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This chart shows the absolute change in the three month treasury bill from one trading day to the next. In normal (calm) market conditions one wouldn't expect to see the yield change much. Keep in mind that when interest rates are REALLY low, say at about 1% in 2004, it starts to look a bit like quantum physics. If the yield changes from 1.00% to 1.01%, that's a 1% change. Since the data is only good to two decimal places, a 1% change is therefore the smallest it can move when the yield is that low.
Greenspan apparently titled his book correctly. This appears to be "The Age of Turbulence."
Here's a closeup of this year's turbulence.
See Also:
The Look of Fear (Information on what happened on August 20, 2007)
CPI Volatility
Source Data: Selected Interest Rates
4 comments:
OT but really interesting from Maverecon:
As regards internal models and marking-to-model, I can see no way the cripling conflict of interest can ever be resolved for anything other than the simplest structured products - those for which even the CEO can understand the principles underlying the model and the numbers going in and coming out. This would mean that banks would not be allowed to hold on their balance sheets, or to be exposed to through off-balance sheet connections, complex structures whose valuation cannot be verified easily by third parties. This is tough and will be unpopular with the industry, but necessary for financial stability.
In any case, if a financial product is too complex for its valuation to be understood by the average Joe, it probably contributes negative marginal social value. Such complex products tend to be motivated by regulatory avoidance and tax avoidance considerations, and should be discouraged by regulatory design. True risk trading and risk sharing require simple, transparent instruments, designed for specific contingencies (states of nature), rather like elementary Arrow-Debreu securities. They don’t require convoluted bundles of heterogeneous opaque contingent claims.
Posted by Willem H. Buiter at Friday,
True risk trading and risk sharing require simple, transparent instruments, designed for specific contingencies (states of nature), rather like elementary Arrow-Debreu securities. They don’t require convoluted bundles of heterogeneous opaque contingent claims.
That's dangerous talk. We can't very well put the reality of risk near the illusion of reward. That's like mixing matter and antimatter, lol.
From 2003:
Buffett warns on investment 'time bomb'
In his letter Mr Buffett compares the derivatives business to "hell... easy to enter and almost impossible to exit", and predicts that it will take years to unwind the complex deals struck by its subsidiary General Re Securities.
Mark,
Just wanted to say, great set of graphs and a wonderful blog.
Got here from CRs. May be you should reference it often there to get more audience share the wealth of info you present here.
My fav post : Wages . (its v revealing)
Cheers
Canary Wharf Banker
Thanks Canary Wharf Banker,
I just seem to keep throwing @#$% at the fan in hopes something sticks. ;)
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