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Michael Bull (website HedgeFundamentals) "Hedge Fundamentals" (England)

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The Escape from Balance Sheet Recession and the QE Trap: A Hazardous Road for the World Economy
The Escape from Balance Sheet Recession and the QE Trap: A Hazardous Road for the World Economy
by Richard C. Koo
Edition: Hardcover
Price: £21.34

6 of 6 people found the following review helpful
5.0 out of 5 stars Still Deserves a Nobel Prize!, 29 Nov. 2014
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Richard Koo's previous book "The Holy Grail of Macro Economics - Lesson's from Japan's Great Recession" has been my bible since 2008. This time he bravely ventures even further off the mainstream economic piste, with his new concept of the QE Trap (see p.64).

But before we critique Koo's latest concept, his original balance sheet recession thesis is beautifully summarised by one immortal sentence (p.37) that demolishes the foundations of mainstream economics: "The question of whether a fiscal deficit is too large can only be answered in the context of private savings". The Holy Grail of Macro Economics lies right there, in that single sentence. Understand that and you have seen God.

Richard Koo's new concept of a QE 'trap' is however rather more debatable than his original brilliant insight of balance sheet recession. He states that winding down QE "could entail serious risks not only for the country in question but for the global economy ...". But market events may already be superseding his arguments.

At the time this book was written during the second half of 2013, the bond markets were certainly in a flap after Ben Bernanke's thinking aloud to the world that summer. But looking back now, the taper tantrum was perhaps driven more by positioning, as risk parity managers were forced to sell out when equity/bond correlations flipped from negative to positive (negative correlation is equivalent to a valuable free put option for global asset allocators - hence bonds are 'worth' more), rather than any fundamental change in the global savings glut that has driven risk free yields inexorably towards zero. His concern (p.98) that the increase in bond yields may have been "triggered by expectations of deteriorating supply and demand conditions in the bond market as QE is unwound" seems at odds with his core balance sheet recession thesis. Steve Major at HSBC laudably and accurately anticipated a resumption of the T-bond bull market in 2014 and macro funds should have thought much more carefully about the underlying drivers. To be clear, the Fed is not unwinding QE just yet, they are simply not increasing it!

QE drives yields lower along the curve, penalising long-term savers to the benefit of long-term borrowers. By operating along the full yield curve, central banks are simply making an implicit statement about their interest rate policy over the long term via forward rates. In fact one could argue that optimal central bank policy should always be to make the yield curve as flat as possible, but that's another story. Since governments own their central banks, any government debt owned by a central bank is effectively invisible unless sold back to the market. If the central bank's view of the forward curve is 'correct', then tautologically there is no QE trap. To his point (p.102) that "a central bank that has implemented QE must move to tighten policy much sooner than one that has not", if private sector loan demand picks up the central bank simply pays interest on excess reserves. As Paul Sheard at S&P and Claudio Borio at the BIS have both pointed out, banks don't use deposits to make loans. It works the other way round - new loans create deposits. The money supply is driven by fundamental loan demand, not by excess reserves. There is no reason to expect a central bank to aggressively sell bonds back to the market unless they consider the yield curve to be seriously mis-priced.

However there are many other profound insights in his work as one of the leading grandmasters of macro (Ken Rogoff - your move next?). The disconnect between the money supply and the monetary base is made clear right from the start (Alan Greenspan - take note!). And his discussion of Lewis Turning Points (p.276-p.280) is timely and illuminating (Thomas Piketty - please read).

I see this book not so much as a New Testament, but more a confirmation and update of Richard Koo's original thesis which should have had huge influence on global policy makers. As I said in my 2008 review, he still deserves a Nobel Prize!
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Silverline 999666 Rechargeable Torch 1 Million Candle Power 1 Million
Silverline 999666 Rechargeable Torch 1 Million Candle Power 1 Million
Price: £10.94

1.0 out of 5 stars Rubbish - mine didn't work, 5 Mar. 2012
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this product simply didn't work. Not one candle, let alone a million. It's useless & waiting for my bi-annual trip to the local refuse dump. Should have known better from all the poor reviews.


The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession
The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession
by Richard C. Koo
Edition: Hardcover
Price: £29.51

26 of 29 people found the following review helpful
5.0 out of 5 stars Deserves a Nobel Prize, 16 Nov. 2008
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Koo's thesis is stunning, yet simple. I was appalled at my own ignorance - having assumed like many others that Japanese government spending and fiscal packages had done little good over the last 15 years or more. Wrong! Highly relevant in 2008 not only to Gordon Brown's plan to spend Britain out of recession but also to the fiscal straitjacket of the Maastricht Treaty. The text is as enjoyable as a J.K. Galbraith classic, yet backed up with key statistics & charts to match. This book should be mandatory reading for all Chancellors & finance ministers.


The Cosmic Landscape: String Theory and the Illusion of Intelligent Design
The Cosmic Landscape: String Theory and the Illusion of Intelligent Design
by Leonard Susskind
Edition: Hardcover

30 of 42 people found the following review helpful
5.0 out of 5 stars Strings that make you go "Hmmm", 23 July 2006
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Leonard Susskind is one of the world's most original and inspired theoretical physicists. The culmination of his life's work is described without mathematics in this book. His brilliance of lateral thinking is on a par with Einstein. He turns conventional big bang theory on its head and explains with stunning simplicity how our Universe could have been so astonishingly fine-tuned as to allow intelligent life. I just wish I could remember all the detail in between without having to read and reread and ...
Comment Comment (1) | Permalink | Most recent comment: Jan 28, 2008 10:06 AM GMT


Financial Modeling of the Equity Market: From CAPM to Cointegration (Frank J. Fabozzi Series)
Financial Modeling of the Equity Market: From CAPM to Cointegration (Frank J. Fabozzi Series)
by Frank J. Fabozzi
Edition: Hardcover
Price: £70.00

5.0 out of 5 stars For serious students, 16 Jun. 2006
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This book is easily the best I have come across on financial markets & econometrics (and I've read a few). Almost everything important is here - robust estimation, conic optimisation, vector autoregression, random matricies, markov switching, etc. The only minor criticism is that a chapter on high frequency data and market microstructure would have been useful. They have also published an excellent but less technical monograph on the same material (not on Amazon) and appear to have two more books coming soon. Can't wait.


Dynamic Portfolio Theory and Management: Using Active Asset Allocation to Improve Profits and Reduce Risk (McGraw-Hill Library of Investment and Finance)
Dynamic Portfolio Theory and Management: Using Active Asset Allocation to Improve Profits and Reduce Risk (McGraw-Hill Library of Investment and Finance)
by Richard Oberuc
Edition: Hardcover

1.0 out of 5 stars Unconvincing & overhyped, 12 May 2006
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Richard Oberuc has collected together a considerable array of formulae, charts, tables and academic references for this book. However almost all the material can be found for free on the internet and he draws little original conclusion from the material himself. The so-called "Dynaporte"(TM) likewise contains nothing new, being a factor model that relies on many (unstated) assumptions. The book just feels rather vacuous at the end of it all - more like an undergraduate dissertation. For a serious read on portfolio theory & management try books like the ones by Amenc or Scherer or the classical approach of Grinold & Kahn.


C# 2005 For Dummies
C# 2005 For Dummies
by Stephen R. Davis
Edition: Paperback
Price: £16.99

5 of 11 people found the following review helpful
2.0 out of 5 stars Disappointing & Rather Boring, 10 Dec. 2005
This review is from: C# 2005 For Dummies (Paperback)
I last programmed in Fortran 15 years ago and was hoping to learn a modern object oriented (oo) lanaguage, but I found this book disappointing, hard work and yes, rather boring.
Instead of enthusing upfront about the wonders of oo programming, the book first drearily grinds through 99 pages of variable types, arithmetic operators and if statements in completely procedural fashion.
"Object-Oriented Programming" doesn't actually come until p211 (after another frustrating 100 pages of technicality), by which stage the book is so far into the nitty gritty of C# syntax that I'm totally lost.
So instead I'm going to try the "Head First" Java book (which tries a much more innovative approach) and reverse into C# since the languages are so similar. I won't be bothering with "Dummies" again.


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