Copy of LinkedIN post, 2020 Bank of England-Staff Working Paper No. 845 Eight centuries of global real interest rates, R-G, and the ‘suprasecular’ decline, 1311–2018 Paul Schmelzing January 2020 The deviation (volatility)in inflation adjusted rates continues to drop. Is an asset allocation change coming? Is the 60-40 portfolio moving to a 40-60 portfolio, with a LINKER, TIIS and SHARI’a compliant fixed income method that is applicable to all participants? Our work shows a mor

Copy of LinkedIN post, 2021 You win. In either an inflationary or deflationary scenario. In asset allocation models and fixed income strategies; Nominal based bonds, Linker’s, Tips, and Sukuk are all being asked to deliver a positive Real return. Yes, one may choose to employ a hedging technique, but this is not available to all participants. The costs, complexities and less than absolute correlations are not available/acceptable to all. Sovereigns, political subdivisions, co

Copy of LinkedIN post, 2020 Insightful question. The ‘deflation floor’ of Linkers and Tips. Does our method have this artificial floor, does the issuer of debt suffer penalty if deflation is observed? Answer: No. the outstanding principal could decrease in a deflationary cycle. No, the lender does not suffer loss of constant purchasing power, the number of units received may decline, but with a known purchasing power. Yes, the structure of Linkers or Tips is not acceptable to

Copy of LinkedIN post, 2022 European Port Contagion. Unions want purchasing power. Employers want to know how to protect themselves. The challenge is the mismatch of the known real payment to the expected real income. Foundational asset/liability management. https://lnkd.in/gJgZwvVA Dock operators/shippers are financed in nominal terms, the employees want to be paid in real terms. Will the ZDS consider a capital structure that implements a payment for capital utilizing the ma

Copy of LinkedIN post, 2021 Did you notice this too? It is the Inflation Adjusted/Real Rate that is the foundational point in financial decisions. For the past few weeks; many, many articles and interviews discussed and commented on what the inflation adjusted return is, was and what it might be going forward. It did not matter what asset class was being discussed. It did not matter the characteristics of the portfolio or asset class. So many experts want you to be aware of w

Copy of LinkedIN post, 2021 False Facts. Currently the “facts” are deemed to be … The structure that delivers the best risk-management outcomes, the maximation of earnings potential and most efficient frontier for all participants is based on the following capital formation method. Firm A lends in a Fixed or Variable nominal rate, in a marketable currency to Firm B. Firm A has determined it is exposed to a greater amount for a single entity that is comfortable with. So, it ac

Copy of a LinkedIN post, 2020 THE WORLD’S BEST GAMBLERS. Inflation risk management. It is time to stop forecasting and utilize KNOWN/PUBLISHED inflation. The key question to ask when developing an inflation risk management protocol for debt instruments – for both the borrower and lender – is ‘How much more do I know than all other participants and stakeholders in this asset class, and what is the strength of that conviction?’ That leads to ‘What is my budget and what am I wil

Copy of a LinkedIN post, 2020 CPI-U or CPI-E? What if the cost of living index utilized for calculation of social security benefits changes from CPI-U to CPI-E? Does it affect the benefits from RRM? In short .... No. In long.... as we researched we found that the index agreed upon by the borrower and lender is not the key driver. We suggested the use of CPI-U, supported by its wide acceptance in governmental, retirement, business contracts etc. The driver is the marked improv

Copy of LinkedIN post, 2020 ‘Ray Dalio on the Decline of Real Rates.’ This is a Bloomberg podcast. The question to me from a LinkedIn connection. Does RRM fit within the Bridgewater All Weather Fund? I do not know the philosophy, process, disciplines and rules of the fund. So I have a number of unknowns and questions. Does it search for the optimal efficient frontier for the weightings of the various asset classes within the fund? Does it weight inflation and growth, when eac

Copy of LinkedIN post, 2020 Nominal Anchors. The IMF definition. “A nominal anchor is a variable policymakers can use to tie down the price level. One nominal anchor central banks used in the past was a currency peg—which linked the value of the domestic currency to the value of the currency of a low-inflation country.” #SarwatJahan in his piece for the IMF “BACK TO BASICS” publication discusses Inflation Targeting with a ‘nominal’ foundation. In an opinion piece in #THEHILL,