Thinking
A “Numble” Fed: What To Do When Random Flip-Flopping And Ambiguity Is The Strategy
I would like to invent a new portmanteau word “Numble” to describe how central banks now operate these days: it is a combination of the Fed’s new word-smithing twist “humble and nimble”, since “transitory” is so 2021. The term perfectly describes the increasingly random (you can put lipstick on it […]
Why Commercial Banks Are a Disaster In The Making And What You Can Do About It
The famous Abbott and Costello skit “Who’s On first, What’s On Second, I Don’t Know is On Third” summarizes the current state of hot potatoes in the bond markets. Of course we know who’s on first. Who? Exactly. The Fed. The Fed holds more Treasury bonds than any other Central […]
CONTEMPORANEOUS COST-EFFECTIVE CONVEXITY: BY VINEER BHANSALI
We have been convinced through our research that the purpose of risk management is to use all tools available in the markets to create more robust portfolios that can survive major shocks. In a recent paper titled Diversifying Diversification my colleague, Jeremie Holdom, and I demonstrate that a democratic and […]
Cash Flows Matter For Tail Hedging Strategies: By Linda Chang, Jeremie Holdom, and Vineer Bhansali
As practitioners providing tail risk hedging solutions to investors, we are often asked to supply return time series and compounded returns for tail risk hedging strategies. The purpose of this paper is to illustrate with simple, hypothetical examples why cash flow based analysis is central to evaluating strategies with high […]
Global Modern Monetary Theory And What It Means For Currency Market Volatility
In the simplest terms, Modern Monetary Theory (MMT) posits that a sovereign country with the ability to print its own currency should do so. This theory laughs at the notion that the growth in debt of a sovereign nation results in risk of default and thus too much debt is bad. […]
Acclimating To Potentially Lower Liquidity Means It Is Time To Own Optionality
Two years ago I attempted to run the Leadville 100 Trail Run with very little training at altitude. For a sea-level, warm-weather, flatlander like me, the outcome of running on cold, 10,000-feet-high, steep and uneven mountain terrain with little acclimation was predictable. An experienced ultra-runner with many “100s” under my well-worn […]
Three Little Birds – When Lawyers Run Central Banks
Rise up this mornin’ Smiled with the risin’ sun Three little birds Pitch by my doorstep Singin’ sweet songs Of melodies pure and true Sayin’, “This is my message to you-ou-ou:” Singin’: “Don’t worry about a thing, worry about a thing, oh! Every little thing gonna be all right. Don’t […]
Hot Dogs And Bonds
This July 4th, the highlight of my TV watching was Nathan’s Hot Dog Eating Contest 2021. I don’t know about you all, but MLE (“Major League Eating”) is a lot more fun to watch these days than other organized sports, not the least because it reminds me of what’s happening in […]
The Great Inequalizers: How Central Banks Have Unknowingly Created The Largest Wealth Disparity Ever And What It Will Mean For Investors
About two years ago, I read Walter Scheidel’s book titled “The Great Leveler”, which traces the history of how economic inequality usually, and sharply, decreases through catastrophes and mass violence. The bottom line of the book is that mass-mobilization warfare, transformative revolutions, state collapse and catastrophic plagues have been responsible […]
Pivoting Powell And Yield Curve Twists: How To Dance To The Fed’s Shifting Tunes
Last year Fed Chair Powell temporarily put inquiring minds to rest by telling reporters that the Fed was not even “thinking about thinking” about raising rates. Last week, in the aftermath of another pivot from easy policy to possibly tightening policy, he said that the most recent meeting was a meeting […]
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