Appassionata e ben scritta difesa degli hedge funds sul Wall Street Journal che solleva un punto fondamentale per mantenerli liberi da regolamentazioni troppo pesanti: Light regulation has allowed Mr. Jones's descendants to seize opportunities as they arise—when Farallon was not buying a bank in Indonesia, it was speculating on corporate mergers, distressed debt or a water project in Colorado. Equally, the freedom to go long and short has permitted hedge funds to express investment views with precision. Rather than simply buying a stock or a bond whose performance will reflect currency shifts, interest rates, trends in the broad market, and so on, a hedge fund can hedge out the risks on which it has no view, isolating the particular risk on which it has a real insight.
E ancora, in conclusione dell'articolo: Given the difficulties with financial reform, legislators should embrace a complementary approach: As well as struggling to tame financial behemoths, they should promote boutique risk takers. With only a few exceptions, hedge funds have the powerful virtue of being small enough to fail; indeed, some 5,000 went out of business in the course of the past decade, and none imposed losses on taxpayers. Mythology notwithstanding, the average hedge fund's leverage is more sober than that of banks and investment banks.
The question for policy-makers is what kind of financial institution will absorb risk most efficiently—and do so without a backstop from taxpayers. The answer awaits discovery in the story of A.W. Jones and his descendants. The future of finance lies in the history of hedge funds.
Dal mondo accademico una ricerca sembra portare nuova evidenza alla tesi sopra esposta in difesa dei fondi hedge: secondo un articolo molto originale di Billio, Getmansky, Lo e Pellizzon il rischio sistemico - il principale target delle riforme finanziarie in discussione negli USA e in Europa - è soprattutto alimentato dagli atteggiamenti troppo speculativi di banche e assicurazioni piuttosto che dai fondi hedge: Our results suggest that while hedge funds can provide early indications of market dislocation, their contributions to systemic risk may not be as significant as those of banks, insurance companies, and brokers who take on risks more appropriate for hedge funds.
Lo studio di Billio e coautori mi sembra davvero molto bello: spero di trovare il tempo per dedicargli un post in un futuro relativamente prossimo.
Qui potete leggere la storia di un blogger di successo: da anni Edward Hugh annunciava la crisi dell'euro sul suo blog ad un piccolo gruppo di lettori. Ora, grazie alla crisi e all'articolo sul New York Times, è diventato una celebrità del Web 2.0! Guardate qui che effetto può avere un articolo sul NYTimes sul numero di visite giornaliere al blog...
lunedì 14 giugno 2010
domenica 13 giugno 2010
L'ENI più sicura del Tesoro? Secondo Credit Suisse l'Italia è più sicura della Francia!
Sul Financial Times di venerdì scorso, James Mackintosh si domanda che senso abbia per il debito sovrano di un paese essere considerato più rischioso del debito di una società localizzata in quel paese. La domanda, ricorrente nel mondo accademico (ne ho spesso discusso con un amico a Siena) è ormai di attualità con i mercati che prezzano il rischio di molte imprese ben al di sotto di quello dei governi corrispondenti. Scrive Mackintosh: The market appears to be saying that companies such as Italy's Eni, Portugal Telecom, Spain's Telefonica, Greece's Hellenic Telecom and Belgium's Belgacom are less likely to default than their home countries. A naive justification is that large groups could survive a sovereign default; (...) But a more satisfactory explanation is that the flight to quality is having strange effects: investors who still want corporate bonds are flocking to the safest multinationals. Investors wanting a risk-free rate from which to calculate prices for European equities and bonds can still use German bunds. But the odd goings-on in the periphery should act as a warning. A theory built on something that does not exist (qui il riferimento è alla nozione di asset risk-free, centrale in tutta la moderna teoria del portafoglio) is bound to be hard to apply.
Vi segnalo inoltre uno studio di Credit Suisse sui rischi del debito sovrano dal quale l'Italia esce benino:
We present a framework for comparing the sustainability of government
liabilities across developed market countries. Our system goes beyond simple
debt and deficit ratios, adding a host of other less obvious but equally important
factors that ultimately affect whose debt is sustainable.
Such an approach is sorely needed, in our opinion. Past sovereign debt crises
had more to do with structural rigidities (fixed exchange rates, etc.), bad politics
(an inability to make tough decisions, etc.), and severe shocks (wars, etc.) than
with headline debt and deficits. Indeed, war is by far the most common cause
of past sovereign defaults in our developed world sample. Our attempt at
scoring yields the following conclusions about relative debt sustainability:
• The first tier of sovereign debt includes the liabilities of China, Germany,
Switzerland, Australia and Canada. More controversially it also includes the
US, Italy and Japan. In our view these countries have negligible credit risk.
These countries may (and probably do) have some unsustainable liabilities,
but for most this implies much longer-term risks of inflation (indirect default) if
action is not taken to cap or reduce long-term entitlement commitments.
• The second tier includes the UK and arguably France. Credit risk remains
very low for these two, but structural factors suggest slightly greater risks of
debt sustainability issues. For the UK these are most likely to show up in
higher inflation risks; for France the main concern is public sector rigidities
and entitlements.
• The third tier includes Greece, Portugal, Spain and Ireland. For these four the
risks of actual default are significantly greater, unless and until rules for a
more explicit fiscal and political union within the euro zone are worked out.
This process has now begun in a classic process of crisis-led reform.
• Note that the euro zone GDP-weighted average score is similar to the UK
score. Moreover, all countries in our sample – no matter what their debt level
– would be perfectly creditworthy if primary budget surpluses were the norm.
Naturally, our conclusions rely on many subjective judgements. The framework
is available in spreadsheet form on request, allowing readers to put in their own
country scores and category weightings.
Vi segnalo inoltre uno studio di Credit Suisse sui rischi del debito sovrano dal quale l'Italia esce benino:
We present a framework for comparing the sustainability of government
liabilities across developed market countries. Our system goes beyond simple
debt and deficit ratios, adding a host of other less obvious but equally important
factors that ultimately affect whose debt is sustainable.
Such an approach is sorely needed, in our opinion. Past sovereign debt crises
had more to do with structural rigidities (fixed exchange rates, etc.), bad politics
(an inability to make tough decisions, etc.), and severe shocks (wars, etc.) than
with headline debt and deficits. Indeed, war is by far the most common cause
of past sovereign defaults in our developed world sample. Our attempt at
scoring yields the following conclusions about relative debt sustainability:
• The first tier of sovereign debt includes the liabilities of China, Germany,
Switzerland, Australia and Canada. More controversially it also includes the
US, Italy and Japan. In our view these countries have negligible credit risk.
These countries may (and probably do) have some unsustainable liabilities,
but for most this implies much longer-term risks of inflation (indirect default) if
action is not taken to cap or reduce long-term entitlement commitments.
• The second tier includes the UK and arguably France. Credit risk remains
very low for these two, but structural factors suggest slightly greater risks of
debt sustainability issues. For the UK these are most likely to show up in
higher inflation risks; for France the main concern is public sector rigidities
and entitlements.
• The third tier includes Greece, Portugal, Spain and Ireland. For these four the
risks of actual default are significantly greater, unless and until rules for a
more explicit fiscal and political union within the euro zone are worked out.
This process has now begun in a classic process of crisis-led reform.
• Note that the euro zone GDP-weighted average score is similar to the UK
score. Moreover, all countries in our sample – no matter what their debt level
– would be perfectly creditworthy if primary budget surpluses were the norm.
Naturally, our conclusions rely on many subjective judgements. The framework
is available in spreadsheet form on request, allowing readers to put in their own
country scores and category weightings.
sabato 12 giugno 2010
Aggiornamenti sul flash crash del 6 maggio
Ecco alcuni link con aggiornamenti e analisi sul flash crash del 6 maggio scorso:
- Qui potete scaricare il rapporto preliminare della SEC sul flash crash del 6 maggio.
- In questo post si analizza la caduta dei principali indici, individuando nel Nasdaq 100 un possibile motore del crash. Siccome Apple contribuisce per il 19%all'indice l'autore provocatoriamente si chiede Was the flash crash Apple's fault? Non prendetelo pero' troppo sul serio !
- Ecco un blog dedicato all'analisi dell'HFT: flashcrash.org !
- Su The Swapper trovate la testimonianza di un high frequency trader mentre il crash si consumava davanti ai suoi occhi. La tesi di Manoj Narang e' decisamente originale... l'intervento umano ha peggiorato le cose: human intervention exacerbated the crisis. First of all, I will just reiterate that this crisis was precipitated by panic selling by humans. The reason why this happened was because was the market was in particular vulnerable state on May 6th. We just had had a huge run-up in the equities markets, we were in the midst of a 10% correction, even before the mayhem unfolded, and on top of that you had very vexing news coming out of Europe, lots of images on CNBC, people rioting in the streets in Greece, the prospects of the second phase of the crisis unfolding. In that sort of an environment, people tend to seed the markets with stop orders. That’s what happened in 1987, that’s what happened this time around. So, the market was ripe for a catastrophic event, because it was so saturated with stop orders, all it needed was a catalyst. And the catalyst occurred, according to a couple of Reuters reporters, because a large mutual fund complex, decided to do a $4.5B hedging transaction in e-mini futures contracts, which track the S&P 500 index, when the market was already in that vulnerable state.
- Un altro post interessante su The Swapper: Should certain algorithmic trading strategies be banned?
venerdì 11 giugno 2010
Ah...questi banchieri!
Un'articolo sul New York Times riporta d'attualità il dibattito sui meccanismi di incentivazione nella banche: secondo uno studio della Fed many of the bonus and incentive programs that economists say contributed to the worst financial crisis since the Great Depression remain in place, according to people briefed on the examinations.
Officials have found, for example, that risk managers at several of the biggest banks still report to executives who have influence over their year-end bonuses and whose own pay might be constricted by curbing risk. In many cases, risk managers do not have full access to the compensation committee of the banks’ boards.
The review also revealed that banks tend to set similar bonus formulas for broad sets of employees and often do not adjust payouts to account for risks taken by traders or mortgage lending officers. Bank executives and directors, meanwhile, are often in the dark on the pay arrangements of employees whose bets could have a potentially devastating impact on the company.
Sempre il NYTimes ha preso qualche giorno fa una posizione molto netta sulle reticenze di Goldman Sachs: Phil Angelides, chairman della Financial Crisis Inquiry Commission del congresso USA ha inviato un'ingiunzione formale alla banca americana affinchè renda disponibile alla commissione documenti di varia natura giudicati indispensabili per lo svolgimento dell'inchiesta. Secondo Angelides Goldman has either not responded to requests — stretching back to January — for documents and interviews or has submitted data that are so voluminous or disorganized as to be useless.
Officials have found, for example, that risk managers at several of the biggest banks still report to executives who have influence over their year-end bonuses and whose own pay might be constricted by curbing risk. In many cases, risk managers do not have full access to the compensation committee of the banks’ boards.
The review also revealed that banks tend to set similar bonus formulas for broad sets of employees and often do not adjust payouts to account for risks taken by traders or mortgage lending officers. Bank executives and directors, meanwhile, are often in the dark on the pay arrangements of employees whose bets could have a potentially devastating impact on the company.
Sempre il NYTimes ha preso qualche giorno fa una posizione molto netta sulle reticenze di Goldman Sachs: Phil Angelides, chairman della Financial Crisis Inquiry Commission del congresso USA ha inviato un'ingiunzione formale alla banca americana affinchè renda disponibile alla commissione documenti di varia natura giudicati indispensabili per lo svolgimento dell'inchiesta. Secondo Angelides Goldman has either not responded to requests — stretching back to January — for documents and interviews or has submitted data that are so voluminous or disorganized as to be useless.
giovedì 10 giugno 2010
Ora è il momento di decidere: più debito, più stimolo, più occupazione?
Brad De Long prosegue dalle colonne di Seekingalpha la sua battaglia a favore degli stimoli all'economia e contro la depression economics: nel suo ultimo post dal titolo We need bigger deficits now sostiene senza mezzi termini che il momento è propizio anche grazie ai bassissimi tassi di interesse che il mercato richiede per finanziare il debito USA: De Long usa un moltiplicatore di 1.5 (!!) per il denaro impiegato dal governo, cioè sostiene che ogni dollaro di ulteriore debito governativo produce 1.5 dollari di aumento del GDP. Non sono competente per sollevare un'obiezione qualificata ma mi sento in dovere di avvertire i lettori meno navigati che si tratta di un punto controverso e politicamente molto sensibile. Un economista meno liberal di De Long abbasserebbe notevolmente questo valore (i libertari più estremisti sostengono addirittura che il moltiplicatore è negativo!). Ciò premesso ecco le conclusioni di De Long:
Each dollar of missing production and each unemployed worker right now is much, much more painful to the country and a much greater loss to human welfare than a dollar of missed production and an unemployed worker in normal times.
The argument for more spending is airtight as long as the arithmetic holds out. That is, until:
Right now, bad politics is undermining good policy, hurting the American economy and legions of unemployed workers. It is long past time for another stimulus package.
Per un'analisi della situazione del mercato del lavoro negli Stati Uniti aggiornata con i dati di venerdì scorso potete leggere questo articolo su Marketwatch: l'incipit dice già tutto...
...
The news on jobs isn't as bad as it seemed on Friday.
It's worse.
President Obama and Treasury Secretary Geithner were trying to putting on a happy face, but the markets weren't buying. They have tumbled worldwide since the latest payroll data.
But instead of overreacting, the markets may only just be waking up to the real bad news
Ma se volete una nota di ottimismo...eccola. Divertente il riferimento all'opacità della BCE.
Each dollar of missing production and each unemployed worker right now is much, much more painful to the country and a much greater loss to human welfare than a dollar of missed production and an unemployed worker in normal times.
The argument for more spending is airtight as long as the arithmetic holds out. That is, until:
- further increases in the deficit lead to rising expectations of inflation, leading the Federal Reserve to raise short-term interest rates, which then crowds out private-sector investment spending;
- further increases in the deficit lead to pressure on the federal government’s debt capacity, so that we can no longer finance additional federal government debt at such extraordinarily advantageous interest rates.
Right now, bad politics is undermining good policy, hurting the American economy and legions of unemployed workers. It is long past time for another stimulus package.
Per un'analisi della situazione del mercato del lavoro negli Stati Uniti aggiornata con i dati di venerdì scorso potete leggere questo articolo su Marketwatch: l'incipit dice già tutto...
...
The news on jobs isn't as bad as it seemed on Friday.
It's worse.
President Obama and Treasury Secretary Geithner were trying to putting on a happy face, but the markets weren't buying. They have tumbled worldwide since the latest payroll data.
But instead of overreacting, the markets may only just be waking up to the real bad news
Ma se volete una nota di ottimismo...eccola. Divertente il riferimento all'opacità della BCE.
mercoledì 9 giugno 2010
E se le società di calcio si pagassero il servizio d'ordine con i propri soldi?
Cari lettori, consentitmi per una volta di andare completamente fuori tema: ho appena letto su La Voce un breve articolo di Fausto Panunzi che mi vede completamente d'accordo. Al Presidente del Palermo che invoca la difesa della libertà contro la patente degli ultrà rilasciata dalle questure Panunzi risponde senza mezze misure:
La libertà è certamente un valore fondamentale, ha ragione il presidente del Palermo. Ma se Zamparini e gli altri presidenti sono seri su questo punto, possono fare una cosa semplice: assumersi l’onere di garantire la sicurezza all’interno degli stadi mediante steward pagati dalle società stesse. Nella Premier League inglese già funziona così. In altre parole, i presidenti delle società dovrebbero non limitarsi a mere enunciazioni di principio e agire concretamente per realizzare i loro desideri. Troppo comodo parlare di libertà, quando poi sono i poliziotti a prendere le botte e il contribuente a pagare le forze dell’ordine che garantiscono (o provano a farlo, a volte anche con errori) la sicurezza negli stadi.
Sono le stesse identiche cose che penso da quando dieci anni fa, appena arrivato a Pisa, una domenica fui testimone del dispiegamento di 5000 poliziotti per tenere a bada le tifoserie di Pisa e Livorno.
La libertà è certamente un valore fondamentale, ha ragione il presidente del Palermo. Ma se Zamparini e gli altri presidenti sono seri su questo punto, possono fare una cosa semplice: assumersi l’onere di garantire la sicurezza all’interno degli stadi mediante steward pagati dalle società stesse. Nella Premier League inglese già funziona così. In altre parole, i presidenti delle società dovrebbero non limitarsi a mere enunciazioni di principio e agire concretamente per realizzare i loro desideri. Troppo comodo parlare di libertà, quando poi sono i poliziotti a prendere le botte e il contribuente a pagare le forze dell’ordine che garantiscono (o provano a farlo, a volte anche con errori) la sicurezza negli stadi.
Sono le stesse identiche cose che penso da quando dieci anni fa, appena arrivato a Pisa, una domenica fui testimone del dispiegamento di 5000 poliziotti per tenere a bada le tifoserie di Pisa e Livorno.
Un'altra opinione (troppo ?) ottimista sulle azioni USA mentre il vecchio continente è da buttare?
Dal Wall Street Journal: Bob Doll, strategist per il mercato azionario USA a BlackRock, vede un futuro roseo per le azioni americane. La tesi fondamentale di Doll è che
(...) compared to the rest of the world the U.S. is in reasonably good shape. Our economic fundamentals are sound: Manufacturing levels are up and interest rates and inflation are low. The broader economy's recovery is also finally translating into meaningful employment improvements—recent employment reports show increases in average hourly earnings and hours worked—and I believe this trend will continue.
The recovery that took root last summer with the help of government stimulus now seems to be evolving into a self-sustaining expansion. In the first quarter of 2010, nominal GDP reached an all-time high. Real GDP will reach a new high either late in the second quarter or early in the third.
Compared with historic trends, these developments are extraordinary. Following the Great Depression, the U.S. took 15 years to return to its previous GDP level. Japan's growth took nearly as long to recover following its "lost decade" of the 1990s. But in just a few quarters, our economy has taken monumental steps toward health.
Now consider Europe, grappling with significant sovereign debt and deflation, and an inflexible currency system straining its governments. In Japan, economic recovery is evident, but the pace is much slower. Deflation and a declining population remain real concerns, a strong yen has slowed exports, and the banking system is pressured.
(...)
What about emerging markets? The largest of the emerging economies (Brazil, Russia, India and China) have advanced their global GDP share to 15% from 7% since 1995. But their relative economic expansion has come at the expense of Europe and Japan—not the U.S. Fifteen years ago, the U.S. accounted for 25% of global GDP. Today? Still 25%.
(...)
Corporate profits could reach a new record high in this year's third quarter. Free cash flow for nonfinancial American companies is also exceptionally high—cash on the balance sheet is close to 11% of assets, a 60-year high. And high cash levels are already generating dividend increases, share buybacks, capital investments and M&A activity—all extremely shareholder friendly.
The importance of improving America's productivity growth can't be overstated. High productivity tends to lower unit labor costs and boost corporate profits.
According to Citigroup, U.S. unit labor costs are dropping at their fastest pace in 40 years. We last saw a similar surge in U.S. productivity in the late 1990s. Then, U.S. corporations were heavily investing in their own businesses, and foreign investors were increasing their U.S. allocations. This sparked a rise in the dollar. Improving productivity, a strengthening currency, and rising equity markets are linked. We saw that synchronization 15 years ago, and we are seeing it today.
(...) The bottom line is that the U.S. has generally performed better on the upside this year and held its ground better on the downside.
The relative strength of U.S. stocks is no accident. Since the credit crisis struck, we have taken quicker action and demonstrated greater innovation than our competitors.
Potential risks—trade complications, escalating credit contagion, overly aggressive financial regulation, and tax increases—clearly remain. But for the moment, our nation seems poised to remain a City Upon a Hill.
La percezione di un'Europa confusa e inconcludente è molto forte negli USA: eccovi altri due assaggi dal Wall Street Journal di oggi:
(...) compared to the rest of the world the U.S. is in reasonably good shape. Our economic fundamentals are sound: Manufacturing levels are up and interest rates and inflation are low. The broader economy's recovery is also finally translating into meaningful employment improvements—recent employment reports show increases in average hourly earnings and hours worked—and I believe this trend will continue.
The recovery that took root last summer with the help of government stimulus now seems to be evolving into a self-sustaining expansion. In the first quarter of 2010, nominal GDP reached an all-time high. Real GDP will reach a new high either late in the second quarter or early in the third.
Compared with historic trends, these developments are extraordinary. Following the Great Depression, the U.S. took 15 years to return to its previous GDP level. Japan's growth took nearly as long to recover following its "lost decade" of the 1990s. But in just a few quarters, our economy has taken monumental steps toward health.
Now consider Europe, grappling with significant sovereign debt and deflation, and an inflexible currency system straining its governments. In Japan, economic recovery is evident, but the pace is much slower. Deflation and a declining population remain real concerns, a strong yen has slowed exports, and the banking system is pressured.
(...)
What about emerging markets? The largest of the emerging economies (Brazil, Russia, India and China) have advanced their global GDP share to 15% from 7% since 1995. But their relative economic expansion has come at the expense of Europe and Japan—not the U.S. Fifteen years ago, the U.S. accounted for 25% of global GDP. Today? Still 25%.
(...)
Corporate profits could reach a new record high in this year's third quarter. Free cash flow for nonfinancial American companies is also exceptionally high—cash on the balance sheet is close to 11% of assets, a 60-year high. And high cash levels are already generating dividend increases, share buybacks, capital investments and M&A activity—all extremely shareholder friendly.
The importance of improving America's productivity growth can't be overstated. High productivity tends to lower unit labor costs and boost corporate profits.
According to Citigroup, U.S. unit labor costs are dropping at their fastest pace in 40 years. We last saw a similar surge in U.S. productivity in the late 1990s. Then, U.S. corporations were heavily investing in their own businesses, and foreign investors were increasing their U.S. allocations. This sparked a rise in the dollar. Improving productivity, a strengthening currency, and rising equity markets are linked. We saw that synchronization 15 years ago, and we are seeing it today.
(...) The bottom line is that the U.S. has generally performed better on the upside this year and held its ground better on the downside.
The relative strength of U.S. stocks is no accident. Since the credit crisis struck, we have taken quicker action and demonstrated greater innovation than our competitors.
Potential risks—trade complications, escalating credit contagion, overly aggressive financial regulation, and tax increases—clearly remain. But for the moment, our nation seems poised to remain a City Upon a Hill.
La percezione di un'Europa confusa e inconcludente è molto forte negli USA: eccovi altri due assaggi dal Wall Street Journal di oggi:
- il piano di salvataggio dell'eurozona non ha garanzie: Is the euro zone's €440 billion ($524 billion) new funding facility more than a very large mirror and an industrial quantity of smoke?It is hard to avoid the suspicion that if the special purpose vehicle (SPV) is truly needed, implying markets have refused to fund several euro-zone countries, it won't work as planned. One fear is over demand for the SPV's bonds.
(...) Ultimately, the only surefire solution to a major funding crisis may be a common euro-zone bond backed by federal taxation. The SPV proposal is a step in that direction. Completing the journey requires a sacrifice of sovereignty few, if any, are willing to make. For now, austerity to avoid being forced to use the SPV seems the more likely outcome.
- la nebbia della BCE: So what do investors want? More information as to how much the central bank will spend on a controversial government-debt-purchase program, the widening chasm between the ECB and Germany's Bundesbank, and the ECB's views on the euro's steep slide.They aren't alone in thirsting for clarity. Financial-market fears have driven overnight deposits at the ECB to records, showing banks figure it is better to accept a paltry 0.25% interest rate than lend to other banks.
martedì 8 giugno 2010
Stocks for the long run?
Tutti sanno che gli investimenti azionari devono essere presi in considerazione solo da investitori disponibili ad accettare perdite nel breve-medio periodo e che possano investire con orizzonti temporali molto lunghi...bene: che ne pensate di un un mercato orso lungo 64 anni?
Ammettiamo per un momento che la bolla internet non sia confrontabile a quella dei mari del sud del 1720 (non penso che lo sia!), e proviamo ad ascoltare un'opinione più autorevole: il fondatore di Vanguard Funds, John Bogle, è ottimista sul futuro dei mercati azionari, almeno per chi è provvisto di pazienza e di fegato. Secondo Bogle è lecito aspettarsi rendimenti intorno al 7% annuo per il prossimo decennio. Infatti:
The dividend yield today is around two and a quarter percent.
From these levels of earnings--whatever they are, because there's a lot of cheating going on in corporate America about earnings, a lot of focus on operating earnings, which are of course higher than reported earnings, which have all those write ups in them--but whatever it is, I think earnings might be able to grow from these levels way above the long-term norm, which is around five percent to maybe six or seven percent.
Let's use seven and say the investment return, that's the dividend yield, plus the earnings growth might be as high as eight or nine percent. I look for price earnings multiples which are the source of speculative return, which can add or detract from that investment return. Nobody knows what those P/E's will do in the next decade, but I'd guess they'd come down a little bit, maybe taking that eight or nine percent return down to say seven percent.
So that would be my outlook for reasonable expectations for stocks in the next decade.
Bogle è invece molto preoccupato dal mercato obbligazionario
Ammettiamo per un momento che la bolla internet non sia confrontabile a quella dei mari del sud del 1720 (non penso che lo sia!), e proviamo ad ascoltare un'opinione più autorevole: il fondatore di Vanguard Funds, John Bogle, è ottimista sul futuro dei mercati azionari, almeno per chi è provvisto di pazienza e di fegato. Secondo Bogle è lecito aspettarsi rendimenti intorno al 7% annuo per il prossimo decennio. Infatti:
The dividend yield today is around two and a quarter percent.
From these levels of earnings--whatever they are, because there's a lot of cheating going on in corporate America about earnings, a lot of focus on operating earnings, which are of course higher than reported earnings, which have all those write ups in them--but whatever it is, I think earnings might be able to grow from these levels way above the long-term norm, which is around five percent to maybe six or seven percent.
Let's use seven and say the investment return, that's the dividend yield, plus the earnings growth might be as high as eight or nine percent. I look for price earnings multiples which are the source of speculative return, which can add or detract from that investment return. Nobody knows what those P/E's will do in the next decade, but I'd guess they'd come down a little bit, maybe taking that eight or nine percent return down to say seven percent.
So that would be my outlook for reasonable expectations for stocks in the next decade.
Bogle è invece molto preoccupato dal mercato obbligazionario
Ancora un po' di incentivi, please. I rating dei CDOs: sbagliati per caso?
Su Seekingalpha Brad De Long difende con caparbietà la necessità di nuovi incentivi per l'economia USA contro i fautori dell'austerità di bilancio fin da subito.
Vi segnalo da Econotwist un post al vetriolo dedicato al rapporto preliminare della commissione del congresso USA sulla crisi finanziaria: se non vi basta il titolo del post How To Create A 3 Trillion Dollar Bubble And Burst It eccovi un assaggio dei contenuti che chiamano in cause senza mezzi termini le agenzie di rating:
The U.S. Financial Crisis Inquiry Commission have released a preliminary report on its findings after investigating the rating agencies role in the financial crisis. Inflated initial ratings, and later rapid
downgrades, on mortgage-related securities by the agencies have contributed to the financial crises through a number of channels, the commission concludes.
“In total, $2.5 trillion worth of RMBS and $564 billion worth of CDOs have been downgraded since January 2007.”
In other words; the rating agencies have erased more than 3 trillion dollars from investors accounts by correcting their own initial mistakes, triggering the biggest financial crisis since the 1930′s. The preliminary report explains what happened and how, but leaves the questions on why open to more speculations. (...)
1. They had no clue what so ever about what they were doing.
Or
2. They purposely tried to manipulate the market.
The commission don’t make any conclusive statements at this point, but the last word have definitely not been said in this matter.
But its beyond doubt that the rating mess was one of the main triggers behind today’s the financial crisis.
Vi segnalo da Econotwist un post al vetriolo dedicato al rapporto preliminare della commissione del congresso USA sulla crisi finanziaria: se non vi basta il titolo del post How To Create A 3 Trillion Dollar Bubble And Burst It eccovi un assaggio dei contenuti che chiamano in cause senza mezzi termini le agenzie di rating:
The U.S. Financial Crisis Inquiry Commission have released a preliminary report on its findings after investigating the rating agencies role in the financial crisis. Inflated initial ratings, and later rapid
downgrades, on mortgage-related securities by the agencies have contributed to the financial crises through a number of channels, the commission concludes.
“In total, $2.5 trillion worth of RMBS and $564 billion worth of CDOs have been downgraded since January 2007.”
In other words; the rating agencies have erased more than 3 trillion dollars from investors accounts by correcting their own initial mistakes, triggering the biggest financial crisis since the 1930′s. The preliminary report explains what happened and how, but leaves the questions on why open to more speculations. (...)
Stupidity Or Manipulation?
There are only two possible explanations for the rating agencies handling of the credit derivatives:1. They had no clue what so ever about what they were doing.
Or
2. They purposely tried to manipulate the market.
The commission don’t make any conclusive statements at this point, but the last word have definitely not been said in this matter.
But its beyond doubt that the rating mess was one of the main triggers behind today’s the financial crisis.
lunedì 7 giugno 2010
La fine dell'oligopolio delle agenzie di rating? Le banche e il gioco del cerino con il debito dei PIIGS: chi si scotterà?
Con un OpEd, il New York Times dà voce a una posizione netta a favore della non obbligatorietà dei ratings per alcuni tipi di investimenti, ponendo fine all'oligopolio delle agenzie di rating:
Reliance on ratings has grown significantly since the 1970s (...)
But as the reliance on ratings has spread, their reliability has plummeted. A continuous thread runs through the collapse of Orange County, Enron, Bear Stearns and the issuers of collateralized debt obligations: All received high ratings and then promptly collapsed.
The crisis hasn’t changed a thing. In fact, more than two years since it began, there are still nearly 2,000 references to credit ratings in the Federal Register. At the height of the crisis, the Federal Reserve instituted the Term Asset-Backed Securities Loan Facility, a huge program to encourage lending, but the borrowers could buy only AAA-rated investments.
Just this year, the S.E.C. endorsed ratings in regulations governing money market funds, even after it removed references to ratings in other rules. Meanwhile the Department of Labor has exempted pension funds from some rules if they trade securities with high ratings.
Government reliance on credit ratings explains why they retain such power in the market. Just as people must obtain a driver’s license before driving a car, borrowers must obtain a regulatory license before borrowing money. This is why Mr. Buffett feels powerless.
Mr. Buffett’s testimony comes at a crucial time, with the House and Senate working to reconcile more than 3,000 pages of financial reform legislation, including a short, simple provision to remove credit ratings requirements and force regulators and institutional investors to find substitutes. (...) under the proposed reform in Congress, ratings wouldn’t be banned, just not required.
Ratings will continue to play an important role in the financial markets, and investors should continue looking to them in making their credit quality judgments. But using them should be an option, not a mandate to follow a government-enshrined oligopoly.
Intanto continuano le incertezze sul debito dei PIIGS, alimentate anche dalla difficoltà a identificare i creditori. E' una versione ad alto livello del gioco del cerino...Secondo il New York Times:
The problem is, alas, that no one — not investors, not regulators, not even bankers themselves — knows exactly which banks are sitting on the biggest stockpiles of rotting loans within that pile. And doubt, as it always does during economic crises, has made Europe’s already vulnerable financial system occasionally appear to seize up. Early last month, in an indication of just how dangerous the situation had become, European banks — which appear to hold more than half of that $2.6 trillion in debt — nearly stopped lending money to one another.
Now, with government resources strained and confidence in European economies eroding, some analysts say the Continent’s banks have to come clean with a transparent and rigorous accounting of their woes. Until then, they say, nobody will be able to wrestle effectively with Europe’s mounting problems.(...)
Limited disclosure and possibly spotty accounting have been long-voiced concerns of analysts who follow European banks. (...)
“Everybody knew there was a lot of debt out there,” said Nick Matthews, senior European economist at Royal Bank of Scotland and one of the authors of the report that tallied up Greek, Spanish and Portuguese debt. “But I think the extent of the exposure was a lot higher than most people had originally thought.”
Concern has quickly spread beyond just the sovereign bonds issued by the three countries as well as by Italy and Ireland, which are also seriously indebted.(...)
The European Central Bank estimates that the Continent’s largest banks will book 123 billion euros ($150 billion) for bad loans this year, and an additional 105 billion euros next year, though the sums will be partly offset by gains in other holdings.
Analysts at the Royal Bank of Scotland estimate that of the 2.2 trillion euros that European banks and other institutions outside Greece, Spain and Portugal may have lent to those countries, about 567 billion euros is government debt, about 534 billion euros are loans to nonbanking companies in the private sector, and about 1 trillion euros are loans to other banks. While the crisis originated in Greece, much more was borrowed by Spain and its private sector — 1.5 trillion euros, compared with Greece’s 338 billion.
Beyond such sweeping estimates, however, little other detailed information is publicly known about those loans, which are equivalent to 22 percent of European G.D.P. And the inscrutability of the problem, as serious as it is, is spawning spoofs, at least outside the euro zone. A pair of popular Australian comedians, John Clarke and Bryan Dawe, who have created a series of sketches about various aspects of the financial crisis, recently turned their attention to the bad-debt problem in Europe. After grilling Mr. Clarke about the debt crisis in a mock quiz show, Mr. Dawe tells Mr. Clarke that his prize is that he has lost a million dollars. “Well done,” says Mr. Dawe. “That’s an extraordinary performance.”
On a more serious front, Timothy F. Geithner, the United States Treasury secretary, visited Europe at the end of May and called on European leaders to review their banks’ portfolios, as American regulators did last year, to separate healthy banks from those that need intensive care.
Others say that if such reviews do not occur, the banking sector in Europe could be crippled and the broader economy — dependent on loans for business expansions and job growth — could stall. And if that happens, says Edward Yardeni, president of Yardeni Research, the Continent’s banks could find themselves sinking even further because “European governments won’t be in a position to help them again.” (...)
On May 7, the cost of insuring against credit losses on European banks reached levels higher than in the aftermath of the Lehman Brothers collapse in the United States. Officials at the European Central Bank warned that risk premiums were soaring to levels that threatened their ability to carry out their fundamental role of controlling interest rates. Three days later, European Union governments joined with the International Monetary Fund to offer nearly $1 trillion in loan guarantees to Europe’s banks. At the same time, the European Central Bank began buying government bonds for the first time ever to prevent a sell-off of Greek, Spanish and other sovereign debt.
The measures, widely regarded as a de facto bank rescue, restored some calm to the markets, but critics said that the aid merely bought time without reducing overall debt load. Europe’s major stock indexes and the euro have continued to fall as investors remain dubious about the ability of Greece and perhaps other countries to repay their debts.
Even so, figuring out which banks may be most exposed to those countries largely remains a guessing game.
Regulators in each country know what assets their domestic banks hold, but have been reluctant to share that information across borders. (...)
According to the Royal Bank of Scotland study, banks in France have the largest exposure to debt from Greece, Spain and Portugal, with 229 billion euros; German banks are second, with 226 billion euros. British and Dutch banks are next, at about 100 billion euros each, with American banks at 54 billion euros and Italian banks at 31 billion euros.
“Banks continue to not trust each other,” says Jörg Rocholl, a professor at the European School of Management and Technology in Berlin. “They know other banks are sick, but they don’t know which ones.”
Reliance on ratings has grown significantly since the 1970s (...)
But as the reliance on ratings has spread, their reliability has plummeted. A continuous thread runs through the collapse of Orange County, Enron, Bear Stearns and the issuers of collateralized debt obligations: All received high ratings and then promptly collapsed.
The crisis hasn’t changed a thing. In fact, more than two years since it began, there are still nearly 2,000 references to credit ratings in the Federal Register. At the height of the crisis, the Federal Reserve instituted the Term Asset-Backed Securities Loan Facility, a huge program to encourage lending, but the borrowers could buy only AAA-rated investments.
Just this year, the S.E.C. endorsed ratings in regulations governing money market funds, even after it removed references to ratings in other rules. Meanwhile the Department of Labor has exempted pension funds from some rules if they trade securities with high ratings.
Government reliance on credit ratings explains why they retain such power in the market. Just as people must obtain a driver’s license before driving a car, borrowers must obtain a regulatory license before borrowing money. This is why Mr. Buffett feels powerless.
Mr. Buffett’s testimony comes at a crucial time, with the House and Senate working to reconcile more than 3,000 pages of financial reform legislation, including a short, simple provision to remove credit ratings requirements and force regulators and institutional investors to find substitutes. (...) under the proposed reform in Congress, ratings wouldn’t be banned, just not required.
Ratings will continue to play an important role in the financial markets, and investors should continue looking to them in making their credit quality judgments. But using them should be an option, not a mandate to follow a government-enshrined oligopoly.
The problem is, alas, that no one — not investors, not regulators, not even bankers themselves — knows exactly which banks are sitting on the biggest stockpiles of rotting loans within that pile. And doubt, as it always does during economic crises, has made Europe’s already vulnerable financial system occasionally appear to seize up. Early last month, in an indication of just how dangerous the situation had become, European banks — which appear to hold more than half of that $2.6 trillion in debt — nearly stopped lending money to one another.
Now, with government resources strained and confidence in European economies eroding, some analysts say the Continent’s banks have to come clean with a transparent and rigorous accounting of their woes. Until then, they say, nobody will be able to wrestle effectively with Europe’s mounting problems.(...)
Limited disclosure and possibly spotty accounting have been long-voiced concerns of analysts who follow European banks. (...)
“Everybody knew there was a lot of debt out there,” said Nick Matthews, senior European economist at Royal Bank of Scotland and one of the authors of the report that tallied up Greek, Spanish and Portuguese debt. “But I think the extent of the exposure was a lot higher than most people had originally thought.”
Concern has quickly spread beyond just the sovereign bonds issued by the three countries as well as by Italy and Ireland, which are also seriously indebted.(...)
The European Central Bank estimates that the Continent’s largest banks will book 123 billion euros ($150 billion) for bad loans this year, and an additional 105 billion euros next year, though the sums will be partly offset by gains in other holdings.
Analysts at the Royal Bank of Scotland estimate that of the 2.2 trillion euros that European banks and other institutions outside Greece, Spain and Portugal may have lent to those countries, about 567 billion euros is government debt, about 534 billion euros are loans to nonbanking companies in the private sector, and about 1 trillion euros are loans to other banks. While the crisis originated in Greece, much more was borrowed by Spain and its private sector — 1.5 trillion euros, compared with Greece’s 338 billion.
Beyond such sweeping estimates, however, little other detailed information is publicly known about those loans, which are equivalent to 22 percent of European G.D.P. And the inscrutability of the problem, as serious as it is, is spawning spoofs, at least outside the euro zone. A pair of popular Australian comedians, John Clarke and Bryan Dawe, who have created a series of sketches about various aspects of the financial crisis, recently turned their attention to the bad-debt problem in Europe. After grilling Mr. Clarke about the debt crisis in a mock quiz show, Mr. Dawe tells Mr. Clarke that his prize is that he has lost a million dollars. “Well done,” says Mr. Dawe. “That’s an extraordinary performance.”
On a more serious front, Timothy F. Geithner, the United States Treasury secretary, visited Europe at the end of May and called on European leaders to review their banks’ portfolios, as American regulators did last year, to separate healthy banks from those that need intensive care.
Others say that if such reviews do not occur, the banking sector in Europe could be crippled and the broader economy — dependent on loans for business expansions and job growth — could stall. And if that happens, says Edward Yardeni, president of Yardeni Research, the Continent’s banks could find themselves sinking even further because “European governments won’t be in a position to help them again.” (...)
On May 7, the cost of insuring against credit losses on European banks reached levels higher than in the aftermath of the Lehman Brothers collapse in the United States. Officials at the European Central Bank warned that risk premiums were soaring to levels that threatened their ability to carry out their fundamental role of controlling interest rates. Three days later, European Union governments joined with the International Monetary Fund to offer nearly $1 trillion in loan guarantees to Europe’s banks. At the same time, the European Central Bank began buying government bonds for the first time ever to prevent a sell-off of Greek, Spanish and other sovereign debt.
The measures, widely regarded as a de facto bank rescue, restored some calm to the markets, but critics said that the aid merely bought time without reducing overall debt load. Europe’s major stock indexes and the euro have continued to fall as investors remain dubious about the ability of Greece and perhaps other countries to repay their debts.
Even so, figuring out which banks may be most exposed to those countries largely remains a guessing game.
Regulators in each country know what assets their domestic banks hold, but have been reluctant to share that information across borders. (...)
According to the Royal Bank of Scotland study, banks in France have the largest exposure to debt from Greece, Spain and Portugal, with 229 billion euros; German banks are second, with 226 billion euros. British and Dutch banks are next, at about 100 billion euros each, with American banks at 54 billion euros and Italian banks at 31 billion euros.
“Banks continue to not trust each other,” says Jörg Rocholl, a professor at the European School of Management and Technology in Berlin. “They know other banks are sick, but they don’t know which ones.”
Oltre al GDP l'economia del sapere.
Prosegue la polemica sulla mossa europea - francese in primis - di proporre nuove
misure di output economico che sostituiscano il GDP: il Wall Street Journal affronta la questione senza mezze misure e con toni decisamente meno neutri di quelli del NYTimes
di qualche giorno fa, che abbiamo discusso in questo post, ignorando completamente la questione della distribuzione della ricchezza (tanto per fare un esempio). Ma l'osservazione che la differenza tra l'output economico USA e quello Europeo potrebbe
essere amplificata dall'introduzione di nuove misure che tengano conto dell'economia del sapere
mi sembra corretta:
Reworking the concept of the GDP is an idea that's been kicking around in economics for decades.
Politicians—mainly European ones—are the reason for the push today. (...)
European leaders have every reason to be chagrined by their GDP record. From 1982 to 2007,
France grew at a rate of 2.1% per year, as did Germany, with Italy at 1.8%, whereas the U.S.
grew at 3.3%. Thus Americans got a third richer over that quarter century. One way to paper
over this staggering differential in economic performance is to call GDP a flawed statistic.
(...) European politicians should be careful what they wish for. For if GDP is reworked in a way consistent
with the cutting edge of macroeconomic theory, the difference between American and European performance
stands not to shrink but widen. The premise of the "new growth theory" of Stanford economist Paul Romer
is the fact that the richest economies (such as the U.S.) sustain higher rates of growth than the next
richest economies. Countries with "room to grow" often don't grow very much, whereas countries at maximal
output keep powering ahead.
The key to Mr. Romer's analysis is that ultra-developed economies tend to have a high and rising degree
of non-depreciable capital. Driving production in these economies are increasingly fewer machines—which
wear out, must be serviced, and replaced—in comparison to "book knowledge"—the formula for a drug,
computer code, a distribution system—that does not depreciate at all. Therefore, ultra-developed economies
come to devote fewer resources to maintaining the capital stock and more to actual production.
Oddly enough, spending on maintaining the capital stock is a component of GDP. But while both Europe and
the U.S. spend a great deal on capital repair and replacement, the headquarters of the knowledge economy
is the U.S.—with its universities, start-ups and pharmaceutical industry, much of which has decamped from
Europe.
In light of the new growth theory, a good portion of what counts as output—fixing all those old
machines—should be minimized in the aggregate output statistic, just as development of non-depreciable
capital, in which the U.S. specializes, should be given extra weight. In recent years, America has been
doing far more than Europe to create permanent (not to mention sharable) capital goods, and this fact at
present is not captured in GDP. The French report makes a brief pass at this major anomaly but does not
grapple with it.
misure di output economico che sostituiscano il GDP: il Wall Street Journal affronta la questione senza mezze misure e con toni decisamente meno neutri di quelli del NYTimes
di qualche giorno fa, che abbiamo discusso in questo post, ignorando completamente la questione della distribuzione della ricchezza (tanto per fare un esempio). Ma l'osservazione che la differenza tra l'output economico USA e quello Europeo potrebbe
essere amplificata dall'introduzione di nuove misure che tengano conto dell'economia del sapere
mi sembra corretta:
Reworking the concept of the GDP is an idea that's been kicking around in economics for decades.
Politicians—mainly European ones—are the reason for the push today. (...)
European leaders have every reason to be chagrined by their GDP record. From 1982 to 2007,
France grew at a rate of 2.1% per year, as did Germany, with Italy at 1.8%, whereas the U.S.
grew at 3.3%. Thus Americans got a third richer over that quarter century. One way to paper
over this staggering differential in economic performance is to call GDP a flawed statistic.
(...) European politicians should be careful what they wish for. For if GDP is reworked in a way consistent
with the cutting edge of macroeconomic theory, the difference between American and European performance
stands not to shrink but widen. The premise of the "new growth theory" of Stanford economist Paul Romer
is the fact that the richest economies (such as the U.S.) sustain higher rates of growth than the next
richest economies. Countries with "room to grow" often don't grow very much, whereas countries at maximal
output keep powering ahead.
The key to Mr. Romer's analysis is that ultra-developed economies tend to have a high and rising degree
of non-depreciable capital. Driving production in these economies are increasingly fewer machines—which
wear out, must be serviced, and replaced—in comparison to "book knowledge"—the formula for a drug,
computer code, a distribution system—that does not depreciate at all. Therefore, ultra-developed economies
come to devote fewer resources to maintaining the capital stock and more to actual production.
Oddly enough, spending on maintaining the capital stock is a component of GDP. But while both Europe and
the U.S. spend a great deal on capital repair and replacement, the headquarters of the knowledge economy
is the U.S.—with its universities, start-ups and pharmaceutical industry, much of which has decamped from
Europe.
In light of the new growth theory, a good portion of what counts as output—fixing all those old
machines—should be minimized in the aggregate output statistic, just as development of non-depreciable
capital, in which the U.S. specializes, should be given extra weight. In recent years, America has been
doing far more than Europe to create permanent (not to mention sharable) capital goods, and this fact at
present is not captured in GDP. The French report makes a brief pass at this major anomaly but does not
grapple with it.
sabato 5 giugno 2010
Addio al lavoro, alle borse, all'euro. Aggiornamento al 4 giugno 2010
Ahi ahi...ahi...che male....ci mancavano l'Ungheria e l'occupazione nell'USA che non cresce (se si escludono i lavoratori a tempo determinato assunti per fare il censimento). Così venerdì se ne sono andati tutti i guadagni che le borse avevano faticosamente messo insieme durante la settimana. Se poi il finesettimana leggete la newsletter di John Mauldin allora vi viene voglia di investire tutti i vostri risparmi in oro, fucili e cibo in scatola...Infatti metà della lettera di questa settimana è dedicata alla possibilità che l'economia USA si contragga nel terzo trimestre del 2010...Scrive Mauldin:
If we go back into recession, the market on average drops 40%. This is NOT a buy-and-hold market. It is a buy-and-trade or, for those with the skills, sell-and-short. (If you are not experienced at short selling, this is not the time to jump in "whole hog." Short selling is a craft. An art form. A dangerous thing for rookies. Trade gently, gentle reader.)
There is a slow train coming. Between December of 2007 and through April of this year disposable personal income would have been DOWN just over $900 billion without the stimulus money (Gary Shilling). It would have been a far more serious recession. And now we are getting ready to find out whether we can make it without the intravenous infusion of government (borrowed taxpayer) money. I fear the train is going to slow down.
Restando su queste note di ottimismo sfrenato vi segnalo anche:
Ecco l'aggiornamento al 4 giugno 2010
If we go back into recession, the market on average drops 40%. This is NOT a buy-and-hold market. It is a buy-and-trade or, for those with the skills, sell-and-short. (If you are not experienced at short selling, this is not the time to jump in "whole hog." Short selling is a craft. An art form. A dangerous thing for rookies. Trade gently, gentle reader.)
There is a slow train coming. Between December of 2007 and through April of this year disposable personal income would have been DOWN just over $900 billion without the stimulus money (Gary Shilling). It would have been a far more serious recession. And now we are getting ready to find out whether we can make it without the intravenous infusion of government (borrowed taxpayer) money. I fear the train is going to slow down.
Restando su queste note di ottimismo sfrenato vi segnalo anche:
- un'analisi lucida e impietosa delle prospettive di medio termine per la Grecia e gli altri PIIGS;
- chi si ricorda della pizza di fango del Camerun? Che sia il momento di rispolverarla...per l'euro?
- Gli economisti si dividono e dibattono: inflazione o deflazione nel nostro futuro? Ecco al riguardo l'opinione di Brad De Long:
I AM going to turn my microphone over to one of my teachers who I think has the very best answer to this question. I never met, him, however: he died three years before I first set foot into an economics classroom, because he has what I think is the best answer to this question.
Here is British economist R.G. Hawtrey*, writing about the coming of the Great Depression to Europe:
The [United Kingdom's] National Government which came into office at the end of Auguest, 1931, made strenuous efforst to balance the budget, but it was too late to stem the flight from the pount. On the 21st September the convertibility of the currency into gold was suspended. On that day Bank Rate [i.e., the Bank of England's discount rate *and* the overnight interbank rate] was raised to 6 per cent [per year]. Once the gold standard was suspended, there could be no doubt of the purpose of that step. In the face of the exchange risk [created by abandoning the peg to gold] the high rate could not possibly attract foreign money. It could only be intended as a safeguard against inflation. Fantastic fears of inflation were expressed. That was to cry "Fire! Fire!" in Noah's Flood. It is *after* depression and unemployment have subsided that inflation becomes dangerous...
It looks alarmingly as if those many of us who do not remember history are, as Jorge Agustin Nicolas Ruiz de Santayana y Borras warned, condemned to repeat it. And it looks, even more alarmingly, like those of us who do remember history are as well condemned to repeat it with them.
* R. G. Hawtrey (1938), "A Century of Bank Rat - Purtroppo le divisioni e la confusione che regnano la politica europea si fanno sempre più sentire: secondo il Wall Street Journal: Europe's national governments have become their own biggest systemic risk. The ECB's Financial Stability Review is a twice-yearly look at the condition of Europe's banking sector. According to the report, European banks need to roll over some €800 billion in long-term debt in the next two and a half years, and to do so they'll have to compete with European governments that last year borrowed some €811 billion among them. This competition for capital between the private and public domains could drive up interest rates, or even lead to a liquidity squeeze for the banks or the public fisc, or both.
The situation is made more dangerous by the rules on how bank capital is calculated. Under regulatory capital requirements, highly rated government debt owned by banks is generally considered nearly risk free, giving financial institutions a strong incentive to hold sovereign debt. According to the Bank of International Settlements, its member banks have some $2.1 trillion in total exposure to European sovereign debt. So a pan-European sovereign debt crisis would not only affect the ability of European capitals to pay their bills. It would pose a threat to the solvency of the private banking system itself.
In the fall of 2008, the worry around the world was that a crisis in bank solvency would drag down the global economy. Today, the risk has shifted. A looming crisis in national solvency could threaten the same banks that Europe and the U.S. so recently saved. Only this time, the lender of last resort could itself be bankrupt. The ECB calls this "adverse feedback between the financial sector and public finance." We call it a recipe for disaster unless governments get their finances under control.
- Cosa deciderà il G20 sugli stress test per le banche?
Ecco l'aggiornamento al 4 giugno 2010
venerdì 4 giugno 2010
Abolire le agenzie di rating, l'arbitraggio della latenza, Basilea n+1 e i CDS sulle banche europee
L'articolo di Andrew Ross Sorkin sul New York Times di qualche giorno fa sulle agenzie di rating mi era sfuggito: si tratta di uno j'accuse senza mezze parole che potete leggere qui.
Ci sono tanti modi di implementare strategie di trading ad alta frequenza, molti dei quali comportano un giusto premio alla creatività e intelligenza dei loro ideatori: non c'è dubbio però che questo tipo di vantaggi (bellino l'eufemismo....latency arbitrage) dovrebbero essere eliminati!
Dal G20 ci si aspetta un sostanziale passo avanti verso Basilea 3. Però aspettare il 2022 per la sua piena implementazione mi sembra un po' tanto. Leggendo l'articolo si trova una frase agghiacciante come:
As part of the rule-making process, the banks conducted studies this spring to gauge the likely impact of the proposals on their capital and liquidity levels.
The data show that banks world-wide would face huge capital and liquidity shortfalls under the proposals, according to government and industry officials briefed on the results.
In Europe, bank executives say there is likely to be a gap of more than €1 trillion ($1.2 trillion) between banks' current capital and liquidity buffers and what would be required under the Basel proposals.
In comparison, stress tests ordered by the U.S. government last year resulted in 10 of the nation's biggest banks being told to raise a combined $74.6 billion in capital to cushion themselves.
E poi vi stupite che l'euro sia in caduta libera e che la crisi (pardon..."correzione") delle borse abbia avuto inizio proprio in Europa?
Intanto la liquidità si sta nuovamente prosciugando anche se siamo ancora lontani dai livelli parossistici del dopo Lehman. La paura degli investitori in un nuovo aggravarsi della crisi finanziaria, magari con qualche banca europea che finisce gambe all'aria, è in continuo aumento, almeno a giudicare dal costo dei CDS sulle principali banche europee, come mostra il grafico qui accanto tratto da un articolo dell'Economist sull'argomento.
Ci sono tanti modi di implementare strategie di trading ad alta frequenza, molti dei quali comportano un giusto premio alla creatività e intelligenza dei loro ideatori: non c'è dubbio però che questo tipo di vantaggi (bellino l'eufemismo....latency arbitrage) dovrebbero essere eliminati!
Dal G20 ci si aspetta un sostanziale passo avanti verso Basilea 3. Però aspettare il 2022 per la sua piena implementazione mi sembra un po' tanto. Leggendo l'articolo si trova una frase agghiacciante come:
As part of the rule-making process, the banks conducted studies this spring to gauge the likely impact of the proposals on their capital and liquidity levels.
The data show that banks world-wide would face huge capital and liquidity shortfalls under the proposals, according to government and industry officials briefed on the results.
In Europe, bank executives say there is likely to be a gap of more than €1 trillion ($1.2 trillion) between banks' current capital and liquidity buffers and what would be required under the Basel proposals.
In comparison, stress tests ordered by the U.S. government last year resulted in 10 of the nation's biggest banks being told to raise a combined $74.6 billion in capital to cushion themselves.
E poi vi stupite che l'euro sia in caduta libera e che la crisi (pardon..."correzione") delle borse abbia avuto inizio proprio in Europa?
giovedì 3 giugno 2010
Buffett, le agenzie di rating, la dis-Unione Europea
Breve elenco di letture suggerite:
- oggi Warren Buffett testimonia davanti alla commissione del Congresso USA che studia le cause della crisi finanziaria. Berkshire Hathaway è il maggiore azionista di Moody's e sarà interessante vedere in che misura la testimonianza di Buffett riuscirà a sfuggire alle accuse relative all'ovvio conflitto di interessi. Il tema sul tavolo è se liberalizzare opppure no il mercato delle agenzie di rating. Ne parla in questo articolo il Wall Street Journal che attribuisce a Bill Gross questa non propriamente diplomatica citazione: Bond-fund king William Gross of PIMCO recently wrote to investors that the raters' credit models call to mind "an idiot savant with a full command of the mathematics, but no idea of how to apply them." He added that the agencies "no longer serve a valid purpose for investment companies free of regulatory mandates" and urged investors to dismiss their judgments.
- Un'idea per il carry trade fai-da-te (attenzione però alla doppia tassazione dei dividendi)
- Aiuto! Ci siamo...dopo la Grecia la speculazione ha l'Italia nel mirino!
- La dis-Unione Europea attira l'attenzione alla riunione dei ministri delle finanze del G20
- Le obbligazioni decennali del Tesoro USA rendono poco più del 3%. Alla fine del 2008 avevno toccato il 2% ma due mesi fa il rendimento era salito al 4%. Ecco il panorama delle previsioni degli analisti secondo il Wall Street Journal:
Jefferies now has the highest 10-year yield forecast among primary dealers, supplanting Morgan Stanley, which on May 10 slashed its outlook from 5.5% to 4.5%, citing the European crisis and the likelihood of the Fed keeping short-term rates lower for longer.
RBS Securities Inc., is likely to cut its rate outlook from 4.4% when its forecast committee meets later this month, said RBS Treasury strategist William O'Donnell.
"It's going to change, and it's likely to be lower," said Mr. O'Donnell, who suggested he would lobby for a significantly lower forecast. "We're about to face fiscal austerity, a threat to growth and for further disinflation, which should support Treasury prices."
HSBC Securities, which has long had the lowest forecast among primary dealers for Treasury yields, has kept its year-end 10-year note forecast at 3%. Goldman Sachs has held firm to its second-lowest year-end forecast of 3.25%. Cantor Fitzgerald, which in late March expected the 10-year note to end the year at 4.15%, was the only primary dealer unavailable for comment.
Economists and analysts, meanwhile, generally think yields will eventually end the year higher, even as they have lowered their forecasts.
"I think we have a sustainable expansion in the U.S., and inflation, though it will remain quite low, is not going to slip into Japan-style deflation," said Mr. Pandl of Nomura. "The inflation outlook is really the biggest point of uncertainty—if you're going to get lower yields, it means you're going to have some deflation scenario for the economy as a whole."
The risks for Treasury bond bulls include economic growth that is stronger than expected and a cooling of the European debt problems that have driven investors into Treasurys. These would help remind investors that the Treasury Department is still borrowing heavily, a situation that could bring higher yields, as it did in Europe - A proposito di inflazione negli USA e della capacità di debito del Tesoro USA: i TIPS decennali hanno un rendimento appena sopra l'1% (!)
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mercoledì 2 giugno 2010
Come fare convivere formiche e cicale
Dalle colonne del Financial Times, Martin Wolf continua la rivisitazione dell'economia internazionale aggiungendo le locuste alle formiche e alle cicale. Ma la questione fondamentale secondo Wolf è
(...) is there a way to ensure ants and grasshoppers coexist harmoniously?
A part of the answer must be to reduce the instability of financial markets.
This is the focus of the debate on regulation – a topic I have discussed previously.
I would add two points here: first, seek to reduce the extremes of the property cycle by taxing the
rental value of land; second, remove incentives for leverage from the tax code.
Yet the biggest single problem of the global system, in my view, is the attempt by ants to provide
so much “vendor finance” to grasshoppers. In the end, both ants and grasshoppers have ended up disappointed.
A more productive use of the surplus savings and productive capacity of ageing ant nests
would be to lend to younger ones. So finance should flow to emerging countries, in general, and
fixed investment in emerging countries, in particular. It is in the latter that the best opportunities
for new investment should exist. It is the latter that are also most likely to generate the ability to
service and repay the loans they have received.
This seemingly sensible proposition runs up against two huge difficulties:
the first is that almost every attempt to generate large net flows of capital to emerging countries
over the past three decades has ended up in a crisis; the second is that, as a result, the emerging
world has decided to run current account surpluses and recycle those surpluses into ever larger
foreign exchange reserves: in 2010, for example, according to the International Monetary Fund,
the current account surplus of emerging countries will be $420bn, with an accumulation of reserves of $630bn.
Thus, in aggregate, emerging countries are recycling current account surpluses,
plus the net private capital inflow, into reserves. Nearly all of these surpluses are generated
by emerging Asia, in general, and China, in particular, though these countries have the best
investment opportunities.
So long as this remains true, the grasshopper colonies of the developed world are likely to remain net
recipients of capital, which they will surely continue to waste. Yet, under the pressure of the crisis
itself, many erstwhile grasshopper colonies are being forced to become more “ant-like”. If today’s rich
ant nests do not change their behaviour, potential surpluses will be huge. Either the emerging world as
a whole starts to absorb these surpluses into potentially productive younger nests,
or the world will be stuck in a demand trap, with everybody seeking export surpluses.
Flows of finance from export-driven ant nests to advanced grasshopper colonies end in tears.
Flows of finance from old ant nests to young ones have not worked out either.
If a way is not found to fix these failures, the open global economy itself may disappear.
(...) is there a way to ensure ants and grasshoppers coexist harmoniously?
A part of the answer must be to reduce the instability of financial markets.
This is the focus of the debate on regulation – a topic I have discussed previously.
I would add two points here: first, seek to reduce the extremes of the property cycle by taxing the
rental value of land; second, remove incentives for leverage from the tax code.
Yet the biggest single problem of the global system, in my view, is the attempt by ants to provide
so much “vendor finance” to grasshoppers. In the end, both ants and grasshoppers have ended up disappointed.
A more productive use of the surplus savings and productive capacity of ageing ant nests
would be to lend to younger ones. So finance should flow to emerging countries, in general, and
fixed investment in emerging countries, in particular. It is in the latter that the best opportunities
for new investment should exist. It is the latter that are also most likely to generate the ability to
service and repay the loans they have received.
This seemingly sensible proposition runs up against two huge difficulties:
the first is that almost every attempt to generate large net flows of capital to emerging countries
over the past three decades has ended up in a crisis; the second is that, as a result, the emerging
world has decided to run current account surpluses and recycle those surpluses into ever larger
foreign exchange reserves: in 2010, for example, according to the International Monetary Fund,
the current account surplus of emerging countries will be $420bn, with an accumulation of reserves of $630bn.
Thus, in aggregate, emerging countries are recycling current account surpluses,
plus the net private capital inflow, into reserves. Nearly all of these surpluses are generated
by emerging Asia, in general, and China, in particular, though these countries have the best
investment opportunities.
So long as this remains true, the grasshopper colonies of the developed world are likely to remain net
recipients of capital, which they will surely continue to waste. Yet, under the pressure of the crisis
itself, many erstwhile grasshopper colonies are being forced to become more “ant-like”. If today’s rich
ant nests do not change their behaviour, potential surpluses will be huge. Either the emerging world as
a whole starts to absorb these surpluses into potentially productive younger nests,
or the world will be stuck in a demand trap, with everybody seeking export surpluses.
Flows of finance from export-driven ant nests to advanced grasshopper colonies end in tears.
Flows of finance from old ant nests to young ones have not worked out either.
If a way is not found to fix these failures, the open global economy itself may disappear.
Emanuel Derman su rischio, HFT ed hedge funds.
Ho letto un lungo articolo di Emanuel Derman su Edge: dopo un inizio a mio avviso un po' in sordina e una lunga discussione sulla differenza tra teorie e modelli tra Spinoza e Wall Street (che ho trovato un po' deludente) entra nel merito delle questioni sollevate dalla crisi finanziaria e dagli avvenimenti degli ultimi anni. Qui la lettura si fa più interessante - almeno dal mio punto di vista - e trovo molte delle sue tesi ampiamente condivisibili anche se non sono convinto dell'opportunità di tassare il trading, tranne se la tassazione colpisse in modo esclusivo le strategie genuinamente di alta frequenza, con un tempo di permanenza in portafogli inferiore a qualche minuto. Ecco un ampio stralcio della parte finale del suo saggio (ho evidenziato alcuni passaggi che mi sembravano particolarmente significativi):
It's interesting in this regard that the three biggest banks recently announced their quarterly results and not only day in the last quarter did they lose money. That is totally astonishing. It's really a reflection of what the administration has done. They've made interest rates very low so it's cheap for the banks to borrow money. They have eliminated a lot of the players, so there is much less competition for taking on risky trades and you can do them at a price that is much more preferable to the person who is in control. This is a risk profile that is a result of regulation and administrative policies rather than of genuine market conditions.
There's a lot of talk about the role of algorithms and the change in markets. The financial world has changed a lot since I worked in it and the biggest change is more people are playing with more of other people's money. When most of the banks were partnerships, they had to be in it for the long run because people who were partners were playing with their own capital and taking risk with their own assets. Their money was tied up for 10 or 15 years. Even if somebody retired, they still couldn't take their money out of there. They just got paid interest while it was being used and drawn down. So there was a certain culture of not taking extreme risks because you didn't really have limited liability. Ultimately you could be broken completely by your company going bankrupt. With trading houses going public, they're playing with other people's money. They're immediately liquid in terms of stock and cash payment. The culture in all of these places has changed in that it's make money liquid and fast. The way this crisis has been treated exacerbates that attitude in that if you do badly, the government bails you out and if you do well, you keep the profits.
It's unfair, though, to allow high-frequency traders to get what essentially amounts to insider trading, to getting an early look at trades and deciding what to do because they are allowed to put powerful computers closer to the stock exchange. That doesn't make it a flat playing field.
More important is incentives and disincentives and making sure that people understand they are going to pay the penalties for their own mistakes and somebody isn't going to bail them out. Jim Grant, who writes a newsletter called "Grant's Interest Rate Observer" that I like, had a column recently pointing out that in Brazil they haven't had a big banking crisis and that there, anybody who runs a trading firm is personally responsible for losses. It's not company risk. It comes down to their own assets. So they are much more cautious about this. Those kinds of incentives are going to make a much bigger difference than finding a better mathematical formula for handing risk.
I have less of a pay problem with hedge funds — I'm not sure if I'm right — from an ethical point of view than I do with very big, too-big-to-fail companies because hedge funds are by and large putting their own money or their clients' money at risk, and it's a clearly articulated compact between them. While there is a possibility of systemic contagion, it's a cleaner business in terms of potential conflicts. They are just doing proprietary trading for their own account or their clients' account.
Whereas, what is confusing about the big investment banks, if you watched the Senate hearings, is that there is a very unclear overlap between being a producer and being a market maker. So Goldman, for example, always used to be pretty much a service provider in the old days. Now they and all the other big banks want to be both a producer and the marketplace on which product trades. There are a many conflicts of interest. To make an analogy, I've read articles about how Amazon wants to be not just a place that sells books but one that also publishes books. That becomes dangerous — if you're a dominant player in both the conduit and the content. There is too much concentrated power. It used to be you were either a market maker or a producer.
It's interesting in this regard that the three biggest banks recently announced their quarterly results and not only day in the last quarter did they lose money. That is totally astonishing. It's really a reflection of what the administration has done. They've made interest rates very low so it's cheap for the banks to borrow money. They have eliminated a lot of the players, so there is much less competition for taking on risky trades and you can do them at a price that is much more preferable to the person who is in control. This is a risk profile that is a result of regulation and administrative policies rather than of genuine market conditions.
In terms of styles of regulation, I'm very disillusioned by what's happened in terms of the bailout. I don't know what is the right thing to do but one of the worst things for society's ethical sense is to see other people having the upside of risky positions and not suffering the downside. It makes me feel very uncomfortable.
What I also dislike is that firms that have made a lot of money out of this won't acknowledge that they made this money by being saved by the taxpayers and the administration.There's a lot of talk about the role of algorithms and the change in markets. The financial world has changed a lot since I worked in it and the biggest change is more people are playing with more of other people's money. When most of the banks were partnerships, they had to be in it for the long run because people who were partners were playing with their own capital and taking risk with their own assets. Their money was tied up for 10 or 15 years. Even if somebody retired, they still couldn't take their money out of there. They just got paid interest while it was being used and drawn down. So there was a certain culture of not taking extreme risks because you didn't really have limited liability. Ultimately you could be broken completely by your company going bankrupt. With trading houses going public, they're playing with other people's money. They're immediately liquid in terms of stock and cash payment. The culture in all of these places has changed in that it's make money liquid and fast. The way this crisis has been treated exacerbates that attitude in that if you do badly, the government bails you out and if you do well, you keep the profits.
I used to hear 10 years ago at Goldman from colleagues that there was going to be doom one day at Fannie Mae and Freddie Mac because they were hedge funds in disguise. To some extent the government and regulators have encouraged this and they still haven't tackled the problems at Fannie Mae and Freddie Mac and are doing with them what they accuse Wall Street banks of doing, which is treating them as off-balance sheet and not counting the money they are spending on them as real money.
In terms of algorithmic trading, that's a big change too. I'm not against it — it's inevitable from a technology point of view. (...)It's unfair, though, to allow high-frequency traders to get what essentially amounts to insider trading, to getting an early look at trades and deciding what to do because they are allowed to put powerful computers closer to the stock exchange. That doesn't make it a flat playing field.
Also, people who benefit from it tend to over-accentuate the need for efficiency. Everybody who makes money out of something to do with trading tends to say, oh, we're got to do this because it makes the market more efficient. But a lot of the people who provide this so-called liquidity and efficiency are not there when you really need it. It's only liquidity when the world is running smoothly. When the world is running roughly, they can withdraw their liquidity. There is no terrible need to be allowed to trade large amounts in fractions of a second. It's kind of a self-serving argument. Maybe a tax on trading to insert some friction isn't a bad idea, just as long term capital gains are taxed lower than short term gains.
Economics is a strange field. One of the things I noticed on Wall Street was that firms use the economists to talk to clients but their trading desks don't necessarily pay attention to what the economists are saying. Unexpected things happen unexpectedly and damage positions and net worths. I don't think there is a good quantitative solution to all of this. I sometimes get letters from mathematicians in Europe saying that they have come up with a better formula for capturing risk or for valuing risk or for trying to control or measure risk. You can do better than VaR but there isn't one formula, one number, that is going to save you in the end.More important is incentives and disincentives and making sure that people understand they are going to pay the penalties for their own mistakes and somebody isn't going to bail them out. Jim Grant, who writes a newsletter called "Grant's Interest Rate Observer" that I like, had a column recently pointing out that in Brazil they haven't had a big banking crisis and that there, anybody who runs a trading firm is personally responsible for losses. It's not company risk. It comes down to their own assets. So they are much more cautious about this. Those kinds of incentives are going to make a much bigger difference than finding a better mathematical formula for handing risk.
And the scale at which people get paid has become quite astonishing. There is an increasing gap in America in general between what people make at the bottom and what people make at the top.
When I decided to work on Wall Street, I interviewed in '83. The guy who interviewed me said, this is one of the few jobs where you won't have to be an accountant or a lawyer and you can make $150,000 a year eventually. Now a trader might make $20 million. If they can't make it at an investment bank, they go to a hedge fund, if they have a really good track record.I have less of a pay problem with hedge funds — I'm not sure if I'm right — from an ethical point of view than I do with very big, too-big-to-fail companies because hedge funds are by and large putting their own money or their clients' money at risk, and it's a clearly articulated compact between them. While there is a possibility of systemic contagion, it's a cleaner business in terms of potential conflicts. They are just doing proprietary trading for their own account or their clients' account.
Whereas, what is confusing about the big investment banks, if you watched the Senate hearings, is that there is a very unclear overlap between being a producer and being a market maker. So Goldman, for example, always used to be pretty much a service provider in the old days. Now they and all the other big banks want to be both a producer and the marketplace on which product trades. There are a many conflicts of interest. To make an analogy, I've read articles about how Amazon wants to be not just a place that sells books but one that also publishes books. That becomes dangerous — if you're a dominant player in both the conduit and the content. There is too much concentrated power. It used to be you were either a market maker or a producer.
martedì 1 giugno 2010
I crash passati, presenti e purtroppo anche quelli futuri...
E' sempre confortante (o sconsolante, dipende dall'umore del momento) sapere che la storia si ripete: non dimenticherò il flash crash del 6 maggio mentre il 28 maggio del 1962 non ero ancora nato. Scrive Jason Zweig: Some of the parallels between the two flash crashes are uncanny.
In this year's crash, many trades, especially in exchange-traded funds, went off at prices wildly different from the orders investors had placed. Likewise, in 1962, "some orders were executed at prices substantially different from those which prevailed when the order was entered," an investigative report by the Securities and Exchange Commission noted the following year.
Some high-frequency traders, which use powerful computers to make markets in stocks, stopped trading in this year's flash crash at the very moments when the market needed liquidity most urgently.
In 1962, high-frequency trading didn't exist, but "specialists" did. By law, specialists were obligated to try to maintain a fair and orderly market for each stock on the floor of the exchange. However, concluded the SEC's report, "At no time during the day did the specialist intervene in sufficient volume to slow the rapid deterioration of the market in IBM."
Even without the Internet, fear spread quickly in 1962. Investors piled into brokerage firms' "board rooms," where wall-mounted boards displayed market prices. "It was standing room only at Merrill Lynch, Pierce, Fenner & Smith," reported the Journal, "with spectators lined up three or four deep in the customers' gallery there."
As the SEC report noted a year later, "The markets' erratic behavior prompted concern and caused bewilderment at home and abroad. The frenetic activity of the break resulted in large and sudden losses for many and gains for some … this break had a strong and immediate psychological impact upon the Nation."
Ancora dal Wall Street Journal e ancora sul flash crash del 6 maggio vi segnalo questo articolo di Mark Spitznagel, fondatore dell'hedge fund Universa (di cui Taleb è consulente). Universa è stato chiamato in causa per un ordine immesso pochi istanti prima del crash. Spitznagel chiama invece in causa ... la Fed, sostenendo che la politica di bassi tassi di interesse rende il sistema intrinsecamente più instabile e più fragile. Non credo che il signor Spitznagel sia esente dal bisogno di tutelare il buon nome del suo fondo, ma le sue argomentazioni non sono prive di senso:
Regulators have been busy searching for the cause of the May 6 "flash crash" when the market dropped by 9.3% and then recovered within minutes. I think it's a good bet no cause will be found; there is still no consensus on what triggered the one-day 20% stock market crash of 1987. But even if there was no trigger, market conditions created by the Federal Reserve's easy money policy definitely made the crash more likely.
The market is a critical system. (...)
Back to markets. Think of every investor holding a risky position. Then think of all of these investors together in a big herd. Each member of the herd focuses on what the others will do next, since the only reason anyone takes a position is because others are initiating like-minded ones.
When imitative behavior starts happening in markets en masse, expect funny things to happen to liquidity. All you need to know about market dynamics—as I learned as a Chicago pit trader—is that market prices always adjust to the level where market-makers see balanced two-way order flow between buyers and sellers. All market-makers want to do is buy at the bid price, sell at the offer price, and at the end of the day go home unscathed. When there are only buy orders, for instance, expect market-makers to be unwilling to sell to those buyers until the price has adjusted to the point where they see roughly equal buyers and sellers again. To expect them to do anything else is to imagine them as charities.
So when you combine imitative behavior with noncharitable market-makers, there will be seismic waves from time to time. What makes our current system particularly prone to global ruptures is that hair-trigger traders have crowded into exceedingly risky bets. Why would that be, with the crash of 2008 so fresh in traders' minds?
This type of alignment among investors in risky positions is precisely what the central economic planners at the Federal Reserve intended when, in response to the historic credit collapse, they commanded interest rates to zero and signaled that they would prop up all risky assets.
The profitability of an investment is simply its return on capital beyond the cost of that capital. It is against this spread that investors must assess risk. So when the Fed distorted the cost of capital following the 2008 collapse by lowering it for many by roughly 2% (to about 0% for banks), it had the same effect as the 2% higher aggregate dividend yield for stocks or higher credit spreads for investment grade bonds. Suddenly what was toxic looked cheap.
The Fed lured everyone to buy everything and anything that was risky—and did so itself with outright purchases of risky assets like mortgage-backed bonds. Anyone eager for easy profits fell right in line, bidding up dangerous assets like clockwork. Sensing safety in numbers, the herd quickly followed, and in no time the market had consumed the Fed's gifted 2% profit spread and then some.
All in all, it seemed like an impressively engineered recovery. In reality, it was an ephemeral illusion caused by distorting investors' assessment of risk. Despite what zero interest rates were signaling, savers flush with cash weren't flooding the capital markets and credit wasn't expanding.
The Fed has managed to align every little market fault right with each other such that they all succumb to the very same stresses at the very same time. Meanwhile—no surprise—the world remains a very seismically active place. What's extraordinary is that the Fed continues this intentional deception about the real cost of credit, even as we've repeatedly witnessed the consequences of this policy.
Il Wall Street Journal mantiene una pagina con i link agli articoli relativi al flash trading e argomenti collegati: potete seguirla cliccando qui.
In this year's crash, many trades, especially in exchange-traded funds, went off at prices wildly different from the orders investors had placed. Likewise, in 1962, "some orders were executed at prices substantially different from those which prevailed when the order was entered," an investigative report by the Securities and Exchange Commission noted the following year.
Some high-frequency traders, which use powerful computers to make markets in stocks, stopped trading in this year's flash crash at the very moments when the market needed liquidity most urgently.
In 1962, high-frequency trading didn't exist, but "specialists" did. By law, specialists were obligated to try to maintain a fair and orderly market for each stock on the floor of the exchange. However, concluded the SEC's report, "At no time during the day did the specialist intervene in sufficient volume to slow the rapid deterioration of the market in IBM."
Even without the Internet, fear spread quickly in 1962. Investors piled into brokerage firms' "board rooms," where wall-mounted boards displayed market prices. "It was standing room only at Merrill Lynch, Pierce, Fenner & Smith," reported the Journal, "with spectators lined up three or four deep in the customers' gallery there."
As the SEC report noted a year later, "The markets' erratic behavior prompted concern and caused bewilderment at home and abroad. The frenetic activity of the break resulted in large and sudden losses for many and gains for some … this break had a strong and immediate psychological impact upon the Nation."
Ancora dal Wall Street Journal e ancora sul flash crash del 6 maggio vi segnalo questo articolo di Mark Spitznagel, fondatore dell'hedge fund Universa (di cui Taleb è consulente). Universa è stato chiamato in causa per un ordine immesso pochi istanti prima del crash. Spitznagel chiama invece in causa ... la Fed, sostenendo che la politica di bassi tassi di interesse rende il sistema intrinsecamente più instabile e più fragile. Non credo che il signor Spitznagel sia esente dal bisogno di tutelare il buon nome del suo fondo, ma le sue argomentazioni non sono prive di senso:
Regulators have been busy searching for the cause of the May 6 "flash crash" when the market dropped by 9.3% and then recovered within minutes. I think it's a good bet no cause will be found; there is still no consensus on what triggered the one-day 20% stock market crash of 1987. But even if there was no trigger, market conditions created by the Federal Reserve's easy money policy definitely made the crash more likely.
The market is a critical system. (...)
Back to markets. Think of every investor holding a risky position. Then think of all of these investors together in a big herd. Each member of the herd focuses on what the others will do next, since the only reason anyone takes a position is because others are initiating like-minded ones.
When imitative behavior starts happening in markets en masse, expect funny things to happen to liquidity. All you need to know about market dynamics—as I learned as a Chicago pit trader—is that market prices always adjust to the level where market-makers see balanced two-way order flow between buyers and sellers. All market-makers want to do is buy at the bid price, sell at the offer price, and at the end of the day go home unscathed. When there are only buy orders, for instance, expect market-makers to be unwilling to sell to those buyers until the price has adjusted to the point where they see roughly equal buyers and sellers again. To expect them to do anything else is to imagine them as charities.
So when you combine imitative behavior with noncharitable market-makers, there will be seismic waves from time to time. What makes our current system particularly prone to global ruptures is that hair-trigger traders have crowded into exceedingly risky bets. Why would that be, with the crash of 2008 so fresh in traders' minds?
This type of alignment among investors in risky positions is precisely what the central economic planners at the Federal Reserve intended when, in response to the historic credit collapse, they commanded interest rates to zero and signaled that they would prop up all risky assets.
The profitability of an investment is simply its return on capital beyond the cost of that capital. It is against this spread that investors must assess risk. So when the Fed distorted the cost of capital following the 2008 collapse by lowering it for many by roughly 2% (to about 0% for banks), it had the same effect as the 2% higher aggregate dividend yield for stocks or higher credit spreads for investment grade bonds. Suddenly what was toxic looked cheap.
The Fed lured everyone to buy everything and anything that was risky—and did so itself with outright purchases of risky assets like mortgage-backed bonds. Anyone eager for easy profits fell right in line, bidding up dangerous assets like clockwork. Sensing safety in numbers, the herd quickly followed, and in no time the market had consumed the Fed's gifted 2% profit spread and then some.
All in all, it seemed like an impressively engineered recovery. In reality, it was an ephemeral illusion caused by distorting investors' assessment of risk. Despite what zero interest rates were signaling, savers flush with cash weren't flooding the capital markets and credit wasn't expanding.
The Fed has managed to align every little market fault right with each other such that they all succumb to the very same stresses at the very same time. Meanwhile—no surprise—the world remains a very seismically active place. What's extraordinary is that the Fed continues this intentional deception about the real cost of credit, even as we've repeatedly witnessed the consequences of this policy.
Il Wall Street Journal mantiene una pagina con i link agli articoli relativi al flash trading e argomenti collegati: potete seguirla cliccando qui.
lunedì 31 maggio 2010
Gli investitori a caccia di un po' di sicurezza
Il Wall Street Journal osserva come in Europa il mercato interbancario in dollari si sia fondamentalmente paralizzato sulle scadenze superiori a un mese. La situazione sta creando un po' di imbarazzo e sottolinea la necessità di procedere con una certa decisione nell'opera di ristabilimento della fiducia nel sistema bancario europeo: But Europe still needs to act aggressively to restore confidence in its banking system and reduce stress in funding markets.
First, the euro zone needs to approve the €750 billion ($927 billion) bail-out package agreed three weeks ago. Second, individual countries must press ahead with austerity packages and, equally important, initiate the labor-market reforms vital to improving competitiveness. Finally, the European Union should commit to a full stress-test of its banking system and, where necessary, commit to further recapitalizations, as U.S. Treasury Secretary Timothy Geithner recommended this week. That might just bring U.S. investors back on board.
Intanto sul New York Times di oggi si discute sul rischio che l'Europa finisca in deflazione:
(...) some economists say it has become a driving obsession that has blinded the bank to a potentially bigger threat to Europe: deflation.
The central bank’s doubters grew louder after it made a big show of taking measures to cancel out the supposed inflationary impact of the government bond purchases it began on May 10 to help keep Greece and several other euro zone countries from defaulting on their debts.
“It’s nuts: how can they be concerned about the inflationary impact of this?” said Carl B. Weinberg, chief economist of High Frequency Economics in Valhalla, N.Y. “If I were the head of the E.C.B., I would be printing money to avert the decline in the money supply.”
Many economists regard deflation as more dangerous than inflation, because it prompts consumers to delay purchases as they wait for lower prices, creating a downward spiral of lower demand and production. Deflation is also bad for debtors like Greece, because they may have to pay back money that would be worth more than it was when they borrowed it.
Economists like Mr. Weinberg — and a few policy makers as well — are beginning to worry that a danger of deflation in Europe, similar to the one that strangled Japanese growth for most of the 1990s, is a bigger threat than inflation.
Prices fell in Ireland in April, while inflation was below 1 percent in five other euro zone countries. The problem also extends outside the euro zone.
“We all share some risks and problems in common with Japan circa 1995,” Adam S. Posen, a member of the Bank of England’s monetary policy committee, told an audience at the London School of Economics on May 2.
The United States is also at risk, Mr. Posen said, though he rated the chances of deflation there as low. But just as Japan did in the 1990s, the European Central Bank and the United States Federal Reserve have cut interest rates close to zero while pumping huge amounts of credit into their economies. That means the two central banks would have limited policy tools left with which to combat a collapse in prices and demand.
The downward pressure on prices has its roots in the economic decline that followed the 2008 financial crisis, but Europe’s sovereign debt problems are likely to add extra impetus. Governments, including those of Spain and Germany, are sharply reducing spending to lower their deficits, which will inevitably curb consumer demand and employment, hindering growth.(...)
Spanish core inflation already turned negative in April.
A mild decline in prices in a few euro zone countries can be managed, economists say, but it will add to the risks of deflation. And the central bank will face more difficulty than usual in devising a monetary policy that fits both the ailing countries and the faster-growing economies like Germany and France.(...)
The recent decline of the euro against the dollar could create some inflation. Oil and other commodities are priced in dollars and could become more expensive in euros.
Still, few economists see prices rising. “There is no reason to fear high inflation for the time being,” Simon Junker, a Commerzbank analyst, said in a note.
Vi segnalo tre post di Brad De Long:
First, the euro zone needs to approve the €750 billion ($927 billion) bail-out package agreed three weeks ago. Second, individual countries must press ahead with austerity packages and, equally important, initiate the labor-market reforms vital to improving competitiveness. Finally, the European Union should commit to a full stress-test of its banking system and, where necessary, commit to further recapitalizations, as U.S. Treasury Secretary Timothy Geithner recommended this week. That might just bring U.S. investors back on board.
Intanto sul New York Times di oggi si discute sul rischio che l'Europa finisca in deflazione:
(...) some economists say it has become a driving obsession that has blinded the bank to a potentially bigger threat to Europe: deflation.
The central bank’s doubters grew louder after it made a big show of taking measures to cancel out the supposed inflationary impact of the government bond purchases it began on May 10 to help keep Greece and several other euro zone countries from defaulting on their debts.
“It’s nuts: how can they be concerned about the inflationary impact of this?” said Carl B. Weinberg, chief economist of High Frequency Economics in Valhalla, N.Y. “If I were the head of the E.C.B., I would be printing money to avert the decline in the money supply.”
Many economists regard deflation as more dangerous than inflation, because it prompts consumers to delay purchases as they wait for lower prices, creating a downward spiral of lower demand and production. Deflation is also bad for debtors like Greece, because they may have to pay back money that would be worth more than it was when they borrowed it.
Economists like Mr. Weinberg — and a few policy makers as well — are beginning to worry that a danger of deflation in Europe, similar to the one that strangled Japanese growth for most of the 1990s, is a bigger threat than inflation.
Prices fell in Ireland in April, while inflation was below 1 percent in five other euro zone countries. The problem also extends outside the euro zone.
“We all share some risks and problems in common with Japan circa 1995,” Adam S. Posen, a member of the Bank of England’s monetary policy committee, told an audience at the London School of Economics on May 2.
The United States is also at risk, Mr. Posen said, though he rated the chances of deflation there as low. But just as Japan did in the 1990s, the European Central Bank and the United States Federal Reserve have cut interest rates close to zero while pumping huge amounts of credit into their economies. That means the two central banks would have limited policy tools left with which to combat a collapse in prices and demand.
The downward pressure on prices has its roots in the economic decline that followed the 2008 financial crisis, but Europe’s sovereign debt problems are likely to add extra impetus. Governments, including those of Spain and Germany, are sharply reducing spending to lower their deficits, which will inevitably curb consumer demand and employment, hindering growth.(...)
Spanish core inflation already turned negative in April.
A mild decline in prices in a few euro zone countries can be managed, economists say, but it will add to the risks of deflation. And the central bank will face more difficulty than usual in devising a monetary policy that fits both the ailing countries and the faster-growing economies like Germany and France.(...)
The recent decline of the euro against the dollar could create some inflation. Oil and other commodities are priced in dollars and could become more expensive in euros.
Still, few economists see prices rising. “There is no reason to fear high inflation for the time being,” Simon Junker, a Commerzbank analyst, said in a note.
Vi segnalo tre post di Brad De Long:
- Come prevedere i rendimenti futuri delle azioni USA? La conclusione è moderatamente ottimista: It's hard to see there being a large, permanent wedge between average real stock returns on the one hand and average earnings yields on the other. With trend earnings on the DJIA somewhere around 600 and with Treasury rates as low as they are, it's hard to argue that U.S. stocks will be outperformed by other asset classes over any even moderately long horizon. Vorrei dedicare un post all'argomento appena trovo un po' di tempo.
- La legge di Walras in azione: ma dove sono le obbligazioni sicure?...
- ...e infatti gli investitori a caccia di titoli di alta qualità fanno volare le obbligazioni trentennali del Tesoro USA, con rendimenti ormai appena superiori al 4%. Scrive De Long: In late May, the yield to maturity of the 30-year United States Treasury bond was 4.07% per year – down a full half a percentage point since the start of the month. That means that a 30-year Treasury bond had jumped in price by more than 15%. So a marginal investor was willing to pay more than 15% more cash and more than 30% more equities for US Treasury bonds at the end of the month than at the beginning. This signals a remarkable shift in relative demand for high-quality and liquid financial assets – an extraordinary rise in market-wide excess demand for such assets.
Why does this matter? Because, as economist John Stuart Mill wrote in the first half of the nineteenth century, excess demand for cash (or for some broader range of high-quality and liquid assets) is excess supply of everything else. What economists three generations later were to call Walras’s Law is the principle that any market in which people are planning to buy more than is for sale must be counterbalanced by a market or markets in which people are planning to buy less.We have seen this principle in action since the early fall of 2007, as growing excess demand for safe, liquid, high-quality financial assets has carried with it growing excess supply for the goods and services that are the products of ongoing human labor. This is true to such an extent that there is now a 10% gap between the global economy’s current output and what it would be producing if it were in its normal relatively healthy state of near-balance.And global financial markets are now telling us that this excess demand for safe, liquid, high-quality financial assets has just gotten bigger.To some small degree, a change in investor sentiment has induced the rise in excess demand for such assets. After all, we can assume that the animal spirits of investors and financiers has been further depressed as a psychological reaction to the exuberant belief just a few years ago in the powers of financial engineering.But most of the recent shift has come not from an increase in demand for safe, liquid, high-quality financial assets, but from a decrease in supply: six months ago, bonds issued by the governments of southern Europe were regarded as among the high-quality assets in the world economy that one could safely and securely hold; now they are not.
domenica 30 maggio 2010
La fine dell'euro? Atene addio?
Fino al due giugno potete partecipare al sondaggio/dibattito sul futuro dell'euro promosso dall'Economist: la tesi del settimanale inglese è che alcuni paesi lasceranno l'euro entro 10 anni. Naturalmente gran parte della discussione si concentra sulla possibilità o meno che la Grecia superi la crisi in cui si trova senza abbandonare la moneta unica. L'abbandono dell'euro potrebbe permetterle una svalutazione competitiva, ma i sostenitori della permanenza dell'euro osservano che il debito si rivaluterebbe (essendo stato emesso in euro) tranne nel caso di un default che sarebbe meglio gestibile restando all'interno della moneta unica. Il merito del dibattito è di rendere assolutamente trasparente come la scelta sia "tra la padella e la brace". Voi cosa ne pensate?
Se volete un assaggio di come viene vista la crisi della zona euro dagli investitori americani potete leggere la lettera di John Mauldin di questa settimana. Ecco come si pronuncia sulla crisi greca e sulle ripercussioni nella zona euro e per le banche europee:
Se pensate che siano solo gli americani a essere pessimisti potete leggere l'ultimo editoriale di Martin Wolf: dopo la cicala e la formica di un paio di giorni fa è il momento di Father and son:
Se volete un assaggio di come viene vista la crisi della zona euro dagli investitori americani potete leggere la lettera di John Mauldin di questa settimana. Ecco come si pronuncia sulla crisi greca e sulle ripercussioni nella zona euro e per le banche europee:
We all know that Greek government deficits are somewhere around 14%. But their trade deficit is running north of 10%. (By comparison, the US trade deficit is now about 4%.)
Going back to the equation, if Greece wants to reduce its fiscal deficit by 11% over the next three years, then either private debt must increase or the trade deficit must drop sharply. That's the accounting rules.
But here's the problem. Greece cannot devalue its currency. It is (for now) stuck with the euro. So, how can they make their products more competitive? How do they grow their way out of their problems? How do they become more productive relative to the rest of Europe and the world?
Barring some new productivity boost in olive oil and produce production, there is no easy way. Since the beginning of the euro, Germany has become some 30% more productive than Greece. Very roughly, that means it cost 30% more to produce the same amount of goods. That is why Greece imports $64 billion and exports $21 billion.
What needs to happen for Greece to become more competitive? Labor costs must fall by a lot. And not by just 10 or 15%. But if labor costs drop (deflation) then that means that taxes also drop. The government takes in less and GDP drops. The perverse situation is that the debt to GDP ratio gets worse even as they enact their austerity measures.
In short, Greek life styles are on the line. They are going to fall. They have no choice. They are going to willingly have to put themselves into a severe recession or more realistically a depression.
Just as British incomes relative to their competitors will fall, Greek labor costs must fall as well. But the problem for Greeks is that the costs they bear are still in euros.
It becomes a most vicious spiral. The more cuts they make, the less income there is to tax, which means less government revenue which means more cuts which mean, etc.
And the solution is to borrow more money they cannot at the end of the day hope to pay. All that is happening is that the day of reckoning is delayed in the hope for some miracle.
What are their choices? They can simply default on the debt. Stop making any payments. That means they cannot borrow any money, but it would go along way toward balancing the government budget. Government employees would need to take large pay cuts and there would be other large cuts in services. It would be a depression, but you work your way out of it. You are still in the euro and need to figure out how to become more competitive.
Or, you could take the austerity, downsize your labor costs and borrow more money which means even larger debt service in a few years. Private citizens can go into more debt. (Remember, we have to have our balance!) This is also a depression.
Finally, you could leave the euro and devalue like Britain is going to do. Very ugly scenario, as contracts are in euros. The legal bills would go forever.
There are no good choices for the Greeks. No easy way. And then you wonder why people worry about contagion to Portugal and Spain?
I see that hand asking a question. Since the euro is falling won't that make Greece more competitive? The answer is yes and no. Yes, relative to the dollar and a lot of emerging market currencies. No to the rest of Europe, which are their main trade partners. A falling euro just makes economic export power Germany and the other northern countries even more competitive.
Europe as a whole has a small trade surplus. But the bulk of it comes from a few countries. For Greece to reduce their trade deficit is a very large life style change.
Germany is basically saying you should be like us. And everyone wants to be. Just not everyone can.
Every country cannot run a trade surplus. Someone has to buy. But the prescription that politicians want is for fiscal austerity and trade surpluses, at least for European countries. But if the PIIGS reduce their trade deficits, that will not be good for Germany.
Yet politicians want to believe that somehow we all can run surpluses, at least in their country. We can balance the budgets. We can reduce our debts. We all want to believe in that mythical Lake Woebegone, where all the kids are above average. Sadly, it just isn't possible for everyone to have a happy ending.
And this brings us to a last quick point, which some day will be its own letter. Every country wants it currency to be valued "fairly" which means lower than its competitors. With both Europe and Britain on their way to parity with the US dollar, what will be the reaction of Asia and especially China?
As Ollie said to Stan (Laurel and Hardy), "Here's another nice mess you've gotten me into!" A nice mess indeed.
Should the US Bail Out European Banks?
The obvious answer to the above question, at least on this side of the Atlantic, is no. But that is the plan being foisted on US tax-payers by the International Monetary Fund. The IMF wants to create a $250 billion dollar bailout fund for Greece, Portugal, et al that the US will contribute roughly 20% to. This fund will loan money and that IMG debt will be subordinate (junior!) to regular Greek debt, so when Greece does default, and they will, the IMF is the last in line to get paid.
Where will the money go? It will buy mostly Greek rollover debt from European banks getting out of their Greek debt. It is a back door bailout for German and French banks. The US Senate voted 94-0 that the US should not fund any such debt if the Treasury cannot certify the probability of getting repayment. If the Obama administration allows this funding to go through, the hue and cry will be large. It is bad enough that we have to pay for Freddie and Fannie (already $400 billion and counting!). Not meaning to be churlish, but the French and Germans can bail out their own banks.
Se pensate che siano solo gli americani a essere pessimisti potete leggere l'ultimo editoriale di Martin Wolf: dopo la cicala e la formica di un paio di giorni fa è il momento di Father and son:
What triggered this aftershock was the revelation that Greece had lied about its fiscal position, followed by the inability of the eurozone to respond: Germans were outraged at the idea that they should rescue irresponsible profligates; others thought the Germans inflexible bullies. So the Europeans made the same mistake as the Americans had made when responding to financial worries: they let the crisis get ahead of them.”
“The big point is that investors are not altogether stupid: they know these are temporary patches; they know Greek indebtedness is going to worsen; they know that other countries in peripheral Europe will find it hard to grow out of their plight; they know that solidarity among eurozone member countries is fraying; they knowGermans are very angry; and they know that inadequately capitalised banks are vulnerable to sovereign risks. All this makes the euro seem a worse bet. So it has fallen in value.”
“I understand that,” replied Bobby. “But won’t that help the eurozone?”
“Yes,” agreed his father. “But it will worsen prospects elsewhere – in the UK and US, for example. And then there’s the worry that these countries have huge fiscal difficulties, too. The markets don’t seem to mind now. But they might change their view. Worse, they don’t know what to fear: will it end up in deflation, default, inflation, financial shocks, or all of these? Markets are unpredictable, like children.”
Bobby decided not to respond to this teasing. “So,” he asked thoughtfully, “what’s going to happen next?”
“If I knew that, I wouldn’t be a mere economic journalist,” his father said.
Bobby smiled: a familiar remark.
His father did not notice. “Maybe, the momentum gained by the US and the big emerging markets, especially China, will let the world ride through the shocks. The OECD calls the outlook ‘moderately encouraging’.
“Alternatively, you could argue that the massive fiscal deficits are unsustainable and that attempts to rein them in, in the eurozone and UK, are going to cause renewed recession and political strife. We have also barely begun reducing private debts, which will take years. The banks are far too big and have too many doubtful assets on their books. Meanwhile, emerging countries are too small and weak to be locomotives for the world. Some people worry that China is overheating or suffering from huge asset price bubbles, too, though I disagree. And then there is geopolitical uncertainty over North Korea and Iran. In short, markets are volatile because of all the uncertainty out there.”
Bobby was beginning to find this familiar: his father tended to see the gloomy side. But he could be wrong, as his mother enjoyed pointing out.
“Anyway,” concluded his father, “these aftershocks are likely to go on for years, with fiscal worries undermining confidence in the financial sector and back again. It will affect you, too: western governments are going to be short of money for decades. It’s going to be miserable. But you can learn Chinese and go east.”
Bobby groaned. It sounded like hard work. But he went off quietly to bed. What nightmares disturbed him?
Infine non mi sono sorpreso troppo scoprendo che c'è chi contesta lo status di guru raggiunto da Nouriel Roubini ma io continuo a trovarlo uno degli economisti più interessanti da leggere e da ascoltare.
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