Finance

New ‘Flash Boys’ Exchange Is No Disruptor

Investors fed up with a market “rigged” in favor of high-frequency traders, who use sophisticated software and algorithms to trade in and out of stocks in milliseconds, now have a place of their own, the Investor’s Exchange (IEX) Group. It went live on Aug. 19, 2016, as an alternative to NASDAQ, the New York Stock Exchange and other SEC-approved exchanges. Proponents of the new exchange say their “speed bump” model, based on a 35-microsecond trading delay, promotes fairness by limiting the ability of high-frequency traders to act on information before it’s seen by smaller traders. Smith School professor Albert “Pete” Kyle remains skeptical. Read more...

Audio: Assessing the Latest Drug Pricing Scandal

Executives at pharmaceutical company Mylan have come under attack for giving themselves raises while boosting the price of a lifesaving injection device by more than 400 percent over the past nine years. Smith School finance professor David Kass compares the situation to a 2015 scandal, when hedge fund manager and pharmaceutical CEO Martin Shkreli raised the price of the AIDS drug Daraprim from $13.50 a pill to $750. Audio (3:41)...

Buffett Reaffirms Apple as Value Buy

As investing icons Carl Icahn, George Soros and Leon Cooperman have exited Apple and its lagging stock, Warren Buffett has reasserted a value-investor approach by upping his stake in the tech giant. SEC filings on Monday revealed Buffett’s holding company Berkshire Hathaway as of June 30 increased its Apple stake by 55 percent, or about $500 million. Smith School professor David Kass shares insights. Read more...

Why Bank Reform Is Just Election Posturing

Democrats and Republicans are calling to reinstate a version of the Glass-Steagall Act, which from 1933 to 1999 separated investment banking (underwriting, issuing and distributing financial instruments like stocks and bonds) from commercial banking (deposit-taking and lending) activities. Are legislators about to break up the big banks? Don't count on it, say professors Cliff Rossi and Phillip L. Swagel at the University of Maryland. Read more...

Why Banks Remain Too Big to Fail

Told big bank failure would trigger a flood of bankruptcies and economic calamity, U.S. taxpayers collectively paid billions of dollars to bail out large institutions from the 2008 financial crisis. Despite passing Dodd-Frank legislation to mitigate a future bailout, Congress is on the verge of amending the U.S. bankruptcy code to make bankruptcy feasible for larger banks — more so than when Lehman Brothers’s 2008 bankruptcy filing ignited widespread panic. Smith School professor Clifford Rossi explains why things don't seem to be getting better. Read more...

Brexit Countdown: Faculty Perspectives

“Divorces are tough,” says Smith School economist Peter Morici. But Britain nonetheless should break from the “shackles” of its union to a Europe economy locked in ruinous cycles of debt crises and high unemployment. "The EU suffers from chronic slow growth thanks to a smothering bureaucracy and single currency," Morici says. Other Smith School professors foresee challenges if United Kingdom voters opt to separate from the European Union in a referendum on June 23, 2016. Read more...

‘Sharks’ Losing Ground to ‘Prey’ in Markets

Since the global financial crisis, “active” fund managers — stock pickers looking to beat the market — have lost ground to their “passive“ counterparts, as investors shun stock pickers amid concerns over bad performance and high fees. Smith School finance professor Russell Wermers compares the situation to the shark-prey relationship. "We need both in the water to make the world go round properly," he says. Read more...

Making Sense of Berkshire’s Bite of Apple

Berkshire Hathaway’s small but much-discussed bite of Apple suggests a vote of confidence for a tech giant that had been sliding in the stock market. It also hints at how Warren Buffett’s holding company will do business after the 85-year-old "Oracle of Omaha" no longer is there, Smith School professor David Kass says. Revealed Monday in a regulatory filing, the roughly $1 billion investment of 9.8 million shares represents about 1 percent of Berkshire’s $129 billion portfolio value. Read more...

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