Blog Posts

It is very likely that currency policy will take on a much bigger role in the next recession. As the ‘trade war‘ associated with the export and import flows between countries plays out, most notably between the US and China, a ‘currency war’ is likely to be one of the next big macro themes as […]

The US stock market recently made new highs. Recession fears caused by inverted yield curves are overblown. While an inverted yield curve has been a strong statistical correlate to a recession over the past five business cycles in the US, it doesn’t get at the underlying reasons for them. In reserve currency countries, recessions typically […]

On September 14, 2019 drones attacked state-owned Saudi Aramco oil processing facilities at Khurais and Abqaiq. The initial size of the shock was huge. Global oil production is slightly over 100 million barrels per day. The attack on Saudi oil infrastructure was worth some 5.7 million barrels per day of production, meaning 5 to 6 […]

Negative interest rates are now a fixture in the financial world. Most developed market countries currently have negative interest rates of some form. Some remain “holdouts” – most notably the US to go along with the UK, Canada, and Australia / New Zealand, but Japan and most of developed Europe are below the zero level […]

With the recent surge in brokers going zero commissions, more traders are celebrating being freed from perpetual costs that eat into their returns. Controlling trading transactions costs is important for all different types of traders from small savers to large institutional funds. These costs are very different depending on size, strategy, market, time horizon, and […]

The swap rate market gained widespread institutional popularity during the 1980s. Reportedly, IBM and the World Bank completed the first modern swap agreement in 1981. Today, hundreds of trillions of dollars’ worth of swaps are outstanding – many multiples of world GDP of some $88 trillion – making them among the most traded financial instruments […]

Even with the Federal Reserve cutting the fed funds rate – which is the predominant feeder into cash rates in the US economy – cash is still one of the best returning financial assets. Treasury bonds return even less or about the equivalent. Stocks do not provide much extra in compensation relative to their volatility […]

Like any financial instrument, short-term interest rates are tradable. While the federal funds rate is under the purview of the Federal Reserve, traders can anticipate the future direction of interest rates several years into the future. Traders price the fed funds rate to move down to just below 100bps (1 percent) in perpetuity. (This chart […]

So first, you’re probably thinking, what does the Manhattan real estate market have to do with day trading? My belief is that it’s important to have as broad of a view as possible of what’s going on in different asset classes – i.e., what are the forward returns of cash relative to bonds, and the […]

Because negative interest rates will be a part of the euro area economy for a long time, central bankers are increasingly focusing on the harmful side effects that they might bring and getting around the matter with a tiered interest rate system. Namely, there is the issue of bank disintermediation. In simple terms, disintermediation means […]