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Credit Market Turbulence. How To Think About Credit Investing August 2014 PDF Print E-mail
Written by Burnham Banks   
Wednesday, 06 August 2014 06:38

After a year of abnormally low volatility, high yield markets are correcting across the globe. Since 2008 the high yield market has experienced 3 bouts of turbulence

  1. The European sovereign crisis in 2011.
  2. The “Taper Tantrum” of 2013.
  3. The last few weeks.

Why have high yield credit markets exhibited this volatility recently?

Credit Spreads in Pictures. Aug 2014 PDF Print E-mail
Written by Burnham Banks   
Tuesday, 05 August 2014 23:34


Without considering fundamentals, lets look at some pictures…


The global economy is in relatively rude health. The US continues to grow and employment is becoming broader based. The UK is one of the faster growing economies in the developed world. China is recovering nicely as the PBOC eases. The ECB is underwritten the Eurozone economy and is cleaning up the banks. LatAm and some other emerging markets are flirting with stagflation but China, India, Indonesia, are healthy. The MENA is in turmoil and but this is in part a consequence of their waning energy importance. On balance, the world economy looks alright. But there is a right price for everything. Sadly we just don’t know what it is until after the fact. So here are a few pictures for you to make up your own minds.

Last Updated on Wednesday, 06 August 2014 06:37
Peak Corporate Profitability. Labor's Share of Profits. Intellectual Property. PDF Print E-mail
Written by Burnham Banks   
Tuesday, 24 June 2014 00:07

It is difficult for an individual to hold, accumulate or acquire intellectual property directly. Storage capacity is one issue. At best an individual can hold or acquire the last mile of the intellectual property chain. The most practical way for an individual to own intellectual property is through ownership of a company or business. (Higher education and vocational training are examples of acquiring non exclusive access to existing technology and need separate treatment.)

Ten Seconds Into The Future. July 2014 PDF Print E-mail
Written by Burnham Banks   
Tuesday, 15 July 2014 23:19

Equity, bond, FX, swaption and commodity volatility have one thing in common. They have contracted steadily from 2008/9 levels to 2006 levels, almost in lockstep. To some, this is a sign of complacency, to others, calm.

Last Updated on Wednesday, 16 July 2014 06:41
THoughts about Asset and Goods Price Inflation. Explaining Stock and Bond Market Performance under QE. PDF Print E-mail
Written by Burnham Banks   
Wednesday, 18 June 2014 23:46

There is more to MV=PQ than meets the eye.

Central banks can expand M but this does not mean they can expand MV. V can always fall to compensate for the increase in M, as has happened for most of the period 2008 – 2014. The maintenance or expansion of V is dependent on a number of things. Necessary conditions include a functioning fractional reserve banking system with sufficient capital and appropriate reserve ratios to transmit the increases in V. Sufficient conditions include a health demand for credit which is dependent on business sentiment.

Assuming that it is possible to increase MV, the impact on PQ and its constituents remain complicated. While PQ is a scalar, P and Q are in fact vectors. Q is a list of all the possible stuff you can spend money on, and P is the corresponding vector of prices. A couple of things to note about Q are that it includes goods, services, and assets, indeed, anything you can allocate money to, and that while the scalar PQ must rise if MV does, its not clear a) which good, service or asset market is experiencing rising nominal output or b) for a given good, service or asset market experiencing rising nominal output whether price, real output or both are rising. In other words, even if MV and therefore PQ is rising, some markets may experience falling nominal output while others may experience rising nominal output and in markets with rising nominal output it could all be due to inflation or real growth or both, but you couldn’t control which. 

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