Low interest rates
Ben Carlson tweeted this funny-accurate observation: "2009-2015: Interest rates are going higher for sure. 2016: Interest rates are staying low forever." Apparently, after years of anticipating an inevitable jump to higher long-term rates, the new "smart" consensus is a resignation that we have entered a prolonged regime of low interest rates. I like Larry Summers' perspective because its grounded in good old fashioned macroeconomics where the interest rate is market clearing rate that balances supply and demand.
Ben Carlson tweeted this funny-accurate observation: "2009-2015: Interest rates are going higher for sure. 2016: Interest rates are staying low forever." Apparently, after years of anticipating an inevitable jump to higher long-term rates, the new "smart" consensus is a resignation that we have entered a prolonged regime of low interest rates. I like Larry Summers' perspective because its grounded in good old fashioned macroeconomics where the interest rate is market clearing rate that balances supply and demand.
- Black Hole of Negative Rates Is Dragging Down Yields Everywhere (As developed-world rates slide, investors widen search for income, driving down yields in corporate bonds and emerging markets) http://www.wsj.com/articles/black-h...is-dragging-down-yields-everywhere-1468174982
- Are Treasurys Headed for 1%? New Lows in a 35-Year Downtrend http://www.wsj.com/articles/are-treasurys-headed-for-1-new-lows-in-a-35-year-downtrend-1467760959
- As Rates Sink, Housing Bubbles Rise http://www.wsj.com/articles/as-rates-sink-housing-bubbles-rise-1468661400 Central banks push ultralow interest rates, but this creates debt-fueled asset (ie, real estate) bubbles
- Reduced Viability? Banks, Insurance Companies, and Low Interest Rates https://blogs.cfainstitute.org/investor/2016/07/11/the-slow-death-of-financials/ “Banks have little leeway in a low-rate environment. They can only cut their funding costs so much. Theoretically they can charge negative deposit rates, but most have been reticent to do so. Instead, they’ve kept retail deposit rates at or near zero as yields decline … one notable exception [among those banks who speculated that rates would rise], however, is Wells Fargo, which put on a large interest rate swap over a year ago that converted its floating rate exposure to fixed-rate, thus locking in higher income if rates remained low at the cost of reduced flexibility if they rose. As it happened, rates barely budged and the bet paid off. But Wells Fargo was the exception.”
- Negative interest rates: a remarkable financial moment by Larry Summers https://next.ft.com/content/a4ebe646-4855-38fb-b167-fad83cac6831 “There is a growing sense that the world is demand short — that the real interest rates necessary to equate investment and saving at full employment are very low and may be often unattainable given the bounds on nominal interest rate reductions.”
- Why Ultralow Interest Rates Are Here to Stay http://www.wsj.com/articles/why-ultralow-interest-rates-are-here-to-stay-1468425498
- Satellite Companies Moving Markets https://www.quandl.com/blog/alternative-data-satellite-companies I recommend the precursor article for its “spectrum of [data] diffusion” at https://www.quandl.com/blog/alternative-data
- Silicon Valley Looks for Lessons in Theranos http://www.wsj.com/articles/silicon-valley-looks-for-lessons-in-theranos-1468402201 "Much of Silicon Valley has since pointed out what was perhaps the company’s biggest red flag: its unusual roster of investors and board members."
- World Economic Forum’s Global Information Technology Report 2016 http://reports.weforum.org/global-information-technology-report-2016/ “Finland, Switzerland, Sweden, Israel, Singapore, the Netherlands and the United States are leading the world when it comes to generating economic impact from investments in information and communications technologies (ICT).” The report (PDF) is here http://trtl.bz/WEF-GITR
- Bad Debt Piled in Italian Banks Looms as Next Crisis http://www.wsj.com/articles/bad-debt-piled-in-italian-banks-looms-as-next-crisis-1467671900
- The Italian job: Italy’s teetering banks will be Europe’s next crisis http://trtl.bz/economist-italian-job
- The Epic Collapse of Deutsche Bank [Chart] http://www.visualcapitalist.com/chart-epic-collapse-deutsche-bank/ The IMF recently identified Deutsche Bank as the riskiest globally systemic bank: "Among the G-SIBs, Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse ... The relative importance of Deutsche Bank underscores the importance of risk management, intense supervision of G-SIBs and the close monitoring of their cross-border exposures, as well as rapidly completing capacity to implement the new resolution regime." IMF report is here http://trtl.bz/imf-deutsche-systemic
- The Big-Bank Bloodbath: Losses Near Half a Trillion Dollars http://www.wsj.com/articles/the-big-bank-bloodbath-losses-near-half-a-trillion-dollars-1467835126
- A Bank Too Big to Jail http://www.nytimes.com/2016/07/17/business/a-bank-too-big-to-jail.html “The report shows how regulators and prosecutors turned a potential criminal prosecution of a large global bank — HSBC — into a watered-down settlement that insulated its executives and failed to take into account the full scope of the bank’s violations.” Here is the report http://trtl.bz/2abwbej
- Morningstar Introduces Global Risk Model to Help Investors Analyze Stocks and Equity Portfolios http://trtl.bz/29zWqFN Here is the methodology http://trtl.bz/morningstar-risk-methodology
- Riskalyze Announces Autopilot for Retirement Plans, a Robo for Advisors, Plan Sponsors and Participants http://blog.riskalyze.com/post/147348131286/riskalyze-announces-autopilot-for-retirement
- New Risk Models Suggest that Diversification is Not Always Good http://trtl.bz/diversification-not-good “With the help of diversification, risk is reduced by investing in a variety of assets … However, the risk will only be reduced for the idiosyncratic part of the risk for each asset. The systematic risk (the risk that is common to all of them, such as the state of the economy) cannot, by definition, be diversified, since it is a risk driver that works through all assets.”
- All Models are wrong, but some are useful! Why good Model Risk Management matters. https://www.linkedin.com/pulse/all-models-wrong-some-useful-why-good-model-risk-zollinger-cfa
- The Evolving Quant Finance Curriculum: Think in Code, Young Risk Analyst! http://trtl.bz/garp-think-code
- An Introduction to Portfolio Component Conditional Value At Risk https://quantstrattrader.wordpress....duction-to-portfolio-component-value-at-risk/
- Map Gives Clearer Picture of Pathways That Affect Financial Stability https://financialresearch.gov/from-.../07/14/map-gives-clearer-picture-of-pathways/ I love this map!
- OCC chimes on bank risks in marketplace lending, cyber security and fintech innovation https://www.finextra.com/pressartic...lending-cyber-security-and-fintech-innovation
- Even for me, [Operational Risk Advanced Measurement Approach] AMA models are too complicated http://www.risk.net/operational-ris...16/even-for-me-ama-models-are-too-complicated
- First U.S. Trader Convicted of ‘Spoofing’ Gets Three Years http://www.wsj.com/articles/first-u-s-trader-convicted-of-spoofing-gets-three-years-1468442317
- 86th Annual Report, 2015/16 http://www.bis.org/publ/arpdf/ar2016e.htm
- Basel III's Net Stable Funding Ratio (NSFR) - FAQs issued http://www.bis.org/press/p160713a.htm
- Revised securitisation framework with capital treatment for "simple, transparent and comparable" securitisations http://www.bis.org/press/p160711.htm
- Risk Governance 2020 http://www.ey.com/GL/en/Industries/...ing---Capital-Markets/ey-risk-governance-2020 Includes a framework for the roles (CEO, CRO, CFO) in risk appetite, here at http://trtl.bz/ey-risk-appetite
- Taking the offensive: Working together to disrupt digital crime https://home.kpmg.com/uk/en/home/in...orking-together-to-disrupt-digital-crime.html Report here http://trtl.bz/kpmg-disrupt-cybercrime
- Ft.com on the Future of Insurance http://www.ft.com/reports/future-of-insurance And in case you missed it (May 2016) http://www.ft.com/reports/risk-management
- Bank of England: Financial Stability Report, July 2016 http://www.bankofengland.co.uk/publications/Pages/fsr/2016/jul.aspx
- Natural Resources Risk Index 2016: A view from the boardroom (50 risks, split into five megatrends) https://www.willistowerswatson.com/en/insights/2016/06/natural-resources-risk-index-2016
- Climate Change: Why Financial Institutions should take note http://globalriskinstitute.org/publ...-why-financial-institutions-should-take-note/
- Transparency in corporate reporting: assessing emerging market multinationals (2016) http://www.transparency.org/whatwed..._reporting_assessing_emerging_market_multinat
- Pinkerton Launches Report that Assesses and Illustrates Corporate Risk Across the Globe http://trtl.bz/29U32Dy “The Pinkerton Risk Index Report takes into account 83 different underlying variables that correlate to critical business risk areas, such as natural disasters, infectious disease, terrorism, economic structure, societal upheaval, and information and technology, and determines how prevalent each risk is in a certain country. Through the use of big data analysis and econometric methods, Pinkerton is able to assign every country with a Risk Index Score.” Here is report http://trtl.bz/pinkerton-risk-index
- Accountants, Auditors to Get a New Ethics Rule Book http://www.wsj.com/articles/accountants-auditors-to-get-a-new-ethics-rule-book-1468283179 “The new IESBA rules—about 20 pages— offer straightforward guidance on what an accountant who discovers or suspects wrongdoing should do.”
- Computer coding error costs Citigroup $7 million (operational risk) https://www.finextra.com/newsarticle/29175/computer-coding-error-costs-citigroup-7-million
- Trading: What happened when the pit stopped (The Nymex floor brought wealth for many without pedigree but electronic trading has blocked the path) https://next.ft.com/content/4d221b22-3dfb-11e6-8716-a4a71e8140b0
- How a Broke Little Island [Puerto Rico] Beat the Hedge Funds http://www.slate.com/articles/business/moneybox/2016/07/how_puerto_rico_beat_the_hedge_funds.html
- The Inner Lives of Markets (ft.com review) https://next.ft.com/content/4509ef0c-2f44-11e6-bf8d-26294ad519fc “The book does a good job of showing the limitations of narrow economic theory, since markets rarely feature rational people with perfect knowledge.” The book is here https://www.amazon.com/dp/1610394925/?tag=bt077d-20
- Makers and Takers: The Rise of Finance and the Fall of American Business https://www.amazon.com/dp/0553447238/?tag=bt077d-20 (I haven’t read this yet, but it’s queued up!)
- Think Twice by Michael Mauboussin https://hurricanecapital.wordpress.com/2016/07/12/think-twice-checklists/ The book is here https://www.amazon.com/dp/B004OC07AI/?tag=bt077d-20
- GARP’s new Foundations in Financial Risk Management (Level 1) http://www.garp.org/#!/courses/foundations-of-financial-risk Here is the brochure http://trtl.bz/GARP-L1-foundations
- Robert Shiller’s Yale Coursera course on Financial Markets https://www.coursera.org/learn/financial-markets
- Coursera's Statistic with R Specialization https://www.coursera.org/specializations/statistics I am auditing this for a refresher; it is excellent (I am in the 2nd course, Inferential Statistics https://www.coursera.org/learn/inferential-statistics-intro)
- New Datacamp course: I recently completed Introduction to Credit Risk Modeling in R by Lore Dirick (excellent and highly recommended!) https://www.datacamp.com/courses/introduction-to-credit-risk-modeling-in-r
- New Datacamp course: I had the honor to be among the beta testers for their newest course Introduction to Portfolio Analysis in R by Kris Boudt (also recommended!) https://www.datacamp.com/courses/introduction-to-portfolio-analysis-in-r
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