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Showing posts with label mutual funds. Show all posts
Showing posts with label mutual funds. Show all posts
Monday, January 27, 2025
Thursday, January 29, 2015
Monday, August 18, 2014
Financial Sarcasm Roundup for 08/18/14
It's time for me to spew my weekly cynicism at the financial world. Let's go.
Chair Yellen's upcoming Jackson Hole appearance is worth watching for what she says about Americans stuck in part-time work. Jeez-louise, do you think she'll admit that the Fed's low-interest rate policy has little to do with this? Keeping interest rates low has kept non-viable businesses alive and priced many Americans out of first-time home purchases. It has had little effect on spurring new job growth, as the St. Louis Fed admitted in April 2013. Ms. Yellen is wasting her time if she thinks the Fed can solve the economy's structural problems with more credit. Anyone at Jackson Hole brave enough to dissent won't be heard among the crowds of central bankers snoring away.
Bond analysts tell investors not to worry about the fixed-income market's size in the mutual fund universe. This is too funny. Comparing the bond funds' size to the total fund universe and saying it's normal ignores how central bank stimulus has inflated equity valuations along with bond valuations. A normal share of a multiple asset bubble is still an inflated share. Comparing cash reserves to a previous bond market rout ignores the zero-interest rate policy that was not present in the last bear market. I don't know what bond analysts are smoking but they need to stay downwind of sane investors.
The ECB is not making that case to banks that its cheap cash is worth taking. Remember that the ECB is not the Fed. It does not have the same policy approach to repos or bank reserves. Euro-area credit institutions hold their reserves with their national central banks, not with the ECB, so enforcement requires more coordination than in the US. This means quantitative easing looks very different in Europe, and proceeds more slowly. I expect the ECB's LTRO to give way to more STRO, as the ECB learns the Fed's lesson of moving its duration pig-in-a-python toward the short end of the yield curve. This will of course increase the ECB's risk of insolvency, just as the Fed has larded up its balance sheet with low-quality assets. It also risks shutting off funding for the various troika bailouts in the eurozone, if interest rates rise. That would be very good for my personal bet against the euro.
These central banks are a rich source of sarcasm this week, if nothing else. They have no idea how much fun they add to my life.
Chair Yellen's upcoming Jackson Hole appearance is worth watching for what she says about Americans stuck in part-time work. Jeez-louise, do you think she'll admit that the Fed's low-interest rate policy has little to do with this? Keeping interest rates low has kept non-viable businesses alive and priced many Americans out of first-time home purchases. It has had little effect on spurring new job growth, as the St. Louis Fed admitted in April 2013. Ms. Yellen is wasting her time if she thinks the Fed can solve the economy's structural problems with more credit. Anyone at Jackson Hole brave enough to dissent won't be heard among the crowds of central bankers snoring away.
Bond analysts tell investors not to worry about the fixed-income market's size in the mutual fund universe. This is too funny. Comparing the bond funds' size to the total fund universe and saying it's normal ignores how central bank stimulus has inflated equity valuations along with bond valuations. A normal share of a multiple asset bubble is still an inflated share. Comparing cash reserves to a previous bond market rout ignores the zero-interest rate policy that was not present in the last bear market. I don't know what bond analysts are smoking but they need to stay downwind of sane investors.
The ECB is not making that case to banks that its cheap cash is worth taking. Remember that the ECB is not the Fed. It does not have the same policy approach to repos or bank reserves. Euro-area credit institutions hold their reserves with their national central banks, not with the ECB, so enforcement requires more coordination than in the US. This means quantitative easing looks very different in Europe, and proceeds more slowly. I expect the ECB's LTRO to give way to more STRO, as the ECB learns the Fed's lesson of moving its duration pig-in-a-python toward the short end of the yield curve. This will of course increase the ECB's risk of insolvency, just as the Fed has larded up its balance sheet with low-quality assets. It also risks shutting off funding for the various troika bailouts in the eurozone, if interest rates rise. That would be very good for my personal bet against the euro.
These central banks are a rich source of sarcasm this week, if nothing else. They have no idea how much fun they add to my life.
Saturday, April 19, 2014
Recent Wisdom From Financial Fools
I have learned about as much from watching stupid people do dumb things in finance as I have from formal education and autodidaction. Fools are better teachers than they will ever realize.
Leveraged funds continue to use high-frequency trading strategies even though large institutions increasingly route their orders to negate the HFT advantage. All of the computational horsepower devoted to HFT will gradually lose its reason to exist as large block trades in dark pools go elsewhere. Math wizards earning huge sums in hedge funds will wonder where it all went. Hedge fund fools are not prepared for the next financial crisis.
Crypto-nerds still love Bitcoin even though its exchanges are collapsing. The myth of anonymity dies hard but the magical thinking of child-like Bitcoin fans is an impenetrable shield against real-world hardship. I really think a lot of these people live with their parents or have marginal careers. There is no other way they could have the free time to jerry-rig video cards that mine Bitcoins. Digital currency fools are not prepared for the real-world consequences of shady financial dealings.
Retail investors still love actively managed mutual funds. They ignore the preponderance of evidence for the advantages of low-cost index funds. The siren song of outperformance dies hard in the minds of people disinclined to think critically. Investing fools don't mind throwing money away on costly, underperforming financial products.
A handful of prominent San Franciscans still find the phony tales of a Stolen Valor con artist to be enthralling. Evidence and facts count for less than emotions when naive people commit their prestige to a charlatan's schemes. Google searches make due diligence easy but some business "leaders" would rather not take the time. I guess keeping up appearances at the City Club matters more than integrity. Elite fools will be blindsided by subpoenas even though they had plenty of warning.
I laugh at fools and I avoid making their mistakes. I love it when humans who have learned nothing make the same mistakes over again. It is too easy to outperform investors who play weak hands.
Leveraged funds continue to use high-frequency trading strategies even though large institutions increasingly route their orders to negate the HFT advantage. All of the computational horsepower devoted to HFT will gradually lose its reason to exist as large block trades in dark pools go elsewhere. Math wizards earning huge sums in hedge funds will wonder where it all went. Hedge fund fools are not prepared for the next financial crisis.
Crypto-nerds still love Bitcoin even though its exchanges are collapsing. The myth of anonymity dies hard but the magical thinking of child-like Bitcoin fans is an impenetrable shield against real-world hardship. I really think a lot of these people live with their parents or have marginal careers. There is no other way they could have the free time to jerry-rig video cards that mine Bitcoins. Digital currency fools are not prepared for the real-world consequences of shady financial dealings.
Retail investors still love actively managed mutual funds. They ignore the preponderance of evidence for the advantages of low-cost index funds. The siren song of outperformance dies hard in the minds of people disinclined to think critically. Investing fools don't mind throwing money away on costly, underperforming financial products.
A handful of prominent San Franciscans still find the phony tales of a Stolen Valor con artist to be enthralling. Evidence and facts count for less than emotions when naive people commit their prestige to a charlatan's schemes. Google searches make due diligence easy but some business "leaders" would rather not take the time. I guess keeping up appearances at the City Club matters more than integrity. Elite fools will be blindsided by subpoenas even though they had plenty of warning.
I laugh at fools and I avoid making their mistakes. I love it when humans who have learned nothing make the same mistakes over again. It is too easy to outperform investors who play weak hands.
Monday, March 26, 2012
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