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  • Analyze this: The Fed is not printing enough money!

    Alexander Gloy

    Before you trash me in the comments, hear me out. It started off with Ray Dalio’s “beautiful deleveraging”, which inspired this post. Since the financial crisis, the Fed has increased its balance sheet from $900 billion to $2.9 trillion (red line in below chart). The difference is $2 trillion (or 13% of GDP). When the…

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  • The “beautiful” deleveraging

    Alexander Gloy

    Some of my clients like to challenge my (admittedly gloomy) views, forcing me to think – which isn’t such a bad thing to do. It started off with Cam Hui’s “A Dalio explanation of Evans-Pritchard’s dilemma“. After laying down his strategy on winning the game of Monopoly, Dalio goes on to model the economy onto…

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  • Who wants to own Investment Banks?

    Alexander Gloy

    I went through the latest available 10-Q filings of major US investment banks. I was after the break-down of assets in levels 1-3. As a reminder: Level 1: stuff that has a market price. Level 2: stuff that doesn’t have a market price, but is valued based on similar assets. Level 3: stuff that where…

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  • Market risk factors

    Alexander Gloy

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  • Rational decisions in closed systems

    Alexander Gloy

    In closed systems, rational decisions lead to irrational outcomes. Take a crowded stadium. A fight or fire breaks out. Panic ensues, and everybody scrambles to get out as fast as possible (rational). In the process, people are hurt or trampled to death (irrational). The same applies to the stock market. Rational behavior demands you buy…

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  • Improving LIMTI

    Alexander Gloy

    The efficacy of both technical and fundamental analysis is disputed by efficient-market hypothesis (which states that stock market prices are essentially unpredictable). If stock prices were unpredictable, my clients would be wasting money. “Technical analysis” tries identify patterns that help determine future prices. You might ask “how can a formula know what happens in the future”? That is a…

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  • What a week

    Alexander Gloy

    Looking at asset class performance during the week August 1-5, 2011: Horrible week for the Dax index, US REITs (Real Estate Investment Trusts) and Emerging Markets. I had wondered why the Dax managed to perform so well despite Euro zone troubles. It is a pretty cyclical index, and usually outperforms the US indices – in…

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  • Road Map to Ruin

    Alexander Gloy

      Budget deficits in “good” times, build-up of government debt Few countries’ (GER, NED) exports lead to trade deficits for others (GR, ESP, POR) Costly bank bail-outs and fiscal “stimulus” Monetary stimulus (0% interest rates); useless Rating agencies finally wake up (downgrades) PIIGS unable to sell more debt as yields rise IMF/EU (read: taxpayers) step…

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  • Greece: Two Bail-outs and a Funeral

    Alexander Gloy

    Here we go again. Another bail-out. [Sigh.] I’ll try to make this as entertaining and easily readable as possible – but first the details of the bail-out agreed on July 21st: Fresh EUR 109bn EFSF/IMF loans until mid-2014 Private sector (read: banks) participation of EUR 37bn EUR 12.6bn from bond repurchases at below par (100%)…

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  • Gold and stocks love inflation, right?

    Alexander Gloy

    In theory, stock prices react positively to inflation. You can explain that with the balance sheet effect: while debt remains same in nominal terms, assets gain in value (with the difference showing up in the equity position via net profit). Gold should also benefit from inflation as the supply of precious metals is limited –…

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