Investment Note

Market Insights 2012


Gridlock : Echoes of 2008

The US political stand-off will weigh on sentiment. The S&P 500 index fell over 3.5% in two trading sessions in response to Obama’s election victory. Primarily, this is due to concern that the stand-off between Democrats and Republicans threatens to send the US into another recession if a compromise cannot be reached over a looming round of tax hikes and spending cuts – the now famous fiscal cliff.

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All to play for!

The fight for the White House is closer than many think. What started as an armchair run-in to the White House for President Obama, rapidly changed into a close race as the polls on 9th October put Mitt Romney ahead 49% to 46% after the first debate in which Romney’s strong debating performance appeared to catch Obama napping.  The poll was a small one, taken nationally and gave no indication of the view in the crucial swing states.

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Come back on St. Legers Day

St. Legers Day fell on 15th September this year and is the day on when those of a superstitious nature may supposedly return with confidence.  Anyone who’s been “away” since 1st May could hardly fail to notice the FTSE 100 chart climbing merrily upwards and accelerating through 5,900.  To be fair, this is only a modest 1.6% gain from where the index closed on the 1st May, but is still a significant recovery from the lows in June when there seemed no escape from the insoluble crisis in the eurozone, not to mention all the other concerns casting a gloomy cloud over market sentiment.

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Don’t panic!

It’s far from over but the time to panic was some time ago. If, like us, you enjoy reading the investment opinions of market participants ranging from the sublime to the ridiculous then you’ll know 2012 is already a vintage year.  Readers of the financial media are offered up a daily smorgasbord of views about how to get out of the eurozone crisis or how to tweak George Osborne’s plan A into a B, C or D.

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Three little PIIGS

This little piggy went to Merkel, this little piggy stayed in Rome

This little piggy had a huge beef, this little piggy just loaned

And this little piggy was a naughty little piggy

And went “oui oui oui” all the way home…

(Found written on the back of a newspaper by a member of the TAM team who should get out more.)

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Mind the gap!

“You know, this deal makes things worse not better. A hundred billion is put up for the Spanish banking system, and 20% per cent of that money has to come from Italy. And under the deal the Italians have to lend to the Spanish banks at 3% per cent but to get that money they have to borrow on the markets at 7% per cent. It’s genius isn’t it? It really is brilliant.” – Nigel Farage, UKIP, European Parliament, Strasbourg 13th June 2012

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Politicians staring into the abyss

“Man looks in the abyss, there's nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss.” Lou Mannheim (Bud Fox’s boss) played by Hal Holbrook in the film Wall Street (1987). In weekend elections, France has elected a new president, François Hollande, and Greece, well, hasn’t elected much at all.  On the face of it, the common factor is that both are the result of a rising wave of anti-incumbent backlash driven by voter’s resistance to austerity measures right across Europe.

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We are all in a crisis!

The rain in Spain falls mainly on equities! “todos estamos en una crisis”; we are all in a crisis! - The popular, if slightly less catchy, Spanish media version of “We’re all in this together”

Perhaps the world was getting a little too complacent but speculation that Spain is heading towards a bail-out has re-surfaced.  There isn’t much one can say about the ensuing sell-off in equities that hasn’t been written before.

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The Myth of Sisyphus

Pushing the Rock of Consensus up the Hill - the Myth of Sisyphus

“Man's futile search for meaning, unity, and clarity in the face of an unintelligible world devoid of God and eternal truths or values.”

One might be forgiven for thinking that there’s nothing to get too excited about in stock markets judging by the newspapers over the last week or so where upheavals in Russia, Iran and Syria have captured the headlines.

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Are the Permabears Starting to Defrost?

Are the Permabears Starting to Defrost?

The last three years have been beset with issues of gravitas.  A banking System that neared collapse in 2008 and the ensuing economic decline pushed the financial world to the brink.  It is unsurprising that against this background many believed that this was Armageddon for the investment industry – and so it nearly was!

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MMT

Théorie souvent ignorée. Le Bureau International du Travail (BIT) vient de publier un rapport qui donne à réfléchir sur la crise croissante dans les marchés mondiaux du travail. Nous avons commencé l'année avec 1,1 milliard de personnes - soit une personne sur trois dans la population active mondiale - au chômage, ou parmi les 900,000,000 de travailleurs qui gagnent moins de 2 dollars américains par jour.

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Minsky

Hypothèses de l’instabilité financière.Nous parlons souvent de Keynes mais s’il y a un économiste qui est devenu populaire après la crise financière actuelle, c’est bien Minsky. Paul Krugman, editorialiste du New York Times et Nobel d’économie a recommandé de relire les travaux de l’illustre économiste et Martin Wolf, du Financial Times s’est exclamé : Minsky avait raison!

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All That Glistens Is Not Gold

The collapse in the price of gold has been as dramatic as the rise. Why is that happening when Bonds made new highs in December? Anyone watching the gloomy New Year messages from leading politicians would no doubt have gathered the impression that the investment world must still be in panic mode following the entirely predictable failure of the European summit...

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