March 2010
2 posts
4 tags
This is not Progress: Transaction Taxes
There have been many calls for a transaction tax. I oppose all of them. I am not a free-market fundamentalist, but intervention here will help nobody. I understand the desire to tax speculator’s trading activities, they can often be seen as value extracting instead of value creating activities, but at the end of the day, they do add liquidity and lead to tighter spreads, even if the...
4 tags
The Benefits of Naked CDS →
In a market where one of Greece’s principal market makers -– Deutsche Bank –- says it will not buy Greek bonds, and where European politicians are having to force their own national banks to do so in order to try and avert the threat of a Greek bond auction failing, the boon from hedge funds looking to hoover-up Greek debt is undeniable.
And the only reason they are in the market to buy is...
February 2010
9 posts
4 tags
Per-Capita Adjusted Retail Sales: Not Such a...
Earlier today Calculated Risk posted about an improvement in total retail sales. I was interested in how these numbers would look once adjusted to their per-capita numbers. Obviously the population estimates (from the Census Bureau) might have a little bit of an error margin, but I wanted to see how the spending trends of Americans had, or had not, changed. In essence, I wanted to know if...
1 tag
“In any process in an isolated system, the total risk and return remains the...”
– First law of thermodynamics, applied to risk/return. Morally Bankrupt
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“Risk can neither be created nor destroyed. It can only change forms.”
– First law of thermodynamics, applied to financial risk. See also: Conservation of probability. Morally Bankrupt.
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“As financial innovation approaches zero, all value-extracting processes cease...”
– Third law of thermodynamics, applied to finance. Morally Bankrupt
1 tag
Entropy: As defined in finance
dS = δQ / T
dS: change in entropy of an economic system δQ: Let δQ be an element of the value given up by the body to any banker/financier during its own changes T: An Absolute Return value
1 tag
“In a product, a process that occurs will tend to increase the total entropy of...”
– Second law of thermodynamics, applied to finance. Morally Bankrupt
1 tag
“Potential return generally cannot flow spontaneously from an instrument at lower...”
– Clausius statement, applied to finance. Morally Bankrupt
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“It is impossible to convert capital completely into value in an economic...”
– Kelvin’s law, applied to finance. Morally Bankrupt
1 tag
“The increase in the return of a product is equal to the amount of return added...”
– First law of thermodynamics, applied to finance. Morally Bankrupt
January 2010
6 posts
3 tags
Nomenclature: It's important! →
The problem we face is not that the broader population wants pointless or destructive revenge on a financial elite that has done well. Nor is it the case that, if left largely to its own devices, our major banks will guide us back along the path to sustainable growth.
The consensus technocratic assessment is simple: We are smack in the middle of a doomsday cycle of repeated boom-bust-bailout...
8 tags
Mortgage Rates, Purchasing Power and Home Prices
As you may have seen, the Case-Shiller housing index has been showing small signs of improvement. While some may consider this a good sign, I am a bit skeptical. Why? Well, as we saw earlier today, mortgage rates are at 40 year lows. These low rates allow us to cover a much bigger principal with the same monthly payment. In the last 40 years mortgage rates have been as high as 18% and as low as...
10 tags
Negative Convexity and The Fed
So there’s this article over in FT Alphaville regarding the negative convexity of the Fed’s MBS purchases. No-shit, right? Callable securities exhibiting those features? Uhm… yeah, not so surprised. But, while Tracy does a good point of countering a lot of Krasting’s fears, I want to jump in to this one.
Tracy is right, the risk here is not so much an issue of negative...
6 tags
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July 2009
1 post
