Central Counter Party Risk Taming

This four part paper deals with a key element of derivative market reform – the CCP (Central Counter Party). The first part looked at the idea behind the CCP. The second part looked at the design of the CCP. This third part looks at the risk of the CCP itself and how that is managed. […]

Bonds Beat Stocks: 1981-2011

Got Bonds? Since 1981, long-term government bonds have gained an average of 11.5% per year, handily besting equities. The S&P 500 index gained the 10.8% per year over the same period, with much more risk and greater volatility (data from Jim Bianco, president of Bianco Research in Chicago). Here’s Bloomberg: “The biggest bond gains in […]

Full Text: European Union letter to the G20 on the Euro crisis

Highlighted in bold are sections of particular note not highlighted in the original text. Joint letter by President Van Rompuy and President Barroso to the G20 leaders The decisions we have taken in our G20 Summits to date have been crucial in steering us through the global financial and economic crisis. We have acted firmly […]

Who Said This?

The following are some excerpts from a paper on the problems Japan faced in the 1990s. If one were to replace Japan with the United States you might think you were reading a Market Monetarist article. Consider first, this paragraph: As already suggested, I do not deny that important structural problems, in the financial system […]

Europe’s Economy Is Falling Apart

Yves here. Note the comment at the end, that Sarkozy’s sales pitch to China on the levered up EFSF did not go so well. If the Chinese don’t relent, this greatly reduces of this scheme working, even in the short term. And further note that the flagging European growth is the result of the austerity […]

Credibility Is Not Everything

Many have argued in recent months that the Eurozone’s emergency meetings should be about restoring credibility, with a ‘big bazooka’ or otherwise. This column looks at Italy, a country financiers are fast turning their back on. It argues however that the problem is Italy’s fundamentals – not its credibility. Many observers of the European debt […]

Head Fake

The markets soared last week, in the aftermath of the European Summit, whereby the leaders of the Euro zone came to terms on how to deal with the on-going crisis. The problem was that no details were announced. The headlines focused on three major points. The first was the recapitalization of the European banks. The […]

Home Affordable Refinance Program

Last week the Federal Housing Finance Agency, Fannie Mae and Freddie Mac jointly announced changes to the Home Affordable Refinance Program (HARP) with the goal of making it easier for some households to refinance their mortgages at lower interest rates. Here I offer some thoughts on this proposal. The graph below plots what some of […]

A Historical Perspective of Recessions and Bear Markets

James Stack of InvesTech Research looks at past bear markets and recessions going back more than 82 years. The details of his findings? • Generational bear markets, with losses exceeding 40% are the exception, not the norm. Since 1940, only one in four bear markets reached such a loss. • The 2000-02 bear market was […]

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