The Institutional Risk Analyst

We all need to remember that shrinking the Treasury portion of the Fed balance sheet is the easy part. The $2 trillion in notional amount of MBS held in SOMA, which now has an effective duration that is much, much bigger than the rest of the portfolio combined, requires some subtlety. The good news is that the agencies and Ginnie Mae are thinking about a potential Fed MBS swap with Treasury. Wall Street can make it all happen and profit handsomely by selling a lot of “AAA” ra

If we were to select one characteristic that describes the financial markets today it would be confirmation bias. The human tendency to interpret new evidence as confirmation of one's existing beliefs or theories is among the most powerful and dangerous trends in financial markets, especially when the predominant passive investment strategies favor a net-long position. Nowhere is confirmation bias more apparent than the market for private-equity backed IPOs.