Archives of “Asset” tag

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Bank of Japan refuses trader requests to work from home

  
  Analysis
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Bloomberg had this piece up earlier (link for more), citing ‘people familiar:

  • The BOJ doesn’t allow home computers to connect to its network for conducting asset purchases and other market transactions
  • Three firms (at least) have asked the BOJ whether traders can participate in its operations from outside the office
  • BOJ-Net infrastructure is used for yen transactions daily, connected via dedicated cables to computers at dozens of financial firms so they can trade assets with the central bank or buy bonds from the government
  • BOJ is concerned about cybersecurity risk.
The hot new toy for summer probably won’t be keenly sought after amongst BOJ counterparties:
Bloomberg had this piece up earlier (link for more), citing 'people familiar:

There's no perfect way to invest. Find what works for you & ignore everyone else

  
Analysis, Education
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The first rule of investing is…that there are no rules. Seriously, NO RULES! With all apologies to Mr. Buffett, there are guidelines, suggestions and simple math, but no rules.

It doesn’t always seem that way. There is no shortage of talking heads (journalists, bloggers, analysts, financial advisors, etc.) telling you what to do with your hard-earned savings. But in the end it’s your money. You can invest it (or spend it) however you see fit.

  1. If you want to hold stocks if they hit Japan-like bubble valuation levels. You can do that.
  2. If you already moved 20% into cash in anticipation of a correction that never came. You can do that.
  3. If you are up to your eyeballs in entrepreneurial risk and want to hold other safe assets. You can do that.
  4. If your career is just getting started and you’re not ready to own stocks. You can do that.
  5. If you want to put 5% of your portfolio into a basket of cryptocurrencies. You can do that.

As Meb Faber writes: “Remember, when Mr. Market shows up at your door, you don’t have to answer….” That being said there are some simple things you can do to improve your financial life without messing with the stock market.

  1. If your employer offers a match for 401(k) contributions, get every penny you can.
  2. If choosing between two similar investment vehicles: choose the cheaper one.
  3. If someone ever says an investment can’t lose or is guaranteed. Walk the other way.
  4. If you have have a young family, buy some low cost, term life insurance.
  5. If you have high rate credit card, work to eliminate that debt ASAP.

Trading on Sentiment: Book Review

  
  Education
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We all know that sentiment is a critically important ingredient in the pricing of tradable assets. But it is extremely difficult to move from this general and somewhat amorphous principle to a trading/investing edge. Richard L. Peterson takes up this challenge inTrading on Sentiment: The Power of Minds Over Markets (Wiley, 2016).
Peterson is the CEO of MarketPsych, a firm that in 2011 joined forces with Thomson Reuters to produce the Thomson Reuters MarketPsych Indices (TRMI), sentiment data feed covering five asset classes and 7,500 individual companies that Thomson Reuters distributes to its clients. As the Thomson Reuters website explains, these indices use “real-time linguistic and psychological analysis of news and social media to quantify how the public regards various asset classes according to dozens of sentiments including optimism, fear, trust and uncertainty.”
Odds are that, unless you’re a bank or hedge fund employee, you won’t have access to TRMI. Peterson’s book is the next best thing, although you have to realize that if you want to incorporate sentiment (not some proxy for sentiment) into your trading decisions and can’t do big data analysis yourself, you’re working with one hand tied behind your back.
Trading on Sentiment is divided into five parts: foundations, short-term patterns, long-term patterns, complex patterns and unique assets, and managing the mind.

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Chief Investment Officer’s fundamental principles

  
  Education
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  • We are for long-termism. We do not give a &*%$ about quarterly returns.
    • We are for asset owners using their purchasing power to get the best deals possible.
    • We are for CIOs empowered as decision-makers by boards that trust and check them. We like intelligent, engaged board members. We don’t like politics in the mix.
    • We are for innovation, collaboration, and talent development.

Biggest Bubble Ever? 2017 Recapped In 15 Bullet Points

  
Analysis, Education
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Here are his 15 bullet points that show why in 2017 we may have seen the biggest bubble ever (and why we can’t wait to see what 2018 reveals).

  1. Da Vinci’s “Salvator Mundi” sold for staggering record $450mn
  2. Bitcoin soared 677% from $952 to $7890
  3. BoJ and ECB were bull catalysts, buying $2.0tn of financial assets
  4. Number of global interest rate cuts since Lehman hit: 702
  5. Global debt rose to a record $226tn, record 324% of global GDP
  6. US corporates issued record $1.75tn of bonds
  7. Yield of European HY bonds fell below yield of US Treasuries
  8. Argentina (8 debt defaults in past 200 years) issued 100-year bond
  9. Global stock market cap jumped1 $15.5tn to $85.6tn, record 113% of GDP
  10. S&P500 volatility sank to 50-year low; US Treasury volatility to 30-year low
  11. Market cap of FAANG+BAT grew $1.5tn, more than entire German market cap
  12. 7855 ETFs accounted for 70% of global daily equity volume
  13. The first AI/robot-managed ETF was launched (it’s underperforming)
  14. Big performance winners: ACWI, EM equities, China, Tech, European HY, euro
  15. Big performance losers: US$, Russia, Telecoms, UST 2-year, Turkish lira

As Hartnett summarizes, “2017 was a perfect encapsulation of an 8-year QE-led bull market”

  • Positioning was too bearish for either a bear market or a correction in risk assets.
  • Profits were higher than expected (global EPS jumped 13.4%) this time thanks to a synchronized global PMI recovery.
  • Policy was aggressively easy, as the ECB and BoJ bought a massive $2.0tn of financial assets; fiscal policy also easy (e.g., US federal deficit up $81bn to $666bn).
  • Returns were abnormally high in 2017 (Table 3); corporate bonds and equities soared, but the biggest surprise was stubbornly low government bond yields: thematic leadership of scarce “growth” (e.g. tech stocks), “yield” (e.g., HY, EM and peripheral EU bonds) and “volatility” once again remained the core of the bull.

Ray Dalio’s Long-Term Debt Cycle Charts

  
Analysis, Education
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The following speech was delivered by Ray Dalio of Bridgewater at the Federal Reserve Bank of New York’s 40th Annual Central Banking Seminar on Wednesday, October 5, 2016.

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It is both an honor and a very special opportunity for me to be able to address such a large and esteemed group of central bankers at such an interesting time for central bankers. I especially want to thank President Dudley and Vice President Schetzel for inviting me to forthrightly share my perspective as an investor and my unconventional template that I believe sheds some light on the very unconventional circumstances that we face.

It is no longer controversial to say that:

• …this isn’t a normal business cycle and we are likely in an environment of abnormally slow growth

• …the current tools of monetary policy will be a lot less effective going forward

• …the risks are asymmetric to the downside

• …investment returns will be very low going forward, and (more…)

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