12
Jan
2015
Finally, A Regulation You Can Opt-Out Of
In the December 2012 issue of ALM Insights, I wrote an article titled Basel III’s AFS Provision. At the time of the article, the provision detailing the effects of Accumulated Other Comprehensive Income (AOCI) on regulatory capital had been delayed due to a “wide range of views”, and the final outcome was still very much up in the air. Few in the banking industry thought that forcing banks of all… Read More
12
Jan
2015
Labor Market Improving, More Needed
The Bureau of Labor Statistics (BLS) reported Friday that the labor market improved in December and for 2014 as a whole. In December, payrolls increased by 252,000 and over the course of the year, 2.95 million new jobs were created, the most added in a single year since 1999. The newly created jobs were one of the key elements in the falling unemployment rate, which started the year at 6.7… Read More
9
Jan
2015
Inflation Expectations in 2015
In my judgment, the biggest stories of 2014 were falling interest rates and oil prices. I’ve written that most people expected interest rates to rise and no one expected a major drop in oil prices. The combination of those two things, plus the unexpected rise in the U.S. dollar (a big story, but not as big as the first two) means that inflation expectations have fallen dramatically in the U.S…. Read More
8
Jan
2015
The Specter of Deflation
I almost always skip the opinion section in nearly every publication that I read. When I do read an opinion piece, it’s because it’s written by someone that isn’t affiliated with the editorial board and someone that I admire. Back in November, I read an editorial in the Wall Street Journal by John Cochrane, a respected University of Chicago professor and one of the world’s leading experts on central banks… Read More
7
Jan
2015
As January Goes, So Goes the Year
The talking heads on CNBC have been talking a lot about how the first few days of trading this January are a lot like the first few days of last year: the polar vortex, nervousness about the economy and sharply falling stock prices. In fact, that’s all true, but I’m hard pressed to draw any implication from the similarities. First of all, we’re talking about five data points – almost nothing… Read More
6
Jan
2015
A Great Year for Bond Investors
Bond investors were expecting a lemon going into 2014 and got lemonade instead. Institutional investors tend to look down their noses at ‘retail’ investors, but they are frequently guilty of the same problems, which in this case, was recency. In general, recency refers to applying what’s happened in the recent past into the indefinite future. For bond prognosticators, interest rates rose and bond prices fell in 2013, so it was… Read More
5
Jan
2015
Economic Growth: Past, Present and Future
Each month, Bloomberg asks 75 professional economists to forecast a variety of economic indicators. At this time last year, the median forecast among the economists for inflation-adjusted (or real) economic growth was 2.6 percent. At this point, we don’t have enough data to say what actually happened, but it looks as though the estimates won’t be too far off base. Assuming that the fourth quarter numbers come in as… Read More
2
Jan
2015
Stocks Enjoyed Amazing Results in 2014
Last year was a mixed bag for stocks. The headline index that most professional indexes follow, the S&P 500 had a great year, up 13.68 percent. I looked at all of the annual returns since 1926, the year when good quality data is thought to begin, and found that 2014 ranks 46th out of 89 years, putting it in the 51st percentile – basically the center of the distribution of returns. Early… Read More
31
Dec
2014
2015: The Year Ahead
On the last day of the year, it’s natural to reflect on the year that’s passed and wonder about what the 2015 might bring. In the next few weeks, I will do my fair share of post-mortem analysis and offer a few thoughts about the year to come. Of course, one of the lessons from 2014 is that it’s tough to predict the future. I’m thinking about how ‘everyone’ thought interest… Read More
30
Dec
2014
Insider Trading Made Easy
Just before the 2008 financial crisis, a Wall Street insider tipped off the Securities and Exchange Commission (SEC) to insider trading at a large, successful, but largely little known hedge fund, the Galleon Group. The founder, Raj Rajaratnam, had a vast network of contacts that he would pay in exchange for confidential information about a company that would affect its stock price when the information became public. Ultimately, he was… Read More