Financial links

1. An ironically titled blog post from Reuter's Felix Salmon. I think he was thinking about "black swans" in the place of "tail risk." When one of the obvious causes behind a large standard deviation move in asset markets has become much less likely it's okay to say that tail risks have decreased. 

2. The IMF has an interesting analysis that clearly explains why a country like Japan has lower sovereign risks than their total debt levels suggest. Central banks and domestic investors reduce funding risk, so the interaction between high debt levels and an unstable investor base is generally more important than one of those factors by themselves.

3. I haven't touched on the Herbalife financial soap opera yet. For those of you who haven't heard of it, it really started when Bill Ackman gave a speech at Ira Sohn and then released a report accusing HLF of being a pyramid scheme. His price target for the stock is zero. If you are interested in whether or not this is a good trade then check out Bronte Capital's post. It seems that while Herbalife is ripping off their customers by overcharging them even after the discounts they are giving their so-called distributors, their multi-level marketing model has created many different nutrition support groups that may not be extremely profitable for people running them but are still generating real value for their customers and thus much of Herbalife's revenue is stickier even in light of the bad press. This means that the only real way the short will work is if the government goes after Herbalife, and their track record in this type of thing is pretty bad.
Why did I call this a financial soap opera? Outside of the arguments between Bill Ackman and Herbalife, fund managers are jumping in on all sides of the trade. Daniel Loeb and Carl Icahn are both rumored to be long HLF. David Einhorn was rumored to be short HLF in 2012 when he asked a question on a conference call a few months before Ackman made his presentation. If you want to see two hedge fund managers on different sides of the trade (one of whom is showing signs of senility) go at each other on live TV then watch the video at the link.  More recently, Herbalife hasn't been helping their credibility when they go and register domain names related to the name of Bill Ackman, the person shorting their company. Actually, this might be more of a comedy than a soap opera.