Выбор редакции
16 января, 05:41

Links for 1969-12-31 [del.icio.us]

something went wrong

Выбор редакции
16 января, 05:30

OPEN THREAD: Goodbye, Comment Tuesday. . . .

OPEN THREAD: Goodbye, Comment Tuesday. . . .

Выбор редакции
16 января, 05:12

JIM GERAGHTY: Twenty Things You Probably Didn’t Know About Kamala Harris….

JIM GERAGHTY: Twenty Things You Probably Didn’t Know About Kamala Harris.

Выбор редакции
16 января, 05:00

HIGHER EDUCATION BUBBLE UPDATE: Universities Face Increased Pressure from Job Programs That Generat…

HIGHER EDUCATION BUBBLE UPDATE: Universities Face Increased Pressure from Job Programs That Generate Results, Not Just Debt.

Выбор редакции
16 января, 04:33

Links (1/15/19)

Will China’s Economy Hit a Great Wall? - Paul Krugman Disruption, Concentration, and the New Economy - Raghuram Rajan The Flynn Effect (Rising IQ Scores Over Time) Reverses - Tim Taylor Bad Precedent - Cecchetti & Schoenholtz 1789, the return...

Выбор редакции
16 января, 04:32

ROBERT MUELLER GETS HIS OWN ACTION FIGURE: The Mueller action figure, which will begin shipping in …

ROBERT MUELLER GETS HIS OWN ACTION FIGURE: The Mueller action figure, which will begin shipping in early summer, is hardly the first politically charged creation from the Brooklyn-based manufacturer. FCTRY raised more than $600,000 on Kickstarter to fund a “Notorious RBG” figure inspired by Supreme Court Justice Ruth Bader Ginsburg last year. They’ve also created […]

Выбор редакции
16 января, 04:17

GABBARD, CASTRO FACE THE LONGEST ODDS IN 2020 WHITE HOUSE BIDS: There was a time when some folks tho…

GABBARD, CASTRO FACE THE LONGEST ODDS IN 2020 WHITE HOUSE BIDS: There was a time when some folks thought Rep. Tulsi Gabbard (D-Hawaii) brought hope of a revived moderate, independent-minded wing of the donkey party. But then she decided to run for president. Then there’s former San Antonio Mayor Julian Castro, who like Gabbard last […]

Выбор редакции
16 января, 04:14

LET THEM EAT BIG MACS — WHY TRUMP GETS AMERICA: INT – APARTMENT – AFTERNOON JESSICA (Harv…

LET THEM EAT BIG MACS — WHY TRUMP GETS AMERICA: INT – APARTMENT – AFTERNOON JESSICA (Harvard ’09, JP Morgan ’10 to ’12, Obama White House Staffer ’13 to ’16) is returning to her Georgetown apartment after her morning Tibetan throat singing class. There is a yoga mat under her arm. She shares the apartment, and a […]

Выбор редакции
16 января, 04:02

Без заголовка

**Note to Self**: Enjoyed Cherryh and Fancher's _Alliance Rising_ very much, but... I wish I had read something else this past week and had saved this for five years from now, when The Hinder Stars II, III, and... IV? would be out... For reasons I do not fully understand, these days publishers seem to want to greenlight books where the office say: “and we have already written to sequels!” This then creates the problem of how to end the first book with a satisfactory plot resolution well still leaving hey bigger story open for the sequels. It is a hard problem. And, much as I enjoyed reading _Alliance Rising_, Cherryh and Fancher did not quite manage to make it work. Mind you, it is close—If only Jen-and-Ross Together had been given twice the screen time, 40% rather than 20% of the book, it would have been a wonderful Happy-for-Now romance In addition to all of its other excellences. And overshadowing it all is that it is all going to end very badly for a great many of the major characters: Because I do not remember hearing about them in any previous Cherryh book, I fear for the ships _Rights of...

Выбор редакции
16 января, 04:00

SPACE: Stratolaunch Airplane Nears First Flight….

SPACE: Stratolaunch Airplane Nears First Flight.

Выбор редакции
16 января, 03:56

Special Guest Post: PG&E's Risk Management Fail

There’s a saying that goes “mistakes are the tuition of learning”. The PG&E case in California is rife with risk management lessons where we can learn from the mistakes of others while they pick up the tab.A big story in the financial news lately is the significant liabilities incurred by Pacific Gas and Electric or PG&E, the biggest electric company in California. The company’s core business is to generate and distribute electricity, and as a part of that business, they maintain the power lines that connect the power grid. Government authorities have concluded that many of the fires that ravaged California over the past two years have been the result of power lines falling into trees, and California law finds PG&E liable for any costs related to fires where power lines were at fault. Matt Levine, a man so cynical and sarcastic he makes me look downright kind and forgiving,  crushes the capital structure story.  Levine brilliantly points out that there weren't any secrets here....only a massive unfunded liability that had PG&E whistling past the graveyard for years...and certainly throughout 2018. PG&E is, for all intents and purposes, bankrupt. How did a regulated utility get to that point so quickly? What were the warning flags? Was there a trade here? Let’s take a look at how a macro trader might have thought about the risk in PG&E stock.Here is the stock chart back to 2004. In early 2017, you were probably feeling pretty good. Nice run higher. No big surprises. The dividend has been increased consistently over the past two years and credit ratings has been raised. PG&E Stock Price, 2004-2018 Source: Bloomberg  Then in early 2017 a fire in northern California burned 36,000 acres and destroyed 5600 structures, including 2800 homes and killed 22 people.  The stock fell precipitously. The 1 week fall in the stock price was somewhat similar to what happened in the financial crisis.  As a macro trader, how did you price fire risk before and after the 2017 fires?  Did you have this quote in your back pocket as the risk manager? ““California law makes utilities responsible for any fire started by their equipment, even if they weren’t negligent.”   If you did, you might have forecasted a big loss, bigger than any drawdown in recent history--and certainly bigger than the PG&E liquid balance sheet-- based on the damage estimates of fires in recent history. But as Donald Rumsfeld taught us, there are "known knowns" and unknown knowns, In 2017 the game changed….PG&E fire risk was a "known known".  Ben Hunt at Epsilon Theory might say fire risk at PG&E in 2018 was public knowledge, but not *common knowledge*. The balance sheet tightened and politicians started to circle the company. While there was an effort to protect the company from further extreme liabilities by allowing them to pass costs from these liabilities onto ratepayers, the latest round of fires in 2018 that were even more severe in terms of acreage, homes and lives lost, put the company in even greater peril. Now bankruptcy is on the table.When the November 2018 Camp Fire destroyed about 10,000 structures, about 100 people and wiped an entire town of 20,000 people off the map, PG&E was finished. But even then, it took a while before common knowledge caught up. Yet those looking for how this risk was priced could have also used credit markets to illustrate this increasing risk…below I have a chart of PG&E’s credit risk in 5 year credit default swaps (CDS).  Note how throughout 2018 credit risk was increasing (a higher or wider CDS spread reflects an increasing risk of default), even before the Camp Fire  Bottom line, bond markets sniffed this out while equity markets pushed the stock 9% higher in 2018 before the fire on November 8.   PG&E 5y CDS Source: BloombergDo you think it was a coincidence that PG&E management did little to recapitalize the balance sheet for fire liabilities or commit to an extreme and fast maintenance fix when they couldn't pass the costs on to tax payers? Which means....it would have been at the cost of the stock price, their bonuses, stock options and probably jobs? PG&E management and stockholders clearly dramatically underestimated the costs and liabilities attached to fire risk. Some was willful, some was stupidly optimistic, and some was no doubt simply a combination of unlucky and ignorant. The fires had incredible human costs. It will also go down as a case study in capital structure, management incentives, and the value of macro analysis that identifies incentives and opportunities across asset classes. 

Выбор редакции
16 января, 03:00

AT AMAZON, save on Vitamins and Dietary Supplements. Plus, deals in Safety and Security….

AT AMAZON, save on Vitamins and Dietary Supplements. Plus, deals in Safety and Security.