Emerging markets used to be known as markets you couldn’t emerge from in an emergency. History is littered with examples of financial disasters in young fast-growing countries, from the Argentinian default of the 1890s to the Asian crisis of the mid-1990s.
By orchestrating a massive appreciation of the yen in the mid 1980s, the US condemned Japan to decades of stagnation and ended the challenge to its own economic hegemony. Effectively Japan was forced to commit financial hara-kiri.
The Japanese are doing it again. The Koreans prefer to do it when nobody’s watching. The Chinese are at it brazenly and, like everything else they do, on an enormous scale. The Swiss tried it, without much success.
The Democratic Party of Japan is about to make a momentous choice. Next week’s contest for the party leadership also decides who holds the office of prime minister. The contrast between the two candidates could not be starker.
The Greeks have got a lot to answer for. As well as roiling the markets and torpedoing the euro, they have inflicted serious damage on the debate about the global crisis and its remedies.
There are not many financial assets that are priced higher today than before the Lehman shock in September 2008. Two that have done investors proud are the yen and gold bullion.
Imagine you are starring in the financial equivalent of the “Life On Mars” TV show. You wake up one morning to find you have time-travelled back to the early nineteen nineties. The Berlin Wall has just fallen. The triumph of capitalism is unleashing a tsunami of globalization as billions of people join the market economy as workers and consumers.
John Veals is the villainous hedge fund manager in Sebastian Faulks’ best-selling credit-crunch novel “A Day In December.” He is a man with no friends, no culture, no interest in anything other than making money. His nefarious machinations lead to the failure of a major British bank, enabling him to make huge profits from his short positions. Other characters in the novel include Gabriel Northwood, a virtuous lawyer, and Roger Malpasse, a retired banker of the old school.
A leadership change in Japan passes almost unnoticed these days, but the ascension of Naoto Kan to the role of prime minister could have a long-lasting impact on the strategic landscape.
Di-worsification is what you do when you invest in mediocre assets for a mediocre reason – for example, because a statistical model has told you they reduce risk. Thanks to the boom in commodities over the past decade, they have become a favoured choice for di-worsifying institutions everywhere. The profusion of ETFs, funds, indices, and brokerage coverage has made them unprecedentedly easy to access for individuals too. However the long-term performance of commodities is pathetic, and there is little reason to believe that “this time is different.”