is breaking price support at (3).

If the correlation remains the same, Crude Oil may very well be sending a bearish message to stocks.

Tricky spot for active investors – careful here.

...

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Chart School

RTT Plus Chart Book (Sneak Peak)

Courtesy of Read the Ticker.

The magic of support and resistance channel lines and how they direct price. Here are some chart disclosed to members via the RTT Plus service. All charts are a few weeks old. 


XAU bound by parallel channel lines.


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Newmont Mining support from Gann Angles.



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US Dollar index (DXY) dominate cycle ...

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Digital Currencies

Cryptos Suddenly Panic-Bid, Bitcoin Back Above $10k

Courtesy of ZeroHedge. View original post here.

Following further selling pressure overnight, someone (or more than one) has decided to buy-the-dip in cryptos this morning, sending Bitcoin (and most of the altcoins) soaring...

A sea of green...

Source: Coin360

Bitcoin surged back above $10,000...

Ethereum bounced off suppo...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

Reminder: We're is available to chat with Members, comments are found below each post.

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

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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