Passive Risk Management

In major cities at this time of year, an army of street vendors bristling with umbrellas await their chance to emerge in entrepreneurial fervour, providing tourists and commuters alike with immediate respite from unanticipated rain. It’s a viable business strategy: the chaotic nature of weather means that occasional rainfall remains practically impossible to predict*, hence Read more […]

Lower Gas Bill? Why Not?

As mentioned in my last post, logistics and technology are the two key factors in propelling commodities from local markets to global markets. The U.S. is now expected to be the biggest producer of natural gas in 2013, so what does that mean for the residents? Will gas bills be cheaper? Will there be a Read more […]

Turn VIX into information you can use

Most people think of VIX as simply an index.  This makes sense — the “I” in VIX stands for that very word.  But VIX is more useful than your average index.  It could easily be grouped with economic indicators, like the unemployment percentage or new home sales.  Why?  Because the VIX level — not just Read more […]

Right Beta equals Right Alpha

In India, over the past few months, investors have seen their investments erode in value. All asset classes are highly correlated and a simple debt plus equity diversification does not help either with the returns or with lowering volatility. In this scenario, Index based investing as a part of larger asset allocation strategy is now Read more […]

The Hunt For Red October

In the iconic film The Hunt for Red October, released in 1990, the cold war standoff between the U.S. and the Soviet Union is taken new to heights. Based on a novel of the same title written by the recently deceased author Tom Clancy, a CIA analyst finds himself in over his head in the Read more […]

Sukuk – Let’s Do the Profit Sharing!

It all started with the Quran, the religious book of Islam, which guides all aspects of Muslim’s life. It is one of the fundamental sources of the Islamic (Shariah) law. The Shariah law has strict rules on finance; it forbids both interest “Riba” and uncertainty “Ghara”. It also prohibits a number of practices, such as Read more […]

What Me Worry

While the stock market was up sharply on Thursday and rose a bit more on Friday amidst rumors of some talks in Washington,  not everyone thinks we’re  out of the woods.  In fact, other parts of the financial system are taking precautions in case the worst – a government default – happens.  Hopefully both these Read more […]

The Shrinking Supply of Alpha

Recently we attended a conference at which many hedge fund representatives were present. Not surprisingly, there was much discussion of the ability of hedge funds, and by extension active managers generally, to generate alpha. This raises an obvious question: what is the market’s capacity to produce alpha?  Is there a natural limit to investors’ ability Read more […]

High Yield Munis Burned by Tobacco Bonds

Tobacco settlement  bonds tracked by the S&P Municipal Bond Tobacco Index are down nearly 9% year to date as yields have risen by over 255bps as the credit risk of these long duration bonds is questioned.  Recent arbitration results have been positive but uncertainty over future disputes and tobacco consumption are pulling these long duration Read more […]

Welcome Janet Yellen

Today’s nomination by President Obama of Janet Yellen as the next chairman of the Federal Reserve is very welcome.  Yellen’s knowledge of the Fed, the banking system and the economy is second to none.  No one, except possibly Ben Bernanke, has more experience on the job. While Janet Yellen’s nomination is very likely to be Read more […]