nyguy123456

Bond Expert: Monday Wrap

Yields still aren't as low as they were back in January. What I find interesting is that everyone thinks that Treasuries are safe investments. Maybe at the short duration end of the yield curve. But, if you're looking at the tail end - say 10 or 30 years, a movement in yield can cause a serious capital gain or loss.

I know people are going to get their money back if they invest in treasuries, but If we define risk as standard deviation of total rate of return, aren't treasuries actually risky assets at this level of volatility, due to the movement in the price of the bond?

Treasuries seem to be overvalued to me. Retirement planning is predicated on the belief that one can earn far more than the current 3.66% 30 year yield. Asset managers can't park all this money in treasuries and hide forever.

Living on $500K a Year?

I have personally seen these models you speak of. They are actually very, very good at predicting default rates, provided that the right inputs are used. However, that was the problem. The inputs to the models weren't the greatest. You can have the greatest model in the world, but as the saying goes - garbage in, garbage out. "Modelers" are not the ones to blame alone. Everyone shares a little bit of the blame. Plus, in 2006 and 2007, fraud was actually involved! So it didn't matter what the model said, because when people lied on mortgage apps and brokers pushed them through, they were approved and the model failed because the inputs were fraudulent. It seems those who criticize always have the benefit of hindsight, but very little of the knowledge or understanding of the situation at hand to do so.

As to Mr. Hsu's comment about making 500 grand a year to live in Manhattan? You can make living single on 40 grand a year quite easily - you just have to sacrifice. I live in Manhattan and I make nowhere near that. But, my lifestyle isn't all that great - I live in a tiny apartment (<300 sq ft) with lots of problems and I don't have any of the amenities that come along with living in a newer space, but that's life...not everyone can get what they want. For a family of 4, you definitely don't need to make 500k.

For those who comment something to the effect of "MOVE OUT!", I noticed that they are usually from some place that has almost no cost of living to it, i.e., Ohio, or Texas. You don't work in the financial industry, I take it. Bulge bracket investment banking doesn't really exist outside of New York. Where are these people going to go to do the same job?


On Feb 06 10:38 AM morph366 wrote:

> Mr Hsu, especially in view of his own background, has a vested interest
> in pre-supposing that there is a huge pent up demand for the kinds
> of expertise that financial engineers possess and that there will
> be competition from plenty of boutiques etc. for their talents.
>
> Alas for him and fellow quants the word is slowly getting out that
> the mathematical skills acquired at the Ames Lab or NASA, along with
> the crude bits of economics that they have acquired along the way,
> are not just a bit wrong in attempting to price risk and quantify
> the likely default or losses of a portfolio, they are inexcusably
> wrong and ill conceived.
>
>
>

Leveraged Market Cap ETFs

I have one thing to add/suggestion for a change in the article:

From the list of daily holdings, it appears these funds are actually using a total return swap to achieve their leveraged positions by swapping the equity index return for some other rate of return. For example, the Ultra S&P 500 lists as of 5/14 $1,010,420,882.49 notional value in S&P 500 swap contracts.

How Microsoft Could Kill Google on the Web

This would be sound reasoning, but classical economics tells us this will be a problem simply due to supply and demand.

Consider This:

Supply - the number of ads that can fit on one user's screen.
Demand - if it's free, certainly more than a screenful.
Result - huge demand for ad space doesn't give each advertiser the kind of exposure it's looking for. They're probably going to go back to Google where they can bid for their top spot.

Secondarily, if Microsoft begins charging for its ads to solve problem #1, it probably has an antitrust problem on its hands. As we all know authorities worldwide are not so friendly toward MSFT.