Archive for June 5th, 2014

Michael Lewis on a Rigged Stock Market and the Heroes of Wall Street..

June 5, 2014

Prof. Jeremy Siegel of Wharton interviews Michael Lewis where he talks about his recent work on bashing Wall Street. The book is called — Flash Boys: A Wall Street Revolt

Here is a sample:

Jeremy Siegel: On page 232, you write the following: “The stock market at bottom was rigged. The icon of global capitalism was a fraud.” Wow. Those are strong statements. They probably have been misinterpreted in a lot of ways. First of all, let me say that I believe a lot of what you are saying about high-frequency trading. It’s true, and we have to get these regulators off their duff to do something about this. But don’t you think words like that scare people away from legitimate investing in the stock market?

Michael Lewis: I doubt any words I could write would be as scary as what high-frequency traders have done and what exchanges have done with them. When I’m writing that, I’m writing through the eyes of the person who’s been investigating the stock market for the previous 231 pages. That’s his view of the matter. A lot of people, when they read the book and the facts of what he’s uncovered, will come to the same conclusions. It doesn’t mean that you shouldn’t invest in the stock market. It doesn’t mean that you won’t do well in the stock market. But it does mean there’s a systematic stealth that’s built into the stock market. “Rigged” is a fair description of it. It just turns on the connotations of “rigged.” But to my mind, that’s a fair description of it. And to Brad Katsuyama’s mind.

Great read all through.

ECB’s several measures to reshore the economy..

June 5, 2014

AS the pressure piled on, ECB doing something was on expected lines.

  • It has set the deposit rate at negative 0.1% (like India’s reverse repo rate where banks park funds with central bank). So if a bank now parks any funds with ECB, it will actually have to pay ECB. FAQs are here
  • After LTRO, we have TLTRO (Targeted LTROs). Were previous ones untargeted?
  • There are plans to buy Asset backed securities in future. (It is called as Intensification of preparatory work related to outright purchases of ABS..

The game of central banks keeps becoming bigger and messier…

Thinking about financial stability issues…

June 5, 2014

Luci Ellis, Head of Financial Stability Department at RBA summarises the several issues on fin stab in this speech.

He even uses cartoons to explain his various ideas. The cartoon on difference between mon stab and fin stab is a nice one. 

A good read..

 

How did Bangalore convert from garden city to garbage city?

June 5, 2014

Bangalore is again in news albeit for the wrong reasons. The garbage in the city has again started to pile up as nearby village refuses to allow any more dumping. This problem surfaced earlier too and some action was promised. But nothing happened as recent events show. Bangalore has indeed moved from its image of being a garden city to a garbage one.

This prompted me to write a more detailed post on the city’s woes as it is not limited to garbage alone. It has been a year since the blogger shifted to Bangalore. Apart from renewing some dead grey cells, the stay has been an eye-opener of sorts. How did Bangalore become this bad?

A city which brought India so much economic prominence has just been allowed to decline in an alarming way. It is even more disturbing considering that the city has declined in most urban terms whereas it has been quite a success on economic terms. How does one figure this disconnect and diverging trends?

Nothing really prepares you for Bangalore. One is warned before moving to other big cities but usually gets a favorable response while moving to Bangalore. And this is where the problems start. One usually comes with expectations that all shall be well (after all the song all is well from the movie 3 idiots was shot in the city) but realizes it is a well of problems.

Bangalore’s list of problems is never ending:

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Should the govt. guarantee infrastructure projects?

June 5, 2014

Kaushik Basu now at WB as chief econ writes this paper.

He says the govts have become way too cautious towards providing guarantees for large mega infra projects. Well, there is one thing of providing guarantees carelessly and other thing of providing them with care and planning. He suggests second such kind of guarantee:

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