Tight Coupling, Decoupling and Risk – So What?

In Richard Bookstaber’s A Demon of Our Own Design he starts things off with a brief analysis on economic and financial market risk. His conclusions are that we’ve made quite a bit of progress at removing much of the risk from economic cycles, i.e. the pain is much less severe with each new downturn.

Oil Demagoguery Delayed

It’s a sad week for the usual demagogues in the US congress (sorry for the redundancy), as global oil companies are reporting lousy earnings. I’m sure oil execs were on the docket for demonizing—all sorts of anti-capitalist screeds planned—as our stalwart leaders mugged for the camera and showed compassion and outrage for the “little guy.”

Here’s an example of what we likely will miss on our telly next week: Cut to close up of typical lawyer congress person who has never held a real job in the private sector or met a payroll: “How dare you nasty global oil companies employ hundreds of thousands of people and risk billions of dollars in private capital in the most inhospitable places across the globe, then turn around and power our economies with your product and then profit from it—it is an outrage. It is downright obscene.” And I’m sure all types of diatribes utilizing the new PC-word of the year “green,” would have ensued.

The Sentiment Switch and Chinese stock market crash!

I noticed the Chinese stock market fell 5% last night—at least that’s what’s been reported by Bloomberg and others; I actually didn’t notice it really. Was it JR’s Currency Currents of yesterday talking of China coming “unhinged” that did the trick? Doubtful, but his views are part of that interconnected and complex hierarchical web we call sentiment.

We’ve been talking about China for a while now, as you know. We see China through a skeptical lens. And though we’d love to say—yes, we called it right on the button (assuming China does come unhinged; still a big assumption), we can’t.

Emerging markets soaring…overshoot?

Emerging markets continue to fly. Many for good reason I suspect. The iShares MSCI Emerging Stock Index has rebounded 50% from its low back in November last year.

However, emerging markets tend to move in unison, driven together by the key global macro rationales of liquidity, risk appetite, and commodities demand. But not all emerging markets are alike.