Monday, June 30, 2008

Are we heading for stagflation on a close-to-global scale? - Part IV


And here is the picture!!!!

Are we heading for stagflation on a close-to-global scale? - Part IV

The story continues. Stagflation expectations seem to become more and more widespread and there are clear signs (I would say) that more and more people start realizing that the current troublesome situation, and past excesses, very well may lead us down the unpleasant stagflation route. OK, there is no global stagflation at the moment, and there might never be any, but a couple of countries are actually starting to experience such a plight. I attach some results from my own research and it seems that the likelihood according to that indicator has continued to stay elevated. The level is not as high as earlier this spring though. I don’t put to much weight into the month-to-month fluctuations but the steady elevated level is possibly a worrying sign. I’ll be back (hopefully with “better” news…)

Thursday, June 26, 2008

Indexation!

Yet another credit derivative index is being created by data provider Markit! The new index (called MCDX) will track the creditworthiness of 50 US investment-grade municipal bonds. These bonds have been all over the media recently thanks to the downgrading threat (and actual downgrades last week) to municipal bond insurers such as MBIA and Ambac.

As a keen supporter of the commoditization of the credit market I cannot but applaud this initiative. Of course, it remains to be seen if the liquidity will improve compared to that of the single-name market.

Wednesday, June 18, 2008

Do the opposite of what the sovereign wealth funds do! - Part II

I once suggested that one should shorten the stocks the sovereign wealth funds (SWF) invested in during the credit turmoil. OK, I agree that stock picking like this (albeit shorting) is somewhat of a casino-activity but still; had you shortened Citigroup last month (in the $4bn share issue) you would have made a profit of about 25%! On average the losses have been around -15. In some cases the losses have been close to -60-70%! Now, many SWFs have started to realize that the crisis isn't over and some of them seem to have stopped investing in share issues by US financial institutions. Perhaps the time of SWFs as "living" sell-signals is over? I wonder! The hidden-agenda-problem is still there for instance...

Friday, June 13, 2008

Island, Island, Island..... - Del II

Kolla dagens DI och artikeln om den isländska banekn som ringer in pengar! Vad var det jag sa?!

Thursday, June 12, 2008

Höj räntan - Del V

Fler och fler instämmer nu i min oro om stagflation. Nu senast är det SHB i dagens DI. Kanke vi hade sluppit stagflation om vi höjt räntan mer aggresivt redan i höstas. Vi hade i alla fall haft en lägre inflation.
Jag tror (fortfarande) att räntan kommer stiga mer än de flesta tror. Floating rate notes (obligationer) känns helt klart mer rätt än fixed rate notes (obligationer). och korta penningmarknadsfonder känns helt fel (av flera skäl som jag ej tror jag behöver gå in på).

Wednesday, June 11, 2008

En lekman i Baltikum - Del IV

Från att ha varit en av de snabbast växande ekonomierna i EU under 2007 har Estlands ekonomi krympt med nästan 2% under de första tre månaderna 2008. Det var 10 månader sedan jag var i Tallinn och noterade alla de typiska tecknen på en bubbelekonomi (för många dyra bilar per capita, oerhört dyra bostäder per lönekrona, för många nybyggda köpcentra per capita, och för stort bytesunderskott). Vad gäller bilarna vet jag inget (fast alla de törstiga SUVarna borde falla ordentligt i pris framöver) men både bytesbalansunderskottet och fastighetspriserna är nu på väg ned. I Tallinn sägs priserna på bostadsfastigheter ha fallit omkring 15% det senaste året. Jag tror det kan bli ännu mer, inte minst som valutan kanske tvingas på knä under 2008-2009.

21st century Spanish disease – will stagflation be one of the symptoms?

The Spanish economy expanded by solely 0.3% in the first quarter of 2008. In 2007, the same number was 0.9%, i.e. three times higher. At the same time, inflation was above 4% (4.5% in March and 4.2% in April). These numbers fit well with my concern that stagflation might start in the worst-hit housing crisis countries (US, Spain, Ireland, Baltics…) and then spread to the rest of Europe and Asia.
[Admittedly, if we extrapolate from the (mere) two inflation observations the inflation trend is pointing downwards. I believe this to be purely temporarily, though, and it will be interesting to see the figures for the second quarter.]