For yesterday’s info-porn, we looked at the YTD and QTD global returns. Today, we have this informative interactive map from the public section of the WSJ:
click for interactive map
Global Correction
August 17, 2007 9:15am by Barry Ritholtz
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Quote of the day: Kasriel on Leverage
The 90 day TBill yield dropped ~ 9% yesterday. That has only happen 22 times in the past. The average return 12 months out is ~ 22%.
…and when the VIX doubles in a month (this time, 2.5X) the DJIA is up, on average, 12.6%.
I forgot to add:
“up 12.6% in 6 months time.”
As Desi Arnaz says….
“Paaaaulsonnnn,..you got sum ‘xplaininnn’ to dooooo”
Where’s that containment? I know, what else was he going to say. Perhaps, prudence and caution is warranted as this has a good chance of spreading do the labryinth of derivatives to navigate through. Doug Kass called it well.
They mistook Burma/Myanmar for Thailand.
I think the most interesting thing about this would be the covariance matrix. All those VaR models fall apart when something like this happens. Risk models always fail to include the “exogenous” shock. Does anyone know of literature or work done on measuring a covariance matrix net convergence “delta or gamma” equivelant. The basic VaR approach is bogus and it is amazing how many PHd’s fail these common sense tests. Buy the way, these exogenous shock panics and the market over reaction provide great post event spread trade opportunities. After the noise is gone, these economies will keep humming along, assuming the central banks don’t panic.
nick wrote: “The basic VaR approach is bogus and it is amazing how many PHd’s fail these common sense tests.”
Not so amazing when you realize that PhD courses are mainly about managing the egos of existing PhDs and regurgitating their postulations in a favourable light.
Critical thinking? Nawwwwwww.
Let’s consider: 1 month bills at 1.6% nominal annual return (a real return of negative 1.3% minimum) or gold – which is safer????