Damodaran: like the good Wine gets better as the Time goes by...

Tweet

Aswath Damodaran

Is Professor of Finance at the Stern School of Business at NYU, teaching classes in corporate finance and valuation, primarily to MBAs.

We had a sort of one way confrontation last year in May. 
He is a bright mind, likely the best in the world in Valuing business from a pure fundamental stand point (except few flaws in intangibles in specifics domains like Luxury) . 
Inloved with the science as I am , is an enormous pleasure to read him after 1 year less deterministic and .... 

A real, real pleasure grown with the joy of being buried in his intellectuals contributions extremely detailed and...perfect in their domain, let's say.

DISCLAIMERS: 
ALL RIGHTS RESERVED TO Aswath Damodaran AND TO THE BLOG "MUSING ON MARKETS"
WE DO DO NOT OWN ANY RIGHTS ON THIS POST AND ON ITS CONTENTS 
COURTESY OF Aswath Damodaran AND  THE BLOG "MUSING ON MARKETS"

TUESDAY, MARCH 22, 2011

Catastrophe and consequences for value

The airwaves have been inundated with news about natural disasters in Japan and their aftermath. Without minimizing the human impact - the thousands who have lost their lives and belongings - and the dangers of a nuclear meltdown, I want to focus on the impact of catastrophes, natural or man-made, on markets and asset values. While each disaster is different, here are some common themes that emerge after the disaster:

a. Our definition of "long time periods" is woefully inadequate: After the quake, which measured 8.9 on the Richter scale and ranked as one of the five strongest in recorded history, it was noted that nothing of this magnitude had been seen in Japan over the last 300 years. Since much of the regulation (of construction and nuclear power plants) had been structured based upon past history, they proved inadequate for the quake. As I look at how much of what we do in corporate finance and valuation is based upon time periods of 80-100 years (if we are lucky) and 10-20 years (if we are not), I wonder how much we are missing as a consequence of our dependence on the past........

How about Us? We are telling so since 10 years...

Benoit, maintenant rien t’embête...mais j’imagine ta gueule ....
Bah, Stone, le monde est Stone...-:))


Tweet

Worst-case scenarios

Fat-tail attraction

Investors’ interest in hedging tail risk is growing

Mar 24th 2011 | NEW YORK | from the print edition

Is it a bird, an extreme event or a cliché?

“TAIL-RISK” hedging was the talk of Wall Street in 2008 after global markets nosedived and traumatised investors tried to figure out how they could protect themselves from extreme or “black swan” events—those well outside an ordinary distribution of outcomes—that cause massive losses. Interest is revving up again as revolutions in the Middle East and Japan’s earthquake have destabilised markets and increased volatility, leaving battered investors searching anew for protection.

Peddlers of tail-risk products like to compare them to insurance: investors pay premiums every year to avoid financial catastrophe later. Some even get philosophical. Vineer Bhansali of PIMCO, a big fund manager, has likened tail risk to Pascal’s wager—the argument that you’re better off believing in God than suffering the consequences of being wrong. The same is true with drastic dives in markets.

Tail risk is technically defined as a higher-than-expected risk of an investment moving more than three standard deviations away from the mean. For mere mortals, it has come to signify any big downward move in a portfolio’s value. There are different ways to hedge tail risk, but a popular one is to create a basket of derivatives that will perform poorly during normal market conditions but soar when markets plunge. These include options on a variety of asset classes, such as equity indices and credit-default-swap indices.

Sellers naturally claim it is worth the cost. Mr Bhansali of PIMCO, which offers several tail funds, estimates that it costs investors between 0.5% and 1% of assets to hedge against tail risk, but that investors will break even in three to five years. That is partly because the market does not have to crash in the way that it did in 2008 for hedges to pay their way. PIMCO now oversees around $30 billion in tail-risk products, mostly in separate accounts. Other funds have also seen inflows. Take, for example, Universa Investments, a tail fund advised by Nassim Taleb, author of “The Black Swan”, which has grown from $300m in 2007 to around $6 billion today.Some banks have started to sell tail-risk products. Deutsche Bank has created the ELVIS index, which generates returns when stockmarket volatility increases. Big asset managers like BlackRock and PIMCO have made a business of advising customers on managing for the worst case. Hedge funds have also got in on the act. Several “tail funds”, which invest in assets that should rise in bad economic times, have started up in the past few years. These funds tend to lose around 15% each year when the market is normal but can return 50-100% when the market dives. Or more: 36 South, a hedge fund, saw its tail fund gain 234% in 2008. According to Gaurav Tejwani of Pine River, which launched a tail-risk fund last year that now manages over $200m, “It costs money in most good years or average years, but it makes you a fairly large return when all your other assets are performing very poorly.”

Even so, Mark Spitznagel, the boss of Universa, complains about complacency among investors. Demand is very uneven. The price of hedging varies, rising when markets are volatile and investors most need it, and declining during bull markets. It is difficult, after all, to keep stomaching losses from hedged positions as markets rise: “The kids outside playing in the snow without sweaters and scarves seemed to have much more fun than those of us who were bundled up,” says Steven Englander of Citigroup
.

FINANCIAL EXCHANGES & MARKETS. WHY THE PROPOSED NEW RULES ARE UNREASONABLE . Debate contribution from CME

WE TOTALLY ENDORSE THE OPINIONS EXPRESSED IN THIS POST. 

Skip to content

Share this entry

 
• 
 
• 
• 
 
• 
 
• 

DISCLAIMERS : 
-ALL RIGHTS RESERVED TO" CME GROUP" AND TO THE WRITER; 
-COURTESY OF CME GROUP; 
-BOOKOFLANNES HAS   NO RIGHTS ON THIS ARTICLE .

QIOTING:

"Attempts to impose unreasonable regulation may simply shift business outside the United States than solve the fundamental problem, market experts say. But is regulatory arbitrage a given, or even a bad thing?

All the calls for more regulation of derivatives in light of the 2008 economic crisis may be satisfied by one of the many proposals circulating Capitol Hill. But if history is any guide, it likely will not police the problem, just handcuff U.S. institutions in the global marketplace, states derivatives expert Christopher Culp, an adjunct professor at the University of Chicago Booth School of Business.

“The temptation in the wake of the financial crisis for politicians and regulators to appear proactive is understandable,” Culp says. “But a lot of what is being discussed would create a very uneven playing field that could badly hurt the competitiveness of the U.S. derivatives business.”...................

The tipping point..IT IS NOT ABOUT OIL..Harvard analysts look to the future of a changing Arab world

The tipping point

Harvard analysts look to the future of a changing Arab world

By Katie Koch

Harvard Staff Writer

Wednesday, March 23, 2011

Photo illustration by John Migliaccio/Harvard Staff

“We are witnessing a fundamental shift in the social and political conditions in much of the Arab world,” said Stephen Walt of the Belfer Center for Science and International Affairs at the Harvard Kennedy School. “The clock is not going to be turned back.”

When Marshall Nannes began researching his master’s thesis on American military bases in Bahrain and Kuwait, he did something practically unknown. He actually asked the people in those countries how they felt about the U.S. presence there.

“All the research on the topic was at the government-to-government level,” said Nannes, a graduate student at Harvard’s Center for Middle Eastern Studies (CMES) who traveled to the two tiny Mideast nations in January for his research. The popular wisdom, he said, was that “it doesn’t really matter what the people — the opposition leaders — think.”

A scant two months later, Bahrain has been swept by turbulent demonstrations and a government crackdown. Bahraini opposition leaders, once just the subjects of Nannes’ obscure thesis, now are interviewed regularly in The New York Times. And Bahrain’s protesters are trumpeting their anger in the streets.

Political protests are sweeping the Arab world across a 2,000-mile crescent. The unrest began in December with one man’s self-immolation in Tunisia and spread like wildfire to Egypt, Libya, Bahrain, Syria, Yemen, and elsewhere, taking the international community by surprise. In a region that historically has appeared inhospitable to democracy, millions of ordinary citizens rose to demand basic political rights..........

JPMorgan: How we landed the AT&T deal

Posted by Duff McDonald, Contributing Editor

March 24, 2011 1:52 pm

JPMorgan's chief banker Jes Staley talks about the AT&T-T-Mobile deal, how the firm responded to the Japan crisis, and why Facebook's valuation might be justified.

JPMorgan's chief dealmaker, Jes Staley

With its role advising AT&T on its proposed $39 billion purchase of T-Mobile, JPMorgan Chase has solidified its lead atop the mergers and acquisitions league tables in 2011. There's been a lot of talk about the $20 billion bridge loan that JPMorgan Chase threw in as part of the deal -- an obvious and important competitive tool in outflanking perennial M&A front-runners Goldman Sachs (GS) and Morgan Stanley (MS). But here's the thing: they're leading the league tables both in deals in which they've provided additional financing and those in which they didn't..............

Syrian journalist, blogger detained: rights groups

• Text size
•  
•  

DAMASCUS, Mar 24, 2011 (AFP) - Journalist Mazen Darwish and blogger Ahmad Hadifa have been arrested in Syria, the latest in a string of detentions targeting activists this month, rights groups said Thursday."Rights activist Mazen Darwish has been detained after he was summoned for questioning Wednesday over the statements he made on arrests in Syria and the Daraa events," the London-based Syrian Observatory for Human Rights said.
Reporters Without Borders on Thursday meanwhile said it feared Darwish, founder of the Syrian Center for Media and Freedom of Expression, had been detained as he had not been seen since shortly before noon on Wednesday............

Barter: a solution for everything. This case is even more appealing....no cash.

• COURTESY OF "the new yorker" ALL RIGHTS RESERVED T&O THE MAGAZINE.  THE NEW
•  YORKER AND TO THE  ARTICLE'S 
WRITER

NEWS DESK

Notes on Washington and the world by the staff of The New Yorker.

• « To-Do List: Tap Water in Tokyo, Capitalism on Mars
• Main
• Charting Three Months of Protests in Seventeen Countries »

MARCH 24, 2011

TRADE SCHOOL: BARTERING FOR SKILLS WITH OURGOODS

Posted by Nana Asfour

What would happen in a world without cash? How would we acquire goods or learn new skills? Could contemporary society function under the antiquated model of bartering? These are the questions that drove a group of creative young New Yorkers to band together, shortly after the 2008 market crash, and form a collective called OurGoods.

The first test was finding a space. In short time, they struck a deal—through bartering, of course—with the owners of the Lower East Side storefront GrandOpening, which has served in the past as a bar, a Las Vegas-style chapel, a ping-pong parlor, and a drive-in theatre. In exchange for design work, OurGoods was given run of the space for an entire month, free..................

Mo - le blogueur de Benghazi -a été tue par un sniper.

T

Les dernières Nouvelles de Sakineh 
Envoyez 
votre lettre à SakinehSignez la pétition ! 
Plus de 171684 signataires

• ACCUEIL
• ARTICLES
• TÉLÉ RDJ
• ENCYCLOPÉDIE
• DOSSIERS
• LA REVUE
• INÉDITS LITTÉRAIRES
• SUIVEZ MOIX
• BLOGS

Libye : le blogueur de Benghazi a été exécuté en pleine rue

GILLES HERTZOG

« Mo », Mohamed Nabbous, ingénieur en télécoms, photographe et blogueur improvisé, est mort, tué par un sniper kadhafiste dans une rue de Benghazi, hier, samedi, vers 13h, alors qu’il filmait les destructions des bâtiments civils sous les bombardements ennemis, à l’heure exacte où, à Paris, se décidait une intervention aérienne pour mettre fin à ces mêmes crimes.

On ne dira jamais assez le courage tranquille de cet homme qui, seul, créa dès l’aube de la libération de Benghazi, il y a trois semaines, Street Press, filmant avec son portable cette libération puis l’avancée des rebelles vers Syrtes, puis leur reflux devant la contre-offensive des troupes de Kadhafi, et enfin les bombardements sur sa ville de Benghazi, dont il fut, caméra-stylo en main, l’un des plus grands défenseurs.
Ses images, ses appels étaient diffusés sur le blog Libya Alhura.....