23 Jan 2015

The ECB Strikes Back

After years of stalling, the European Central Bank (ECB) finally launched a meaningful quantitative easing (QE), or bond-buying program. ECB President Mario Draghi announced that the ECU will buy €60 billion, which at today’s rate is roughly equivalent to $69 billion dollars. The program will begin in March and is expected to last through at least September 2016, which means that the ECB is expected to spend close to €1… Read More

22 Jan 2015

Burgernomics

The Swiss National Bank (SNB) revaluation of the Swiss franc caused me to look at The Economist magazine’s ‘Burgernomics’ website (which can be found here). While it may not be popular with high minded economists, the Burgernomics site attempts to put a fundamental value on currencies from around the world by looking at the cost of buying a Big Mac in each country. In theory, a Big Mac ought to… Read More

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

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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

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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

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18 Dec 2014

ALM Insights – December 2014

ALM Insights is focused on banks and other institutions that use their portfolio to manage risk on both sides of their balance sheet. It takes an in-depth look at securities investment strategies, balance sheet and asset/liability strategies, regulatory topics and general economic information. To view this issue, click the image below. In This Issue: King Dollar Finally, A Regulation You Can Opt-Out Of Reading The Tea Leaves

19 Nov 2014

Are Banks Safer?

The mantra coming out of the 2008 financial crisis was that banks that are ‘too big to fail’ are simply too big. Our government passed the Dodd-Frank Wall Street Reform and Protection Act and the countries from the G20 got together to create the Financial Stability Board (FSB) in an effort to create a safer banking system. One of the great ironies of the too big to fail problem is… Read More

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18 Nov 2014

Japan is in Recession. When is it Not in Recession?

Not a single major Wall Street economist forecast that the Gross Domestic Product (GDP) in Japan contracted in the third quarter, so yesterday’s economic release that showed an annualized loss of -1.6 percent came as a real surprise. The average forecast, according to the Wall Street Journal was for a positive gain of 2.25 percent. The chart below shows the growth of the US and Japanese economy from an equalized starting… Read More

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