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Princeton Bank Consortium

Bob Bryan, Business Insider, GOLDMAN: The US bond market is getting ‘overrun’, here.

The bond market is setting a multitude of records right now. Over $13 trillion in bonds have negative yields, US Treasury bonds have hit record lows, and US corporate bonds have sunk to lows not seen since Marilyn Monroe was starring in films.

Francesco Garzarelli, cohead of Goldman Sachs’ market and macroeconomic research teams, put the issue very simply: The market is pricey.

Wolf  Richter, Business Insider,Negative interest rates are ‘one of the greatest scams in the history of mankind’, here.

US Treasuries set new records on Friday: The 10-year note rose to a new high, with the yield dropping to a new low of 1.366%. The 30-year Treasury bond also hit a new high, with the yield dropping to 2.11%, a record low.

If 2.11% sounds like a miserably low return for tying up your money for three decades of hell and high water, it’s practically bond nirvana for whatever else is out there.

The German government, paragon of fiscal rectitude at the moment, one of the few AAA-rated governments left on earth, is able to charge investors for lending it money: the 10-year yield ended the week at a negative -0.187%; the 30-year yield is still positive at 0.35%, but creeping closer to zero.

The Vampire Squid, here. Looks like the formula is becoming clear. NIMo should move to a cross of The Vampire Squid, Godel’s Lost Letter, and Princeton Election Consortium to find an audience of Bank Treasurers and Fed Regulators. The global banking environment will provide growth opportunities, so this will focus on USD assets for a short period of time before going global. The premise is the Princeton Bank Consortium will be able to source sufficient public data to run stochastic forward simulations that will allow us to back out efficiency information about individual banks. Banks are giving away about a factor of 1000 in floating point performance to what we can source via x86 or Sparc cloud. That advantage will not last forever but it seems stable enough to establish the modeling and analytics for the Princeton Bank Consortium (PBC). PBC can start by simulating all USD assets and liabilities and establishing quarterly benchmarks to track the bank CCAR submissions. Do they make sense in aggregate? How does the static scenarios hold up under forward stochastic simulation with he FED econometric projects. The computational advantage should  make for a compelling narrative for evaluating US Federal Reserve and Individual bank announcements. We will do this in open source  for the unoptimized versions so everyone can play. PBC will run optimized version of the open source code to generate the projections. PBC can run as a second opinion on the published forecasting results. As PBC takes on non-dollar assets it can sharpen the coverage of individual banks.

After nearly two years at Goldman in the Investment Banking Group, I would get many emails and Linkedin requests with prospective and eager undergraduates with questions like, “what are your hours, what’s your favorite deal, what do you do everyday”. On the other spectrum, my non-finance friends were mostly oblivious to what Investment Bankers do except for the fact that we work long hours and always run late to dinner plans… In my family, my mom would marvel when I taught her P/E, EV/EBITDA multiples and how they could be used to compare companies that would make for more informed equity investment decisions.

From likes of the above experience, it became clear that there has been a lack of education and transparency within the finance industry. Consequentially, there is a social stigma associated with working in finance nowadays that isn’t usually positive, some reasons valid and some not. By providing more education and transparency, we can make more well-informed opinions and decisions with respect to finance (and those who work for it). The Vampire Squid attempts to bridge this gap and hopefully dispel (or confirm) many of the myths and rumors that exist today.

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