MetaFilter posts tagged with finance

The Material Girl is now a tangible investment

Mutant — Wed, 20 Aug 2008 02:50:40 -0800

Follow the money: for the past year, the big trade was short bank stocks, and use the cash to go long oil. Massively profitable, but now that trade is unwinding. So where is the big money being invested now? Lots of places: diamonds, fine art, guitars, and Madonna.

It's the end of the world as we know it... lalala

blahblah — Sat, 16 Aug 2008 23:23:38 -0800

Upclose and personal on the man, Nouriel Roubini, who predicted the subprime crisis. Apparently we're in for a long long haul out of this mess. Oh, and it may be the end of America (reg req'd) as we know it. His blog.

Most countries treat tourists better than citizens

Mutant — Sun, 10 Aug 2008 09:27:56 -0800

The Perpetual Traveller wields Five Flags in the quest for personal freedom.

Unusual Public Offering

thatbrunette — Sat, 02 Aug 2008 20:50:53 -0800

When a young company is in need of some dough, they often will issue an IPO. But what if, instead of a company, an author decides to sell shares of his book royalties? Tao Lin is doing exactly that. Currently he is selling 6 shares (equal to 60% of his royalties) for $2,000 per share. (A steep price, given that the First National Bank of Alaska is trading around the same.)

While this is timely information bank failures are normal part of life.

Mutant — Mon, 14 Jul 2008 06:58:14 -0800

Worried about bank failures? First step: check if your bank is insured by the Federal Deposit Insurance Corporation (FDIC). If so, then your first $100K is insured against loss so no worries.

Got more than $100K? Well then, you'd better speak with EDIE. EDIE (the Electronic Deposit Insurance Estimator) will tell you exactly how much FDIC insurance coverage you've got. The maximum coverage is $100K per depositor per savings account per institution. So one approach would be to distribute one's money at multiple financial institutions. But by enlisting the entire family, the apparent FDIC limits for deposits at a single institution can be circumvented. Assuming we're talking about a married couple with two children, here's how it works. Husband and wife each maintain separate savings accounts, gaining FDIC coverage on an aggregate amount greater than $100K but less than $200K. The children can help out here as well; by opening accounts in their name, and using either a living trust or what is called a Payable On Death account another $100K per child will gain FDIC protection. And IRAs, are insured to a max of $250K per account holder, regardless of other funds on deposit. Using this approach, a family of four can gain FDIC coverage totaling almost one million dollars of deposits at a single institution. What ever you do, don't make these mistakes. Troubled by trusts? Confused by all these accounts? Well, the simplest approach would be to deposit your money into one of the 73 Massachusetts based banks which is a member of both the FDIC and The Depositors Insurance Fund (DIF). After FDIC coverage has been exceeded, this private insurance covers any shortfalls. The last time we saw a large number of bank failures, the DIF covered uninsured losses of some 6,500 depositors at 19 failed member financial institutions. Since it's inception "no depositor has ever lost a penny in a bank insured by both the FDIC and the DIF".

Sir John Templeton, 1912-2008, RIP and thank you for the investing lessons.

Mutant — Wed, 09 Jul 2008 03:48:25 -0800

The simple phrase "it's different this time" are the four most expensive words in the English language. Sir John Templeton, 1912-2008, we thank you for this lesson and countless others. One of modern finance's greatest pioneers, in 1954 Sir John Templeton launched what was one of the first globally oriented mutual funds, Templeton Growth Fund. At that time, almost nobody invested outside The United States. However Templeton argued that by restricting choices to domestic securities, investors were denying themselves of the chance to markedly increase portfolio diversification, lower volatility while increasing overall returns. Today Templeton's approach to portfolio diversification is textbook at business schools. Ideas and theories he devised and put into practice decades ago led to such stunning performance that in 1999 Money Magazine called Sir John “arguably the greatest global stock picker of the century”. Over a period of forty years, Templeton Growth Fund returned an average of 14.5% per annum. In 1992, a month before his 80th birthday, Templeton sold his mutual fund empire for a reported $440 million to Franklin Resources Inc. of San Mateo, California. While still was active in the fund's strategic management, Templeton next turned his attention to religion and charitable endeavours, founding the John Templeton Foundation which he intended to "serve as a philanthropic catalyst for research on concepts and realities such as love, gratitude, forgiveness and creativity." Sir John did, however, leave those of us still learning how to invest with one final gift: Sir John Templeton's 16 Rules for Investment Success. [.pdf] Sir John Templeton, 1918-2008, RIP and Godspeed.

Bringing Down Bear Stearns

SeizeTheDay — Tue, 01 Jul 2008 15:22:23 -0800

Bringing Down Bear Stearns, from Vanity Fair's August issue.

Floating university moored

divabat — Sat, 14 Jun 2008 21:07:37 -0800

The Scholar Ship , an international floating university stewarded by top universities in Morocco, the United Kingdom, China, Australia, Mexico, USA, and Ghana, have temporarily suspended all voyages due to lack of funds - mainly caused by the withdrawal of main sponsor and initiator Royal Caribbean International. The program ran two voyages in 2007 and 2008 before shutdown. Alumni and prospective students on Facebook and Ning are busily sourcing options to revive the organization, while Semester at Sea is offering spaces to students who were accepted for the now-cancelled voyages. This is reminiscent of 2000, when global education non-profit Up with People were also forced to shut down due to lack of funds. Efforts from UWP alumni and supporters allowed for its reform as the WorldSmart Leadership Program in 2003, before returning to its original performance-based roots in 2006. Will the alumni of The Scholar Ship be as successful in bringing back their beloved experiences? How does this reflect on the finances of international education programs in general, when the pullout of a major backer can spell life or death for the organization?

Is Ben Bernanke a finally coming out of the closet?

Mutant — Mon, 09 Jun 2008 04:01:36 -0800

While the wild crowd call it "Woodstock for Central Bankers", others get festivities off on a sour note, referring to it as "Understanding Inflation and the Implications for Monetary Policy". Regardless of what your invitation to this party reads, it starts today, Monday June 9th on the 50th anniversary of The Phillips Curve, a previously discredited forecasting tool which may be revived by Ben Bernanke at The Federal Reserve. The Phillips Curve models an inverse relationship between unemployment and the rate of inflation. Specifically, as inflation increases unemployment decreases, and vice versa. Adherents of The Philips Curve argue for a monetary policy accepting relatively high rates of inflation as a trade off for low unemployment. While we have seen The Phillips Curve hold during long periods of both American and British economic history we have also seen 1970's style stagflation invalidate this theory, and today many believe the purest form of this model to be flawed. However variants of The Phillips Curve exist and are still in use by a variety of market participants to help forecast interest rates. It was long suspected Alan Greenspan used what is known as "The Fed Model" - a comparison of the ratio of stock's earnings to prices¹ against the yield on a 10 year Treasury bond - to help guide decisions regarding monetary policy. Knowing precisely what models are used by The Fed is highly valued information to those hoping to anticipate - and thus profit from - changes in interest rates. Until now, Fed watchers could only speculate about the tools Ben Bernanke would deploy as part of his decision making process. But with his keynote address at this conference, and considering other times he's mentioned this model, it's now obvious - Ben Bernanke is a closet Phillips Curver. No doubt a large number of market participants are busily building their own Phillips Curve models. ¹That is, a ratio calculated as earning divided by price, not to be confused with the more commonly known price to earnings ratio, or PE.

Islamic Banking - a compelling mix of religion and finance

Mutant — Fri, 06 Jun 2008 08:40:00 -0800

While western banking institutions continue to reel from the credit crunch, Islamic banking, with assets approaching one trillion dollars, is growing at roughly 20% pa by offering Sharia compliant - and only Sharia compliant - financial products. But compliance to Sharia law in matters financial is not easy (previously). Sharia law, derived from The Koran, is central to all aspects of Islamic life including, of course, financial affairs. Devout Muslims are forbidden from investing in businesses dealing in alcohol, tobacco, pornography, weapons or pork. Further constraining Islamic Bankers, financial products offering interest (making money from money, "riba") or allowing the holder to profit from speculation (uncertainty or gambling, "gharar") are expressly forbidden by The Koran. Considering such restrictions one might think cash is the only Sharia compliant investment. But such thinking is deeply rooted in the mindset of Anglo American capitalism. Indeed, Islamic Banking - ethical investment by definition - offers devout Muslims a wide range of Sharia compliant, financial products. Murabaha is a transaction where all profit earned by the seller must be revealed to the purchaser. Sharia compliant Ijara mortgages are structured in this manner, where a property, acquired and owned by a bank, is paid off by the purchaser via fixed monthly payments broken down as rent plus equity. And lest one think Islamic banking incapable of recognising business realities, Tawliyah or Wadiah - selling at cost or at loss respectively - are Sharia compliant transactions. Sukuk is a Sharia compliant bond. It works by, for example, purchasing then leasing out land with capital paid in. Profits are returned to the Sukuk holder instead of interest. Such vehicles allows investors to realise regular return on their capital, but not by the receipt of interest. Sukuk is superior to many Western fixed income products, as there are always physical assets underlying the structure. Takaful - Sharia compliant insurance - pools the financial resources of a group of Muslims, and allowing them to claim benefit when needed. The five principles of Takaful encourage mutual cooperation, personal responsibility and foster community. With these basic structures almost any retail financial product can be offered in a Sharia compliant manner. And Islamic banking is big business; HSBC, Barclays and many other western insitutions now offer Islamic financial products. Finally, western governments have caught on as well - England and Hong Kong both have plans to issue Islamic bonds, hoping to tap into offshore oil wealth.