Dollars and Jens
Sunday, December 19, 2004
Futures markets mine the basics: Air and housing
I'm not sure what I have to add to this aging tribune piece on new financial derivatives.
Two recent events in Chicago expand the way you think about investing:And so on.
The Chicago Climate Exchange, which a year ago began trading industrial pollution allowances issued by the U.S. Environmental Protection Agency, on Friday launched futures trading in the EPA's sulfur dioxide emission allowances.
The Chicago Mercantile Exchange, a 106-year-old institution that began life as a butter and egg exchange, said it may trade futures contracts on house prices.
...Two of the best thinkers about identifying and trading values are Richard Sandor, a pioneer of interest rate futures and CEO of the Chicago Climate Exchange, and Yale University professor Robert Shiller, perhaps best known for his best-selling book "Irrational Exuberance."
Shiller, whose firm Macro Securities Research is behind the housing futures proposal, notes that consistently less than 10 percent of national income is generated by corporate profits--the sole basis of stock prices.
Sandor says we may be near the limit of creating value through stocks and bonds.
Many Americans wisely have discovered another source of value, Shiller noted.
"I think everybody should be invested in real estate, because it's a diversifying move."
derived vulnerabilities in the financial system
The BBC last week showed a movie that was fictional, but designed to look like a documentary — kind of like a Michael Moore movie — and there's been a certain amount of what the British call "wingeing" from the financial community that derivatives traders were portrayed as terrorists. On the contrary, I thought what they did was fairly clever, from a political correctness standpoint. In the show, an Arab derivatives trader commits suicide shortly after a terrorist attack on an oil facility, and it's discovered that a number of the OTC derivatives he was using to cover potential losses had a knock-out clause invalidating them if oil got above $75 per barrel. It turns out eventually that he is not a terrorist working from the inside to destroy a major bank and bring down the global financial system; thus the BBC gets to raise the possibility of a terrorist, even an Arab one, infiltrating a major financial institution and leaving global capitalism especially vulnerable, while ultimately catering more explicitly to ethnic profiling concerns of civil libertarians. Much like Galileo did in his dialog. (Remind me, how did that work out for him?)
Saturday, December 04, 2004
The fussy duck featured in commercials for insurer AFLAC is slated to pop up in "Lemony Snicket's A Series of Unfortunate Events" and a series of ads promoting the movie.Links added. I found the quoted story by Googling, having seen one of the ads and wondering who was paying for them. Apparently, AFLAC is paying, in exchange for having their duck in the movie.