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 […]

What May Have Happened at JPMorgan?

Let me start with a disclaimer: I have no privileged information about the USD 2B trading loss at JPMorgan. The reasoning in this post is purely speculation on my part. How could a firm with a long history of conservative, commercial banking practice make a USD 2B error investing its own capital? The error is […]

What is the Price of Risk Aversion?

Those of you familiar with First Degree’s investment process will know that we focus on risk aversion as the major determinant of asset prices. Risk aversion, in our opinion, dominates cash flow variation as the driver of returns – easily by a factor of ten times or more. If risk aversion is so important, is […]

The ECB Keeps the Politicians Honest

The ECB has always maintained that the EU debt crisis is a fiscal problem requiring a fiscal solution. Monetary policy is the ECB’s domain and they will not deviate policy to afford the EU spendthrifts an easy way out. The ECB owns the very same Greek debt that the politicians are seeking to force the […]

The Benefits of Delaying the Second Greek Bailout Package

As I write, the EU are debating whether they should delay their decision on the second Greek bailout. One issue is that should they delay, then the EUR 14.4B redemption due on March 20 2012 will have to be paid in full rather than be subject to the haircut associated with the Bond Swap. Does […]

Take Two a Day and Come Back and See Us in Three Weeks

…so was the prescription from the world’s richest nations to the EU and the IMF. Following on from last week’s blogpost, the baton to beat up the Europeans begging for money at last weekend’s G20 Finance summit was passed to Brazil. More emotional than the Asian cultures, the Brazilians were quite open with the EU/IMF […]

What Do Steve Jobs and Josef Stalin have in Common? Thought Vacuum in their Management Teams

When Josef Stalin died in a dachka outside Moscow, there was no announcement for 36 hours. Stalin’s management team, the Politburo, were frozen with no idea how to continue alone now that their leader had departed. Stalin was so commanding that the Politburo members had had little experience taking initiatives or making decisions. Apple, the […]