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Fix one thing, break another. Parallels Between 2001 and 2009. Another Credit Bubble. PDF Print E-mail
Written by Burnham Banks   
Wednesday, 05 December 2012 11:39

The Parallel Stages of the Credit Bubble 2001 versus 2009

Last Updated on Sunday, 09 December 2012 23:52
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Collecting Luxury Watches PDF Print E-mail
Written by Burnham Banks   
Friday, 30 November 2012 01:14

You never really own a Patek Philippe, you merely look after it for the next generation. It has been one of the most successful advertising slogans ever. It appeals to our vanity, yet tempers it, it appeals to our immortality, yet reminds us of our mortality, it panders to our hopes for our progeny, yet gets us to buy today, and by suggesting an element of investment for the future it makes us less price sensitive and willing to move up the complication and price point curve.

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Heptadecagonal Tires PDF Print E-mail
Written by Burnham Banks   
Monday, 26 November 2012 07:33

Anyone who has ever worked in a bureaucracy will have figured out what's wrong with our world. Apocalyptic risks can present themselves in no uncertain terms to the market and still evoke the calmest, most dazed and serene of reactions. Solutions to calamitous problems can stare a herd in the face, and the herd will stare blankly back without even the slightest pupil dilation.

Last Updated on Monday, 26 November 2012 07:38
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Instability: Macro, Banking and Agency: PDF Print E-mail
Written by Burnham Banks   
Thursday, 15 November 2012 05:19

Instability: Macro, Banking and Agency:

 

Thirty years of prosperity, falling interest rates, rising stocks and bonds, moderate inflation and widening inequality of wealth within nations had led to an unstable position. While inequality has receded between countries, it had increased within countries regardless of their economic model or system of politics.

Last Updated on Friday, 30 November 2012 01:05
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Friday Pearls of Folly Nov 9 PDF Print E-mail
Written by Burnham Banks   
Friday, 09 November 2012 01:06

 

The yield on high yield bonds is not very high.

 

The ability of an insolvent concern to raise debt can stave off insolvency.

 

  • I’m sorry, I can’t pay you in silver or gold, will you take an IOU?
  • But that’s what you said last time. Can you pay off the last IOU?
  • Will you take paper money? 
Last Updated on Monday, 26 November 2012 07:31
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Time is Running Out, Even For Countries With Low Borrowing Costs. PDF Print E-mail
Written by Burnham Banks   
Tuesday, 30 October 2012 06:54

 

How does one put an economy in order? An economy is like a business, but it is a lot more complex, with more stakeholders. Still, a business in distress is a good starting point to try to find a way out.  

Last Updated on Tuesday, 30 October 2012 07:00
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Sheep to the Slaughter PDF Print E-mail
Written by Burnham Banks   
Tuesday, 23 October 2012 03:12

The need for political correctness is the tolerated, celebrated suppression of honesty. It conflicts with the goal of transparency. Yet today's world seems to drift toward more political correctness, rhetoric and oratorical populism.

Last Updated on Tuesday, 23 October 2012 03:14
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Friday Pearls of Folly Oct 12 PDF Print E-mail
Written by Burnham Banks   
Friday, 12 October 2012 07:22

Never write off the US consumer, particularly when the Fed is providing them with financing.

Last Updated on Friday, 12 October 2012 07:25
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Friday Pearls of Folly 28 Sep 2012 PDF Print E-mail
Written by Burnham Banks   
Friday, 28 September 2012 02:31

Happy Friday

Last Updated on Monday, 01 October 2012 00:42
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A Potentially Missed Opportunity. Southern Europe Has Bought UK and Germany Time. Will It Be Well Spent? PDF Print E-mail
Written by Burnham Banks   
Thursday, 27 September 2012 00:00

For the US, UK and Germany, a small window remains to raise long term debt. Take the UK for example. They need to issue 30 year debt in quantities sufficient to remove refinancing risk for the next 5 yrs, and then cut tax rates.

Last Updated on Friday, 28 September 2012 02:32
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Friday Pearls of Folly PDF Print E-mail
Written by Burnham Banks   
Friday, 21 September 2012 06:20

Its Friday and its been a long week...

Last Updated on Monday, 24 September 2012 03:11
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QE3. QE(N) PDF Print E-mail
Written by Burnham Banks   
Tuesday, 18 September 2012 07:03

Finally Bernanke has tired of announcing successive bouts of quantitative easing, he's just announced that the Fed will be buying assets until the labour market picks up.

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Asset Allocation Under Acute Uncertainty - The RIsk Neutral Portfolo PDF Print E-mail
Written by Burnham Banks   
Tuesday, 11 September 2012 05:26

Uncertainty and the Futility of Having A View.

 

Financial markets are highly uncertain today. As the great workout of 2008 continues to unfurl, the interplay of politics and policy on economics has blunted the traditional methods of fundamental analysis and asset allocation.

Last Updated on Tuesday, 11 September 2012 05:34
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QE, Debt Monetization and Hyperinflation Risk PDF Print E-mail
Written by Burnham Banks   
Monday, 27 August 2012 06:13

The rescue efforts from 2008 - 2012 to bail out the global economy have resulted in a massive inflation of sovereign balance sheets almost everywhere from the US Fed, to the Bank of England, the Bank of Japan, the Peoples Bank of China, and even the ECB.

Last Updated on Monday, 27 August 2012 06:18
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Liquidity Premia and Financial Oppression PDF Print E-mail
Written by Burnham Banks   
Friday, 24 August 2012 07:50

The co opting of banks in debt monetization, the fear of investors, the shackles of Basel 3, place significant constraints on the banking industry. 

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Being Too Bearish? The Next Bubble. PDF Print E-mail
Written by Burnham Banks   
Wednesday, 05 December 2012 03:48

I've not taken my own advice lately and have been too bearish on risk assets. Entirely my fault for ascribing more weight to fundamentals than I normally do.

Last Updated on Wednesday, 05 December 2012 08:34
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Capital Gains and Long Term Investing PDF Print E-mail
Written by Burnham Banks   
Friday, 30 November 2012 01:02

Capital gains tax should be reduced over the life of an investment. This creates an incentive for long term investment and discourages short term trading. Every year that an investment is kept, there should be a 10% discount on the capital gains tax payable on that investment so that an investment that is held for 10 years attracts no capital gains tax. A similar principal would apply to losses eligible for offset against income or profits. Such loss offsets would decay similarly.

Last Updated on Friday, 30 November 2012 01:05
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Instability: Labour PDF Print E-mail
Written by Burnham Banks   
Monday, 26 November 2012 07:18

For as long as one can remember the path to a better future began with a college degree. Especially in emerging markets where college graduates used to be a scarce commodity this was particularly true. In small, rapidly growing markets the scarcity premium was high. Even public sector jobs paid a substantial premium for college graduates while providing them with job security.

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Another Intractable Problem: Economic Growth, Sovereign Solvency, Inflation and Equality PDF Print E-mail
Written by Burnham Banks   
Wednesday, 14 November 2012 08:45

In early 2012 it gradually became apparent that the world was slipping into a synchronized slowdown. At least it became gradually apparent to slower minds like this one. By mid 2012 it became quite clear that the US recovery which started in August or September 2011 was petering out, Europe had never really picked up since the Summer of 2011 when Greece first exposed the vulnerability of the Union, and China’s slide was gaining momentum. In the last month we have seen better numbers from China, continuing weakness in Europe and in the US, a rebound in the real estate market if nowhere else in that economy.

Last Updated on Thursday, 15 November 2012 05:19
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Engineering Inflation, A Good Idea? PDF Print E-mail
Written by Burnham Banks   
Monday, 05 November 2012 01:23

Since the great transfers following the great crisis of 2008 and the realization that debt levels had surged out of control, inflation has seemed like a tantalizingly viable and easy solution to the debasement of debt.

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The Thirst For Yield (and other Class A drugs) PDF Print E-mail
Written by Burnham Banks   
Wednesday, 24 October 2012 01:06

The past decade has seen the emergence of the yield junkie. You recognize them from their propensity to pay and subsequently overpay for anything with the tiniest shred of yield from investment grade corporate bonds to sovereign bonds to AAA rated junk. In the past couple of years, the yield junkie has trampled on spreads and thinned out yields across investment grade and high yield bonds. The more hardened ones even buy equities for an at risk dividend payout.

Last Updated on Friday, 04 January 2013 06:41
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Human Nature PDF Print E-mail
Written by Burnham Banks   
Wednesday, 17 October 2012 00:45

Morality and social norms are informal rules of law which humans invent to deal with conflicts which do not yet warrant formalization in law. Morality exists for pragmatic reasons, the result of a Folk Theorem.

Last Updated on Tuesday, 30 October 2012 06:56
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Investment Outlook for 4Q2012 PDF Print E-mail
Written by Burnham Banks   
Tuesday, 02 October 2012 02:41

Note that the US economy had begun its recovery in October 2011. Stage 1 of the recovery came from exports. Countries that benefited were not the natural exporters like China and Japan but rather anyone exporting to emerging markets, since they were the only importers with any ability to pay. Now even this game appears to have run its course as every country on earth seeks to export amid the current synchronized slump. Exacerbating this is a dearth of trade finance whose natural source has been the European banks who now find themselves a little bit short on capital.

Last Updated on Wednesday, 03 October 2012 00:45
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Hedge Funds Ever More Relevant Today PDF Print E-mail
Written by Burnham Banks   
Thursday, 27 September 2012 00:36

Hedge funds are now more useful than ever now that many investors have given up on them.

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QE Is Only Debt Reorganization. Where Is The Business Restructuring? PDF Print E-mail
Written by Burnham Banks   
Monday, 24 September 2012 01:25

I'd like to understand the causality between lower MBS yields and unemployment. I'm sure there is a correlation, but I'm not sure that the dependence is so high.

Last Updated on Monday, 24 September 2012 08:15
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The Consequences of Serial Quantitative Easing, QE3, 4, 5... PDF Print E-mail
Written by Burnham Banks   
Friday, 21 September 2012 06:07

Painkillers are addictive. People follow the path of least resistance. Principles are always compromised. The prudent are the few. And often made to pay.

Last Updated on Friday, 21 September 2012 06:12
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Asian Private Wealth Management PDF Print E-mail
Written by Burnham Banks   
Tuesday, 18 September 2012 02:41

In a previous article (Private Wealth Management) we explored the failings of the current model of wealth management in Asia. Now we look at possible solutions.

Last Updated on Tuesday, 18 September 2012 07:07
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How Emerging Markets Mature and Employment PDF Print E-mail
Written by Burnham Banks   
Tuesday, 11 September 2012 04:42

Having just read the article in the latest Economist magazine on Emerging Market economies creating a welfare state I started thinking about how economies mature.

Last Updated on Tuesday, 11 September 2012 05:35
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Emerging versus Developing Markets; Equities versus Bonds PDF Print E-mail
Written by Burnham Banks   
Monday, 27 August 2012 00:36

Given the fragile state of the global economy the resilience of risky assets is remarkable.

Last Updated on Monday, 27 August 2012 01:43
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Where, When and How Does Quantitative Easing End? PDF Print E-mail
Written by Burnham Banks   
Tuesday, 21 August 2012 12:38

What's all this talk of QE3? The private commercial banks have been big buyers of US treasuries to the extent that they are operating QE3 on behalf of the Fed. Buying has accelerated from 63 billion usd in 2011 to 136 billion usd YTD 2012. The Fed is already the largest lender to the US treasury, ahead of the PBOC.

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