Business

Stock prices suffer a one-two punch. Rising raw material prices tends to compress margins or earnings, and rising interest rates tend to compress p/e ratios, as earnings yield must compete with interest rates.

Unknown.

Firstly, inflation is always and everywhere a monetary phenomena. Secondly, the Phillips curve is dead and buried. US employment, and domestic measures of capacity utilization didn't even work 40 years ago! We stuck a stake in the heart of such measures about 15 years ago.

Unknown.

Today away from monetary policy, global factors drive inflation, and for tangible goods emerging market drivers are key. We note commodity consumption per unit of GDP explodes as per capita income rises from $3000/yr into the $5000 to $15000 bracket.

Unknown.

Crime, for those living in poverty, can become a business. Much like any other capitalist enterprise, their business further exacerbates inequality in society. The poor feel aggrieved by inequality - they exist in a world where they are disproportionately unrewarded for their input into the economy.

Unknown.

This is not just about the elephant- it's about there being different types of elephants. Looking at the market in simplistic distribution perspectives misses the true effect, threat and risk of large movements and upcoming changes.

Physics professor studying complex systems, crowd behavior, and social networks.

The actual actions of the people in the market are the things that determine what happens next within the market.

Physics professor studying complex systems, crowd behavior, and social networks.

Looking at the bond market to provide you protection from inflation is a fools game. If you are really worried about inflation- you have to buy stocks.

We compute some level of default and losses because of those defaults- and perform IRR calculations to create yields and then we haircut it some more because, in truth, we have no idea!

The true risk with all of these securities is the fact that real-yields are actually negative. So I don't think this is an issue of ability or willingness to pay, it's really that you are getting negative real returns.

The only value that government paper provides you at this point is, basically, the fact that if everything goes to 'hell in a handbasket' that you have some assets of value.

Academics, research analysts, and even regulatory agencies have recognized that today's markets are more liquid and less expensive than before the advent of HFT. This is no doubt due in part to the improvement in liquidity provisioning that has arisen from the better risk management that computers provide over human traders.

To take the example to an extreme, consider how many real estate or private equity transactions are currently executed by a computer versus a human being. Being an 'alpha-less market maker' in such a market is not possible.

To give a sense of perspective, consider that an HFT making $0.001 per share in SPY has an alpha that is worth roughly 0.0008%. A one penny spread is ten times this amount. In contrast, long term investors are able to effectively employ active strategies. Their alphas are orders of magnitude greater than the cost of crossing the spread.

Once one understands the disadvantage of being at the bottom of the stack, it becomes much easier to understand the importance of speed in HFT. As new price levels form, HFTs compete with other HFTs to join the new price as quickly as possible in order to secure advantageous stack position for passive orders.

The majority of US Equity HFT is employed in the strategy of liquidity provisioning, also known as electronic market making. Historically, such a service was provided by NYSE specialists and NASDAQ market makers but, with the advent of decimalization, human specialists and market makers were no longer able to keep up with the liquidity demands of investors and automated technology became necessary for this function.

I think the biggest risk is the situation with the EMU as I have explained. I can see that this has the potential to derail the world economy in the same way the 2008 credit crisis did.

Economist who coined the term "BRICS" for emerging markets.