The document discusses Japan's deteriorating financial situation, with a debt-to-GDP ratio approaching 200%, the highest in the world besides Zimbabwe. This has led S&P to downgrade Japan's credit rating, raising concerns that other countries like the US could face similar downgrades if deficits are not reduced. Rising debt is a major global problem with nations having to pay higher interest rates, making deficits harder to manage.
FOMC meeting crucial for forex and commoditiesHantec Markets
After the huge swing in positioning for the Fed to turn dovish, this week's meeting of the FOMC will be crucial for the medium term outlook on financial markets. We look at the impact on forex, equities and commodities markets in the coming days.
Trekking markets & more with InvestrekkInves Trekk
The report presents a summary of the Indian market activity during the week ended 27 June 2021. It also provides some important insights about the global market trends and Indian Market outlook for the Week beginning 28 June 2021.
FOMC meeting crucial for forex and commoditiesHantec Markets
After the huge swing in positioning for the Fed to turn dovish, this week's meeting of the FOMC will be crucial for the medium term outlook on financial markets. We look at the impact on forex, equities and commodities markets in the coming days.
Trekking markets & more with InvestrekkInves Trekk
The report presents a summary of the Indian market activity during the week ended 27 June 2021. It also provides some important insights about the global market trends and Indian Market outlook for the Week beginning 28 June 2021.
The global economy is improving overall, with the U.S. and U.K. leading the way. We expect higher GDP growth from the U.S. to support risk assets in the third quarter. We continue to expect a rise in U.S. interest rates in 2014, though eurozone policy may help slow a near-term increase. We favor credit, prepayment, and liquidity risks, which we express in allocations to mezzanine CMBS, peripheral European sovereigns, select EM sovereigns, and interest-only (IO) CMOs.
As Fed tapering unfolds, we expect to see stronger growth from developed markets, while emerging markets in aggregate may experience further currency and capital market weakness. In the United States, declining labor participation continues to drive falling unemployment figures, and may harbor the beginning of a wage inflation surprise.
• We expect credit, liquidity, and prepayment risks will continue to
be rewarded by the market in the months ahead, while interestrate
risk remains unattractive due to its asymmetric risk profile.
Is the US dollar set for a correction as the year draws to a close?5Hantec Markets
Well, the bond markets certainly called the Fed decision pretty much spot on, in that there was very little volatility on the FOMC rates announcement. However, could it be that it was the euphoric reaction from the equity markets that was the wrong call?
Whats Ahead In 2012 - An Investment Perspective (Spring Update)scottmeek
Bob Doll, Chief Equity Strategist for Fundamental Equities with BlackRock, updates his economic and market outlook, comments on his 10 predictions for the year and discusses investment opportunities for the current environment.
All eyes on the Fed, but what sort of cut?Hantec Markets
It is an incredibly important week for markets with the big focus on the monetary policy meeting of the Federal Reserve. A rate cut is guaranteed, but what will forward guidance bring? We look at the impact on forex, equities and commodities.
Signs of inflation will raise the stakes for the Fed’s policy communications. Favorable conditions for leveraged strategies could reverse quickly. Reasonable valuations and the Fed’s policy goals continue to support risk assets.
Agcapita July 2013 - Central Banking's Scylla and CharybdisVeripath Partners
While I believe that eliminating QE is the right thing to do for the long-term health of the economy, the recent equity and bond market declines are but modest harbingers of the unintended short-term consequences that the Fed’s prolonged ZIRP/QE program and its termination will wreak – rollover and convexity risk. These are the proverbial pigeons that will come home to roost if the US Federal Reserve stops its massive bond-buying spree and rates normalize.
U.S. equities continued their impressive advance, with
no significant declines during the quarter. In Europe, policy changes may function as an important tailwind for growth and market performance. Globally, M&A activity has been on the rise, giving a boost to equity prices across the market-cap spectrum. The current bull market has been significant — in terms of both length and magnitude.
The global economy is improving overall, with the U.S. and U.K. leading the way. We expect higher GDP growth from the U.S. to support risk assets in the third quarter. We continue to expect a rise in U.S. interest rates in 2014, though eurozone policy may help slow a near-term increase. We favor credit, prepayment, and liquidity risks, which we express in allocations to mezzanine CMBS, peripheral European sovereigns, select EM sovereigns, and interest-only (IO) CMOs.
As Fed tapering unfolds, we expect to see stronger growth from developed markets, while emerging markets in aggregate may experience further currency and capital market weakness. In the United States, declining labor participation continues to drive falling unemployment figures, and may harbor the beginning of a wage inflation surprise.
• We expect credit, liquidity, and prepayment risks will continue to
be rewarded by the market in the months ahead, while interestrate
risk remains unattractive due to its asymmetric risk profile.
Is the US dollar set for a correction as the year draws to a close?5Hantec Markets
Well, the bond markets certainly called the Fed decision pretty much spot on, in that there was very little volatility on the FOMC rates announcement. However, could it be that it was the euphoric reaction from the equity markets that was the wrong call?
Whats Ahead In 2012 - An Investment Perspective (Spring Update)scottmeek
Bob Doll, Chief Equity Strategist for Fundamental Equities with BlackRock, updates his economic and market outlook, comments on his 10 predictions for the year and discusses investment opportunities for the current environment.
All eyes on the Fed, but what sort of cut?Hantec Markets
It is an incredibly important week for markets with the big focus on the monetary policy meeting of the Federal Reserve. A rate cut is guaranteed, but what will forward guidance bring? We look at the impact on forex, equities and commodities.
Signs of inflation will raise the stakes for the Fed’s policy communications. Favorable conditions for leveraged strategies could reverse quickly. Reasonable valuations and the Fed’s policy goals continue to support risk assets.
Agcapita July 2013 - Central Banking's Scylla and CharybdisVeripath Partners
While I believe that eliminating QE is the right thing to do for the long-term health of the economy, the recent equity and bond market declines are but modest harbingers of the unintended short-term consequences that the Fed’s prolonged ZIRP/QE program and its termination will wreak – rollover and convexity risk. These are the proverbial pigeons that will come home to roost if the US Federal Reserve stops its massive bond-buying spree and rates normalize.
U.S. equities continued their impressive advance, with
no significant declines during the quarter. In Europe, policy changes may function as an important tailwind for growth and market performance. Globally, M&A activity has been on the rise, giving a boost to equity prices across the market-cap spectrum. The current bull market has been significant — in terms of both length and magnitude.
A list of blogs and articles by Shamik bhose...a list of links and summary of TV interviews of Shamik on National business channels like ET Now or Cnbc or Zee Business news etc etc..
US Fed rate hike in September 2015: Who will be the top 4 winners and losers?Aranca
The much hyped US Fed rate hike likely to be in September 2015 will mark the end of an era of free money. While it brings the good news that the most powerful economy of the world is back on track and can sustain a rate hike, there may be certain repercussions for the global markets. Here’s our take on who may win, and who may lose.
World Currencies
Currently most—if not all—currencies are directly pegged to the US dollar with the
governance of a monetary standard. The variance in the effects of inflationary pressure—when
compared to the US dollar—is due to their value (purchasing power) and their central banks'
monetary policies. Today we have reports concerning the rise in value of various currencies
when compared to the US dollar. For the most part, this is due to the US dollar's rate of descent
due to its central bank's failure to raise the Fed Fund rate which would give some balance to its
devilish inflationary monetary policy.
Market Outlooks
We leverage a global network of investment consultants and researchers to deliver industry specific knowledge and dynamic tools, which allows our clients to make informed strategic investment decisions.
Will bank loans increase, or decrease? Will this stop the recovery in its tracks. Fed at moment is "puchasing" $85 bn in assets from banking system as traditional monetray policy is in "liquidity trap".
It is our opinion that wishful thinking and your investments do not go well together and wishful thinking is what the brief shift in market sentiment regarding a Fed pivot amounted to.
https://youtu.be/INhxM58dFwA
1. Reflation Phase To Be Temporary, More Downside Ahead
Earlier on in 2016, ‘random and violent markets’ went off to panic mode out of (i) fears over China’s messy stock market and devaluing currency, (ii) plummeting oil price, (iii) strong US Dollar. Today, we believe complacent markets are similarly illogical and over-shooting, this time on the way up. As we re-assess the validity of the underlying risks, we expect a shift in narrative in the few months ahead and a sizeable sell-off for risk assets.
2. Four Key Conviction Ideas
We analyze below our key ideas for the next 12 months:
Short Chinese Renminbi Thesis. In Q1, China only managed to keep GDP in shape by means of graciously expanding credit by a monumental 1 trn $. Unsurprisingly, at 250% total debt on GDP, you cannot borrow 10% of GDP per quarter for long, without a currency adjustment, whether desired or not.
Short Oil Thesis. Long-term, we believe Oil will follow a volatile path around a declining trend-line, which will take it one day to sub-10$. Within 2016, we expect global aggregate demand to stay anemic and supply to surprise on the upside, inventories to grow, primarily due to the accelerating speed of technological progress.
Short S&P Thesis. To us, the S&P is priced to perfection, despite a most cloudy environment for growth and risk assets, thus representing a good value short, for limited upside is combined with the risk of a sizeable sell-off in the months ahead.
Short European Banks Thesis. We believe that micro policies at the local level, while valid, are impotent against heavy structural macro headwinds, and only the macro environment can save the banking sector in its current form in the longer-term. Macro structural headwinds for banks these days are too heavy a burden (negative sloped interest rate curves, deeply negative interest rates, deflationary economy, depressed GDP growth, over-regulation, Fintech), and will likely push valuations to new lows in the months/years ahead.
Question 1Response 1Development inside and out effects t.docxaudeleypearl
Question 1:
Response 1:
Development inside and out effects the entire country's economy. It impacts the managing body, regardless the clearly irrelevant subtleties in the average person's dependably life. Both a conditions and clear deferred results of how the economy is getting along, swelling has the two its fans and spoilers. Distinctive envisions that particular degrees of swelling are helpful for a prospering economy, yet that progressively critical rates raise concerns. It can degrade the money basically and, at logically lamentable, has been a key part to subsidences.
Swelling, as referenced, is the rate a worth ascensions, and fundamentally how much the dollar is worth at a given moment concerning checking. The idea behind swelling being an impact for good in the economy is that a reasonable enough rate can nudge financial movement without debasing the money so much that it ends up being basically vain (Kohn, 2006).
Swelling can in like manner falter from asset for asset. Subordinate upon the season, the expense of gas could go up independently from with everything considered headway as it routinely does as summer moves close. In reality, there is even a term - focus improvement - for swelling that parts in everything except for sustenance and imperativeness (gas and oil), as these regions have separate factors that add to them. There are a wide degree of sorts of swelling, subordinate upon what remarkable is being viewed comparatively as what the development rate truly is by all accounts. For example, what happens if the swelling rate is well over the Fed's normal goal? At a higher rate, yet still in the single digits, that is known as walking swelling. It is seen as concerning yet sensible (Ball, 2006).
Swelling is generally depicted reliant on its rate and causes. By and large, Inflation happens in an economy when vitality for thing and experiences outmaneuvers the supply of yield. in this manner, clarifications behind Inflation have different sides, the intrigue side and supply side. The widely inclusive activity of hazard premiums in driving enlargement pay over the scope of advancing years is dependable with secured budgetary improvement and inside and out oblige cash related procedure events in the moved economies. The degree for further fitting budgetary enabling seen with money related stars seems to have declined amidst the enough low advance charges and gigantic monetary records of national banks (Bodie, 2016).
In relentless time, the correspondence of perils has wound up being constantly phenomenal, the general point of view has lit up, and money related conditions have engaged on net. With the work superstar proceeding to reinforce, and GDP improvement expected to keep up a vital good ways from back in the consequent quarter, it likely will be fitting soon to change the affiliation supports rate. Likewise, if the economy propels as shown by the SEP concentrate way, the affiliation supports rate will probably app ...
The fundamental theme of the newsletter remains the same -- to dive deeper into economic issues that affect our investors. However to keep it interesting, the analysis has been kept at a macro level without getting into minute details.
We received encouraging feedback on the inaugural issue and we have used the same to improve this edition.
We hope you find the newsletter interesting.
1. Shamik Bhose
sbhose@microsec.in ; shamikbhose@yahoo.com
The consequences are profound and if it is not your foremost concern as an investor then it probably should be.
This morning news came down the wires that the rating agency S&P had downgraded Japan's sovereign debt from 'AA' to 'AA-'. This
is no small development.
The reality is that Japan's finances are in even worse shape than those of the US when its overall indebtedness is compared as a
percentage of GDP. Japan is approaching a debt to GDP ratio of nearly 200%! Yes, you read that correctly. The only nation in the
entire world that is higher is Zimbabwe. In effect, the Japanese government spends 2 yen for even one yen of overall economic
activity.
What this means is that the rating agencies, who are watching these sovereign debt woes which have struck various countries in the
EU, are concerned about the same problem beginning to surface in other quarters around the globe. Quite simply they are looking at
the huge deficits being run by many nations in the West (and Japan). In other words - TOO MUCH DEBT!
That led to selling in the long end of the US yield curve this morning as bond traders are starting to be more than a bit fearful that the
same thing is going to happen to the US's 'AAA' rating at some point in the future if the US does not get its financial house in order.
They are watching massive amounts of QE2 and another ballooning of the federal budget deficit and are selling even as the Fed
attempts to jam the market higher with its purchases. AT this point, the only thing holding the long end of the curve is the Fed. How
long can that last especially without affecting the Dollar?
More and more we see the integrity of sovereign debt being brought into doubt which leads to the question among many investors;
"what is a safe haven that is actually safe?" Who wants to take the chance of holding a nation's bonds if overnight they face the real
risk of being downgraded?
The real world impact of this is that nations whose debt gets downgraded will have to offer potential investors a higher rate of return
to compensate them for the increased risk of holding their debt. For nations already hopelessly in debt, that means borrowing costs
begin to rise forcing them to borrow even more money just to keep their heads above water. The whole thing becomes a vicious cycle
with rising interest rates compounding the problem.
The US has been able to sneak by and thus far avoid a rating agency's downgrade partly because its borrowing costs are so low.
Should these agencies begin to train their sights on the US and give closer scrutiny to its miserable financial condition, there is a
chance that a downgrade could follow. Such a development, were it to indeed occur, would force the US to offer higher rates of return
on its debt. That of course would raise its borrowing costs at a time when it can least afford it not to mention short circuiting the QE
policy which is deliberately designed to lower borrowing costs.
This is why the take down in gold, after yesterday's nice performance, is so remarkable for its perverseness and why long term
oriented holders of the metal should not be the least bit concerned as to the antics taking place in the paper market. Sovereign debt
woes are not behind us - the problem lies squarely ahead of us and no amount of wishful thinking is going to change that hard reality.
This being said, one of the things we now want to monitor will be the performance of gold when priced in terms of the Yen.
sbhose@microsec.in ; shamikbhose@yahoo.com
2. Talking about cheap money- the Indian RBI is now falling behing the curve and showing nerves..........
We are already battling an inflation of 8.5%+ in the country despite the Reserve Bank of India (RBI) already having raised the
overnight repo rate to 6.25% to counter the upward movement in prices but so far with little success.The RBI, for its part, has already
indicated its desire to raise rates even further. However, a 25-basis point (bps) rise is mostly discounted by the market and the price
movement of the rate sensitive stocks yesterday showed that the market would take a 25-bps rate hike as more of a fait-accompli than
as any surprise. The moot point is why would the RBI just raise 25-bps ? Let us look at the context.
As of now, India’s one-year T-bill rate rose 50-bps last week to 7.70% perhaps to fully discount the possibility of 100-bps rate hike
from the current rate in a year’s time from now. However, our 1-year T-bill rate is rising at a faster clip than the 10-year Government
Bond yield, which seems to be stalling out close to 8.20%. The result of which the spread between their yield curve has narrowed
considerably to just around 48-bps by the end of last week. This is a worrisome signal.Typically, stock markets do not perform well
when the yield spread is narrowing, especially as an outcome of tighter monetary policy. But that is not central bankers brief ?
If the yield curve becomes flat with short term rates becoming equal to long-term bond yields, it generally results in a substantial
correction in the equity market. It is said, if the short-term rates move above long-term yields for a significant time period it can
induce an economic recession and a bear market for equities.
If the RBI continues to lift its repo rate by another 100-bps (including what it did this week) in this year it can at some point in time
lead to a situation where the 10-year G-Sec yield would be lower than the 1-year T-bill rate resulting in a situation where we get an
“inverted yield curve.” While this may sound a bit alarming but if the inflation genie refuses to get back into the bottle this could well
be one of the possibilities whose probability of becoming a reality would not be that small to give us any degree of comfort except, of
course, if we decide to delude ourselves in wishful thinking that unbearable things simply don’t happen.The calibrated rate hike
exercise has become all the more difficult with the US FED becoming totally oblivious of inflation becoming a problem and continues
its dollar printing exercise currently with QE-2 and may be after June with another QE-3.
The intransigent behavior of the FED is getting all the more blatant when you hear such things like the FED Governor Daniel Tarullo
said recently in an interview on a business television channel that he is not worried about inflation. He said, “The increases in longer-
term interest rates in spite of the central bank’s efforts to bring them down are a sign (that) FED policies are working. At the moment,
and looking forward, one does not see at this juncture any signs of upward significant pressure on inflation.” He added, “Rising food
and energy costs have boosted total inflation, but price increases excluding those items don’t show any signs of significant upward
pressure on inflation.” However, the impact of the FED’s highly inflationary QE-2 scheme is being felt very heavily in emerging
countries like India .
Traders and bond market participants are worried that sharply higher oil prices that is already higher by 30% from its last September
levels could fuel inflation (or, already fuelling) worldwide and tax the disposable income of households and businesses leading to
cracks in equity market performances in most places.The problem is that commodity prices have gone up across the world. With such
high levels of commodity prices sooner than later corporate profitability would be dented severely in a rising interest rate scenario.
What is even more worrying is the fact that the grand fiscal stimulus that was given here in our country from late 2008 would have to
be phased out if fiscal corrections have to be done. Would the high growth then be able to find its legs to stand on?
Meanwhile, The Dragon ...prowls. Diversification of investments from normal debt market instruments that carry an inherent
currency risk also.
Thus the diversification of investment plus aquisition of resources or technology.................recent convergence of moves as
dollar index weakened against the euro alongside gold/silver/crude oil / metals correcting.
Although, each commodity group corrected for different reasons;
sbhose@microsec.in ; shamikbhose@yahoo.com
3. Metal’s were overbought, WTI crude found it hard to go beyond 93$ despite trying and gold - silver made double tops and
were technically weak...
The consequences are profound and if it is not your foremost concern as an investor then it probably should be.
Correlations have continued to increase despite falls in individual asset volatility.
The most obvious manifestation is the lack of diversification which is now available to you, fat tail risk!! .
Equities, interest rates, energy, commodities and currencies now move in tandem.
And why has the euro gone from 1.29 per US$ to 1.36 in a matter of days ?
Shamik Bhose
sbhose@microsec.in ; shamikbhose@yahoo.com
To see our various commodity, currency and related world financial market articles visit our commodity dept. website
of www.commoditylive.in and click on the reports icon on the top left corner of the screen and you can also visit
www.4shared.com and type Microsec And Or www.scribd.com and type Shamik Bhose in the search column to
access our latest review and outlook articles ;