Markets exist primarily to efficiently allocate resources. The market mechanism has its imperfections but it is still the best way we know for ensuring that people get what they want. From time to time, regulators decide to shut down markets. Recently, it has become fashionable to justify closing down an asset market due to a […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2014-06-30 05:31:022018-05-21 05:31:28Singapore Property: Capital Immobility and Slower Growth is the Cost of the Property Market Shutdown
Q: What is the major reason for the litany of regulatory and legal breaches committed by just about every major banking institution over the last decade? A: The banks have gotten too big. It is well known that as an enterprise grows, it becomes more difficult to monitor and control its operations. While a two-man […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2014-06-18 05:31:362018-05-21 05:32:02Big Banks, That Should be Small Banks, Hog Tie Themselves with Compliance
Bloomberg published a story yesterday which noted that turnover in the US Treasury market is currently 18% below its 10 year average of USD 502B per day. Bloomberg argued that the decline in volume is one reason that interest rates have fallen so much this year. The claim is that a small group of traders […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2014-06-01 05:32:282018-05-21 05:32:53Lower Volume in the US Treasury Market Does Not Mean Incorrect Pricing
The following graph from Bloomberg shows the dramatic collapse in the demand for money in the US. The image shows the behaviour of the US velocity of money as measured by M1 from 1970 to the present. Velocity is a critical determinant of the price level since it measures the number of times money […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2014-05-15 05:34:552020-03-09 01:19:53US Velocity of Money Hits a 40 year Low: What Determines Interest Rates Now?
I very rarely comment on day-to-day market movements since most observed price variation can be classified as noise. However, Friday night’s US Treasury market behaviour was fascinating. The main news of the day was an unexpected increase in US employment and the corresponding decrease in the unemployment rate to 6.3%. The following Bloomberg picture captures […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2014-05-05 05:41:482018-05-21 05:42:40Has the US Treasury Market Finally Accepted the Inflation-Free Growth Story?
The ‘no brainer’ trade was for interest rates in developed markets to rise this year. The rationale cited Fed tapering, economic recovery, rotation out of bonds and into stocks amongst many reasons for higher interest rates. Instead, interest rates have fallen in 2014 and the bond markets are outperforming stocks. The ‘no brainer’ trade is […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2014-04-28 05:43:352018-05-21 05:44:05Reversing the ‘No Brainer’ Trade of 2014 Could Precipitate a Scramble to Buy Bonds
Mario Draghi at the ECB is being pressured to adopt a Quantitative Easing policy similar to that implemented by the Federal Reserve and the Bank of England. The argument most fervently pushed by Christine Lagarde, Managing Director of the IMF, warns of the “dangers” of disinflation/deflation, which apparently (?) leads to low growth and higher […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2014-04-24 05:44:102018-05-21 05:44:36QE or not QE, That is Mario’s Question…
Making markets in US Treasuries, and other bonds as well, is no longer a profitable business. The Federal Reserve has purchased so many of the securities that “two-way flow” has all but dried up. Broker dealers make their money out of flow, buying low from one seller and selling high to another buyer. While bad […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2014-04-22 05:44:392018-05-21 05:45:06Why the Broker-Dealers’ Woes are Good For You
Academic economists long for proof that their theories and beliefs actually work. In the absence of policy power, researchers are left to pick through historical databases in search of correlations that may support their economic views. Can you imagine, therefore, the gleeful anticipation that salt water economists experienced when one of their heroes, Ben Bernanke, […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2014-02-12 05:45:092018-05-21 05:45:37The Greatest Lesson From Bernanke’s Fed Presidency Will Be Swept Under the Carpet
The Reserve Bank of Australia has been “talking down” the Australian dollar for the last 12 months. They have threatened direct intervention but refrained. They have cut Interest rates to historical lows, to the point of exhaustion. It is still their opinion that the Australian dollar is too high. In December, the RBA Governor Stevens […]
Singapore Property: Capital Immobility and Slower Growth is the Cost of the Property Market Shutdown
Markets exist primarily to efficiently allocate resources. The market mechanism has its imperfections but it is still the best way we know for ensuring that people get what they want. From time to time, regulators decide to shut down markets. Recently, it has become fashionable to justify closing down an asset market due to a […]
Big Banks, That Should be Small Banks, Hog Tie Themselves with Compliance
Q: What is the major reason for the litany of regulatory and legal breaches committed by just about every major banking institution over the last decade? A: The banks have gotten too big. It is well known that as an enterprise grows, it becomes more difficult to monitor and control its operations. While a two-man […]
Lower Volume in the US Treasury Market Does Not Mean Incorrect Pricing
Bloomberg published a story yesterday which noted that turnover in the US Treasury market is currently 18% below its 10 year average of USD 502B per day. Bloomberg argued that the decline in volume is one reason that interest rates have fallen so much this year. The claim is that a small group of traders […]
US Velocity of Money Hits a 40 year Low: What Determines Interest Rates Now?
The following graph from Bloomberg shows the dramatic collapse in the demand for money in the US. The image shows the behaviour of the US velocity of money as measured by M1 from 1970 to the present. Velocity is a critical determinant of the price level since it measures the number of times money […]
Has the US Treasury Market Finally Accepted the Inflation-Free Growth Story?
I very rarely comment on day-to-day market movements since most observed price variation can be classified as noise. However, Friday night’s US Treasury market behaviour was fascinating. The main news of the day was an unexpected increase in US employment and the corresponding decrease in the unemployment rate to 6.3%. The following Bloomberg picture captures […]
Reversing the ‘No Brainer’ Trade of 2014 Could Precipitate a Scramble to Buy Bonds
The ‘no brainer’ trade was for interest rates in developed markets to rise this year. The rationale cited Fed tapering, economic recovery, rotation out of bonds and into stocks amongst many reasons for higher interest rates. Instead, interest rates have fallen in 2014 and the bond markets are outperforming stocks. The ‘no brainer’ trade is […]
QE or not QE, That is Mario’s Question…
Mario Draghi at the ECB is being pressured to adopt a Quantitative Easing policy similar to that implemented by the Federal Reserve and the Bank of England. The argument most fervently pushed by Christine Lagarde, Managing Director of the IMF, warns of the “dangers” of disinflation/deflation, which apparently (?) leads to low growth and higher […]
Why the Broker-Dealers’ Woes are Good For You
Making markets in US Treasuries, and other bonds as well, is no longer a profitable business. The Federal Reserve has purchased so many of the securities that “two-way flow” has all but dried up. Broker dealers make their money out of flow, buying low from one seller and selling high to another buyer. While bad […]
The Greatest Lesson From Bernanke’s Fed Presidency Will Be Swept Under the Carpet
Academic economists long for proof that their theories and beliefs actually work. In the absence of policy power, researchers are left to pick through historical databases in search of correlations that may support their economic views. Can you imagine, therefore, the gleeful anticipation that salt water economists experienced when one of their heroes, Ben Bernanke, […]
The RBA Gets Caught Telling Porkies
The Reserve Bank of Australia has been “talking down” the Australian dollar for the last 12 months. They have threatened direct intervention but refrained. They have cut Interest rates to historical lows, to the point of exhaustion. It is still their opinion that the Australian dollar is too high. In December, the RBA Governor Stevens […]