Risks and Opportunities
Investors started off 2015 with a slow global economy, low oil prices, a strong Dollar, and a deflationary Europe with great uncertainties on the progress of the US economy and the recent launch of Europe’s quantitative easing. The question is, what opportunities lie ahead? This article highlights the main topics covered in an interview between Mr. Frank Suess, CEO and Chairman of BFI Capital Group, with the globally renowned Swiss fund manager, Mr. Felix Zulauf. Mr. Zulauf currently heads Zulauf Asset Management, a Switzerland-based hedge fund and has forty years of experience with global financial markets and asset management. He has been a member of the Barron’s Roundtable for over twenty years. Continue reading
While several exceptionally wealthy and successful people have admirably come out and spoken passionately of the broken nature of financial markets and the political system, as well as the threat this poses to society in general (think Paul Tudor Jones and Nick Hanauer), there have been several examples of oligarchs coming out and conversely demonstrating their complete disconnect from reality, as well as a disdain for the masses within a framework of incredible arrogance.
The latest example comes from Charlie Munger, Warren Buffett’s right hand man, who tends to demonstrate an incredible capacity for verbal diarrhea. Recall his commentary on gold: “gold is a great thing to sew onto your garments if you’re a Jewish family in Vienna in 1939.” Continue reading
A global war of currency depreciation has begun. Although the weapons are not killing anyone, the slow damage will be no less devastating than nuclear, chemical or biological warfare. In a worst-case scenario, there will be a substantial redistribution of the income and wealth of all nations and an even wider gap between the rich and poor.
The war has now spread to Denmark, Singapore, the EU, Switzerland, Japan and even South Korea and Taiwan. The weapons used include banknotes, central bank control of foreign exchange and interest rates, and vultures (hedge funds) in the financial markets defending and speculating on the currencies. Continue reading
A top German body has called for a clear mechanism to force Greece out of the euro if the left-wing Syriza government repudiates the terms of the country’s €245bn rescue.
“Financial support must be cut off if Greece does not comply with its reform commitments,” said the Institute of German Economic Research (IW). “If Greece is going to take a tough line, then Europe will take a tough line as well.”
IW is the second German institute in two days to issue a blunt warning to the new Greek premier, Alexis Tsipras, who has vowed to halt debt payments and reverse austerity measures imposed by the EU-IMF Troika.
- Bank of International Settlements warns of ‘violent’ market crash
- Low levels of market volatility persist despite conflicts and crises across the world
- Investors buying assets on the misguided presumption of a level of liquidity
- Share prices continue to plummet as investor confidence decreases
A potentially ‘violent’ stock market crash could be on the horizon as financial markets become dangerously stretched, a think-tank has warned.
The Bank of International Settlements said that suspiciously low levels of volatility in the markets seen this year suggest a lack of liquidity that could trip up investors who assume they can dispense of assets when a sell-off begins. Continue reading
In 1929, a businessman and economist by the name of Jerome Levy didn’t like what he saw in his analysis of corporate profits. He sold his stocks before the October crash.
Almost eight decades later, the consultancy company that bears his name declared “the next recession will be caused by the deflating housing bubble.” By February 2007, it predicted problems in the subprime-mortgage market would spread “to virtually all financial markets.” In October 2007, it saw imminent recession – the slump began two months later.
The Jerome Levy Forecasting Center, based in Mount Kisco, New York, and run by Jerome’s grandson David, is again more worried than its peers. Its half-dozen analysts attach a 65 percent probability of a worldwide recession forcing a contraction in the US by the end of next year. Continue reading
The international body representing central banks is warning its members that record low interest rates are generating conditions for another global financial crisis that may be worse than the first.
In its annual report, the Swiss-based Bank for International Settlements (BIS) expressed serious concern that global share markets had reached new highs and the interest rate premium for many risky loans had fallen.
“Overall, it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally,” the bank wrote. Continue reading
While just about every other central bank on the planet is giving everyone two thumbs up on the economy, the deputy chair of the Monetary Authority of Singapore (Lim Hng Kiang) said last night at a dinner that “an uneasy calm seems to have settled in markets” and that “we remain in uncharted waters.”
It was pretty amazing, really, to see such pointed language from a central banking official. Continue reading
A continued escalation could mean a further and more serious step towards debasing the petro-dollar, which would in turn break the backbone of the American economy.
Deadly clashes in eastern Ukraine and warnings of broader US sanctions against Russia have sent tremors through Moscow’s financial markets and forced the country to cancel a sovereign debt auction yet again.
Russia’s RTS equities index fell to a one-month low, with Gazprom and Sberbank both down 3.5pc in volatile trading. Russia’s treasury pulled a 20bn rouble (£330m) bond auction intended to test the waters, saying there were no buyers at an acceptable cost. Yields on 10-year Russian bonds have jumped to 9.17pc.
The second most senior Goldman Sachs executive has warned the world risks sowing the seeds of the next financial crisis through regulation aimed at making banks safer.
Gary Cohn, the global chief operating officer of the Wall St bank, today highlighted the risks of rules forcing banks to hold larger capital buffers so they can absorb bigger losses.
Speaking in Sydney, Mr Cohn said that in forcing banks to hold more capital, regulators risked encouraging the unregulated “shadow” banking sector, so it became the next problem. Continue reading
The World Bank’s former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.
“The dominance of the greenback is the root cause of global financial and economic crises,” Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. “The solution to this is to replace the national currency with a global currency.” Continue reading
As the world awaits the Fed’s decision, today a 42-year market veteran told King World News there will be no tapering and that the gold will soar “after the Fed has surprised the market tomorrow.” Greyerz also warned KWN that to further complicate matters for the Fed, there is a “major shortage of physical gold” ahead of their decision. Below is what Egon von Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say.
Greyerz: “Eric, it is important to consider what the truly important factors are that will determine what will happen to the world, its people, and to the global economy. If we look around, what do we find? We find a world that is financially, politically, and morally bankrupt. Continue reading
BRUSSELS — The spillover effects of the U.S. central bank unwinding its policy stimulus risk being greater now than in 1994, and that episode highlights the importance of clearly communicating exit strategies from expansionary policies, an ECB policymaker said.
The Federal Reserve is expected to start slowly reducing its bond purchases when it meets later this month, beginning to unwind a policy that has helped foster recovery in the world’s largest economy and buoyed financial markets.
“In early 1994, when the U.S. recovery gained strength, the Fed started a tightening cycle and bond markets crashed not only in the U.S. but also around the world,” European Central Bank Executive Board member Joerg Asmussen said on Tuesday. Continue reading
Although both items need to be constantly looked at (50/50), the fundamental data lately is seemingly overriding the technical data. Observing geopolitics on a regular basis shows you the big picture where you can use inductive reasoning to hammer out the specifics in planning your future, be it from an investment standpoint or personal.
Had anyone asked back in January what kind of risks you thought might be giving financial markets a jolt by mid-year, odds are that you would have talked about the Federal Reserve’s intentions with respect to quantitative easing, the outlook for economic growth and whether S&P 500 companies are delivering the kind of earnings that analysts had been expecting.
Perhaps, given recent history, you might have thrown out an additional concern: That some unforeseen event in Spain or Italy might buffet the Eurozone and spill over into North American markets—after all, that has become an almost routine summertime occurrence. Continue reading