Interesting Commentary from Andrew Lo

The link below goes to a video with Andrew Lo with some interesting commentary about how the current financial crisis altered the underpinnings of investment diversification. Andrew LO is an award winning MIT economist.

http://www.investmentnews.com/apps/pbcs.dll/section?category=wealthtrack

A Tale of Two Depressions

Finally, an article complete with charts that compares the economic decline in 1929 to the situation today. After reading the information, it leaves little doubt the the current scenario in terms of industrial output decline and other factors is worse than the 1930s. It only leaves the question if the government policy reponse of massive stimulus and bailouts will actually improve the economic recovery this time around.

A Tale of Two Depressions
http://www.voxeu.org/index.php?q=node/3421

Today's must read article

One article showed up in my inbox today which is an excellent read. It has some solid information describing the differences between a Recession and a Depression mixed into the overview. Ray Dalio, founder of Bridgewater Associates and manager of what is now the world's biggest hedge fund, believes we are in the middle of a global depression.... or a 'D-process' as he calls it.

Inside the world's biggest hedge fund
http://biz.yahoo.com/hftn/090319/031809_okeefe_bridgewater_fortune.html?&.pf=retirement

"Most people, says Dalio, think that a depression is simply a really, really bad recession. But in reality, the two are distinct, naturally occurring events. A recession is a contraction in real GDP brought on by a central bank tightening monetary policy, usually to control inflation, and ends when the central bank eases. But a D-process occurs when an economy has an unsustainably high debt burden and monetary policy ceases to be effective, usually because interest rates are close to zero, and the central bank has no way to stimulate the economy. To compensate, the value of debt must be written down (risking deflation) or the central bank must print money (a trigger of inflation), or some combination of both."

Trillion Dollar Bailout

Come play the game: Trillion Dollar Bailout

"Punish greedy fat cats and save honest peoples! Hand out moneys to homeowners. Put the hurt on dudes in suits! Do it right and save the world!"

Drag the slap symbol to deny a bailout and drag the cash bag to provide assistance to the various characters that pop-up.

Here are some hints - don't give the money to banks & only give to homeowners who are not in foreclosure. Go to the Addicting Games site to play.

The Math that Destroyed Wall Street...... and Main Street

Wired magazine recently presented a good article about the underlying math which destroyed Wall Street.

Recipe for Disaster: The Formula That Killed Wall Street

Page 3 actually outlines the basic math of the Copula Function approach which underlies the CDO market.

The Ascent of Money

Earlier this week, PBS ran a special two hour program "The Ascent of Money". The program is an excellent overview of current financial crisis placed in context of other historical events. The show includes some excellent commentary and interview clips.

It can be watched online at:
http://www.pbs.org/wnet/ascentofmoney/