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Author: Alexander Gloy

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  • Euro-zone: How not to manage a crisis

    Alexander Gloy

    Germany’s handling of the Euro crisis has been anything but stellar. It all begins in October 2009, when the newly elected Greek government reveals the 2009 budget deficit to be 12.5% of GDP, far above the 3.7% predicted only 5 months earlier. Markets barely notice. On December 8, rating agency Fitch strips Greece off its…

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  • The Fed has run out of options – is it bluffing?

    Alexander Gloy

    Tuesday we have US mid-term elections, and Tuesday-Wednesday the FOMC (Federal Open Market Committee) meeting. Policy announcement on Wednesday 2:15 EST. So far, the Fed has increased its balance sheet by $1,500bn (from $750bn to $2,300bn) by purchasing various assets (MBS – mortgage backed securities, GSE debt – government sponsored entities and treasury debt). Federal…

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  • Irish, Portuguese government bond yields up sharply – the end of moral hazard?

    Alexander Gloy

    Irish 10 year government bond yields on Monday reached a new high of 7.1% (compared to a May-crisis peak of below 6%). Portuguese yields shot up to 6.10% (+0.15). All this on the back of the Franco-German proposal to “allow” bondholders to suffer losses in a future debt crisis (read: debt restructuring a.k.a. default). Suddenly…

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  • Are politicians signaling imminent debt restructuring?

    Alexander Gloy

    Now things get interesting. If you listen carefully, politicians and central bankers suddenly seem to signal an imminent debt restructuring for Greece. Everybody except the rating agencies seem to get the memo. According to a Sunday newspaper, Greek Deputy Prime Minister Pangalos uttered the fatal sentences: “Debt exists to be restructured. We may pursue it…

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  • Trading olives and feta cheese for submarines is a losing proposition

    Alexander Gloy

    Greek 10-year government bond yields, after having graced 8.73% merely a good week ago, are back with a vengeance (9.67%). Where is the insatiable demand for Greek bonds from China? On October 22, Eurostat published revised Euro zone government deficit and debt figures for 2009. One country was missing – Greece: “Eurostat is not publishing…

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  • Why the Fed is fighting deflation tooth and nail

    Alexander Gloy

    Economics class is in session! Let’s have a look on the impact of inflation and deflation on companies. We are focusing on the balance sheet only: Impact of inflation and deflation on balance sheets. Source: Lighthouse Investment Management Inflation means prices go up, so the value of the asset side of the balance sheet increases. Liabilities remain the…

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  • Portfolio managers asleep at the wheel – again?

    Alexander Gloy

    What would you do if you expected a stock market decline, but had to be invested in stocks no matter what (i.e. if you are a fund manager of a mutual fund – you can’t have more than 5% in cash)? You would shift your portfolio out of cyclical (sensitive to economic cycles, i.e. makers…

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  • Presenting the LIMTI

    Alexander Gloy

    Presenting the LIMTI  (Lighthouse Investment Management Timing Index) Apart from fundamental considerations markets move in waves (prevailing bearishness or bullishness). As supply is often constrained (number of shares, bonds, currencies, gold etc) the change in investor sentiment has to happen via the price. Traditional sentiment polls might be misleading, as many portfolio managers are constrained…

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  • Bank of America under pressure

    Alexander Gloy

    Will Bank of America (BAC) get into difficulties because of a) legal problems to foreclose on delinquent homeowners and b) being forced to repurchase soured mortgage-backed securities? A mortgage is a publicly registered lien on the house. The attached mortgage note is a debt instrument that can be, like a check, endorsed to others. This…

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  • Gold takes a breather – US Mint to sell some Eagles

    Alexander Gloy

    First serious setback in the gold price since quite some time (from a record-high $1,363 per ounce to $1,333 within a few hours): Gold price ($/oz) intraday 2010-10-07. Souce: DailyFX.com Coincidently, AngloGold Ashanti announced it has completed the unwinding of its hedge book (gold mining companies used to sell gold forward at fixed prices to…

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