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Michael Parmar  

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  • Is The Current Market Overvalued? [View article]
    Excellent article. you conclude:

    "In my opinion, the stock market today generally does not offer a favorable risk/reward profile"

    I think more and more people will be forming this conclusion and that is when an uptrend loses momentum
    Feb 14, 2013. 09:44 AM | 2 Likes Like |Link to Comment
  • A Statistical Analysis Of S&P 500 [View article]
    Nice article, good to be reminded about how often Gaussian distributions don't fit the data.

    In your next article, why dont you look the other way: if there was a >3sigma down month, what type of month was it followed by?
    if there was a >2sigma down month, whaty type of month was it followd by and so on? That would also be really interesting to see.
    Feb 11, 2013. 06:22 PM | Likes Like |Link to Comment
  • Fasten Your Safety Belts In 2013 [View article]
    I did also say there is a chance of can kicking and if that happens it won't be good for the US or global economy.

    Keynesian stimulus was always predicated on the marginal efficiency of capital - his point was that if there is money in the private sector and it is idle, while the government can spend and CREATE incomes and jobs and invest at a rate above the opportunity cost then it is worth doing.

    I believe right now that a $ is worth more and creates more wealth and incomes in private sector hands than government hands.

    The debt burden can be dealt with over time if the economy grows, the tax base grows, spending is curbed and no additional debt is added.

    Its a long road and we are very unlikely to reach the Keynesian end point you think which is US govt default in an economy crippled with debt. The US is a resilient economy in many respects.
    Feb 4, 2013. 07:50 PM | Likes Like |Link to Comment
  • Fasten Your Safety Belts In 2013 [View article]
    A good short term trading summary :)
    Feb 4, 2013. 07:43 PM | Likes Like |Link to Comment
  • Fasten Your Safety Belts In 2013 [View article]
    Thanks for the comment, indeed the total asset purchase is $85bn per month of $45bn long term Treasury securities and $40bn of MBS.

    The latter is what i was referring to as the two have very different effects on commercial bank balance sheets and the monetary policy transmission mechanism.

    Buying Treasuries off banks reduces their AAA collateral and to maintain a specific investment grade banks have to cut RWAs ( reduce lending - although the effects are more complicated as often the primary dealrs buy the assets from the Treasury and flip them to the Fed)

    Buying Mortgage backed securities for a given size of collateral and risk weighting allows banks to offload risk to the Fed making space for more lending which might not end up in the US mortgage market.

    A lot of Fed funds (QE2) went to foreign banks who shored up balance sheets in Europe with the funds, and this could be happening again ( and some gets recycled back into the US) so the transmission channels are not as straightforward.

    Your point about the adverse financial effects on the average US consumer is a very important and significant one. That is one of the reasons I was referring to the government deficit reduction as an attempt by the US to restructure its economy and things happening in 2013 may well lay the foundation for the next few years. And thank you, exactly Bernanke cannot "fix" underlying trends like reversing the private sector deleveraging.

    What matters ultimately (I believe) is the fundamentals, restoration of business confidence and improved private sector investment. These things will matter and are at present moving in the right direction but the ride is going to be bumpy.

    Private corporations are sitting on a lot of cash, they have cut costs, productivity is up ( hence unemployment will be slow to fall), lots of things could happen, but these companies will only invest if there is a market for their products.

    Somehow the market has mistaken a Fed pump-priming exercise to free bank balance sheets from some RWAs to make room for more lending and improved credit, hoping this time the funds will move to the real economy and particularly into real investment, as a signal that the Fed is restoring demand for goods and services and underpinning asset prices, which it clearly cannot fix as you point out.

    Even the Fed, by stating that it is hoping for QE to work through the asset channel/wealth effects is really hoping that the low interest rate will finally attract investment, and THAT remains its clear policy instrument, because that has the primary wealth effect.

    Nevertheless, the result has been inflated asset/equity priceswhich I pointed out here.
    Feb 4, 2013. 07:38 PM | Likes Like |Link to Comment
  • Resolutions For The Fiscal New Year - Staying On Track Is No Easy Task [View article]
    From your mouths to policy makers ears.....

    Thank you for a clearly written piece, I have great respect for IMF publications and articles and never noticed the presence here.

    For the US the deficit restructuring is tantamount to an economic restructuring that has to occur.

    I have two questions:

    Your multiplier less than 1 depends on relative marginal efficiency of capital and assumptions about which channels a deficit reductions flows into. It would be interesting to know what underpins your assumptions and what elasticities your models generate.

    Particularly for the US, govt deficit reduction could be accompanied by foreign debt repatriation which would have no immediate benefits to the economy ( higher interest rate pressure, recycling of funds into the private savings sector (effects on $ competitiveness uncertain)) but not necessarily into investment sector, unless confidence returns.

    To what extent do IMF calculations/estimates include impact of business confidence and/or consumer?
    Feb 4, 2013. 06:32 PM | Likes Like |Link to Comment
  • Fasten Your Safety Belts In 2013 [View article]
    True, thanks for clarification
    Feb 4, 2013. 05:40 PM | Likes Like |Link to Comment
  • Fasten Your Safety Belts In 2013 [View article]
    The forecast takes into account the Fed's projection of the impact of reduced spending/increased taxes - I read somewhere (or think I saw it in a press conference answer to a question) where Charmain Bernanke vaguely replied that they expect Washington to get about "half way" there to fixing the problems.

    It struck me that with a deficit of $1 trillion, reducing that to half involves - $500bn from the economy.

    Asset purchases are $40bn per month X 12 = $480bn

    Don't those numbers look (coincidentally) close?

    And yes, the market hasn't priced it in.

    They priced in the Fed "juice" (and more) but not the sequester.
    Feb 4, 2013. 05:40 AM | 1 Like Like |Link to Comment
  • Fasten Your Safety Belts In 2013 [View article]
    Thanks for the comment TAS.

    It amazes me how many people forget the heartache of a bad week or quarter once their positions pay off and they convince themselves that what they are doing now is right by looking backwards and ignore the warning signs.


    I'm not doing this for the money or the clients. You do your own research and ignore people like me.

    Feb 4, 2013. 05:24 AM | 1 Like Like |Link to Comment
  • Fasten Your Safety Belts In 2013 [View article]
    No I didn't nor have i claimed to
    Feb 4, 2013. 04:52 AM | Likes Like |Link to Comment
  • Fasten Your Safety Belts In 2013 [View article]
    Thanks for the Comments Jim,

    The question about unemployment is a big one, especially if you add that the ageing population are holding onto their jobs and there is a growing population overall so there are many potential workers in the sidelines who would enter if they thought job prospects would get better.

    While any things point to investments and equity being a good place at times prices are going to be over-inflated.

    Investment is averse to uncertainty and there is more of that to come.

    The US is about to embark on a restructuring which will no doubt lead to investment opportunities in niche spaces and cash coming into play for some companies.

    I'm less certain about the overall effects of the restrcuturing on the US dollar and wouldn't like to predict what they might be
    Feb 3, 2013. 08:13 PM | Likes Like |Link to Comment
  • When QE3 Will End [View article]
    In monetary policy terms, what they are "accommodating" is high growth with inflation prospects.

    Now as you said they have no reason to take their foot off the pedal with your great analogy of inflation being the wall and low unemployment being the destination, and they haven't.

    Yet we seem to be rolling backwards with GDP falling and unemployment rates rising. Makes you wonder what sort of juice they have in the car - is it just smoke and mirrors?

    Who is getting the $40bn asset purchase per month? Sure some of it is going to writing more mortgages but most banks are still paring back on those and /or investing abroad and/or buying govt bonds to repair their balance sheets and lower their own risk weighted assets without boosting investment in the US economy.
    Feb 3, 2013. 04:57 PM | Likes Like |Link to Comment
  • When QE3 Will End [View article]
    Lawrence you are right that paragraph is out of context.

    Here i s the Fed statement from jan30 2101 using the word "after QE ends"

    " the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal,
    Feb 3, 2013. 04:20 PM | Likes Like |Link to Comment
  • When QE3 Will End [View article]
    the 6.5% is linked to INTEREST RATES, not QE!!

    Many in the market think its is linked to QE but read the Feds statement carefully or look at the middle of this article which highlights the paragraph
    Feb 3, 2013. 02:23 PM | 1 Like Like |Link to Comment
  • Sex, Lies And Asset Allocation [View article]
    Nice to have the "bond rotation" view inspected.

    Another argument why the market is running on fumes at the moment.

    I just assessed your question about where the market would be without Fed QE policy which has consistently distorted asset prices:
    Feb 3, 2013. 02:09 PM | Likes Like |Link to Comment