Category: Central Bank

  • FX intervention – Analysis says central bank activity works

    | | Central Bank, International Finance

    Many have held the view that central bank FX intervention is ineffective. It can be disruptive and have some temporary impact, but central banks cannot make currency markets do what they don’t want to do. Research using public data, a limited sample and mainly focused on floating exchange rate regimes, shows, at best, mixed value for intervention. Nevertheless, intervention does create market frictions and an investor can take advantage of those central bank actions.    The latest economic research based on extensive private central bank intervention data tells a different story and suggests that central bank intervention is effective at … Read more FX intervention – Analysis says central bank activity works
  • Central Bank Communication and the “Cool Hand Luke” Effect

    | | Central Bank, communication

    ” What we’ve got here is failure to communicate. Some men you just can’t reach. So you get what we had here last week, which is the way he wants it. . . well, he gets it. I don’t like it any more than you men.” – Cool Hand Luke (1967) – The Captain’s speech The last week was tough on both bond and equity markets around the globe because central bankers were trying to provide “forward guidance” to the market. Central bankers speak and the market will listen and react … Read more Central Bank Communication and the “Cool Hand Luke” Effect
  • The Failures of Central Banking

    | | Central Bank, CTA, Education, Federal Reserve, RMG Wealth

    We have been meaning to write an in depth report on central bank policies for some time and the market responses to recent BoJ policy decisions as well as the Fed meeting and press conference this week have nudged us to make a start. Below are some initial thoughts on how good central banks are in their forecasts and where they may take us in the future. We don’t mean this to be a rant, but it’s hard to discuss central banking politely when they have been so ineffective, when they refuse to accept they have been incorrect and they refuse to fully acknowledge the full unintended consequences of their hugely experimental policies … Read more The Failures of Central Banking
  • Paradigm Shift

    | | absolute return, Central Bank, Education

    The Absolute Return (AR) series of articles provides a primer on alternative investment styles to which few investors have access. Global markets and economies appear to be at the precipice of a paradigm shift making the timing of the AR series of unique value. In the 7 years since the financial crisis, most asset prices have experienced significant appreciation allowing for even the most inexperienced investor to increase his or her wealth. As the saying goes, “a rising tide lifts all boats”. For investors, understanding the tide of financial momentum is extremely important. Accordingly, we summarize 4 primary drivers of past returns to help gauge whether the tide can continue to rise or if retreat is more likely … Read more Paradigm Shift