Published in InsiderFinance Wire·Jun 10What’s the scenario?“Here we go, yo, here we go, yo. So what, so what, so what’s the scenario? Ay yo, Bo knows this and Bo knows that, but Bo don’t know jack ’cause Bo can’t rap…” The above introductory verse from the 1991 hip hop classic “scenario” from A Tribe Called Quest’s…Inflation5 min read
Published in InsiderFinance Wire·Jun 3What is the point of a model in finance?I started my journey in financial modeling around 20 years ago when I purchased the late Simon Benniga’s classical book “Financial Modeling” second edition. I went through this book chapter by chapter and replicated the exercises in Excel and even reached out to professor Benniga to get access to the…Models4 min read
Published in InsiderFinance Wire·May 18The state of the markets: How did we get here? Where do we go?2022 has been a rough year so far for investors as most asset classes lost value. The classical conservative asset allocation of 60% bonds and 40% stocks has broken down as the correlation between most asset classes is now positive, offering little diversification. In previous equity bear market cycles, US…Markets9 min read
Published in InsiderFinance Wire·May 4Will 3.00% be enough?The Fed Funds Target rate (upper bound) sits at 50 bps and is expected to go up by another 50 bps today to 1.00%. In general, the market is expecting the Fed Funds Target to reach around 3.00% …Fed3 min read
Apr 18How to hedge macro risk underlying cryptocurrencies?In a prior post , I noted the increased correlation between Bitcoin and Ethereum with the NASDAQ 100 Technology Stock Index and mentioned that this may reduce diversification benefits of holding cryptocurrencies. Historically, one generally sees correlations of risk assets increase during times of uncertainty and stress and this was…Cryptocurrency6 min read
Apr 15Will deposit rates rise faster?Historically, banks tend to lag when repricing deposit rates after the Fed has increased the policy rate. This tends to be more true for retail consumer deposits than for corporate deposits since institutions (i.e. …4 min read
Apr 14Are rate hike expectations in-line with inflation and GDP expectations?The market has priced in the US raising the Fed Funds rate to 3% by next year. I compare this to the EUR policy rates that are priced in, which appear to be less aggressive. Furthermore, I compare the consensus forecast of Bloomberg contributors for inflation (YoY CPI) and economic…Inflation3 min read
Apr 13Do cryptocurrencies offer diversification benefits?The observed high returns of Cryptocurrencies has attracted new investors and some argue that despite the high price volatility, this new asset class may offer diversification benefits. Under Modern Portfolio Theory, it is possible for an asset to offer diversification to a portfolio even if the return to risk ratio…Cryptocurrencies4 min read