Category: economics
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Ponzi Scheming on the Beach
The other day there was a new report on an investigation into a possible Ponzi scheme, this one run by R. Allen Stanford, a “flamboyant Texas billionaire” who claims to be related to Leland Stanford (Jr.) (but that also seems to be a fraud). The key point which has led to this investigation is: Several…
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Unsustainable Lending (part II)
News has certainly slowed down at the end of the year (and the Bush administration has checked out entirely), but the Fed just announced that it will buy $500 billion in mortgage backed securities (MBS) by the middle of next year. There are a few obvious questions that I have: (a) isn’t this what the…
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Unsustainable Lending (part I)
I’ve been doing way too much reading about the mortgage crisis, and it’s kind of depressing how we got ourselves into this mess. The numbers just don’t add up…but I guess it never mattered for the people driving us into the ditch, since they get paid based on short-term results, long term be damned. There…
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Share buybacks!
A-ha! In my previous post on owning stocks, I had completely forgotten about stock buybacks, when the company uses excess cash to buy outstanding shares. In this sense, the company itself is placing real value on the stocks, and this gives them some intrinsic value other than (a) producing dividends or (b) liquidation. The traditional…
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More thoughts on the stock market
This week, The Economist asks the question: Where have all your savings gone?, with a picture of a guy staring down a bottomless pit. But they’re relatively upbeat, now’s the time to buy, things will recover, etc. But they also had this nugget: In demographic terms, asset markets could be seen as a pyramid scheme,…
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What’s the purpose of owning stocks?
Something I was thinking about the other day…what is the value of stock in a publicly traded company these days? According to the wise people at wikipedia: A share of stock is one of a finite number of equal portions in the capital of a company, entitling the owner to a proportion of distributed, non-reinvested…