2013-31 How markets react to news

The news of the pending shutdown resulted in small declines in markets

Why small? Because it was expected
Why a decline at all? Because the matter is closer to a negative resolution than it was on Friday. So it is still news.
What may happen if there is no shutdown? Hard to say.

2013-30 Shutdown!

It looks like the US will not come up with a budget by midnight. As a result the so-called shutdown will start. It is for the 17th time in 37 years. Out of recent presidents, only George W. Bush did not experience a government shutdown.
What you shoud know: the Globe article mentions a few things.

• What it is about? The Republican party wants to derail the Affordable Health Act, or Obamacare. They need to agree on a budget but they put forward conditions that the Democratic party rejects
• What will happen? Non-essential government personnel will not work or be paid. The rules change but if you are planning to visit Yosemite, forget it (National parks do close). There can be lineups on the border.
• Debt default is not now, only on October 17, if they do not come to an agreement. That would be a disaster.

My comment: Loonie is not just a one dollar coin

2013-29 Economic discrimination against women

A report was just published  by  the World Bank. They looked at laws that make a distinction between men and women: "in almost 90 percent of the 143 countries surveyed in the World Bank study, at least one law remains on the books to bar women from certain jobs, opening a bank account, accessing capital or making independent decisions."

So despite progress, women have equal rights only in a minority of countries. The biggest offenders are in the Middle East and in Africa. Some of these countries have oil; others are poor. No wonder.

2013-28 $11 billion

is the today's estimate of the fine on JP Morgan related to mortgage-based securities.
The bank is in negotiations with regulatory agencies in the U.S.; $11 billion is the rumored amount. Yesterday the talk was about $3 billion - see post 2013-23

So what happens with shares of a bank that may be paying a record - breaking penalty? They go up.

There are two interpretations:
1. Wall Street Journal's (the view from Wall Street)
the fine puts the legal problems behind, and the bank will be able to concentrate on what it does best (i.e. money)
2. My suggestion: there was talk of $20 billion. So if they end up with $11 billion, it is not so bad.

Here is the Wall Street Journal article, in case you cannot read it online

Knowledge Is Power at J.P. Morgan

Investors May Be Seeing Some Light at the End of the Firm's Legal Tunnel

By
• DAVID REILLY

Eleven-figure legal settlements are scary for any company, even big banks. But for investors, there is also something to be said for certainty.
J.P. Morgan Chase JPM +2.74% appears to be nearing a settlement with federal and state regulators over mortgage-backed bonds. The possible price could be a cool $11 billion or even more.
Only a portion, possibly $7 billion, would be cash, with the remainder coming through relief to consumers. Even so, that is still a big hit, equal to nearly a third of the bank's forecast 2013 net income. Yet J.P. Morgan's stock rose nearly 3% Wednesday.
One possible reason: A deal would show the bank is getting some of its numerous legal issues sorted. A week ago, it settled for nearly $1 billion charges related to its "London whale" trading debacle. And even a big number at least allows investors to quantify the damage.
Consider Bank of America. In recent years, it entered into settlements worth many billions of dollars related to mortgage securities, including an $8.5 billion agreement still subject to legal challenge. Yet BofA's stock rebounded as it showed it was whittling down its mountain of legal woe and could handle the cost.
Granted, J.P. Morgan's settlement, if reached, could cause larger-than-expected legal expenses for the current quarter. While the bank had signaled those would likely be more than $1.5 billion, the charge could now end up even higher. And the bank still faces other regulatory and legal issues.
For investors, though, just being able to put a figure on such hits is half the battle.

2013-27 Banks still need more capital

According to an estimate, banks have insufficient capital.
The good news: the shortfall fell by almost a half in the first half ot 2013; the bad news is that European banks are behind.

2013-26 Robin Hood in reverse

Here is an article from the Forbes that addresses one of the biggest economic problems: the growing inequality. Income inequality has been growing in most developed countries in recent years. It gave rise to the Occupy movement in many countries. We do know that the bigger income inequality, the less happy people say they are. The effects of income inequality on economic performance are debatable.
Income redistribution is not really an economic question: it is a social question and different societies approach it differently. In Scandinavian countries income taxes are very progressive, income inequality is low, people are happy and quite wealthy. There are other societal arrangements as well.

Here is a voice from the other side. Mr. Binswanger argues that the rich should pay no taxes and that the 99% should give to the 1%.

Well, he is obviously .... , let us say politely Hobin Rood, or Robin Hood in reverse

But why is this argument wrong from the economic point of view?

2013-25 US to run out of money

US will run out of money by October 17
So by then the borrowing limit needs to be raised (see posting 2013-22)

2013-24 Insider trading 2.0

What is insider trading? It is trading on information that is not publicly available.
Does it matter how the information was obtained? Probably not very much for the trader, but I am not a lawyer.
But it matters for the provider of the information. How about someone selling the information for a profit?
Well, it turns out that things are more complicated that one may think. Here is the story
and here is the explanation from a law professor
The story: University of Michigan conducts a survey of consumer sentiment. The results of the survey provide important information to market participants and move share prices.
The UofMichigan provides the study to Thompson Reuters, which sells it to a select group a couple of seconds before making the information public.
The institutions that get an early peak at the data are the so-called high-frequency traders. They have powerful computers, and sophisticated computer programs, which allow them to make trades within milliseconds of receiving information. So the 2 seconds advance information is sufficient for them to make trades before the general market learns the results of the survey.

In a nutshell, the law professor says that an institution that holds information obtained through research can do with it as it pleases. It may be unfair to sell early access to information, but it is not illegal. Companies must release information about themselves simultaneously to everyone. But the survey information is not about Thompson Reuters.

Below is some legal info from Professor Henning:

"Although it is natural to think that having access to information that influences the markets before others is always wrong, the laws on fraud do not go that far. Instead, they focus on whether someone has been deceived, either through a misstatement or by a failure to disclose information [...] the core of any violation is still about proving fraud, which includes not just false statements but also any “deception, concealment, suppression, false pretense or fictitious or pretended purchase or sale” of securities.[...]
Thomson Reuters and others who selectively disclose information to subscribers are not hiding what they do. Indeed, it is the exact opposite — they tell the world that only those willing to pay will get the advantage of an early peek at the information."

And so it is all legal but unfair.

2013-23 Malfeasance continued

I wanted to take a break from the chronicles of malfeasance, but news took over. The biggest bank in the US is JP Morgan. It did pretty well during the Great Recession. But now it is facing numerous investigations. So - a banker's idea  - why don't we just pay off the investigators
This is from the WSJ, Just in case you cannot see it, a summary: they propose to pay a fine of $3billion.
Sounds like  a lot of money. But maybe it is not. It is less than half of their last quarter's profits.
Below is the list of fines so far.

I have seen a report  that a government agency proposed a fine of $20 billion. It will be interesting to see how it ends.
Andrew Ross Sorkin makes an interesting point about fines for malfeasance. Who pays them? Shareholders. Who is guilty? Management. Talk about other people's money.
In the "London whale" fiasco, the company lost $6 billion. This reduced profits and the value of shares. Now they paid almost $1 billion in fines. This reduces profits and the value of shares, yet again.

2013-22 Problems in the US

In a week the U.S. government may partially shut down. It current spending authority runs out at the end of the month. The House of Representatives and the Senate must agree on a continuing spending resolution to fund the government. It then has to be signed by the President.
So far the House, which moves first, approved a continuing spending resolution that provides the authority to spend money but defunds the health - care plan popularly known as Obamacare. The Senate will not agree to this; it will remove the defunding provision and send it back to the House. What happens afterwards is anyone's guess.
The government shutdown is not a terrible problem; it happened before (in 1995/96).
It is possible that it will be avoided as the action is very unpopular: in a recent poll 59% of Americans were against linking the funding bill to Obamacare, 19% is for.

But there is another looming problem. The U.S. cannot legally borrow more money because of a legislative limit on debt. In the middle of October it will run out of money and will not be able to fund its operations. One possibility is that it will default on debt. If this happens, the damage to the world economy will be enormous.

I will keep you informed.

2013-21 The policy dilemma in India

India is facing a policy dilemma. Inflation is high, and the economy is weak. What to do?
The new governor of the India's central bank, Raghuram Rajan is a leading macroeconomist from the University of Chicago business school. His answer: inflation is a bigger problem. So the central bank is raising interest rates.
Inflation in India is 9.5%, extremely high by current standards. The Reserve Bank of India decided that inflation is now a more pressing issue than output and, if it is not adressed now, it will become a bigger problem in the future. We have seen this in Canada in the early and in the late 1980s, when two recessions were caused by anti-inflationary policies of the Bank of Canada.

Question: The new interest rate is 7.5%, the inflation rate is 9.5% so the Reuters journalist concludes  "the cost of living is rising faster than interest rates." Is the journalist right?

2013-20 Greece on the mend

According to the latest reports, Greece may achieve a primary surplus in 2013. This is a condition for asking for more help. So if they do manage to have a primary surplus, it will be a sign that Greece is on the mend.
What is primary surplus? It is a difference between current revenue and current expenditure, and does not count interest payments on debt.
I have always thought that it is a strange measure, with only one sensibel application. A country that has a primary surplus can default on its debt and, if nobody does anything, wil have sufficient funds to survive. But of course creditors will do something, for example take over export receipts. So you tell me what the significance of a primary surplus may be.

2013-19 Chronicles of financial misconduct - Canada edition

Last week the Ontario Securities Commission reached a settlement with Ian Telfer, Chairman of Goldcorp Inc (current market cap $21 billion). The details of the agreement are here.
Two things worth noting:

• Advising Agueci to use Blackberry PIN messages instead of email 

• Non-disclosure of the beneficial ownership of shares

Details are further below.
As part of the agreement "Telfer agreed to pay $200,000 toward the investigation costs.

He also cannot “directly or indirectly, trade, arrange for trading by others,” any securities of issuers of which he is a promoter for one year." (this is a quote from a Toronto Star article).

Below is a part of the Settlement Agreement (Click here for the entire agreement). Look in particular on the details of a couple of transactions in points 21, 23 and 27a.

I first read the description of the settlement in  he Globe and Mail (their report is here). It does not provide the details mentioned above. I then read the description in the National Post, and researched the matter further.

Advising Agueci to use Blackberry PIN messages instead of email
15. In and about January 2008, Telfer advised Agueci to use Blackberry PIN messages instead of email.
16. On January 29, 2008, Telfer advised Agueci in an email as follows:
Go to the “wrench” on the homescreen and click on “status” Send me the #. On my address beside the pin: [pin number] Instead of emailing. Use pin with very close friends. Messages don’t go to the gmp server. They go straight to blkberry.
17. The use of Blackberry PIN messages is a technique which Telfer now understands that Agueci subsequently used to communicate with others in relation to trading securities.
18. Agueci on occasion asked Telfer via Blackberry PIN messages about companies in which she was invested. Agueci and Telfer also discussed via Blackberry PIN messages Agueci’s investment in a company for which he was Chairman.
19. Telfer acknowledges that irrespective of his reasoning for using Blackberry PIN messaging from time to time, it was not proper of him to advise someone working for a registrant such as Agueci to use Blackberry PIN messages where those messages would not be monitored. At the time, Telfer had no knowledge of how Agueci used her Blackberry to communicate with others and he had no knowledge of Agueci’s other conduct as alleged in the Statement of Allegations.
20. From time to time Telfer and Agueci exchanged updated PIN numbers.
Non-disclosure of the beneficial ownership of shares
21. In April 2008, Telfer provided Agueci with the opportunity to purchase 500,000 common shares in a private share transaction in 222 Pizza Express Corp. (“222 Pizza”). 222 Pizza was a shell company listed on the NEX board of the TSX Venture Exchange.
22. Telfer advised Agueci that the 222 Pizza shares should not be purchased in her name. During the discussion Telfer and Agueci agreed that Agueci’s brother in law, Santo Iacono (“Iacono”), would instead purchase the 222 Pizza shares.
23. As agreed, Iacono purchased the 222 Pizza shares in his name for $5,000. Telfer now understands that Iacono deposited the 222 Pizza shares in a brokerage account held jointly by him and his wife.
24. At the time of the transfer, Telfer knew that Agueci had disclosure obligations and trading restrictions as an employee of GMP. Telfer knew that Agueci was prohibited from engaging in undisclosed securities transactions.
25. Prior to the transfer of 222 Pizza shares to Iacono’s account, Telfer corresponded directly with Iacono and other investors, and advised them of particulars of the transfer and emphasized that they should “keep this confidential”.
26. Subsequent to the transfer of 222 Pizza shares to Iacono’s account, 222 Pizza went through a corporate reorganization, investment in gold stream royalty agreements, and the renaming of 222 Pizza to Kadywood Capital Corp. and then Gold Wheaton.
27. Telfer now understands that:
a. the 222 Pizza shares were sold in Iacono’s account and ultimately yielded a return of over $500,000;
b. Agueci used those proceeds to, among other things, direct trading in Iacono’s account in securities of other issuers that were then listed on GMP’s grey or restricted list;
c. in or about the same time as the purchase of 222 Pizza shares, Agueci purchased and sold shares of Kadywood/Gold Wheaton in her brokerage accounts at GMP and TD Waterhouse which were monitored by GMP compliance. The sale of these shares in Agueci’s GMP and TD Waterhouse accounts yielded a return of over $71,000; and
d. Iacono subsequently transferred funds from his account to Agueci or on her behalf, at her request, frequently in allotments of under $10,000, which had the effect of avoiding regulatory detection. Telfer further understands that approximately $200,000 was paid to/for Agueci in this manner.
28. Telfer acknowledges that if Agueci’s interest in or trading authority over the 222 Pizza shares in Iacono’s account had been disclosed to GMP, that GMP’s compliance department would have been able to monitor trading in that undisclosed account, just as they monitored trading in Kadywood/Gold Wheaton shares in Agueci’s GMP and TD Waterhouse accounts, to ensure that Agueci was not conducting trades inappropriately.
29. Telfer’s agreement with Agueci, a person with securities transaction reporting obligations, to have another name associated with the private share transaction of 222 Pizza shares, resulted in a transaction in which the beneficial owner of the shares was not disclosed. Telfer ought to have known there was a real risk that Agueci might have a beneficial interest in those shares that was not monitored by GMP, as required.

2013-18. Bank of Canada sees good times

The governor of the Bank of Canada spoke shortly before Fed's announcement. He sees good things ahead for the Canadian economy.

He points out that, with the economy improving, business confidence increases and he expects that firms are going to increase investment soon.

Note the last sentence. The interest rates have been kept low since 2010 and analysts do not expect an increase until the next year. We will see if the Bank of Canada surprises, or does not surprise, analysts.

2013-17 FED talks, world reacts

No end to monetary stimulus means loose U.S. monetary policy. This spills over around the world and stock markets rise

2013-16 FED decided to keep the monetary stimulus

to the surprise of analysts

It seems the problem is communication. The FED appeared to be ready , and signalling, a reduction in bond purchases.

There are two lessons:
- transparency
- things may change over time

Transparency: The analysts do not say that they expected the stimulus to weaken because of the state of the economy; they say that it was because of FED's words.

In recent years central banks have been switching towards clearer communication. In the past they avoided being clear about their goal and policy, being concerned that if they do not deliver as promised, they will lose reputation. The thinking has changed and now Banks try to be transparent and open about what they think about the economy. Bank of Canada was one of the pioneers, providing markets with detailed information about the economy and its thinking. This time transparency did not work with the FED.

 Changing economic conditions.  The decisions of the FED are collective decision, by voting of  its Open Markets Committee. The committee updates its information continuously and, apparently, its members felt the economy was not as strong as they thought.

2013-15 The chronicles of financial misconduct

1. Es tu, Teachers?!

2. The London whale

3. And one more (actually, this is the first one).

Say you missed the title and what it is about. How can you figure out that it is a matter of high finance? Easy: "Twenty-two of the firms have agreed to settle the civil charges, though they did not admit or deny wrongdoing."

But do not get depressed, there is good news too, in case you are sleepy in the US.

2013-14 FED policy and emerging markets

Here is an article about the worries in emerging markets about the end of the monetary stimulus

2013-13 Less of the monetary stimulus

The FED has been meeting in Washington and is expected to change the current policy of purchasing $85 billion of assets every month
The FED has been buying long-term securities in huge amounts as a part of three-element strategy to stimulate the economy:
1. A traditional approach: lower the short-term interest rates;
2. Forward guidance: promise to keep short-term interest rates low for an extended period of time (until unemployment falls to 6.5%);
3. Quantitative easing: purchases of long term securities

2 and 3 are unconventional and were introduced following the Great Recession. The reason: zero bound on interest rates. The currents level of interest rates can be found here.
The important rate is the first one: the Federal Funds Rate; this Wikipedia article explains what it is.
Since short-term interest rates cannot be reduced further, hence the need for extra measures.

The goal of these measures is to increase liquidity in the economy, promoting lending and investment. This also creates a potential problem since more liquidity leads, in normal times, to inflation. As long as the economy is depressed inflation does not increase. The task of the FED is to reduce the stimulus in such a way that
- the economy does not suffer too much
- inflation does not rise too much

The whole thing is unprecedented. Monetary policy is a mixture of science (whereby the decision-makers use available evidence and the knowledge of their staff and their own) and art (usually described as - well - decision-making based on accumulated wisdom and experience). This time the mixture involves more art than usual.

2013-12 The economy is improving

says RBC

2013-11 A complex unemployment picture

Paul Krugman argues that unemployment situation is worse than it appears

2013-10 More on the fianancial crisis

on the occasion of the fifth anniversary:

The untold story of how Canada survived the financial crisis from the Globe and Mail. This is very long but really good.

Andrew Ross Sorkin (check him out on Wikipedia) speculates on What might have been.

Here is a good point: "It is also worth noting that most of Wall Street was convinced that the failure of Lehman Brothers would not pose a systemic risk. In truth, in the fairy-tale version of bailing out Lehman, the next domino, AIG, would have fallen even harder. If the politics of bailing out Lehman were bad, the politics of bailing out AIG would have been worse. And the systemic risk that a failure of AIG posed was orders of magnitude greater than Lehman's collapse."

 

Lehman Brothers collapse  five years on, we're still feeling the shockwaves - mostly British perspective from the Guardian.

2013-09 Mortgage-based securities.

Here is a detailed story of one such security that did not work out as planned.

And a bit more on subprime lending

One of the most egregious cases was Countrywide Financial. Its boss was Angelo Mozilo. A son of a butcher - well, read the rest in his bio on Wikipedia
He made almost 500 million dollars running the company. He was then prosecuted, settled for $67.5 million (of which he paid only $20 million) and was banned for life from serving as an officer of a public company. He admitted no wrongoing.

Now he is, apparently, a "Fallen Titan"  and good guy.

I think the original titans would have objected. 

2013-08 Five years after the Great Recession Started

Various publications reflect on the five years since Lehman Brothers collapsed. You can find a wide variety of opinions. Here is the one I find the most interesting.

Matthew Yglesias summarizes well what we have, and have not, learned from the crisis.

1. Ending the financial panic of 2008-2009 was not sufficient to get the economy on track
2. Economic predictions were too optimistic. They mention a projection, made in 2009, that the unemployment rate in the US will peak at 8% and will be 5.5% by now. Actually, the unemployment rate reached 10.6% in the US (and 8.8% in Canada, which was less affected) and is still over 7%.

Bottom line: a financial crisis drags on for a long time. This is the message of a well know book by Reinart and Rogoff: "This time is Different" (warning: it is a long read).

3. In 2002 Bernanke, then not yet the chair of the US central bank, pointed out that we will not repeat mistakes from the Great Depression. During the Great Depression the FED reduced the money supply, leading to a prolonged slump. This time monetary policy was expansionary, with interest rates near zero and new measures: forward guidance (promises to keep interest rates low for a long time) and quantitative easing (massive purchases of long-term securities).

4. We still do not have a good answer on what policy can help the economy create jobs. See posting 2013-11.

2013-07 The Economist on the financial crisis

Here is an excellent summary of the financial crisis from the Economist

2013-06 Income of Canadians

Yesterday, Statistics Canada released a publication Income of Canadians. It provides lots of information on where Canadians get income from, how income is distributed across the population and how income is redistributed through public institutions, among others. Some highlights:

• ·        Over 95% of Canadians aged 15 and over received income in 2010,
  83% - some income from private sources.
  
  
  Ø  70% - some income from government transfers
  Ø  13% - only from government transfers
  Ø  predominantly from private sources, and
  
  
  ·         Median total income of almost $30 000
  
  
  Ø  7/8^th of total from private sources
  Ø  1/8^th  of total from government
  
  
  ·         Employment was the main source of income for Canadians
  
  
  Ø  70% of Canadians aged 15years and over earned income through employment.
  Ø  Employment earnings – ¾ of  the total income received by private households
  
  
  ·         Income redistribution through income taxes and government transfers
  
  
  Ø  Government transfers made up a large proportion of the income of seniors and of Canadians with the lowest income
  -          41. 1 % of the total aged 65 years and over;
  -          90% of these transfers came from Canada Pension Plan/Quebec Pension Plan (CPP/QPP), Old Age Security pension (OAS), and Guaranteed Income Supplement (GIS).
  
  
  Ø  For the 10% of Canadians with the lowest family after - tax incomes, government transfers contributed 2/3 of their income.
  Ø  Collectively , Canadians in each of the lowest five deciles received more money from government transfers than they paid in income taxes
  Ø  The 10% of Canadians with the highest family after - tax incomes paid 25 % of their income in income taxes and received 2% of their income from government transfers

It seems that papers concentrated on what one needs to earn to be in the top 1% ($191 000). You may read about it in the National Post but keep in mind (it is fairly obvious) that Terence Corcoran is extremely biased.
By the way, he does suggest that the publication is misleading. No, it is not. It is a survey of 4.5 million of households, and is done by statisticians whose only agenda is to provide good statistical information. Statistics Canada is one of the best statistical offices in the world. You can use their data with full confidence.

2013-05 Dangers of ending the monetary stimulus by the FED

Here is the one of the most important issues in monetary policy that we will be following this term.

Some background: with the economy weak, the US central bank (FED) introduced several rounds of monetary stimulus. The one in question involves monthly, large scale  purchases of long-term bonds, often called QE3 (for the third round of Quantitative Easing). The aim: to increase the price of bonds and reduce long-term interest rates (as we will learn later in the course, there is an inverse relationship between bond prices and interest rates).

These purchases eventually have to stop as they increase liquidity in the economy and will cause inflation. The FED has been talking about the end of QE3 for the last few months.

The article points out the dangers of ending the stimulus. It compares the current situation to that in 1994. Then, as the FED tightened policy, the bond markets crashed around the world. Now the stimulus is much larger than in 1994, and international links are stronger. So the end of the stimulus may lead to a global bond crash.

Solutions proposed by the policymaker mentioned in the article (Joerg Asmussen, a member of the ECB - European Central Bank - board) is clear communication, so that markets are not surprised, and monitoring inflationary expectations.

2013-04. Weak job market

In today's Financial Post (available in the Peters Building) there is an article on the job market in Canada.
One way to get a handle of how the job market will perform is through a survey, The article reports the results of a Manpower Canada Survey. "Of the 1,900 Canadian firms polled,

• 74% said they expect to keep staffing at current levels between October and December [...]
• 8% plan to cut staff [...]
• 16% responded they plan to increase payrolls [...]
• 2% have yet to decide either way."

So there is a small upward trend but three quarters of the firms are not planning to do anything.

The VP of Manpower Canada says the reasons for poor labour market situation are:

• poor productivity
• a skills mismatch
• high labour costs

He suggests that the education system needs to be overhauled to ease the skills mismatch.
We will be talking about the labour market in chapter 7 and 8.

2013-03 Grecovery

We will be talking a lot about the sovereign debt crisis. Itbegan in Greece in 2009 and spread to Portugal, Ireland, Italy, Spain and Cyprus. The coomon problem was excessive foreign borrowing. In Greece the crisis was precipitated by the disclosure that the outgoing government cheated and the actual deficit was much higher than reported.
Since 2008 the Greek economy shrank by almost a quarter. Now the Greek prime minister says the worst is over.
It seems that people do not believe him. Wait a second! How did the crisis start?

2013-02. No prosecution for Lehman executives

5 years ago, on September 15, Lehman Brothers, the 4th largest investment bank in the US, collapsed. The failure of Lehman converted a recession that started several months earlier into the Great Recession.

So has anyone at Lehman done anything wrong? Apparently not. This article describes the end of attempts to prosecute Lehman personnel. Prosecution concluded they did not have a chance to win.
Now, I am not a lawyer, and perhaps the reporting is inaccurate. But I had a laugh when I read the following explanation about Repo 105 and Dick Fuld, the CEO: "Bart H. McDade, another Lehman executive, told Mr. Valukas that Mr. Fuld “was familiar with the term” Repo 105 and “knew about the accounting.” But Mr. Fuld told the S.E.C. that he had never heard of Repo 105, officials said, undermining a potential case."

Rep 105 was an accounting trick to reduce the bank's leverage reported in quarterly report. It seems that prosecution gave up when the CEO said he has not heard about it.

It could be that, indeed, Lehman failed because of bad business decisions, not criminal acts. But following the biggest financial crisis in history it is hard to believe that there was no outright fraud in the entire financial industry. You can read more on the topic here.

2013-01. Growth versus Level

One of the things I would like to teach you is to avoid common errors. So, from time to time, I will point out an error when I find one. The title in the Financial Post says:Canada’s productivity beats the U.S. for the first time in a long time
Well, it does not. Productivity  GROWTH  was higher in Canada than in the US in the second quarter of 2013, not the level.  As the article correctly says, our productivity lags behind US.
A similar mistake would be to write that Sierra Leone is richer than Canada.  Last year Sierra Leone's GDP grew by over 15%; much faster than Canada's. But per capita GDP in Sierra Leone is 25 times lower.
Lesson - do not mistake growth rate and level.

2013 COURSES START HERE. POSTS 1-76 ARE FROM 2012