It’s always been easy to lose perspective. In the modern social media age, maybe it has become even easier. Conventional wisdom rarely seems to get challenged anymore, particularly given the assignment of “what everybody knows.” Big Data is, for example, predicated on a very good theory, the wisdom of crowds. It hasn’t yet lived up to its expectations because as [...]
It used to be a big deal, the kind of move that would itself move markets all over the world. Very quietly, JPY has been trading higher over recent weeks and has reached a level of appreciation we haven’t seen since those rocky days in early September. Only then, a rising yen (falling dollar) was a sign of bad things, [...]
Sometimes you just have to laugh. A lot has been made on the inside of LIBOR’s assumed demise. The suite of interest rates is not being discontinued really, merely relegated to the backbench. As usual, the rationale for doing so is perfectly sound: As noted by the Financial Stability Board’s Market Participants Group, there are many current uses of LIBOR [...]
In July 2012, the LIBOR manipulation scandal broke wide and before Congress then-Federal Reserve Chairman Ben Bernanke used it to cleverly cover up for his crisis actions (more so inactions). He told the Senate Banking Committee that the LIBOR system was “structurally flawed” before intimating it had been that way for some time. Asked if the rates calculated by the [...]
1 - 2017 Summer Series: Milton's Mailbag Released 04 August 2017 Grant and Aaron kick off the 2017 Summer Series by addressing some of the most pressing listener questions during the first season of Adventures in Finance. The guys are also joined by Jeffrey Snider, of Alhambra Partners, and Michael Oliver, of Momentum Structural Analysis, who shed light on the [...]
Ben Bernanke, then Chairman of the Federal Reserve, told Congress in March 2007 that subprime was contained. He will rightfully be remembered in infamy for that, but that wasn’t the most egregious example of being wrong. Even putting it in those terms risks understating the problem and why it stubbornly lingers. Being really wrong is claiming that IOER will establish [...]
When Bear Stearns nearly failed, made to merge, in March 2008 it wasn’t really a surprise. Yes, markets were shocked by the demise of the ancient firm, one of the bulge bracket cartel which suggested surprise over the severity of it more than that things were going bad. For more than a year, starting in early 2007, Bear had been [...]
MF Global failed on a trade that would have made it enormously profitable. AIG’s portfolios of “toxic waste” ended up making money – for the Federal Reserve. Bear Stearns and Lehman Brothers were ended like the others by liquidity, not losses. SemGroup was another firm that went into bankruptcy during that period, but one that practically no one has heard [...]
We are at the stage ten years later where it is still necessary to define terms. In every finance and economics textbook, the chapter on monetary policy defines “tight” money as when the Federal Reserve (or whatever central bank) raises its policy rate(s). Conversely, “accommodative” money is where it lowers the rate(s). In the US system, the technical reason given [...]
If you are an enterprising financial firm with spare cash toward the end of the business day, you have several options for it. Primary among them is the Fed’s Reverse Repo (RRP) desk which will pay you 50 bps interest with your cash secured by both the reputation of the Federal Reserve as well as UST collateral. Given that option, [...]
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