Macroeconomics || Markets || Fixed Income || Commodities. Views are Independent and Intellectually Genuine. DM for Academic & Non-Academic Research Assistance
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Joined February 2024
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Zero Equilibrium Economic Community (ZEEC):
Zero Equilibrium is a think-tank dedicated to the enlightenment of individuals, and spreading knowledge. The objective of this Economic Community is to improve economic thinking and synchronize seekers of knowledge and people of knowledge.
We have a strong passion for education, so academic development and support is a big part of our objective, but we are no less dedicated to professional (academics or institutional research support and analysis).
The community welcomes certified economists, enlightened and ordinary economic enthusiasts. A meeting point for discussing economic theory, and economic policy. Anyone is free to contribute to the discussion with relevant posts, comments and contents.
And as anchor, I will be providing contents centered around core Macro theory: books, journals by renowned economists.
We would also be discussing policy: notable local, and foreign macroeconomic indicators and developmens, as well a broad-based analysis on various segments of the financial markets: Fixed Income, Equity (Indexes), Commodities, Cryptocurrency.
Core Contents and Tenets of ZEEC:
Contents are divided into 6 with the 5th and add-on bonus that would later grow in prominence.
1. Macro/Micro Academia:
Free flowing syllabus, with threads (and papers) on macro economic concepts, from different schools, even though this is a Post-Keynesian outfit.
There would be explanatory comments and responses to questions and queries in order to boost understanding different schools of thought.
[Monthly Spaces to have a chance for an interactive session on published content]
2. Applied Macroeconomics:
Here we link economics to real life, analysing different spheres of the economy, sports, health, government policy, public sector efficiency, Industry,etc.
Debates on Policy and Theories (and Markets):
3. Global/Local Macro:
Economic Indicator Watch Analysis, Commentary, and
Interpretations of trending policies, central bank, fiscal and trade policies.
4. Commodity Watch:
Updated Analytical Research Papers. On a select group of commodity futures.
Should be tailored for traders, or purchasers.
5. [Periodic] Financial Markets Analysis:
a. Currency
b. Bonds
c. Stocks
d. Index movements
e. Crypto
6. Investment Education:
a. Basics of Investing.
b. Portfolio advisory.
Rules of Engagement:
1. Contrarian ideas and against arguments are welcome, and anyone can respond to ZE posts, or articles on the blog, and anyone who wishes can write and send rlevenat articles to our email that we would the then post on the our blog.
2. Queries, questions and demands for clarification on any topic (theory, markets or policy) will be most welcome and responded to swiftly. Anyone with knowledge can also throw in theirs
3. The discussions around policy and national economic development WOULD be factual, objective, and without malice. Emotional arguments are not welcome.
4. There is no right and wrong just reason.
Zero Equilibrium retweeted
INVESTOR EDUCATION | GROWING PROFITS DON'T TELL THE WHOLE STORY
A company can report rising profits without delivering equally strong cash generation.
That is why investors must look beyond the income statement.
Examine the balance sheet and cash flow statement to understand debt, liquidity, cash generation and the overall financial position of the business.
Don't just ask how much a company earns. Understand how financially strong the business really is.
Beginner’s Guide to Investing in Stocks provides a structured foundation for learning how to analyse businesses and make informed investment decisions.
Get your copy:
selar.com/l91haz1977
#NGX #Investing
!!!!!!!!
You ain't on APEX, you ain't ON NOTING!!!!!!
INVESTOR EDUCATION | GROWING PROFITS DON'T TELL THE WHOLE STORY
A company can report rising profits without delivering equally strong cash generation.
That is why investors must look beyond the income statement.
Examine the balance sheet and cash flow statement to understand debt, liquidity, cash generation and the overall financial position of the business.
Don't just ask how much a company earns. Understand how financially strong the business really is.
Beginner’s Guide to Investing in Stocks provides a structured foundation for learning how to analyse businesses and make informed investment decisions.
Get your copy:
selar.com/l91haz1977
#NGX #Investing
Authority should never become a substitute for intellectual humility. The strongest economists I know, aren't necessarily those who sound most certain, they're those who can distinguish what they know from what they believe, whilst identifying what the evidence suggests and what remains uncertain. There's one quality that cements this: they must be comfortable moving between macroeconomic theory, financial markets, political economy and practical policy.
ZERO EQUILIBRIUM® APPLIED FINANCE SERIES: Financial Instruments, Asset Classes and Investment Vehicles
Perhaps, this should have been the introductory thread, but then I would be able to link the contents to the earlier two. So consider this an extension of the Zero Equilibrium Applied Finance Series.
The last thread talks about diversification, amongst asset classes, financial markets and financial instruments, but did not explain the concepts. In this thread I do so, and also help understand the linkage between them.
Before you begin investing, there are three concepts you need to understand: asset classes, financial instruments and investment vehicles.
They are related, but they are not the same thing, and understanding their differences, and value proposition, helps you identify what you are investing in, what rights you acquire, how returns are generated and what risks you are exposed to.
So, what is an asset class?
👇🏾👇🏾👇🏾
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ZERO EQUILIBRIUM® APPLIED FINANCE
Foundations of Applied Finance: Personal, Retail, Institutional and Public Finance
Finance is often defined in narrower limiting terms. Many refer and limit it to saving money, investing in stocks, borrowing from banks or making profits. But it is much broader.
Just as well, many think of Public Finance from corporate or even household lens.
The series aims to combine financial and economic literature to offer my followers a valuable insight into the financial world to help make better decisions from a strong conceptual understanding.
Using academic and real life applications, we aim to provide a sound knowledge and understanding for individuals/households, institutions and even governments to help make better decisions and maximise gains from the financial markets.
The motivation for this is the realisation I came to a long time ago as an account officer, and relationship manager for Banks, Insurance and Pension funds, that many Nigerians do not participate in the markets, partly because of a knowledge deficit.
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Notice what has happened.
The investor has diversified across five asset classes, but has also diversified within some of them through different instruments, issuers, sectors and markets.
This is why understanding the distinction between asset classes, instruments and investment vehicles becomes important.
You can obtain equity exposure by purchasing individual shares or through an ETF or mutual fund. You can obtain fixed-income exposure by purchasing Treasury bills and bonds directly or through a fund. Similarly, commodity exposure can come from physical ownership, commodity-backed products or futures contracts.
Each route carries different costs, liquidity conditions, ownership rights and risks, and financial institutions facilitate these investments in different ways.
Stockbrokers provide market access, asset managers construct portfolios, funds pool investor monies, banks provide deposit services, while pension funds invest contributions to meet future retirement obligations.
From the abve, it suffices to say that, diversification across asset classes does not automatically mean that a portfolio is adequately diversified.
An investor holding Nigerian equities, Nigerian government bonds, Naira cash, Nigerian real estate and Nigerian corporate bonds has exposure to several asset classes, but remains significantly exposed to the same domestic economic environment.
Inflation, exchange-rate depreciation, domestic interest rates and sovereign risk can affect several of these investments simultaneously.
This is why diversification must consider not only the number of asset classes but also their underlying economic exposures and correlations.
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ZE Summary:
You gain exposure to asset classes through financial instruments or investment vehicles, financial institutions structured by the variety of financial insitutions mentioned above.
You diversify across assets through financial instruments and vehicles, and gain exposure to potential risks and rewards.
Understanding the differences between several financial instruments and investment vehicles, is essential to sound captal accumulation, a prerequisite for successful investment.
Before investing in anything, ask three questions:
(1). What asset class am I seeking exposure to?
(2). What financial instrument am I purchasing, and what rights or obligations does it carry?
(3). Am I investing directly or through a proxy asset/investment vehicle?
These questions help prevent a common mistake of focusing on the name or popularity of an investment product without understanding what risks it carries, and if it fits into your own personal investment goals, risk tolerance and liquidity preferences.
When applying finance, understanding what you own is the starting point for understanding what you stand to gain or lose. And by extension, how to match investments objectives with the Right Financial instrument.
[Next in the series: Matching Investment Objectives with the Right Financial Instruments.]
By @Muhammad_Okoye for Zero Equilibrium® Finance.
10/10
Zero Equilibrium retweeted
ZERO EQUILIBRIUM® APPLIED FINANCE
Foundations of Applied Finance: Personal, Retail, Institutional and Public Finance
Finance is often defined in narrower limiting terms. Many refer and limit it to saving money, investing in stocks, borrowing from banks or making profits. But it is much broader.
Just as well, many think of Public Finance from corporate or even household lens.
The series aims to combine financial and economic literature to offer my followers a valuable insight into the financial world to help make better decisions from a strong conceptual understanding.
Using academic and real life applications, we aim to provide a sound knowledge and understanding for individuals/households, institutions and even governments to help make better decisions and maximise gains from the financial markets.
The motivation for this is the realisation I came to a long time ago as an account officer, and relationship manager for Banks, Insurance and Pension funds, that many Nigerians do not participate in the markets, partly because of a knowledge deficit.
1/12
Zero Equilibrium retweeted
Most markets do not price their products like an auction market. The majority of prices are calculated as a mark up on total average unit cost. Proof and empirical data right here: socialdemocracy21stcentury.b…
Sallie Mae isn't unintelligent or guilty for charging interest on student loans. It understands that lending money is not a one-off transaction. The interest charged helps sustain the lending facility, meet its financing costs, manage credit risks and ensure that it can continue extending credit without running into liquidity or insolvency problems.
#NELFUND would have a short quick life ir a long miserable one. By either way, it I'll not be sustainable on this model. But, further incentives can keep it going just a little bit longer than its natural life cycle. But interest rate and asset quality are the foundational determinants. Cause as it stands, the asset quality is is doubt.
ZERO EQUILIBRIUM® APPLIED FINANCE: Diversification: Horizontal and Vertical Diversification
Diversification can be defined as holding a composition of differentiated assets (within or across asset classes), that presents the most optimal risk-reward balance. If a stock portfolio owns five banking stocks, and another holds five stocks in different industries: one escape of Telecom, Banking, Oil and Gas, Industrials, and Phrama, they both hold a similar portfolio mix but exposed to different risks and returns.
Whilst the former with a concentrated holding of banks can gain exponentially in the event of a major bid driving up prices of banking sector stocks relative to their industry, it is also more exposed when the market sentiment on the banking sector turns negative.
But, Diversification is deeper than just owning different assets, the composition of these assets and the correlation risks matter as much ad the distribution of capital across assets.
To be able to diversify, you'd need to be able to understand, and identify the risks every asset exposes you to.
The cocept of Diversification is more complex than what it is often reduced to. The principle goes much deeper than that.
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ZERO EQUILIBRIUM® APPLIED FINANCE
Foundations of Applied Finance: Personal, Retail, Institutional and Public Finance
Finance is often defined in narrower limiting terms. Many refer and limit it to saving money, investing in stocks, borrowing from banks or making profits. But it is much broader.
Just as well, many think of Public Finance from corporate or even household lens.
The series aims to combine financial and economic literature to offer my followers a valuable insight into the financial world to help make better decisions from a strong conceptual understanding.
Using academic and real life applications, we aim to provide a sound knowledge and understanding for individuals/households, institutions and even governments to help make better decisions and maximise gains from the financial markets.
The motivation for this is the realisation I came to a long time ago as an account officer, and relationship manager for Banks, Insurance and Pension funds, that many Nigerians do not participate in the markets, partly because of a knowledge deficit.
1/12
Diversification Has Costs and Limits:
Horizontal expansion can create duplicated costs, unfamiliar products, management complexity and capital missallocation.
Vertical integration can lock capital into less liquid assets, increase operating complexity and expose a company to industries with structural vulnerabilities and financial risks e.g., liquidity).
For both forms of diversification the tradeoff is: increase transaction costs, fees. And there is also a danger of over-diversification, where different investment are added without materially improving the portfolio's risk-return profile.
Just as a business should not enter a market merely because it is available. An investor should not buy an asset merely because it is different from existing holdings.
Both decisions require a clear assessment of expected benefits, costs, capabilities and risks.
Diversification is a means to an objective, not an objective in itself.
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Applying Diversification: The Questions that Must be Answered.
Before diversifying a business or investment portfolio, ask:
1. What concentration risk am I trying to reduce?
2. Are the new products, markets or assets exposed to different economic drivers?
3. What additional costs, liabilities and operational risks will the decision create?
4. Does the expansion build on existing capabilities or require expertise I do not possess?
5. Will it improve resilience, returns or productive capacity after accounting for costs?
6. Could the new exposures become correlated during a crisis?
7. Does the strategy fit the entity's financial objectives, time horizon and capacity to absorb losses?
In all, always keep in mind that;
"The value of diversification depends on the risks reduced, the new exposures introduced, the costs incurred and the capabilities developed."
✍️🏽 By @Muhammad_Okoye for ZERO EQUILIBRIUM® APPLIED FINANCE.
[Next up: Assets, Financial Services, Finanial services Providers, and Financial Instruments]
DM for Academic and Applied Economic and Financial Markets Research.
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