Ray Dalio of Bridgewater Associates – one of the biggest hedge funds in the world – explains how the economy works in 30 minutes.
Here’s the ultimate sentence from the 129 pages long report:
The model operated through a series of Excel spreadsheets, which had to be completed manually, by a process of copying and pasting data from one spreadsheet to another.
Fucking amazing. I mean, just wow.
What’s Inside America’s Banks? [TheAtlantic]
A disturbing number of former bankers have recently declared that the banking industry is broken (this newfound clarity typically follows their passage from financial titan to rich retiree). Herbert Allison, the ex-president of Merrill Lynch and former head of the Obama administration’s Troubled Asset Relief Program, wrote a scathing e-book about the failures of the large banks, stopping just short of labeling them all vampire squids. A parade of former high-ranking executives has called for bank breakups, tighter regulation, or a return to the Depression-era Glass-Steagall law, which separated commercial banking from investment banking. Among them: Philip Purcell (ex-CEO of Morgan Stanley Dean Witter), Sallie Krawcheck (ex-CFO of Citigroup), David Komansky (ex-CEO of Merrill Lynch), and John Reed (former co-CEO of Citigroup). Sandy Weill, another ex-CEO of Citigroup, who built a career on financial megamergers, did a stunning about-face this summer, advising, with breathtaking chutzpah, that the banks should now be broken up.
Story of the week for sure.
High-frequency trading raises an existential question for capitalism, one that most traders try to avoid confronting: Why do we have stock markets? To promote business investment, is the textbook answer, by assuring investors that they can always sell their shares at a published price—the guarantee of liquidity. From 1792 until 2006, the New York Stock Exchange was a nonprofit quasi utility owned by its members, the brokers who traded there. Today it is an arm of NYSE Euronext, whose own profits and stock price depend on getting high-frequency traders in the door. Trading increasingly is an end in itself, operating at a remove from the goods-and-services-producing part of the economy and taking a growing share of GDP—twice what it did a century ago, when Wall Street was financing the enormous industrial expansion of the economy. “This is counterintuitive, to say the least,” wrote New York University economist Thomas Philippon in an article for the Russell Sage Foundation. “How is it possible for today’s finance industry not to be significantly more efficient than the finance industry of John Pierpont Morgan?”
If you’re further interested in the topic, I strongly recommend reading this interview with an experienced high-frequency trading expert.
Google’s Marissa Mayer Becomes Yahoo’s Chief [Dealbook]
Marissa Mayer, one of the top executives at Google, will be the next C.E.O. of Yahoo, making her one of the most prominent women in Silicon Valley and corporate America.
The appointment of Ms. Mayer, who was employee No. 20 at Google and was one of the few public faces of the company, is considered a surprising coup for Yahoo, which has struggled in recent years to attract top flight talent in its battle with competitors like Google and Facebook.
I honestly think that Yahoo! as a brand is unfixable. No one can fix it, not even Marissa Mayer.
Great op-ed by Joe Nocera published in the New York Times yesterday. He is totally on point by stating that the main problem with initial public offerings nowadays is the short term thinking of investors:
What [the current Facebook stock price] doesn’t reflect is where Facebook will be 5 or 10 years from now. I could easily make a bullish case for Facebook — with its 900 million users, and its wise-beyond-his-years chief executive. I could just as easily make a bearish case: Maybe Facebook will never figure out mobile. Maybe its moment will pass before it ever becomes the kind of technology juggernaut that Microsoft once was, or Google is. But being either bullish or bearish requires making a judgment that is years away from being revealed. For bullish investors, it means holding the stock patiently, waiting for the judgment to pay off. That’s what good investors do.
Boom.. right on.
I think gold is a great thing to sew onto your garments if you’re a Jewish family in Vienna in 1939 but civilized people don’t buy gold – they invest in productive businesses.
Netflix (NFLX) is getting demolished right, left and center. The stock is down nearly 35% today alone. Even though I’m still very optimistic about the future of this company, I think it’s time for CEO Reed Hastings to go.