Tag Archives | leverage

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Simplicity the key goal for bank regulation

Over the past 20 years, the financial sector has captured an increasing share of the wealth created by the rest of the economy. At its peak before the Crisis, it accounted for 40% of all profits in the US corporate sector, allowing financiers to claim they were ‘masters of the universe’. A key reason for […]

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USA money supply slows to near-record lows

“Money makes the world go round” as the song from the musical Cabaret tells us. But the chart above, from BofA Merrill Lynch, suggests there isn’t too much money circulating in the world’s largest economy today. It shows M3 (the broadest measure of money supply). Merrill note that its growth is now close to the […]

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Dow Jones Index has worst May since 1940

‘Sell in May and go away’ seemed a good tactic to the blog at the beginning of the month. It worried that we might now be approaching the ‘drawn-out fundamental downtrend’ phase of the current cycle. And in spite of several major ‘relief’ and ‘short-covering’ rallies, financial markets have continued to suffer. The US Dow […]

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Major banks seem to “window-dress” their accounts

Its bad enough that many of the world’s major banks collectively lost $4 trn, whilst continuing to pay themselves $bns in bonuses. Equally sad was the fact that the heads of these banks seemed unable to understand the simple principle of fiduciary duty, when asked by the US Congress about their responsibilities to clients. But […]

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IMF warns on government spending

The global economy and the chemical industry have been boosted, since the Crisis began in 2008, by massive government stimulus programmes in areas such as autos and housing. Now the International Monetary Fund (IMF) has released a new report, focusing on what happens next. It warns that “general government debt is expected to rise by […]

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Napa Valley foreclosures rise in ‘new normal’

Further evidence that the West is moving into a ‘new normal’ can be seen in the rising number of Napa Valley wineries facing foreclosures. The concept, adopted by the blog for its recent 2010 Outlook White Paper, suggests that the ‘conspicuous consumption’ seen in the West during the 2003-7 Boom is being replaced by more […]

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3 Scenarios for Financial Markets

The Financial Times’ Investment Editor argues this week that “there is no point in forecasting stock market performance to the last digit“. Instead it presents 3 scenarios for 2010: • Standard Bear Market. This view suggests that the current rally is “the normal adjustment after a market crash“. After the rally ends, we will then […]

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Leverage returns to financial markets

Gillian 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 […]

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G-20 moves on financial regulation

Last April’s G-20 Summit brought together the leaders of the major world economies. Yet in terms of their announced goals for the Summit, financial regulation seemed to be the only one that gained traction. That impression is confirmed by the weekend’s meeting of Finance Ministers, in preparation for the next Summit in Pittsburgh later this […]

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V-shaped sellers meet L-shaped buyers

Picture: www.businessoffashion.com A senior figure in the investment community told the blog recently that companies’ views on the outlook for the economy seemed to vary according to their own financial position: “the stronger the balance sheet, the more realistic (and worse) the view on the economy”. This analysis was confirmed at an interesting M&A Round […]

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