Latest Blog: Beach Reading - 07/29/2021
Investment Insights are written by Angeles' CIO Michael Rosen
Michael has more than 30 years experience as an institutional portfolio manager, investment strategist, trader and academic.
TOO MANY WORDSPublished: 12-22-2014
Among monetary economists, there is a raging debate over the merits of the Fed’s burgeoning balance sheet. Back in November 2010, an open letter to Fed chairman Ben Bernanke was published in the Wall Street Journal (http://blogs.wsj.com/economics/2010/11/15/open-letter-to-ben-bernanke/), arguing that Quantitative Easing (QE) raised the risks of currency debasement and inflation. Some very smart economists signed on (Michael Boskin, Ronald McKinnon and John Taylor, all of Stanford), a few brilliant money managers (Cliff Asness of AQR, Seth Klarman of Baupost and Paul Singer of Elliott), and a couple of renowned historians (Niall Ferguson and Amity Schlaes), among others.
I did not sign the letter. I could say the reason was that I did not share the urgent fear others held of QE because I could see that these excess reserves would have little real impact unless they left the Fed’s balance sheet and flooded into the economy. With banks unwilling to lend and consumers unable to borrow, there was little chance these trillions of reserves would go anywhere or have any material impact. And with no requirement to manage the size of its balance sheet, the Fed could in theory expand it forever, or wind it down over a century, as it chose. I continue to believe that QE had very little real impact on the economy, benign or malign, and the end of QE and the prospects of monetary tightening need not be feared by investors.
All of the above is true, although I must admit, among friends, that the real reason I didn’t sign that letter was not disagreement and prescient foresight, but that simply, no one asked me. That’s not a complaint, just an admission.
While I continue to believe that QE had little effect on the real economy, it apparently did have a pernicious (and unforeseen, by me, at least) impact on civility, specifically, the efficiency of language. For as the Fed’s balance sheet expands, so too does its verbiage explaining its decisions (kudos to Vincent Reinhart of Morgan Stanley for keeping tabs on this important data series). Clarity and succinctness have been under assault in our society for many years, and we must resist this rising tide of words. I am hopeful that the end of QE will facilitate the return to the good old days of 200 words or less from Fed pronouncements. If the authors will amend their 2010 letter to emphasize this point, I’ll happily sign it now.PRINT THIS ARTICLE
Normally, I wouldn't comment on any single economic release, but today's GDP revision adds to the mounting evidence of a ...READ MORE
Still in Neutral 04-07-2016
The first quarter began with a bang and ended with a whimper. At least, that's the message from the VIX (volatility ...READ MORE
My quarterly letter talks about the strength of the US dollar and why it should continue to rise (see Chart below), but ...READ MORE
We build portfolios of best-in-class investment managers across all asset classes. If you would like to be considered for our portfolios, please contact us using our manager inquiries form.
- MANAGER INQUIRIES
How Can We Help You?Institutional Investors
Fully resourced investment office built to manage sophisticated client investment programsPrivate Wealth
Personalized discretionary portfolio and wealth management services powered by institutional processInvestment Management
Rigorous process and a flexible platform designed to meet client needsArticles & Insights
Latest insights and perspectives from the Angeles teamContact Us
Get in touch