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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
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.)

Bank Regulation Investment Theme. PDF Print E-mail
Written by Burnham Banks   
Monday, 12 May 2014 01:01

One of the most interesting and rewarding investment opportunities currently available trades on the reform of the banking sector. We live in a world where, unfortunately, pragmatism has for too long trumped ideology. This lack of a guiding philosophy had led banks to myopia and to overreach themselves resulting in over-levered balance sheets and inappropriate operating practices, culminating in the financial crisis of 6 years ago. Regulators are still trying to reform the banking system and this has produced a host of investment opportunities. 

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. 

Quantitative Easing and Taper in the Context of Debt Monetization. PDF Print E-mail
Written by Burnham Banks   
Tuesday, 29 April 2014 01:28


If we stop thinking about QE as an expansionary policy but rather as a treasury refinancing operation and debt monetization, the behavior of the Fed becomes clearer. For one, the Fed surely understands that without reducing the banking system’s reserve requirements, the money multiplier and the velocity of money cannot accelerate and thus asset purchases have very little impact on real or nominal output. Indeed by increasing capital requirements, the Fed is effectively neutralizing any expansionary effects of QE. A side effect of refinancing the treasury is an expanded balance sheet which risks runaway inflation should the velocity of money pick up. Any sign of improved fiscal position must encourage a corresponding reduction in asset purchases.

The impact on pricing of the term structure due to the Fed going forward should be regarded as at best neutral.


Last Updated on Monday, 12 May 2014 01:02
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