The New Abnormal: Inflation Expectations & the Stock Market

There’s a rumor going around that the crowd’s worried about inflation. Tim Bond of Odey Asset Management speaks for many of this persuasion when he writes in the Financial Times that “the rise in inflation has been the main factor responsible for the sharp slowdown in global growth since the start of the year.” Normally, […]

Profiting From the Confusion Over Europe

Mrs. OldProf “delicately” suggests that my work might be improved via brevity.  OK. Here is the Executive Summary of what you need to know. When it comes to Europe, there is a pundit and media checklist for any proposed solution: Does it account for the certain Greek default? How many dominoes (other defaulting countries) are […]

Is Bank of America at Risk of a Death Spiral?

Bloomberg’s Jonathan Weil took a look at Bank of America’s stock price, which is trading at less than half of the Charlotte bank’s book value, and discussed whether the bank is at risk of a serious crisis. If a levered financial firm’s stock trades at a severe discount from book value, it is not attractive […]

Weighing the Week Ahead: Assessing Risk

Most investors do not know how to measure risk.  Usually they do not even try. Risk is difficult to define and more difficult to measure.  Risk is often confused with volatility, which is easy to measure. Most investors do not understand that volatility measures variation in both directions.  They care about the downside, but are […]

Eurozone Leaders Fiddling as Rome Starts to Burn?

Worries about the Eurozone have heretofore been depicted as afflicting the periphery. But even though Italy is geographically on the margin, if the crisis engulfs it, it irreparably damages the core. And that time seems to be upon us. European leaders have managed to muscle their way through an existential crisis with eleventh hour patch-up […]

Dubai Debt Pile in 2012

The year 2012 will be a crucial year for Dubai Inc. as a number of significant debt matures in the year. Analysts expect the emirate to service these maturities, but they expect external support. Here’s a look at Dubai’s options. 2012 is going to be a major year for the emirate of Dubai as it […]

Why a Downgrade of Italian Sovereign Debt Is Increasingly Likely

There are at least four reasons why a downgrade of rating/outlook of the Italian sovereign debt by the main rating agencies is becoming increasingly likely, some home-made, some imported. 1.      The municipal elections have weakened the government and, most importantly, the “pro-fiscal-discipline” faction within it: I discuss this point here . 2.      In late April, […]

Breaking News! QEII Is Not Ending!

The “End of QE II” story has turned into the biggest source of market misperception in decades.  I watch and read financial news constantly.  Each day goes by with no one correcting the many factual errors on this subject. The QE II matter is probably the most important market issue, so getting it right should […]

How Innocuous Is a Treasury Default?

Steven Englander, Global Head of G-10 FX strategy for Citi is not very sanguine about a Treasury default, especially as it pertains to foreign holders of Treasurys. From an email today (not online): We argue below that the impact of a debt ceiling breach may be larger and more permanent on the dollar than on […]