Yield Curve As a Signal for Reccesion

 25 March 2019
https://tinyurl.com/y5fxbu3h

Yield curve is one of the commonly watched indicator by investors.  In the past,  it has been used as a  signal for the start of a recession.  It was found to be quite accurate over many many years before 1980.   Many talked about the inverted yield curve in 2008 to predict the  last great recession in 2008/09 but recession only came after the SubPrime crisis exploded many months after.

Today,  it is the talk of the town again.  Many articles called out for the attention of the investors.

What Do the Yield Curves Tell us?

Here are some yield curves of the various countries

The above yield curves show that the US yield curve’s short term rates have inverted over the last 6 months.  The same was observed in the yield curves of the other countries except for China which showed an even better yield curve than before.

According to the conventional wisdom,  one would judge that China’s yield curve is the best and Hong Kong’s yield curve is the worse.  In between is Japan and  US States.  

How Accurate and True is the  Conventional Wisdom?

It is accurate and true if the  Market players have been given the right to determine and set the price of the bonds in a free market.  However,  the yield curve may mean nothing if the bond market is heavily manipulated.  Take US for example,   Fed sets the rates of the short term bonds, leaving the market players to determine the long term bonds.  Fed also interfered the market by buying Treasury Bonds and Mortgage Back Securities from the Banks,  seriously interfering the bond market,  making  the market a totally different “animal” altogether when compared to those markets in the 1960s. 

How and Why?

Fed was founded in 1913 to control financial crisis and prevent bank runs. It has the mandates to maintain market stability and to maximize  employment.  It tweaks  monetary policies and adjust  Federal fund rate to control and tame the inflation.
 
Fed was able to control Federal  fund rate to within 5% over the years.  It was about 6%  during the Great Recession in 1929. The control was maintained at below this rate until end of 1960s.  From then on,  the rate went all the way up to 20% as recorded in  Dec 12 1980.  The rate then returned gradually to the present level of 2.5 to 3%  as shown in the following chart

The bond market,  especially the short term bond market,  have been manipulated heavily by Fed.  However,  all these years,  Fed was able to leave the long term bond market like the 30 years untouched until after 2008 when Fed started the QEs and purchased large amount of Treasury Bonds and Mortgage Backed Securities from the Banks. This action of Fed affected also the market for the  long term rates. 

The following chart shows the differences before and after  1980.  After 1980,  Fed kept rate hike averaged below  7%. 

One could observe

1)  Before 1980,  recession often happened just after a rate hike.  The rate hike has also inverted the yield curve as evidenced by the 1-year shooting above the 10-year bond rate. This,  however, did not happen after 1980.

2)  The 1-year bond rate has been manipulated and pushed way below the 10-year bond rate especially after 2010.   The 1-year bond rate did not even have the chance to fully form an inverted yield curve before the recession began;  also

3)  The yield curve improved over and during all the recessions after 1980.

What Do All These Mean?

It all mean that we are now looking at a different “animal”;   in other words,  an inverted yield curve might not necessary signal a recession has started although it is highly probable that a recession is in the making or about to happen.   It is also probable that a recession could be reverted as the recessions  are more crisis  related and would recede once the crisis is removed.  As  a result,  one might expect the inverted yield curve to "stand" for a much a longer period and recession might not have even started. 

Presently,   the Fed rate and bond yields are extremely low.  Even the Pension Funds do not find bond investment attractive.  Many Pension Funds was reported to put more than half of their assets in the stocks.    This has made today's yield curves to look very much different than those days when bond  was a natural choice  of investment for the Pension Funds.

It would appear that one should not just depend on  inverted yield curves to predict the present of  a recession. Also,   the present Fed fund rate is so very low that cutting Fed rate will not significantly help solve crisis related recession  such as a Trade War. 

In Conclusion

The presence of a inverted yield curve has been taken to be a reliable to predict a recession before 1960.  This is no longer the case after 1980.  However,  one can still use it to express a  recession is in the making.   

Presently,  the Trade War between US and China and other events like Brexit have  significantly affected the Global economy.  These are something that monetary policy controls cannot help until they are resolved and ended.  Therefore,  it would be better for investors to monitor the progress of these significant events rather than monitoring the development in the yield curves.

Should one still wanted to monitor the progress of a recession in the absence of any crisis,  a better tool to use is to monitor the rise of the yield spread as described in this article. 

Use Generic Games Controller for Fortnite and Other Epic Games

23 March 2019
 https://tinyurl.com/y2nxujpe

Epic Game allowed Generic Games Controller (or USB joystick) to be used before mid 2018 for their games.  Then the  users need only to install  a small program called  "x360ce emulator".  Now Epic Game only allows Xbox and PS4 controllers to be used for some reasons.    This article will describe how a Generic Games Controller could be used for  Epic Games again.

How x360ce Emulator works?

X360ce is a popular Xbox emulator that has been used widely in PCs for many many years.  For the emulator to work,  one must configure the controller and install the program's  ini files together inside the games'  folder for it to be picked up when the games started.  This no longer works for Epic games since mid 2018.

What’s the Alternative?

To use the x360ce Alpha version 4.8.0.14 developed by GitHub.

Why the Alpha Version can work?

The Alpha version works exactly like the x360ce;  in fact,  it is a modified x360ce. It differs from the older version in where the little program resides.   Instead of residing in the games' folder,  the Alpha version is now part of Windows’ operating system just like any controller box.  It can be found in the [Devices and Printers] of [My Computer] as shown below.

How to install the Alpha Version

Step by Step

Description	Action	Remark (double click to enlarge pictures)
1.  Download x360ce Alpha	1. From here.   Remember where one has saved the file 2. If you have previously download other versions,  delete the old program called "x360ce" found in [C:\ProgramData]	Only the 32 bit version is available but it will work also in Windows 64 bit OS
2. Configuration	1.  Fire up the downloaded program	One would be greeted with the following main menu The program will highlight  any issue found in starting up the program such as missing drivers or software etc.  Some of these issues are described in the next section below
	2.  Press [+Add Game..] found on the top of the main menu screen.  In the next screen,  browse to x360ce folder to select x360ce.exe.  Make sure the x360cd.exe checkbox is also checked,
	3.   a)  Go back to the main menu b)  Plug in the USB joystick,  making sure the joystick’s LED light is on; c) Select [Controller 1] , then d) Select [+Add…] c)  In the screen shown on the right,  select and delete the keyboard and mouse by [x delete], leaving only the [USB joystick] behind.   d)   Click ok to return to  the main menu.
	4. In the main menu, tick the following check boxes  a)  [Enable 1 Mapped Device] b) [Get Xinput State] and c)  Highlight the required  Joystick.  Tick the check box if it is unchecked	The [Enable 1…] refers to the 1st item in the device box.
3.  Matching the controls	b)  On the buttons to be matched,   left click it with the mouse and select [Record] to show the blinking lights on each button in the picture c)  Click the corresponding button on the joystick d)  Repeat same for all other buttons	The button of Xbox picture will flash when [Record] is selected The flashing light will go away when a button in the controller is pressed
4.  Testing	Click the [Game Controller] button at the lower left hand corner	The following screen will show.  Select [XBOX 360] to test.  Calibrate the joystick buttons if necessary by selecting  [setting] in the properties section
5.  Saving the configuration	Go back to the main menu and press [save all] at the top right hand corner to save.	Unlike the older version of X360ce,  there is no ini file or Xinput files to be created;  instead,  an xml file will be created in the ProgramData’s x360ce folder.
6.  Creating a Windows start up shortcut	a)  Type [shell:startup] in the search window of Windows’ start button. A window with the folder will show b)  A right click in the startup  folder will allow a shortcut to be created for x360ce.exe.    c) In the [New] section,  navigate to the folder where one has saved the x360ce.exe to select and create the shortcut	The x360ce program should always be loaded throughout the game.   To automate it during every Windows startup,  one would have to create a shortcut in the startup folder.
7.  Configure the shortcut to auto-start when Windows started	a)  Right click the [x360ce] shortcut in startup folder; b)  In the [Run] dropdown box,  select [Minimized] c)  In the [compatibility] tab,   click to run the program as Administrator	To ensure x360 will not slow down Fortnite,  it is always recommended to minimize x360ce.exe
8.  Restart the computer	After restarting the window,  fire up [Device & Printers] in the start menu	If the joystick configuration is done properly,  one should find 2 games controllers listed in the devices section;  one for generic controller and the other for Xbox 360 as shown earlier.

Issues During Configuration process

Description	Action	Remark (double click to enlarge pictures)
Missing KB3033929 Windows security updates	Update Windows’ OS if it has not been updated before	Windows needs an update.  Preferably to do  a complete updating process rather just downloading this file
Missing Xbox 360 drivers	Download the required drivers,  Select the correct Windows OS to download
Windows KB cannot start	Turn on Windows Updating service from [Disable] to [Manual] and start up Windows Updating service
Controller buttons not active	In the main menu,  delete all other devices using [X remove] button,  making sure there is only one device left,   which is the  defaulted joystick	When the game controller is in first row and is selected,  the check box [Enable 1 Mapped Device] should show up. if the button still not active,  do a device clean up by pressing the [Test] in the top right corner and select [Cleanup Devices]  which will show the numbers of  inactive devices.  Click [Yes] to remove them.

Other references

http://skyjuiceiswater.blogspot.com/search/label/computer

Huge Loss in Pension Funds Globally affecting stock market

 11 March 2019
https://tinyurl.com/y3mfs8en


The Organisation for Economic Co-operation and Development (OECD) that tracks Pension funds activities all over the World reported that the Pension funds lost about US$5.4 Trillion in 2008 due to the stock market crash during the “the Great Recession”. 

This year,  there were reports that many Pension Funds all over the World suffered much losses in the last 3 months ended December 2018 when US stock market crashed over 20%.  Although OECD's Pension Fund's  report is only due mid 2019,  one can expect that report will not look pretty.

What was Reported Recently?

1.  Japan’s Government Pension Investment Fund (GPIF)

GPIF reported that it lost about 9% or US$136 billions in the last 3 months ended Dec 31,  2018.  It was their biggest losses since April 2008.   GPIF put-in about half of the USS$1.5 Trillions in Domestic stocks and foreign equities.
  

2  US Public Pension

The US Public Funds was reported to have lost about US$ 900 billions or 7.5% of its  US$12 Trillions assets.  The Country's Pension Funds expected to have a shortfall exceeding US$2 trillions in 2019 unless the Government can  make up the differences.

3.  Ford Motor Co’s Pension

Ford Motor was expected to report US$1.27 billion income in 4Q 2018;  instead,   they reported a loss of $116 million.  This was all because it has recorded a Pension fund losses of US$877 million in the 4th Quarter.

Why so much losses?

Pension funds have to be attractive or looked to be attractive in order to attract pensioners to part with their money.  Most Pension funds will look for investments that could bring in enough earnings to satisfy their "hungry" members.  Naturally, one place where they would first look at is their Treasury Department or the Government related finance companies or establishment.

After Ben Bernanke started the Quantitative Easing (QEs) with other countries followed suit,  Pension funds do not find their investments in  the usual and traditional places attractive.  They must have looked for alternative investment grounds.   Many of them put more money instead in stocks and equities as the investment return was the best.  Some put more than  half of their assets "in that basket".  Therefore,  it is not difficult  to understand why there was such huge loss in terms of  billions or trillions when there is a market crash.

Why Market has not Crash?

Market will not crash unless the investors especially the Funds have all given up or there are some better places  that the Funds can earn enough money to satisfy their "hungry" customers.  At present,  the interest rates all over the World were so low;  some even went negative like Japan, France,  Germany and many other European countries.   The Funds were not quite interested in the Bonds nor other investments except in stocks and equities.  So long as there are hopes that the stock market can recover,  one should expect these “hungry” Funds to continue maintaining their investments in stocks and equities.  They might even try to uplift the stock market to recover all their previous losses.

Why Can’t the Government help?

The Governments all over must have noticed this unhealthy development in their Pension Funds but they could not do much because they themselves are in bigger trouble. Many US Municipals are in serious financial trouble.  So far, there were over 70 defaults in Municipal bonds reported since 2017, involving a sum of not less than US$ 4.0 billions.   2019 is expected to see more Municipal bond defaults as the default sum has already reached US$1.0 billion in the last 2 months
 

How Pension Funds make their Investment?

Pension Funds do not normally involve directly  in  tradings,  such as stock tradings.  They would employ Fund Managers to do these jobs for them. However,  some Pension Funds, especially those in Canada, would carry out their work much like any private equity firms and hedge funds.

What to Expect?

It is expected that the Global stock markets will be volatile in the coming months when the Funds are sorting out their losses.   The loan market will be very active especially in leverage loan market when these Funds cannot get the usual lending from their traditional sources.

The Funds will try to “kill” each other in the stock markets;  some will completely disappear from the horizon.  In the end,  we should expect a “bloody” market unless the Governments can step in to stop the “killing”.

Installation of Recording Cameras for PMDs

 8 March 2019

There has been a spate of accidents happening recently in Singapore involving Personal Mobility Devices (PMDs)  and the pedestrians.  The accident rate has been reported to have increased two folds,  from 132 in 2017 to 250 in 2018.  There were also  a few reports about the seriousness of these accidents involving the lost of innocent life.

In an effort to carry out better enforcement,  the Land Transport Authority (LTA) of Singapore is trying out using Close Circuit Television (CCTV) at various hotspots to monitor  errant cyclists and PMD users in Singapore.    

 

The Goods and the Bads of CCTVs

As usual,  the installation of the CCTVs received many  supportive as well as adverse remarks from many people.

The Goods

1.  The camera will be  a deterrent.   It will force the PMD users to behave and not the speed along walk paths and pedestrian crossing;  

2.  When there is a working camera,   the pedestrians will have the safe feelings and walk at ease without having to look right and left and every where for the present of the speedy PMDs;

3.  The cameras can also doubled up to fight crimes.  Very often,  PMD users will speed in seclusive areas where there is no other surveillance camera around;  the  CCTVs will be installed in these hot spot.

4.  The camera recordings can be used for further research and also as evidence and proofs in the courts to prove for the innocence.

The Bads

1.   Lots of CCTV cameras will be required.    They will have to have very high resolutions so that it can record far away images clearly without losing the picture quality at all material times.  These cameras will be expensive and the installation will involve large sum of money;

2.  These cameras will need to be maintained regularly involving a very large team, incurring high  maintenance cost which is recurrent;

3.  Most cameras will be fixed in position and there will always be some “blind” angle that the cameras cannot record properly when accidents happened at these “blind” spot;

What’re the Other Alternative?

1.  PMDs With Built-in Recording Cameras

Nowadays,  recording cameras are inexpensive; many of these are very small and handy.  They  can be fitted easily to PMDS without much problem.

These cameras can be front mounted to record what is happening in the front of PMD when it is moving.   Many of these cameras have time signatures that some could also record the speed of the PMDs.   They use very little electricity and the recordings are in loops,  capturing the pictures non-stop.   The  recordings can be kept for many hours depending on the capacity of the memory card.  A 16 GB memory card can keep up of 80 minutes of recording at 720p resolution,  good enough for HD play backs.   At lower resolutions,  it can record up to 5 hours or around 320 minutes.   The cameras usually will have a viewing angle of 160 to 180 degrees,  good enough for most applications. 

The Goods and the Bads

The Goods

1.  The cameras can be used as a deterrent to prevent PMD riders from  speeding as the cameras would have speed recording.   In case of accident,  it can be used as evidence to determine which party was at fault; 
2.  The Government and taxpayers can save lots of money.  The camera would be cheaper to install as the picture resolution will not be as stringent as the CCTV cameras;
3.  The owners of the PMDs will provide the maintenance and save the Police and taxpayers large sum of money;  if necessary,  made it mandatory for the PMD riders to use the camera recordings to prove that they are not responsible for any accident;
4.  The cameras will record what is happening at the front of the PMDs;  this is usually where the actions will be;

The Bads

1.  No so reliable;  there are so many brands of cameras in the market;  which brand to choose?;
2.  The cameras can be easily tampered with and may not always be admitted as a good evidence;
3.  Additional cost to the PMD owners;  it may not go down well with the  PMD owners;
4.  Able to capture only the front view and not the side and the back views;

To overcome some of the problems,  the Government can help.  For example,  for the selection of the cameras,  the Government can get Spring Singapore or  other approved testing body  to test some of the cameras in the market and prescribe the approved cameras for use in the PMDs. 

As for the tampering of the cameras or memory cards,  rules and laws should be in place to make it always the PMD riders to be  responsible for any accident unless they can show camera footage to prove their innocent, it will then force the riders to always maintained the cameras in good and working condition.

As for the poor capturing angles,  it should not be too much of a problem as most actions in an accident would have been captured by the front cameras before any accident could happen.

Conclusion

1.  The Government should explore the use of built-in cameras for use in PMDs and if necessary,  make study for a trial to be conducted to check its effectiveness;

2.  For those PMDs on rental schemes,  the Government should encourage or make it mandatory for the operators to use the built-in camera as such measure will benefit both the operators and the pedestrians.