More financial trading irresponsibility?

By 10am it emerged that Mr Perkins had single-handedly moved the global price of oil to an eight-month high during a “drunken blackout”.

The most innovative product for a financial firm is one that always has volume and, sometimes, always has volatility. Many investors would prefer neither, they would prefer their investments boring. So there’s a clash here.

Similar sentiments were what I gathered from my reading of The Big Short by Michael Lewis. While there was a lot of common sense ignored in some of the large investment firms, it seems that the more transactions you can skim fees off of the better (if you’re a banker) and little thought was placed on the outcome or the quality of investment vehicle.

To me, I take the Warren Buffett philosophy on investing when I think of finance; it should be boring.

As I’m reading The Big Short by Michael Lewis, my mind can’t help but wander to his other book on the financial world, Liar’s Poker. This morning I was thinking about Dr. Mike Burry and I remembered reading this update on Liar’s Poker and thought it was worth mentioning.

Two alternative routes to banking have passed by my radar: BankSimple (no confusing products or hidden fees) and On Deck Capital (small business loans based on cash flow with no loan officer). On Deck Capital has been around for a couple years (I’ve had the site bookmarked for 2+ years) and BankSimple is soon to launch. It’s interesting to see these new players in the money world. I hope they both are successful as I think we need a swift kick in the pants with how we manage money.

One other “money” product to consider is Square, the mobile phone add-on device that allows anyone to take credit card payments on their phone. What’s interesting about Square and BankSimple is that both are founded by early Twitter employees.

David Swensen was pretty revolutionary in his methods for investing the Yale Endowment fund (it’s worth noting this great Fortune article on the Harvard/Yale Investment rivalry), earning higher returns than the S&P. Recently his portfolio, like many others, has taken a hit. I think it’s too quick to judge his philosophy and whether it works. Personally, I think it will/does as his approach makes sense.

Read Pioneering Portfolio Management and you see very quickly that his approach calls for constant thinking and retesting of assumptions and changing of allocations

Actually, shouldn’t our approach to life follow this theory?

I love this description of the free market (as used when discussing derivatives).

One of the fundamental assumptions about the free market (itself a mathematical model, not reality, but one that reality can be measured against) is that all information is available at all times to all participants, producers and consumers alike. To use an example, think of a farmers market. The shoppers can compare the fruits and vegetables, the farmers can weigh the number of customers against the size of their inventories, and so on. Ultimately the guy with the best apples gets the best price. (And, of course, customers don’t mind bruised apples will get them at a different, lower price. They make perfectly good applesauce.)

Allow me to continue my Erin Burnett gravy train…At the end of the Vanity Fair piece I referenced earlier, I saw a link to a 2008 article on Erin Burnett and Maria Bartiromo. It touches on who’s the Queen of CNBC, but here’s why I prefer Burnett to Bartiromo.

With sultry blue eyes, sharp, almost perfect features, dimples, and a lazy, bedroomy smile, Burnett not only was knowledgeable about financial issues but had a knack for translating them into plain English, and in contrast to Maria, who was more singularly focused on corporate news, Burnett was interested in broader policy issues—education, health care, how to pay for the repair of America’s crumbling infrastructure. She had a casual, breezy on-air persona. She was also a bit irreverent—and spontaneous.

Monday through Friday I spend the hours of 9 – 11a (Squawk on the Street) and 2 – 3p (Street Signs) with Erin Burnett. She and I have a bond. While I enjoy her commentary on the markets, I have been known to occasionally mutter the same sentence as the wife of this Vanity Fair article’s author.

My wife, sitting next to me, was equally transfixed by Burnett’s flawless complexion and piercing blue eyes. “Jesus Christ she’s hot,” she muttered

If you’re interested in the Big Short as I am, you may find this Harvard Thesis to be rather interesting (as I did). According to Michael Lewis,

A.K. Barnett-Hart, a Harvard undergraduate who had just written a thesis about the market for subprime mortgage-backed CDOs that remains more interesting than any single piece of Wall Street research on the subject.

Apparently, you’re better off lending money (bonds) to Warren Buffett than Barack Obama. Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity. This comes as the USA risks its AAA rating.