As the BOC action today shows

it is good to avoid spurious talk of ‘normalizing monetary policy’ when we are living in a paradigm of wage stagnation, precarious employment, household indebtedness, rising inequality, and job losses from off shoring and technological change.

Monetary policy is supposed to be the elixir to fix this?

My disagreement on Twitter from last January…



The busiest infographic you will see today

This Marketing Technoclocy Landscape Supergraphic is by Scott Brinker over at While not exhaustive it must come close and once you discern the various sections: Marketing Experiences. Marketing Operations, Marketing Environment from Infrastructure, Backbone Platforms, and Middleware, you can drill down into sub categories and see his list of companies that exist and compete in those spaces. With the fluid nature of technological change we will no doubt see many more entrants into each category with many failing but the shake out over the coming decade will change the face of how marketing is done from the back end to the front line and every touch point in between.

Marketing Technolocy Landscape

You can download the pdf marketing_technology_jan2015.

Brinker’s four takeaways for readers are:

  1. Marketing has unquestionably become a technology-powered discipline.
  2. The quantity of martech ventures is a barometer of how much marketing is evolving.
  3. The marketing technology field is heterogenous, with a very broad range of products.
  4. To thrive in this environment, marketing should steadily develop its technical talent.

Read the rest of his post.

Everything you were Taught About Risk is Wrong

They way we are taught to think about risk is wrong as this post illustrates in its MPT takedown. How about articulating ‘regret’?

Wall Street and Beyond

In my experience, “Risk” is the single most misunderstood concept in finance. Volatility, risk and uncertainty are all terms that are used interchangeably on Wall Street. The confusion is in no small part due to the strong influence of “Modern Portfolio Theory”, which continues to live on despite the fact that it makes no sense. At the core of MPT is the (flawed) idea that risk is equivalent to price volatility. It’s remarkable to me that so much complex math has been built on the back of such a dumb assumption.

Risk = Volatility?

The willingness of the financial community to accept this assumption is astounding. Any reasonably intelligent person who stops to think about this for 5 minutes will realize how nonsensical it is:

  1. Volatility measures the extent to which a stock price has fluctuated historically, both upward and downward over an arbitrary time period (e.g. a month). Risk

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Do we need Business Innovation – or Common Innovation? By Peter Swann

From Peter Swann’s post:
Many business-enhancing innovations are organisational innovations, outsourcing innovations, restructuring innovations or financial innovations. They are very valuable to the innovator, and the financial services industry, but do little or nothing of value to the end-user.

The advent of globalisation meant that many towns dependent on a traditional manufacturing industry saw their income and employment decline as production was relocated to lower-wage economies. This led to many social and economic problems in depressed towns.

ElgarBlog from Edward Elgar Publishing


What is the best way to create and share prosperity in a society? Professor Peter Swann argues that common innovation is about ordinary people creating the wealth of nations, and that business has no monopoly over innovation or wealth creation.

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BOC: Easing bias before a rate cut

Nice table here from Pension Partners (via @MktOutperform )

The Race to Negative Yields (%)

And here is the Canada 10 year Government Bond (from Trading Economics)

Canada10 Year Bond (2009-2015 YTD)

On January 21, 2014 I argued that the Bank of Canada’s policy rate would continue to flat-line for the year despite market optimism to the contrary. I also disclosed that I had added long bond exposure to my personal portfolio with the view that 2014 would be a bounce back year for sovereign long bonds, specifically Canadian. Little has changed to deter the portfolio choice as the global landscape worsens.

At home, in an era of what I believe are low rates for a very long time, financial repression is killing the spending capacity of retirees. A not so small point is that the front end of Canada’s baby boom generation began retiring last year. That is a trickle; a flood of retirees will follow. Central banks are relying on reduced interest rates to spark credit creation (and in turn a greater stock of private debt) to spark consumption. The price of real estate remains at a high in nominal terms in major cities like Toronto and Vancouver and household debt to income ratios remain high as well. To keep the not so virtuous cycle of consumption going will require the central bank to more encourage credit creation and asset price inflation to spur the industry that is growing –real estate development– however with the federal government attempting to balance its budget the output gap that the BOC calculates as a guide (but necessarily a final decision making metric for policy) is likely to expand rather than contract. With slack only increasing and knock on effects from oil’s price decline yet to be felt in the numbers that drive markets, 2015 will be another year of easy monetary policy. Absent increases in real wages of working and middle class workers there will be no spike in effective demand within the Canadian economy that will be sustainable. If anything, the case is now being made by Ted Carmichael and others for a policy rate cut. I agree with this view. While a rate cut on January 21 is unlikely the language leaning toward an easing bias may occur in the coming months. Reading the tea leaves of monetary policy statements is more art than science. If the BOC’s dovish language is enough then it will stand pat as long as it can but as the data flow increases and core inflation falls we will see a rate cut this year.

The scheduled announcement dates for BOC policy rates in 2015 are:

Wednesday 21 January
Wednesday 4 March
Wednesday 15 April
Wednesday 27 May
Wednesday 15 July
Wednesday 9 September
Wednesday 21 October
Wednesday 2 December

Canadian (un)employment – the worst is yet to come

Here are the Canadian employment numbers courtesy of Statistics Canada that tell the story of 2014. Jobs losses were 4,300 with full time employment increasing 53,500 and part-time decreasing 57,700. For the year, employment rose by 185,700.

Canadian Labour Force (month/month and year/year)

Let’s keep in mind, however, that employment numbers are a lagging indicator. The drop in oil prices and the knock on effects in oil sands jobs will be reflected in the coming months. This is in turn should also see a multiplier effect in the form of housing and jobs dependent on growth in the resource sector.

Is banking ready for the digital revolution?

When asked “What technology skills (programming or other) do you see becoming obsolete by 2020?” Josh Schubkegel, ex-head of global equities technology at UBS, answered:

 “After Facebook bought Instagram a few years ago, they seamlessly moved petabytes of data on a live application via configuration automation tools like Chef, and their end users didn’t notice at all. All of us in the financial industry rely far too heavily on humans doing things in a certain sequence or legacy systems that have been patched together, but to be able to effectively handle the complexities of today’s world we have to be able to remove those types of steps from critical processes. Folks in roles where they’re managing legacy systems or processes with bailing wire and duct tape should probably begin actively looking to augment their skill set, since it feels like we’re rapidly moving to a point where new technologies will significantly reduce those types of jobs.” (emphasis added)

You can read the rest of his interview with e-financial careers here but suffice to say that his view scratches the surface.

Taking the evolution in the area of mobile payments and the payments landscape as an example

Mobile Commerce Ecosystem (Source: Perficient blog)

Understanding the payments landscape

there will be a rush of capital going to the “FinTech

How to influence FinTech buyers

A good report by Thomas F. Dapp of Deutsche Bank research title “Fintech – The digital (r)evolution in the financial sector” came out in November, 2014. Download it here: Fintech-The digital (r)evolution in the financial sector

It’s main takeaways are;

The significance of digital structural change in many business segments is, however, frequently underestimated. Digitisation is impacting not only on certain elements of value-added processes and business models but on them as a whole, and they must also be adapted as a whole to the architecture of the digital age.

Over the long term an all-encompassing digitisation strategy should be accorded a high priority (not only) by traditional banks. Despite the massive squeeze on some margins, the fallout from the financial crisis which has still not been cleared up, the changing consumption behaviour of clients and increasingly strict regulatory requirements the banks need to undergo a radical course of innovation therapy during the transformation process. This will tie up considerable resources over the medium term.

The financial sector has a lot to offer. Valuable comparative advantages that a traditional bank has to offer include specific financial expertise (risk assessment, evaluation and management), discretion in handling client-specific (digital) data, as well as many years of experience of providing clients with regulatory-driven high levels of operational security. The latter is of less importance (as yet) to the new players in particular.

This is how modern banking will look. Modern data analysis methods will be used just as routinely as a seamlessly integrated web of all distribution channels. Flexible digitised infrastructures will in future enable banks to implement modern technologies and appropriate finance-specific internet services efficiently and above all in a timely manner with the aid of (open) programming interfaces. Strengthening one’s own brand and identity as well as the obligation to handle client data confidentially will also help to deliver a sustained increase in customer satisfaction and loyalty.

I am less sanguine about the ability of the banking industry to come to terms with this. Banking in some nations is a protected oligopoly and a technological laggard in employing capital to improve infrastructure. Bank executives have been swift to cut costs and outsource thus employing cheaper (from the reserve army of labour globally) at the expense of capital at home but that gig cannot continue indefinitely. Is banking ready for the digital revolution?