" /> Coruscation: August 2008 Archives

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August 31, 2008

Fashion in Vogue, India

Fashion publicity gets publicity where the goods are richer
than the models.

The juxtaposition between poverty and growing wealth presents
an unsavory dilemma for luxury goods makers jumping into India.

Expect follow-ups on Rate A Desi or Sepia Mutiny.

Business / World Business
Vogue's Fashion Photos Spark Debate in India
Published: September 1, 2008

Update: Indeed, Sepia Mutiny is on the case.

August 30, 2008

Level 1, 2, 3: for sale on the market ?

For securities, this brings us to the three categories of investments; Levels 1, 2 and 3. Here's a guide:

Current Name; Level 1
Prior Name; Trading Securities
English Translation; We're selling now
Valuation (exit); Market value, probably on an exchange

Current Name; Level 2
Prior Name; Available for Sale
English Translation; We're selling if the price is right
Valuation; Market value, preferably on an exchange

Current Name; Level 3
Prior Name; Held to Maturity
English Translation; We're not selling
Valuation; Cost, unless the loss is "other than temporary".

Do you see a trend in valuations? It's ALL exit value. It's all based on intent. The reason we don't time value discount Level 1 and 2 securities is because the cash conversion is projected to happen now (or soon enough).

[ Via Calculated Risk ]

August 20, 2008

Creative destruction: another look at Japan's lost decade

Creative destruction is only half of Schumpeter's message. Far less in vogue is his projection that entrepreneurs will disappear as innovation becomes mechanized in corporate labs - as it has today in Japan - and that ultimately the very success of capitalism will beget socialism. Will creative destruction give way to central planning? Not necessarily, says Harvard's Clayton Christensen. "What happened in Japan is exactly what Schumpeter envisioned," he argues. "But here, folks just leave - they pick up venture capital on the way out, and they start new disruptive corporations." So as long as Washington encourages an infrastructure that supports entrepreneurship, creative destruction can continue after all.

In a paper presented at a recent Fed retreat, former treasury secretary Lawrence Summers and his ex-deputy Bradford DeLong observed that "the economy of the future is likely to be 'Schumpeterian,'" with creative destruction the norm and innovation the main driver of wealth. Products based on ideas - music, software, pharmaceuticals - require an enormous investment to develop but very little to keep making. And they're often subject to network effects, which reward those that achieve critical mass. Together, these factors - high cost to create, minimal cost to produce, and a winner-take-all environment - tend to generate natural monopolies, at least until the next innovation comes along. How regulators should respond is debatable, but clearly the rules that governed manufacturing economies don't apply.

[Via WiReD ]

August 16, 2008

Buy-Write covered calls: BEP and BWV

There are many funds today offering some version of covered call strategy (BuyWrite strategy). We have been asked "What do they do?" and "Are they a good addition to a diversified and allocated portfolio?"

In September 2004 the Ibbotson Associates consulting found higher returns and much lower volatility for a the BuyWrite index versus the S&P 500 alone.


-- qvmgroup

Fund descriptions from the sponsor's sites:

BEP: The Fund's investment objective is to seek total returns through a covered call strategy that seeks to approximate the performance, less fees and expenses, of the CBOE S&P 500 BuyWrite. The Fund will pursue its investment objective principally through a two-part strategy. First, the Fund will invest the proceeds in all of the common stocks included in the S&P 500 Index weighted in the same proportions as the S&P 500 Index and/or other investments that have economic characteristics similar to the securities that comprise that Index. Second, each calendar month during the term of the Fund, the Fund will write (sell) one-month call options on the S&P 500 Index ("Written Options").

BWV: iPath Exchange Traded Notes (ETNs) are senior, unsubordinated, unsecured debt securities issued by Barclays Bank PLC delivering exposure to the returns of a market or strategy with the trading flexibility of an equity. Investors can trade iPath ETNs on an exchange at market price or receive a cash payment at the scheduled maturity or at early redemption, based on the performance of the index, less investor fees. The iPath CBOE S&P 500 BuyWrite Index ETN offers investors cost-effective and tax-efficient exposure to the CBOE S&P 500 BuyWrite Index, commonly known as the BXM Index (the "Index"). The Index is designed to measure the total rate of return of a hypothetical "buy-write", or "covered call", strategy on the S&P 500 Index. This strategy consists of a hypothetical portfolio consisting of a "long" position indexed to the S&P 500 Index (i.e. purchasing the common stocks included in the S&P 500 Index) and the sale of a succession of one-month, at- or slightly out-of-the-money S&P 500 Index call options that are listed on the Chicago Board Options Exchange ("CBOE").

August 15, 2008

Index Exchange-Traded Funds (ETFs), etfconnect

ETF Connect reports on exchange traded funds.

Index Exchange-Traded Funds (ETFs) and Closed-End ETFs (CEFs) feature
intra-day trading and stock exchange listing. They rapidly are changing
the way many financial advisors and investors manage their portfolios.

Index ETFs, including SPDRs, Diamonds and HOLDRS.
Closed-End ETFs, including municipal bond and country funds.

August 14, 2008

Foreign oil speculator outrages Toronto cyclists

In the past, Igor Kenk has said that he was accumulating bicycles in preparation for a severe oil shortage. But in a somewhat disjointed interview in July for a radio documentary, portions of which were published by The Globe and Mail, a Toronto daily newspaper, Mr. Kenk portrayed himself as a crusader against theft and a protector of cast-off bicycles.

Mr. Kenk holds a passport from Slovenia and has claimed he was a police officer and a former K.G.B. agent. He has shed little light since his arrest. After one court session, he told reporters, "I'm a dead man."


Toronto Journal: In a Cyclist-Friendly City, a Black Hole for Bikes
Published: August 22, 2008
What exactly was he planning to do with 2,865 bicycles? That is just one of many questions the police and others have been puzzling over since the arrest of a man accused of stealing them.

August 13, 2008

Mortgages in America, a people's History

A breif history of subprime mortgage.

But any industry this big was soon irresistible to speculators. In several waves of deregulation, the industry set out to fix something that wasn't broken and managed to slip outside the bounds of government banking supervision. In each of these cycles, free-marketers promised greater efficiency and more plentiful credit, if government regulators would just get out of the way. In each episode, however, the result has instead been increased speculation followed by huge losses and costs to the public.

Robert Kuttner

August 12, 2008

FT Alphaville

FinancialTimes' ftalphaville. Instant trends, market moves, as seen from the City outside the USA.

August 11, 2008

Index Universe

indexuniverse covers US-listed ETFs and index funds.


assests are up:
* Assets in US REIT ETFs have increased 15.4%.
* Assets in commodity ETFs saw assets grow by 34%.
* Assets in TIPS, or Treasury inflation-protected securities ETFs increased by 39%.
The new SPDR DB Inflation-Protected Securities ETF (WIP) was launched in March 2008 as the first and only ETF to offer access to international inflation-protected bonds. WIP had gathered $183 million in assets as of June 30, 2008.

August 7, 2008

Concert Economy: getting bundled and amenity-riden, or getting cheap and amenity-stripped ?

Summer music festivals go posh, report from Europe, via WSJ:

Summer rock music festivals, long the preserve of teens and twentysomethings, are increasingly becoming familiar territory for a generation that still remembers the hits of the 1970s and '80s even as it keeps up with current stars. Concert promoters are starting to cater to the needs of this older crowd of festival-goers, many of whom are looking for something more than mosh pits, fast food and porta-potties -- and who can afford multiday tickets costing between €150 and €250.

"They still want to experience the buzz of the festival, they still want to have the excitement of the festival, but they don't want to sleep in a two-person tent anymore," says Melvin Benn, managing director of Festival Republic, which promotes the Leeds, Reading and Glastonbury festivals in the U.K. "They don't want to rough it in quite the same way."

A Grown-Up's Guide To Summer Rock Festivals

An opposing take says concerts are offering cheap tickets as they have difficulty filling venues-- Barry Ritholtz / Big Picture in 2008; and in 2005.

Electric Picnic ( Filthy Lucre ?) Aug. 29-31, Stradbally, Ireland

How much: Family camping ticket for 2 adults and as many as four children €480

Who: The Sex Pistols, Franz Ferdinand, Sigur Rós

Another boutique festival with 76 live acts, saunas and a healing area offering 18 different therapies, from Thai massages to tarot reading.


August 6, 2008

Etrade options

Etrade's option infographs and risk management strategies.

August 5, 2008

Foreclosure Pulse

Realty Trac's Foreclosure Pulse: hype for bargain home buyers ?

August 4, 2008

Housing Wire

Housingwire is a lively news source for the mortgage and residential real estate industries.

August 3, 2008

Bronte Capital / John Hempton, on Wachovia

Bronte Capital on Wachovia's quest for deposits and on WaMu 'this is not a credit driven crisis. It's a funding driven crisis'.

August 2, 2008

Aleph / David Merkel on covered bonds

Aleph blog explains covered bonds, proposed to save the mortgage market.

It is not a passthrough, it is a bond. The covered bond buyers do not receive the principal and interest from the security held by the bank, the bank receives it. The covered bondholder (in absence of default) receives timely payment of interest at the stated rate, and principal at maturity. Only in default does the value of the security for collateral matter. If the collateral is insufficient to pay off principal and interest, the covered bondholders are general creditors for the difference.

August 1, 2008


Optionetics pitches options trading to retail investors. Will training make informed investors ?