Systemic Risks and Collateral Velocity, Part II: Credit Bottlenecks and Market Tremors
In our commentary dated February 10th (http://stage.blacksummitfg.com/3375) we outlined the significance of collateral velocity and the inherent dangers of another crisis given that the main culprit (derivatives) of the 2008 crisis has not been addressed yet. The...The Flattening of the Yield Curve and the Migration of Risks: The Path of Hedging Holdings and a Contrarian View on Market Trajectory
Historically, the inversion of the yield curve is a good predictor of recessions. On top of this when spreads of high yield bonds reach the current level of 850 bps (i.e. 8.5% above Treasuries) the probability to experience a recession within 8-12 months is between...The Banking Sector, Collateral Velocity, and Credit Creation, Part I: Where are we Headed?
Modern finance depends on credit. Credit creation depends on inter-bank trust. Inter-bank trust depends on asset valuation. Asset valuation is an opaque process that is a function of several parameters (economic, financial, geopolitical, strategic, among others). For...Market Hysteresis and Capitulation: Financial Stress and Secular Trends
It takes some time for the market to comprehend when stress is built up in the economic and financial systems. This is part of the hysteresis reality. When financial stress builds up for some time, a crisis ensues that is followed by a recession. The graph below from...Operation Market Garden: Can it Happen Again? (This time in the financial world)
Following the successful Normandy invasion in June 1944, the Allies executed that September the military operation known as Market Garden (Market referred to the airborne forces that were supposed to seize bridges, and Garden to ground forces). The purpose was to...Sign Up for Our Publications
