In 2011, interest rate markets for Greek government bonds bolted and interest rates skyrocketed raising the specter of a sovereign debt crisis for the whole of Europe. Overall, interest rates around the world have remained at record lows thanks to the maneuvering of central banks; 10-year US treasuries for example pay less than 2 percent.
Investors are increasingly impatient and there is a rapidly growing demand for equity capital that has to be pumped into the economy to salvage balance sheets. Governments and central banks are already fully leveraged and do not have sufficient resources to keep interest rates low indefinitely. Fixed income markets around the world will unravel; this will send shock waves across the global economy.
Today, there are globally 212 trillion USD of financial assets, which includes 158 trillion of debt, see the 2011 McKinsey Global Institute report. The debt is 3.5 times bigger than the world annual product of 45 trillion.
As soon as interest rates start to increase, then the prices of bonds drop. The economic impact of the price decline will be daunting due the sheer size of the 158 trillion of outstanding debt…
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By: Richard B. Olsen, Founder and CEO of Olsen Ltd
January 12th, 2012 |
Market, News | No Comments »
We are please to announce that our product profile was ranked in the Barclay Hedge Ranking award for October 2011.
This fund was ranked based on the data in BarclayHedge’s CTA database
In October, the unfolding of the European crisis was in the focus of market participants. At the European summit a new rescue package for Greece was structured. Governments and private institutions have decided on a haircut for the Greek debt. After the US has enacted the Volcker rule for banks, European banks will have to recapitalize by 106bn EUR and increase their core capital quota to nine percent.
Product profile AF generated 1.18% net profit. The high market volatility in October offered profitable trading opportunities in many of the currencies, in particular CHF, CAD and EUR.
To learn more about our managed accounts please visit Olsen Invest.
December 14th, 2011 |
Investment, News | No Comments »
“The global economic system is dysfunctional because of the mismatch between the modern technology used in the real economy and the operational procedures of the financial system.” Richard Olsen is an economic researcher in high frequency finance. He has a long experience and strong knowledge of the forex market structure, technology and buy/sell side. “The financial system needs to be reformed, which is not as difficult as people might think”, he stressed.
Olsen proposes the introduction of electronic certificates, global early warning system or stabilizing investment strategies, among other innovations. He also gives us his forecast on the market volume and turnover, diversity of market players, investment products, ethic changes or technology and internet evolutions. “Long-term, there will be one centralized exchange – it will be embedded and integral part of the Internet” he foreshadows.
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December 13th, 2011 |
Economics, General, High frequency finance, News | 2 Comments »
For the last 25 years you have been trying to make currency investments more efficient. Given the distortions in the market today, isn’t this an impossible mission?
Richard Olsen: I don’t think so. However, the current distortions in the market show that the economic mechanisms behind the foreign exchange markets are not understood well enough. In particular, the fact that the economy is not static, but in a constant state of change, is ignored. The situation is comparable to classical physics before 1900: only Einstein’s theory of relativity, which took the dynamical behaviour into account, allowed for a breakthrough.
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January 24th, 2011 |
Economics, General, High frequency finance, Market | 5 Comments »
We are publishing a small booklet on how to trade. The content is based on previous posts on the subject. I have expanded the material and hope that you will find the text helpful. Read the rest of this entry »
July 22nd, 2010 |
News | 32 Comments »
We have published a small booklet ‘Global Economy under Siege – Possible Initiatives’. The booklet is based on a post that I published 14th December 2009. The booklet includes visuals created by Lisa Wilkens. Pictures can mean so much more than words. I hope that you enprepared a small booklet that you can download as a pdf or have us send you a copy. It includes the text of a post that I published on the 14th December 2009 and has since been edited. Lisa Wilkens has created visuals to accompany the text. A picture is worth a thousand words, thank you Lisa. I hope that you enjoy the booklet. I look forward to your feedback.
May 6th, 2010 |
Economics, News | 2 Comments »
Price moves in the currency markets can be disruptive and lead to large losses with investors and corporations. In general, institutions do not protect themselves against this risk, because the cost of hedging is high. In this post, I try to explain how dynamic hedging improves the cost structure and makes hedging appear indispensable.
Currency risk is incurred, whenever assets or liabilities are denominated in a foreign currency. Liabilities are the opposite of assets and can basically be hedged in the same way as assets. Assets, just as liabilities, can be of any shape or form; they can be financial instruments, fixed assets, such as a house or factory; or an income or payment stream, for example pension receipts or payments for project work. Whenever the foreign currency appreciates, the value of the respective asset increases, whenever the foreign currency drops, so does the value of the asset. Read the rest of this entry »
April 29th, 2010 |
Investment, News | 6 Comments »
The biggest danger for any trader is excessive exposure. An unexpected price spike can then trigger a margin call that wipes out all the profits generated over months of hard effort. This is the most frequent reason why traders lose money. How can we prevent this from happening? What do we have to know?
Diversification
As there is no such thing as perfect foresight and an unexpected price spike can occur at any time, a trader should always diversify his risk and trade not just one, but two or three ideas at the same time. It is through diversification that he can improve his risk profile – when one trading idea is in the profit, the other runs a loss and vice versa. Read the rest of this entry »
March 18th, 2010 |
Market, News | 39 Comments »
Policy makers are typically concerned with long-term economic issues; so why should they be interested in the field of high frequency finance that seems to deal with short-term market phenomena? High frequency finance has the potential of biotechnology and can revolutionize economics and finance by turning accepted assumptions upside down and offering novel solutions to today’s issues.
Why high frequency finance turns economics and finance into a hard science
High frequency finance is a new discipline in economics that was officially inaugurated at a conference held in Zurich in 1995 organized by Olsen. Read the rest of this entry »
February 25th, 2010 |
High frequency finance, News | 10 Comments »
The sovereign debt crisis that started with Iceland last year has now spread to Greece, Spain and Portugal. Other countries with large deficits are on the firing line as well, the US is one of them with a deficit of 12 percent of GDP, the same as Greece. Treasury Secretary Timothy F. Geithner tried to shore up confidence in an ABC News interview by claiming that the US would never lose its Aaa rating. A number of commentators have picked up on this news and have ridiculed Geithner saying no way; the US will lose its Aaa rating.
It is no trifle matter, if a country has a government budget deficit of 12 percent; this is even more perilous when interest rates are at an absolute low as they are today and there is the danger that interest rates snap up dramatically increasing the cost of servicing debt and the size of the public deficit. There are also the private house holds, which make up for 70% of GDP with their consumption, who are heavily indebted. Read the rest of this entry »
February 10th, 2010 |
Market, News | 2 Comments »
