Edouard Chazal

Inside the New York Fed: Secret Recordings and Culture Clash

The audio is muddy but the words are distinct. So is the tension. Segarra is in Silva’s small office at Goldman Sachs with his deputy. The two are trying to persuade her to change her view about Goldman’s conflicts policy.

“You have to come off the view that Goldman doesn’t have any kind of conflict-of- interest policy,” are the first words Silva says to her. Fed officials didn’t believe her conclusion — that Goldman lacked a policy — was “credible.”

And here is the audio report from This American Life.

→ ProPublica

Reality = Normal + Fat-Tail Distributions

To illustrate the phenomenon, consider the S&P’s daily percentage returns in terms of quantiles, which divides the performance record into equal-sized portions. The graph below plots the sample return of the S&P (black circles) against the theoretical quantiles (red line), defined here by a random distribution. If the S&P’s daily returns were perfectly random, the black circles would match the red line.

Normal distributions are still useful for analyzing markets and designing portfolios. Indeed, even in the daily return plot above it’s clear that the distribution looks quite normal for a fair amount of the sample. We can’t rely on normality alone for modeling markets. Factoring in fat-tails risk is essential. But letting a fat-tail worldview dominate your analysis is every bit as flawed as assuming that normal distributions will prevail. Asset pricing doesn’t neatly fit into one theoretical box, which means that our analytical tool kit shouldn’t be in a conceptual straightjacket either.

→ The Capital Spectator

Ello Is a Wake-Up Call for Social Media Marketing

Businesses need to take Ello and its manifesto as a wake-up call to rethink the way they use social networks to reach customers. The intense interest and discussion engendered by this manifesto attests to the profound misgivings many of those customers now have about the networks that occupy a growing place our work, our relationships and our lives.

And here is the manifesto.

→ Harvard Business Review

Bill Gross: The Bond King’s Move to a New Throne

From Bloomberg’s Market Makers :

Celebrity sells. And it can sell mutual funds as well as it sells sneakers. Bill Gross helped build Pacific Investment Management Co. into a $1.97-trillion firm by becoming a star. He cultivated his fame with a busy media schedule and colorful commentary on everything from Paris Hilton to the U.S. economy’s “new normal.”

→ Bloomberg

Everything That’s Wrong with the US/French Tax System in One Chart

Think about it. It is not surprising that the corporate citizens of France view their country’s tax system as burdensome. After all, France has to feed a huge government sector that swallows up revenue equal to 53 percent of GDP, and still runs a budget deficit of more than 3 percent. Yet the US tax system manages to be nearly as uncompetitive as that of France while raising 40 percent less revenue.

Or compare the United States to Denmark, whose government collects the most revenue of any of its OECD peers—57.4 percent of GDP. You would think such a massive tax take would render Denmark radically uncompetitive, but instead, its Tax Institute score is 43 percent higher than that of the United States, close to the OECD average.

→ EconoMonitor