Finance

Nov
17
2010

Written by:
Shali Zhu

Small Investors and the Big Stock Market Rally

After the Federal Reserve’s announcement of a new quantitative easing program and the midterm elections, the S&P 500 Index rose 1.9% to 1221, a 23-point increase that brought the index to its highest close in over two years. And with interest rates at an all-time low and expected to remain in that position for the coming months, investors are likely to boost their returns by taking on additional risk and purchasing stocks, according to an article on the Wall Street Journal. That implies higher stock prices, and individual investors have been taking notice. In a recent report from TrimTabs Investment Research, private investors had poured $759 million into U.S. equity funds in the week leading up to the Fed’s announcement, the first time in six months that they have put more money into the U.S. market than they have taken out.

Oct
10
2010

Written by:
Shali Zhu

Is There a Bond Bubble? Two Experts Weigh In

Ever since the recent economic downturn, investors, hoping to seek shelter from the excessive volatility in the stock market, have been flocking to seemingly safe fixed income investments. According to a recent article by Smart Money, the amount invested in bond funds in the first ten months of 2009 increased by $313 billion. Moreover, investors poured $88 billion into bonds in that October alone, an especially staggering amount when you consider the fact that this translates into investing nearly $2 million every minute. Overall, a Wall Street Journal article reports that retail investors have plowed more than $375 billion into bond funds last year and $230 billion more this year. Are these the signs of a growing bubble in the bond market?

May
26
2010

Written by:
Shali Zhu

The Consumer Side of Financial Reform

You know that the financial regulation bills recently passed by the House and the Senate are targeted primarily toward reforming the way business is done on Wall Street, but how does the passage of these pieces of legislation affect consumers like you? In order to answer this question, we need to first take a look at the two versions of the financial reform bill.

Apr
1
2010

Written by:
Joseph Seydl

Wall Street Compensation Reform: A Necessary Distinction

In the financial regulatory reform arena one of the most widely discussed and highly sensitive issues relates to compensation structures on Wall Street. From the numerous opinion-based articles written on this topic it seems that there is a growing sense of populism in America against the so called ‘unjust’ bonuses being paid out to bankers working on Wall Street. While I think it’s important that we, as a collective society, voice our populist opinions in order to make sensible reforms in regards to outlandish compensation schemes on Wall Street, we also need to be very careful about how we toss around the term ‘unjust’. And right now the general public is failing to make a very important distinction on the issue of Wall Street compensation: that is, the justness of bonuses paid out to junior-level analysts vs. senior-level managers.

Mar
18
2010

Written by:
Wade Senti

The Convergence of Hollywood and Wall-Street

While corporate arbitrage, hostile-takeovers, and high-leveraged dealings of Wall Street may seem perfect for an action-packed script, the reality is, such financing mechanisms have been and are becoming more widely used to fund some of the largest film budgets in Hollywood.

It is estimated that in a span of three years (2005-2008) almost $15 billion was flung into feature film flicks from institutions such as Merrill Lynch and Lehman Brothers (Reuters, Sue Zeidler). This spreading and to some extent, transferring of risk – from studios to investment firms, has become a dichotomy of the world of finance.

Ironically, one would think that betting for or even against Hollywood would be a sure mistake. The outcomes of films are largely unpredictable, with promotions, marketing, viewer preference, star-power, and an array of other factors determining the gross ticket sales and thus the bottom-line. Even with a ‘bankable star’ the financial outcome can vary.

Apr
2
2009

Written by:
Zach Liebmann

Old Theory for New Times

Few of us have heard of his name and even fewer know about his contribution to economics. But the economic theory of Hyman Minsky is making its triumphant return thanks to the current financial crisis.

A recent article in The Economist discusses Minsky's theory's that "the financial system played a big role in exaggerating the economic cycle, one that was understated by conventional theory."

The Economist writes:

"Minsky divided the process into three phases. In the first, investors take on little enough debt that they have no trouble meeting their capital and interest payments. In the second, they stretch their finances so they can only afford the interest. In the third, or Ponzi, phase they take on debt levels that require rising prices to be safely financed; the homebuyers who took on 125% mortgages at the peak of the property boom were a classic example."