Mr. Levine is back. He was slacking/off on vacation for a week, but now his witty commentary arsenal is well-supplied, his fun financial market reflections back and ready to be FIIIIREEEED at the world.
First story is a classic story of regulation trying to achieve a specific end and result in merely redistribute the risks but economically and materially speaking _not doing anything.
Right see 18 times leverage is still peanuts compared to Lehman Brothers, but some of the fun is creeping back into this sort of activity. Only now it is called “shadow banking” or “hedge fund trading” rather than “investment bank trading.”
“We will retreat from doing trading, and instead lend money to Jane Street to do the trading” is arguably a plausible model for a bank, but you can’t expect the bank to like it."
Second story about Mr. Godking Elon who, while acquiring Twitter, made a filing error (on purpose?) that was clearly and openly illegal (not legal advice; I'm a paltry economist writer, don't know legal minutae). Nothing much came of it... except when the SEC, a week before Trump assumed office, filed charges. Uh-hu.
Now, it wouldn't have been stinky and smelly of political retribution had the SEC charged him in April 2022, but now...? very bad.
He just very publicly violated the securities laws! What were they supposed to do? Not bring a case? Ugh no the obvious answer is: They were supposed to bring the case when he did it, not in January 2025. In 2022 he was a little bit above the law; in 2025 he’s entirely above it.
NEXT: Efficient Market Hypothesis in action (#861085)
The idea is that people compete to make stock prices efficient: If a stock’s price is too low, you can make a lot of money buying it, so smart people expend enormous resources to figure out which stocks’ prices are too low. This competition is reasonably effective in making prices efficient: All those smart people buy the stocks that are too low and sell the ones that are too high, until all of their prices are about right.
Life insurance version:
Life insurance depends on a pooling of risk, so people who die early get paid out more than they pay in, while people who die later pay in more than they get back. (But are happy, because they didn’t die.) But if everyone’s risk can be priced exactly, then everyone gets back what they pay in, which is not a useful product for the people who don’t have long to pay in.
So now smartwatches and other spyware tools provide better biometric data that life insurance companies now try to monetize off: by getting slightly tiny itsy bitsy better at predicting when an individual dies they can offer better/more competitive life insurance policies to them.
FAAANTASTIC.
That's it.
Non-paywalled here: https://newsletterhunt.com/emails/163905