Reflections of a NewsOSaur: Mobile offers local media a digital do-over, Jan. 3, 2014

Excerpt:

.."Fully 79% of the 181 million Americans who own smartphones reach for them within 15 minutes of waking up in the morning, according to a survey last year by IDC. And here’s what they do: 78% check email, 73% browse the web, 70% use Facebook, 64% get directions, 60% play games, 57% search for information, 44% read news or sports, 43% talk and/or text, and 37% make or view videos.

This has unhinged news consumption. In comparing preferred news sources among Americans, Pew found 68% chose television in 1991 vs. 55% in 2012, 56% chose newspapers in 1991 vs. 33% in 2012 and 54% chose radio in 1991 vs. 33% in 2012. By contrast, 30% of Americans named the Internet and mobile media as their preferred news outlets in 2012. A separate Pew study in 2013 found that the Internet is the top news choice for nearly half of those under the age of 45, as compared with the 17% in the cohort who favor newspapers." Source: Reflections of a NewsOSaur

Keywords: Mobile Computing, Internet

Davis Polk: Flowcharts on final Volcker Rule

"Normally, it’s not in the nature of law firms to oversimplify complex government regulations for their biggest customers. But Davis Polk & Wardwell LLP has decided to do just that for its mega-banking clients to start off the new year, giving them a handy, color-coded, “user-friendly” flow chart to help them navigate the Volcker rule, which restricts banks from making market bets with their own capital.

How simple? The chart extends over 27 pages.

Take Step 2D-2, on page 11, which describes permitted trading in foreign government securities. There are 13 boxes, diamonds, or circles on the page, (plus eight yes’s and eight no’s). It notes how the rule impacts foreign affiliates of U.S. banks, but not foreign branches of the banks.

“Everybody is finding it a huge challenge to describe this one,” said Margaret Tahyar, a Davis Polk partner who oversaw the drafting of the charts. “It’s super hard to summarize.”

Intimidating as the chart may be, it reflects the breadth and density of the regulation, which extends for close to 1,000 pages. The Volcker rule is part of the Dodd-Frank Act, a response to the financial crisis that is intended to reduce systemic risks in the banking system. Though the Volcker rule does not take full effect until mid-2015, bankers have been gobbling up information to help guide them to safety. Ms. Tahyar said that a preliminary version of the flow chart that Davis Polk formulated based on proposals was downloaded more than 100,000 times.

But if the chart and its many arrows and red warning boxes seems challenging, Ms. Tahyar has what may be an unwelcome message. “You’re looking at half the rule,” she said. A flow chart on the second half, about limits on the investments banks may make in hedge funds and other trading firms, is due next week, and it is likely to be longer than the earlier chart." Source: New York Times

Keywords: Volcker Rule, Regulation

Quotes in article:

Buffett: "In Grand Island, Nebraska, everyone is interested in how the football team does. They're interested in who got married. They're maybe even more interested in who got divorced."

Prof. Benjamin C. Esty (Harvard): "In retrospect, his targeting just the smaller papers is a big clue about his forecast for the industry. Unlike regionals or big-city papers, small-town newspapers don't have a lot of competition or good substitutes."

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Keywords: Media, Newspapers, Warren Buffett

Related:

Buffett will definitely also face major challenges:

Reflections of a Newsosaur, Local news rivals doom publisher pay walls

Abstract:

This paper studies the implications of opacity in financial markets for investor behavior, asset prices, and welfare. Transparent funds (e.g. mutual funds) and opaque funds (e.g. hedge funds) trade transparent assets (e.g. plain-vanilla products) and opaque assets (e.g. structured products). Investors can observe neither opaque funds' portfolios nor opaque assets' payoff s. Consistent with empirical observations, an "opacity premium" arises: opaque assets trade at a premium over transparent ones despite identical payoffs. This is accompanied by endogenous market segmentation: transparent (opaque) assets are traded only by transparent (opaque) funds. The opacity premium incentivizes financial engineers to render transparent assets opaque deliberately. Source: SSRN

Keywords: Opacity, asset Prices, Moral Hazard, Signal Jamming

Abstract:

"A growing body of literature suggests that over widely varying historical eras and across a wide range of asset classes momentum investing, often accompanied by a trend following overlay, provides superior risk-adjusted returns. We examine the effectiveness of applying these methodologies to pan-European equity asset allocation through periods of potentially substantial market dislocation, in particular, with the advent of the single currency and the equity market crashes of the early 2000’s and 2008. With the introduction of the Euro there has been much discussion of the benefits of diversification via country based portfolios versus industry sector portfolios. Early studies simply looked at changing return correlations over time. The simple conclusion that increasing country correlations over time drives superior risk-adjusted portfolios towards diversification across sectors has been increasingly challenged. Our approach is different in that we apply momentum and trend following investing strategies and assess whether it is sectoral or country indices which dominate our portfolios through periods of structural changes and extreme volatility. Diversification via sectors is clearly the best strategy in times of equity market stress. In addition, the application of trend following offers a substantial improvement in risk-adjusted performance compared to traditional buy-and-hold portfolios. The terms momentum and trend following have often been used interchangeably although the former is a relative concept and the latter absolute. By combining the two we find that one can achieve the higher return levels associated with momentum portfolios but with much reduced volatility, tail risk and drawdowns due to trend following. We observe that a flexible asset allocation strategy that allocates capital to the best performing instruments irrespective of asset class enhances this further. Such methodologies offer superior risk adjusted returns, especially through periods of raised market volatility." Source: SSRN

Keywords: Trend Following, Momentum Investing

Keywords: Monetary Policy, Stock Market, Quantitative Easing

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It was a drizzly day in Washington when Ben Bernanke went to his confirmation hearing in November 2005, but all seemed bright for the US economy. Growth was on track to hit 3 per cent. House prices had another five months left to rise.

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The assembled senators felt indulgent towards the modest academic – variously described by the media as bearded, or sometimes whiskered – seated in front of them. “A superb appointment,” said Richard Shelby, the Republican committee chair. “Tremendously impressive,” agreed Chris Dodd, his Democratic counterpart. read more in the Financial Times

Keywords: Monetary Policy, Fed, Ben Bernanke, US Economy

The business of hedge funds is caught between rising costs and falling management fees, holding little profit for managers who don't perform. That's one key finding from the second annual global survey of the economics of hedge funds in the just-released Citi Prime Finance 2013 Business Expense Benchmark Survey.

According to the survey, the traditional "2 and 20" model of investment manager compensation -- 2% management fee and 20% of the profits -- has declined to fee levels as low as 1.58% of assets under management for all but the largest managers. As a result, hedge fund managers, unlike their counterparts in traditional, long-only funds, barely break even simply collecting fees. For example, after paying expenses, funds with $500 million in AUM realize operating margins of 69 basis points, rising to 82 basis points for a manager overseeing $900 million, survey data show. read more in the Wall Street Journal

Keywords: Alternative Assets, Hedge Funds, Management Fees, Performance Fees