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Fri Nov 21

• What's Happening to Berkshire Hathaway? - Finance Blog - Felix Salmon - Market Movers - Portfolio.com: So yes, Berkshire might be looking cheap -- but other stocks are looking cheaper, and always remember that Berkshire, like any insurance company, is very highly leveraged, with contingent liabilities many times higher than its asset base. AIG and the monolines were brought down because they stopped insuring real-world risks and started insuring financial risks. Berkshire' ;s in the same business, with its credit default swaps and equity puts. Which means that in fraught times like these, there will be lots of question marks over its real value.
• Pushing on a string - Paul Krugman Blog - NYTimes.com: Bernanke?s problem, and ours. This picture shows the target Fed funds rate, the usual tool of monetary policy; the 10-year Treasury rate; and two rates that actually matter to the private sector, the mortgage rate and the rate on Baa-rated corporate bonds. The Fed has had no success in reducing mortgage rates, and corporate borrowing costs have gone up, not down. Add in falling expectations of inflation, and in real terms monetary policy has gotten tighter, not easier.
• The Epicurean Dealmaker: Graveyard Spiral: While descending turns are commonly performed by pilots as a standard flight manoeuvre, the spiral dive is differentiated from a descending turn owing to its feature of accelerating speed. It is therefore an unstable flight condition and pilots are trained to recognise its onset, and to implement recovery procedures safely and immediately. Without intervention by the pilot, acceleration of the aircraft will lead to structural failure of the airframe, either as a result of excess aerodynamic loading or flight into terrain. Spiral dive training therefore revolves around pilot recognition and recovery.
• Modulo: Governance, Risk, Compliance, Management, software, IT
• End of the beginning? ? Crooked Timber: "The national bankruptcy of Iceland seems likely to followed by something similar for Switzerland&qu ot; - too big to fail, too big to save
• naked capitalism: The Ill-Considered Problem of a GM Bankruptcy: However, a second, and potentially far more damaging issue, may have been largely overlooked. The proponents of letting GM go argue that it can go into Chapter 11 just like other big companies that get themselves in trouble. That may not come to pass, and a Chapter 7 (liquidation) would be a seismic event. We have noted more than once on this blog that debtor-in-poss ession financing, along with other forms of credit, has become virtually non-existent and costly. DIP is essential for most Chapter 11 bankruptcies. Why? It actually takes time to get the plan of reorganization approved by creditors and the courts. Most companies, and GM is in that category, head to bankruptcy court when they are at the end of their rope liquidity-wise .
• Curious Cat - What's the Value of a Big Bonus?: Extracted from the NYT (once again their website is functionally borked) - "the offer of a higher bonus led to poorer performance&qu ot; - Dan Ariely (NYT, Nov 2008) - cf. Alfie Kohn (NYT, 1993, plus ca change) - risk of extrinsic motivation (betting the farm/company/c ountry)
• Jeff Matthews Is Not Making This Up: Is Buffett Worried? No, but Somebody Is: All told, Berkshire entered the crisis with nearly $50 billion of theoretical derivative exposure. This may seem ironic, given Buffett?s early warnings against derivatives as an asset class (?ticking time-bombs,? he called them five years ago), s. ?We have at least 60 derivatives,? he told shareholders two years ago, ?and believe me: we?ll make money on all of them.? And his shareholders believed him. But somebody, now, does not. Who might that somebody be? For starters, the firms (insurance companies, most likely) who purchased those index puts from Berkshire might be getting nervous that, since the crisis has not let up, they should hedge their exposure to Berkshire. Or it might be insurance companies that have purchased reinsurance from Berkshire (Berkshire does a huge business in catastrophic reinsurance?hu rricanes and such), hedging their exposure in case the ?Oracle of Omaha? suddenly loses his touch.

Thu Nov 20

• The Atlantic Systems Guild
• The Two Kinds Of Security Threats, And How They Affect Your Life | securosis.com: We get money for noisy threats, and get called paranoid freaks for trying to prevent quiet threats (which can still lose our organizations a boatload of money, but don?t interfere with the married CEO?s ability to flirt with the new girl in marketing over email).

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