The credit crisis visualised

This is an interesting animated film on the origins of the crisis, it holds with the view that banks were only ever a part of the problem and not necessarily the sole cause. Central banks have a lot to answer for, as does all of society because when you stop saving and instead spend somebody else’s savings it means that eventually, when it comes time to repay your loans that not only is the money not there, but the productivity has likely suffered as well – income based on lending gives the artificial appearance of wealth but it is a mirage.

part 2

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Toxic traders, capitalising on volumes

Joe Saluzzi of Themis Trading (I mistakenly read the link initially as ‘the mistrading’!) have recently published a paper which accuses traders of intentionally trading huge volumes where they buy and sell for the same price and in the process make a half a cent per share. The volume of trading is fictitious ‘high frequency traders’, what they do is buy and sell and collect liquidity rebates from the exchange (note: 50 milliseconds is a huge amount of time) in this game. Do it 8 billion times and it really starts to add up.

This is just depressing, actual investors don’t get to join in because the firms engaged in this are doing it within the actual exchanges using the fastest computer technology available. They also have an unfair advantage in how they trade because they use rules intended to match buyers and sellers to their advantage, they find hidden liquidity and in essence remove it from the market as profit.

The most powerful deterrent would be to make a rule …

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5 keys to the market, stock indicators to watch

Todd Harrison of Minyanvill.com talks to Yahoo!’s tech-ticker team about the five signals he sees as being those that fundamentally move the market.

1.Treasury yields: The 10-year yield settled at 3.50% on Friday, down from its recent rise to 3.78% on June 19, but still well above the January lows around 2.7%. Whether traders view this rise as a sign of “normalization” or incipient inflation will help determine the market’s fate, Harrison says.

2.Inflation vs. Deflation: Even Alan Greenspan knows the Fed faces a major challenge of needing to rein in excess liquidity before inflation takes hold, but not too soon as to risk choking off the recovery. Inflation is clearly a long-term threat, but Harrison says there’s 75% odds deflation persists for the near-term. (great piece on this by Morgan Stanley here)

3. New Supply of Stock: UBS’s $3.5 billion stock sale Friday is just the latest in a series of secondary offerings from banks. Some are worried about the pure supply and demand issues, but Harrison is …

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Boom Bust, house prices, banking, and the depression of 2010 by Fred Harrison (book review)

I have been quite public about my belief in property tax (caveat being we should have far less income tax/levies etc. perhaps a ‘flat tax’ would be best), and if there is one book that has really helped to shape that opinion quite succinctly it is Fred Harrison’s masterpiece on the topic, and the subject of this review ‘Boom Bust‘.

Fred Harrison saw the property crash in the UK of 1989/90 in 1980, and furthermore, he named a date, he also named a date of specifically 2010 (as a bottom, not as the ‘start’ of a crash) in the mid 90’s. How? It is due to his analysis which goes back to the 1500’s of property cycles, and while I am still sceptical about his ’18 year’ cycle, the one thing that fully convinced me was the basis and need for a more rational and working approach to property and taxation of same, or the ‘democratisation …

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IMF Report on Ireland, condensed.

The IMF released their report on Ireland yesterday, here are some of the bullet points of the report.

Executive summary:

Given our serious imbalances Ireland was especially vulnerable to the recent global shocks. Specifically, over reliance on construction, financial intermediation, and this was coupled with a loss of competitiveness. Our expected drop cumulative drop in GDP of 13.5% to 2010 is the largest amongst advanced economies. The decline in wages will need to be sustained to help redress our cost disadvantage. Rapid progress on bank restructuring is critical. Authorities have taken important steps towards stabilization through the blanket guarantee. ECB is providing vital liquidity. NAMA is potentially the right mechanism, but it requires realistic assessments. Fiscal consolidation has begun and must be sustained. A continued commitment is required to address sensitive expenditures including the public wage bill and the scope of social welfare programmes.

1. The Context

The problems in Ireland reflect the unwinding of critical imbalances, easy credit fostered a property bubble, bank exposure to property soared as did the use …

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Alan Blinder talks to Charlie Rose

I know on the last post with Charlie Rose I said ‘this is a must see’ but cancel that, this one is the must see of the day!

This is a conversation about the growing fiscal deficit with Alan Blinder, Professor of Economics at Princeton University and Director of Princeton’s Center for Economic Policy Studies, David Leonhardt of “The New York Times” and Alan J. Auerbach, Professor of Economics and Law, Director of the Burch Center for Tax Policy and Public Finance, University of California, Berkeley

Alan Blinder of Princeton is a brilliant economist with both academic and practitioner experience, I always find his views really interesting.

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Financial Fragility and Corporate Governance in Ireland today

This is footage of a talk given by Prof. Stephen Kinsella of the Kemmy Business School in University of Limerick, about his thoughts on regulation, corporate governance, and the Minsky Hypothesis.

You can watch the whole playlist here. Or go to the Irish CFA channel on youtube and check out the follow on videos, there are six in total, the questions and answer section is particularly interesting to anybody who may have an interest in financial regulation and some of the pitfalls of it, Stephens thoughts are quite refreshing to the normal solutions you’ll hear (although I don’t agree with them all!).

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Inflation or Deflation? 1923 or 1932? What will it be?

I have been a proponent of inflation being the greater risk to society than deflation for quite some time, so all said, I am in the ‘inflation is the true risk’ camp. Interestingly, it is starting to become the topic of the day now and apart from my feelings that a fixed rate now is a good idea, there are two debates from the major money channels below, one is from Bloomberg the other CNBC. They are well worth watching.

The first clip from Bloomberg has Tom Keene, Economics editor and Alan Blinder (formerly of the Fed)  of Princeton University.

The next clip is from CNBC on the same topic, featuring Larry Kudlow, Michael Darda, MKM Partners; Joe Lavorgna, Deutsche Bank and CNBC’s Sharon Epperson.

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Irish economic policy for the crisis: What Next? (second session)

The second session was chaired by John McHale  now of NUIG, formerly of Queens University Canada, who I have emailed back and forth with in the past (so I was really pleased to meet him in the flesh!).

Colm McCarthy (more recently infamous for his role in an bord snip nua) talked about pensions and debt management. The audio on this one is a bit tricky as he was talking away from the camera but it is a great talk, the other segments are here ( part 2, part 3, part 4, )

Philip Lane gave a talk on on the challenges facing Ireland regarding our fiscal policy, the factors affecting Ireland (such as our EMU membership) were raised and his talk was fascinating, he also -and …

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