This weekend's sections include Economics, Regulation, Trading & Markets, Hedge Funds, Algo & HFT, Other. Some pretty interesting ones, but no absolutely must-read articles.
Previously on MoreLiver’s:
22.9. Disregard This Post (links to euro breakup analysis)
21.9. Weekender: Weekly Support (weekly reviews and previews)
ECONOMICS
The Gray Tsunami – Discover
The world faces a wave of aging, and with it
wrenching social and economic changes. An Arizona retirement community
hints at things to come.
Excessive Reserve Accumulation and
International Trade Balances – PIIE
The doomsday cycle turns: Who’s next? – voxeu.org
Simon
Johnson, Peter Boone: Industrialised
countries today face serious risks – for their financial sectors, for their
public finances, and for their growth prospects. This column explains how,
through our financial systems, we have created enormous, complex financial
structures that can inflict tragic consequences with failure and yet are
inherently difficult to regulate and control. It explains how this has happened
and why there are more and worse crises to come.
The Narrative Structure of Global Weakening – Project
Syndicate
Robert Shiller: When one considers the
evidence about external economic shocks over the past year or two, what emerges
are stories whose precise significance is unknowable. We only know that most of
us have heard them many times.
What’s the use of economics? – voxeu.org
Five years after Lehman’s collapse, economics
is under fire both from outside and inside the profession for irrelevance,
arrogance and more. This column introduces a new Vox debate focused on two
questions: What’s the use of economics, and how should we be teaching it to the
next generation?
Morgan Stanley on fundamentals versus monetary
policy – alphaville
/ FT
Central bankers in the US and Europe may think
they’re engaging in policies accommodative to economic growth, but two can play
in this game of acronyms! The team at Morgan Stanley fights letters with
letters, in a note released on Friday
60-Second Adventures in Economics – Farnam
Street
If you want to learn about economics, these
videos are for you.
Inflation: The global output gap – Free
exchange / The Economist
If the resource-price moves that have been
tripping up central bankers since 2000 suddenly moderate, then what happens
next? If the global potential story is right, then the critical dynamic once
again becomes the flow of new labour into the global economy.
Examining the Recession’s Effects on Labor
Markets – FED
Understanding central bank balance sheets – Buba
Guest contribution by Dr Joachim Nagel, Member
of the Executive Board of the Deutsche Bundesbank, to The International Economy
magazine, no 26 (2012), published on 31 August 2012.
REGULATION
The great mystery story in American politics
these days is why, over the course of two presidential administrations (one
from each party), there’s been no serious federal criminal investigation of
Wall Street during a period of what appears to be epic corruption. People on
the outside have speculated and come up with dozens of possible reasons, some
plausible, some tending toward the conspiratorial – but there have been very
few who've come at the issue from the inside.
Bank Supervision: Bye Bye Basel? – EconoMonitor
So why this call to “reset” Basel? The desire for a
new, simpler, bullet-proof regulation may just a way to make up for the
weaknesses of supervision, which were the true trigger behind the latest
financial crisis (as shown by the fact that EU member states – having the same
rules in place – were very unevenly
affected).
Do bailed-out banks remain bad, while good
banks behave better?
– alphaville
/ FT
The trauma and cost of a public rescue must
surely teach the bank management concerned to behave in a more prudent manner,
right? Wrong, according to a recent Bank of International Settlements paper.
Whistleblowing incentives just got
international – alphaville
/ FT
Last week’s news that Bradley Birkenfeld, aka
‘Tarantula’, was awarded $104m for his role in exposing a UBS tax evasion scheme that cost the US government billions
of dollars sent waves around the financial world. The case has important
ramifications for bankers globally.
What Business is Wall Street In? – Mark
Cuban
http://blogmaverick.com/2012/09/21/what-business-is-wall-street-in-3/
Take on Wall St titans if you want reform – John
Kay
The only sustainable answer to the issue of
systemically important financial institutions is to limit the domain of
systemic importance. Until politicians are prepared to face down Wall Street
titans on that issue, regulatory reform will not be serious.
A Lonely Redemption – NYT
He knows Wall Street’s heights. He helped hire
Michael R. Bloomberg, and he invested the money of two former Securities and
Exchange Commission chairmen, making a fortune in the 1980s. And he knows its
depths, since he pleaded guilty to stock manipulation in 1989, and was barred
from the Street.
If I ruled the world: Michael Sandel – Prospect
Magazine
It is time to restore the distinction between
good and gold
TRADING & MARKETS
On The Rise Of ETFs As A Driver Of Bond Returns – ZH
A Foolish Interview With Michael Mauboussin – The
Motley Fool
Chief investment strategist at Legg Mason
Capital Management and adjunct professor of finance at the Columbia Business School. We had an
outstanding conversation about his views on investing and how we can get
better, as well as his new book to be released soon, The Success Equation.
How to Identify High Quality Stocks, Continued
(Part 3b of 4) – Turnkey
Analyst
A Small Survey of Quantitative Models that
Discard Estimation of Expected Returns for Portfolio Construction – SSRN
We notice that the benchmark model has a poor
risk adjusted performance while the Minimum Variance and Minimum Expected
Shortfall models have good results.
Ray Dalio on QE3, Gold, China, Europe, Economy
& More (Interview) – market
folly
Book Bits | 9.22.2012 – The
Capital Spectator
DB: gold price to hit $1,900 by the end of
October – Sober
Look
A Perspective on Quantitative Finance: Models
for Beating the Market (2003) – Ed
Thorp / Quantitative Finance Review (pdf)
Why you have to be very lucky to have average
luck – Aaron
Brown / Minyanville
We document two patterns of informed insider
stock trading: isolated trades and trade sequences. Isolated trades are trades
in a single month while sequenced trades are those by the same insider over
several consecutive months. Approximately 25 percent of trade months are
sequenced, and they include about 40 percent of trade days. Monthly abnormal returns
following isolated insider stock sale (purchase) months are -60 to -100 basis
points (60 to150 basis points) greater in magnitude than those following trade
months that are sequenced.
Top 10 Operational Risks: The first two risk
areas in a 10-part series – All
About Alpha
SEI put together a 10-part guide as an effective risk management tool to
set the foundation for operational excellence. Below are excerpts from the
first two chapters, now available for download at www.seic.com/OpsSurvivalGuide.
Quant: A Dangerous Word Frequently Misused and
Misunderstood – Minyanville
Aaron
Brown: False etymologies and sloppy use
can lead to errors. An essay on the meandering path of the word
"quant" from 1896 to the present.
Investor Decisions - Experience Is Still Not
Enough (But It Helps A Bit) – The
Psy-Fi Blog
The general idea is that our personal
observations don’t generalize, because market behavior is continually adapting
under evolutionary pressure. Now recent research confirms this, up to a point.
HEDGE FUNDS
Don’t Blame Hedge Funds for Financial Crisis,
Study Says – MarketBeat
/ WSJ
Revisiting Kat's Managed Futures and Hedge
Funds: A Match Made in Heaven – SSRN
We revisit and update Kat's original work.
Using similar data for the period June 2001-December 2011, we find that his
observations continue to hold true more than 10 years later. During the
subsequent 10.5 years, a highly volatile period that included separate stock
market drawdowns of 36% and 56%, managed futures have continued to provide more
effective and more valuable diversification for portfolios of stocks and bonds
than have hedge funds.
Giant Infographic Guide to Hedge Funds – The
Big Picture
ALGO / HFT
Errant math algorithms ‘more common than
anticipated’: report
How to Save a Wounded Market from Rogue Algos – Advanced Trading
You couldn't ask for a better example in the
Knight Capital debacle of how quickly today's fast markets can claim a victim.
Will this be the last of the rogue algorithms to hit the markets?
Can Buy-Side Traders Trust Their Brokers'
Algos? – Advanced Trading
How Are Algos Tested? – Advanced Trading
The HFT challenge to global equity markets – qfinance
OTHER
Duhigg, The Power of Habit – Reading
The Markets
Most habits are innocuous enough; they don’t
make a major difference in our lives. But some habits do, and not always for
the better. Moreover, no matter what we do, those bad habits never really
disappear; “they’re encoded into the structures of our brain.”
'Solidarity – is that word even used in
English?' – The
Guardian
After years with a US firm, Sebastian moved
to a big German bank. He believes he has much to be grateful for in Frankfurt
For London City types it's beer
o'clock, their but risk-averse 'cousins' prefer sipping Apfelwein and chewing
on a sausage