Knowledge Products – 360 Series

The Knowledge Products below are a collection of our analytical work, called “360 Series” papers. Our papers summarize key complex world macro issues translating them into a simple language. They are produced and updated with an in depth knowledge of the subject, having a practitioner approach, and provide unconventional insights to world markets by high level coherent approaches and ready-to-use tools to our Readers and Clients.

What is likely to happen if we have another crisis?

Given the level of risk buildup in the system, there is a need for an analytical piece to look at what would be most likely to happen in the event of a return to crisis conditions. This paper analyzes what crisis management tools do Central Banks typically have and which will they be able to deploy next time around and what are the likely implications.

Are we starting to enter a systemic crisis rather than a “Business-as-Usual” bubble type of crisis?

Business-as-usual is the default mode for most companies yet in 2017, nine years after the Lehman Brothers episode, many economic indicators are not behaving as per usual. US unemployment looks low but Labor Participation Rates are concerning. Why Central Banks cannot generate 2% inflation? This paper reviews and combines key unconventional indicators to detect whether this is a cyclical or a systemic crisis.

What is required for growth?

Growth is the ultimate point of corporate activity, but there has been very little of it to show for more than nine years of intense central bank activity. This paper examines why growth since 2008 has been so low and what sort of policies would be required to generate the kind of growth that would generate jobs while beginning to reduce the debt load.

… Liquidity and macro-instability

Changes in regulations have reduced the liquidity capacity of financial markets and this is not reflected at all in bond and credit pricing. This paper looks at the possible implications in terms of asset valuation, which asset classes are likely to be hit most severely, and which balance sheets will suffer.

Extreme risk buildup and why awareness may be rapidly reclassified into wake up calls mode

While by most metrics the financial system appears to be in business-as-usual mode, there are risks bubbling up deep in the system to which attention should be paid. This paper looks at today’s level of debt, how markets price risk, and recent cultural changes in the asset management industry to identify the key risks of the future.

The Quantitative Easing type models used from 2008 onwards

Central Banks adopted Quantitative Easing (QE) programs after the 2008 crisis. This paper looks at the successes and failures of that policy, how the world economy is now, how well do QE models map what is actually happening, and what are these models missing. This analytical piece provides readers key insights on QE models and its implications for the future.

Key drivers of systemic risk

This paper addresses systemic risk in full. Systemic risk is a topic that tends to be generally ignored. Under systemic risk the operation of the system itself becomes risky. One example is that current economic times evidence that the continued production of debt and its level are no longer a growth generator. This paper looks at the key drivers of systemic risk in the global economy.

A different approach to model Systemic Risk 

This papers provides a different approach to model Systemic Risk. Companies fail because of risks that were either ignored or misunderstood. The metrics and methods best suited to modeling the economy change over time. Central Banks are facing big challenges to generate inflation. Growth is very low. The question today is: How can ‘what is happening now’ be modeled since it must be modeled? Systemic risk is a dangerous risk that is formed silently as time passes. Since it takes many years to form, many times markets are biased to forget about it. Many models are adapted to business-as-usual environments and many do not factor in this type of risk. This paper provides an alternative framework to address systemic risk, which complements current models.

2017 Oil price analysis in a nutshell 

In 2017, Oil prices are still below breakeven points that are hurting growth in many oil-based economies and oil companies’ profits. This paper gives the reader a thorough analysis of the Oil industry, price ranges implications given history, and today’s status of world players given conventional and unconventional production methods. It also links the Oil market, financial indicators, and economic implications of Oil prices.

The importance of a top layer in financial modeling and what models still lack

Banks and insurance companies spend many hours refining their Basel III and Solvency 2 models. This paper looks at the critical gaps in those models and the evolving risks in the financial system today, which are not captured using market consistent pricing. This paper includes a framework to add to conventional modeling that capture the true level of risk to act upon.

What model can we use to address early signals as an effective crisis prevention tool?

This paper analyses a critical model that capture debt level along with crisis. Economist Hyman Minsky’s model explains the capacity of the financial system to crash repeatedly and the behavior that drives this. His model highlighted how at some point financial engineering and leveraged investments, based on the idea that asset prices will continue ascending, usually reaching a peak and then unravel. This paper presents his theory in an accessible format, in a simple language, and no technicalities. This papers also provides critical insights on how his analysis of debt driven economic fragility may be applied to the current economic situation.

How dependable are rating agencies’ models?

Rating Agencies’ models could not foresee the run up to the 2008 crisis. This analysis look at how much has changed since then, how good are rating agency models, what kind of advice are rating agencies giving to clients today, where are the blind spots of their models and what can be done about them.

The case for adjusted pricing to monitor systemic risk

This paper focuses on Systemic risk and how to price for it. Market pricing has several key weaknesses and careful attention must be paid to them. We look at the drivers of systemic risk and recommend a pricing approach that builds awareness of developing risk into an early warning system.

How to improve regulations across markets

Regulation was exposed as a weakness that led to the great financial crisis of 2008. Many regulators were caught by surprise. This paper looks at what has changed and what remains to be done in 2017. Are regulators on top of things now?  How good are their models? Can investors feel secure, knowing that regulation will be effective no matter what happens? This paper provides critical insights on this.

Six of the biggest threats to balance sheets

Balance Sheets are the ultimate corporate defense. In this paper we look at the main threats to the balance sheet, most of which are not priced by financial markets. We look in particular at demand and debt, and the relationship between the two. We share our insights on how to track Balance sheet defense status, as they are likely to become increasingly important over the next few years.

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