What to watch: Fiscal cliff, housing starts, GDP, retail sales
By Malcolm Morrison, The Canadian Press - Sunday, December 16, 2012 - 0 Comments
TORONTO – Talks aimed at avoiding the so-called “fiscal cliff” will continue to cast a shadow over trading this week as markets begin to wind down for the Christmas-New Year’s holidays.
But traders will have some key economic data to serve as a possible distraction, including the latest reading on Canadian economic growth and retail sales. And in the U.S., investors will look to see if the strong runup in housing starts carried on into November and whether worries about going over the fiscal cliff have taken a toll on consumer confidence.
Going over the cliff involves the automatic imposition of hundreds of billions of dollars in spending cuts and tax increases that could plunge the world’s largest economy back into recession and depress economies around the world.
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Food price hikes: Why I blame investors
By Andrew Hepburn - Monday, September 24, 2012 at 11:19 AM - 0 Comments
Andrew Hepburn is a former hedge fund researcher. He writes on commodities, the stock market and the financial industry–but without the jargon.
Once again, food prices are soaring. For the third time in five years, the world seems on the verge of a crisis. Prices for corn, soybeans and wheat have all skyrocketed on international markets, rising 21 per cent, 41 per cent and 31 per cent respectively since the start of the year.
The key question is: Why?
The standard answer is that there are a plethora of factors making food more expensive worldwide. The International Monetary Fund lists them in the following order, which is fairly typical:
• Strong food demand from emerging economies, reflecting stronger per capita income growth, accounts for much of the increase in consumption. Although demand growth has been high for some time now, the recent sustained period of high global growth contributed to depleting global inventories, particularly of grains.
• Rising biofuel production adds to the demand for corn and rapeseeds oil, in particular, spilling over to other foods through demand and crop substitution effects. Almost half the increase in consumption of major food crops in 2007 was related to biofuels, mostly because of corn-based ethanol production in the US; and the new biofuel mandates in the US and the EU that favor domestic production will continue to put pressure on prices.
(…)
• The policy responses in some countries are exacerbating the problem: (i) Some major exporting countries have introduced export taxes, export bans, or other restrictions on exports of agricultural products. (ii) Some importing countries are not allowing full pass-through of international prices into domestic prices (less than half a sample of 43 developing and emerging market countries allowed for full pass through in 2007).
• Drought conditions in major wheat-producing countries (e.g., Australia and Ukraine), higher input costs (animal feed, energy, and fertilizer), and restrictive trade policies in major net exporters of key food staples such as rice have also contributed.
• Financial factors: the depreciating US$ increases purchasing power of commodity users outside of the dollar area; falling policy interest rates in some major currencies reduce inventory holding costs and induce shifts from money market instruments to higher-yielding assets such as commodity-indexed funds.
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The LIBOR scandal: Why manipulating prices is easier in the financial industry
By Andrew Hepburn - Friday, July 13, 2012 at 9:00 AM - 0 Comments
Barclays bank former Chief Executive Bob Diamond. (Luke MacGregor/Reuters)
Andrew Hepburn is a former hedge fund researcher. He writes on commodities, the stock market and the financial industry–but without the jargon.
Is there an epidemic of price-fixing and market manipulation? Recent headlines certainly raise the question.
On June 28, Britain’s Barclays Bank agreed to pay over $450 million to settle allegations that it attempted to manipulate the London Inter-Bank Offered Rate (LIBOR), a crucial global interest rate. LIBOR is (supposedly) the rate at which banks can borrow funds from other banks. It is a key measure of stress in financial markets: When banks start getting nervous about lending to each other (therefore charging one another higher interest rates), it’s a sure sign we’re all in trouble. LIBOR is used as a benchmark for interest rates the world over and affects everything from student loans to mortgage payments. And LIBOR is not an ordinary rate: It is calculated based on the daily submissions of up to 18 global banks, depending on the currency in question (rates are published for 10 different currencies).
Barclays attempted to manipulate LIBOR both to give a false impression of the bank’s health and also to benefit its trading positions. It did not do so alone: traders coordinated their activities with other banks to ensure successful manipulations. For example, let’s say Barclays had accumulated bets that interest rates would rise. Submitting artificially high estimates of how much it cost the bank to borrow funds would tend to push the published LIBOR rate higher, thus benefitting its trading positions. To do so, however, it would need to collude with other banks, because the highest and lowest submissions are automatically excluded in the calculation of LIBOR.
The LIBOR scandal by itself is shocking, but there are other recent examples of outrageous (alleged) manipulation. On July 2, a former trader for Glencore International, the world’s largest commodities company, sued rival Louis Dreyfus Commodities for allegedly causing an artificial spike in the price of cotton. The alleged scam cost Glencore over $300 million and the trader in question was fired.
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Michael Douglas is telling traders that greed is not good
By Chris Sorensen - Thursday, March 15, 2012 at 6:40 PM - 0 Comments
Unfortunately, Gordon Gekko’s message was more compelling
20th Century Fox Film Corp./Everett Collection
Though a villain, Michael Douglas’s portrayal of Gordon Gekko in the 1987 movie Wall Street came to epitomize the “look” of downtown Manhattan: slicked hair, suspenders and bankers’ collars. And judging by the 2008 financial crisis, so did his catchphrase “greed is good.” But now the FBI is hoping Douglas’s star power will deter real-life crooks. In a new public service announcement, Douglas reminds us that Gekko was a fictional character and warns that insider trading is a serious crime. In fact, it has become a huge problem in an age of hedge funds, which make money through short-term trades and are always looking for an edge. And last year’s conviction and 11-year sentence of Galleon Group co-founder Raj Rajaratnam showed that authorities are taking the problem seriously. Douglas’s message is the right one, but unfortunately for the FBI, it’s also a lot less compelling than the film.
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Are you worried by the downturn in global financial markets?
By macleans.ca - Wednesday, August 3, 2011 at 12:51 AM - 39 Comments
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Not a campaign event, we hope
By John Geddes - Wednesday, October 8, 2008 at 8:43 PM - 6 Comments
Finance Minister Jim Flaherty will talk to the media tomorrow morning at 8 a.m. on Parliament Hill about process surrounding meetings with the International Monetary Fund and G7 countries. Something to do with the spot of bother on the stock exchanges. And the banks. And the jobs outlook.
