“An ounce of prevention is worth a pound of cure.” Benjamin Franklin, circa 1736. For those in the more advanced metric world, there are 16 ounces in a pound, or adjusted that would be “28.35 grams…| Convex Strategies
“Situations of uncertainty and intractability rule out optimization and, along with it, the usefulness of the theory of maximizing subjective expected utility.” Gerd Gigernzer, November 2024. The r…| Convex Strategies
Admiral Lord Horatio Nelson is credited with proclaiming “I see no ships” when disregarding the signal to retreat during the Battle of Copenhagen in 1801. The saying has become a British idiom for …| Convex Strategies
“…if you want utility, don’t optimize expected utility because you’re bound to lose actual utility.” Ole Peters and Oliver Hulme, May 2025. Expected-utility maximizers don’t maximize utility. – Erg…| Convex Strategies
“…granting boundless power to government agencies to solve the world’s problems does not square with my disposition…some may believe the biggest threat to our economy comes from outsiders who seek …| Convex Strategies
“Moral hazard is a natural concern for a policy which removes the main risk that hedge funds face when taking leveraged positions in cash-futures basis.” Kashyap, et al, March 2025 The above quote …| Convex Strategies
“The products are gaining traction because the buyers don’t have to mark them to market, thus avoiding the possibility of booking paper losses.” Japan Regulator Planning Crackdown on $6…| Convex Strategies
“I guess I’d say this, uncertainty is with us all the time. It’s, it is human nature apparently to underestimate the, how fat the tails are in a way, that the possibility, we think of t…| Convex Strategies
Just as we were putting together our thoughts for this month’s update, we came across the above linked article which is such a good example of the misunderstanding of fragility, our chosen topic fo…| Convex Strategies
Way back in our June 2021 Update we noted the insistence of several central banks to stick with their historically extreme monetary policy settings, despite clear indication that their traditional …| Convex Strategies
In last month’s Update, we pondered the question “what about the 40?”. This has long been a topic of our own discussions and clearly an issue that rose to the front of many people’s minds in the mo…| Convex Strategies
“Pretium iustum mathematicum, licet soli, Deo notum” Sometimes we get accused of being hard on central bankers. It is, however, not central bankers per se, nor any given particular practitioners, t…| Convex Strategies
We have pointed to similarities between the Fed’s current rate cutting cycle and the one back in the second half of 1995. Given the length of experience around here, we are regularly asked question…| Convex Strategies
“We are open to new ideas and critical feedback and will take onboard lessons from the last five years and adapt our approach where appropriate to best serve the American people, to whom we are acc…| Convex Strategies
What if it works? Regular readers will know that this has long been our favourite question to ask central bankers and government policymakers since the implementation of “inflation” igniting strate…| Convex Strategies
Like many, our attention this month was drawn towards a non-market related set of events. The US 20-year war in Afghanistan finally came to an end. What really got our attention can be visualized b…| Convex Strategies
“Europe’s fundamental values are prosperity, equity, freedom, peace and democracy in a sustainable environment. The EU exists to ensure that Europeans can always benefit from these fundamental righ…| Convex Strategies
“The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” Jerome…| Convex Strategies
To the best of its knowledge and belief, Convex Strategies considers the information contained in this website as accurate only as at the date of publication. All information and opinions on this w…| Convex Strategies
“Mainstream economics is replete with ideas that “everyone knows” to be true, but that are actually arrant nonsense.” Jeremy Rudd. Federal Reserve Board. September 2021. We don’t often go looking f…| Convex Strategies
A question we often get asked, as we discuss building convexity into investment portfolios with large Pension Funds/SWFs/Insurance Companies/Endowments/Banks, is something along the lines of “How m…| Convex Strategies
“Too often, the potential range of behavior of complex systems had to be guessed from a small set of data. When a system worked normally, staying within a narrow range of parameters, engineers made…| Convex Strategies
“The interest burden of the debt is at what I would call normal historical levels.” Janet Yellen. June 2024. US Treasury Secretary Yellen (Professor Yellen, as we know her) gives a masterclass in o…| Convex Strategies
“The Governing Council today decided to lower the three key ECB interest rates by 25 basis points. Based on our updated assessment of the inflation outlook, the dynamics of underlying inflation and…| Convex Strategies
Nassim Taleb introduced the concept of Wittgenstein’s ruler in the first book of his Incerto series, “Fooled by Randomness: The Hidden Role of Chance in Life and in Markets”. He elaborated on the c…| Convex Strategies
“At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan assessed the virtuous cycle between wages and prices, and judged it came in sight that the price stability target o…| Convex Strategies
“I have been working in or around central banks for over fifty years. To my regret, as I look back on my career, I can now see that I was often guided by an evolving set of false beliefs about how …| Convex Strategies
“To ensure that a central bank does not prioritise the solvency of the sovereign over its primary mandate of price stability, the European treaties prohibit monetary state financing. In its public …| Convex Strategies
Last month we titled our Update “Recession. Yay!” in which we said this: “As we have stated over recent months, the ‘good outcome’ would be to get to the recession, and we see people willingly buy …| Convex Strategies
Sorry, but we must return to our often-used Hayek quote yet again. “We are ready to accept almost any explanation of the present crisis of our civilization except one: that the present state of the…| Convex Strategies
“Those whose job it is to manage risk today tend to focus on the things to which probabilities can be attached and shrug their shoulders about everything else.” Niall Feguson, Oct. 2023. Decent not…| Convex Strategies
In what could prove to be a pivotal month, September saw a swath of central banks pause at what many hope will be the end of the historically swift monetary policy tightening cycle. The Federal Res…| Convex Strategies
In our discussions last month about entropy, we introduced the term “arrow of time”. “Like with all things that live in non-ergodic, path dependent space, time dependence matters. Something that ma…| Convex Strategies
It was a busy cycle for policymakers to close out the month. The Federal Reserve raised their Fed Funds target another 25bp, from 5.25% to 5.50%, and reiterated their commitment to battling inflati…| Convex Strategies
“Do you know the secret of life? One thing. Just one thing.” Curly Washburn. City Slickers, 1991. We find this a very useful, and accepted, philosophy when it comes to risk management of any activi…| Convex Strategies
If we ever had the means and resources to launch our own academy of finance and economic higher learning, we might dub it Common Sense University and, without question, would appoint Bill White as …| Convex Strategies
What role do central banks play in such philosophical concepts as “the social contract/compact” and the “consent of the governed”? That’s a pretty big rhetorical question, even for us. Central bank…| Convex Strategies
Last month, in our February 2023 Update, “Sharpe World is Nefarious”, we posed this question: “If a bank loses money in accrual books and can continue to fund the losses with government guaranteed …| Convex Strategies
