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The revenue generated per dollar of assets may be about to decline by around a third.In part, that is because of a change in asset mix.
Not surprisingly, the "wealth effect" (the extent to which a change in asset prices affects people's spending) is bigger in the indebted Anglo-Saxon economies than elsewhere.
That's a hefty move for a $30 billion shock, but not for something ten times larger.The third story one might tell, and the one that's closest to the truth in my estimation, is that the news of no change in asset purchases in September was one very minor part in a suite of communcations.
From your standpoint, what you care about is total return dividend, interest and yearly change in asset value after subtracting costs, divided by opening-day value.
If the portfolio is large enough, the model only really needs to be applied to the change in asset size to build a portfolio that looks just like the portfolio model.
For example, such an exercise might suggest that a sharp change in asset prices would not only affect the value of a particular firm's holdings but also impair liquidity in key markets, with adverse consequences for the ability of the firm to adjust its risk positions or obtain funding.
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These figures show why it is deceptive to look only at the change in debt, not the change in assets.
To illustrate that point, Goldberg shared a showing the change in assets per share among firms that have raised capital since the second quarter of 2007.
These changes in asset prices – together with measures that increase private-sector credit growth – can boost aggregate demand and increase inflation expectations.
"Should changes in asset prices foster economic imbalances, as they appear to have done in recent years, it is the latter we need to address, not asset prices," he said.
"Together with a perceived increased risk of default on the sovereign debt of certain European countries and unprecedented stresses on the financial system within the eurozone, these factors have resulted in significant changes in market conditions including interest rates, foreign exchange rates, credit spreads, and other market factors and consequent changes in asset valuations".
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