Today is relatively quiet on the China-financial-news front (the SSE Composite was down 36 bps, but not much else happened), so rather than discuss the most recent numbers and events and their possible implications for financial policy, I want to write about something a tad more theoretical. For the past two months there has been a big buzz about a paper (.pdf) by Carmen Reinhart and Kenneth Rogoff (which I will refer to as R/R) called “This Time is Different: A Panoramic View of Eight Centuries of Financial Crises.” As the title implies, the authors examine the historical evidence of financial crises over a long time frame in an effort to develop an understanding of the causes and consequences of financial crises.

As someone who has been interested for a long time by the history of international capital flows and financial crises (a big part of my book The Volatility Machine was an examination of developing country crises over the past 200 years), it was a dead certainty that I would read the R/R piece, and sure enough I have just finished it. It was a great pleasure to see so many references to some of the classic and obscure books on financial history that I have read so often that I feel almost as if they were old friends.

Warren Buffett regularly points out that a business with pricing power will reign supreme over the long run. He reflected on this theme (among others) in one of his 3 lectures at Notre Dame in 1991:

I’ll try this on the students later: What’s the highest price of a daily newspaper in the United States? [Pause] [This is what he said to the students later: Most of you are familiar with it. The highest priced daily newspaper in the United States, with any circulation at all, is the Daily Racing Form. It sells about 150,000 copies a day, and it has for about 50 years, and it’s either $2.00 or $2.25 (they keep raising prices) and it’s essential. If you’re heading to the racetrack and you’ve got a choice between betting on your wife’s birthday, and Joe’s Little Green Sheet, and the Daily Racing Form, if you’re a serious racing handicapper, you want The Form.

2008-05-16T06:47:40-04:00 Shai Dardashti

Shai Dardashti submits:

Warren Buffett regularly points out that a business with pricing power will reign supreme over the long run. He reflected on this theme (among others) in one of his 3 lectures at Notre Dame in 1991:

I’ll try this on the students later: What’s the highest price of a daily newspaper in the United States? [Pause] [This is what he said to the students later: Most of you are familiar with it. The highest priced daily newspaper in the United States, with any circulation at all, is the Daily Racing Form. It sells about 150,000 copies a day, and it has for about 50 years, and it’s either $2.00 or $2.25 (they keep raising prices) and it’s essential. If you’re heading to the racetrack and you’ve got a choice between betting on your wife’s birthday, and Joe’s Little Green Sheet, and the Daily Racing Form, if you’re a serious racing handicapper, you want The Form.

Complete Story »

BRK.A BRK.B Shai Dardashti

Agriculture Is Still Growing - Fast Money Recap (5/15/08)

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Recap of CNBC's Fast Money, Thursday May 15.

Oil Rolling Over

On oil’s rollover, Tim Seymour discussed Congress’ plan to curtail the buying practices of speculators, but thinks this news will have little effect on oil. With options expiration, there should be selloff in oil, and Seymour cites demand as a large factor. Pete Najarian says oil is being traded like a currency and while it finished flat, the oil services sector was strong. Jeff Macke expected a much bigger drop in oil on Thursday.

2008-05-16T06:46:03-04:00 SA Editor Miriam Metzinger

Recap of CNBC's Fast Money, Thursday May 15.

Oil Rolling Over

On oil’s rollover, Tim Seymour discussed Congress’ plan to curtail the buying practices of speculators, but thinks this news will have little effect on oil. With options expiration, there should be selloff in oil, and Seymour cites demand as a large factor. Pete Najarian says oil is being traded like a currency and while it finished flat, the oil services sector was strong. Jeff Macke expected a much bigger drop in oil on Thursday.

Complete Story »

POT DE MOS MON AGU BG DRYS BNI KFT AMLN ISIS YHOO MSFT RIMM AAPL CSCO JNPR T TIF JCP KSS WMT CVS TIN KO PEP CLX TAP BUD CELG DNA MDRX GLW DIS BHP INTC SOHU IMAX DOG C SSL SA Editor Miriam Metzinger

Berkshire Hathaway Assurance Corp.: An Royalty on Stabilty

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The Forest:

Some Personal Reflections from 20,000 Feet...

2008-05-16T06:42:50-04:00 Shai Dardashti

Shai Dardashti submits:

The Forest:

Some Personal Reflections from 20,000 Feet...

Complete Story »

BRK.A BRK.B Shai Dardashti

Clear Channel: Are the Banks a Clear Winner?

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Daniel Primack over at PE Hub, in his post sizing up the Clear Channel (CCU) settlement, said it was difficult to determine if the banks were winners or losers. Given the failure of the banks to present a united front, as described by Deal Journal, having John Mack’s top bankers step up to work out a solution was just about the best outcome the banks could have hoped for.

After going to court, the banks cannot compare the outcome to just paying the break-up fee not to do the deal. They traded a lower loss on this debt to improve their reputations and cap the losses that could have been enormous if the court case went forward. Yet, it is worth noting that the court case may have been an exercise in futility for the sponsors if their damages got capped at $600mn by the courts. If this settlement makes the sponsors give up more on BCE (BCE), then clearly the banks are winners here.

2008-05-16T06:37:44-04:00 Prince of Wall Street

Prince of Wall Street submits:

Daniel Primack over at PE Hub, in his post sizing up the Clear Channel (CCU) settlement, said it was difficult to determine if the banks were winners or losers. Given the failure of the banks to present a united front, as described by Deal Journal, having John Mack’s top bankers step up to work out a solution was just about the best outcome the banks could have hoped for.

After going to court, the banks cannot compare the outcome to just paying the break-up fee not to do the deal. They traded a lower loss on this debt to improve their reputations and cap the losses that could have been enormous if the court case went forward. Yet, it is worth noting that the court case may have been an exercise in futility for the sponsors if their damages got capped at $600mn by the courts. If this settlement makes the sponsors give up more on BCE (BCE), then clearly the banks are winners here.

Complete Story »

CCU Prince of Wall Street

PE May Get More Rope to Hang Itself

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