'Financial Corner'
Echos from Jackson Hole
Posted on 29. Aug, 2010 by Christof.
Apart from the Bernanke speech, there was a lot of debate over the weekend amongst central bankers on how to proceed with monetary policy towards the future. And from all the interesting comments, it seems that one main conclusion comes out : The post Greenspan- & Bernanke – era has to taccle issues from out of a different monetary perspective. (meer lezen…)
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On Krugman, Bubbles and “Minsky moments”
Posted on 26. Aug, 2010 by Christof.
According to Paul Krugman in one of his latest blog articles, there are bubbles and there are bubbles (25/08). The point Krugman is trying to make is that bubbles are not always detrimental to the economic system, it merely depends on the cause setting the scenario for a “Minsky moment”. (meer lezen…)
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Hannibal Lecter and Marcus Aurelius
Posted on 24. Aug, 2010 by Christof.
“First principles, Clarice. Simplicity. Read Marcus Aurelius. Of each particular thing ask : what is it in itself ? What is its nature ? What does he do, this man you seek ?” – “He kills women, Doctor”- “No ! That is incidental. What is the first and principal thing he does ? What needs does he serve by killing ?” (meer lezen…)
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An Englishman in NY – An Austrian in Washington
Posted on 19. Aug, 2010 by Christof.
Dissidents are fun, from time to time they “move” the world and hence they deserve listening to. History is full of examples in the field of philosphy, literature, music, politics and economics make no exception. Furthermore, dissidents are intriguing just because they dare to say what mainstream thinking doesn’t want to say or, for various motives, “forgets” to say. (meer lezen…)
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FOMC 10/08 and QE version 2.0 : The 5th dimension
Posted on 11. Aug, 2010 by Christof.
With a more than substantial interest, markets were keen to find out whether the FOMC would throw in some extra ammunition or fire a silver bullit. What did the FED say, what are the implications and how did markets digest ? (meer lezen…)
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Inflation, Radio FM and popular delusions
Posted on 05. Aug, 2010 by Christof.
The current debate on the absolute need to create inflation is very intense. Advocates such as Krugman point to various benefits, not in the least the fact that the real debt burden is lowered. I believe it is a little bit more complex than that. Furthermore, adding more budgetary and monetary stimuli can create serious problems in terms of policy mistakes, this on 3 fronts : (meer lezen…)
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Growth “Conundrums”
Posted on 14. Jul, 2010 by Christof.
We had some very upbeat reports lately on the global recovery gaining momentum and avoiding the double dip. The IMF in its latest report even lifted the outlook from 4,3% (April) to 4,6%. Developing nations will continue to cushion the relative weak developed performance with Europe posting a 1% growth this year. In fact, according to the IMF, a European sovereign debt explosion is the sole weak link in the further overall bright business cycle outlook. For the US, 3% is still in the cards whilst Japan will post a 2,4% growth rate (!). The most positive surprise will come from Brazil (forecast upgraded by 1,6% to 7,1%) and China (10,5% instead of 10%). Though we don’t want to sound like Dr Doom and wish the world economy all the best of luck in realizing this scenario, there are some very disturbing indicators questioning this particular roadmap. (meer lezen…)
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Bank stress testing : “Wasserdruck !!”
Posted on 06. Jul, 2010 by Christof.
One of the scarce hilarious moments in the motion picture “Das Boot” concerns the “usual” exercise of emergency diving after an enemy alert. When the U-boot goes beneath 250 m, the infrastructure crumbles and shakes with bolts flying around. The chief engineer smiles to the propaganda representative aboard – having cold sweat and laughing green – merely saying “Wasserdruck”, winking an eye to those familiar with the exercise. Todays’ exercise on European banks and stress testing shows some similarities with the above scene : it involves shaky fundamentals and could possibly involve misleading propaganda. (meer lezen…)
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CDS and Krugman Revisited – Charts of the week
Posted on 01. Jul, 2010 by Christof.
In the world of Keynesianism of which Krugman and Bernanke are part, everything is possible. You can stimulate as much as you like and if it doesn’t work, you add some more. It becomes even better because you can pull the trick at low interest rates. So in the second half of this year, with double dip looming and banks still in a coma, the US seems to be on track to shift into higher gear : A new budgetary stimulus package in the pipeline and an extension of quantitative easing with the blessing of “Helicopter Ben”. Concerning the latter, apparently scenarios are circulating to expand the FED balance sheet from the current 2,300 bio USD to 5,000 bio USD, an adventure even captain Kirk is afraid to embark upon. And it all will come at a zero cost, right ? (meer lezen…)
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“Mrs Watanabe” – BIS warning
Posted on 29. Jun, 2010 by Christof.
Mrs Watanabe is the designation used to describe the typical Japanese housewife. Next to her usual household activity, she is also actively playing the market of foreign currency (forex). Carry trade refers to the process of borrowing low yield currency and selling it against a high yield currency. Not exactly carry trading is the fact that Mrs Watanabe is also selling her JPY outright – which hardly generates interest income on her domestic savings’ account – and buys higher yielding currency such as Australian $, Kiwi $ etc. (meer lezen…)
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The “Power Elite” becomes worried
Posted on 24. Jun, 2010 by Christof.
When people like George Soros speak, the world listens. It usually arouses attention on the issues of mega speculation : what is he buying or more importantly, what is he “shorting big time” this time ? Not this time. In fact, the recent interview of Soros in the run-up to the G-20 meeting next weekend is unveiling the thoughts of a powerful man becoming increasingly worried.
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Just in case…
Posted on 21. Jun, 2010 by Christof.
Christof Govaerts
There once was was an English castaway, stuck on a desert island in the Pacific. When by accident a ship discovered the unfortunate man after 20 years, they found him running around naked, only wearing a bowler hat. When asked why he was running around naked, the answer was : “Why not, hardly any one comes around here”. So why the bowler hat then ? “That’s just in case some one should drop by”. (meer lezen…)
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Skinny dipping in the ring of fire
Posted on 17. Jun, 2010 by Christof.
Christof Govaerts
One of the largest Mutual Fund managers in fixed income – Bill Gross of Pimco – has decided to change tactics. And how. In February of this year, Gross in his newsletter warned for vicious debt dynamics in several G-7 countries and labelled them “the ring of fire”. (meer lezen…)
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Dr Doom – Marathon Man
Posted on 10. Jun, 2010 by Christof.
Christof Govaerts
“Is it safe ?” These three words have gone into history as the introduction to the most cruel torture scene ever being put on the big white screen. It comes from “Marathon Man” in which Sir Laurence Olivier – Dr Szell, “the white angel”, a nazi-doctor from a WWII concentration camp – performs some primitive harsh root canal action on Dustin Hoffman. Yesterday, we also went to the dentist and were prepared for the worst. It turned out to be a little bit different. (meer lezen…)
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273° Kelvin – A flock of black swans
Posted on 04. Jun, 2010 by Christof.
Christof Govaerts
“This was not supposed to happen and yet, there it is”. We are now in late spring but as far as markets are concerned, it’s time to put our ice skates back on. We have a strong revival of the credit crisis on our hands, despite all the efforts put into place such as quantitative easing (ECB buying up distressed debt) and the 750 bio eur rescue plan (07/05) in an effort to restore confidence. Apparently, all the measures fail to convince Mr Market. (meer lezen…)