LaxPower Back-Up Stick

PizzaSnake wrote: ↑Sun Mar 28, 2021 12:13 pm

Farfromgeneva wrote: ↑Sat Mar 27, 2021 10:29 pm

PizzaSnake wrote: ↑Tue Mar 23, 2021 11:20 pm

Farfromgeneva wrote: ↑Fri Mar 19, 2021 12:27 pm It's a principal-agency problem, though I'd argue the principal side has abrogated their own responsibilities over time and not all of it is structural, acknowledging some is. Principals' have yet to construct a decent incentivization structure in the entire time of my life on this planet from what I've personally observed.

Problem with MBA, which I have, is that it was designed to be for folks with 4-10ish years of experience to learn about becoming middle management (a portion of the pyramid or matrix, take your pick, that's been flattening for two decades partially due to demographics of the boomer cohort which Tech or some other "greycap" will claim is ageism or take offense rather than picking up a book on Malthusean economic theory). Since wall st became "cool" in the mid - late 1980s, ironically at the same time the firms were really consolidating and going public to become producers of financial prodcuts using "other people's money" rather than advisors and intermediaries with their own partnership capital at risk, it's become either (largest group) a place to go when you can't get the call to make the "A to A" (analyst to associate, street firms typically blow out 90% of their analysts after three years, very few are offered promotions organically) move or go from "sell side" Ibanking analyst preparing pitch books until 3am to "buy side" Private Equity where they work until midnight getting paralysis modeling every hypothetical deal that a banker sends across their bosses desk. None of that has to do with teh original intent and structure of business school but as you might guess our fearless leaders in acadamia have bent the programs to that focus over the past 25yrs.

MBAs are also less "academic" than some other programs, though you could argue that about some hard sciences which would make some folks uncomfortable around here. If you've replaced Kierkegaards "leap of faith" to slaughtering your son for the man to a similar absoute belief in a world that we can never fully understand before we run into Xeno's paradox on time and space (i.e. can never reach the end, or covnersely and understanding of the beginning) including most hard sciences I wouldn't be so quick to dimiss other graduate programs. This is not directed at Pizza more of a "royal" we/you being used here. The nobel prize in economics has been given to Robert Merton and Leland/Rubenstein for option pricing which can only ever approximate the real world in option pricing (Merton) and directly lead to Black Monday in 1987 (other two for discovering something called portfolio insurance, both misunderstood fat tail exposure horribly) and is considered more legitamate by the academic crowd...

What impact if any?

https://www.bloomberg.com/news/articles ... n-waterway

Think they’ll need to do this?

https://m.youtube.com/watch?v=0ENOJBLVgjw

In the Suez Canal, Economics and Physics Make for Tough Sailing
Container ships have grown in size, making ‘bank effects’ a potential hazard to navigation

Tugboats are continuing their attempts to pull the Ever Given from the thick sediment lining the Suez Canal.
PHOTO: KHALED ELFIQI/SHUTTERSTOCK
By Stu Woo
March 27, 2021 8:00 am ET
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When Evert Lataire studied the publicly available data for the Ever Given’s fateful voyage this week, he noticed the vessel did something unusual just before settling sideways in the Suez Canal: The container ship veered close to the channel’s western bank.

Mr. Lataire knew the hydrodynamics of the situation. He wrote his Ph.D. dissertation about such physics—and has simulated it over and over with model boats in an indoor testing tank in his native Flanders.

“At that point to me, the accident was inevitable,” he said.


It is still unclear exactly why one of the world’s biggest ships ended up plowing into the canal’s eastern bank, blocking the shipping choke point and upending the global supply chain. But two reasons, one rooted in physics and the other in economics, explain why the conditions were ripe for a mishap.

Big Ships
The ship that held up Suez Canal traffic, the Ever Given, is one of the world’s biggest ships.


How the ship stacks up
Ever Given built 2018
Deadweight*: 220,123 tons
Width: 194 feet
length
1,312 feet
HMM Algeciras 2020 (world’s largest ship)
Deadweight*: 220,462 tons
Width: 200 feet
1,312 feet
18 tractor trailers (72 feet)
1,296 feet
NYK TRITON 2008
The largest ship through the Panama Canal
Deadweight*: 88,456 tons
Width: 131 feet
997 feet
*Summer deadweight tonnage, the ship’s carrying capacity at a particular draught; figures converted to short tons.
Sources: MarineTraffic (measurements); Oil Companies International Marine Forum (deadweight); Marine Insight (largest ship)
One factor is size. Cargo ships didn’t used to be this big. As recently as 1996, the biggest container vessels carried the equivalent of 7,000 boxes, each 20 feet long. There was no reason to go larger. “You get to a point where you need a bigger port and bigger cranes,” said Paul Stott, a U.K.-based maritime consultant who teaches at Newcastle University.


Then harbors went down that route, building larger ports and cranes to accommodate ever-growing vessels. And the industry realized bigger boats made economic sense. Mr. Stott said a massive cargo ship with double the capacity of another requires the same amount of crew, about 20 to 25. Larger boats also burn less fuel per box aboard.

By the mid-2000s, cargo ships could carry the equivalent of 15,000 boxes. In recent years, ships including the Ever Given surpassed 20,000 containers, which laid end-to-end would stretch 75 miles.

Shipbuilders made the vessels bigger by making them wider, which creates consequences for hydrodynamics, especially in shallow, narrow waters such as canals. Imagine standing on a bank, watching a ship sail from right to left, said Mr. Lataire, a Ghent University professor and researcher for the Belgium-based Knowledge Center for Maneuvering in Shallow and Confined Water. The water between the boat and bank would be traveling in the opposite direction, from left to right, as the boat displaces water.

If the boat gets closer to shore and further squeezes the water against the bank, it would create an area of high pressure that nudges the front of the boat toward the center of the canal, while an area of low pressure draws the back of the boat toward the bank, Mr. Lataire said.


A ship moving through a canal creates low-pressure areas alongside it that pilots steering the ship must manage.
1
Canal
bank
North
Low-
pressure
area
Low
pressure
High pressure
If the ship encounters encounters a high-pressure area, the combination can create suction — the back of the boat is pulled toward the bank and the bow veers toward the center of the canal.
2
Suction area
Drift due to
bank effect
High
pressure
Wind can catch the side of a tall container ship, turning the bow even farther towards the opposite bank.
3
Drift due to
wind effect
Wind
Source: Marine Insight
The “bank effects” are well known in the shipping industry. What is unclear is why the Ever Given got so close to the bank.

The ship was sailing north, while a strong gust was blowing west-to-east. To compensate for the wind, a pilot would have had to steer the boat to the left to sail straight ahead. If there were a sudden lull in the gusts while the boat was still steered to the left, the ship could have inadvertently gotten too close to the western bank, Mr. Lataire said. That is where the bank effect would have kicked in, causing the front of the boat to spin out toward the eastern bank.


A mechanical failure, or human error, could have also been the problem. Egyptian officials continue to probe the accident.

Write to Stu Woo at [email protected]

Too clever by half. Incomplete engineering driven by disproportionate emphasis on profit. Reminds me of the demise of the culture of Boeing after the LM merger.

"Then harbors went down that route, building larger ports and cranes to accommodate ever-growing vessels. And the industry realized bigger boats made economic sense. Mr. Stott said a massive cargo ship with double the capacity of another requires the same amount of crew, about 20 to 25. Larger boats also burn less fuel per box aboard.

By the mid-2000s, cargo ships could carry the equivalent of 15,000 boxes. In recent years, ships including the Ever Given surpassed 20,000 containers, which laid end-to-end would stretch 75 miles.

Shipbuilders made the vessels bigger by making them wider, which creates consequences for hydrodynamics, especially in shallow, narrow waters such as canals. Imagine standing on a bank, watching a ship sail from right to left, said Mr. Lataire, a Ghent University professor and researcher for the Belgium-based Knowledge Center for Maneuvering in Shallow and Confined Water. The water between the boat and bank would be traveling in the opposite direction, from left to right, as the boat displaces water.

If the boat gets closer to shore and further squeezes the water against the bank, it would create an area of high pressure that nudges the front of the boat toward the center of the canal, while an area of low pressure draws the back of the boat toward the bank, Mr. Lataire said."

Try moving your hands in opposing directions in the bath in a parallel propalinal fashion -- pretty obvious effect.

seacoaster wrote: ↑Thu Apr 01, 2021 7:12 pm The hope was that this money would be used for investment, hiring and other purposes that would inure to workers, customers, suppliers and shareholders.

CU88 wrote: ↑Fri Apr 02, 2021 8:58 am Since the r's thought that 2xIMPOTUS did such a great job with average numbers, they must be loving POTUS Biden skills with the US economy:

The U.S. economy added 916,000 jobs in March as recovery gains steam again!

Have they seen the Dow?

Farfromgeneva wrote: ↑Fri Apr 02, 2021 4:00 pm Liberty Street Economics
« The Persistent Compression of the Breakeven Inflation Curve

Farfromgeneva wrote: ↑Fri Apr 02, 2021 4:00 pm Liberty Street Economics
« The Persistent Compression of the Breakeven Inflation Curve | Main | Reasonable Seasonals? Seasonal Echoes in Economic Data after COVID-19 »

MARCH 24, 2021
Did Dealers Fail to Make Markets during the Pandemic?
Jiakai Chen, Haoyang Liu, David Rubio, Asani Sarkar, and Zhaogang Song

In March 2020, as the COVID-19 pandemic disrupted a range of financial markets, the ability of dealers to maintain liquid conditions in these markets was questioned. Reflecting these concerns, authorities took numerous steps, including providing regulatory relief to dealers. In this post, we examine liquidity provision by dealers in several financial markets during the pandemic: how much was provided, possible causes of any shortfalls, and the effects of the Federal Reserve’s actions.


Dealer Inventory Positions during the Pandemic
Dealers support market liquidity by intermediating customer trades—for example, by taking customer sell orders into inventory when buyers are absent. Hence, changes in the size of their inventory positions can indicate whether dealers are performing intermediation activities.

The chart below shows that primary dealer net positions in commercial paper (CP) and investment-grade (IG) corporate bonds (dashed lines, marked on the left vertical axis) fall starting the week of February 26 and bottom out in the week of March 18 (for CP) and March 25 (for IG bonds) before recovering in April. By comparison, dealer net positions in U.S. Treasury bills, Treasury notes and bonds, and agency residential mortgage-backed securities (RMBS) (solid lines, marked on the right vertical axis) are generally higher or similar in March as compared to their prior levels–although net positions in bills fell sharply in the week of March 25. Overall, dealers cut inventory in some markets but increased or maintained it in others in March.


Did Dealers Fail to Make Markets during the Pandemic?


Net positions that result from substantial long and short positions are more likely to indicate intermediation activities than one-sided positions—say, moderate long but minimal short positions. Using the microdata underlying the aggregate dealer statistics, we plot the changes in the long and short positions in March 2020 averaged across five major dealers with significant market share in all securities (see chart below). Major dealers increased both their long and short positions in markets where dealers in the aggregate increased or maintained net positions in March (bills, notes and bonds, and agency RMBS). In markets where aggregate dealer net positions decreased (CP and IG bonds), major dealers did not expand inventory but did not reduce it either. Thus, it appears that major dealers generally maintained intermediation activity at the height of the pandemic.


Did Dealers Fail to Make Markets during the Pandemic?


Market Liquidity and Dealer Intermediation in March 2020
In CP and corporate bond markets, limited dealer intermediation and heightened market illiquidity went hand in hand, and improved only after the Fed’s actions. For example, the Commercial Paper Funding Facility (CPFF) was announced on March 17, and dealer net positions recovered the week of March 25. Similarly, two corporate bond facilities were announced on March 23 to support IG bonds. Liquidity in the corporate bond market improved on the announcement, and dealer net positions recovered in the week of April 1.

In contrast, even as dealers maintained intermediation, market dysfunction continued apace in U.S. Treasury and agency MBS markets in March 2020. What accounts for this disjunction? One possibility is that the amount of liquidity provided by dealers was insufficient to meet the volume of customer selling, as shown for the agency MBS markets. Ultimately, the Fed’s massive purchases of Treasury and agency MBS securities helped to accommodate the selling pressure.

Why Did Dealers Provide Insufficient Liquidity?
During crises, customers may sell in such large amounts that dealers are reluctant to fully absorb the orders into their inventory, thereby impeding liquidity. Their reluctance may arise because internal risk management practices limit their positions in times of enhanced market volatility or because the costs of holding more inventory are prohibitive (for example, due to regulatory constraints). For example, following the selloff in fixed income markets during the taper tantrum of 2013, dealers reduced both net positions and risk-taking.

Dealer risk management. Increased costs of taking on risk may hinder dealers in taking on bigger positions. Consider the market risk premium, which indicates the compensation required by investors to bear risk, including inventory risk. The chart below shows that the agency MBS spread to LIBOR spiked on March 9, when market-wide circuit breakers were triggered for the first time since 1997, and remained high through the third week of March. The IG bond spread to Treasuries increased earlier but also spiked on March 9 before peaking on March 23. These results suggest that dealers’ cost of bearing inventory risk increased in March.


Did Dealers Fail to Make Markets during the Pandemic?


When dealers increase their net positions, and the cost of doing so also rises, they are exposed to greater risk of being stuck with excess inventory. This inventory risk increases when market volatility spikes, as occurred during the pandemic. A measure of risk exposure is value at risk (VaR) which is the worst expected loss over a given time horizon at a given confidence level. A variant is stressed VaR in which the expected loss is calculated during a period of financial stress. The chart below shows that the average VaR and stressed VaR of the banks that the five major dealers are affiliated with increased sharply in 2020:Q1, indicating greater risk exposure.


Did Dealers Fail to Make Markets during the Pandemic?


In sum, increased dealer positions during the pandemic, combined with an increased cost of taking on positions, boosted dealers’ risk exposure, thereby limiting their capacity to bear risk and make markets.

Regulation and dealer balance sheet capacity. Regulation may also constrain dealer intermediation activity by requiring dealers to hold more capital for regulatory purposes. For example, the supplementary leverage ratio (SLR) requires the largest banks to hold a minimum ratio of 3 percent of tier 1 capital to total on- and off-balance sheet exposures.

In the chart below, we show changes in the long and short positions in March 2020 of unaffected dealers (that is, those affiliated with banks not subject to the SLR). If the SLR was a binding constraint on dealer intermediation, then we might expect these positions to increase relative to the major dealers (all of whose affiliated banks were subject to the SLR). In fact, the chart indicates that unaffected dealers mostly did not expand their long and short positions and, in many cases, reduced them. In contrast, our earlier chart showed that long and short positions of major dealers did not decrease and in some cases increased.


Did Dealers Fail to Make Markets during the Pandemic?


On April 1, 2020, the Fed temporarily allowed banks to exclude U.S. Treasury securities and deposits at Federal Reserve Banks when calculating their total leverage exposure, in order to provide dealers “increased flexibility to continue to act as financial intermediaries.” On March 19, 2021, the Fed announced that the temporary change to the SLR will expire as scheduled on March 31.

Enhancing Market Making Capacity
How might market making capacity be improved? One suggestion is to implement central clearing which reduces the amount of dealer balance sheet required due to improved netting of trades. Faster settlement times also help dealers economize on balance sheet space. In the agency MBS market, the Fed innovated in how it purchased securities to allow dealers to reduce their inventory rapidly, much sooner than market convention would otherwise allow, thereby reducing the short-term selling pressure on the market. Another suggestion is to reduce the costs of regulation. There have also been discussions about the composition of the investor base and increasing the number of primary dealers. Whatever the approach, the sharp decline in market liquidity during the pandemic lends urgency to initiatives that might enhance intermediation capacities of the dealer community.


Jiakai Chen is an assistant professor at the Shidler College of Business, University of Hawaii.