September 21, 2003
Metaphor Fun with Ken Rogoff

Ken Rogoff says: Arguing that the world's big economies were already too dependent on the willingness of American consumers to live beyond their means, the IMF said the US could not continue to run a current account deficit of 5% of GDP. The IMF's chief economist Kenneth Rogoff said that it was just a matter of time before the gap closed, tipping the dollar into a potentially steep fall. "If we were looking at a poor developing country, the world gives them just enough rope to hang themselves. A country like the United States, they give them enough rope to tie the noose around their neck several times. But it does happen in the end," he said. Is it possible to have too much fun with metaphors? Ken Rogoff appears to be having a very good time at the IMF....

Posted by DeLong at 02:19 PM

September 19, 2003
Why Are Financial Markets So Optimistic?

Morgan Stanley's Steven Roach wonders why foreign exchange traders, gibbering in terror as they look at the U.S. trade deficit, haven't dumped the dollar, pushing it down in value. He also wonders why bond traders, gibbering in terror as they look at the budget forecast, haven't pushed long-term interest rates up further: Morgan Stanley: Which takes us to the critical question of the moment: What do financial markets see that the IMF and its like-minded sympathizers -- yours truly, included -- are missing? The main insight, in my view, is the presumption that global imbalances really don't matter at all. They are judged as the inevitable, benign, and even desirable outgrowth of yet another burst from the world's only real growth engine. For what it's worth, I continue to take issue with that key point (see my 2 September 2003 essay in Investment Perspectives, "Do Imbalances Matter?"). Imbalances, in my view, are tantamount to instability and fundamental disequilibrium. I would be the first to concede that such a state of disequilibrium is not life threatening in and of itself. But it does leave the economy, or economies, under question far more vulnerable to shocks than might otherwise be the case....

Posted by DeLong at 07:23 AM

September 18, 2003
The Economist Worries About a Dollar Crisis

The Economist worries about a dollar crisis: Zanny Minton Beddoes: With no alternative engines ready to kick in, the dollar will have to play an even more important role in America's adjustment than it did in the 1980s, when it fell by 55% against the D-mark and 56% against the yen. Since its peak in 2002, the dollar has already fallen by a total of 8% against its trading partners. But that is nowhere near enough. Many economists reckon that, in the absence of a shift in global demand patterns, it would need to fall by 40% or more to make a serious dent in America's current-account deficit. That kind of depreciation is hugely risky. The more a currency falls, the greater the danger that it will fall too far, too fast. A sudden dollar crash could roil financial markets and plunge the world into recession. Moreover, the dollar is unlikely to fall evenly against other currencies. The Asian central banks' determination to stop their currencies rising has, so far, concentrated the dollar's fall on the euro, with a 20% drop against the European currency since early 2002 compared with 8% overall. A further, even bigger drop in the dollar,...

Posted by DeLong at 02:06 PM

September 11, 2003
China's Exchange Rate

Morris Goldstein and Nicholas Larby set out Op-ed: A Modest Proposal for China's Renminbi: ...A medium-size revaluation of the currency may not be as "sexy" as a large revaluation or no revaluation but it rests on a firmer foundation and is more consistent with China's long-term interest. Those arguing for a large revaluation of the renminbi--35 per cent or more--sometimes confuse bilateral trade balances with overall current account balances. While China is running a large (Dollars 100bn in 2002) bilateral trade surplus with the US, its trade balance with the rest of the world is in deficit, at Dollars 75bn (Pounds 47bn). Bilateral trade balances are especially misleading in this case because China processes goods previously exported to industrial countries by other emerging Asian economies... They believe China should undergo a modest revaluation of its currency for two reasons: first, it will help China avoid financial instability; second, it will do the United States--which does need to bring its trade back into balance--a favor....

Posted by DeLong at 07:32 PM

July 23, 2003
Backstopping Pensions

The GAO thinks the PBGC needs a lot more money: - GAO Sees 'High Risk' At U.S. Pension Insurer: Many large employer pension plans have become underfunded because of asset losses and low interest rates, which increase risk for the Pension Benefit Guaranty Corp., a quasi-public insurer that takes over pension plans of bankrupt companies and pays a portion of the pension benefits. The GAO noted that the insurer's single-employer insurance program has moved from a $9.7 billion surplus in 2000 to a $3.6 billion deficit in fiscal year 2002. David Walker, the comptroller general of the GAO, an investigative arm of Congress, said in a statement that the office favors tougher rules requiring employers to increase minimum funding of their pension plans, and also favors increases in the premiums that employers pay to the Pension Benefit Guaranty Corp., moves that are supported by the Treasury and the insurer......

Posted by DeLong at 08:34 PM

June 09, 2003
New Online Column From the Economist

The Economist is starting a new online column about the daily ticking and tocking of financial markets. AN ODD thing is happening in the market for risk and the market of the riskless, also known as the equity and government-bond markets: prices are rising in both. The S&P 500 share index, up by over 20% from its low earlier this year, continues to soar. Meanwhile, rising prices in the bond market have driven yields on the ten-year note down to 3.35%--a level last seen when Elvis Presley was a youngster. The same, broadly, is true in Europe: both stocks and government-bond prices are up. It has happened before, of course; indeed, there have been long periods where the two have moved in tandem, in part because lower interest rates reduce the financial burden on companies and make investment cheaper. But the coupling is a perplexing one right now, nonetheless, because the reasons that investors are buying the two markets appear to be diametrically opposed: in effect, bond-market investors seem fearful that the American economy will remain sluggish, while the equity market thinks it is over the worst... Such a column is a hazardous exercise to undertake. It violates Bob...

Posted by DeLong at 03:26 PM

May 13, 2003
Emerging-Market Bonds with Collective Action Clauses

Emerging-market bonds with collective action clauses to make restructuring easier. Not yet the wave of the future, but perhaps a ripple: ...GEORGE BUSH'S Treasury Department has a mediocre reputation in international economic circles. Mr Bush's first Treasury secretary, Paul O'Neill, was known more for gaffes than for gravitas. His affable successor, John Snow, has been too busy trying to sell Mr Bush's tax cut at home to show much interest in matters abroad. On the international scene, Team Bush pales in comparison with Robert Rubin and Larry Summers, Bill Clinton's Treasury secretaries. Yet the Bush administration may have more influence on one of the most pressing questions in international economic policy than the Clinton crew ever did: how can the debts of developing countries be restructured? John Taylor, the top international man in Mr Bush's Treasury, has long touted a market-based approach to dealing with sovereign-debt crises. He is sceptical of the International Monetary Fund's proposal for a "sovereign-debt restructuring mechanism" (SDRM), which would create, in essence, a watered-down international bankruptcy court. Mr Taylor prefers to encourage solutions to debt problems by persuading emerging economies to introduce "collective-action clauses" in their bonds. In recent months all this has changed....

Posted by DeLong at 11:43 AM

April 18, 2003
A Big Step Forward on Corporate Reform

Finally, an excellent choice to try to repair the damage done by the corporate fraud and accounting scandals. William McDonough is a class act. Accounting in America Sorting out the wreckage Apr 17th 2003 | NEW YORK From The Economist print editionAmerica's accountants learn the identity of their new overseer BIT by bit, America's financial markets are being patched together again. On April 15th William Donaldson, chairman of the Securities and Exchange Commission (SEC), nominated William McDonough, the retiring head of the Federal Reserve Bank of New York, as the first head of the new Public Company Accounting Oversight Board. Moments later, it was reported that the troubled NASDAQ stockmarket would appoint another banker, Furlong Baldwin, as its chairman and an executive of a financial-technology firm, Robert Greifeld, as chief executive. These appointments should bring stability to areas blighted by chaos. In Mr Baldwin the NASDAQ, a metaphor first for fast-growing technology companies and then for corporate collapse, has chosen a man whose career at Mercantile Bancshares, a Maryland bank, was nothing if not conservative. With Mr McDonough, regulators hope to fill a job that has so far been stillborn. The attempt by Mr Donaldson's predecessor, Harvey Pitt, to appoint...

Posted by DeLong at 08:42 AM

March 20, 2003
The Costs of Failing to Put Corporate Reform on the Front Burner

Federal Reserve Bank of New York President William McDonough says that in his judgment the failure to take much more thorough and aggressive action to repair trust in corporate governance and corporate accounts has been and is being very damaging to the American economy. I fear that he is correct. War risk not the only drag on US economy-McDonough: Federal Reserve Bank of New York President William McDonough, citing the damage done to investor and lender confidence by corporate scandals. In a speech to the New York State Bankers Association on Thursday, McDonough said investors continue to doubt the quality of internal governance and external oversight as well as the reliability of the information corporations provide. That contrasts to the Fed's Federal Open Market Committee statement after its policy meeting on Tuesday when it argued that geopolitical uncertainty was the main factor holding back the economy and once that uncertainty lifts, the recovery should pick up. McDonough is currently a voting member of the FOMC but is slated to retire in July. The Fed's next policy meeting is on May 6. McDonough said the rash of serious governance problems was one of the surprises that followed the bursting of...

Posted by DeLong at 10:57 AM

March 18, 2003
Accounting for Options

The Economist makes fun of the Silicon Valley executives' campaign to try to stop FASB from requiring that they account sensibly for options granted: | Expensing share options: ...ONLY desperate, last-minute lobbying saved America's technology firms last summer from having to count as an expense the billions of dollars-worth of share options that they dish out to their staff each year. This time, the tech industry is better prepared. Even before the Financial Accounting Standards Board (FASB) announced on March 12th that it was opening a formal inquiry into mandating the expensing of stock options, a coalition of tech lobbyists was carpet-bombing the press with propaganda. Wisely, the techies have also shifted their defence. The expensing debate has required delicate handling by Silicon Valley. On the one hand, tech firms oppose the notion that options are an expense at all: accounting for their cost by the usual method (the Black-Scholes options-pricing model) would cut tech firms' reported profits by 70%, on some estimates. On the other, tech firms must guard against the notion that their profits?such as they are?are an accounting fiction. This creates a countervailing urge to argue that the market is already counting in the costs of...

Posted by DeLong at 10:14 AM

March 16, 2003
Morris Goldstein Is a Very Good Economist

Morris Goldstein is a very good economist. The latest thing from him to land on my desk is his look at "Debt Sustainability, Brazil, and the IMF." After reflecting on Morris's take, I find myself a little bit less optimistic about Lula and Brazil than I used to be......

Posted by DeLong at 07:41 AM

March 11, 2003
Germany Under Stress

Germany Under Stress: A correspondent writes: Do you realize the German DAX is down 70% from its early 2000 highs? Look at the ten year chart of the DAX versus the S&P 500. The Germans had, in many ways, a much worse bubble and harder come down than we did. That society must really be under some stress. The answer is, "No." I had not realized the magnitude of the decline in the DAX. And I no much too little about what a large stock market decline in Germany must be doing to the shareholder class, to German finance, to the German economy, and to German society. Yet another thing I need to learn about pronto......

Posted by DeLong at 09:30 AM

Japan Under Stress

Japan under stress. The Japanese economy and financial system have been under stress for more than a decade now. But the amount of stress has just ratcheted itself up again. From Dow Jones: TOKYO -- Tokyo stocks ended sharply lower yet again Tuesday, as geopolitical fears and concerns about the falling market's impact on Japan's fragile financial system prompted further selling. The Nikkei 225 Stock Average closed under the 8000-mark, falling 179.83 points, or 2.2%, to 7862.43 -- the lowest finish since January 1983. It was the sixth straight session of declines for the key index. The Topix index of all the Tokyo Stock Exchange First Section issues fell 13.90 points, or 1.8%, to 770.62, the lowest close since August 1984. On the TSE's First Section, 966 issues fell, 419 issues rose, and 133 were unchanged from Monday. The slumping stock market rekindled worries about Japan's financial system. At current index levels, major banks' latent stock losses appear to have ballooned to around ¥6 trillion ($51.2 million or ?46.5 million), and most major life insurers are also seen to have heavy losses, analysts said. Among banks, Sumitomo Mitsui sank 12% to a new all-time low of ¥206,000. Mitsubishi Tokyo Financial...

Posted by DeLong at 09:24 AM

March 10, 2003
Fannie Mae and Freddie Mac Lose Six Percent of Their Market Value

I realize that this is one of Bill Poole's stock lines--that we need to figure out exactly what kind of animals Fannie Mae and Freddie Mac are, and make that clear, and that uncertainty is a potential source of vulnerability. And I realize that Bill Poole repeating one of his stock lines should not knock six percent off the equity value of these GSE's. But this market is really weird. Perhaps this line should be rotated out of the stock speech... : Fed's Poole: Fannie Shocks Could Spread: The agencies' stock prices sank after Poole's comments, with Freddie Mac's shares falling to a new 52-week low and Fannie Mae's clinging just above its one-year low. "Should either firm be rocked by a mistake or by an unforecastable shock, in the absence of robust contingency arrangements the result could be a crisis in U.S. financial markets that would inflict considerable damage on the housing industry and the U.S. economy," Poole said at a conference on the two government-sponsored enterprises, or GSEs. Surprises that destabilize financial markets can and do occur with some frequency, Poole said. Because of the scale of the short-term debt obligations of Fannie Mae and Freddie Mac,...

Posted by DeLong at 07:32 PM

March 04, 2003
Those Who Do Not Remember History...

Those who do not remember history are condemned to repeat it, and the rest of us are condemned to repeat it with them. Gerardo della Paolera and Alan M. Taylor point out that those who have studied the 1929 collapse of the gold standard in Argentina would have found few surprises indeed in the 2001 collapse of the currency board. Yet another brick in the wall suggesting that it is long-lasting institutional deficiencies that are the causes of the "bad policies" that overoptimistic economists like me think stand in the way of successful development and growth. Gaucho Banking Redux: Gerardo della Paolera, Alan M. Taylor | NBER Working Paper No. w9457 | Issued in January 2003 | Argentina's economic crisis has strong similarities with previous crises stretching back to the nineteenth century. A common thread runs through all these crises: the interaction of a weak, undisciplined, or corruptible banking sector, and some other group of conspirators from the public or private sector that hasten its collapse. This pampean propensity for crony finance was dubbed 'gaucho banking' more than one hundred years ago. What happens when such a rotten structure interacts with a convertibility plan? We compare the 1929 and 2001...

Posted by DeLong at 02:02 PM

February 22, 2003
Notes: Capital-Account Openness and Growth Acceleration

Michael Klein from Tufts is arguing that it is middle-income countries that have the most to gain from capital-account openness. The underlying argument appears to be that truly poor countries lack the institutional and educational infrastructure necessary for foreign investment to produce truly valuable growth-enhancing spillovers, and that capital-account openness may encourage kleptocracy as well; while rich countries already have everything they need to take advantage of modern industrial technologies. Yet another thing to put into the "reread in my copious spare time..." pile... Capital Account Openness and the Varieties of Growth Experience: he effects of capital account openness on economic growth may vary across countries. Some countries may not have in place the constellation of institutions required to fully benefit from open capital accounts. Other countries may realize only small marginal improvements in the wake of capital account liberalization. This paper presents evidence of an inverted-U shaped relationship between the responsiveness of growth to capital account openness and income per capita. Middle-income countries benefit significantly from capital account openness. However, neither rich nor poor countries exhibit statistically significant positive effects......

Posted by DeLong at 12:12 PM

September 14, 2002
Daniel Gross, Meet Daniel Gross

Last week Slate's Daniel Gross tut-tutted that Berkshire-Hathaway's Warren Buffett is lending money to distressed companies at usurious interest rates: these transactions are not in existing shareholders' interest, but they do satisfy managers' desire to postpone bankruptcy in the hope that something, anything might turn up. Daniel argued that Berkshire-Hathaway's resort to this strategy--the exploitation of the conflict-of-interest between managers and shareholders--is a sign that the stock market is still highly overvalued: The New Warren Buffett Way - From value investor to vulture investor. By Daniel Gross: ...Perhaps the deals say something more profound about the post-9/11 market than about Buffett. With so many stocks having plummeted, so many companies beset by scandal, so much money fleeing the market, and such a crisis of investor confidence, one might expect that the classic value situations that are Buffett's hallmark would be everywhere. Buffett should be grabbing an underpriced company every few days. The fact that Buffett, who has oodles of cash to put to work, hasn't found many--and has instead been nibbling on distressed properties--shows just how overvalued stocks still are... This week Daniel does a backflip and savages PIMCO Bond's Bill Gross for... saying that the stock market is still...

Posted by DeLong at 08:52 AM

September 12, 2002
Ken Rogoff on the IMF

Ken Rogoff on the claim that IMF bailouts take the money of rich-country taxpayers, give it to the unworthy, and so create "moral hazard". (He also covers a host of other issues.) ...It would be hard to overstate the influence of the popular perception that IMF crisis loans are thinly disguised bail-outs, with the tab paid mainly by ordinary taxpayers in the industrialised world. The presumed need to limit such bail-outs, and their adverse long-term incentive effects, is a central element of virtually every important plan out there to improve the way the IMF does business. The challenge posed by the bail-out view is not simply lack of transparency—that IMF loans are really outright transfers and should be called such. No, the deeper and more troubling implication is the “IMF moral hazard” theory. Simply put, if lenders are confident they will ultimately be bailed out by heavily subsidised IMF loans, they will extend too much credit to emerging-market debtors at rates that do not reflect the true underlying risk. The result? Bigger and more frequent crises than if the IMF did not exist. Giving the IMF more resources, it is argued, exacerbates the crises it was designed to alleviate....

Posted by DeLong at 02:21 PM

September 09, 2002
Alan Murray on IPO Underpricing

Alan Murray wrestles with the problem of IPO--Initial Public Offering--underpricing. On the one hand, why should the rest of us care if entrepreneurs wish to sell 10 percent of their companies at a half-off discount to the friends and clients of their investment bankers when their firms go public? Entrepreneurs are giving a rather large present to those on the IPO list, but if they did not wish to do so they could always use Hambrecht and Quist and run a true auction to sell off the initial tranche of shares. And they get benefits--a bunch of people who will have made money by investing in their stock, and who are likely to hold onto it and talk it up. Murray comes down on the side of the--highly plausible--theory that IPO underpricing is a way that investment banks get their going-public client corporations to bribe those from whom they want to be thrown other prices of investment banking business. - Article ...When the price of a stock jumps to $20 from $10 in the first day of trading, reaping instant profits for the lucky few who have been allocated shares, the investment bankers celebrate a "hot" offering. They ought...

Posted by DeLong at 09:18 PM

September 06, 2002
Think Analytically!

Think Analytically! I remember one day during the first Clinton Administration when Joe Stiglitz came into the room to chair a meeting, looked around, noticed that--so far--only economists had shown up, and announced that nobody who did not have a Ph.D. in economics would be allowed to speak at the meeting. (Do I need to point out that that Joe was making a joke?) He was. All of us got it. All of us cheered and applauded. We did so not because we Clinton-era economists all agreed on all the issues--anybody with half an ear to the ground would know that we did not. We did so because we had found that it was possible to make intellectual and policy progress in discussions with economists because we had all been trained to think analytically: to break the issue down into background assumptions about the world, beliefs about the principal causal mechanisms, and claims about the likely effects of different policies on those chains of cause-and-effect. When we disagreed--as we often did--we could quickly ascertain where and why, and then agree on how to go hunting for pieces of information that would help resolve the disagreement. This was in striking contrast...

Posted by DeLong at 05:58 PM

The Economist Joins the Pile on Alan Greenspan

This week's "Economics Focus" in the Economist joins the pack piling on to Alan Greenspan for not deflating America's stock market bubble earlier: ...There may be no painless way to deflate bubbles. Yet the correct test is not whether a bubble can be deflated without some loss of output. Rather, it is whether the early pricking of a bubble causes less pain than letting it grow only to burst later. The longer a bubble is allowed to inflate, the more it encourages the build-up of other imbalances, such as too much borrowing and investment, which have the power to turn a mild downturn into something nastier. If the Fed had let some air out of the bubble earlier, America's economy might now be better placed for future growth... Admittedly, for the Fed to justify an increase in interest rates when inflation was low would have been hard—but not impossible. It could, for instance, have argued that raising rates and so containing financial imbalances would avoid future economic instability and hence a large undershoot in future inflation. Central bankers do not have a political mandate to respond to asset prices. Even so, Mr Greenspan could still have done more to...

Posted by DeLong at 03:10 PM

September 03, 2002
Really Scary

It's hard to know if this is a fair picture of what went on--and of how ignorant the typical large-corporation board member is. But if it is a fair picture, it's really scary. Back to School, but This One Is for Top Corporate Officials September 3, 2002 By ANDREW ROSS SORKIN HICAGO — The class was not faring well. On its accounting exam the average score was 32 percent. The teacher was particularly exasperated that so many students had missed a multiple-choice question on the meaning of retained earnings. "Don't tell me that you're on the audit committee and can't tell me what retained earnings are," Roman L. Weil, an accounting professor at the University of Chicago Graduate School of Business, said to the class. These were no first-year M.B.A. students. They were top executives and board members of some of the nation's largest corporations, at a novel post- Enron boot camp. About 80 officers and directors from companies including Pfizer, McDonald's, Motorola and Dow Chemical sat through three days of lectures to understand how to do their jobs at a time when far more people are watching them....

Posted by DeLong at 01:54 PM

August 30, 2002
Greenspan Defends His Policy Toward the Late Stock Market Bubble

There is a principal about asset market bubbles: a policymaking authority like the Federal Reserve can never be sure enough that an asset market rise is a bubble in order for it to take steps to pop it. Why? Because if the Federal Reserve can be sure it is a bubble, the "smart money" in the stock market can be sure that it is a bubble too--and if the smart money is sure that it is a bubble, the smart money will already have gone short the market on a large scale, and so popped the bubble by itself. Therefore the only bubbles that can flourish and grow are those that people are not sure are asset market bubbles. Here the Associated Press reports on Alan Greenspan's defense of Federal Reserve policy in the late 1990s. The only point on which I think Greenspan is weak is his claim that he knew that raising margin requirements would do no good, hence did not raise them. It's not clear to me that they wouldn't have had a beneficial effect--although probably a very small one. Greenspan Defends Decisions of Policy Makers in Late 1990s: ...In addition to defending the Fed's decision not...

Posted by DeLong at 12:36 PM

August 16, 2002
Trying to Calculate Expected Inflation

One of the reasons that the Rubin Treasury decided to issue inflation-indexed bonds--Treasury Inflation Protection Securities, or TIPS--is that we hoped it would provide a market-based measure of expected inflation. If the marginal investor in the market expects inflation to be high, they would sell their conventional bonds and buy TIPS until the gap between the yields made them think TIPS were no longer attractive even given their high expectation of inflation. Here we have Morgan Stanley's Richard Berner and David Greenlaw using yields on TIPS to do exactly that: calculate that recent softness in the bond market is not the result of lower expectations of inflation, but of declines in the current real interest rate. I'm not sure that they are right (neither are they), but it is nice to see at least one of the reasons for setting up the TIPS validated... Morgan Stanley: ...the very recent plunge in yields over the past month appears also to reflect the sea change in prospects for US economic growth. That's because most of the recent decline appears to be in real yields rather than in inflation premiums. We judge that approximately by looking to the Treasury's Inflation Protected Securities, or...

Posted by DeLong at 01:27 PM

August 05, 2002
Estimates of the Economic Costs of the Corporate Governance Crisis

Add this to the "to read as soon as possible" pile. I suspect that Litan and Graham have missed most of the costs. They focus on the effect of the stock market decline on next year's level of production and aggregate demand. But the big costs will come via a higher long-run cost of capital to investing firms as the breaking of trust in corporate reporting causes savers to shy away from whole classes of investments. Those costs aren't in Litan and Graham's calculations. (Then, again, I have no clue how to quantify them either.) Brookings Study Details Economic Cost of Recent Corporate Crises A new report from the Brookings Institution estimates that the Enron and WorldCom scandals will cost the U.S. economy approximately $37 to $42 billion off Gross Domestic Product (GDP) in the first year--assuming the market does not recover from its July 19 level or drop substantially below it. Even with the July 24 rebound, the market remains close to that level. The study, "The Bigger They Are, The Harder They Fall: An Estimate of the Costs of the Crisis in Corporate Governance," bases its findings on conservative estimates of the effects of the crisis on...

Posted by DeLong at 08:08 PM

July 26, 2002
Tom Maguire Briefly But Effectively Deconstructs Paul O'Neill

Now the interesting question is, "At what level did Paul O'Neill wish to denounce the accounting reform bill as pointless?" Consciously? Semi-consciously? Unconsciously? Just One Minute And can Treasury Secretary O'Neill deliver a sound-bite? How about this, on Moneyline: "I'm very glad that the members of Congress have now come to an agreement to send a bill to President... It's the lock on the barn door." Oh, good, we locked the barn door. Now I have to see a man about a horse......

Posted by DeLong at 09:07 AM

July 22, 2002
The Economist Joins the Chorus: Options Make Executives Long Volatility

Quite a while ago my brother Chris pointed out to me that stock options do not align the interests of executives with those of shareholders. Options, he said, make the top executives want as much volatility in the company's stock price as possible. Now this point is becoming the conventional wisdom. I think this is healthy. ...The theory is that the huge amounts of stock options dished out to executives in the 1990s encouraged them to behave badly. Unlike stock itself, a stock option has no downside: the owner might gain a lot of money if his company's share price rises, but he loses only the cost of the option if the share price falls (and nothing at all if the option is given to him). That might have encouraged excessive risk-taking at the top--a willingness, as Ira Kay of Watson Wyatt, a pay consultancy, puts it, to "roll the dice". Combined with the freedom to sell the company's stock once the option is exercised, stock options might also have encouraged short-term business strategies, or even fraud. By fiddling with their accounts, company bosses could hope to drive up the share price, cash in their options, and set sail...

Posted by DeLong at 10:35 AM

July 21, 2002
Greenspan's View of the Proper Limits of Government Expands

The National Journal picks up on Alan Greenspan's change of mind on the proper role of government in corporate supervision and surveillance. National Journal Magazine Archive But for my dwindling money, none of the overtly reassuring riff was as reassuring as the little off-the-cuff acknowledgment: "I was wrong." To be sure, it is downright depressing to contemplate what the chairman declared himself to have been wrong about. "My original view was that taking accounting standards ... out of the private sector was really utterly unnecessary ... [because business'] self-interest is so strongly [dependent upon the fact that] their reputation was unimpeachable.... I was wrong." In other words, where honesty is not only the best, but the most self-serving, policy, regulation should hardly be required. But he now had to admit, regulation is required.... Granted, he had changed his mind on a very finite point and to a fairly unavoidable conclusion. But it was a finite point in the infinitely repackaged question of what is and is not the proper reach of government, and precious few of his self-declared disciples ever change their minds about any aspect of that......

Posted by DeLong at 12:22 PM

July 20, 2002
Joshua Micah Marshall Says Go Read Chris Caldwell

Joshua Micah Marshall says go read Chris Caldwell's New York Press column, and then go read it again... Talking Points Memo: by Joshua Micah Marshall I didn't want to do any posts this weekend. But this article by Chris Caldwell in the New York Press merits an exception. It's simply devastating and the most apt statement of the White House's predicament I've yet read. Every word of it practically is worth reading and reading again. There's always an element of unmerited, guilty pleasure you feel when you hear someone on the other side making your side's case for you. But it's equally true that sometimes a political point can only be made clearly by someone who has to say it with an element of regret, whose words are free of the dross of wishful-thinking and mindless overstatement......

Posted by DeLong at 10:04 PM

Alan Blinder Calls for Actions, Not Words

Alan Blinder--former Vice Chair of the Federal Reserve, former Vice Chair of the Council of Economic Advisers, and one of my heroes and role models since before I was a professor--calls for the U.S. government to take actions, not just mouth words, to fix investor confidence in the numbers that they are fed. What actions? Ah, there's the rub. He doesn't say. I am trying hard to think about this right now... Stocks Are Only Part of the Story talk is cheap -- which may be why the markets shrugged off even the reassuring words of Mr. Greenspan, their most trusted guru. This just may be one of those moments when both the markets and the body politic are calling for action, some of which must be government action. Can it be true that financial markets want the government to regulate them more? Paradoxically, the answer is yes. The markets have long had an ambivalent attitude toward government intervention. When things go well, they want to be left alone. But when things start to fall apart, they want Washington's help. The reaction to President Bush's recent speeches was instructive. If Wall Street were truly opposed to government help, one might...

Posted by DeLong at 08:02 PM

July 13, 2002
Steven Roach Preaches Doom and Gloom

Morgan Stanley's Stephen Roach--one of the best we have at current analysis of the state of the business cycle--explains why he is so much more pessimistic about the future of the American economy than the typical forecaster. In brief, he sees the parallels between the U.S. today and Japan a decade ago as much stronger than the typical forecaster does (or than I do). Morgan Stanley Global Economic Forum ...most view the US macro outlook through the lens of a traditional business cycle framework. That's not unlike the approach that remains in favor back home. I guess I'm on a different planet. I continue to see the US macro through the lens of a popped asset bubble. As a result, the macro I practice these days couldn't be more dissimilar from that embraced by the broad consensus of investors, businesspeople, and policy makers. For me, the past several years have been like peeling away the layers of an onion. Once the equity bubble popped, the steady progression of subsequent events has fallen into place in a fairly logical and predictable fashion. Nasdaq, of course, was the first to go -- and, sadly, is still going. It's currently off 73% from...

Posted by DeLong at 01:20 PM

July 10, 2002
When Should the Federal Reserve Take Away the Punchbowl?

William McChesney Martin, famous Chair of the Federal Reserve in the 1950s and 1960s, once said that the job of the Federal Reserve is to "take away the punchbowl when the party gets really going." But when does the party get "really going"? The overwhelming majority of macroeconomists would agree that times of rapidly-rising price indices and of unemployment rates far below average are signs that the punch bowl has been left on the big table in the middle of the stock exchange for too long. But what if consumer prices are not accelerating, if indicators of labor-market tightness are not exceptional, but if asset prices are going wild and through the roof? What then? There is no consensus. Here Michael Bordo and Olivier Jeanne weigh in on the side of taking away the punchbowl early if there is asset price inflation along. They base their conclusion on the belief that what goes up must come down, and the fear that when asset prices come down they will generate a large and destructive credit crunch that will be had to fix on the spot without large output losses and high unemployment. Boom-Busts in Asset Prices, Economic Instability, and Monetary Policy...

Posted by DeLong at 01:47 PM

Workers' Retirement Accounts Should Be Diversified

Just after World War II Walter Reuther demanded that auto company-provided worker pension funds be invested not in the auto industry, but in a diversified portfolio. The workers' jobs already depended on whether the company did well. They should not have their exposure to the company leveraged by having the existence of their pension funds depend on whether the company did well as well. Yet the defined-contribution plans of the 1990s have--either through what the bosses require or what the bosses suggest--wound up disproportionately invested in the firms for which employees work. This was always bad economics. And now it is turning out to be bad public relations too. Workers' 401(k)s Lost $1.1 Billion ...About 32 percent, or $642.3 million, of WorldCom employees' retirement funds were held in company stock at the end of 2000, when WorldCom last filed its retirement benefit information with the Department of Labor and the Internal Revenue Service. Those investments now make up less than 4 percent of the total assets in WorldCom's 401(k) investment portfolio, and they are now valued at less than $18.7 million, said spokesman Brad Burns. In 1999, the value of the company stock in that portfolio was at least...

Posted by DeLong at 09:42 AM

July 08, 2002
The FT's Peter Martin Talks About the Increasing Power of Commercial Banks

Peter Martin thinks that banks have become and will become more and more powerful in their voice in corporate management changes over the next year or so. Why? Because banks have cash, and because the risk environment has changed so that anyone seeking to raise cash from the financial markets themselves is seen as likely to be facing a short-term cash-flow crunch. So managers will have to persuade commercial banks that their firms are or can become "fundamentally sound" in order to gain access to resources and liquidity. Peter Martin: Bankers Regain Powers The driving force in corporate transformation was no longer the company's shareholders, advised by high-priced investment bankers. Instead, it was a collection of commercial bankers holding that most crucial ingredient in the post-bubble economy: cash. Cash matters because companies now have severely diminished access to other sources of short- term finance, such as commercial paper, bond and equity markets and asset sales. The commercial paper market, which freed big companies from dependence on banks for short-term working capital needs, has shrunk in recent years. In any case, the extent to which it gave issuers independence from the banks turned out to be more illusory than real, since...

Posted by DeLong at 01:32 PM

July 07, 2002
Before Paul Krugman Leaves for His Vacation...

Before Paul Krugman leaves for his vacation, he takes one more shot at George W. Bush. Between the two options Krugman gives us--Bush knew about and benefited from Harken's accounting frauds, and Bush was just a very negligent and disconnected director--I think the second is by far the most probable. Succeeding in Business ...the ploy works as follows: corporate insiders create a front organization that seems independent but is really under their control. This front buys some of the firm's assets at unrealistically high prices, creating a phantom profit that inflates the stock price, allowing the executives to cash in their stock. That's exactly what happened at Harken. A group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10 million phantom profit, which hid three-quarters of the company's losses in 1989. White House aides have played down the significance of this maneuver, saying $10 million isn't much, compared with recent scandals. Indeed, it's a small fraction of the apparent profits Halliburton created through a sudden change in accounting procedures during Dick Cheney's tenure as chief executive. But for Harken's stock price -- and hence for Mr. Bush's...

Posted by DeLong at 03:36 PM

July 03, 2002
How Did WorldCom Get Away With It For Even an Instant?

Amey Stone tries to understand how WorldCom could have gotten away for so long with what was really a simple, simple, transparent fraud stream. Certainly the auditors--Arthur Anderson--should have caught it. And why didn't the analysts following WorldCom catch it? They were supposed to have a good sense of what WorldCom's investments plans were. BusinessWeek Online: How Everyone Missed WorldCom | JULY 3, 2002 COMMENTARY By Amey Stone: The accounting fraud was obvious -- only to the few who had full access to its books. At least now real reform is almost certain A major source of the gnawing sense of insecurity generated by the WorldCom (WCOME ) scandal is that so many people missed what seems to have been the most basic of accounting tricks. The foundering telecom giant admitted on June 25 that it essentially disguised billions of operating expenses as capital expenditures, allowing it to report fictitious profits. With outside auditors, stock and bond analysts, bankers and regulators, even journalists, all scouring the finances of this already ailing company, how could they not notice that billions in operating expenses had gone missing? Chief Executive John Sidgmore did his best to build confidence in the new management team...

Posted by DeLong at 10:15 AM

Gregg Easterbrook on CEO Overpayment

Gregg Easterbrook wonders where the free-market conservative outrage at CEO overpay is. He's right: there should be a lot of it by now. At least, a bunch of conservative columnists should be ranting and raving about how CEO overpayments are another scandal produced by excessive government interference of some sort with the free market. TNR Online | Greed Isn't Good (print)| ...The genteel larceny has reached the point that CEOs pay themselves enormous amounts even when there is zero pretense of management success. Establishing this premise, in 2000 overall CEO pay rose by 22 percent even as the broad market declined by 12 percent. The next year, 2001, John Chambers of Cisco Systems paid himself $154 million as his company was losing $1 billion. Edward Whitacre of SBC Communications, one of the Baby Bell offshoots, paid himself $80 million in 2001, even as his firm's stock price fell for the third consecutive year. That same year at AOL Time Warner, joint CEOs Gerald Levin and Steve Case paid themselves $148 million and $128 million, respectively, even as the combined company's valuation was contracting by $56 billion because of the two men's decision to merge. Fifty-six billion is almost as much...

Posted by DeLong at 09:51 AM

July 02, 2002
Enron: A Book to Add to the To-Be-Read Pile

The New York Observer | Stephen Metcalf reviews What Went Wrong at Enron: Everyone’s Guide to the Largest Bankruptcy in U.S. History, by Peter C. Fusaro and Ross M. Miller. John Wiley & Sons, 256 pages, $14.95. '...Cunning and saurian, Mr. Skilling is the visionary who crafted Enron's "asset-lite" strategy, unloading pipelines and oil wells while converting the company into, essentially, a giant hedge fund. The notorious ex-C.E.O. of Enron has outdone Mr. Lay in pleading innocent by pleading ignorance, offering Congress the most elegantly concocted seven syllables in the history of buck-passing. To pertinent questions about Enron's sham partnerships, Mr. Skilling, a former McKinsey & Company partner, serially replied, "I am not an accountant"--finger-pointing by sleight-of-hand.... Not so long ago, we were sold on Bush II's promise that his would be a "C.E.O. Presidency." The phrase was meant to reassure us--he only needs to master the briefing memo, people--and to evoke as well an image of buck-stopping probity. Now, according to some of those same Bush cheerleaders, "C.E.O." seems to imply zero accountability. "We had people who could handle the details," former Halliburton C.E.O. Tom Cruikshank replied tartly, when asked about Enron-style accounting irregularities during Dick Cheney's tenure....

Posted by DeLong at 06:56 AM

July 01, 2002
Awaiting Michael Mussa's Take on Exactly What Went Wrong in Argentina...

Definitely something to put on my "to be read" list. I've never seen Michael Mussa pull his punches. The best Mussa story: his quip that the boss of the IMF, Michel Camdessus, was so optimistic that he "always saw the glass as half-full, even when there was no glass there at all." Publication - Argentina and the Fund: From Triumph to Tragedy POLICY ANALYSES IN INTERNATIONAL ECONOMICS 67: Argentina and the Fund: From Triumph to Tragedy, by Michael Mussa The catastrophic crisis of late 2001 and early 2002 marks the tragic end to Argentina's initially successful, decade-long experiment with sound money and market-oriented economic reform. The IMF consistently supported Argentina's stabilization and reform efforts in the decade leading up to the current crisis, and often pointed to many of Argentina's policies as examples for other emerging market economies to emulate. In this policy analysis, former IMF Chief Economist Michael Mussa addresses the obvious question: What went wrong in Argentina and what important errors did the IMF make in either supporting inappropriate policies or in failing to press for alternatives that might have avoided catastrophe? He emphasizes that the persistent inability of the Argentine authorities at all levels to run a...

Posted by DeLong at 10:07 AM

June 28, 2002
World Com's Bizarrely Transparent Fraud

One does wonder just what, eggzacktly, auditors think they are supposed to do. Are you supposed to detect fraud only when a company's CFO tells you about it? Or are you supposed to be able to figure out when $3.8 billion of current expenditures leasing telecommunications lines are missing, and have gone someplace else? - Major Business News ...Accounting experts say WorldCom Inc.'s outside auditors should have noticed that the telecommunications company hid $3.8 billion of expenses, even though it may have been hard to find because the chief financial officer had centralized all the financial reporting through his office. WorldCom, which has been charged with fraud by the Securities and Exchange Commission, disclosed Tuesday that it created profits out of losses for 2001 and the first quarter of 2002 through accounting engineered by its chief financial officer, Scott Sullivan. Mr. Sullivan, who has been fired, improperly booked the $3.8 billion in expenses as capital expenditures for last year and the first quarter, the company said. The revelations have stunned investors and analysts. Meanwhile, Arthur Andersen LLP, which audited the company's books during the period when the alleged fraud took place, has said it was misled by Mr. Sullivan,...

Posted by DeLong at 01:56 PM

A Very Nice Column From Paul Krugman on Large-Scale Financial Fraud

Paul Krugman puts his finger on exactly why the implications of the recent wave of discoveries of large-scale corporate fraud are so ominous: half-awake auditors and half-competent tracking analysts should have uncovered these quite a while ago: ":There are a couple of ominous things about this menu of mischief. First is that each of the major business scandals to emerge so far involved a different scam. So there's no comfort in saying that few other companies could have employed the same tricks used by Enron or WorldCom -- surely other companies found other tricks. Second, the scams shouldn't have been all that hard to spot...." | Paul Krugman | Flavors of Fraud | ...First there's the Enron strategy. You sign contracts to provide customers with an ice cream cone a day for the next 30 years. You deliberately underestimate the cost of providing each cone; then you book all the projected profits on those future ice cream sales as part of this year's bottom line. Suddenly you appear to have a highly profitable business, and you can sell shares in your store at inflated prices. Then there's the Dynegy strategy. Ice cream sales aren't profitable, but you convince investors that...

Posted by DeLong at 12:37 PM

June 25, 2002
Clive Crook on Argentina

Clive Crook returns from a trip to Argentina and gives his view. As always, it is extremely insightful and very well written. In some ways it's not fair: no one should be able to write like an angel to such a degree. One bone to pick, however: Crook says that: "...what Argentina shows is not the folly of any particular initiative. Rather, it highlights in an unusually stark way an ultimately irresolvable dilemma that confronts all emerging-market economies. To grow as fast as your potential allows, you must attract foreign capital. The more you succeed in this, the more you will come to depend on foreign capital-and, for as long as it takes to build a strong, diversified economy, the more fragile your success will be..." It's the currency mismatch in debts and credits plus the hard currency board peg of the peso plus the unsustainable deficits that together brought Argentina down. Remove any of those three, and Argentina today would be likely to be in quite good shape. Prosperity doesn't have to be "fragile"... National Journal Magazine Archive COLUMN: Argentina Crossed the Line Between Triumph and Disaster | by Clive Crook During the past 100 years, excluding ruin caused...

Posted by DeLong at 11:07 AM

June 20, 2002
The Federal Reserve Says Its Keeping Its Foot on the Gas

At the moment short-term real interest rates are negative: the 1.75% per year interest rate that the Federal Reserve has set on overnight federal funds is less than the rate at which consumer prices are rising. This is a very stimulative posture--it tells businesses that they should undertake investments that (in the short term at least) promise any profits at all, no matter how low. Now the Federal Reserve is telling us that there are no interest rate hikes on offer for the next few months. The Federal Reserve does not have confidence that the recovery is strong and steady enough to risk disrupting it by raising interest rates and making the incentive to invest less. The Federal Reserve does not fear rising inflation enough to want to raise interest rates to put downward pressure on price increases. | Fed May Not Raise Rates At Least Until September | John Berry | June 20, 2002 | The Federal Reserve now appears unlikely to raise interest rates until the fall, at the earliest, because inflation remains extremely low and the U.S. economy is not growing fast enough to create many new jobs. At the beginning of the year, some investors...

Posted by DeLong at 09:10 PM

The Economist's Fears for the Strength of the U.S. Recovery

It is a strange business cycle conjuncture that the U.S. is in now. Stock prices appear overvalued, and likely to fall--an extremely unusual thing to happen at the start of the recovery. Business investment seems likely to weaken further. Yet productivity growth appears extraordinarily strong. The most likely forecast thus seems to involve (a) relatively slow growth--less than the growth rate of potential output (which is about 3.5% per year, or perhaps a touch more), coupled with (b) rising unemployment for the rest of this year at least. The Economist's gloomy take: ...there are good reasons for the markets' current angst. Doubts about the pace of economic recovery lie behind much of it. Wall Street is still, by any historical measure, extremely highly valued.... In so far as they ever made sense, such valuations assumed a speedy return to the extraordinarily high profit claims of the late 1990s. That assumption seems increasingly far-fetched. Mr O'Neill may not have noticed any " substantive information" recently, but others have. In particular, they fret about signals that the American consumer may be running out of steam. May's retail sales fell by an unexpectedly large 0.9%. With no evidence of a rebound in...

Posted by DeLong at 11:32 AM

June 15, 2002
Argentina's Recent Collapse: Can't We Find an International Economic System That Doesn't Require Getting Policies 100% Right?

A depressing analysis of Argentina's crash by Perry and Servén says there were no options once the economy turned down in 1998-1999. The only solution was a peso float back in 1996-1997. It's a shame: Argentina implemented 75 percent plus of the neoliberal reform program, yet the 25 percent not implemented was absolutely crucial to long-run success. You simply cannot run a hard-currency peg without both (a) a balanced budget, and (b) a financial system that is well-enough capitalized to withstand the pressures that currency mismatches would generate if the peg were to fail. What should the IMF have done differently? In retrospect, it should have told Argentina in 1997 to (a) float the peso, or (b) balance the budget and raise bank capital requirements substantially. But why would the Argentine government have believed the IMF in 1997? The IMF in 1997 couldn't even convince the Thai government that it had a financial crisis brewing.

Posted by DeLong at 08:43 PM

June 08, 2002
From Forbes--Looking Closely at Earnings Numbers...

After every bubble, there comes a time when people and the press rediscover the fundamentals of valuing businesses. IMHO, it's now accident that Graham and Dodd published Security Analysis in 1934. Now here is a story from Forbes about how to value companies... Breaking Down The Numbers On Wall Street Breaking Down The Numbers On Wall Street Elizabeth MacDonald, 06.06.02, 2:34 PM ET NEW YORK Robert Olstein, the hyperkinetic head of the five-year-old Olstein Financial Alert Fund... His fund's recent victories: Avoiding fiascoes at Boston Chicken, Sunbeam and Lucent Technologies (nyse: LU - news - people ). "We would rather spend one night with a 10K report than two days with management," he says. Patience is key. "It takes anywhere from six months to three years for a stock to implode after I see these problems," he says. To find those problems, Olstein focuses on the major differences between generally accepted accounting principles and economic reality. For instance, Olstein avoided Sunbeam at $32 in 1998 when he saw a disparity between its reported $189 million in pretax profits for 1997 and a footnote that disclosed it had reported a meager $5 million in pretax earnings for tax purposes. Olstein...

Posted by DeLong at 12:05 PM

The Use and Value of Stock Options

I used to hold the belief (broadly speaking) that stock options are good, but that failing to disclose stock options in your headline accounts was bad. My smart brother Chris has pointed out that that is not what I should believe: Giving top executives stock options does not align their incentives with shareholders--it doesn't make them want to maximize the value of the company to shareholders--but makes top executives long volatility. That is, they benefit from anything that increases the riskiness and variance of the firm's performance. If one were serious about aligning top executives' incentives with those of shareholders, one would require them to use their salaries (or their previous earnings) to buy lots of restricted stock, and bar them from hedging it... Business Lobby Seeks to Limit Investor Votes on Options Business Lobby Seeks to Limit Investor Votes on Options By GRETCHEN MORGENSON The New York Times Thursday June 6, 2002 An effort by the New York Stock Exchange to require companies whose shares it trades to put all stock option plans to shareholder votes is coming under fire from the Business Roundtable, a lobbying organization that represents chief executives of large United States corporations. The pressure indicates...

Posted by DeLong at 11:27 AM

May 31, 2002
We counted on you to stop us from cooking our own books! That's what auditors are paid to do!

Blame the Accountant By Michael Kinsley It would have been fun to be a fly on the wall that day in April when Halliburton Co. fired the firm of Arthur Andersen as its auditor. Although the year is not yet half over, this one will be hard to top as Best Capt. Renault Moment of 2002. Like the Claude Raines character in Casablanca, the company apparently was "shocked, shocked" to learn what Andersen had been up to.... One imagines the scene: an orgy of self-righteousness. "You despicable swine!" these companies shriek at the trembling, cowering number-crunchers. "How dare you sully the sacred title of auditor? We counted on you to stop us from cooking our own books. That's what auditors are paid to do. If you're going to look the other way and then shred documents to cover up our misbehavior, there's no telling the terrible things we might do. Shame on you, Arthur Andersen. Shame! Shame!..."...

Posted by DeLong at 05:36 PM

November 28, 2001
International Financial Crises in the 1990s: Some Simple Analytics

One important thing missing from the syllabus of intermediate macroeconomics courses has been a clear, theoretically coherent, and comprehensible (to intermediate macroeconomics students) explanation of the international financial crises of the 1990s. Start with the collapse of confidence on the part of international currency speculators in the long-run values of the Mexican peso, the baht, the won, the ringit, the rupiah, the Brazilian real, the Argentinian peso, and the Turkish lira. What were the origins of the crisis? Why did governments and central banks afflicted by crisis find themselves forced to let their exchange rates rise--to let the value of their domestic currency rise? Why did they find themselves forced to raise interest rates? Why were they unable to keep output and employment from falling? Why were they so anxious to borrow money from the IMF during the crisis? And what was the rationale for the policy changes the IMF then demanded from crisis-afflicted countries before it would provide them with emergency loan support? The standard models taught in intermediate macro--flexible-price full-employment, IS-LM, Mundell-Fleming--are of absolutely no help. So I have taken a crack at writing down such an intermediate macro-level discussion of the developing world international financial crises...

Posted by DeLong at 10:34 AM

August 01, 2001
Clinton Administration International Monetary and Financial Policy

J. Bradford DeLong and Barry Eichengreen, "Between Meltdown and Moral Hazard" Abstract International monetary and financial policies were at the center of the activities of the Clinton administration for two reasons: first, its own political failures destroyed the administation's ability to make large moves in domestic policy; second, ongoing globalization raised the stakes in international economic policy. From one perspective, the administration's monetary and financial policies as extraordinarily successful. The U.S. experienced one of the longest, strongest expansions in history, and largely as a result of the U.S.- and IMF-led response, the financial crises of the period did not produce more than transitory interruptions of economic growth in any advanced economy and in any emerging market except Indonesia. A surprising number of virulent financial crises struck the world economy in the 1990s. Because these crises followed a new pattern, they surprised policy makers in Washington as in other parts of the world. The response therefore had to be assembled on the run. It can and has been criticized, but the criticisms are less important than the fact that the IMF and the U.S. Treasury did make substantial loans to crisis-affected countries, that these loans greatly eased the process of adjustment...

Posted by DeLong at 05:13 PM

June 01, 1990
Robert B. Barsky and J. Bradford DeLong (1990), "Bull and Bear Markets in the Twentieth Century," Journal of Economic History 50: 2 (June), pp. 1-17.

Robert B. Barsky and J. Bradford DeLong (1990), "Bull and Bear Markets in the Twentieth Century," Journal of Economic History 50: 2 (June), pp. 1-17....

Posted by DeLong at 03:10 PM

July 01, 1989
J. Bradford DeLong, Andrei Shleifer, Lawrence H. Summers, and Robert J. Waldmann (1989), "The Size and Incidence of Losses from Noise Trading," Journal of Finance 44: 3 (July), pp. 681-696.

J. Bradford DeLong, Andrei Shleifer, Lawrence H. Summers, and Robert J. Waldmann (1989), "The Size and Incidence of Losses from Noise Trading," Journal of Finance 44: 3 (July), pp. 681-696....

Posted by DeLong at 12:21 PM