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Market Insights

Markets Return from Summer Holidays to a World of Volatility! 02/9/08 at 08.57
Good Morning! As market participants return from the traditional summer holidays, they do so to a volatile and confusing back drop. The events of the summer have proven to be significant both in their own right and in their effect on financial trading. Traditionally, desks during the summer months are manned by juniors as the dealers proper are on vacation. This gives rise to large swings in some markets as liquidity is an important factor. The summer of 2008 was no exception, b Read more

Score Update - Lions : 1, Christians : 0! 16/7/08 at 11.17
Good Morning!Chairman Bernanke’s testimony before Congress yesterday gave little hope for an early resolution to market turmoil. In fact, Bernanke at least tacitly agreed with our headline from yesterday in his opening statements. To paraphrase the chairman admitted that risks to growth had grown substantially, whilst there is a simultaneous danger of intensified inflation.This is an almost impossible situation for the Fed. From a monetary policy standpoint, no matter w Read more

Fed Loses Ability to Control the Crisis! 15/7/08 at 09.19
Good Morning!Looking at the screens this morning and reading in reading the news wires, it is abundantly clear that markets are losing confidence in US officials ability to control the current financial crisis.The dollar is under siege everywhere on the foreign exchanges, gold is higher again as is crude oil, world equity futures are sharply lower and flight to quality sovereign debt trades abound. Interestingly one of the main barometers of risk appetite, the carry trade Read more

Is Paulson Wellington or Is He Napoleon! 14/7/08 at 09.31
Good Morning!As we discussed on Friday, the US Treasury has come to the “rescue” of Fannie Mae and Freddie Mac!The package which is to be tabled before Congress during the coming week is significant, not only in its immediate demeanor but also in its longer term repercussions. A sketch of the bail out is characterized in brief by the following. The Treasury will be able to purchase an unlimited equity stake in the GSE’s, which changes an implicit guarantee to explic Read more

GSE’s Are Too “Important” to Fail! 11/7/08 at 09.20
The trouble surrounding the GSE’s (Government Sponsored Enterprises) in the form of Fannie Mae and Freddie Mac have hit the headlines in recent days and yesterday were the subject of official presentations before Congress.Their primary purpose is to make funding more readily available for agriculture, home financing and in the case of Sallie Mae, student loans. For many years they have been bastions of security, carrying the implied full faith and credit of the US Government. The s Read more

Traders Run Around Stirring Up Apathy! 09/7/08 at 09.08
Good Morning!Ho Hum….  The more things change, the more they remain the same.With the summer doldrums well and truly upon us, the screens this morning are looking suspiciously like yesterday’s. What, even the events in the Middle East can’t seem to get things going in a meaningful way. The news overnight that Iran has test fired a medium range missile capable of reaching Israel should have done something to shake us out of current ranges. Alas, this was not the cas Read more

Volatility Abounds in a Thin Summer Market! 08/7/08 at 09.21
Good Morning!With juniors manning the trading desks during the summer months as most  “real” dealers are on vacation, it is unsurprising to see whippy volatile swings in all major markets. This has been exacerbated by the events of the last six months and continued confusing posturing by government officials.Global bonds have suddenly caught a bid as ECB indicates that last week’s rate hike was likely a one off occurrence. It is truly amazing how markets that were Read more

The Fed’s Cowardice is Rewarded with Financial Asset Price Mark Downs! 27/6/08 at 09.40
Good Morning!Yesterday, in response to the Federal Reserve’s decision to nothing with rates, Wall Street tumbled by 360 points and the USD lost further ground against foreign currencies world wide. The reaction to an abominable posturing by policy setters was somewhat predictable. This morning the bloodletting continues with commodities prices once again soaring to new highs in the form of crude oil closing in on $142 per barrel. Gold, the traditional store of wealth in Read more

As Suspected, Fed Had Not the Courage! 26/6/08 at 09.24
Good Morning!In our commentary yesterday we argued that the proper course of action by the Fed was to begin the rate rise scenario in the face of fairly substantial pricing pressures. We also stated that while this was the most prudent course, that it was unlikely that Bernanke and the FOMC would have the courage to do so. We hit it “bang on”!Yesterday the Federal Reserve opted for no change in monetary policy with 9 of 10 voting members supporting the dec Read more

Bernanke Maintains First Strike Initiative! 25/6/08 at 09.09
Good Morning!When playing with ballistic missiles in thermo-nuclear war, First Strike Initiative refers to the ability of one side to make a pre-emptive launch against the enemy for reasons of self preservation. Today after a two day meeting the Fed will announce its decision on interest rates and hence it’s near term focus on the relative importance of growth versus inflation.Market wisdom, such as it is, is pricing in no movement in rates at this meeting with a probab Read more


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