- Food prices have risen significantly since 2001 as supplies have fallen, with the most dramatic changes occurring between 2005-2008. Continued increases are expected due to rising demand from developing countries.
- Commodity investments by funds have increased substantially, which some argue has contributed to higher prices. However, studies have found little evidence that speculation has played a material role in price rises. Price increases have also occurred for commodities not traded on futures markets, indicating fundamentals are a primary driver. While correlations exist, position changes do not clearly precede price changes, suggesting speculation reflects rather than causes price movements.
The document discusses recent underperformance in the US credit sector and factors driving spread widening, including fears over a Chinese economic slowdown, high corporate debt issuance, and declining oil prices. It analyzes how the metals and mining sector decline suggests China fears as the dominant factor rather than just oil prices. While the short-term market reaction has been painful, mispricings create opportunities. The document advocates a balanced approach of assessing risks and opportunities rather than reacting to short-term volatility.
Whitepaper from CFTC Analyzing Correlations Between Equities And CommoditiesJohn Farrall, CFA
Research finding that the relation between the
returns on investable commodity and U.S. equity indices has not changed
significantly in the last fifteen years. Refutes the theory of a "market of one" where under stress all asset classes move together.
We measure how securitized assets, including mortgage-backed securities and other asset-backed securities, have shifted across financial institutions over this crisis and how the availability of financing has accommodated such shifts. Sectors dependent on repo financing – in particular, the hedge fund and broker-dealer sector – have reduced asset holdings, while the commercial banking sector, which has had access to more stable funding sources, has increased asset holdings. These findings are important to understand the role played by the government during the crisis as well as to understand the factors determining asset prices and liquidity during the crisis.
Zhiguo He (University of Chicago), In Gu Khang (Northwestern University) and Arvind Krishnamurthy (Northwestern University and NBER)
- The Indian stock market opened cautiously after the GDP growth of 6.1% in the third quarter missed estimates and led to losses the previous day.
- Key indices were up marginally, with the Sensex gaining 0.12% and Nifty 0.18%, while mid and small cap indices rose over 1%.
- ONGC and other energy stocks gained, while banks and capital goods stocks declined slightly on concerns over the lower GDP growth.
- Asian markets were mixed in early trade while investors awaited further cues from global economic data releases through the week.
The document discusses the recent fall in the Indian stock market. It provides 3 key reasons for the decline:
1) Negative signals from within India like high interest rates and economic slowdown.
2) Global market turmoil from the European and US debt crisis causing a decline in US stocks that spread worldwide.
3) Concerns around continued high unemployment and lack of immediate financial recovery in the US sparking fears of a recession.
The stock market indices across sectors like banking, infrastructure, IT, and healthcare all declined substantially over the past week.
1) The document discusses derivatives flock case risk and its effect on market sectors. It focuses on how ignorance in derivative pricing can lead speculators to follow false demand, known as flock case.
2) Flock case can negatively affect market sectors by directing production and demand away from real needs towards imagined demand based on speculation. This can misallocate resources and potentially reduce profits.
3) Derivatives markets are also interconnected with currency exchange, stock prices, commodity prices, and interest rates. Failure in derivatives markets can therefore transmit risk throughout the financial system and broader economy.
This document is a dissertation submitted by Martin Reilly in partial fulfillment of an MFin degree in international finance. The dissertation examines the impact of quantitative easing announcements by the US Federal Reserve on equity prices in the US. Specifically, it analyzes the stock price movements of 100 equities and three major indices in response to 7 announcements regarding the Federal Reserve's QE3 program between 2008-2014. The dissertation reviews previous literature on the topics of policy-rate guidance, interest rate effects, and large-scale asset purchase programs. It then outlines the methodology used, presents results showing the statistical significance of stock price movements on announcement days, and concludes that QE announcements had a measurable impact on equity prices.
Global financial markets showed signs of stability despite volatility since the terrorist attacks. While some temporary delays and inability to meet margin calls occurred in the US, central banks intervened to provide liquidity and ease fears of a banking cash crunch. European stock markets gained 1-3% after liquidity injections while emerging markets were mixed and bond trading remained suspended in most markets. Regional currencies also showed signs of recovery following steep declines the prior day.
The document discusses recent underperformance in the US credit sector and factors driving spread widening, including fears over a Chinese economic slowdown, high corporate debt issuance, and declining oil prices. It analyzes how the metals and mining sector decline suggests China fears as the dominant factor rather than just oil prices. While the short-term market reaction has been painful, mispricings create opportunities. The document advocates a balanced approach of assessing risks and opportunities rather than reacting to short-term volatility.
Whitepaper from CFTC Analyzing Correlations Between Equities And CommoditiesJohn Farrall, CFA
Research finding that the relation between the
returns on investable commodity and U.S. equity indices has not changed
significantly in the last fifteen years. Refutes the theory of a "market of one" where under stress all asset classes move together.
We measure how securitized assets, including mortgage-backed securities and other asset-backed securities, have shifted across financial institutions over this crisis and how the availability of financing has accommodated such shifts. Sectors dependent on repo financing – in particular, the hedge fund and broker-dealer sector – have reduced asset holdings, while the commercial banking sector, which has had access to more stable funding sources, has increased asset holdings. These findings are important to understand the role played by the government during the crisis as well as to understand the factors determining asset prices and liquidity during the crisis.
Zhiguo He (University of Chicago), In Gu Khang (Northwestern University) and Arvind Krishnamurthy (Northwestern University and NBER)
- The Indian stock market opened cautiously after the GDP growth of 6.1% in the third quarter missed estimates and led to losses the previous day.
- Key indices were up marginally, with the Sensex gaining 0.12% and Nifty 0.18%, while mid and small cap indices rose over 1%.
- ONGC and other energy stocks gained, while banks and capital goods stocks declined slightly on concerns over the lower GDP growth.
- Asian markets were mixed in early trade while investors awaited further cues from global economic data releases through the week.
The document discusses the recent fall in the Indian stock market. It provides 3 key reasons for the decline:
1) Negative signals from within India like high interest rates and economic slowdown.
2) Global market turmoil from the European and US debt crisis causing a decline in US stocks that spread worldwide.
3) Concerns around continued high unemployment and lack of immediate financial recovery in the US sparking fears of a recession.
The stock market indices across sectors like banking, infrastructure, IT, and healthcare all declined substantially over the past week.
1) The document discusses derivatives flock case risk and its effect on market sectors. It focuses on how ignorance in derivative pricing can lead speculators to follow false demand, known as flock case.
2) Flock case can negatively affect market sectors by directing production and demand away from real needs towards imagined demand based on speculation. This can misallocate resources and potentially reduce profits.
3) Derivatives markets are also interconnected with currency exchange, stock prices, commodity prices, and interest rates. Failure in derivatives markets can therefore transmit risk throughout the financial system and broader economy.
This document is a dissertation submitted by Martin Reilly in partial fulfillment of an MFin degree in international finance. The dissertation examines the impact of quantitative easing announcements by the US Federal Reserve on equity prices in the US. Specifically, it analyzes the stock price movements of 100 equities and three major indices in response to 7 announcements regarding the Federal Reserve's QE3 program between 2008-2014. The dissertation reviews previous literature on the topics of policy-rate guidance, interest rate effects, and large-scale asset purchase programs. It then outlines the methodology used, presents results showing the statistical significance of stock price movements on announcement days, and concludes that QE announcements had a measurable impact on equity prices.
Global financial markets showed signs of stability despite volatility since the terrorist attacks. While some temporary delays and inability to meet margin calls occurred in the US, central banks intervened to provide liquidity and ease fears of a banking cash crunch. European stock markets gained 1-3% after liquidity injections while emerging markets were mixed and bond trading remained suspended in most markets. Regional currencies also showed signs of recovery following steep declines the prior day.
This document discusses monetary and fiscal policies used to manage inflation. It defines inflation and outlines its stages and types. The causes of demand-pull and cost-push inflation are explained. The effects of inflation on various groups are described. The objectives and instruments of monetary policy like bank rate, cash reserve ratio, and open market operations are covered. Fiscal policy and its tools to counter recession are also summarized.
The document provides an economic update and outlook on various markets such as equity, debt, forex, and commodities. It recommends staying invested in equity markets while using put options to hedge against volatility, and advises that gold continues to be an effective hedge. The outlook expects ongoing volatility in Indian asset markets due to global liquidity and potential asset bubbles.
Efma_BCG_point of view_pricing for bankingBritt Dejager
The 'new normal' environment of durably low interest rates is challenging the model of banking intermediation. While effects have not yet fully played out, the flattening of the yield curve puts banks' profitability under pressure. To mitigate the impact, banks need to develop a strategic response including measures such as review of their business portfolio, development of asset distribution, cost reduction… In this paper, we focus on two important levers of adaptation: banks need to adapt their pricing schemes, looking at the entire balance-sheet, as well as enhance their ROE forecasting capabilities at product level.
- The key Indian indices closed near neutral levels, reflecting low trading volumes due to the holiday season. European stocks opened higher while US futures traded up.
- China's Shanghai Composite index fell 1.9% after the central bank raised lending and deposit rates.
- In India, the Sensex closed just above 20,000 points, erasing gains late in the day. Oil and metal stocks declined on concerns over economic growth in China.
Financial crises have become relatively frequent events since the beginning of the 1980s. They have taken three main forms: currency crises, banking crises, or both - so called twin
crises. As the number of developed economies, developing countries, and economies in transition experienced severe financial crashes researchers are trying to propose a framework for systemic analyses. That is why attempts to advance the understanding of features leading to the outbreak of financial crisis as well as the reasons of vulnerability have become more and more important. In recent years a number of efforts have been undertaken to identify variables that act as early warning signals for crises. The purpose of this paper is to provide some perspective on the issue of early warning signals of vulnerability to currency crises. In particular, it is aimed at presenting and highlighting the main findings of theoretical literature in this area.
Authored by: Magdalena Tomczynska
Published in 2000
This document introduces the stress test approach used by the Federal Reserve to regulate banks, comparing it to the previous Basel Accords approach. It discusses that the 2008 financial crisis showed the Basel Accords underestimated credit risk. In response, the Federal Reserve implemented the Dodd-Frank Act Stress Test (DFAST) and Comprehensive Capital Analysis Review (CCAR) to better evaluate capital adequacy. The stress test projects bank losses and capital levels under adverse economic scenarios, allowing regulators to ensure banks maintain sufficient capital buffers. The document argues stress testing is superior to the Basel Accords as it uses current economic conditions rather than historical data, and evaluates risks across the entire financial system rather than just individually.
This document summarizes the key points from a speech given by Erdem Başçı, the Governor of the Central Bank of the Republic of Turkey, at the World Bank-IMF Annual Meetings in April 2012. The summary discusses rebalancing of the domestic and external demand in Turkey, moderate economic growth expected in 2012, inflation peaking in April 2012 and falling for the rest of the year, and the Central Bank's focus on using policy tools to achieve its 5% inflation target by mid-2013.
This document summarizes a research paper that develops a dynamic general equilibrium model to analyze systemic risk in the banking sector. The key aspects of the model are that it includes banks that engage in maturity transformation by issuing non-state contingent debt, and the banks are exposed to risks in capital markets that can affect their solvency. The model shows that individual banks in a competitive system will take on excessive systemic risk due to pecuniary externalities, leading to a higher crisis probability than the socially optimal level. The document then discusses using prompt corrective action (PCA) policies to reduce crisis risk by strengthening bank capital requirements.
1) As the U.S. pays down the public debt, it raises important issues regarding benchmarks for risk-free assets, how the Federal Reserve conducts monetary policy, and what kinds of assets the government might accumulate.
2) The swap market has taken on some of the benchmark role of Treasuries, but it does not fully substitute as Treasuries are not subject to default risk. The Federal Reserve may need to use different tools for open market operations as Treasuries decline.
3) Accumulating assets raises questions about what types of investments the government should hold, like state/local bonds or private fixed income, and how to manage the investments independently and avoid conflicts of interest.
Commodities can be useful diversifiers for inflation risk when included in a portfolio, but the shape of the futures curve is important. When the spot price is lower than deferred futures prices (contango), changes are likely due to demand, while a backwardated market suggests supply issues. Evaluating the term structure allows investors to better understand if commodities will diversify portfolio risk from inflation.
This document analyzes Brazilian National Treasury primary auctions from the 2000s using a Modern Monetary Theory interpretation. It finds that:
1) The Brazilian government was always able to sell its treasury bonds and was not pressured into higher interest rates by bond markets or rating downgrades.
2) Downgrades by international rating agencies did not cause persistent pressure on auction rates or changes in bond sales volumes.
3) The Central Bank ensured liquidity for treasury bonds through repo operations, maintaining interest rate targets and guaranteeing demand for government bonds.
Viewpoint Newsletter from Clear View Wealth Advisors with a focus on the role of dividend-paying stocks and the inflation-deflation debate. Also includes links to the free financial roadmap tool.
Using Proprietary Algorithms to Identify an Option's Relative PriceRYAN RENICKER
This document provides a snapshot of equity volatility and identifies stocks with options that are considered rich or cheap based on an analysis of implied and realized volatility spreads. It summarizes the results of a screen that labels options as rich if implied volatility spreads are currently at least one standard deviation above their historical averages or cheap if spreads are at least one standard deviation below averages. Stocks with rich options according to this screen are identified, along with those having cheap options. The screen output and methodology are available on the analyst's webpage for further analysis.
Convertible Bonds and Call Overwrites - 2007RYAN RENICKER
The document evaluates Best Buy's 2.25% convertible bonds due 2022 with call overwrites as a risk-adjusted trade on Best Buy stock. It analyzes the trade over 3 time horizons (3 months, 5 months, 15 months) with varying degrees of call option overwrites. Selling calls at higher implied volatilities allows investors to monetize rich option premium. The trade provides upside potential if the stock rises while limiting downside through the call premium collected and bond floor. Tables show estimated returns for the convertible bond under different stock price scenarios and call overwrite strategies.
The document provides a weekly market snapshot and commentary from Green Financial Group. It summarizes recent economic indicator readings and testimony from Federal Reserve Chairman Ben Bernanke. It also reviews index performance, interest rates, currencies and commodities. Key economic reports and events for the coming week are listed on an economic calendar.
The document discusses the financial crisis and its implications for regulation. It summarizes the causes of the crisis as excessive risk taking facilitated by low interest rates, loose regulation, and flawed compensation structures. It also outlines some initial regulatory responses like increased deposit insurance and bank bailouts. Going forward, it argues more needs to be done to reduce leverage, strengthen risk management practices, improve transparency, and reform compensation to discourage short-term risk taking. Banks may also need to raise capital and curb certain business activities.
Presentation on stock market and growthSolara Kadouf
The stock market allows individuals and companies to trade shares of ownership in public companies. For individuals, it provides an opportunity to generate income and increase wealth through dividends or capital gains. Companies benefit by raising capital through stock offerings at a lower cost than other financing options. The stock market also benefits the overall economy by facilitating efficient allocation of capital and corporate governance. However, financial crises can negatively impact stock prices and dampen investment.
Thiet ke Bao cao thuong nien - Vietcapital 2008Viết Nội Dung
The annual report summarizes Viet Capital Fund's performance in 2008, a difficult year for the fund and markets. The fund lost 57% in value compared to a 66% loss for the market index. While the fund outperformed the market, its net asset value fell to VND 418 billion by year-end. The fund increased its cash position from 22% to 44% over the year as it focused on capital preservation during the market turmoil. Top holdings were reduced in industries like real estate that were hit hard by the economic downturn. Going forward, the fund will emphasize quality companies and maintain a risk-aware strategy while seeking recovery opportunities.
Thiet ke Bao cao thuong nien -Vietcapital (vchf 2008)Viết Nội Dung
- The Viet Capital Healthcare Fund (VCHF) ended its first year of operations in 2008 with a net asset value of 511 billion VND, a 4% increase from its initial value despite a difficult market environment.
- During 2008, the VCHF invested over 30% of its assets in top pharmaceutical and hospital companies while protecting capital as markets declined sharply.
- Through prudent investment strategies, the VCHF was able to deliver positive returns while the Vietnam stock market and pharmaceutical index declined over 50% in 2008.
The document summarizes the outlook and strategy of the Global Commodity Systematic Program (GCS) managed by Global Advisors. GCS uses a rules-based, non-discretionary approach to identify and manage trends across 35 commodity markets. It expects profitable opportunities over the next few years due to factors such as the devaluation of paper currencies, continued demand growth in emerging markets like China, a supply shock from reduced commodity investment, and increasing investment in commodities from stock market investors. Charts are presented supporting these views, and it is argued that if commodity markets exhibit strong trends, the GCS program will be able to generate strong returns managing those trends.
1) GE expects earnings of around $18 billion in 2008, below its previous forecast, but above the S&P 500's performance.
2) For 2009, GE projects Industrial segment growth of 0-5%, Financial Services earnings of around $5 billion, and flat performance for Corporate/C&I.
3) GE will maintain its $1.24 per share dividend for 2009 and expects long-term earnings growth to return to 10% after the recession ends.
This document discusses monetary and fiscal policies used to manage inflation. It defines inflation and outlines its stages and types. The causes of demand-pull and cost-push inflation are explained. The effects of inflation on various groups are described. The objectives and instruments of monetary policy like bank rate, cash reserve ratio, and open market operations are covered. Fiscal policy and its tools to counter recession are also summarized.
The document provides an economic update and outlook on various markets such as equity, debt, forex, and commodities. It recommends staying invested in equity markets while using put options to hedge against volatility, and advises that gold continues to be an effective hedge. The outlook expects ongoing volatility in Indian asset markets due to global liquidity and potential asset bubbles.
Efma_BCG_point of view_pricing for bankingBritt Dejager
The 'new normal' environment of durably low interest rates is challenging the model of banking intermediation. While effects have not yet fully played out, the flattening of the yield curve puts banks' profitability under pressure. To mitigate the impact, banks need to develop a strategic response including measures such as review of their business portfolio, development of asset distribution, cost reduction… In this paper, we focus on two important levers of adaptation: banks need to adapt their pricing schemes, looking at the entire balance-sheet, as well as enhance their ROE forecasting capabilities at product level.
- The key Indian indices closed near neutral levels, reflecting low trading volumes due to the holiday season. European stocks opened higher while US futures traded up.
- China's Shanghai Composite index fell 1.9% after the central bank raised lending and deposit rates.
- In India, the Sensex closed just above 20,000 points, erasing gains late in the day. Oil and metal stocks declined on concerns over economic growth in China.
Financial crises have become relatively frequent events since the beginning of the 1980s. They have taken three main forms: currency crises, banking crises, or both - so called twin
crises. As the number of developed economies, developing countries, and economies in transition experienced severe financial crashes researchers are trying to propose a framework for systemic analyses. That is why attempts to advance the understanding of features leading to the outbreak of financial crisis as well as the reasons of vulnerability have become more and more important. In recent years a number of efforts have been undertaken to identify variables that act as early warning signals for crises. The purpose of this paper is to provide some perspective on the issue of early warning signals of vulnerability to currency crises. In particular, it is aimed at presenting and highlighting the main findings of theoretical literature in this area.
Authored by: Magdalena Tomczynska
Published in 2000
This document introduces the stress test approach used by the Federal Reserve to regulate banks, comparing it to the previous Basel Accords approach. It discusses that the 2008 financial crisis showed the Basel Accords underestimated credit risk. In response, the Federal Reserve implemented the Dodd-Frank Act Stress Test (DFAST) and Comprehensive Capital Analysis Review (CCAR) to better evaluate capital adequacy. The stress test projects bank losses and capital levels under adverse economic scenarios, allowing regulators to ensure banks maintain sufficient capital buffers. The document argues stress testing is superior to the Basel Accords as it uses current economic conditions rather than historical data, and evaluates risks across the entire financial system rather than just individually.
This document summarizes the key points from a speech given by Erdem Başçı, the Governor of the Central Bank of the Republic of Turkey, at the World Bank-IMF Annual Meetings in April 2012. The summary discusses rebalancing of the domestic and external demand in Turkey, moderate economic growth expected in 2012, inflation peaking in April 2012 and falling for the rest of the year, and the Central Bank's focus on using policy tools to achieve its 5% inflation target by mid-2013.
This document summarizes a research paper that develops a dynamic general equilibrium model to analyze systemic risk in the banking sector. The key aspects of the model are that it includes banks that engage in maturity transformation by issuing non-state contingent debt, and the banks are exposed to risks in capital markets that can affect their solvency. The model shows that individual banks in a competitive system will take on excessive systemic risk due to pecuniary externalities, leading to a higher crisis probability than the socially optimal level. The document then discusses using prompt corrective action (PCA) policies to reduce crisis risk by strengthening bank capital requirements.
1) As the U.S. pays down the public debt, it raises important issues regarding benchmarks for risk-free assets, how the Federal Reserve conducts monetary policy, and what kinds of assets the government might accumulate.
2) The swap market has taken on some of the benchmark role of Treasuries, but it does not fully substitute as Treasuries are not subject to default risk. The Federal Reserve may need to use different tools for open market operations as Treasuries decline.
3) Accumulating assets raises questions about what types of investments the government should hold, like state/local bonds or private fixed income, and how to manage the investments independently and avoid conflicts of interest.
Commodities can be useful diversifiers for inflation risk when included in a portfolio, but the shape of the futures curve is important. When the spot price is lower than deferred futures prices (contango), changes are likely due to demand, while a backwardated market suggests supply issues. Evaluating the term structure allows investors to better understand if commodities will diversify portfolio risk from inflation.
This document analyzes Brazilian National Treasury primary auctions from the 2000s using a Modern Monetary Theory interpretation. It finds that:
1) The Brazilian government was always able to sell its treasury bonds and was not pressured into higher interest rates by bond markets or rating downgrades.
2) Downgrades by international rating agencies did not cause persistent pressure on auction rates or changes in bond sales volumes.
3) The Central Bank ensured liquidity for treasury bonds through repo operations, maintaining interest rate targets and guaranteeing demand for government bonds.
Viewpoint Newsletter from Clear View Wealth Advisors with a focus on the role of dividend-paying stocks and the inflation-deflation debate. Also includes links to the free financial roadmap tool.
Using Proprietary Algorithms to Identify an Option's Relative PriceRYAN RENICKER
This document provides a snapshot of equity volatility and identifies stocks with options that are considered rich or cheap based on an analysis of implied and realized volatility spreads. It summarizes the results of a screen that labels options as rich if implied volatility spreads are currently at least one standard deviation above their historical averages or cheap if spreads are at least one standard deviation below averages. Stocks with rich options according to this screen are identified, along with those having cheap options. The screen output and methodology are available on the analyst's webpage for further analysis.
Convertible Bonds and Call Overwrites - 2007RYAN RENICKER
The document evaluates Best Buy's 2.25% convertible bonds due 2022 with call overwrites as a risk-adjusted trade on Best Buy stock. It analyzes the trade over 3 time horizons (3 months, 5 months, 15 months) with varying degrees of call option overwrites. Selling calls at higher implied volatilities allows investors to monetize rich option premium. The trade provides upside potential if the stock rises while limiting downside through the call premium collected and bond floor. Tables show estimated returns for the convertible bond under different stock price scenarios and call overwrite strategies.
The document provides a weekly market snapshot and commentary from Green Financial Group. It summarizes recent economic indicator readings and testimony from Federal Reserve Chairman Ben Bernanke. It also reviews index performance, interest rates, currencies and commodities. Key economic reports and events for the coming week are listed on an economic calendar.
The document discusses the financial crisis and its implications for regulation. It summarizes the causes of the crisis as excessive risk taking facilitated by low interest rates, loose regulation, and flawed compensation structures. It also outlines some initial regulatory responses like increased deposit insurance and bank bailouts. Going forward, it argues more needs to be done to reduce leverage, strengthen risk management practices, improve transparency, and reform compensation to discourage short-term risk taking. Banks may also need to raise capital and curb certain business activities.
Presentation on stock market and growthSolara Kadouf
The stock market allows individuals and companies to trade shares of ownership in public companies. For individuals, it provides an opportunity to generate income and increase wealth through dividends or capital gains. Companies benefit by raising capital through stock offerings at a lower cost than other financing options. The stock market also benefits the overall economy by facilitating efficient allocation of capital and corporate governance. However, financial crises can negatively impact stock prices and dampen investment.
Thiet ke Bao cao thuong nien - Vietcapital 2008Viết Nội Dung
The annual report summarizes Viet Capital Fund's performance in 2008, a difficult year for the fund and markets. The fund lost 57% in value compared to a 66% loss for the market index. While the fund outperformed the market, its net asset value fell to VND 418 billion by year-end. The fund increased its cash position from 22% to 44% over the year as it focused on capital preservation during the market turmoil. Top holdings were reduced in industries like real estate that were hit hard by the economic downturn. Going forward, the fund will emphasize quality companies and maintain a risk-aware strategy while seeking recovery opportunities.
Thiet ke Bao cao thuong nien -Vietcapital (vchf 2008)Viết Nội Dung
- The Viet Capital Healthcare Fund (VCHF) ended its first year of operations in 2008 with a net asset value of 511 billion VND, a 4% increase from its initial value despite a difficult market environment.
- During 2008, the VCHF invested over 30% of its assets in top pharmaceutical and hospital companies while protecting capital as markets declined sharply.
- Through prudent investment strategies, the VCHF was able to deliver positive returns while the Vietnam stock market and pharmaceutical index declined over 50% in 2008.
The document summarizes the outlook and strategy of the Global Commodity Systematic Program (GCS) managed by Global Advisors. GCS uses a rules-based, non-discretionary approach to identify and manage trends across 35 commodity markets. It expects profitable opportunities over the next few years due to factors such as the devaluation of paper currencies, continued demand growth in emerging markets like China, a supply shock from reduced commodity investment, and increasing investment in commodities from stock market investors. Charts are presented supporting these views, and it is argued that if commodity markets exhibit strong trends, the GCS program will be able to generate strong returns managing those trends.
1) GE expects earnings of around $18 billion in 2008, below its previous forecast, but above the S&P 500's performance.
2) For 2009, GE projects Industrial segment growth of 0-5%, Financial Services earnings of around $5 billion, and flat performance for Corporate/C&I.
3) GE will maintain its $1.24 per share dividend for 2009 and expects long-term earnings growth to return to 10% after the recession ends.
The document discusses the stock market and factors that influence stock prices. It provides information on:
1) How companies issue stock to raise funds and people buy shares to be part owners and receive dividends.
2) Long-term stock market behavior follows bull and bear markets and stock returns generally outpace other assets over the long run.
3) Stock prices serve as a barometer of economic sentiment and expectations for an economy's performance can become detached from reality in speculative bubbles.
This document summarizes Jeffrey Peek's remarks from a Lehman Brothers Financial Services Conference on September 8, 2008. Peek discusses CIT's transition to a global commercial finance company, securing over $11 billion in liquidity, continued funding progress in Q3, reducing high risk exposures, and initiatives to enhance profitability. The future vision is outlined as a global commercial finance company focused on the middle market with a balanced funding model and strong capital levels and ratings.
Regulators should monitor the impact of financialization on commodity markets through:
1. Comparing spot commodity indices to open interest and positions in commodity futures to examine the feedback between physical and paper markets.
2. Comparing spot commodity indices to investments in commodity ETFs and ETNs to understand the impact of financial investments.
3. Analyzing the relationship between commodity price indices and other asset prices like stocks and oil to identify potential spillovers.
This will help regulators evaluate the need for measures like position limits to reduce excessive speculation and curb unintended volatility. International coordination is also important given global nature of commodity futures markets.
11 eaton vance volatility - the black widow returns123jumpad
Richard Bernstein warns that investors are again ignoring the risks of income investing strategies during a period of global credit deflation. He notes that high-yielding assets like MLPs, REITs, and emerging market debt have historically underperformed and faced higher risks during credit downturns. However, many investors continue to view them as "safe" or "opportunistic" despite abnormally high yields often indicating hidden risks. Bernstein argues sustainability of dividends and cash flows is more important than yield alone during the ongoing deflation of the global credit bubble. His portfolios focus on fundamentals suggesting continued dividend payments rather than stretching for income.
The document analyzes the relationship between stock market performance and economic growth in the U.S. from 1980-2011. It finds a strong positive correlation between changes in the Dow Jones Industrial Average and nominal GDP. Regression analysis shows stock market fluctuations explained about 87% of the variation in GDP. The results suggest stock prices can influence economic activity by affecting business confidence, financing, and household wealth. Therefore, large declines in stock prices may precede and prolong economic downturns.
Mosaic Financial Conditions Index is an effective asset allocation tool, based on the credit markets as a leading indicator for both economy and risk assets.
This document summarizes research on the relationship between portfolio turnover and investment performance. Recent studies have found no evidence that higher portfolio turnover leads to lower returns, as was previously thought. Trading costs have declined over time, and portfolio turnover is not a good proxy for actual trading costs, which depend more on trade size and type of security traded. A 2007 study directly estimated trading costs and found no clear correlation between costs and returns. The author's own analysis of mutual funds from 2007-2008 also found little relationship between turnover and performance. Therefore, advisors should not assume higher turnover means lower returns.
This document summarizes research on the relationship between portfolio turnover and investment performance. Recent studies have found no evidence that higher portfolio turnover leads to lower returns, as was previously thought. Trading costs have declined over time, and portfolio turnover is not a good proxy for actual trading costs due to variations based on security type and trade size. A 2007 study directly estimated trading costs and found no statistical relationship between costs and returns. The author's own analysis of mutual funds from 2007-2008 also found little correlation between turnover and performance. Therefore, advisors should not assume higher turnover indicates lower potential returns.
Greenwich Ateb Presentation 21 Oct 2008 Finalrcsmuk
The document summarizes the results of surveys conducted in 2008 on the impact of the credit crunch. It shows that a majority of respondents believed the US government and financial institutions were responsible for the market turmoil. Respondents expected the economic downturn to last 12-18 months and for equity markets to bottom out within the same time frame. Banks planned to continue tightening credit standards in the US and Europe.
11.crude oil price, stock price and some selected macroeconomic indicatorsAlexander Decker
This document analyzes the impact of crude oil prices, stock prices, and macroeconomic indicators like interest rates and exchange rates on Nigeria's economic growth from 1980-2010. Using techniques like Johansen cointegration, unit root tests, and error correction modeling, the study finds that crude oil prices, stock prices, and exchange rates have a significant influence on economic growth in Nigeria. Specifically, GDP growth is positively associated with stock prices and exchange rates, but negatively associated with crude oil prices and interest rates. The study recommends that Nigeria diversify its economy away from oil reliance and ensure transparency in financial markets to boost growth.
Equity analaysi on macro economics factor of selectied securityMohitAgarwal312
This document provides an analysis of equity shares in selected Indian industries. It examines daily closing prices of companies in sectors like automobile, banking, IT, oil and gas, and telecom. Technical indicators like simple moving averages, money flow index, and relative strength index are applied to identify buy/sell signals and analyze trends. The analysis finds that some stocks like State Bank of India are oversold and poised for an upturn, while others like Maruti Suzuki may need more confirmation of a trend reversal before being a good investment. The study aims to help investors understand stock behavior and make better decisions.
This document discusses the major components of stress testing processes required by regulators. It covers economic scenarios, cash flow models, new business plans, capital consumption models, income/expense models, and capital ratios. Accurately modeling cash flows is challenging, as separate risk functions make aggregation difficult. Regulators expect banks to use competing risk models to simultaneously consider multiple risk factors. Data and model limitations remain issues for banks to address.
The document discusses market liquidity in fixed income markets post-financial crisis. Several factors have contributed to reduced liquidity, including decreased broker-dealer trading inventories due to regulations. This has increased execution risk for investors. The document recommends asset managers adapt by evolving trading strategies, portfolio construction, and risk management. It proposes a three-pronged approach: modernizing market structure; enhancing fund tools and regulation; and supporting new products to address liquidity challenges.
Crude oil price, stock price and some selected macroeconomic indicatorsAlexander Decker
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Food Prices And Finance Sector
1. Food Prices: A View from the Finance Sector
World Trade Institute, 26-27 September 2008
Judson Berkey
2. Summary
1. What is the Issue?
2. What is the Evidence?
3. Potential Conclusions
4. Parting Thoughts
Disclaimer: the following are personal views and do not represent an official
position of UBS AG or any of its affiliates.
1
4. Key global food price, supply and demand developments
♦ Prices Up and Stocks Down: since 2001, food commodity prices have gone up significantly
(reversing an almost 75% decline since the mid 1970s) and inventories for most major
commodities have fallen. The most dramatic changes occurred 2005-mid 2008.
♦ It Could Get Worse: according to OECD-FAO, over the period 2007-2016, non-OECD
countries will continue to increase consumption of agricultural products and as a result
food prices are expected to rise another 20–50% by 2016. The International Food Policy
Research Institute (IFPRI) has estimated that world agricultural GDP is likely to fall by 16%
by 2020 due to global warming, with a larger, disproportionate impact on developing
economies compared to industrial countries.
♦ The Question: is this basically supply and demand at work or is there something else going
on in the markets causing additional price increases?
3
5. Prices Rose As Commodity Investments Increased
♦ Commodity funds have become a new asset class in the investment allocations of investors,
particularly institutional investors (i.e. pension funds, sovereign wealth funds, endowments).
♦ From a low base, the amount of assets under management has increased significantly (e.g. <
10 B USD at end 2002 to approx. 200 B USD as of Jun 2008) as spot prices, represented by
index prices, increased more than 3 times during the same period.
♦ There even may be scope for further increase – e.g. 3.5% allocation by estimated USD 29
trillion of institutional investment money would result in USD 1 trillion in commodities.
♦ This includes investment in agriculture/livestock.
Source: 8 July 2008 Financial Times article 4
6. Types of Investors
♦ There are two main types of investors in commodity markets – commercials (i.e. traditionally
hedgers of physical product) and non-commercials (i.e. speculators - traditional and now
index investors).
♦ In some cases, the index speculators have reached a significant market size the value of
which has increased as prices of commodities increased.
5
Source: 20 May 2008 testimony of Michael W. Masters to US Senate Committee on Homeland Security and Governmental Affairs.
7. Commodity Index Investment via Futures
♦ The investments in commodity funds involve the use of futures. These futures represent
potential future claims on real products (but only if delivery is actually taken). Unlike
traditional speculators who are spread traders (i.e. long one month and short another to bet
on price direction) index investors are always net long (but someone else is short).
♦ Index investors do not take possession but roll futures forward each month. Some argue this
is equivalent to additional stocks (i.e. form of inventory “hoarding”) that raises prices
beyond what would otherwise be the market clearing level.
Source: 20
Source: 11 Sep
May 2008
2008 CFTC
testimony of
Staff Report
Michael W.
on Commodity
Masters to US
Swap Dealers
Senate
& Index
Committee on
Traders with
Homeland
Commission
Security and
Recommenda-
Governmental
tions
Affairs.
6
9. Increases in Futures Contracts versus Prices
♦ World Bank study concluded that 130% increase in the IMF’s index of internationally traded
food prices from January 2002 to June 2008 was due to confluence of factors
– 25-30% due to higher energy prices , related increase in fertiliser and energy costs, and dollar weakness
– 70-75% due to biofuels and related consequences of low grain stocks, land use shifts, export bans, and
speculative activity
♦ The study did not identify the amount due to speculative activity but placed it last in its list
of potential causes.
♦ In addition, it noted that increases in future contracts did not coincide with increases in
commodity prices for those commodities where index speculators are supposed to have a
large market share.
Thus, the study concluded
that it is difficult to state
that speculation played a
material role in price
increase.
8
Source: World Bank July 2008 Policy Research Paper 4682 “A Note on Rising Food Prices” by Donald Mitchell
10. Price Increases without Futures Contracts
♦ A further piece of evidence is that prices have increased significantly for commodities that
are not even traded. This favors explanations focused on supply and demand fundamentals.
♦ Others have noted that past attempts to shut down commodity futures markets in the face
of price increases proved futile at alleviating price increases.
♦ These are further pieces of evidence that raise doubts about the role of commodity
speculation in driving prices far out of alignment with fundamentals.
Source: 8 July 2008 Finance Times article 9
11. Looking for Causation
♦ The most detailed studies to date on recent investment activity in commodity markets
have been done by the US Commodities Futures Trading Commission. The first, released in
July 2008, relied primarily on oil futures data from January 2003 to June 2008 and tried to
determine the potential for causal links between investment activity and price increases.
♦ “…the correlations between position changes and price changes tend to be quite variable.
While it is true that the positions of non-commercial traders in general, and hedge funds
in particular, often move in the same direction as prices, these correlations, standing
alone, do not provide definitive information about causation. Thus, further assessment of
the dynamic relationship between position changes and price changes is warranted”
Primarily negative
correlation – i.e.
commercials go net
shorter when prices
go up as they sell
more forward
Primarily positive –
i.e. hedge funds
going net longer as
prices go up
10
Source: Interim Report on Crude Oil, Interagency Task Force on Commodity Markets, July 2008
12. Looking for Causation
♦ “Over the full time period, there is little evidence that daily position changes by any of the
trader sub-categories systematically precede price changes. This result holds for all
potential categories of speculators – for non-commercial traders in total, for hedge funds
and swap dealers individually...”
Thus, positions likely are
being adjusted to reflect
new price information
and represent economic
interests of the different
classes of trader.
Caveats:
• tests are of trader
groups not individual
traders
• test use end of day
positions and not
intraday trades
• tests are on nearby
contracts alone and not
on the full term structure
11
Source: Interim Report on Crude Oil, Interagency Task Force on Commodity Markets, July 2008
13. Are there Hidden Factors?
♦ Some have argued that speculators “hide” in the CFTC commercial trader category through
their OTC swaps with swap dealers (i.e. swap dealers will combine all OTC and index
positions they handle and then enter into futures to hedge the residual exposure which right
now count as commercial hedges in CFTC data sets).
♦ CFTC analysis showed that while gross positions increased significantly, the swap dealer NET
positions decreased between 2006 and June 2008 and they were NET SHORT during first five
months of 2008 (i.e. betting on falling prices during a period of rapid increase).
12
Source: Interim Report on Crude Oil, Interagency Task Force on Commodity Markets, July 2008
14. Additional Analysis of Swap Dealers and Index Traders
♦ CFTC released another study in September 2008 specifically examining detailed position
data collected on swap dealer and index trader activity in index commodities from 31 Dec
2007 – 30 Jun 2008. Focus on NYMEX crude, CBOT wheat & corn, and ICE cotton.
– Nature of market activity has changed since reporting requirements and position limit structure last modified
– Index trading volume still reasonable relative to total open futures interests in most commodity categories as of end
Jun 08 (13% for NYMEX crude, 47% for CBOT wheat, 18% for CBOT corn, 23% for ICE cotton)
– Index trading volume (measured by number of futures equivalent contracts) either steady or decreasing over time
period examined (Jan-Jun 08) so increase in value invested more due to price increase than new money (-11% for
NYMEX crude, +5% for CBOT wheat, +7% for CBOT corn, +1% for ICE cotton)
– Some client positions with swap dealers have exceeded exchange traded position limits (18 traders out of 550
examined with 35 individual positions). Amount of excess usually small but in a few cases non-commercial client
combined ETF position and OTC position combined significantly exceeded limits.
– Regular data collection to occur with specific data collected on swap dealers and a new quot;long formquot; report for large
traders. CFTC to consider eliminating bona fide hedge exemption on position limits for swap dealers and replace
with narrower risk management exemption. Also, CFTC to review separation between trading and research.
13
Source: Staff Report on Commodity Swap Dealers & Index Traders with Commission Recommendations, September 2008
16. Expert Analysis on the role of speculators
♦ Expert opinion generally sees speculators as contributing to “price discovery” and thus
helping stabilise the markets with their futures investments. This does not deny the role
that speculation can have on prices but places it into a more holistic context in terms of
signalling the need for adjustments to the supply and demand fundamentals in future.
– IEA (International Energy Agency) (June 2008, re oil): quot;Blaming speculation is an easy solution
which avoids taking the necessary steps to improve supply-side access and investment or to
implement measures to improve energy efficiency.“
– Sanders, Irwin, and Merrin (The Adequacy of Speculation in Agricultural Futures Markets: Too
Much of a Good Thing, June 2008): “First, if there is a market impact from index fund activity, it
seems likely that it would have occurred during the period of most rapid growth: 2004-2005.
Second, the stabilization of the index funds’ percent of total open interest may suggest that
other traders have adjusted their strategies to better cope with this relatively new market
participant. Third, Working’s speculative index [a measure of speculative activity relative to
hedging activity] suggests that long-only index funds may in fact be beneficial in markets
dominated by short hedging pressure. That is, they improve the adequacy of speculation by
helping the market to ‘carry’ unbalanced short hedging.”
15
17. Financial industry analysis on the role of speculators
♦ Financial industry analysis focuses on major structural and cyclical reasons for the price
increases and agrees with regulators and other experts on the role of speculation:
– UBS (Sep 2007): quot;In the near-term, food prices are unlikely to rise in simple linear fashion – short-
run supply responses are sufficiently elastic to mitigate many price increases. Over longer time
horizons, however, the secular forces of supply and demand are likely to place strong pressure on
the prices of many agricultural products, as well as on the inputs of modern food production,
including land, fertilizers, pesticides, water use, and related infrastructure.“
– Barclays Capital (June 2008): “Our view is that the rise has been well supported by fundamentals
and that purely speculative demands have not played a role.”
– Deutsche Bank (July 2008): quot;When regulators turn the lights on these 'dark markets', they will
find no monsters in the room – rather underlying fundamentals driving prices higher.“
– Goldman Sachs (June 2008): “The role of speculators is to bring new information to the market
on forward supply and demand fundamentals….The role of index investors is to supply a pool of
stable, passive, unleveraged capital to bear commodity price risk….by allowing commodity
producers to transfer their inherent commodity price risk exposure to long-term investors who
are better-suited to bear it, the participation of the index investors in the commodity futures
markets lowers the cost of capital to commodity producers, and by lowering costs helps to lower
commodity prices over the long run.”
16
Source: Speculators, Index Investors, and Commodity Prices (Goldman Sachs, June 29, 2008)
18. So it comes back to shocks in supply and demand
Taken from Bernd Schanzenbächer, Global Head Environmental Business Group, Credit Suisse at Trading on 17
Scarcity: Ecological Progress and Financial Market Innovations conference, 10-11 Sep 2008, Zurich.
20. Are We Asking the Right Questions?
♦ We are asking whether weak market structures allow speculators to manipulate prices
beyond fundamentals – i.e. are investors contributing to the food price crisis
– On balance, markets (in their role as a means to identify prices and allocate resources) work.
– This assumes that markets have the necessary and sufficient information to make decisions and
the reporting and other rules are sufficient to prevent market manipulation.
♦ Should we instead ask whether markets get all necessary and sufficient information to
perform their role efficiently – i.e. how do we best address the food quality crisis
– Need to include negative externalities from agricultural processes (climate change, environmental
damage, human health)
– Need to consider the distorting effects of subsidies, tariffs, and taxes (including water pricing)
– Need to determine whether to include non-monetary values (ecosystem services, local production
& food security, food waste and consumption choices (e.g. meat, agrofuels), economic
development, traditions associated with certain agricultural practices and food products).
♦ The question is whether our cheap food was really as cheap as we thought – i.e. was it only
cheap because of our lack of knowledge or deliberate avoidance of certain considerations.
– As with climate change, we need a public debate, informed by science and economics, about the
kind of agriculture that we want.
– This may fit into a broader discussion about tradeoffs in the use of natural resources (see, e.g., the
UN Millennium Ecosystem Assessment & EU Economics of Ecosystems and Biodiversity reports)
– Once the goals are set, technology and markets will provide tools to achieve the identified ends
with governments there to make sure the rules of the game are followed
19