Finance is a tool for greasing the wheels of an economy, and when it
serves its proper role, finance can be a very good thing. But it can
(and should) never be the economy itself; it is fundamentally
derivative on the labor of real people doing real work. By extension,
an economy that gives pride of place to what should be a tertiary
concern is an economy that is winding down and running out of ideas.
Just as the ascendancy of the lawyers is the death knell of an industry
(cf. the dying spams of the major record labels and the RIAA), so the
dominance of financial services signals an economy that has become
tired and spent.

Via – Felix Salmon:

Rich doesn’t mean you have no debt. Rich doesn’t mean you don’t want more money. Rich doesn’t mean you can have whatever you want, or that you can live on the interest on your interest. And rich certainly doesn’t mean you have no worries and are satisfied with your lot in life.

Rich doesn’t mean the top half of the population, or the top quarter, or the top eighth, or even the top sixteenth. But the top 3.5%? Sure.

Are you in that income bracket? Then admit it. You’re rich. It’s nothing to be ashamed of.

Mauritania | Setting sail | Economist.com:

Armoud, a Gambian taxi driver who attempted the pirogue trip to the Canaries last year. With time to spare, I ask him to tell me his story.

In lyrical English, he recounts three attempts to reach Europe since 2002. He tried and failed to enter through Algeria and Libya, returning to his home in Banjul where he worked for his younger brother as a taxi driver.

After eight months he returned the car. “It’s Africa,” he says defeatedly. “When you have nothing and your younger brother has a small amount, they control you.”

Determined to return to Gambia a rich man, he went to Mauritania, raised money as a taxi driver and travelled to the Canaries by pirogue. Three people died on the way because they “felt crazy inside the sea” and jumped out of the boat. The Spanish returned him to Mauritania after a few weeks.

He is determined to keep trying. He thinks his best bet is to make his fortune in Libya. It is not as “sweet” as Europe, but the risks are lower and there is work to be found. No matter what, he will only return to his family in Banjul a wealthy man. “Then,” he says, “everybody can feel proud and enjoy it together.”

EconTalk, Economics Podcasts Hosted by Russ Roberts: Library of Economics and Liberty:

2008 Investment company factbook. There are now twice as many mutual funds as stocks in the US.

Putting Death to Sleep with an eventful life:

Liberty is a wonderful antidote to socialism. Freedom appeals to those who can take care of themselves, socialism appeals to those without much confidence in themselves. The faux security of socialism is an easy sell over the visible risks of personal responsibility.

Wall Street is, as always, little more than a sublimated pirate fleet,
albeit a highly educated, highly compensated one. Many are called, few
are chosen, and fewer still rise through the ranks to run an entire IB
division.

Succeeding in the upper echelons of a Wall Street firm is as much a matter of nuanced power politics as anything else. You need to be good at the actual job, to be sure. But you also need to be good at favor-trading, strategic maneuvering, and convincing the board of directors that you’re good at your job.

In the U.S., with a population of 300 million, the average person uses 25 barrels of oil a year. In Asia, with a population of 3 billion, the average person uses two barrels a year.

What Warren thinks… – Apr. 14, 2008

How do you get your ideas?

I just read. I read all day. I mean, we put $500 million in PetroChina. All I did was read the annual report. [Editor’s note: Berkshire purchased the shares five years ago and sold them in 2007 for $4 billion.]

Bakken Formation

North Dakota and Montana have an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil in an area known as the Bakken Formation.

A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency’s 1995 estimate of 151 million barrels of oil

Most students come to business school for a handful of reasons, (roughly in order of priority):

1) To break into new industries or functional specialities
2) To punch their ticket in order to get a promotion
3) To make connections
4) To re-brand their resumes with a better educational institution
5) To actually learn something
6) For a company sponsored “vacation” (esp. consultants & bankers)
7) To ride out a lousy job market

In almost all cases, the student anticipates compensation increases to make the investment worthwhile. A general curriculum addresses all but the first item, and elective courses can enable learning a new field.

MBA students come with a wide range of expertise and the first year core curriculum is a way to ensure everyone has a grounding in the basics. Also, many of the students that become investment bankers and consultants upon graduation eventually enter and lead operating companies. Those in private equity and VC shops still need to be able to think like managers. While the Master of Finance may be a better course of study for the functional specialist, the MBA will retain its appeal as a generalist degree.

Index, ETF and Funds Data – IndexUniverse: Downloadable

The New Math: Alpha Magazine

On Exactitude in Science

Dreams of a super regulator – TheDeal.com

Engineering Targeted Returns and Risk by Ray Dalio of Bridgewater.

FT Alphaville » Soros – There is a fundamental market misconception (it says so in my book)

Free exchange | Economist.com

Risk is inherent in financial markets. The outcome of many variables can not be perfectly anticipated. The current portfolio models do not, and never have been, intended to enable hedging of every potential outcome. Most are equilibrium models, which means they rely on a set of assumptions that rarely hold in the market. That does not diminish their value. Economic and financial models can be thought of as a map. If a map included every detail in the geography (trees, country roads, etc.) it would be intractable, rendering it useless. Maps do give you a sense of scale and how variables relate. This facilitates your journey, but does not eliminate unforeseen diversions and the potential for accidents.

Finance is a brain for matching labour to capital, for allowing savers and borrowers to defer consumption or bring it forward, for enabling people to share, and trade, risks. The smarter the system is, the better it will do that. A poorly functioning system will back wasteful schemes and shun worthy ones, trap people in the present, heap risk on them and slow economic growth. This puts finance in a dilemma. A sophisticated and innovative financial system is susceptible to destructive booms; but a simple, tightly regulated one will condemn an economy to grow slowly.

Guide to Financial Markets, 4th Edition, Marc Levinson, 2006

Headhunters and How to Use Them, Nancy Garrison Jenn, 2005

Dealing With Financial Risk, David Shirreff, 2004

Guide to Business Modelling, Second Edition, John Tennent and Graham Friend, 2005

Guide to Analysing Companies, Fourth edition, Bob Vause, 2005

Guide to Economic Indicators (6th Edition), 2007

One morning, a blood vessel in Jill Bolte Taylor’s brain exploded. As a brain scientist, she realized she had a ringside seat to her own stroke. She watched as her brain functions shut down one by one: motion, speech, memory, self-awareness …