Monday, February 16, 2015

Minsky quoted in the WSJ

Saturday, 02/14/15: Why Bear Markets are Inevitable (Morgan Housel).

We have mentioned Minsky a lot, over the years (he has his own category). It's nice to see him referred to, albeit in a Saturday issue which implies reflective views rather than something more operational (that is, until we have the downturn with the accompanying pain).

At the FEDaerated blog, we're doing a series (albeit slowly) on why the markets crash so fast.

Look at the graph (below) that Housel touts. Now, be aware of several things. For one, the current level is supported by largess on the part of the Fed and other central bankers. Then, recall that those higher levels are supported by rules that keep runaway falls from happening (though they did not catch the not-so-long-ago falls due to technical glitches [it is said, but who knows?] which caused some to experience losses - not golden sacks who was let off the hook). Then, remember that we now have computational influences of an unknown nature, as well as the existence of dark pools, and such, muddying the whole framework. ... We will, in time, go on and on.

Yes, inflated market
We appreciate the Hyman Minsky mention as it will allow another relook: A Theory of Systemic Fragility. ... We intend to show that his sequence (hedge, speculative, ponzi [made-off?]) has been perturbed in ways never consider by Prof Minsky. Namely, computation (dark pools, et al) have exacerbated the problem. My put: flim-flam use of mathematics (easily done since the algorithmic tools allow this) has run amok (it's time for a review).

Remarks: Modified: 02/16/2015

02/16/2015 -- The left side's view.

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