A Home in the Colonias | The New York Times

A Home in the Colonias | The New York Times

This video is about 5 years old, but it shows some the living conditions where we will be working in South Texas.    The New York Times


Here is some more:
Border Communities: The Case of Colonias in Texas by Cecilia Giusti

"Education levels are very low there. In El Cenizo, one established colonia in Webb County, only 15 per cent of people older than 25 are high-school graduates, a lower figure than the 76 per cent in the state of Texas and 80 per cent in the US as a whole. The median age of El Cenizo residents is 18.5, much younger than 32 years for Texas.  
Low income levels. Income levels are very low in these settlements. About 60 per cent of the colonia population lives below the official poverty line. In El Cenizo about 68 per cent are under the poverty threshold, much higher than in Texas (15 per cent) and the United States (12 per cent).
 
Incremental construction patterns. Construction in small steps is common. Colonia residents often work on their homes as schedules and finances permit. Houses are constantly improved and, as families grow, they expand accordingly. During construction, families continue to live in the houses and the building pace is generally slow."

I will update this more in the near future.

Shrinking Universe

AM reading: Common Sense of Mutual Funds by John Bogle.  Here is a really cool insight:

Page 359: he is writing about the fact that given normal restrictions (not owning more than 2% of portfolio in any single asset and not owning more than 5% of shares of any individual company), the number of potential investments drops significantly.  For example, using 2009 data, a 1 Billion fund could invest in any of 1,927 firms.  However a $20 billion fund would only be able to choose from 251 firms. 

Related articles

• Bogle Grades Financial System 'D' as Volcker Urges Curbs (businessweek.com)
• Rejoice! Passive investing is gaining momentum (cbsnews.com)

Why U.S. Companies Continue to Pay Dividends - Bloomberg

Why U.S. Companies Continue to Pay Dividends - Bloomberg:

Love it!  Virtually identical to our class discussions:

"It seems clear from our recent work that dividends are very resilient, and are unlikely to disappear. What explains this staying power?

First, some argue that dividends provide important “signals” about the strength or quality of the firm’s underlying earnings stream. (Because investors know that a significant dividend is a very strong commitment to paying out at least the current dividend amount on a continuing basis.)

Second, dividends help discipline managers’ tendency to squander their firms’ cash on wasteful or unproductive projects or acquisitions. This is particularly a problem in large, mature companies that generate sizable free cash flow.

Third, it could be that companies are catering to certain investors..."

Wall Street Warriors

A look at what it can be like to work on Wall Street. (this episode focuses on "winners" in Hedge funds, commodities, and currency trading):

I am back

I realize I have been gone, but I was very busy nursing my mom in her battle against breast cancer. It pains beyond words that we lost the battle. I will try to get more articles up in the coming weeks. I also encourage you to "like" financeprofessor on facebook where I do share articles in a much faster manner.

Video on ETF creation and redemption

Good stuff! 

Wall Street Bonus Drop Means Trading Aspen for Discount Cereal - Bloomberg

Wall Street Bonus Drop Means Trading Aspen for Discount Cereal - Bloomberg

Everything is relative. Pay cuts at $35,000 or $350,000 a year hurt:

Bloomberg has a personal interest story on how Wall Street bonus cuts have hurt those who had expected to get more money.

"The smaller bonus checks that hit accounts across the financial-services industry this month are making it difficult to maintain the lifestyles that Wall Street workers expect, according to interviews with bankers and their accountants, therapists, advisers and headhunters.

“People who don’t have money don’t understand the stress,”"

There are several examples. I will pick this one:

"Richard Scheiner, 58, a real-estate investor and hedge-fund manager, said most people on Wall Street don’t save.

“When their means are cut, they’re stuck,” said Scheiner, whose New York-based hedge fund, Lane Gate Partners LLC, was down about 15 percent last year. “Not so much an issue for me and my wife because we’ve always saved.”
Scheiner said he spends about $500 a month to park one of his two Audis in a garage and at least $7,500 a year each for memberships at the Trump National Golf Club in Westchester and a gun club in upstate New York. A labradoodle named Zelda and a rescued bichon frise, Duke, cost $17,000 a year, including food, health care, boarding and a daily dog-walker who charges $17 each per outing, he said.
Still, he sold two motorcycles he didn’t use and called his Porsche 911 Carrera 4S Cabriolet “the Volkswagen of supercars.” He and his wife have given more than $100,000 to a nonprofit she founded that promotes employment for people with Asperger syndrome, he said."

The solution? The article mentions many who are looking for bargains, shopping on price, and in general cutting back even though they still make much more than most of us.

It should be noted, that this view is only slightly different than that espoused in a recent paper by Kamukura and Du that suggests the cuts in spending by the "rich" are a function of not needing to spend as much to impress since the "less rich" can not afford to spend when the economy is slower.
BTW my biggest piece of advice would be to spend less and remember this simple formula:

               Wealth= (What you have) / (What you want)

5 Simple Hedge Strategies for Volatile Times - Forbes

5 Simple Hedge Strategies for Volatile Times - Forbes

I am not convinced these are really "strategies", but more ideas of things you should give some attention. For example market volatility, credit risks, risk of low returns, inflation. Not so much a "how to" article, but more of a useful reminder of the various risks investors face. :

A rather long "look-in":

"Dawal encourages a portfolio that is well-diversified, well-managed and built to weather such volatility. They key is to have assets that are not correlated over an extended period of time.

He sees a diversified portfolio as one that includes cash, bonds and “equities of all ilk.....”

“We would also recommend real assets, commodities, real estate, infrastructure, perhaps timber, managed futures, private equity and traditional alternatives,” he adds....

In the not-so-distant past, these strategies were out of reach for all but the most high-net-worth investors and institutions. Now many of those hedge fund-worthy strategies have been replicated for a more mainstream audience through mutual funds and ETFs."

Could Twitter predict the stock market? | Reuters

Could Twitter predict the stock market? | Reuters

Nice article for class from Reuters:

"A basic premise of behavioral economics is that the markets aren't perfectly rational machines, but are expressions of human emotions like greed and fear. If you agree with that premise, and are looking for an immediate gauge of those human sentiments, then Twitter is one of the greatest tools ever invented....The trick is how to crunch that data effectively and make some sense of the 250 million tweets generated every day. Peterson, for example, filters the data using 1,500 different factors, culling keywords to track global moods. His is essentially a contrarian take on the markets: If the public is overly bullish, it's time to be cautious. If it is extremely gloomy, on the other hand, it might be time to snap up a bargain."

Why Do Individuals Exhibit Investment Biases? by Henrik Cronqvist, Stephan Siegel :: SSRN

Why Do Individuals Exhibit Investment Biases? by Henrik Cronqvist, Stephan Siegel :: SSRN

Abstract:
"We find that a long list of investment biases, e.g., the reluctance to realize losses, performance chasing, and the home bias, are "human," in the sense that we are born with them. Genetic factors explain up to 50% of the variation in these biases across individuals. We find no evidence that education is a significant moderator of genetic investment behavior. Genetic effects on investment behavior are correlated with genetic effects on behaviors in other domains (e.g., those with a genetic preference for familiar stocks also exhibit a preference for familiarity in other domains), suggesting that investment biases is only one facet of much broader genetic behaviors. Our evidence provides a biological basis for non-standard preferences that have been used in asset pricing models, and has implications for the design of public policy in the domain of investments."

 
Oh the essays questions I could/will write! 

 
Cite:

Cronqvist, Henrik and Siegel, Stephan, Why Do Individuals Exhibit Investment Biases? (February 19, 2012). Available at SSRN: http://ssrn.com/abstract=2009094

Too Much Cash in the Corner Office - Businessweek

Too Much Cash in the Corner Office - Businessweek


A definite must-read for my classes!

"In 2008, the CEOs who run companies in the Standard & Poor’s 500-stock index earned, in total, less than 1 percent of what everyone who’s a 1 percenter earned. So it’s unfair to blame CEOs alone for fostering inequality. Defenders of the system cite such data to advance a larger claim. Pay for public company CEOs has risen, they say, for the same reasons it has for movie stars, real estate moguls, and private entrepreneurs: Globalization and technology has created a wider market. Even President Obama, no friend of the very rich, acknowledged in December that “over the last few decades, huge advances in technology have allowed businesses to do more with less, and made it easier for them to set up shop and hire workers anywhere in the world.” Read thoughtfully, that implies that 1 percenters are taking home more because, in an economic sense, they’re earning it."

That said, $189,000 an hour? Really? mmm...Maybe a tad extreme?

UBS hires former Bear Stearns CFO Molinaro | Reuters

UBS hires former Bear Stearns CFO Molinaro | Reuters

"UBS has hired former Bear Stearns financial chief Sam Molinaro as operating head of its investment bank effective March 1, according to a memorandum seen on Friday by Reuters."

Congratulations to St. Bonaventure Graduate Sam Molinaro:

The Dog that Did Not Bark: Insider Trading and Crashes by Jose Marin, Jacques Olivier :: SSRN

The Dog that Did Not Bark: Insider Trading and Crashes by Jose Marin, Jacques Olivier :: SSRN

Interesting. And sort of unexpected.

Marin and Olivier document

"that at the individual stock level, insiders’ sales peak many months before a large drop in the stock price, while insiders’ purchases peak only the month before a large jump.We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. A key feature of our theory is that rational uninformed investors may react more strongly to the absence of insider sales than to their presence (the “dog that did not bark” effect).We test our hypothesis against competing stories, such as insiders timing their trades to evade prosecution."

Hedging Demand Halts Issuance of Credit Suisse VIX Note: Options - Bloomberg

Hedging Demand Halts Issuance of Credit Suisse VIX Note: Options - Bloomberg:

"Credit Suisse suspended the creation of new stock in the VelocityShares Daily 2x VIX Short-Term ETN on Feb. 21 after its market value more than quadrupled in 2012 to a record $694.4 million, data compiled by Bloomberg show. Shares outstanding have surged 699 percent since Dec. 30 as the S&P 500 climbed 8 percent and posted its best January gain since 1997.

Demand for products that let investors hedge has surged during a four-month rally in global stocks. The Credit Suisse note tracks a gauge linked to the Chicago Board Options Exchange Volatility Index, or VIX, which moves in the opposite direction of the S&P 500 about 80 percent of the time. The structure of the ETN known as the TVIX (TVIX) makes it harder for Credit Suisse to offset risk. "