Category Archives: finance

Yet Another Use for the bitcoin ledger…

25 Friday Apr 2014

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From a recent email (estimize.com) comes this very interesting idea:

“Imagine a stock market where every trade has to be conducted on a public ledger for all to see. The SEC wouldn’t even have to lift a finger to find out who is doing insider trading. Because when one person commits insider trading it hurts other investors, the investment community would write algorithms to catch each other conducting illegal trading activity. Then they would report the public address codes of traders involved in highly suspicious activity to the authorities. From there the regulators would have some way to investigate and identify the perpetrator if the evidence was sufficient . Everyone would still be pseudonymous until the SEC is handed a complaint, then it could act as the enforcer that it’s supposed to be and crack down on the illegal activity discovered by other traders.

Crime and law enforcement have always been and will always be in a technological arms race. Utilizing the transparency of the blockchain protocol and shifting the burden of detection away from the SEC and into the hands of the crowd could be a much better way to do it. Other traders obviously have a much stronger incentive than the SEC to be vigilant and proactive in eradicating insider trading because they’re the ones who stand to lose money when it goes undetected.”

Shiny apples

12 Saturday Apr 2014

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[Edit: 17-Apr-2012, scuttlebutt is the iPhone 6 will cost $100 more than the iPhone 5s (retail) and that Apple is asking telcos to absorb some of this increase, to which there is some push-back. See bottom of post for more analysis.]

Idle speculation, whilst on the treadmill ….

Where could $AAPL be planning to use its Sapphire? (too much smoke for there not to be a fire; Apple’s planning something to do with Sapphire, but what?)

1) iPhone screen – ok, so every other dude and his dog, thinks this is the plan.

Criticisms: It’s too expensive – about 10x the cost of Gorilla Glass ($GLW) they say

It’s too heavy, denser than Gorilla Glass….

It’s harder, but not more shatter proof. It’ll scratch less but may not be more durable.

It’s less transparent.

So assuming all of the above is true to some degree:

It’s heavier, less transparent, at greater risk of shattering and costs 10x more –> but is much more scratch-resistant. There’s some scepticism…but is it a case of hater’s gonna hate?

2) iPhone Back – no one’s saying this (at least no one I’ve heard as yet …)

iPhone backs (the metal bits) are what seems to get scratched the most; a very thin sheet of Sapphire coating the back would make it super-awesome. Shatter-resistance would come from being bonded to the metal underneath?

3) Trackpads – Sapphire is insanely smooth; much much smoother than glass. Fingers glide so much more freely.

Not as big as screens. Less to worry about in terms of weight and transparency. Perhaps it’s trackpads on MacBooks?

4) Some new device altogether – perhaps some kind of remote….?

Go on, tell me what you think ….leave a comment….

It has begun ….

29 Monday Mar 2010

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The globalization of the internet …

  • Google: 890mm worldwide visitors, 745mm non US – 84% non US
  • Facebook: 471mm worldwide visitors, 370mm non US – 78% non US
  • Twitter: 74mm worldwide users, 53mm non US – 72% non US

The BRIC countries are going to be the most important markets going forwards…. now is the time to invest in Internet properties in India/China etc. Properties with an Indian focus like say Rediff.com are going to be increasingly important, possibly more important than Facebook and Twitter in the coming decade.

All your base….

Note: stats nicked from a post by Fred Wilson who is superb at detecting trends before they’re "trendy”.

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CoCo’s reinvented …

19 Friday Mar 2010

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I just love how the FT can misreport stuff and get away with it. Like “Snakes on a Plane”, it’s so bad, it’s good!

Check out:

http://www.ft.com/cms/s/0/76bc2ae2-e34c-11de-8d36-00144feab49a,s01=1.html

“Are they bonds? Are they stocks? Or are they actually catastrophe insurance?

Bankers declared the birth of a new asset class – contingent convertible capital notes, nicknamed CoCos – after Lloyds Banking Group announced a successful take-up of a £9bn exchange of CoCos for some of its existing hybrids.

Regulators think these instruments are the answer to banks’ capital prayers because they clear up the uncertainties of existing hybrids by converting into equity at a pre-set trigger and price.

But how do CoCo bonds work? Our interactive feature explains.”

You’d think that CoCo’s are a new asset class?

Nope! Old scam. CoCo’s were used as a means to inflate reported earnings. You did not have to report CoCo’s as equity when computing fully diluted earnings. You could pretend the contingency would never arise and therefore, pretend that your yield was that much higher than any sensible definition (based on pragmatism) would allow.

In 2004:

“I don’t like deals that don’t have a real reason other than an accounting gimmick," says Ted Southworth, a fund manager at Northern Trust. The CoCo, he says, is "close enough to a gimmick that we’d probably be better off without it."

Possible Accounting Change May Hurt Convertible Bonds
Aaron Lucchetti.  Wall Street Journal (Eastern Edition). New York, N.Y.:Jul 8, 2004.  p. C.1

In 2005:

FASB Rule 128 dented the enthusiasm somewhat. CoCos became forgotten. Now being revived with the active connivance of the FASB which has been diluting all kinds of rules off late 🙂

In 2009:

So why is this old scam being revived? ‘Cuz CoCo’s count as equity when it comes to computing “Tier-1” Capital. Figured that out from the FT’s interactive graphics? Good on you!

So what happens when err… a bank’s totally safe, ‘AAA’ rated assets fall in value? CoCo’s convert into? worthless equity further diluting existing shareholders, causing equity value to fall, triggering "protection” money being robbed from us tax payers. And we can blame it all on the “derivatives” bogey-man.

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India Budget 2009 – Early Reaction

06 Monday Jul 2009

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Nothing big bang; disappointing overall

Sensex Down:Sensex on Jul 6 2009

Notes

  • Surcharge on personal tax scrapped.
  • Fringe benefit tax scrapped.
  • Personal tax limit increased to 2.4 lakhs for senior citizens , 1.9 lakhs for women, 1.6 lakhs for others
  • No change in Corporate tax.
Disappointing for housing, they were expecting a lot more.
Only small changes in terms of personal tax — which means people will have a little more to spend. Perhaps this will benefit FMCG. Certainly not enough for housing.
Fairly good for infrastructure, some bank loans will be refinanced but less than expected. Hence infra stocks down
Emphasis on education
Good for IT Sector. Earlier had to pay excise & service tax –> now pay only service tax on transfer of licenses
Overall some simplification of taxes.

Budget Highlights http://indiabudget.nic.in/ub2009-10/bh/bh1.pdf

Full text of Pranab Mukherjee’s Speech: http://indiabudget.nic.in/ub2009-10/bs/speecha.htm

Coverage on Yahoo Finance: http://in.budget.yahoo.com/live-coverage.php

Agency Ratings – An idea

03 Friday Jul 2009

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Attending a CF class at the moment, where we’re talking about ratings (‘AAA’) and the like. Just wondering why people would bother with agency ratings when its clear that most agencies have really pathetic track records.

Why not just use an implied rating? I mean the spread between a company’s current cost of debt and govt. cost of debt scaled to between ‘AAA’ and ‘BBB-‘ or something…? We use implied vol, implied corr, implied everything … so why not implied rating?

Consider http://www.mscibarra.com/resources/pdfs/market_implied_ratings.pdf … really straightforward. Take a peek at Table 1 (from the paper)

46% of companies with an ‘AAA’ agency rating have an implied ‘AAA’ rating.

54% of companies with an ‘AAA’ agency rating have a different implied rating! Shocked?

Just Google for “implied ratings”. Tons of good material

I mean if we don’t need to pay S&P it is better for the world economy as a whole right?

I think it would be a good idea to setup a neat open-source, implied rating website for the common good.

  • What is a good source of bond spreads (free, open)?
  • What are the rules relating to the use of S&P ratings? Are they available free for use on a website?

Update 22/7/09
Just noticed this. SACRAMENTO — The nation’s largest public pension fund has filed suit in California state court in connection with $1 billion in losses that it says were caused by “wildly inaccurate” credit ratings from the three leading ratings agencies.

Update 17/01/10

Really good video which explains the whole problem. Just realized that Fitch, Moody’s and S&P are the only three agencies that have a mandate from the government. This means that pension fund managers and others who are forced to buy ‘AAA’ rated securities must rely on the dodgy and obviously crap ratings given by Moody’s, Fitch & S&P.  Why not let the fund manager decide what to buy and find some other way to align the fund managers interest with that of the funds beneficiaries? I mean that’s what everyone else does right? Trying to align manager’s incentives with their own and then let the manager do whatever he/she likes?

In the meantime .. need to think of a good way to profit from this “insanity”