November 2012
Gridlock: Echoes of 2008
The US political stand-off will weigh on sentiment. The S&P 500 index fell over 3.5% in two trading sessions in response to Obama’s election victory. Primarily, this is due to concern that the stand-off between Democrats and Republicans threatens to send the US into another recession if a compromise cannot be reached over a looming round of tax hikes and spending cuts – the now famous fiscal cliff. It’s also worth remembering that the market reacted badly with a 5% sell-off the first time Obama was elected President in 2008, although that was in the midst of a crisis of...
Read the Full NoteOctober 2012
All to play for!
The fight for the White House is closer than many think. What started as an armchair run-in to the White House for President Obama, rapidly changed into a close race as the polls on 9th October put Mitt Romney ahead 49% to 46% after the first debate in which Romney’s strong debating performance appeared to catch Obama napping. The poll was a small one, taken nationally and gave no indication of the view in the crucial swing states. However, it is always the first debate that sets the tone of the battle ahead and the 11 point swing from before...
Read the Full NoteSeptember 2012
Come back on St. Legers Day
Sell in May and go away, don’t come back ‘til St. Legers Day St. Legers Day fell on 15th September this year and is the day on when those of a superstitious nature may supposedly return with confidence. Anyone who’s been “away” since 1st May could hardly fail to notice the FTSE 100 chart climbing merrily upwards and accelerating through 5,900. To be fair, this is only a modest 1.6% gain from where the index closed on the 1st May, but is still a significant recovery from the lows in June when there seemed no escape from the insoluble crisis...
Read the Full NoteAugust 2012
Don’t panic!
It’s far from over but the time to panic was some time ago. If, like us, you enjoy reading the investment opinions of market participants ranging from the sublime to the ridiculous then you’ll know 2012 is already a vintage year. Readers of the financial media are offered up a daily smorgasbord of views about how to get out of the eurozone crisis or how to tweak George Osborne’s plan A into a B, C or D. But the problems facing markets today are as seemingly insoluble as they have ever been and this has affected market behaviour as it...
Read the Full NoteJuly 2012
Three little PIGS
This little piggy went to Merkel, this little piggy stayed in Rome This little piggy had a huge beef, this little piggy just loaned And this little piggy was a naughty little piggy And went “oui oui oui” all the way home… We think it is reasonable to ask whether the EUR500 billion European Stability Mechanism (ESM) is just a house of straw that the latest EU summit failed to upgrade to a house of sticks, let alone bricks? Is it too weak, even if it was merged with the European Financial Stability Facility (EFSF) and fully funded (which it...
Read the Full NoteJune 2012
Mind the gap!
“You know, this deal makes things worse not better. A hundred billion is put up for the Spanish banking system, and 20% per cent of that money has to come from Italy. And under the deal the Italians have to lend to the Spanish banks at 3% per cent but to get that money they have to borrow on the markets at 7% per cent. It’s genius isn’t it? It really is brilliant.” – Nigel Farage, UKIP, European Parliament, Strasbourg 13th June 2012. A hundred billion is put up for the Spanish banking system, and 20% per cent of that...
Read the Full NoteMay 2012
Politicians staring into the Abyss
“Man looks in the abyss, there's nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss.” Lou Mannheim (Bud Fox’s boss) played by Hal Holbrook in the film Wall Street (1987) In weekend elections, France has elected a new president, François Hollande, and Greece, well, hasn’t elected much at all. On the face of it, the common factor is that both are the result of a rising wave of anti-incumbent backlash driven by voter’s resistance to austerity measures right across Europe. Spain has recently unilaterally pushed back deficit...
Read the Full NoteApril 2012
We are all in a crisis!
The rain in Spain falls mainly on equities! “todos estamos en una crisis”; we are all in a crisis! - The popular, if slightly less catchy, Spanish media version of “We’re all in this together” Perhaps the world was getting a little too complacent but speculation that Spain is heading towards a bail-out has re-surfaced. There isn’t much one can say about the ensuing sell-off in equities that hasn’t been written before. Like an Agatha Christie novel where the plot is always broadly the same but the characters change, there is striking similarity to media articles, comment and opinion trying...
Read the Full NoteMarch 2012
The Myth of Sisyphus
Pushing the Rock of Consensus up the Hill - the Myth of Sisyphus “Man's futile search for meaning, unity, and clarity in the face of an unintelligible world devoid of God and eternal truths or values.” One might be forgiven for thinking that there’s nothing to get too excited about in stock markets judging by the newspapers over the last week or so where upheavals in Russia, Iran and Syria have captured the headlines. One could argue that these events matter in the long term but the best long term indicator we have, the stock and bond markets, are exhibiting...
Read the Full NoteFebruary 2012
Are the Permabears starting to Defrost?
Are the Permabears Starting to Defrost? The last three years have been beset with issues of gravitas. A banking System that neared collapse in 2008 and the ensuing economic decline pushed the financial world to the brink. It is unsurprising that against this background many believed that this was Armageddon for the investment industry – and so it nearly was! However we have survived and the majority of investors may not have prospered as much as they would have wished but they have certainly survived to fight another day; indeed equity markets have nearly regained all the ground lost during...
Read the Full NoteFebruary 2012
MMT
Théorie souvent ignorée Le Bureau International du Travail (BIT) vient de publier un rapport qui donne à réfléchir sur la crise croissante dans les marchés mondiaux du travail. Nous avons commencé l'année avec 1,1 milliard de personnes - soit une personne sur trois dans la population active mondiale - au chômage, ou parmi les 900,000,000 de travailleurs qui gagnent moins de 2 dollars américains par jour. En plus des 200 millions de chômeurs, les marchés du travail mondiaux verront une moyenne de 40 millions de nouveaux demandeurs d’emplois chaque année. Cela signifie que quelque 400 millions d'emplois supplémentaires devront être...
Read the Full NoteFebruary 2012
Minsky
Hypothèses de l’instabilité financière. Nous parlons souvent de Keynes mais s’il y a un économiste qui est devenu populaire après la crise financière actuelle, c’est bien Minsky. Paul Krugman, editorialiste du New York Times et Nobel d’économie a recommandé de relire les travaux de l’illustre économiste et Martin Wolf, du Financial Times s’est exclamé : Minsky avait raison! Il est clair que l’implémentation de garde fou basé sur l’hypothèse de l’instabilité financière n’aurait pas pu éviter une récession dans le passé. Mais il aurait certes forcé les participants économiques à êtres plus prudent et éviter des bulles qui aggravent la...
Read the Full NoteJanuary 2012
All that Glistens is not Gold
The collapse in the price of gold has been as dramatic as the rise. Why is that happening when Bonds made new highs in December? Anyone watching the gloomy New Year messages from leading politicians would no doubt have gathered the impression that the investment world must still be in panic mode following the entirely predictable failure of the European summit in early December when the Euro weakened. One would be forgiven however for having expected Gold, as well as other ‘safe haven’ investments to have rallied strongly. Oddly though, Gold has in fact fallen 20% from its high while...
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