Sections
this weekend: Regulation, High-Frequency / Algorithmic, Trading, Economics,
Bubbles, Books, Other.
Previously on MoreLiver’s
REGULATION
Not Making the Grade: Report Card on Global
Financial Reform – iMFdirect
Despite a host of reforms in the right
direction, the financial structures that were in place before the global crisis
have not actually changed that much, and they need to if the global financial
system is to become a safer place.
Studies of investment and commercial bank
balance sheets show that these financial firms are extremely reluctant to alter
the absolute amount of equity outstanding
FSOC pushes ahead on MMF reform – alphaville
/ FT
HIGH FREQUENCY / ALGORITHMIC
Are HFT's Days Winding Down? – Advanced
Trading
They just might be in Europe where lawmakers appear to be at
their wits' end when it comes to high-speed trading.
Beyond Wall Street, Curbs on High-Speed Trading
Advance – DealBook
/ NYT
Industry leaders and regulators in several
countries including Canada, Australia and Germany have adopted or proposed a
wide range of limits on high-speed trading and other technological developments
that have come to define United States markets, reports Nathaniel Popper in The
New York Times.
The measure seeks to require traders to
register with Germany's Federal Financial Supervisory Authority, collect fees
from those who use high-speed trading systems excessively, and force stock
markets to install circuit breakers that can interrupt trading if a problem is
detected.
Man vs. Machine – Institutional
Investor
Can the technology be tamed in a way that
ensures safe and efficient markets? Judging by a series of calamities that
included the granddaddy of high frequency markets run amok, the May 2010 “flash
crash,” the accidents are too normal — and the prognosis is getting worse… “In
complex, nonlinear systems it is inevitable that at some time, two or more
failures — perhaps trivial, individually — will interact in a way no designer
could have anticipated and no operator can understand”
“As the only person in the room who has
apparently never written a line of computer code…” – alphaville
/ FT
Presenting, a rather charming tale from
Nicholas Colas, group chief market strategist at ConvergEx, who recently
attended an algorithm-themed conference, and discovered — to his surprise —
that quants aren’t really like regular people.
TRADING
Comparison of the two ”elite” portfolio
strategies.
Gaming the System – Above The
Market
In all probabilistic fields, like investing and
gambling, the best performers dwell on process… Maintaining good process is
really hard to do psychologically, emotionally, and organizationally. But it is absolutely imperative for
investment success. And for gambling
success too.
Risk Assessment – And Why You Stink at It – Risk
Management Magazine
People are prone to (at least) six errors in
judgment when appraising risk. Learn them. Then try to avoid them.
ECONOMICS
Producer Tristan Quinn on his documentary about
one of the 20th century's most influential economists, Friedrich Hayek.
Part 1 – youtube
A time of hoarding and inflation fears, 1930s
edition – alphaville
/ FT
Our working theory is that the crisis results
as much from the conjoined effects of a suddenly over-abundant and
over-productive world (on account of technology advances) — something which has
been exacerbated by a shortage of safe assets, credit and money relative to
goods available — as it does from credit profligacy in the mid-naughties . In
that sense, we believe that the credit binge, rather than being the ultimate
cause of the crisis, was possibly only one of its symptoms.
Sovereign Debt Restructurings 1950–2010 – IMF
/ The Big Picture
60 years, 186
debt exchanges, 447 bilateral debt agreements. Coming soon to area near you….
Public debt: Easy does it – The Economist
Monetary policy is the secret ingredient to
bringing down debt ratios
Notes On Internal Devaluation (Wonkish) – Krugman
/ NYT
I guess it could slightly accelerate the adjustment by driving unemployment even higher; but if the biggest problem is actually one of maintaining social and political cohesion, which seems to be the case, it’s actually counterproductive even for the creditors.
I guess it could slightly accelerate the adjustment by driving unemployment even higher; but if the biggest problem is actually one of maintaining social and political cohesion, which seems to be the case, it’s actually counterproductive even for the creditors.
Monetary policy in a downturn: Are financial
crises special? – BIS
Accommodative monetary policy during the
financial crisis was instrumental in preventing a deeper recession. Views
differ, however, on how long such measures should be kept in place. At the
heart of this debate is the notion that a protracted period of policy
accommodation could create distortions.
The Economic Crisis,
Failing Orthodoxies and New Policy Principles – EconoMonitor
As time passes and economic circumstances
change, and as theoretical advances, modelling and statistical investigations
provide new knowledge and insights into the functioning of the economic system,
then long-held policy views often need to be abandoned or adjusted.
Fiscal imbalances and monetary stability – BIS (pdf)
Stefan Gerlach, Deputy Governor of the Central
Bank of Ireland, to the German-Irish Chamber of Industry and Commerce, Dublin,
28 September 2012.
Is Low Inflation Always Good? – Tim
Duy’s Fed Watch
at least think about the possibility that while
high and variable inflation is not ideal, perhaps neither is very low inflation.
Clearly some of the new rules are important -
particularly those dealing with adequate liquidity. But the prescriptive
methods used to solve every possible concern dealing with capital and liquidity
will push financial organizations to focus on the "letter of the law"
instead of the "spirit of the law". And loopholes will inevitably
arise (as they did with Basel I) creating more systemic risks.
BUBBLES
Asset price bubbles: What are the causes,
consequences, and public policy options? – FED
(pdf)
This article discusses how the global financial
crisis has forced researchers and policymakers to reconsider their
understanding of both the economics of asset price bubbles and alternative policy
options to address them.
Asset Bubbles – Causes, Consequences and Policy
Options – PragCap
comments
the above paper from Fed.
What are asset bubbles and why do they happen? (Jan 2012) – Noahpinion
Bubbles – The Physics of
Finance
comments
the above article from Noahpinion.
BOOKS
Investing books that go above and beyond – Abnormal
Returns
“Investing is hard.” In my day-to-day job as a
blogger I have written this not altogether grammatically correct phrase any
number of times. Now after having written a book on investing I should probably
also note that: “Writing a book on investing is really hard.”
Book Bits – The
Capital Spectator
Book Review: Finance and the Good Society – CFA
Institute
OTHER
Sponging boomers – The Economist
The economic legacy left by the baby-boomers is
leading to a battle between the generations
The welfare state’s a worthy Ponzi scheme – John
Kay
The only bread fit to eat is bread baked today:
but why should today’s bakers feed the retired bakers of yesteryear?
The secrets of Buffett’s success – The Economist
Beating the market with beta