ECO 401: Studies in Monetary Stupidity

Way back in my first year of Grad School, I enrolled in ECO 401: Studies in Monetary Theory. To my amusement and surprise, the entire semester was spent deriving the Basic Neo-Classical Model and its extensions within the ‘Real Business Cycle Theory’ framework. RBC was the most promising development in macroeconomics for decades. The amusing […]

Negative interest rates: The cost of monetary saturation?

I have banged on many times about the drastic collapse in the velocity of circulation of money. This is a fancy way of saying that banks and individuals don’t want to hold the money that the Central Banks have been throwing at them for a decade. Despite the attempts of the Central Banks to ‘reignite […]

A leader is born

It is said that 2 things drive ambitious people: Money and Power. Those that prefer money gravitate toward finance and business where they can live relatively private lives with the comforts of wealth. Those that prefer power gravitate toward politics where they are publicly scrutinised, but get to impose their beliefs on the lives of […]

Netflix attempts a Global Optimisation … plus the latest release from DJ Dr Fish

If you are like me, you tried to steer clear of Operations Research at university for as long as you could. OR, for those of you who either don’t know or delightedly forgot, is the practical application of optimisation methods to real world problems. Dull but really important if that’s your bag… Netflix has emerged […]

What happens if I know that you know what the Fed knows?

“For all the talk of the challenge facing officials as they orchestrate higher rates with so much money sloshing around, Thursday’s market operations weren’t much different in scale than previous days. And the benchmark rate rose 0.2 percentage point, or 20 basis points on Thursday — practically to the middle of the Fed’s intended range.” […]

The ETF’s subtle advantage over a mutual fund

There is nothing original in this post. However, with a number of mutual funds closing their doors over the last few days, I thought it might be worthwhile discussing why an ETF structure should be more resilient than the standard mutual fund. ETF’s and mutual funds are both derivative securities. Their intrinsic value depends on […]

Not panicking is too hard to do

Most people would have missed the violent reaction of the European currency and bond markets to Mario Draghi’s discussion of the ECB’s policy statement last Thursday. I say ‘violent’ since the currency and bond markets registered movements of +1.5 and -3% respectively, during 15 minutes of trading post announcement. Mario Draghi apparently disappointed the investment […]

Macro Prudential regulation: One bird in the bush is worth more than 10 in the hand

Macro-Prudential controls on Loan-to-Value and Debt-Service-to-Income ratios are the hot topic in banking supervision at the moment.  The IMF, for instance, has been pushing these policies as a means for reigning in housing markets. The premise is that banks are incapable of assessing credit risk on a deal-by-deal basis, and therefore it falls to the […]

Investing in Retail Land: trends we like, trends we hate

Retail investors really get the thin end of the investment wedge. In general, they buy last year’s best performing asset class which then turns sour, or they ignore this year’s ‘dog’ investment which subsequently has its ‘day’. In my experience, the only time I have seen the retail investor outmanoeuvre the institutional professionals was when […]

The best way to spoof is not to spoof at all

The Chicago commodity trader Michael Coscia was convicted of ‘spoofing’ 2 days ago. Spoofing is where a trader submits an order with the intention of canceling it before transacting. The idea is to send a false signal of market demand or supply to trick other traders into believing an imbalance is present. Are traders that […]