When Everything Is Too Safe, Add Risk
bloomberg.com
bloomberg.com
It's an interesting time to be in the markets. The steady decline of interest rates has helped keep asset prices high, but now interest rates are starting to come up again. That coupled with newly created wealth from developing countries trying to find a safe place to get a decent return has pushed future expected returns down so investors are struggling to find investments that will give the the returns they've been accustomed to.
I'm addicted to his writing and I generally hate financial markets. Reading his stuff is enjoyable, educational, unbiased and entertaining. I highly recommend any techies here who want to understand the financial world to read his stuff.
This appears to not matter at all in the "new normal". The 10y yield tapped 2.93% yesterday and still, everyone made a mad dash to bid up equities.
It should be noted that while the Fed is reducing its balance sheet this year, the BOJ, ECB, and PBOC's easing efforts are resulting in a net increase in global CB-led asset purchases.
Kuroda alone will likely be enough to keep risk assets elevated, regardless of what interest rates do.
Of course, the first derivative is only scary if you're expecting it to continue for a while. That's forecasting, or guesswork, or something besides just observing the current rate.
[1] "Derivative" in the calculus sense, not in the financial instrument sense.
“’With hashgraph every user participates in confirming transactions, so the process is faster.’ I realize that I am in many ways an ignorant rube, but I am constantly confused by the notion that having every participant in a market confirm every transaction is a fast way to confirm transactions.” Also:
“[...]not even bank executives seem to understand what is going on inside their banks. If that is the case then it shouldn't be surprising if sometimes the market thinks the bank is worth less than the bank thinks it's worth, or if the market turns out to be right. It's not literally that the market knew about the $1.77 billion fraud before the bank did. It's just that the whole enterprise is kind of a random-number generator, and the market did a better job of guessing the right random number than the accountants did.”
I sometimes vacillate between superstition and suspicion when things like this happen. Example: a bunch of anonymous bidders converge on almost exactly the same price for a somewhat obscure item. For a second it’s confusing, then I wonder if they are shill bidders, then I think: huh. lots of people saw the auction, and they basically all agree on how much a widget is worth. Anybody else here ever get a spooky feeling when observing an efficient market?
The first story segues into the second ("What is risk?" -> "Elsewhere in dumb products") but then subsequent parts go on as if the writer is rambling about completely unrelated stuff that would be fine in separate articles.
Having finished reading it, I am just confused.
Edit: There are also lots of inside jokes in the headings (and occasionally in the articles) that only make sense if you've been reading the column for a while.
For another example of a famous columnist who does the same thing, Dear Abby: https://chicago.suntimes.com/lifestyles/dear-abby-late-wifes...
The broader point he's making is that people bought complicated, high-risk instruments that they may not have understood (or at least treated as something other than what they were, in this cases, vehicles to bet against macro volatility) and lost money on them, and then blamed the losses on something other than the actual downside of that risk.