I’ll gladly pay you Tuesday for a hamburger today

Was it Popeye’s friend, Wimpy, who kept asking for a hamburger on credit? Today’s credit markets are anything but robust, with reduced demand and supply for borrowed funds. Always eager to find obscure terms for modern dilemmas, economists refer to this condition as a liquidity trap. With a little prodding from Facebook friend and . . . → Read More: I’ll gladly pay you Tuesday for a hamburger today

Paying for liquidity provision on exchanges

Market making versus the electronic limit order book Exchanges in India all operate as electronic limit order book markets. There are no `market makers’; there is just a publicly visible limit order book. Anyone is free to supply liquidity, by placing limit orders. The person who places market orders is the consumer of liquidity: . . . → Read More: Paying for liquidity provision on exchanges

How to damage market quality

The problem of measuring the price

In a liquid and transparent financial market, there is no doubt about the price. There is high pre-trade transparency, because orders are visible on the limit order book, and the best estimate of the true price is (bid+offer)/2. You glance at the screen and you know what is . . . → Read More: How to damage market quality

Wanted: International Buyers of Danish Mortgage Bonds

Not too long ago, I compared the Japanese economy to a bumblebee because of the economy’s ability to keep on chucking along even as the government debt/GDP ratio stormed above the 200% mark. I am starting to think that the same comparison might be warranted too in the case of my home country.

. . . → Read More: Wanted: International Buyers of Danish Mortgage Bonds

On High Risk Investments

So in reading the WDUQ snippet on the otherwise boring and esoteric machinations of public finance: 2 Votes move Bond Plan Forward, is a awfully important factoid.  In it there is a mention of the size and scale of the ‘illiquid assets’ held by the City of Pittsburgh combined municipal pension fund.  The line . . . → Read More: On High Risk Investments

Other Alpha Sources for August 6, 2010

Team Macro Man has a nice perspective on what deflation might mean in the OECD context and it is difficult to disagree with the underlying rationale.

One sector that is glaringly not singing to the Deflationistas’ hymn sheet is commodities. While a rapidly-growing global population continues to compete, like bacteria on a Petri dish, . . . → Read More: Other Alpha Sources for August 6, 2010

Futures Market Liquidity: Indexes vs. Currencies vs. Individual Stocks

In continuation of this blog post on the big quantities visible on the order book of the NSE currency futures market, I got hold of order book information for one recent timepoint (10:32 AM on 9 April) for three April expiry futures: Nifty, INR/USD and Reliance. This is not as good as looking at . . . → Read More: Futures Market Liquidity: Indexes vs. Currencies vs. Individual Stocks

Fake Volume And Increased Volatility

On 6 May 2010 the DOW dropped a massive 600 points in a mere seven minutes and at one point was down 998.50 points which is the largest nominal drop ever. One of the reasons for this increased volatility is the knowledge of all major market participants that their assets are neither safe nor . . . → Read More: Fake Volume And Increased Volatility

When a Currency Futures Market Dominates a Currency Forward Market

In recent months, a sense has emerged that the exchange-traded currency futures market in India is more liquid than the corresponding contract traded OTC (i.e. the forward market). As an example, we examine a dataset from NSE of 28,797 observations of data – one observation per second – from 3 November 2009, for the . . . → Read More: When a Currency Futures Market Dominates a Currency Forward Market

The King of Currencies

A reader has asked me to comment on these two recent GATA articles www.gata.org/node/7908 and www.gata.org/node/7911, which claim that London unallocated metal is a fractional reserve system.

Adrian Douglas’ assertion is that there is at a minimum four owners for each ounce of unallocated metal held in London. His support for this is to . . . → Read More: The King of Currencies