Leverage returns to financial markets

Tett.jpgGillian Tett, the blog’s favourite financial journalist, highlights today the rampant speculative behaviour in financial markets around the world.

Quoting a senior banker, she notes that “highly leveraged short-term trades are back in vogue“. She adds that “traders feel stupid if they don’t leverage up“.

The basis for the speculation is that “central bankers have poured huge amounts of money into the system that is frantically seeking a home, because most banks simply do not want to use that cash to make loans“.

The results can be most clearly seen in China, where mainland property prices have soared 73% so far this year. Even the property bubble in the West never saw prices rise more than 30% in a year.

The blog shares her “sense of foreboding” about how it will all end.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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