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Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.
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Articles about events, conflicts and disease around the world
Rolling correlations reveal more: 20 and 60-day rolling correlations between VSTOXX® and VIX tell a deeper story (Mark Shore, Eurex Group) Portfolio construction depends on the use of correlations to reduce volatility by incorporating uncorrelated and negatively correlated assets. While this sometimes is helpful, there are times when the expected results simply are not realized. The reason is that correlations are time variant and tend to deviate the most from average values in times of economic crisis,just when the investor is most vulnerable and needs then the most. The first graph below gives the general impression that the VIX volatility index and the SPY 500 Index are negatively correlated. There is a visually identical graph (not shown here) for European volatility index (VSTOXX) and European stocks.
The Longest Cycle on Record (Krishna Memani, Oppenheimer Funds) The current business cycle recovery and expansion is already almost 6 years old and shows few signs of overheating. Memani thinks the expansion is still in its early stages. He says the global macroeconomic environment is highly conducive to risk asset outperformance. Globally he sees continued private sector deleveraging and rising savings rates which are muting growth and leading to an unprecedented cycle of worldwide monetary policy accommodation. He offers a number of interesting graphs, including the following showing the deep contraction and long period of slow credit growth following the Great Financial Crisis.
Other Economics and Business Items of Note and Miscellanea
House Flippers Are Back Together With Wall St. What Could Possibly Go Wrong? (Bloomberg) Colony Capital Inc., Blackstone Group LP and Cerberus Capital Management are among the companies that have started making bridge loans to investors who buy homes to sell them quickly for a profit. Borrowing costs -- traditionally the highest in residential lending -- are tumbling as the firms compete for customers.
Judaism: The Economics of Liberty (Arutz Shiva) You can have one or the other but not both: the more economic freedom, the less equality; the more equality, the less freedom.
Grand Central: This Is Not An Irrational Exuberance Moment (The Wall Street Journal)
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