Every week I try to take noteworthy events and provide accessible commentary regarding the potential impacts of these events and my own personal interpretation. These comments are not necessarily the viewpoint of Newfound Research and solely represent my own personal perspective.

Week Ending: April 26th, 2013

Noteworthy Reads of the Week

  • On Tuesday, capital markets experienced what some are coining the “HashCrash.” At 1:07pm an Associated Press Twitter account was hacked, and a tweet was broadcast professing a terror attack on the White House. The market plunged 143 points and quickly recovered, however, some are using this to point out the “dangers” of high-frequency trading, while others are claiming the robotic reaction was perfectly in-line with a would-be human response.
  • Spain’s woes deepened this week. Not only did Spanish unemployment increase by more than an entire percentage point, from 26.02% to 27.20% (well above the median forecasts of economists and the highest rate in over 37 years), but also Spain’s economic forecast was revised downward significantly to a 1.3% contraction from a 0.5% contraction.
  • A new survey Central Banking Publications, Central Banks are finally pursuing the purchase of equities instead of solely government debt and institutional debt. Although 70% of Central Banks in the survey stated that equity exposure is an unacceptable vehicle, notable central banks such as the Swiss National Bank and the Bank of Japan have already begun purchasing ETFs to gain passive exposure to equities.
  • As we always say, “models are only as good as the data they are trained on.” Robert Samuelson from the Washington Post argues that the the shift in investor / business expectations (i.e. the inputs to the model) is the reason for such erroneous forecasting results around output, money multiplier, impacts of monetary easing, etc. He furthermore believes this shift will pave the way for an era of less economic understanding and less control over economic destiny (I would argue only until we’ve gained adequate data to re-train our models).
  • If the goal of austerity is to address budgetary deficits, then it’s working. This week EU data showed that budgetary deficits for financially burdened countries have been shrinking. Unfortunately, those same countries have experienced increases in overall debt burden (debt to GDP), adding yet another point of rebuttal against the path of austerity being pursued by the European Union.

Benjamin is a Managing Director in Newfound’s Product Development and Quantitative Strategies group, where he is responsible for the ongoing research and development of new intellectual property and strategies. Specifically, Benjamin’s focus is in the area of exploring model applications to fundamental, economic and systemic market variables. Drawing on his years of experience in the financial services industry, he helps to ensure that Newfound’s products and messaging effectively meet the needs of investors and portfolio managers. He also plays a critical role in developing new business and client relationships.