#ltcm:3

[dirtychainsawconfessions]

I hope that we can all agree that Tex from the third movie was so fking hot...

[tallman-robotics]

XYZ Translation Stages will be Delivered to Italy

XYZ Translation Stages from Tallman Robotics Limited will be transported to Italy.  XYZ translation stages are devices used in scientific and industrial applications to precisely adjust the position of an object in three dimensions (x, y, and z directions). These stages can move objects in micron or sub-micron increments, allowing for precise positioning and movement in laboratory and research settings. The devices usually consist of a base, a stage, and a drive mechanism, which can be manual or motorized. The stage moves horizontally along the x and y directions, while the base and stage can both move vertically along the z direction. XYZ translation stages have applications in various fields including microscopy, metrology, semiconductor processing, and nanotechnology. On 28th,Feb, we got an inquiry from Italy as follows:  Hello,we would like to have a technical and commercial offer for a complete xyz gantry coordinate system according to the following specification: Vertical mounting: the z axis will be horizontal (NOT vertical as for usual application) and subjected to bending moment due to gravity, see the layout image here attached.

X axis actual stroke: 2000 mm with 20 mm extra stroke Y axis actual stroke: 2000 mm 20 mm extra stroke Z axis actual stroke: 1290 mm 20 mm extra stroke External weight on z axis end: 3 kg (item to move + gripper assembly) External weight position on z axis: according to attached image. Speed: max. time to move from to farthest opposite location on the xy plane of coordinate system = ~ 20 sec. Speed: max. time to move along the entire stroke on z axis = ~ 20 sec. Service: 10 hours a day for 365 days a year and with very high time between failures and maintenance. In normal condition. the system shall work without any human supervision. Installatiom: clean room 10°C / 40 °C Accessories: stationary brake on Y axis, all sensors for safety and smooth functioning, monitoring and control of the systems. Precision: +/- 2 mm. Scope of supply: all mechanical parts + all electric parts with motors and drivers + control system to be interfaced with an external PLC based control system. Please indicate exclusions (if any) in the offer according to your typical supply and expertise. Delivery: Rome, Italy. Here I attach two 3d models links (STEP and IGEST format) of the preliminary system with the required features just for reference (they are too big to be directly attached to this email): STEP: www.boschrexroth.com/ics/Modules/Download.cfm?File=20230227_CMS_79812/CMS_3SC_23_2_2020_2020_1310_12_5_16_ML_1.stp&Configurator=CMS IGES: www.boschrexroth.com/ics/Modules/Download.cfm?File=20230227_CMS_79812/CMS_3SC_23_2_2020_2020_1310_12_5_16_ML_1.igs&Configurator=CMS Both 3D models are in millimeters . Please note that the attached 3D model are for a normal horizontal mounting so for this application, sliding pad could be larger. We kindly ask you for: Split price quotation for all system components and control system 3D model Delivery time to Italy from order. After studying the data, we select solutions as follows: 

X1 axis：TMB135-L90S2020-CU750-C2U-LTCM(including ratio 10 planetary gear reducer)  X2 axis：TMB135-L90S2020-NU-LTCM : Y axis:TMB170-L90S2020-CU750B-C2U-LTCM(including ratio 10 planetary gear reducer)  Z axis：TMB100L-L90S1310-CU400-C2U-LTCM(including ratio 10 planetary gear reducer ) :  Three-axis connecting parts: including connecting plate, stiffener, three-axis tank chain, connecting rod, connecting rod support:  1pc 750W Delta servo motor with brake+750W Delta drive+ 3 meters cable 1pc 750W Delta servo motor without brake+750W Delta drive+ 3 meters cable 1pc 400W Delta servo motor without brake+400W Delta drive+ 3 meters cable Controlling system :  Including PLC: XD5E-30T4-E,1pc. Touch screen: TGM765S 1pc including programming XYZ translation stages are mechanical devices that enable movement in three perpendicular directions: X, Y, and Z. These stages are used in a variety of applications that require precise positioning of an object or tool in three dimensions, such as microscopy, laser cutting and welding, and semiconductor fabrication. The construction and design of XYZ translation stages can vary depending on the specific application, but the basic concept is to use multiple linear translation stages that are aligned perpendicularly to each other. Each stage is controlled by a motor or a manual mechanism that allows for smooth and precise movement along a particular axis. One of the key components of an XYZ translation stage is the linear motion guide, which provides guidance for the stage as it moves along the designated axis. The guide consists of a rail and a carriage or slider that sits on top of the rail. The carriage is equipped with a set of bearings, which allow it to move smoothly and with low friction along the rail. Another important aspect of XYZ translation stages is the control system, which manages the movement of each axis independently. The control system may consist of servo motors, stepper motors, or piezo actuators, depending on the specific application and requirements. These motors are typically connected to a programmable controller that provides precise positioning information and allows for highly precise movements. In addition to the linear motion guides and control system, there are other components that may be included in an XYZ translation stage depending on the specific application. One common feature is a position feedback mechanism, which provides real-time feedback on the position and orientation of the object or tool being moved. This feedback can be used to adjust the movement of the stages as needed to ensure precise positioning. Another feature that may be included is a locking mechanism, which can hold the stage in a particular position once it has been moved. This is particularly useful in applications where stability is important, such as microscopy or semiconductor fabrication. To optimize performance and ensure smooth movement, XYZ translation stages are often made from high-quality materials and designed with tight tolerances. For example, the rails and carriages may be made from materials such as stainless steel or aluminum, which are durable and resistant to wear and corrosion. The bearings used in the linear motion guides are often made from high-performance materials such as ceramics or specialized polymers, which offer low friction and high precision. Benefits of XYZ Translation Stages There are several advantages to using XYZ translation stages in various applications. One of the primary benefits is the high degree of precision they offer. With the ability to move along three perpendicular axes with nanometer-level accuracy, XYZ translation stages are ideal for applications that require high precision positioning, such as semiconductor fabrication, nanotechnology, and biotechnology. Another benefit is the versatility of XYZ translation stages. With the ability to move in three dimensions, these stages can be used in a variety of applications, from laser cutting and welding to microscopy and biomedical research. This versatility allows for greater flexibility in design and application, as well as easier integration into existing systems. Finally, XYZ translation stages are often designed to be highly stable and durable, with many components made from high-quality materials and designed for high-performance. This ensures reliable and long-lasting performance, even in demanding and high-stress applications. Applications of XYZ Translation Stages XYZ translation stages have a wide range of applications across multiple industries, including: Microscopy: In microscopy, XYZ translation stages are used to position samples and optical components with high precision. This allows for more accurate imaging and analysis of specimens, and can also improve the speed and efficiency of the microscopy process. Semiconductor Fabrication: In the semiconductor industry, XYZ translation stages are used for precise alignment and positioning of materials during the fabrication process. This helps to ensure accurate and consistent results, and has become increasingly important as the industry has moved towards smaller and more complex designs. Laser cutting and welding: In laser-based manufacturing processes, XYZ translation stages are used to position the laser beam with high precision, allowing for precise cutting and welding of materials. Biotechnology: In biotechnology and biomedical research, XYZ translation stages are used to position samples and tools with high precision. This allows for more accurate analysis and manipulation of biological specimens, and can be particularly important in areas such as drug discovery and gene editing. In conclusion, XYZ translation stages are mechanical devices that enable movement in three perpendicular directions, with applications in microscopy, semiconductor fabrication, laser cutting and welding, and biotechnology. They are designed to be highly precise, versatile, and durable, and offer several advantages over other positioning and alignment technologies. As industries continue to demand greater precision, speed, and efficiency in their manufacturing and research processes, XYZ translation stages are likely to become increasingly important tools for achieving these goals. You are welcome to  https://www.youtube.com/@tallmanrobotics to watch our video centre for more projects or visit our website to check other series or load down e-catalogues for further technical data.  Read the full article

[raymondsecurityadventures]

Security Everywhere 3 - Risky Business

Low Risk High Impact Mini Case Study

https://en.wikipedia.org/wiki/Long-Term_Capital_Management

Disclaimer: I’m a finance major so I find this kind of thing interesting but you might not. 

Long Term Capital Management (LTCM) was an American hedge fund that used an incredibly low risk but high impact investment approach that some would argue would inevitably blow up in their faces. And which did, causing the hedge fund dream team that the partnership was consisted of, to haemorrhage 4.6bn USD in a month

LTCM used a single strategy to generate return for its investors, a strategy which at the time seemed cutting edge but in retrospect sounds pretty dumb. 

Sovereign government central banks issue debt instruments known as treasury bonds to help fund said government’s financing requirements. Most people trust that the government would not ever fail to make debt repayments, so this bond is considered the ‘benchmark’.  A 30-year benchmark is thus a treasury bond, whose principal (face value) is paid in 30 years.  Since everyone buys the benchmark, for numerous finance reasons, the bond is considered readily tradable, i.e. liquid, as benchmark buyers are everywhere. This liquidity, causes benchmark transaction costs to be lower as there are less hoops to jump through when selling and as such there is a premium attached to the liquidity of the bond: the more liquid, the higher the liquidity premium. However, the benchmark’s liquidity, and thus its liquidity premium, would tend to decrease as new debt instruments are issued by the central bank and people flock to purchase these new fangled shiny benchmarks. This would cause the old benchmark’s price to drop. 

What LTCM did was buy 29.75 year bonds (30 year bonds that have been issued for 0.25 years) and to short newly minted 30 year bonds. The idea was that the newly minted bonds would trade at a premium due to their liquidity, but would eventually lose their liquidity premium after a few months at which point the prices of the previously new 30 year bonds would have converged to the price of the 29.75 year bond. Since you shorted the falling bond (you sold at a high price and the price fell), you’ve made profit. This is known as a convergence trade and is considered very low risk as the payment obligations of shorting the 30-year bond would be covered by the cash flows from the 29.75 year bond.

However, the profit you attain from this strategy is minimal as the liquidity premium really isn’t that much. So LTCM borrowed vast sums of money, to the tune of 1.25 trillion USD, to make this trade and trades similar to these, assuming that these trades would always pay off. This assumption was wrong and this enormous amount of debt would screw them later on. 

You see, LTCM didn’t keep much cash on them. They would pay out their investors who had funded them after making successful trades, and keep a bit of the cut for themselves and then nothing would be left. 

When the Russian Financial Crisis occurred, investors worldwide panicked and purchased all the safest and most liquid securities they could find. This included the US 30 year treasury bond which was in record demand, causing the price to be bid up. This was very bad for LTCM who were short 400 billion dollars in treasury bonds and 800 billion in similar securities. The 29.75 year treasury bonds were in demand too, but not as much as the fresh ones.

And so LTCM’s strategy unravelled as the price of liquidity falling as the price of liquidity rose and convergence seemed an ever distant dream. Margin calls came in left, right and centre and LTCM’s lack of cash meant they could not afford to meet them as stock exchanges demanded that LTCM pay up for selling something that wasn’t theirs and now that something was worth far more. LTCM couldn’t afford to wait for bond prices to normalise and converge, they needed cash immediately and so, they sold their positions at enormous losses. They were haemorrhaging money and could do nothing about it. 

In the end, a group of banks got together and bailed LTCM out - injecting a bunch of cash to allow them to pay their margin calls but the damage was done.  What LTCM did was tantamount to picking up pennies in front of a bulldozer and while fairly safe, it took only one small outside event to cause a disaster for the company. 

What could LTCM have done differently?

If they wanted to continue pursuing their strategy, then all they really could’ve done was either:

- Reduce their leverage and total debt exposure: so that their losses aren’t amplified to ridiculous extents when their strategy fails. 

- Diversify their holdings i.e. buy financial instruments that move in the opposite direction to the price movements of bond prices, whose movements would offset their losses

in fact, they would be prohibited from pursuing this strategy today due to new-ish regulations limiting the amount of leverage that companies are able to take on; forcing them to hold more cash. 

[bitcofun]

Three Arrows Capital co-founders Su Zhu and Kyle Davies broke their silence following their company's personal bankruptcy in an interview with Bloomberg today. Arthur Hayes has actually because weighed in to take chance ats the set. Key Takeaways Three Arrows Capital co-founders Su Zhu and Kyle Davies spoke up for the very first time given that their company declared bankruptcy in an interview with Bloomberg today. BitMEX co-founder Arthur Hayes required to Twitter to satirize the set over the interview. Like 3AC, Hayes has actually ended up being understood for his bullish market takes, just recently forecasting a $1 million Bitcoin in the next 5 years. " Didn't check out the whitepaper tisk tisk," Hayes stated of 3AC's losses on Terra's LUNA token. Arthur Hayes Slams 3AC One of crypto's most precious pranksters has actually fired arrows in Three Arrows Capital's instructions. Arthur Hayes has actually weighed in on the 3AC legend after the insolvent hedge fund's co-founders Su Zhu and Kyle Davies broke their silence in a Bloomberg interview today. " This post is so incredible I do not even understand where to start," the BitMEX co-founder stated on Twitter Friday with an accompanying link to the Bloomberg piece He then highlighted numerous excerpts of the function that appear to mock Zhu and Davies. "Common y' all. Su ain't fancy, he trips his bike to work and to the marina where his superyacht is moored," he composed together with a screenshot of Zhu rejection that he leads an elegant way of life. "ONLY 2 houses, brah you straight slumming it in the Kampong aka Tanglin." Highlighting a quote in which Zhu stated that 3AC "stopped working to understand that Luna can being up to efficient no in a matter of days," Hayes took chance ats the company's bad due diligence practices. "Didn't check out the whitepaper tisk tisk," he composed. In reaction to Zhu's claim that the 3AC crisis remembered the collapse of the conventional financing hedge fund Long-Term Capital Management, Hayes as soon as again slammed Zhu and Davies over their actions to Bloomberg " While this may be the # crypto variation of LTCM, the creators of stated hedge fund never ever provided an interview rather like this," he stated. Hayes completed his attack by paraphrasing a supposed quote that's been credited to Zhu in the fallout from the 3AC collapse: "When you owe the lending institution 1 $BTC it's your issue, when you owe the lending institution 10,00 0 $BTC it's their issue." While 3AC has actually landed in hot water and dealt with claims that it averted liquidators in current weeks, Hayes himself does not have the cleanest record in the area. In May, he was sentenced to 2 years probation and 6 months home arrest over BitMEX's failure to avoid cash laundering. Like 3AC, Hayes has actually likewise ended up being something of a cult figure in the crypto scene for many years, partially thanks to his vibrant rate forecasts for properties like Bitcoin and Ethereum. He memorably stated that Bitcoin might strike $1 million in 3 to 5 years in an April Medium post and doubled down on his target previously this month, arguing that main lenders would present yield curve control procedures and trigger a so-called " Doom Loop" in which fiat currencies collapse and crypto grows. Disclosure: At the time of composing, the author of this piece owned ETH and numerous other cryptocurrencies. The info on or accessed through this site is acquired from independent sources our company believe to be precise and trusted, however Decentral Media, Inc. makes no representation or service warranty regarding the timeliness, efficiency, or precision of any details on or accessed through this site. Decentral Media, Inc. is not a financial investment consultant. We do not offer tailored financial investment recommendations or other monetary recommendations. The info on this site undergoes alter without notification. Some or all of the details on this site might end up being out-of-date, or it might be or end up being insufficient or incorrect.

We may, however are not bound to, upgrade any out-of-date, insufficient, or incorrect details. You need to never ever make a financial investment choice on an ICO, IEO, or other financial investment based upon the details on this site, and you ought to never ever translate or otherwise depend on any of the details on this site as financial investment guidance. We highly advise that you speak with a certified financial investment consultant or other competent monetary expert if you are looking for financial investment guidance on an ICO, IEO, or other financial investment. We do decline payment in any kind for examining or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or products. See complete conditions Arthur Hayes Sentenced to Two Years Probation, Six Months House Arrest News May. 20, 2022 Hayes had actually pleaded guilty previously this year. Hayes Sentenced A U.S. court in New York has actually sentenced BitMEX co-founder Arthur Hayes for breaching the U.S. Bank Secrecy Act by stopping working ... " The Whole Situation Is Regrettable": 3AC Breaks Silence to Bloomb ... News Jul. 22, 2022 The distressed hedge fund's co-founders have actually detailed its unfortunate collapse for the very first time considering that stating insolvency. 3AC Co-Founders Break Silence Three Arrows Capital's co-founders have actually begun talking. Su Zhu ... Liquidators Claim "Radio Silence" From Three Arrows Capita ... News Jul. 18, 2022 Liquidators are slamming Three Arrows Capital's absence of interaction and fear the hedge fund's directors might be preparing to liquidate their properties to put them "beyond the reach" of their ... Read More

[fx999blog]

3月30日外汇交易提醒：美元和美债收益率攀升，日元接近一年低点

3月30日外汇交易提醒：美元和美债收益率攀升，日元接近一年低点 周一(3月29日)美元指数在震荡交投中创逾四个月新高，由于担心一家对冲基金发生保证金违约的潜在后果，美元吸引了一些避险买盘。美元指数盘中一度高见92.965，为去年11月以来最高，尾盘升0.23%，报92.93。 荷兰合作银行策略师称，美国的快速疫苗接种进程和对刺激政策的预期也提振了美元。 Cambridge Global Payments首席市场策略师Karl Schamotta表示，美元因避险买盘而上涨，交易员们担心一场小型长期资本管理公司(LTCM)事件正在发生，他们正试图从倒下的多米诺骨牌中脱身。LTCM是一家大型美国对冲基金，于1998年崩盘，迫使美国政府提供纾困，部分归因于其高杠杆策略。 欧元周一走势挣扎，因法国和德国将出台更严格疫情限制措施，令欧洲经济的短期前景变得黯淡。欧元兑美元下滑0.25%，报1.176…

[ericfruits]

How the 0.001% invest

THINK OF THE upper echelons of the money-management business, and the image that springs to mind is of fusty private banks in Geneva or London’s Mayfair, with marble lobbies and fake country-house meeting-rooms designed to make their super-rich clients feel at home. But that picture is out of date. A more accurate one would feature hundreds of glassy private offices in California and Singapore that invest in Canadian bonds, European property and Chinese startups—and whose gilded patrons are sleepwalking into a political storm.

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Global finance is being transformed as billionaires get richer and cut out the middlemen by creating their own “family offices”, personal investment firms that roam global markets looking for opportunities. Largely unnoticed, family offices have become a force in investing, with up to $4trn of assets—more than hedge funds and equivalent to 6% of the value of the world’s stockmarkets. As they grow even bigger in an era of populism, family offices are destined to face uncomfortable questions about how they concentrate power and feed inequality.

The concept is hardly new; John D. Rockefeller set up his family office in 1882. But the number has exploded this century. Somewhere between 5,000 and 10,000 are based in America and Europe and in Asian hubs such as Singapore and Hong Kong. Though their main task is to manage financial assets, the biggest offices, some with hundreds of staff, undertake all sorts of other chores, from tax and legal work to acting as high-powered butlers who book jets and pamper pets.

The costs of bringing such expertise in-mansion means that they generally make sense only for those worth over $100m, the top 0.001% of the global pile. Asian tycoons such as Jack Ma of Alibaba have created their own fiefs. The largest Western family offices, such as the one set up by George Soros, an investor and philanthropist, oversee tens of billions and are as muscular as Wall Street firms, competing with banks and private-equity groups to buy whole companies.

Every investment boom reflects the society that spawned it. The humble mutual fund came of age in the 1970s after two decades of middle-class prosperity in America. The rise of family offices reflects soaring inequality. Since 1980 the share of the world’s wealth owned by the top 0.01% has risen from 3% to 8%. As the founders of family firms receive dividends or the proceeds of initial public offerings, they usually redeploy the cash. But since the financial crisis there has been a loss of faith in external money managers. Rich clients have taken a closer look at private banks’ high fees and murky incentives, and balked.

These trends are unlikely to fade, as our Briefing explains. The number of billionaires is still growing—199 newbies made the grade last year. In the emerging world older entrepreneurs who created firms in the boom years after 1990 are preparing to cash out, while in America and China younger tech entrepreneurs may soon float their companies, releasing a new wave of cash to reinvest. Family offices’ weight in the financial system, therefore, looks likely to rise further. As it does, the objections to them will rise exponentially. The most obvious of these is the least convincing—that family offices have created inequality. They are a consequence, not its cause. Nonetheless, there are concerns—and one in particular that is worth worrying about.

The first is that family offices could endanger the stability of the financial system. Combining very rich people, opacity and markets can be explosive. LTCM, a $100bn hedge fund backed by the super-rich, blew up in 1998, almost bringing down Wall Street. Scores of wealthy people fell for a Ponzi scheme run by Bernie Madoff that collapsed in 2008. Still, as things stand family offices do not look like the next disaster waiting to happen. They have debt equivalent to 17% of their assets, making them among the least leveraged participants in global markets. On balance, they may even be a stabilising influence. Their funds are usually deployed for decades, making them far less vulnerable to panics than banks and many hedge funds.

The second worry is that family offices could magnify the power of the wealthy over the economy. This is possible: were Bill Gates to invest exclusively in Turkey, he would own 65% of its stockmarket. But the aim is usually to diversify risk, not concentrate power, by taking capital from the original family business and putting it into a widely spread portfolio. The family-office industry is less concentrated than mainstream asset management, which a few firms such as BlackRock dominate. Compared with most fund managers, family offices have welcome habits, including a longer-term horizon and an appetite for startups.

It is the third danger that has most bite: that family offices might have privileged access to information, deals and tax schemes, allowing them to outperform ordinary investors. So far there is little evidence for this. The average family office returned 16% in 2017 and 7% in 2016, according to Campden Wealth, a research firm, slightly lagging behind world stockmarkets. Nonetheless, tycoons are well connected. Family offices are becoming more complex—a third have at least two branches—making tax wheezes easier. Hungry brokers and banks are rolling out the red carpet and pitching deals with unlisted firms that are not available to ordinary investors. If all this did lead to an entrenched, unfair advantage, the effect, when compounded over decades, would make wealth inequality disastrously worse.

The rich discover do-it-yourself

The answer is vigilance and light. Most regulators, treasuries and tax authorities are beginners when it comes to dealing with family offices, but they need to ensure that rules on insider trading, the equal servicing of clients by dealers and parity of tax treatment are observed. And they should prod family offices with assets of over, say, $10bn to publish accounts detailing their workings. In a world that is suspicious of privilege, big family offices have an interest in boosting transparency. In return, they should be free to operate unmolested. They may even have something to teach hordes of flailing asset managers who serve ordinary investors, many of whom may look at their monthly fees and wish that they, too, could ditch the middlemen.

This article appeared in the Leaders section of the print edition under the headline "How the super-rich invest"

[goldrolloverira]

Exclusive: Russia considers extra $17 billion bailout for two rescued banks – sources

Reuters/Tatiana Voronova/3-16-2018

“Russia’s central bank is considering pumping more than 1 trillion rubles ($17 billion) into two banks it first bailed out last year to shore up their balance sheets, three sources familiar with the discussion told Reuters.  Russian banks have been hard hit by the fallout from Western sanctions over Russia’s annexation of Crimea in 2014 and the economic impact of a sharp fall in oil prices on the country’s foreign currency earnings.”

MK note: I recall that it was a financial crisis in Russia in 1998 that set-off the collapse of LTCM (Long Term Capital Management) and a generalized systemic rollover that nearly toppled the system.  The Federal Reserve, if I recall correctly, bailed out LTCM, presumably to save the financial system.

[harbourfronttechnologies]

Financial Market Insurance is Not Hurricane Insurance

In a previous post, we pointed out several reasons why the VIX is so low There are several explanations. But in our opinion, currently nobody knows the exact reasons yet. However, a consensus started emerging. Several market experts say that volatility is low because of the increase in the short volatility trade through VIX-based ETFs. Dani Burger reported: While gallons of ink have been spilled on whether the VIX is “broken,” some traders are now suggesting that exchange-traded products linked to the index have a hand in the perceived distortion. What’s more, they warn, their popularity — VIX ETPs have absorbed $700 million this year — could exacerbate a selloff if volatility spikes. Yet budding evidence suggests that VIX ETPs — a more than $3 billion industry that includes the popular $1 billion iPath S&P 500 VIX Short-Term Futures ETN, symbol VXX — have altered the futures market, and at times indirectly influenced the index itself. However, there are people who don’t agree Most strategists believe there are stronger forces than ETPs keeping the VIX low. An accommodative Federal Reserve and European Central Bank, strong earnings, low sector correlation and numerous other positive market indicators have capped pessimism, they say. It’s difficult to prove that ETPs apply constant pressure that pushes the VIX lower, according to Ramon Verastegui, head of flow strategy and solutions in the Americas at Societe Generale SA. Still, with ETPs looming as such a large market presence, they affect the VIX’s term structure while the threat of a sell-off hangs over the index. When VIX futures move 1 point, typically the VIX spot price moves 1 to 2 points, Verastegui said. Read more Regardless of the reasons, the short volatility trade seems to be crowded. Therefore, it can have a huge impact on the market in case of panic and everyone wants to exit. Dean Curnutt wrote The hurricane is not more or less likely to hit because more hurricane insurance has been written. In the financial markets this is not true. The more people write financial insurance, the more likely it is that a disaster will happen, because the people who know you have sold the insurance can make it happen. So you have to monitor what other people are doing. While Haghani’s statements were focused on the manner in which LTCM-specific trades were seemingly attacked by the market, they remain highly relevant today because the notion that financial market insurance is not like hurricane insurance is broadly applicable. When trades are especially crowded, their unwinding can amplify market moves as investors seek to de-risk in unison. Stable markets not only invite trades that bet on the continuation of stability, they almost force investors to pursue them in an investment climate so deprived of nominal return. Read more The title of this post, Financial Market Insurance is Not Hurricane Insurance. refers to Haghani’s statement above, i.e. unlike the insurance markets, in financial markets everyone can sell insurance, and this can lead to a crowded trade. Interestingly, from a mathematical point of view, pricing an insurance contract is vastly different from pricing an option contract. The former is priced in the statistical measure, where the latter is valued in the risk-neutral world. But this will be the subject of another post. Published via http://harbourfronttechnologies.blogspot.com/

[myteeplus]

God Bless America - Land That I Love shirt

God Bless America – Land That I Love shirt

Yeah man, I wrote some long-ass shit where I tried to tie 1987 to ltcm to passive investing to algo to the hustle that is Bridgewater and I wove in renaissance and Saba and some other shit but I think I’m done. I’m gonna maybe make a throwaway account and breakdown MMA or something. But I still love this shit. Followed so I can read all God Bless America – Land That I Love shirtposts later.…

[palmettocapital]

A Man For All Markets (2017)

Recommended by: @Dutch_Book (who gave me one of his personal copies) and @JerryCap 

Super interesting childhood -- didn’t speak a word until he was two and then began speaking in full sentences; reading at a 10-yr-old level when he was 5. Details a lot of “science play” including a number of fairly advanced amateur chemistry and physics experiments he conducted as a kid

Compares ham radio to the first Internet, allowing amateurs with simple setup to communicate with people all over the world. Had to pass a licensing exam on Morse code to operate one. Used a self-devised system to teach himself Morse that was 4x faster than the method used to teach army trainees

Method for permanent retention was to fall asleep reviewing material he’d taught himself

Martingale system -- betting scheme that requires “doubling up” after each loss in a game like roulette, consistently betting (eg, always red), will eventually recoup your loss but subject to needing a very large bankroll and bets may get so big the casino disallows them

Initially attracted to beating roulette because he believed an equation properly factoring in friction and gravity could predict how the ball would fall, though conventional wisdom was that any noise would be enough to ruin the prediction. Later proved this to be the case.

Basic blackjack/21 dates to at least 1601 (mentioned by Cervantes), referred to by 18th Century French as vingt-et-un. Conventional wisdom was that it was mathematically proven no system of varied bets could beat the house’s edge, but Thorp decided to test it when he learned of a system that lowered house edge to 0.62% (best of the casino games on offer). 

His core insight on blackjack was that previous calculations had assumed the odds of any card being played stayed constant throughout the game, whereas Thorp realized the real odds varied wildly and depended on which cards were left in the deck --> means there are periods where player has an edge vs. house. So player just has to keep track of the shifting odds and vary his bets accordingly. This is the beginning of card counting. Simply, player’s edge for a deck in progress depends mainly on fraction/percents of each type of card present.

Modern computing (IBM 704) and Thorp’s access to it as an junior professor at MIT made his advances possible. Basically used a brute-force approach that wouldn’t have been possible by hand to test the impact of removing various card values from the deck on the player’s edge. Taking out small cards (2s-6s, and particularly 5s) helped player, removing 10s and Aces hurt player.

Devised his “ultimate strategy” which assigned a point value to every card, but was too hard to keep track of mentally. Decent compromise for usability was assigning 2s-6s a value of +1, 7s-9s a neutral 0 and 10/J/Q/K/A a -1. As small cards (+1s) are seen, implies a higher proportion of large cards remaining, so count rises and deck becomes more favorable.

5s are the most impactful card, but he decided to use a measure of “ten-richness” for casino play because there are 4x as many 10-value cards in a deck. Deck starts with 36 non-Tens and 16 Tens or a ratio of 2.25. Below 2.25 is “ten-rich”, at 2.0 the player has an edge of 1% and it rises as the ratio drops.

Decided to publish his results quickly because he believe in science it’s common for the time to be right for a discovery, with multiple researchers discovering something at the same time (eg, Newton & Leibniz with calculus; Darwin & Wallace with evolution). This was clearly the case with blackjack owing to improving computing power.

Initial approach was to bet 2x his minimum when edge was 1%, 4x when it was 2%, up to 10x when his edge was 5%. 

Spent a lot of time practicing his play as well as working his way up in terms of what he was emotionally comfortable betting in order to be able to play his system calmly/accurately.

Why 16 is such a bad hand in blackjack - draw and you bust with high probability, stand and dealer likely to beat you with 17+.

Odds swing around a lot more near the end of a single deck, so some players use “end play”. Casinos began to combat this with early reshuffling to keep returning deck to its initial state. Early reshuffling slows play and frustrates casual players, which hurt profitability -- eventually card-shuffling machines made this must faster, but casinos paid a per-shuffle fee to those vendors, so it was still a hit to profitability.

Discusses how there are some systems that rely on tracking cards following a shuffle, since one shuffle does not fully randomize a deck (apparently it’s been proven it takes 7 thorough shuffles to effectively randomize a deck). He built mathematical models and empirical studies to study shuffling.

“Third base” (left-most seat) best one for the card counter because he’s last to act and has seen more cards because play begins to dealer’s left.

Tested his mental/emotional state before playing by “counting a deck” -- if he could do this in 20-25 seconds, he was ready to play at speed.

Never play at a table for a 2-card blackjack has been changed from original 3:2 to something lower.

Their roulette strategy applied Kelly criterion thinking, ie that it’s worth forgoing some expected gain for a large reduction in risk. For example, their betting system on roulette yielded average profit at 44% of bet for one pocket, but a 43% advantage if they reduced risk by spreading the bet across 5 numbers (expected number + 2 on each side). Called “voisinage” betting in French.

Along with Claude Shannon (MIT prof & “father” of information theory), created the first ever wearable computer for beating roulette -- believes this is perhaps the first instance of a computer that could outplay any human at a game (later occurred in checkers, chess, Go, Jeopardy)

Key to beating baccarat was that while it was impossible to win on Banker/Player bets (due to card-counting being less effected with 8 decks in a shoe at once), side bets (around natural 8/9) had exploitable characteristics. These were later eliminated.

Baccarat is a high-rolled game and was massively profitable for casinos -- accounted for 50% as much profit as blackjack with 2% as many tables, ie 25x on a per-table basis.

His partner sourced investors for their first fund by going to the courthouse, pulling other funds’ filings, and cold-calling their LPs.

His approach to arbing warrants was to use computers to draw a fair value curve for the security and then buy or short the common/warrant based on which was rich/cheap to the curve, using the slope of the curve at that point as the hedge ratio. 

Converted Bachlier’s options pricing theory into a usable trading strategy by subbing in the risk free rate (UST bill with expiry closest to warrant expiry) for growth rate & discount rate. This was in 1967 vs. Black & Scholes publishing their formula in 1972.

Due to inability to assess cultural fit in interviews, his approach was to hire everyone for his fund on a provisional basis for 6 months

CBOT introduction of CBOE in 1973 was a game-changer for increased liquidity and lower costs to trading options (put options came in 1974)

His fund’s risk management approach rejected conventional notions like VaR in favor of more comprehensive/intuitive questions around what major risks could befall market or counterparties.

“Junk bonds” -- Milken/Drexel approach was a game-changer because it provided steady capital to less established companies that had not had financing needs met. This new spigot of capital increased competition for more established companies and led to hostile takeovers and restructurings, and apparently a structural rise in valuations -- he argues that blue chip companies with low returns on capital were vulnerable to Drexel-finance takeovers that often made them more valuable through more aggressive investment.

Interesting discussion of the arbitrage opportunity his son discovered in 1990 to participate in de-mutualization of small S&Ls across the US by becoming a depositor and subscribing pro-rata to rights offerings as they raised equity. Notes that management incentives made it clear this would happen over time as directors had priority subscription rights before depositors and could therefore capture outsize value.

He declined to be an LP at LTCM because he had heard John Meriwether had a history of taking outsize risk at Salomon, and he though Merton & Scholes lacked street smarts/investing experience.

His modeling suggests 2% rule is preferable to “4% rule” typically used in retirement calculations.

Key to using leverage responsibly is factoring in the worst imaginable outcome and whether you can tolerate it. If not, reduce borrowing.

Optimal bet under Kelly = edge/odds. Causes you to bet larger in situations with minimal downside or big edge. Because Kelly method leads to large swings, most users go <optimal, like half-Kelly or less. Requires long time horizons.

Since 1520, 85 institutions have remained continuously in existence -- 70 of these are universities.

Believes it’s easy to spot bubbles once well under way. Hard to profit, but key to avoid it.

Believes in scaling down TBTF institutions as a general rule.

Studies pre- and post-GFC show earnings and stock performance for a given company correlate negatively to the % of corporate profit paid to top-5 executive.

Believes there is a need for more probability/statistics education at the K-12 level -- aligns with Annie Duke there.

Economists have found one factor explains a nation’s future economic growth & prosperity above any other -- output of scientists & engineers.

Takeaways

Thorp is clearly a remarkable person -- a genius autodidact and a classic example of what Taleb would call a “skeptical empiricist”, somewhat obsessive about testing conventional wisdom using his own calculations, models and experiments, often identifying significant profit opportunities. It’s also a story about how the ability to stay abreast of technological breakthroughs (modern computing, new programming languages, new financial instruments, etc) over a long career can be extremely profitable, especially if you consistently get to them before others.

There are lots of remarkable autobiographical features I skipped over in my notes that make the book particularly worth reading. Thorp is an amazing idea of “American dream” type mobility -- born to a working class family during the Great Depression, attending public schools, winning scholarships and eventually working his way up to great wealth. The book makes him sound like the financial world’s Forrest Gump, as it covers almost every major issue of the last 50 years and Thorp/s involvement -- for example, he invents the card-counting method; “beats” blackjack, roulette and baccarat; meets Buffett as he’s winding down the Buffett Partnership; discovers Black-Scholes before Black/Scholes/Merton; participates in the early days of convertible arbitrage and evolves it into statistical arb; determines Madoff is running a fraud in 1991; pioneers quant and factor investing and the market-neutral approach to hedge funds, helps Ken Griffin & Frank Meyer get Citadel off the ground and signs on as their first LP; etc.

In many ways, the book is written for an investor with little technical knowledge and does a good job explaining much of what he worked on. The later ~1/3 of the book focuses on a number of his business ventures, opinions on politics/wealth/charity, and high-profile anecdotes that are interesting without being particularly technical.

[stiriarges]

Tenismenul Mihai Ciungu, de la ACS LTCM Mioveni, a câștigat Turneul ”Performance Team” - București

Tenismenul Mihai Ciungu, de la ACS LTCM Mioveni, a câștigat Turneul ”Performance Team” – București

În perioada 31 august – 3 septembrie, la București s-a desfășurat Turneul de Tenis ”Performance Team”, turneu înscris în calendarul (more…)

[bestblockchainby-blog]

Мнение: Почему сейчас самое время покупать эфир

Автор статьи на Hacker Noon — Дункан Чиа, адепт криптовалют и трейдер по деривативам с десятилетним стажем. Он подробно объясняет, из-за каких факторов снизился курс эфира за последние месяцы, сколько это может продолжаться и как быть инвесторам в сложившейся ситуации. Предлагаем вашему вниманию перевод. Уничтожение «бычьего» лагеря инвесторов эфира происходило жёстко: за последние 30 дней пары ETH/USD и ETH/BTC снизились на 45%. По данным onchainfx.com, это пятый наихудший результат в топ-100 монет (другие четыре худших результата принадлежат более мелким монетам с совокупной рыночной капитализацией не более $500 млн. притом, что капитализация эфириума составляет $19,2 млрд.); по некоторым данным, эфириум переместился со второго места по рыночной капитализации на четвёртое, а на второе и третье места вышли Stellar и Ripple; американский судья обвинил одно из ICO в нарушении закона о ценных бумагах; даже размышления Виталика теперь звучат несколько по-медвежьи.

Давайте внесём ясность, я никогда не го��орил, что в криптовалютной экосистеме «нет места для роста». Я сказал, что нет места для «1000-кратного роста цен». Увеличение цен в 1000 раз означает $200 трлн. в крипто, или 70% сегодняшнего мирового богатства, которое в этом случае перешло бы в крипто. Чем вызвана такая распродажа? Неужели рынок внезапно изменил своё мнение о достоинствах децентрализации эфириума и смарт-контрактов? Все ли теперь думают, что только биткоин может стать устойчивой валютой? Нет. Я считаю, что эфириум испытал «техническую» распродажу, связанную с ликвидностью и его собственным позиционированием. Я думаю, что это скоро прекратится. Чем обосновано моё мнение:

1. Экономическая активность эфириума ослабла по сравнению с токенами других смарт\-контрактных платформ

Эфириум можно считать смарт-контрактной платформой высочайшего качества (учитывая возраст, экосистему разработчиков, рыночную капитализацию, хеш-мощность). Это объективное утверждение, в отличие от споров о том, станет ли эфириум «лучшей» платформой и предложит ли самую высокую доходность вместе с децентрализованными приложениями в будущем. С учётом этого можно было бы ожидать, что и в «медвежьи» периоды качественные проекты будут чувствовать себя лучше остальных. Капитал, который инвесторы ещё не вывели из крипто, было бы логично переместить в надёжные, проверенные временем проекты, а вложения в рискованные стартапы оставить на потом. Однако этим летом всё было не так. С конца июля эфириум стал значительно отставать от своих основных смарт-контрактных конкурентов — EOS, Stellar, NEO, Cardano, NEM. Снижение эффективности эфира колеблется в пределах от 10 до 125%, см. таблицу ниже:

Такое драматичное отставание от эфира странным образом успокаивает. Оно, скорее всего, говорит о специфической проблеме эфириума, а не о глубоком разочаровании в смарт-контрактах или криптоактивах в целом. Утверждение №1: Это специфическая проблема эфириума, а не переоценка криптовалют, смарт-контрактов и децентрализации

2. Фонды ICO ведут распродажу

Только эфириум смог провести значительное количество ICO (более чем на $10 млрд.). Хотя это свидетельствует о силе экосистемы эфириума, здесь также присутствует проблема краткосрочной ликвидности, так как эти эфириум-фонды теперь конвертируются в доллары США для выплат командам проектов. Ликвидация таких средств — один самых обсуждаемых вопросов, который часто истолковывается неверно. Отследить движение средств в кошельках ICO-фондов и увидеть, как эфир превращается в доллары, можно здесь и здесь. По приблизительным подсчётам, ICO уже продали 6,2 млн. (62%) из 9,9 млн. своего эфира. За многими из этих проектов стоят небольшие команды, которые сейчас бьются над тем, как потратить собранные на ICO огромные средства. Во многих случаях им уже удалось конвертировать в фиат суммы порядка $10 млн., которых хватит на финансирование команд в течение года или двух. Имея на банковских счетах такие суммы в долларах, казначеи проектов десять раз подумают, прежде чем продавать остатки криптовалюты. В общем, похоже, что 80% продажи эфира уже завершено. Итак, многие знают об этих вынужденных распродажах. Мой опыт трейдера подсказывает: информация о том, что кто-то вынужден продавать (или покупать), — это очень прибыльная информация. Нетрудно представить себе панику казначея ICO, сидящего на большом мешке эфира, который надеялся получить лучшую цену за эти монеты. Когда эфир обвалился ниже $400, эта паника стала ещё более ощутимой. Другие трейдеры наверняка решили воспользоваться ею и стали играть на понижение. Это похоже на то, что как трейдеры расправились со знаменитым хедж-фондом LTCM.

Рост шортинга эфира, в то время как его цена снижается В торговле акциями есть эмпирическое правило, касающееся несоразмерно крупных сделок. Например, если есть большой объём акций для продажи и этот факт общеизвестен, цена возвращается к норме ещё до момента продажи всего пакета. Тех, кто купит последние акции по низкой цене, вовремя заметив приближающийся конец распродажи, можно считать счастливчиками. Обычно всё возвращается на круги своя, когда рынок переваривает две трети объёма. Это может пройти раньше на более уверенном рынке или, наоборот, позже. Вышеприведённые данные показывают, что эфириум дошёл до этой важной отметки. Или даже перешагнул её — в зависимости от того, как считать. Утверждение №2: Рынок не будет ждать распродажи 100% монет. Оставшийся в фондах ICO эфир можно проигнорировать.

3. Эфир заметно ослаб, пройдя ниже отметки в $400

Два предыдущих рассуждения объединяет то, что в конце июля экономическая активность эфира ослабла. Это был момент, когда эфир пробил уровень критической психологической поддержки в $400. Этот уровень за последний год тестировался несколько раз, что всегда приводило к значительным объёмам торговли. Заметное ослабление после этого не случайность, а прямое воздействие вышеназванных распродаж фондов ICO. Мы отчётливо видим эту панику после $400 — она прослеживается по увеличению объёма торгов (см. таблицу ниже).

Утверждение №3: Паника казначеев ICO очень наглядна. Паника обычно сигнализирует о скорой смене тренда.

Выводы

Эфириум ослаб по отношению к смарт-контрактным проектам и «устойчивым валютам», но это не связано с изменением перспектив эфириума или его экосистемы. Напротив, это прямой результат успешного сбора капитала ICO-стартапами в рамках этой экосистемы. Очевидно и то, что остатки сбережений ICO на исходе. Кроме того, паника была усилена пробитием психологической отметки в $400. Таким образом, комбинация из технического избытка предложений, финишной прямой продаж и видимой паники/отчаяния создают привлекательную точку входа для покупки эфира. Что же делать? Ниже я не буду давать советы по инвестициям, а просто покажу, как буду составлять свой собственный портфель. Низкий риск: продам криптовалюту других смарт-контрактных платформ и вместо этого куплю эфир для долговременного хранения. Динамика других смарт-токен��в превзошла эфир, и если распродажа на самом деле происходит потому, что криптовалюты больше никому не нравятся, эти проекты более низкого качества не выживут. Средний риск: открою новую долговременную позицию по какому-нибудь смарт-контрактному токену против эфира. Высокий риск: буду покупать эфир за фиат или даже за биткоины. Read the full article

[rulystuff]

https://servicemeltdown.com/ideology-masquerades-impartial-economic-analysis/

New Post has been published on https://servicemeltdown.com/ideology-masquerades-impartial-economic-analysis/

HOW IDEOLOGY MASQUERADES AS IMPARTIAL ECONOMIC ANALYSIS

It is a rare economist who doesn’t wear a mask of ideology. And, it is ideology that drives what the American lay public [and many who are otherwise sophisticated about business and finance] presumes is apolitical, clinical, and neutral economic analysis rendered for the betterment of our society. Alas, such is not the case as ideology is the predicate for much of what we understand to be dispassionate economic analysis. Ideology comes in many forms: as academic arrogance, institutional bias, or political partisanship. Maybe all of this makes sense if we view economics as more of a political ideology than an objective science. Still, Americans must be aware of the masquerade.

The “can’t fail” models of Myron Scholes and Robert Merton, Nobel Prize winning economists both, were the centerpiece of the hedge fund they, with others, founded as Long Term Capital Management (LTCM) in 1994. The founders’ notoriety was based on the mathematical work they did, along with Fisher Black, to value the theoretical price of derivatives (the so-called Black-Scholes model). Big investment banks among them Merrill Lynch and UBS went for the bait with minimum $10 million investments. At the end of August 1997, the firm sported a capital base of $6.7 billion and the firm was rocking. Scarcely a year later, however, following the collapse of the Russian economy, LTCM was left with an almost worthless portfolio of assets. The firm, whose self-assessed risk of failure, had been calculated to be near zero had to be bailed out by the Federal Reserve Bank of New York in league with fifteen banks as a way to avoid a contagion of the financial markets.

Some economic models are so narrowly framed [never mind that they lack empirical verifiability] that their applicability has little or no value in a real world context. The founders’ own post-mortem after the LTCM collapse was that their data base had not gone back far enough to pick up all historical market perturbations. So, their mathematical pyrotechnics were one-of-a-kind but their common sense was nil. Still, there is a bumper crop of economists, notwithstanding the debacle that was LTCM, whose elegant equations are believed by many to speak to science and truth in explaining some real world phenomenon. Worse, once a certain celebrity is achieved by the PhD economist doing the theorizing or the modeling, especially when abetted by a compliant academic or popular press, if not a Nobel committee, then the individual is venerated for his sagacity in areas far afield from his narrow-gauge expertise. This makes a burlesque of the field of economics and it should be seen as such by all Americans.

“THE CENTRAL PROBLEM OF DEPRESSION PREVENTION HAS BEEN SOLVED…”

The caption heading above was a prognostication voiced by the 1995 Nobel Prize winning economist Robert Lucas. In 2003, in his presidential address to the American Economic Association, Lucas further added that the problem, “…has in fact been solved for many decades.” Then, as if to double down on his incantation, in the aftermath of the Lehman Brothers collapse, Lucas stated he was skeptical that the economy would slip into recession or that the subprime mortgage crisis was of any more general consequence. “If we have learned anything from the past 20 years,” said Lucas, “it is that there is a lot of stability built into the real economy.”

Eugene Fama, the Nobel Laureate in Economics in 2013 is the father of the efficient-market hypothesis. The hypothesis essentially argues that it is impossible to beat the market as all of the information that is available about a stock is already baked into the price. In essence, Fama was saying that stock picking was a dart throw. So far so good except that if you take Fama’s hypothesis to heart there is no place for regulations of any kind. How could there be when everything you need to know about a stock is already known? Fama’s influence was profound. It was no coincidence that in 2000 Congress passed the Commodity Futures Modernization Act which, for all practical purposes, deregulated derivatives and credit default swaps. Bear Stearns, American International Group, and Lehman Brothers all collapsed as a direct result of a failure to regulate the derivatives market. That’s not all. When asked if his efficient market hypothesis applied to housing, Fama went on to explain that: “Housing markets are less liquid, but people are very careful when they buy houses. It’s typically the biggest investment they’re going to make, so they look around very carefully and they compare prices. The bidding process is very detailed.”

Fama, the brilliant economist, obviously failed to incorporate the human factor into his equations. As it turned out, home owners bore a great deal of the responsibility for the subprime fiasco – lying about their incomes, while living beyond their means – but it is instructive to remember that mortgage brokers were incented to sell high-risk mortgages, and that mortgage underwriters processed applications without full documentation in order to handle ever-increasing volumes of loans. Lending institutions, for their part, packaged and sold these high-risk loans to oftentimes unwary investors.

David Lereah, chief economist for the National Association of Realtors, in 2005 published the awkwardly titled, Are You Missing the Real Estate Boom? The Boom Will not Bust and Why Property Values Will Continue to Climb through the End of the Decade – And How to Profit from Them. Lereah, as others before him, was lionized by the media and his message became both ubiquitous and indisputable.

To be fair, not every economist failed to read the housing market tea leaves. Two are noteworthy:

An economist who didn’t drink the Kool-Aid was Robert Shiller, Nobel Laureate with Eugene Fama and Lars Peter Hansen in 2013. Shiller argued of irrational markets – not of efficient ones as his co-Nobel Prize winner Eugene Fama argued – and warned of a housing crash in 2006. Amazingly, Shiller also warned of a tech bubble just before the dot com fiasco.

Raghuram Rajan, Professor at the University of Chicago was a former Governor of the Reserve Bank of India as well as Chief Economist at the International Monetary Fund. Rajan is credited for his prescience, when in 2005 he warned about the growing risks in financial markets. For his insight, Rajan was called a Luddite and his warnings “misguided” by the former U.S. Secretary of the Treasury Lawrence Summers.

“TEN THOUSAND WILL DIE PER YEAR DUE TO TAX REFORM”

The great British economist Lionel Charles Robbins laid much of the groundwork for economics as the study of scarcity in his seminal “An Essay on the Nature and Significance of Economic Science”  published in 1932. In that same essay, perhaps most notably, Robbins made clear that the job of the economist is to study what is and not what ought to be.

It is fair to say, however, that economists then and now have failed to heed that lesson [or have chosen to ignore it] and thus theorize, not necessarily in accordance with the facts, but in accordance with their own political worldview and predispositions.

Lawrence Summers did more than denigrate Raghuram Rajan as a modern day Luddite. The former President of Harvard University and Chief Economist at the World Bank while in a position of great influence and power during the 2008 meltdown argued against a cram down that would have allowed the courts to force banks to  reduce mortgage balances, cut interest rates or lengthen loan amortizations that would have helped millions of homeowners. Sadly, Summers’ signal policy achievement while in Washington was the aforementioned disaster known as the Commodity Futures Modernization Act.

Summers is now on his high horse as an “intellectual” anti-Trump activist. When Summers proffers that ten thousand people will die as a result of the President’s tax reform package his rationale is couched in so many “what-ifs” as to be meaningless. And, when he tells CNN that the tax plan will make “middle class Americans poorer” he demonstrates that he is pseudoscientific as well as incapable of rising above petty political jealousies. Summers is not alone, however, as a contemporary big mouth and wrong-headed  economist.

“WE ARE LOOKING AT A GLOBAL RECESSION…”

Nobel Prize winning economist Paul Krugman is not to be outdone for his caustic partisanship. In the aftermath of President Trump’s election Krugman assured his readers at the New York Times that the world’s stock markets would never recover. The election of such an “irresponsible, ignorant man,” said Krugman, would bring about the “the mother of all adverse effects” on the economy. “So, we are very probably looking at a global recession, with no end in sight.” That is hardly an intelligent economic observation so much as it is unbridled animus toward the President.

The numbers, ruefully for Krugman and his acolytes, tell a different story from his apocalyptic view. Gross Domestic Product exceeded 3% during the second and third quarters of 2017.The unemployment rate at 4.1% is at a seventeen year low. Consumer confidence in November of 2017 is at a seventeen year high. The stock market has added over $5 trillion in wealth. And,  the number of Americans receiving employee bonuses, pay hikes, and increases in benefits now numbers in excess of 2,000,000.  Bumps in capital spending, and charitable contributions are also being announced by companies in reaction to President Trump’s December tax reform: AT&T, for one, has announced plans to spend an additional $1billion in capital spending in 2018; Comcast, has indicated it will spend $5 billion over the next five years; and Wells Fargo has announced that it will pump $400 million into community chests in 2018.

It is clear that Krugman’s bias is such that he would rather engineer the economy according to his predilections than simply study it and objectively report on it. His mantra has been for years that America’s apparent  economic success is due to the fact that “…our rich are much richer.” So much for the analytical prowess of a Nobel Laureate: a man whose ideology has an answer before a question has even been asked.

The Nobel committee’s vetting of Krugman’s work in economic geography was sloppy if not politically motivated. The field, including the mathematical elegance that is ascribed to Krugman, goes back for decades. What is worse, Krugman gives scant credit to those who preceded him. That is shameful.

Mathematical economist J. Barkley Rosser Jr., Professor of Economics at James Madison University, who has reviewed Krugman’s work has cited all of the previous relevant work which Krugman purposely ignored. Rosser concludes his review by stating that “if [Krugman] is indeed the emperor of the new economic geography, then he is an emperor who has no clothes.”

[foursproutwealth-blog]

Twelve Days Of Christmas Fed’s QE Gave To Me – by Michael Carino, Greenwich Endeavors

New Post has been published on http://foursprout.com/wealth/twelve-days-of-christmas-feds-qe-gave-to-me-by-michael-carino-greenwich-endeavors/

Twelve Days Of Christmas Fed’s QE Gave To Me – by Michael Carino, Greenwich Endeavors

On the 12th day of Christmas Fed’s QE Gave To Me:

TWELVE Fed Districts Dancing

ELEVEN Bubbles Bubbling – (11 – Crypto Currencies like the recently famous soon to infamous Bitcoin, Bonds (every one of them), Stocks, Intra-day leverage from high volume trading, Emerging Markets, Short Volatility Trades in a temporarily suppressed volatility environment, Liquidity Risk from enormous Alternative Funds – LTCM was only 4bl, a fraction of the current day behemoths, Spread Products, Farm Land, Commercial Real Estate, Residential Real estate, Yellen’s Champagne Flute)

TEN th Year US Economy Expanding – (longest expansion ever!?!)

NINE Trillion Treasuries Issued – (only 5 Trillion existed in 2008, now 14 Trillion!!!)

EIGHT High Frequency Treasury Trading Hedge Funds – (In 2015 BrokerTec published a list of interdealer market Treasury trading volumes showing 8 of top ten traders by volume were hedge funds, not dealers. This represented up to 70% of Treasuries traded.  In a market that can have daily volumes of 1 Trillion when incorporating cash and futures markets – dictated by high volume traders that manipulate prices –– yet somehow the world believes yields reflect a consensus outlook for growth and inflation instead of the will of 8 traders – is no different from the Hunt Brothers cornering the silver market.  This ended catastrophically for the Hunt brothers and the silver market.  High volume strategies by a few are currently cornering the Treasury market and therefor the global bond market.  As the strong economic fundamentals make current low yield levels look comical and cash rates rise high enough to encourage rotation away from bonds, this manipulation will collapse and along with it bond prices.)

SEVEN Hundred Billion Federal Budget Deficit (potentially going to 1 Trillion in 2018 with the new tax reductions passed)

SIX Central Banks Pursued QE (US, UK, Switzerland, EU, Japan and China all pursued quantitative easing programs in order to monetize debt, competitively depreciate their currency for trade advantages and fund at subsidized rates ever expanding government deficits that normally lead to soaring interest rates)

FIVE Fed Funds rate hikes (at this pace there will be five more years of hikes and one heck of a bubble to burst –if the monetary policy insanity lasts five more years, the global financial and economic system will be imperiled)

FOUR Trillion Bonds on the Fed’s Balance Sheet (was only appx. 700 billion in 2008, now 4.4 trillion!)

THREE Egg Nogs for Big Ben (Academics love to party and Fed Chairman Bernanke, as the father of excessive and highly impaired QE policies, had all the Fed members over-imbibing)

TWO Dissenting Doves – (Fed Presidents Evans – Chicago and Kashkari – Minneapolis both want to revel into the new year and voted not to raise rates and continue to normalize Fed policy at the recent December 17 Federal Reserve meeting. It was rumored they were overheard calling Yellen a Grinch!)

AND A Powell In the Fed’s chair seat – (Jerome Powell will replace Fed Chair Yellen February 3, 2018. A prior article I wrote, will Trump dance or be a dunce is looking like he has his dancing shoes on. Let’s stay in the holiday spirit and dance the night away with a new Fed Chairman that will stick with the status quo and keep the party going!  Chairman Greenspan decided to keep the party going at all costs and let the music stop on someone else’s watch.  This practice has been followed by Chairman Bernenke and Chairman Yellen.  Chairman Powell now seems prepared to practice what everyone else preached. Let’s do whatever it takes, regardless of future economic costs (and these costs will be catastrophic) and let this monetary policy experiment end with a thundering boom on the next person’s watch!

    by Michael Carino, Greenwich Endeavors, 12/23/17

Michael Carino is the CEO of Greenwich Endeavors and has been a fund manager and owner for more than 20 years.  He has positions that benefit from a normalized bond market and higher yields. 

[foursprout-blog]

Twelve Days Of Christmas Fed’s QE Gave To Me – by Michael Carino, Greenwich Endeavors

New Post has been published on http://foursprout.com/wealth/twelve-days-of-christmas-feds-qe-gave-to-me-by-michael-carino-greenwich-endeavors/

Twelve Days Of Christmas Fed’s QE Gave To Me – by Michael Carino, Greenwich Endeavors

On the 12th day of Christmas Fed’s QE Gave To Me:

TWELVE Fed Districts Dancing

ELEVEN Bubbles Bubbling – (11 – Crypto Currencies like the recently famous soon to infamous Bitcoin, Bonds (every one of them), Stocks, Intra-day leverage from high volume trading, Emerging Markets, Short Volatility Trades in a temporarily suppressed volatility environment, Liquidity Risk from enormous Alternative Funds – LTCM was only 4bl, a fraction of the current day behemoths, Spread Products, Farm Land, Commercial Real Estate, Residential Real estate, Yellen’s Champagne Flute)

TEN th Year US Economy Expanding – (longest expansion ever!?!)

NINE Trillion Treasuries Issued – (only 5 Trillion existed in 2008, now 14 Trillion!!!)

EIGHT High Frequency Treasury Trading Hedge Funds – (In 2015 BrokerTec published a list of interdealer market Treasury trading volumes showing 8 of top ten traders by volume were hedge funds, not dealers. This represented up to 70% of Treasuries traded.  In a market that can have daily volumes of 1 Trillion when incorporating cash and futures markets – dictated by high volume traders that manipulate prices –– yet somehow the world believes yields reflect a consensus outlook for growth and inflation instead of the will of 8 traders – is no different from the Hunt Brothers cornering the silver market.  This ended catastrophically for the Hunt brothers and the silver market.  High volume strategies by a few are currently cornering the Treasury market and therefor the global bond market.  As the strong economic fundamentals make current low yield levels look comical and cash rates rise high enough to encourage rotation away from bonds, this manipulation will collapse and along with it bond prices.)

SEVEN Hundred Billion Federal Budget Deficit (potentially going to 1 Trillion in 2018 with the new tax reductions passed)

SIX Central Banks Pursued QE (US, UK, Switzerland, EU, Japan and China all pursued quantitative easing programs in order to monetize debt, competitively depreciate their currency for trade advantages and fund at subsidized rates ever expanding government deficits that normally lead to soaring interest rates)

FIVE Fed Funds rate hikes (at this pace there will be five more years of hikes and one heck of a bubble to burst –if the monetary policy insanity lasts five more years, the global financial and economic system will be imperiled)

FOUR Trillion Bonds on the Fed’s Balance Sheet (was only appx. 700 billion in 2008, now 4.4 trillion!)

THREE Egg Nogs for Big Ben (Academics love to party and Fed Chairman Bernanke, as the father of excessive and highly impaired QE policies, had all the Fed members over-imbibing)

TWO Dissenting Doves – (Fed Presidents Evans – Chicago and Kashkari – Minneapolis both want to revel into the new year and voted not to raise rates and continue to normalize Fed policy at the recent December 17 Federal Reserve meeting. It was rumored they were overheard calling Yellen a Grinch!)

AND A Powell In the Fed’s chair seat – (Jerome Powell will replace Fed Chair Yellen February 3, 2018. A prior article I wrote, will Trump dance or be a dunce is looking like he has his dancing shoes on. Let’s stay in the holiday spirit and dance the night away with a new Fed Chairman that will stick with the status quo and keep the party going!  Chairman Greenspan decided to keep the party going at all costs and let the music stop on someone else’s watch.  This practice has been followed by Chairman Bernenke and Chairman Yellen.  Chairman Powell now seems prepared to practice what everyone else preached. Let’s do whatever it takes, regardless of future economic costs (and these costs will be catastrophic) and let this monetary policy experiment end with a thundering boom on the next person’s watch!

    by Michael Carino, Greenwich Endeavors, 12/23/17

Michael Carino is the CEO of Greenwich Endeavors and has been a fund manager and owner for more than 20 years.  He has positions that benefit from a normalized bond market and higher yields. 

[sharemarkettipsripplesadvis-blog]

Given the Government’s response in expediting action on policy concerns in the wake of falling economic growth (multiple pullbacks in the GST regime, banking recap, MSP hikes), it would not be unfair to say that the NDA is at present a reactive administration.

Over the last six quarters GDP growth in India has fallen continuously. As of Q1FY18, growth fell to 5.7 percent. This has led to mounting discontent as evidenced by the September 27, 2017, piece by former NDA Finance Minister Yashwant Sinha.

Given the Government’s response in expediting action on policy concerns in the wake of falling economic growth (multiple pullbacks in the GST regime, banking recap, MSP hikes), it would not be unfair to say the NDA is at present a reactive administration.

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The above pattern of events is leading investors to believe there is a Modi put in play; i.e. when GDP growth slows down, the NDA will go into overdrive mode to reflate the economy.

Given India’s sliding economic growth and weak earnings per share (EPS) growth (Sensex EPS growth has been in single digits for the last four years), the Modi put is as good an explanation as any for the Sensex’s surreal valuation of 24x trailing earnings, two standard deviations above its long-term average.

The sequence of events which has transpired in India over the past couple of years is reminiscent of what happened in America in the decade running up to the Lehman crisis when the US markets believed there was a Greenspan put in play; i.e. whenever it looked as if the US markets were facing a challenge (e.g. the LTCM crisis in 1998, the aftermath of 9/11), Greenspan would come to the rescue with monetary easing.

These interventions by the US Fed emboldened investors to take increasingly risky long bets in the US stock and bond markets until that party ended in 2008. So, can PM Modi underwrite returns for Indian equity investors?

The challenge: The trilemma

Macroeconomic theory says it is impossible for an economy to have all three of the following at the same time:

1. A fixed foreign exchange rate 2. Free capital movement, and 3. Independent monetary policy

In India’s case, if the RBI wants to keep the INR at around the Rs 65/US Dollar-mark, and if the country wants to continue to have free capital movement then the RBI has to reconcile itself to losing control of monetary policy.

In the current context it means that were economic growth to stay weak, it is unlikely the RBI can support a recovery through rate cuts given that India’s current account deficit is running at around 2 percent of GDP.

Hence, India needs capital inflows of around 2 percent of GDP to keep the INR stable.

Exhibit 1: The INR depreciates when Balance of Payments (current + capital account) is negative

In fact, where things could get tricky for India – and where the trilemma could come to the fore – is if:

(a) Global commodity prices keep rising:

Crude oil, petroleum gas, and copper are India’s largest imports. They account for 37 percent of India’s import of goods. While the price of oil has risen by 13 percent per annum over the last two years to USD 61 a barrel (as of October 31, 2017), copper has risen 16 percent per annum in the past two years.

This has had a direct impact on the current account deficit, which has widened (see exhibit below). If this trend continues, India will have a problem on its hands as the RBI might have to tighten monetary policy even with a weak economic backdrop in India.

Exhibit 2: Rising oil prices worsen India’s current account deficit (CAD) as evinced by the episode spanning CY09-CY13 and the CY07 episode

(b) Inflation rises:

Inflation in India usually picks up in the run-up to General Elections. In specific, a historical analysis of inflation cycles in India suggests the average inflation tends to be higher in the last two years leading up to a General Election (GE).

For instance, average CPI inflation was higher by 80 basis points (bps) in the last two years leading up to a GE in the case of the last 5 election cycles.

Such a rise in CPI inflation would not only forestall further rate cuts from the RBI, it would also push up bond yields and thus, increase the cost of capital (against the backdrop of a sluggish economy).

Since inflation erodes the value of the currency, rising inflation would also trigger capital outflows thus putting pressure on the INR.

(c) Global liquidity tightening:

The US Fed has hiked rates three times since late 2016 and seems all set to hike one more before the end of 2017. On November 3, 2017, the Bank of England raised rates for the first time in a decade by a quarter of a percentage point to 0.5 percent.

Concerted tightening of monetary policy by the Western central banks would bring to an end the post-Lehman era of almost free money sloshing around the world, which has resulted in the S&P500 (16 percent annualized returns in USD terms since March 1, 2009) and the Sensex (17 percent annualized returns in INR terms since March 1, 2009) hitting record highs in spite of fairly ordinary underlying economic performance.

As this era of central bank liquidity gradually winds down in 2018, EMs including India will have to answer tricky questions regarding Balance of Payments.

If the Indian economy is not able to get export growth firing again, then global liquidity tightening and/or rising commodity prices would compel the RBI to tighten monetary policy.

Such a move by the RBI should shore up FII inflows (which seem to track real interest rates) but would exert further pain on a sluggish economy.

Exhibit 3: India’s real interest* has been rising, driving capital flows

Investment implications

The illusion that the Indian Government holds the country’s destiny entirely in its own hands has been facilitated by a combination of circumstances.

Some of these circumstances, to the NDA Government’s credit, are of its own making; e.g. fiscal rectitude in all of the budgets that this Government has presented so far, and an attack on black money.

However, India has also benefited enormously from benign oil prices alongside the liquidity generated by Western central banks.

This has allowed us Indians to have our cake (in the form of consistent inflows of foreign capital in our financial system) and eat it too (in the form of low CPI inflation and low-interest rates).

This divine combination – of capital inflows into India alongside low Indian interest rates – cannot sustain indefinitely. As the Western economies recover, not only are commodity prices likely to rise globally but also foreign capital inflows into India could slow down.

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Alongside this, if the NDA were to let its fiscal rectitude slip in a bid to win more elections over the next 17 months, then the outlook for the market could change very quickly.

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