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Contents contributed and discussions participated by Sophia Wang

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Definitions - 98 views

  • Sophia Wang
     
    Sovereign wealth fund (SWF)
    Meaning: Pools of money derived from a country's reserves, which are set aside for investment purposes that will benefit the country's economy and citizens. The funding for a sovereign wealth fund (SWF) comes from from central bank reserves that accumulate as a result of budget and trade surpluses, and even from revenue generated from the exports of natural resources. The types of acceptable investments included in each SWF vary from country to country; countries with liquidity concerns limit investments to only very liquid public debt instruments.
    Investopedia explains Sovereign Wealth Fund - SWF
    Some countries have created SWFs to diversify their revenue streams. For example, the United Arab Emirates (UAE) relies on oil exports for its wealth; therefore, it devotes a portion of its reserves to an SWF that invests in other types of assets that can act as a shield against oil-related risk.

    The amount of money in these SWF is substantial. As of May 2007, the UAE's fund was worth more than $875 billion. The estimated value of all SWFs is pegged at $2.5 trillion.

    (http://www.investopedia.com/terms/s/sovereign_wealth_fund.asp)
  • Sophia Wang
     
    Long-Term Capital Management (LTCM)
    A large hedge fund led by Nobel Prize-winning economists and renowned Wall Street traders that nearly collapsed the global financial system in 1998 as a result of high-risk arbitrage trading strategies.

    The fund formed in 1993 and was founded by renowned Salomon Brothers bond trader John Meriwether.
    (http://www.investopedia.com/terms/l/longtermcapital.asp)
  • Sophia Wang
     
    Alpha and Beta accutally have interesting meanings in business.

    Alpha
    1. A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha.

    2. The abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the capital asset pricing model (CAPM). Investopedia explains Alpha
    1. Alpha is one of five technical risk ratios; the others are beta, standard deviation, R-squared, and the Sharpe ratio. These are all statistical measurements used in modern portfolio theory (MPT). All of these indicators are intended to help investors determine the risk-reward profile of a mutual fund. Simply stated, alpha is often considered to represent the value that a portfolio manager adds to or subtracts from a fund's return.

    A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%.

    2. If a CAPM analysis estimates that a portfolio should earn 10% based on the risk of the portfolio but the portfolio actually earns 15%, the portfolio's alpha would be 5%. This 5% is the excess return over what was predicted in the CAPM model.
    (http://www.investopedia.com/terms/a/alpha.asp)

    Beta:
    A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns..
    Also known as "beta coefficient".
    (http://www.investopedia.com/terms/b/beta.asp)
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Global financial crisis has one beneficiary: The dollar - The New York Times - 0 views

  • The great market upheaval of 2008 has stripped 45 percent from the value of global equities, led bank lending to nearly dry up and caused commodity prices to crash from stratospheric heights
  • it is helping to lift the long-suffering dollar
  • As stock markets sank again Wednesday, the dollar rose against its European counterparts, with the British pound falling to $1.6242, a five-year low, and the euro falling to $1.2843, near a two-year low. Only the yen, on a tear of its own, has been stronger
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  • The dollar's rebound "is a sign of real panic and risk aversion
  • Institutional investors, faced with losses suffered on U.S. investments, are also liquidating overseas assets to meet margin calls
  • Central banks everywhere have moved to an emphasis on supporting economic growth from a focus on inflation
  • investors expect more and faster interest rate cuts in Europe, bringing the rates closer to their U.S. and Japanese counterparts, which would make investing in short-term European assets less of a draw
  • Prime Minister Gordon Brown of Britain said Wednesday that Britain and other major economies were likely to fall into recession, following similar comments from Mervyn King, the Bank of England governor
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Terra Securities, Norway Towns Sue Citigroup For Subprime Loss - Investor Insight - Sub... - 1 views

  • suing the New York-based company for fraud and misrepresentation of sales tied to high-risk mortgage backed securities
  • Citigroup represented the FLNs as safe, conservative investments. In reality, however, the products were neither. Returns on the notes were linked to the U.S. housing market
  • The lawsuit also contends Citigroup’s marketing materials contained misleading statistics
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  • the group says Citigroup directed Terra Securities to present the deceptive materials to the municipalities
  • The seven towns involved in the lawsuit lost some $90 million as a result of their investment with Citigroup
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    This is a lawsuit of Citigroup, charged by 7 Norway towns, for their subprime loss. They provided detailed charges.
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Economist: Blame Government for the Crisis - NYTimes.com - 1 views

  • inept government policy, not Wall Street greed, that allowed the financial system to spin out of control
  • government has put in place a system in which it is easy to gamble with other people’s money — particularly borrowed money — by making sure that almost everybody who makes bad loans gets their money back
  • If Fannie’s and Freddie’s bonds reflected their true risk, they would never have been bought up by the Chinese government or small investors, Mr. Roberts contends, adding that the government just made things worse when it moved in to secure the two mortgage giants in the fall of 2008.
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Op-Ed Columnist - Berating the Rating Agencies - NYTimes.com - 0 views

  • of AAA-rated subprime-mortgage-backed securities issued in 2006, 93 percent — 93 percent! — have now been downgraded to junk status
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    For someone who is doing rating agencies.
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Credit Rating Agency Heads Grilled by Lawmakers - NYTimes.com - 2 views

  • Conflicts of interest were largely responsible for the disastrous performance of credit rating agencies in assessing the risks of mortgage-backed securities
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