We talked about grandad who came to Newcastle in the 1950s as a Commonwealth immigrant and registered as a peddler. This involved selling household goods out of a suitcase on credit. The credit aspect was appealing because collections meant an opportunity for him to sell more goods. Losses given default were 100% and so it […]Read More
Confirmation Bias We are reading Michael Lewis’s latest book the “The Undoing Project” which is about the Nobel Prize winning behavioural economists Tversky and Kahneman. The book has made us question if a degree of confirmation bias is setting into this market. It has continued to rally with very low volatility despite increasing warnings of […]Read More
Their hit single “If You Tolerate This Your Children Will Be Next” and the song’s line “If I can shoot rabbits/I can shoot fascists” come from the Spanish Civil War that Welsh volunteers surprisingly fought in. We highlight this only to illustrate how deeply emotive politics is. As investors we do not get involved in […]Read More
Little Blighty On The Down* Central Banks are rolling back Quantitative Easing and their associated liquidity programmes. One such programme, the Bank of England Term Funding Scheme, is expiring in February next year. It currently stands at £75bn and has provided UK banks with cheap term funding to make consumer and business loans. Some commentators have […]Read More
The original 1990 series of House of Cards was set around a Conservative Party leadership challenge and is said to have drawn inspiration from Macbeth and Richard III. For TV buffs it is a must see. My turn on the policy joy-stick The pendulum is swinging from central bankers and monetary policy to government and […]Read More
Inflation and Slack That is just an anecdote which in itself has no meaning but we note that some economists are calling the recent disinflation transitory, particularly in the US where a large component was caused by a wireless price war. Oil prices are also starting to pick up again (albeit from low levels). With oil supply […]Read More
Behavioural Finance Good Judgment is a commercial spin out of a project that was funded by the US Intelligence Department after the forecasting failures of 9/11 and Iraq’s Weapons of Mass Destruction. The project was a big statistically measurable success and formed the basis of Phil Tetlock’s excellent book “Superforecasting: The Art and Science of […]Read More
Written records show hurricane impacts in the Caribbean going back to 1600s. They are unfortunately a part of human history. They used to savage trading ships, fishing vessels, homes, plantations and cause many deaths. The good news is that people and economies always bounced back. Current damage assessments show the economic impact of Irma for […]Read More
Netflix and the HY bond market Speaking of which, we read with interest that Netflix increased its cash burn from $1.7bn last year to $2.5bn this year on rising content costs. The content is really great, which is what you would expect for a company that has produced 4 of the 10 most expensive TV series […]Read More
Fire and Fury The recent market rally stopped in its tracks and reversed quite sharply this week. The reversal coincided with Tuesday’s comments by President Trump on further aggression from North Korea being met with “Fire and Fury”. Also, Disney ended its distribution deal with Netflix which caused a pause in the perpetual business model […]Read More
Zero balance transfers and stoozing We have mentioned UK consumer leverage as an idiosyncratic concern in the current credit cycle. One practice that demands scrutiny is EIR (Effective Interest Rate) modelling of credit card balances that are transferred at 0% for up to 49 months. Banks assume an average balance, maturity and EIR for the […]Read More
Central Bank Shuffle Despite the recent fall in inflation prints we believe the focus of the major central banks is still on policy normalisation. The broad direction of travel is the same for the FED, the BoE, the BoC and the PBoC. This is quite possibly being coordinated to prevent destabilising FX moves. We describe […]Read More
Back to the markets and Snapshots is analysing credit opportunities as the markets pause ahead of an August summer lull. We have been saying for some time that opportunities in liquid credit are sparse away from bank capital. Structured credit still presents good risk adjusted value and we are excited about a new asset class […]Read More
Co-ordinated unwinding This is because global yields are still reeling from the aftershocks of last week’s central bank messaging. This is now feeding into the equity markets and credit spreads. The obvious risk here is that Mx Market (yes that is a deliberate gender neutral prefix) over-reacts and over-discounts what ze (another gender neutral prefix) […]Read More
The result was a surprise. However, this morning the Conservative Party reached agreement with the Democratic Unionist Party of Northern Ireland to form a minority government which should mean a soft Brexit stance with the EU. We think this explains the muted reaction in the FX, rates, credit and equity markets this morning. Banco Popular […]Read More
And is there a quantifiable measure of “love” between human groups that can be analysed and does it follow its own cycle, like the business cycle, the debt cycle or the default cycle? We will leave that to social scientists and historians to ponder in the new data rich world we inhabit. The Climate Sceptic […]Read More
European Renaissance The original renaissance was a cultural movement that lasted from the 14th to the 17th century and is regarded as the cultural bridge between the middle ages and modern history. The latest renaissance was evident at the recent SALT investment conference in Las Vegas. Among the reasons cited were lower P/E ratios, higher […]Read More
Data mining This is because historic simulations show it is statistically not significant. In the words of Ron Burgundy it’s a case of “60% of the time it works all the time”. On a more serious note in the world of big data, machine learning and systematic trading, if a simple seasonal pattern existed it […]Read More
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