Fiscal Cliff or Stairway to Heaven?

Why would 50% of US Republican voters favor a tax rate hike now to pay for Obama’s spending? The answer is that they are going to have to pay for it at sometime in the future, so now is as good a time as any. This logic is not only simple and compelling, it also […]

Quality: The New Battleground in Asset Management. Can Alternatives Go Mainstream?

“The reason we hire big managers is because, if something goes wrong, they will fix it internally. Its too hard for our Investment Committee to fire a manager, so we rely on our managers to respond themselves” – CRA’s pension plan sponsor, 1993. This comment still resonates with me nearly 20 years after the conversation. […]

Bozo the Clown Advises on Greek Bond Buy-Back Tender

“Greece fails in attempt to buy-back their bonds” will be the headline in a few weeks following the poorly conceived tender off that will be presented to bondholders. How so? Many moons ago I enthusiastically agreed with the proposal to reduce Greek debt through outright purchases of bonds on the secondary market. I had expected […]

Urban Hip Supplants the Agrarian Revolution in China

Revolution is a central thesis of Marxist-Leninist economic theory. The argument is the following: Capitalists exploit the Proletariat by paying just enough in wages to allow the labour pool to subsist. Profits are pocketed by the Capitalists. The Proletariat doesn’t like this very much and spontaneously rise up and – bang – Revolution! The key […]

Bernanke Comes Under Pressure From a Most Unlikely Source…the IMF!

The annual meetings of the IMF and World Bank not only have a carnival atmosphere, they are carnivals! 10,000+ delegates and 5,000+ additional hangers-on converge on the hapless host city. Tents are erected to shelter cocktail parties, private jets chauffer bank CEO’s in and out of the airports while anxious relationship managers (salespeople) sweat over […]

Will Settlement Manipulation Kill the ‘Golden VIX’ Futures Market?

One of the recent success stories for new financial instruments is the CBOE’s VIX futures market. The VIX is a measure of expected S&P 500 stock index volatility – sometimes known as the ‘fear index’. Because the VIX is calculated using a complex formula and scores of Put and Call options, the VIX itself can […]

Plosser’s Attack on QE3 Rattles Markets…But What Did He Exactly Say?

I went to sleep on Tuesday night content that the markets were in good shape – only to wake up to the news that a 2% fall in the S&P was being blamed on Philly Fed President Charles Plosser’s ‘…attack on QE3.’ The financial press left it at that – but Chuck is no fool, […]

Norges Bank Recognises Time-Variation in Expected Returns

Our intrepid CEO, Tony Morgan, noticed an article on CNBC ( that reported on the post-GFC inquiry into the activities of the USD 700B Norwegian Sovereign Wealth Fund, Norges Bank. Many had expected that the inquiry was going to berate Norges Bank for not cutting risk during the Global Financial Crisis. On the contrary, to […]

Attention Europe: The Asian Cavalry Is Not Coming

The Chairman of China Investment Corporation (China’s Sovereign Wealth Fund) yesterday confirmed exactly what this blog had been speculating would be the outcome from Greece’s debt restructuring. The Chairman stated that the CIC is no longer buying European Government debt. My guess is that the CIC is not alone in shunning European debt. The State […]

So Where Does the Money Go Now?

The results of the Greek Debt Swap recorded an 86% voluntary tender rate. In their wisdom, the Greeks forced non-tenders to take the package as well. We think that most Asian and Middle Eastern Sovereign reserves managers must have tendered, for no other reason than to avoid publicity. Altruism does not play a part. Greece […]