re: Don't get greedy........................
Here's a couple of quick tidbits out of the news of late:
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Asset prices to decline in the world: Greenspan
SEOUL, April 12 (Xinhua) -- Former U.S. Federal Reserve Chairman Alan Greenspan warned on Wednesday a global satiation in liquidity would bring a fall in asset prices.
The former Federal Reserve chairman made the remarks while addressing a conference in Seoul sponsored by the Financial Times newspaper via satellite from the United States.
Greenspan, who stepped down from the powerful post earlier this year, said the market value of assets worldwide had been rising faster than nominal gross domestic product globally due to a fall in real long-term interest rates over the years and a significant fall in real equity premiums.
"A good part of this expansion is a direct function of the decline in real equity premiums," Greenspan said. "That cannot go on indefinitely."
He also predicted asset prices will begin to drop, but did not specify when that would happen.
"I am reasonably certain that what we are looking at today is an abnormal situation," he added.
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business.timesonline.co.uk
Be prepared for a crisis, EU regulators are told
BY GRAHAM SEARJEANT, FINANCIAL EDITOR
FINANCIAL regulators in all EU countries are to be asked today to prepare for the collapse of a big hedge fund or a similar sudden financial shock. EU finance ministers and central bankers, meeting in Vienna, were told that the collapse of a hedge fund could now destabilise European financial systems as well as the financial markets.
They have equally raised anxieties about the rapid growth of private equity. They fear that this could unravel if one of the key sources of funds or markets for selling on companies dries up. Officials also argue that many regulators do not understand the risks involved in the £10,000 billion market in credit derivatives, which are traded privately between banks rather than on public exchanges.
Yields on 10-year US Treasuries have risen above 5% for the first time since 2002 on heavy selling by big institutions, sending tremors through the US mortgage and corporate credit markets.
Analysts said the surge in bond yields may have been accelerated by panic selling of Treasuries by hedge funds and US investment banks.
The US 10-year bond is the key instrument used to price borrowing in the American economy, with ripple effects through the global system.
Yields have risen sharply by 0.6 percentage points so far this year, reaching 5.036% in New York last night.
The powerful upward draft has lifted German, French and other eurozone bonds in step, driving up the cost of borrowing on the capital markets.
Analysts said the spike in yields is chiefly caused by an exodus of Asian investors, who hold a huge chunk of the US national debt.
"We've started seeing a lot of money being repatriated into the Japanese equities market," said Matthew Smith, a manager at Smith Affiliated Capital. J-apanese holdings of foreign bonds has fallen by $70bn so far this year, according to data from Japan's fin-ance ministry.
Strong US retail sales in March and growing fears that high energy and commodity costs will soon start feeding into core inflation has also weighed on the bond markets.
Michael Taylor, senior economist at Lombard Street Research, said this year's sudden rise in 10-year yields risked tipping the US economy into a downturn.
"This could be the catalyst for a sharp correction in property prices and wean consumers off their credit binge," he said.
The cost of the average 30-year mortgage in the US has risen from 5.5pc last summer to 6.43pc this week. The housing boom is now the mainstay of the US economy. Last year Americans withdrew the equivalent of 6pc of GDP in home equity from their houses, spending most of it on daily bills, holidays and consumption.
Long-term yields remained near historic lows during 2005 despite a string of rate increases by the US Federal Reserve. The muted response of the bond markets dulled the impact of Fed tightening, prompting ex-chairman Alan Greenspan to talk of a "conundrum". "The conundrum just died," said Paul McCulley, an economist at the world's biggest bond trading company Pimco.
Joachim Fels, an economist at Morgan Stanley, said the conundrum had been caused by the easy money policies in Japan and Europe, creating a flood of global liquidity that continued to overrun the US credit markets long after the Fed began raising rates.
He said synchronised tightening across the world was now leading to bond sell-offs everywhere, with "nasty implications" for risky assets. "I think it is time to hunker down," he said. The bank is predicting a 7.9pc fall in European stock markets over the next six months.
JP Morgan Chase is forecasting a 13% fall in Amer-ica's S&P 500 stock index, and 12% fall in the FTSE 100.
"Our big concern is the combination of rising bond yields, sustained high energy prices and weakness in US housing," said Abhijit Chakrabortti, the global equity chief.
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re: "Don't be greedy."
One door closes -- and another opens.
The undercurrent in Davos was the global financial imbalances.
Central Bankers have still been meeting behind closed doors concerning the derivatives crisis.
We've seen Central Bankers from Japan to the US -- throw a reflation (read inflation) party unlike any other.
The markets are now sitting atop a historic misallocation of capital...with a degree of "off the books" leverage - via derivatives...that even keeps fiat paper-hanging Central Bankers awake at night.
And for those who have ridden the commodity boom.. the amount of leverage in commodities is staggering.
A 50% collapse in Natural Gas in just a matter of weeks ?
C'Mon...
Tic' Toc`
You won't find the right answers...until you start asking the right questions.
1998esque-Deja Vu all over again ?
More on "not being greedy"....and "asking the right questions" -- later'
That's all for now folks ~
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