Economic, financial, and political trends commentary
As promised, the write up about Professor Hemang Desai’s research. It’s about how mutual fund managers that use short selling get better returns. Skip down to “Short sellers, the forensic accountants.” That’s the part most relevant to the previous post’s discussion about my concerns that regulation will target the wrong culprits. Read here.
There’s a speech given today which sums up the series of events leading up to the financial crisis and impending economic malaise. It’s presented in fairly plain English as opposed to more technical Fed speak. He addresses the global savings and liquidity glut (which lead to excess capital chasing returns). Excessive risktaking ensued. Poor choices were made by lenders and other unscrupulous types, but also innocent investors were unaware of the risks they were taking. Financial markets imploded the latter part of 2008, and we are where we are.
He ends by saying that significant reforms to financial regulation and financial practices will be needed to reduce risks of future financial crises like this one. All true. What worries me is that regulation will be imposed that identifies the easy scapegoats rather than the true culprits, that politics and quick fixes will rule over reason. I was working with some financial research for a biz school recently that gives me this concern; one piece recently posted, and another upcoming. Will post later. No need to labor over content, but you’ll see what I mean. Good intentions gone astray.
