Practical analysis for investment professionals
Fixed Income Roundup

While December is typically a quiet month in the world of finance and investing, last month had a surprising number of important stories. Concerns over the European sovereign debt crisis dominated the intellectual bandwidth, yet there were other stories deserving of the fixed income investor's attention.

Forecast Fatigue: What’s the Value of Annual Market Predictions?

At the beginning of each year, most leading brokerage houses and many prominent investors issue market forecasts. As we approach the saturation point, it is worth pondering whether these forecasts merit the attention of professional investors.

Take 15: ROE: The Wrong Performance Measure for Banks

Robert Jenkins, FSIP, cites the flaws in the traditional return on equity (ROE) measure in measuring bank financial performance and proposes some much needed alternatives.

Losing Money to Preserve Capitalism: Can We Afford to Continue Bailouts? (Part 2)

Modern banking system bailouts fly in the face of the ancient capitalist philosophy of losses signaling market risks. In addition, financial bailouts tend to escalate in size and damaging effects with time.

The Hildebrand Case: Ethics and the Power of Perception

The recent scandal that led Swiss National Bank chairman Philipp Hildebrand to resign highlights the difference between what is legal and what is ethical. The law tells us what we “can and cannot do,” whereas ethics tells us what we “should and should not do.”

Losing Money to Preserve Capitalism: Can We Afford to Continue Bailouts? (Part 1)

A major and ancient tenet of capitalism is the importance of losses to preserving the efficiency of markets. Yet modern banking system bailouts fly in the face of this perennial philosophy.

Book Review: Super Sectors

This book provides a highly accessible and pragmatic approach to the subject of investment vehicles. For the relative newcomer to active investing, it offers several nuggets of useful information. For veteran system developers interested in further honing their trading acumen, it serves as a refresher of key concepts.

Trust is in the Details: Why Advisers Need to Close the Knowledge Gap on Alternative Strategies

A recent survey suggests that some investment advisers may be recommending alternative investment strategies that neither they nor their clients fully understand. In order to regain the confidence and trust of clients and the public at large, investment professionals must commit to doing a better job of understanding — and communicating — the features, characteristics, and risks of these complex strategies.

The DCF Model: Question Your Assumptions

The recent public debuts of companies that have shown great revenue growth but little to no earnings, such as Groupon and LinkedIn, were reminiscent of the dot-com bubble of the late 1990s, and there is a natural temptation to get caught up in the hype. For this reason, it is as important as ever for analysts to rely on the fundamental principles of investing and valuation. And the discounted cash flow (DCF) model is a great place to start.

Take 15: How Much Is the Financial Sector Contributing to the Real Economy?

Roger Bootle shares his views on concerns about the relative size of pay and performance in the financial sector as well as what needs to be done to address these concerns.



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