
When Everything Is Too Safe, Add Risk - sergeant3
https://www.bloomberg.com/view/articles/2018-02-15/when-everything-is-too-safe-add-risk
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jeffreyrogers
Funny seeing Matt Levine's column on HN. He's one of the only financial
commentators who consistently has something interesting to say.

It's an interesting time to be in the markets. The steady decline of interest
rates has helped keep asset prices high, but now interest rates are starting
to come up again. That coupled with newly created wealth from developing
countries trying to find a safe place to get a decent return has pushed future
expected returns down so investors are struggling to find investments that
will give the the returns they've been accustomed to.

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daxorid
> but now interest rates are starting to come up again

This appears to not matter at all in the "new normal". The 10y yield tapped
2.93% yesterday and still, everyone made a mad dash to bid up equities.

It should be noted that while the Fed is reducing its balance sheet this year,
the BOJ, ECB, and PBOC's easing efforts are resulting in a net _increase_ in
global CB-led asset purchases.

Kuroda alone will likely be enough to keep risk assets elevated, regardless of
what interest rates do.

~~~
sempron64
is 2.93% really such a scary rate? It's still historically very low.

~~~
AnimalMuppet
Well, it's a big change in a short time from 2.4%. It's more the first
derivative[1] that's scary than the actual value.

Of course, the first derivative is only scary if you're expecting it to
continue for a while. That's forecasting, or guesswork, or something besides
just observing the current rate.

[1] "Derivative" in the calculus sense, not in the financial instrument sense.

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elipsey
Thanks for introducing me to this column, it’s hilarious.

“’With hashgraph every user participates in confirming transactions, so the
process is faster.’ I realize that I am in many ways an ignorant rube, but I
am constantly confused by the notion that having every participant in a market
confirm every transaction is a fast way to confirm transactions.” Also:

“[...]not even bank executives seem to understand what is going on inside
their banks. If that is the case then it shouldn't be surprising if sometimes
the market thinks the bank is worth less than the bank thinks it's worth, or
if the market turns out to be right. It's not literally that the market knew
about the $1.77 billion fraud before the bank did. It's just that the whole
enterprise is kind of a random-number generator, and the market did a better
job of guessing the right random number than the accountants did.”

I sometimes vacillate between superstition and suspicion when things like this
happen. Example: a bunch of anonymous bidders converge on almost exactly the
same price for a somewhat obscure item. For a second it’s confusing, then I
wonder if they are shill bidders, then I think: huh. lots of people saw the
auction, and they basically all agree on how much a widget is worth. Anybody
else here ever get a spooky feeling when observing an efficient market?

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fragsworth
I don't get it. There are 5 or 6 different, seemingly unrelated stories that
don't merge into a cohesive point.

The first story segues into the second ("What is risk?" -> "Elsewhere in dumb
products") but then subsequent parts go on as if the writer is rambling about
completely unrelated stuff that would be fine in separate articles.

Having finished reading it, I am just confused.

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jeffreyrogers
They're not supposed to be related. It's a columnist's newsletter. He just
writes about financial topics he finds interesting. Each topic under a
different heading is separate.

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fragsworth
But the title is "When Everything Is Too Safe, Add Risk". The stories below
are completely unrelated to that, and it just seems really odd

~~~
jeffreyrogers
Yeah, I agree it's confusing, but it's just the format of his column. They had
to pick a title and it's better than "Money Stuff #912"

Edit: There are also lots of inside jokes in the headings (and occasionally in
the articles) that only make sense if you've been reading the column for a
while.

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tzakrajs
"In the meantime they lost some money on the producty stuff." What does this
mean?

~~~
jjxw
He's referring to the more complicated derivative products that allowed those
funds to buy risk in the form of betting on low future volatility. Since
volatility has recently spiked, those types of products have lost the majority
of their value.

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arisAlexis
if you want to add some risk you know what you can buy :)

