Tag Archives: bubbles

New bubbles from misguided monetary policy

Have any lessons been learned following the Great Financial Crisis? Around the world, it looks like new bubbles are growing. Certainly, the crisis showed that central banks and politicians can move decisively on the threat of economic collapse. But the sequel has been years of bad policy; propping up banks, bad loans and unsustainable growth. […]

Continue reading

8 years on, has Lehman cut global bank risks?

The Great Financial Crisis still casts a shadow in the industry, eight years on. The fear remains that it might not be the main event, but simply advance warning of something bigger. After two decades of accumulated bank leverage and a few years of irresponsible lending, the remedy has mainly been sticking plasters. Regulation has […]

Continue reading

Why are commodities over-represented in indices?

Do investors have an outdate view of commodities? Far from helping to diversify portfolios, or representing a tangible way to benefit from economic growth, commodities have become volatile financial plays. A misguided view of the nature of these assets has resulted in them being over-represented in indices. Indeed, many passive investors may be surprised to […]

Continue reading

Illusory liquidity and other risks from misguided central bank policy

Does liquidity matter? Not, it seems, to regulators and central banks. Little thought is being given to the global systemic risk created by today‚Äôs liquidity illusion. In a world awash with money, trading is actually drying up, with little depth in many markets. Entering positions is easy, but the exit doors could prove surprisingly narrow. […]

Continue reading

Should we worry about China?

Investors struggle with bubbles. Sure, we know they eventually burst, but lessons are quickly forgotten. Now China is a puzzle: it might look like a bubble, but what to do? Uncontrolled Yen devaluation could break China’s Renminbi peg and trigger more global deflation. But, timing and is hard to assess. Analysts and the press pay […]

Continue reading

Deflation an unimagined world for investors

Experience drives what we recognise and forecast, but deflation is unfamiliar territory. Investors base analysis on what they know and understand; periods of stable or rising prices. But that is not the pattern now; Europe’s inflation outlook is steadily being revised down, but getting little attention. Even if the deflation risk is recognised, the problem […]

Continue reading

Risks increasing in Emerging Markets – investors should review exposure

Emerging markets have become a bigger part of most global portfolios. Even private investors have followed institutional funds seeking more rapid growth in developing economies. But, despite the higher risks, the stronger growth of these economies has not translated into better investment performance. Over the first half of 2013, emerging markets are down 10% on […]

Continue reading

Market bubbles everywhere; sorting them out

A failure to identify bubbles has been a recurring weakness of investor psychology. Most are unprepared for the crashes that eventually follow booms. Investors were caught by surprise with technology in 2000 and, more recently, with sub-prime. The risks have usually been missed by most, including regulators. But now bubbles are being spotted everywhere. Behavioural […]

Continue reading