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Risk Update: December 2022 – Restoring Market Function

“If something cannot go on forever, it will stop.” Stein’s Law. Herbert Stein has been proven prophetic, yet again, at least as it relates to the Bank of Japan’s (BOJ) commitment to holding their 10yr Government Bond (JGB) yields at 0.25%. By now, most will be well aware that the BOJ announced at their December 20th, 2022, Policy Committee Meeting the widening of the intervention band around their YCC (Yield Curve Control) target of 0.00% for the 10yr JGB yield from +/- 0.25% to +/- 0.50%. For practical purposes, this raised the ceiling (ie. BOJ’s commitment to buy unlimited bonds)…

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Risk Update: November 2022 – Fools or Liars?

“The economics discipline prefers to remain in fantasy land, ignoring real-world experience and far more realistic theories. It’s as if the Catholic Church not merely tried Galileo, but also destroyed all knowledge of his telescope. If they had, humanity might never have escaped the Dark Ages. Mainstream economists, it seems, are happier in the dark than in the light.” Steve Keen article “The fantasy economics of the Nobel Prize”. This is a great little article from heretical economist Steve Keen. He is considered heretical by the consensus, neo-Keynesian, mob because he advocates that the expansion and contraction of credit…

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Risk Update: October 2022 – PIVOT!™

Reminiscent of what we saw from late June through mid-August, over much of October markets had another healthy dose of PIVOT!™ (in honour of our friend Ben Hunt, we borrow his “trademark” indicator of something that has entered the common narrative). PIVOT!™ is the phrase that encapsulates the strongly held market sentiment that central bank interest rate hikes are nearing their end, presumably aligned with inflation measures topping out and commencing their precipitous declines back to target, and that the much hoped for recession is just around the corner. This, of course, will lead to the inevitable PIVOT!™ by the…

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Risk Update: September 2022 – Is “Sharpe World” Closing?

In last month’s Update, we pondered the question “what about the 40?”. This has long been a topic of our own discussions and clearly an issue that rose to the front of many people’s minds in the month of September. In the gigantic world of wealth management, we simplify down to the core premise of 60/40 as a market standard of what we commonly refer to as a “balanced portfolio”, a portfolio of 60% Equity “balanced” with 40% Fixed Income. Of course, it is just a core proxy, a skeleton framework, representing an enormous array of investment strategies that all…


Risk Update: August 2022 – What About the 40?

One year ago, in our August 2021 Risk Update, we laid out how we look at the world through the prism of Self-Organized Criticality. That note is undoubtedly one of our most popular Updates and one that we always refer people to when they would like to understand our philosophical mindset. In that Update, which we humbly recommend you read if you have not already, we compared President Biden’s July 2021 speech (, regarding the end of the Afghanistan war and pending full withdrawal of military troops, to Fed Chair Powell’s August 2021 Jackson Hole speech ( We said…

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Risk Update: July 2022 – The Pointlessness of Forecasting.

“Pretium iustum mathematicum, licet soli, Deo notum” Sometimes we get accused of being hard on central bankers. It is, however, not central bankers per se, nor any given particular practitioners, that ruffle our feathers. Rather, central planning and economic forecasting in general is where our criticism falls. Central bankers just happen to be the best examples of where the worst practices reside. According to their own website, the Federal Reserve employs in excess of 400 PHD economists. Hard to fathom what great schemes they are formulating.,and%20specific%20areas%20of%20expertise. We fall rather squarely into the Hayek and Taleb camps on this topic….

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Risk Update: June 2022 – Rates & Inflation Last Time (1997-1998)

“….I think we now understand better how little we understand about inflation.”  Jerome Powell. 29 June 2022 “The longer that monetary easing continues, the bigger the side effects are, with the resulting low growth making the exit of monetary easing more difficult. The result is a vicious cycle.” “…. central banks have more or less built in the cause of the deep-seated problem.” Masaaki Shirakawa. 7 July 2022 It was an eventful month in the domain of monetary policy. The table below gives a quick recap across some of the major developed market central banks. As we had…

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Risk Update: May 2022 – Why wait?

Why wait? That’s the question we keep asking our central banking friends, most particularly the laggard of laggards, the ECB. Amazingly, it almost seems as if ECB President, Christine Lagarde, heard us and hid some nuggets of such newly discovered recognition inside an otherwise long-winded mea culpa on the need to pivot away from their monetary extremism. ”…. it is appropriate for policy to return to more normal settings rather than those aimed at raising inflation from very low levels.” Christine Lagarde, 23 May 2022. So, finally, they admit that their policies are currently at a setting aimed at…

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Risk Update: April 2022 – How did they expect it would end?

In her novel “The March of Folly”, historian Barbara Tuchman attributes as a quote in reference to Philip II of Spain this absolute gem – “no experience of the failure of his policy could shake his belief in its essential excellence.” It is hard to imagine a more appropriate tagline for today’s central bankers and their mad clinging to their extraordinary monetary easing largesse. We could lay the above quote clearly on each and every modern-day central banker, but none more so than Bank of Japan’s (BOJ) Governor Haruhiko Kuroda. We discussed in last month’s Update the unique and…

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Risk Update: March 2022 – The most dangerous peg in the world.

When thinking about real world “tail risks” few are more frightening than food shortages and famine. Aside from the obvious direct implications, they tend to be the catalysts behind most socio-political uprisings throughout history. It is not oversimplifying to state that “price stability” or “inflation targeting”, as the core premise of central banking, boils down to this basic issue. If only they could keep that in their sights. Figure 1: UN Food and Agriculture World Price Index Source: Bloomberg The implications of the long manipulation of the global economic sandpile and its inevitable transition towards its critical state, could rightly…