Plenty of stuff - some more 'econ' stuff relating to Europe is included here instead of the previous Weekender: Euro Crisis-post.ASSET CLASS VIEWS
Buttonwood: Marginal improvement – The Economist
Corporate profit margins are extremely high. Can they be sustained?
Yen Rally Here to Stay, For Now – The Source / WSJ
…the yen has found it is back at the top of the safe-haven club, replacing the dollar that had only reigned briefly while the U.S. recovery appeared to have been no longer in doubt.
Detail View: S&P Cycles (1932-Present) – The Big Picture
TRADING
Limits to currency momentum trading – voxeu.org
Momentum trading – buying past winners and selling past losers – is a popular trading strategy in many assets. In foreign exchange high returns to momentum trading have fuelled concerns that it is little more than destabilising speculation. This column argues that, for better or worse, such strategies are likely to continue.
The Rules, Part XXXI – The Aleph Blog
The offering of liquidity through limit orders is a real service to the market, and on average gets rewarded in lower overall execution costs. In choppy markets, it can really add value.
Goldman Diaspora Falters as Flamand Hedge Fund Declines – BB
Ex-prop traders of the bank have difficulties making money in markets.
Stock Trading Is About to Get 5.2 Milliseconds Faster – Businessweek
When it opens in 2013, Project Express will be the fastest cable across the Atlantic, reducing the time it takes data to travel round-trip between New York and London to 59.6 milliseconds from the current top speed of 64.8 milliseconds,
Beta is not volatility – Portfolio Probe
The missing link between beta and volatility is correlation.
Building A Better Sharpe Ratio – Financial Advisor Mag
The weaknesses of the Sharpe are well-known (assuming joint-normality). Some discussion how CVaR and other measures to adjust the ratio have also their own problems.
Maximum weight of the low vol cohorts – Portfolio Probe
“Low (and high) volatility strategy effects” created 6 sets of random portfolios as of 2007 and showed their performance up to about a month ago. “Rebalancing the low vol cohorts” looked at how much turnover was required to move back to the constraints. This post looks at one of those constraints — how far away from the maximum weight of 4% have we drifted?
HEDGE FUNDS
Top 25 Highest Earning Hedge Fund Managers of 2011 – market folly
Large Hedge Funds Fared Well in 2011 – DealBook / NYT
The Rich List – Absolute Return + Alpha
Highest Earning Hedge Fund Managers Include Many New Faces – Institutional Investor
Dalio tops hedge fund pay list with $3.9bn – FT
A Bill to Loosen Hedge Fund Marketing – DealBook / NYT
(JOBS act)…would reverse parts of a nearly 80-year-old regulation preventing these funds from discussing even the most basic items, like performance or investment strategy, with outsiders. The rule, part of the Securities Act of 1933, gave an already secretive industry the regulatory cover to remain silent.
ECONOMICS
A policy of mass destruction – University of Cambridge
A new study reveals how a radical economic policy devised by western economists put former Soviet states on a road to bankruptcy and corruption.
Now you see the headline fiscal deficit, now you don’t – alphaville / FT
So, in case you missed it, the IMF released an excellent, pithy staff note on ‘Accounting Devices and Fiscal Illusions’ this week – all about book-cooking of sovereign debt stats. It touches on almost any accounting trick you can think of…
The problems of European monetary union – asymmetric shocks or asymmetric behaviour? – voxeu.org
Divergent behaviour from Eurozone countries that have very different economic, social, and political structures is threatening the existence of the single currency. This column argues that the Eurozone is a fragile bureaucratic creation that has hardly ever raised much popular enthusiasm anywhere. If behaviour across the area remains as asymmetric as it has been over the last decade or so, the project could run into even stronger headwinds in the long run.
Excessive risk-taking by banks – voxeu.org
Risk-taking by banks played a critical role in the global crisis and Eurozone crisis. This column introduces a new eReport that focuses on four aspects of excessive risk-taking by banks, highlighting the causes and the cures. The eReport applies the best available theory and data, bringing together the main insights and views that have emerged from the crisis.
Re-examining central bank orthodoxy for un-orthodox times – BIS (pdf)
Bank of France Governor Christian Noyer 26-Mar
Steve Keen and the Minsky moment – alphaville / FT
There’s a polite blogosphere debate going on between Paul Krugman and Steve Keen, an Australian economics professor who has some strong views about the role of debt and the financial sector, and about how conventional economics has overlooked or misunderstood them.
Behavioral finance people are doing experiments! – Noahpinion
Experimental finance, like all experimental studies of complex systems, suffers from a problem of "external validity" - it is not clear that a few inexperienced undergrads trading $20 worth of made-up assets in a lab is anything like a real-world market with thousands of supercomputer-armed professionals trading trillions of actual assets over the course of years.
IMF: deal with CEE bad debt hangover – beyondbrics / FT
Just when the mood among investors in central and east Europe is improving, along comes a warning from the International Monetary Fund about the region’s economic “hangover”
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Visualizing The Fed's Clogged Plumbing – ZH
From Bank of America / Merril Lynch: Credit channels: most severely cracked, Interest rate and wealth channels: leaks continue, Exchange rate channel: an interrupted flow.
If like me you sometimes find yourself wondering why the UK and the Netherlands have managed to cling on to their triple A credit ratings while all around are losing theirs
The case against economic pessimism – Wonkblog / WP
The American political system is polarized and gridlocked and the European Union is structurally flawed. Those two facts will continue to lead to bad decisions going forward. And the slow recovery, even if it was partly the fault of bad luck, is creating permanent problems
Property markets and financial stability – BIS
a workshop on property markets and financial stability in Singapore on 5 September 2011. The workshop aimed to bring together academics and researchers at central banks, regulatory agencies and international organisations to present and discuss ongoing theoretical and empirical work in the field.
Housing bubbles and interest rates – voxeu.org
Visit Ireland and Spain and you will find row upon row of empty houses – the remnants of a housing boom turned bust. Were low interest rates to blame? This column looks at the effect of a deviation in interest rates from the Taylor rule and finds that keeping interest rates ‘too low’ can explain up to 50% of the overvaluation of the property market in these countries and elsewhere.
The Shadow of Depression – Project Syndicate
There are no psychological preferences, natural-resource constraints, or technological factors that make investing in private enterprises riskier than it was five years ago. Rather, the risk stems from governments’ refusal, when push comes to shove, to match aggregate demand to aggregate supply in order to prevent mass unemployment.
OTHER
Credit Event Auctions – alphaville / FT
The article series was updated with two new ones on Friday. Inspired by the Greek event – and good preparation for things to come...
3. Mechanics
FiveBooks Interviews: Barry Ritholtz on Causes of the Financial Crisis – The Browser
The Wall Street money manager diagnoses the ills of America’s political and economic system in a fizzing, irreverent analysis (with promised f-bombs thrown in)
OFF-TOPIC
Death of a data haven: cypherpunks, WikiLeaks, and the world's smallest nation – ars technica
Traffic – GQ
At any given moment, on any given morning, there are roughly 6,000 planes on their way to somewhere, from somewhere, over American airspace. Getting them safely down to the ground will depend upon the efforts of a small group of controllers who, nearly without fail, get the job done despite long hours, grim working conditions, and ancient technology.
Book Bits – The Capital Spectator
Research Digest – Blogging on brain and behaviour