Alpha, Beta, and Beyond by Professor Nouriel Roubini

The following is an excerpt from Project Syndicate:

nroubiniEven in normal times, individual and institutional investors alike have a hard time figuring out where to invest and in what. Should one invest more in advanced or emerging economies? And which ones? How does one decide when, and in what way, to rebalance one’s portfolio?

Obviously, these choices become harder still in abnormal times, when major global changes occur and central banks follow unconventional policies. But a new, low-cost approach promises to ease the challenge confronting investors in normal and abnormal times alike.

In the asset management industry, there have traditionally been two types of investment strategies: passive and active. The passive approach includes investment in indices that track specific benchmarks, say, the S&P 500 for the United States or an index of advanced economies or emerging-market equities. In effect, one buys the index of the market.

Read the full article on Project Syndicate here.

Posted in Uncategorized | Leave a comment

Professor Lawrence White on the Implications of Glass-Steagall

lwhiteThe following is an excerpt from Washington Examiner:

The Volcker Rule, criticized for its complexity, has already forced some megabanks to divest in ways they might not have had to under the late-stage versions of Glass-Steagall. Goldman Sachs, for instance, spun off its proprietary trading business in preparing for implementation of the Volcker Rule.

The 21st Century Glass-Steagall Act would go far beyond that, White said, forcing, for instance, Bank of America to divest itself of investment bank Merrill Lynch.

The financial industry would survive, he said, but might not be safer. “If Glass-Steagall, with all of its pristine beauty of 1933, had still been in place, nothing would have been different” in 2008, he said.”

Read the full article here.

Posted in NYU Stern, Regulatory Risk | Tagged , , , | Leave a comment

Professor Nouriel Roubini on Greece’s Economic Recovery

The following is an excerpt from Reuters:

nroubini“”It’s a constructive deal, positive for the euro zone, and means that for now, those tail risks that would have led to a more fundamental repricing of euro zone assets should not occur,” Roubini told Reuters in an interview in London.

“You don’t necessarily have to be negative or underweight on the euro zone because there are some of these risks.”

After 17 hours of negotiation, euro zone leaders made Greece surrender much of its sovereignty to outside supervision in return for agreeing to talks on an 86 billion euros bailout to keep the near-bankrupt country in the euro.

A Grexit would call into question the whole euro zone project, which would cease to be a true monetary union and instead turn into a collection of fixed exchange rate regimes. The inevitable question would then be, ‘Who’s next to leave?’.

But that has been avoided, at least for now, lifting the clouds of market and economic uncertainty. As Roubini noted, the euro zone had been performing relatively well in the first few months of the year, according to activity, sentiment and growth indicators.

“The question is, do you have enough time to do the kind of structural reforms that are going to increase potential growth over the medium term?”"

Read the full article here.

Additional coverage on the Grexit was also published in the Financial Times.

Posted in Foreign Exchange Risk, Market Risk, NYU Stern, Sovereign Risk | Tagged , , , , | Leave a comment

Professor Ian Bremmer Explains the Evolution and Costs of Cyber Warfare

The following is an excerpt from an recent op-ed by Professor Ian Bremmer published in TIME:

ianbremmerHackers aren’t only in the game to damage governments—sometimes good old-fashioned robbery is enough. The FBI had to notify over 3,000 U.S. companies that they were victims of cyber security breaches in 2013. Victims ranged from small banks to major defense contractors to mega retailers. An astounding 7 percent of U.S. organizations lost $1 million or more due to cyber crime in 2013; 19 percent of U.S. entities have claimed losses between $50,000 and $1 million over the same span. Hacking costs the U.S. some $300 billion per year according to some estimates. Worldwide that figure is closer to $445 billion, or a full 1 percent of global income. The research firm Gartner projects that the world will spend $79.9 billion on information security in 2015, with the figure rising to $101 billion in 2018—and that still won’t be enough.

Read the full article titles “These 5 Facts Explain the Threat of Cyber Warfare” here.

Posted in NYU Stern, Regulatory Risk, Systemic Risk | Tagged , , , | Leave a comment

China’s International Growth Agenda by Prof. Michael Spence

The following is an excerpt from a recent Project Syndicate article by NYU Stern Professor and Nobel laureate Michael Spence:

mspenceFor most of the past 35 years, China’s policymakers have set their focus on the domestic economy, with reforms designed to allow the market to provide efficiency and accurate price signals. Though they had to be increasingly aware of their country’s growing impact on the global economy, they had no strategy to ensure that China’s neighbors gained from its economic transformation.

But now China does have such a strategy, or at least is rapidly developing one. Moreover, it extends well beyond Asia, embracing Eastern Europe and the east coast of Africa.

A key element of China’s strategy is the recently established Asian Infrastructure Investment Bank (AIIB), and to some extent the BRICS’ New Development Bank, established last year by Brazil, Russia, India, China, and South Africa. Both banks are obvious alternatives – and so rivals – to the Western-dominated World Bank and International Monetary Fund.

Read the full article published in Project Syndicate.

Posted in NYU Stern, Regulatory Risk, Sovereign Risk | Tagged , , , , | Leave a comment