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It’s here! BlackRock launched the much-discussed fixed income crossing network.
BlackRock Solutions will operate the network for the benefit of it’s own managers and a network of forty-six external clients. BlackRock, alone, manages $3.5t in assets across ten thousand portfolios, but the Aladdin Trading Network –the network’s working title– will also include sovereign-wealth funds, insurance companies and other money managers. For a small fee, participants can cross trades for corporate bonds, mortgage securities and other assets through the platform.
Fixed income trading has been a profitable mainstay of investment banks. The prospect of electronic trading through a crossing network is simultaneously laughable and terrifying. Given the vast investable universe of fixed income instruments, trading these instruments presents a far more complex problem than equities. GE has only one ticker, but it may have a dozen or more credit instruments associated with it, each with its own maturities, rates, claims, etc. Nonetheless, BlackRock is not moving forward on the basis of charity. They want to cut costs, and that means cutting into investment banking profits.
BlackRock’s magical, mystery service has many miles to go before we see the disruption people have predicted. They currently cross 3% of trades internally, and they hope to raise that number to 6-8% with Aladdin. What’s exciting is that they’re bringing forty-six external clients along for the ride.
The insider trading scandal began with shock and awe. Each week brought a raft of indictments. Well-stationed members of society were exposed as frauds and criminals. With insider trading its most visible focus, the legal violence against the finance industry continues. And like so many TV-addled teenagers, the public may now have lost the ability to respond.
An apathetic public, however, is no a reason to stop. Just because insider trading is no longer shocking doesn’t mean we shouldn’t prosecute it to the full extent of the law. But the failure to shock is also not a reason to search for a response by expanding the definition of insider trading.
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the health insurance mandate does not require Americans to subject themselves to health care. It requires them only to buy insurance to cover the costs of any health care they get.
—Einer Elhauge, professor of law at Harvard, founding director of the Petrie-Flom Center in Health Law Policy: via NYT
Professor Elhauge enters the healthcare debate with a precise refutation of the but they’ll make me eat broccoli contingent. So say the many critics of the healthcare legislation passed by congress. If the government can make me buy health insurance, what’s to stop them from making me buy broccoli or worse. Elhauge finds these critics and their adherents baseless for three reasons, all of which point to a perversion of the debate based on a faulty understanding of the Constitution.
It happens that we are already legally bound to purchase healthcare. It’s called medicare, and everyone must contribute to medicare as a condition of employment. Elhauge points out that some might say one can always forgo employment and, therefore, it’s not a mandate. But, asks Elhauge, is that a difference of substance?
If we were to entertain a difference of substance, Elhauge has a constitutional lesson for these opponents. The discussion of the commerce clause, argues Elhauge, is a red herring. Yes, one can invoke it to support the present healthcare reform, and precedents, such as Wickard v. Filburn, provide legal cover. He does make a technical point that the healthcare reform law would need to be phrased differently and offers the following: anyone who has engaged in any activity that affects commerce must buy health insurance. Nonetheless, the broccoli contingent will still have their will it only stop when they make me eat broccoli editorials. Perhaps yes, Congress could make you eat broccoli, but Elhauge reminds us that there is nothing in the constitution against making stupid laws, and not all laws requiring purchases are stupid – example, airbags.
Elhauge swiftly moves from the commerce clause, however, to the necessary and proper clause. If the discussion around the commerce clause is a red herring, the necessary and proper clause is unambiguous.
The mandate is clearly authorized by the “necessary and proper clause,” which the Supreme Court has held gives Congress the power to pass any law that is “rationally related” to the execution of some constitutional power.
Because the law requires insurers to cover everyone while also restricting premiums, it is necessary and proper to the execution of the law to compel everyone to seek coverage. If not, premiums would skyrocket, coverage would be untenable, and the law would fail.
The commerce clause is important, but it’s not the only mechanism at play. The necessary and proper clause provides a critical underpinning to healthcare reform. By narrowing the debate to the commerce clause, healthcare reform’s critics have introduced a red herring and avoided a proper analysis of the law.
He got it right. Des Lachman put a stake down and predicted that Greece would default in May 2010. Today, it did.
Though some had talked about it, few were willing to stake their reputation on the probability of a Greek default. Lachman said, in testimony to a Joint Economic Committee of the Congress, “There is every prospect that within the next twelve to eighteen months Greece will default on its US$420 billion in sovereign debt.” Fifteen months later, the ECB arrived at a debt accord that would give holders of sovereign Greek debt a 50% haircut – more or less, a technical default. Read the rest of this entry »
News stories glue portfolio managers and analysts to their screens. Each story feeds into a positive or negative bias. What if I could automate that? What if I could read everything as it comes out and sort it according to positive and negative news for a company? I could react systematically, quickly and across more stocks. I might even replace the role of the analyst.
Machine-readable news starts with exactly this economic intuition.
Disaffection with existing quantitative trading signals has brought it to investor attention. Advances in linguistic processing and the steady decline in computing costs have made it better and cheaper than before. And a raft of academic and industry papers have guided the way. Read the rest of this entry »
You could say, as many do, that shipping jobs overseas is no big deal because the high-value work—and much of the profits—remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?
—Andy Grove, former CEO of Intel. He goes on to quote Alan Blinder, who wrote, “as TV sets became ‘just a commodity,’ their production moved offshore to locations with much lower wages. And nowadays the number of television sets manufactured in the U.S. is zero. A failure? No, a success.” Grove, however, warns, “…abandoning today’s “commodity” manufacturing can lock you out of tomorrow’s emerging industry.”: via Bloomberg BW
Arguably, the most important economic trend in the United States over the past couple of generations has been the ever more distinct sorting of Americans into winners and losers, and the slow hollowing-out of the middle class. Median incomes declined outright from 1999 to 2009. For most of the aughts, that trend was masked by the housing bubble, which allowed working-class and middle-class families to raise their standard of living despite income stagnation or downward job mobility. But that fig leaf has since blown away. And the recession has pressed hard on the broad center of American society.
—Don Peck: via The Atlantic
The Myth of the Sole Inventor, Mark Lemley, Stanford
There’s nothing that you can look at here that is signaling some revival in growth in the second half of the year, and in fact we may see another catastrophically weak quarter next quarter if things go wrong next week…[that is]…if Congress actually starts implementing a massive contraction by suddenly cutting government spending immediately”
—Nigel Gault, chief United States economist at IHS Global Insight, remarking on recent revision of economic data that indicates the current GDP remains below it’s high-water mark in 2007: via NYT
The word for this report is ‘shocking.’ With slow growth, higher inflation and almost no consumer spending growth, it is very tough to find good news.
—John Ryding, chief economist at RDQ Economics: via NYT
Apparently, contrary to what as Representative Dave Camp and EVP of the US Chamber of Commerce Bruce Josten would have one believe, neither economist is in on the joke.
we now know it is amateur hour on Capitol Hill and we don’t want to be painted in this corner again.
—Christian Cooper, head of dollar derivatives in NY at Jeffries, subverting the Republican conceit that Wall Street is in on the joke: via Bloomberg
Stilltitled 