As John Carney notes today, Citigroup's market capitalization is $21 billion; that of Goldman Sachs is $20 billion. Can anyone say "merger of equals"? Nothing's unthinkable in this market, not even the idea that you can tie two rocks together and hope that they float. Reportedly Lloyd Blankfein approached Vikram Pandit with a merger proposal in September, and was rebuffed; now, however, the matter is out of Pandit's hands, and Citi's board might be more ...

Jonathan Stempel of Reuters has a very useful look at what's going on at Berkshire Hathaway, which fell $6,500 per share today to close at its lowest level in over five years. After reading his article, I think we might be one step closer to understanding why Berkshire's CDS are trading so very wide right now. But first, here's David Gaffen: In recent weeks, the credit-default swaps has seen a marked decline in liquidity and ...

On the face of it, recent activity in Berkshire Hathaway makes little sense. Credit default swaps on the triple-A company were trading at 388bp yesterday, and are somewhere over 450bp today, possibly having risen as far as 560bp this morning. As Bloomberg says, For the swaps to pay off, Berkshire would have to exhaust its $33.4 billion cash hoard, and Buffett's decades-long record as the world's most successful investor would have to come to a ...

You might expect it from right-leaning commentators like Will Wilkinson. You wouldn't expect it from someone like Mark Perry, who lives in Flint, Michigan. And you certainly wouldn't expect to see it in the New York Times, from the likes of Andrew Ross Sorkin. But all of them are perpetuating the meme that the average GM worker costs more than $70 an hour, once you include health and pension costs. It's not true. The average ...

Last summer, Baruch, Zubin, and I got into a discussion about the oft-cited statistic that 75% of fund managers underperform their benchmark. Is it true? Baruch concluded that no one really knows where it came from: "it seems the 75% rule will remain unattributable," he said. But now there's an empirical study out: Standard & Poor's Index Services has relaunched its Spiva scorecard, which compares the performance of US mutual funds and benchmark indices. Using ...

Yesterday I sketched out a possible financial plan for how GM might be restructured within bankruptcy. Today, Andrew Ross Sorkin provides the other side of the coin -- the operational side of things. Which, in his plan, includes a merger with Chrysler: The merger should reduce costs by as much as $7 billion. But that's not the tough stuff. The harder decisions are these: Both companies would have to jettison brands -- lots of them. ...

Tradesports, one of the most venerable real-money prediction markets, has closed. I'm not sure what this means for spin-off site InTrade, which recently increased the cost of withdrawing funds. But it can't be good news, especially now that US election fever has passed. Could this be the beginning of the end for such markets?Related LinksThe US FirebreakAnxious Days for Tax DodgersThe Case for Chapter 11

Phil Gramm, Ph.D. (Econ): "There is this idea afloat that if you had more regulation you would have fewer mistakes," he said. "I don't see any evidence in our history or anybody else's to substantiate it." He added, "The markets have worked better than you might have thought." Really? Maybe Gramm should have a look at Spain. Or, in the other direction, Iceland -- which has now, thanks to zero bank regulation, found itself on ...

The Onion News Network has a video up headlined "In The Know: Should The Government Stop Dumping Money Into A Giant Hole?". It's sponsored by Saab, a wholly-owned subsidiary of General Motors.Related LinksDetroit Needs a MiracleHelp Us or We DieThe Drive to Save Detroit

Antony Currie says that it's possible to structure a GM bailout so that it behaves like a bankruptcy without being called a bankruptcy: If an official bankruptcy label is really too scary, another template already exists: the government bailout of Chrysler almost 30 years ago, when shareholders, bondholders, car dealers and employees all made considerable concessions in return for federal financial support. That sounds like a Chapter 11 process, but was never labeled as such. ...

Top Goldman Sachs Executives Will Not Receive Bonuses for 2008: A 99% pay cut for Lloyd Blankfein, but none of his $68.5 million 2007 bonus is being clawed back. A New Bailout Low: Buy a $10 million bank, get a $3.4 billion bailout free! Foreign Aid Goes Military! Easterly on Collier. Important. A Pig in a Poke: How Morgan Stanley misled retail investors in Singapore, who thought they were taking Australia and Singapore credit risk ...

There's a bailout vs bankruptcy meme going around with regard to GM -- a choice which makes me want to tick "none of the above". I've seen it in dozens of places of late, but since it comes with the imprimatur of Paul Krugman, let's look at the argument of Jonathan Cohn: GM can't build cars without parts, and it can't get parts without credit. Chapter 11 companies typically get that sort of credit from ...

Gari has a question about AIG, in the comments: Why did a well-capitalised insurance company with plenty of long-dated liabilities decide that it was a better use of shareholders' and policyholders' cash to write protection against debt instruments rather than owning them? I think part of the reason was the anomaly in the pricing of CDS compared to bond yields that the CPDO tried to exploit. I don't know whether I'm just raging against accounting ...

I don't fully understand Nick Denton's decision to fold Valleywag into Gawker. Gawker's readers don't care about Silicon Valley gossip, and Valleywag's readers don't care who was spotted having lunch at Michael's yesterday. What's more, Gawker's clearly having difficulty selling out its inventory already -- hence the end of pay-per-pageview. So readers won't benefit, and although Gawker.com will get a traffic boost from this, it's not going to be easy to monetize that. But I ...

Baruch has a corker of a post over at Ultimi Barbarorum on hedge funds, and why it is that they've unravelled so spectacularly this year despite largely escaping the bursting of the dot-com bubble unscathed. Go read the whole thing, but here's a tiny taster: The hedgies are hanging onto the winners of the Great Moderation, and instead of selling them when they go wrong, their first impulse is to defend, manipulate, and hang on. ...

Harvard president Drew Faust is worried about the university's endowment: As a result of strong returns and the generosity of our alumni and friends, endowment income has come to fund more than a third of the University's annual operating budget. Our investments have often outperformed familiar market indexes, thanks to skillful management and broad diversification across asset classes. But given the breadth and the depth of the present downturn, even well-diversified portfolios are experiencing major ...

Let's say you're a risk-averse investor with a nest egg you want to save for retirement. You're not greedy; you'd rather take absolute safety over an extra point or two in annual returns. You could just keep your money in cash, but then you run the risk that it will be eroded by inflation: while that might not be a huge worry right now, your time horizon is decades long. And so you look to ...

The FT.com redesign isn't live yet, but you can get a preview here. It has a lot more white (or, rather, pink) space than before, and places a huge onus on the front-page editors to get the story mix exactly right. It also, at least according to the preview, has the grand total of one ad unit on the whole page. I can't imagine that will last long. The most depressing part of the relaunch, ...

Jennifer Hughes deserves some kind of medal for her magnificent article on Lehman Europe's insolvency in this weekend's FT. Hughes's piece clears up a large number of questions about UK law, the $8 billion taken from Lehman Europe by Lehman US, and the $40 billion of assets held by Lehman Europe's prime brokerage operation. It paints the PricewaterhouseCoopers team now running Lehman as surprisingly competent -- even after you make allowances for the fact that ...

Just how much does Ben Stein love his "mighty Cadillac STS-V"? So much, it seems, that he considers its survival a matter of national security. Srsly: The national security considerations make saving General Motors, Ford and Chrysler a life-or-death matter. I wish I were making this up. I'm not: We'll want a G.M. or a Chrysler when it's time to make tanks and Humvees. I guess we were all kidding ourselves about China being any ...