Quants Quench

A very instructive and entertaining paper by Amir E. Khandani and Andrew W. Lo:
What Happened To The Quants
In August 2007?

The pointer has been from The Trading Digest.

Bill Miller Video

Bill Miller interview

BT&T Timelife

On 2007-12-27 came this announcement from BT&T Timelife AG:

Successful CHF 30 million class action suit against Lernout & Hauspie / KPMG
BT&T TIMELIFE AG is receiving an amount of about CHF 30 million from a successful class action suit against the Belgian software company Lernout & Hauspie, which filed for bankruptcy in 2001 due to accounting fraud, as well as against their auditing firm KPMG.
The Net Asset Value of BT&T TIMELIFE AG will be adjusted as of December 28, 2007 – proportional to the value increase through the financial returns from the class action suit – by CHF 1.53 per share from CHF 1.43 per share to newly CHF 2.96 per share.

On 2007-12-28 there was an insider transaction purchase of 182'480 securities amounting to CHF 179'378.00 (CHF 0.98 / security).

The share price later on closed at CHF 1.50 for a nice 53 % intraday profit. For the whole day the stock increased a whopping 89 %. Thought the whole market capitalization is still less than CHF 21 million.

Nestle Insider Transaction

Wow, good timing, Mr. Brabeck-Letmathe?!

According to the SWX Swiss Exchange:

Issuer	Nestlé AG
Transaction date	12.12.2007 by an executive member of the board of directors / member of senior management
Type of transaction	Sale of 20'000 securities amounting to CHF 11'000'000.00 (CHF 550.00 / security)
Type of security	Equity securities
ISIN	cf. remarks on the product
Remarks on the product	Exercise de Management Stock Options

Or are there any other executive members of the board of directors?

The all time high of Nestle was CHF 550.50 at 2007-11-15 and this sale was less than 1 permille below it. Anyway, today's price is still only -4.82 % below that sale price.

Jon Tait

An inspiring interview at StockTickr from 2006-10-18:
Interview with Jon Tait, the Fickle Trader

Oil Reserves

Who has the oil?

Greatest Oil Reserves by Country, 2006

Trading Psychology

Brett Steenbarger: Two Kinds of Traders

Now here's the interesting part: The first group of traders almost universally asks me to help them tame their emotions. They have problems with impulsive trading, failing to honor risk limits, failing to take valid signals due to anxiety, etc. The second group of traders, having researched successful strategies, almost universally asks me to help them take maximum advantage of their edge. They want help taking *more* risk and trading larger positions.

The trading psychology literature focuses strongly on the first group of traders, because much of the universe of retail traders falls into this category. At many investment banks and hedge funds, however, visual trading is practically non-existent. If you don't have a model with a demonstrable edge, you don't trade. Such traders tend to have solid analytical strengths, but are not necessarily risk-takers.

Riding Bubbles?

Here is a paper by Eric Kole, Nadja Guenster, and Ben Jacobsen: Riding Bubles

Here is a summary/comment about the paper: Bubbles: Ride, Watch or Play the Pop?

Cataclysmic Countrywide

Here is a background article by Art Detman for the FTSE Global Markets Magazin about Countrywide Financial.

Buffett too Old?

Gannon to Barron’s: Berkshire Fairly Valued…As a Buffettless Empire!

However, the age angle is overdone in most media reports. People look at Buffett (like Bill O’Reilly recently did) and say “this guy’s old; he’s going to be dead soon”.

There are a few problems with this logic when applied to Buffett’s future services to Berkshire. One, CEOs don’t usually die in office. Even great CEOs retire long before they reach 77 – and 86 is never even contemplated.

Buffett will work for as long as he’s able. Taking Barron’s actuarial life expectancy of nine years, it’s obvious that Buffett is still expected to last longer at Berkshire than the average public company CEO appointed today. CEOs don’t make it much more than five years on average; so, Buffett’s expected future service time is actually above-average not below average.

Investment Banks Carnage

Investment or other big bank current share price drawdowns (drawdown = percentage below all time high), as of 2007-12-14:

US       |  ATH Date|   ATH| Price|Down %
Morgan S.|2000-09-11|109.37| 50.30|-54.01
Citigroup|2000-08-28| 58.88| 30.70|-47.86
Bear St. |2007-01-12|171.51| 95.29|-44.44
Merrill  |2007-01-24| 97.53| 56.84|-41.72
JP Morgan|2000-03-23| 65.67| 45.20|-31.17
Lehman B.|2007-02-02| 85.80| 62.24|-27.46
BoA      |2006-11-16| 54.90| 42.16|-23.21
Goldman  |2007-10-31|247.92|210.67|-15.03

Europe
Fortis   |2007-04-10| 35.35| 18.47|-47.75
RBS      |2007-03-06|  7.19|  4.39|-38.94
Soc. Gen.|2007-05-04|158.42|100.67|-36.45
Barclays |2007-02-23|  7.90|  5.32|-32.66
ING      |2001-07-02| 39.95| 27.06|-32.27
UBS      |2007-06-01| 80.00| 55.25|-30.94
CS       |2007-04-30| 95.45| 69.95|-26.72
Unicredit|2007-04-26|  7.68|  5.72|-25.52
Deutsche |2007-05-11|117.96| 89.15|-24.42
HSBC     |2001-01-25| 10.84|  8.39|-22.60
BNP Par. |2007-05-23| 94.25| 74.64|-20.81
Santander|2007-10-31| 15.00| 14.69| -2.07

Domestic
N. Rock  |2007-02-09| 12.51|  0.92|-92.65
Countryw.|2007-02-02| 45.03|  9.80|-78.24
IKB      |2006-04-21| 33.13|  7.96|-75.97

Joe Cool

Dr. Joseph Ackerman (source DPA/Manager Magazin)

Anchoring

A good post on anchoring...

Stock Market Psychology Blog: Behavioral finance and beyond - For Smooth Sailing, Winch up Your Financial Anchors