I have been reading Noah Smith work and found very interesting, sharing the 2008, financial crisis that was unfolding, there was a big argument as to whether the crisis was a “liquidity crisis” or a “solvency crisis”. It’s a very important distinction. A “liquidity crisis” is when banks (or similar finance companies) are financially in the black – their assets are greater than their liabilities – but they can’t get the cash to keep paying their bills in the short term. A bank run is the classic example of a liquidity crisis – even if the bank could eventually pay everyone back, it can’t pay them back all at once, so if people get scared and all try to withdraw their money in a rush, they force the bank to collapse. A “solvency crisis”, on the other hand, is when finance companies are actually bankrupt, and no amount of short-term borrowing will change that fact.
This question has important policy implications in a financial crisis. If companies are illiquid but solvent, you just need to have the Fed lend them money to tide them over until liquidity comes back. If they’re insolvent, you either need to bail them out, or help them into an orderly bankruptcy, in order to reduce systemic risk caused by disorderly failure. Continue reading ““liquidity crisis” or a “solvency crisis” – 2008″
Last weekend I have been reading lot of literature and news about the deal between Facebook and Whatsapp. Most of the people have challenged it on the Value and Pricing Perspectives. Have taken some extracted thoughts from prof Aswath Damodaran and they looks very interesting:
Following in the footsteps of my favorite baseball general manager, Billy Beane, its time to play some Moneyball, where we let the data drive our actions, rather than our intellects. Here is what I take out of these numbers:
- If you are an investor, stop trying to explain price movements on social media companies, using traditional metrics – revenues, operating margins and risk. You will only drive yourself into frenzy. Continue reading “WhatsApp Facebook’s Deal”
I do not know how people can be so insane about Candy crush that Candy Crush Saga, made its pitch to potential investors for its initial public offering couple of days back, revealing in a U.S. Securities and Exchange Commission filing just how good its business has been. By the way I don’t like the Candy crush invite on Facebook.
Every month, millions of people download King’s free apps, only to pay up for little digital trinkets that help them make progress in its games. People managing huge investment funds are probably just as hooked as the rest of us on those blinking jelly beans.
The way people changing taste social network and IT gaming companies en-cashing the opportunities, Facebook and Whats-app is a different story in line would put up with details soon. Continue reading “The Candy Crush: King milking out Candy”
In the past years my posts on 14th February some way or the other have been in conversations between Love and Finance, my last post in 2013 on Feb 14th was a kind of open proposal expression through the priceless charts Love you by Finance Market Professional : Valentine day! , also today my blog turned-up 6 years old, and my first ever post was on the Mergers and Acquisitions in India! and the government policies .
Getting back to the topic for today A few years ago, somebody asking this question on market timings would have been dismissed as a nit-picking nerd, but today that question has become extremely important. Last week, the Wall Street Journal’s Money Beat blog ! carried an interesting story about how this difference cost a trader $100,000. Continue reading “At What Time the Market closes 4:00:00 PM or 4:00:01 PM”
These are my all time favorite rules which I try to follow and they are applicable in all the forms of market across the globe.
- Your investor’s edge is not something you get from Wall Street experts. It’s something you already have. You can outperform the experts if you use your edge by investing in companies or industries you already understand.
- Over the past 3 decades, the stock mkt has come to be dominated by by a herd of professional investors. Contrary to popular belief, this makes it easier for the amateur investor. You can beet the market by ignoring the herd.
- Often there is no correlation b/w success of a company’s operations and the success of its stock over a few months or even years. In the long term there is 100% correlation b/w the success of the company and the success of the stock. This disparity is the key to making money: it pays to be patient, and to own successful companies.
- You have to know what you own, and why you own it. “This baby is a clinch to go up!” dosen’t count. Continue reading “Some more from the likes of Peter Lynch”