Posts Tagged ‘ financial markets ’

Welcome to the World, North Korea – Investment Opportunities Will Eventually Sprout

March 13, 2012
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Welcome to the World, North Korea – Investment Opportunities Will Eventually Sprout

North Korea has been isolated since the disintegration of the Soviet Union in 1991. Significant amounts of communist aid ceased, and the fall of communism across Eastern Europe ultimately had a profound impact on the Democratic People’s Republic of Korea for the next two decades. North Korea was figuratively and literally off the grid as the country experienced severe shortages of electricity, energy, and food for many years. Society was more advanced around the time of Mao Zedong’s death in 1976 compared to today and the economy was much more productive. North Korea has been one of the few industrialized civilizations to experience famine during peacetime over the past 50 years. The state controlled media ranks second to last in terms of the World Press Freedom Index (if you’re...

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Negative German Yields – Implications for Risk Averse Financial Markets

January 10, 2012
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Negative German Yields – Implications for Risk Averse Financial Markets

On Monday, Germany gained entrance to a rarified club of sovereign nations paid to borrow money. This US accomplished this feat during the depths of the financial crisis. Now Germany is able to achieve the same feat during the Eurozone sovereign debt crisis. In a debt auction on Monday, Germany was able to sell 3.9B EUR worth of six-month debt priced at an average yield of -0.0122%. The auction was almost 2x oversubscribed. Investors were willing to pay Germany a little over a basis point to take money for six months and simply give it back. These are fascinating times within financial markets, where there is no term premium for money and such extreme risk aversion. There are a number of items which will have implications for financial markets...

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When Will the Market Start to be Forward Looking – Early Signals from Asia?

November 2, 2011
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When Will the Market Start to be Forward Looking – Early Signals from Asia?

The markets have been through a period of wicked volatility with a significant pullback almost to the point of entering a new bear market. Intraday the S&P 500 was down 20% from its high but closed above those levels and went up from there. From the market’s closing bottom of 1,099 the S&P had a tremendous move higher up about 17% in 4-weeks. During this period, the market maintained an obsession with day-to-day and even hour-to-hour news. The situation becomes impossible for investors because the news flow is utterly unpredictable and investors can get whipsawed and hacked up quite easily. Often the market is described as a voting mechanism for 6-9 months out. Understanding that this is the normal state of things will be important at some point in...

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Welcome to the ECB Mario Draghi!

November 1, 2011
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Welcome to the ECB Mario Draghi!

Who is Mario Draghi? Today is day #1 of a new job for Mr. Draghi, the President of the ECB, which right now is the world’s most powerful position in finance. Under normal circumstances, that position would be the Chairman of the Federal Reserve Board but at the present moment, the ECB President will have more of an impact on the direction of the global economy in 2012. I wish I could outline a viewpoint on whether Mario Draghi tends to be more of a hawk or a dove. Based on a read of the few writings and speeches that are archived it is difficult to have a strong impression. Here is what I came across which I believe to be concrete: Mr. Draghi’s CV: Undergraduate Degree from La...

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Germany Wants To Go At Their Own Pace – Implications for Financial Markets

October 17, 2011
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Germany Wants To Go At Their Own Pace – Implications for Financial Markets

German leaders are coming out with comments that indicate there will not be a sweeping fix to the Eurozone financial crisis when leaders meet at a summit on October 23rd. Angela Merkel has been credited as saying “dreams that are taking hold again now that this package will be solved and everything will be over on Monday won’t be able to be fulfilled”. To me that is a pretty clear statement by an important leader. Moreover Wolfgang Schaeuble is echoing these sentiments this morning in the Financial Times. There are two approaches to crisis management, the American style approach which entails bringing out the bazooka, implementing a broad, sweeping, and immediate fix and worrying about many of the finer details and legal issues later on down the road. There...

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Eurozone Breakup – Implications for Financial Markets are Disastrous

September 6, 2011
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Eurozone Breakup – Implications for Financial Markets are Disastrous

Over Labor Day weekend we saw an unfortunate breakdown in Europe’s approach, strategy, and near-term ability to avoid a financial crisis. In the Mecklenburg Western Pomerian state (along the coast of the Baltic Sea), Germans voted against the Christian Democratic Union which is a repudiation of Angela Merkel’s support and commitment to the Eurozone. I’ll start out by saying that an all-out breakup of the Euro would be disastrous for the global economy and for financial markets. At a minimum, the world would go back into recession with a dire scenario being a redux of the financial crisis. If this were to happen there would be a rush to get to the sidelines quickly and heavy selling in all types of risk assets. As a result of the very...

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