As Europe’s banks undergo so-called stress tests, an old adage comes to mind. Every failed trade becomes an investment. Every failed investment becomes a strategic holding.
Apart from specifying the nature of the stress, what is being assumed in each stress scenario, what probabilities have been assigned to sovereign default, etc etc, the valuation of assets [...]

Governments are torn between fiscal austerity and stimulating economic growth. Since credit driven growth ceased in 2008 private sector economic growth has been muted. Consumption has been hampered by the need to restore household balance sheets. Such restoration is likely to overshoot as the lessons of 2008 linger, so savings rates are likely to be [...]

 
In economic policy there is a difference of view between the US and the rest of the world. As Japan’s largest trading partner the US is especially empathic to the deflation scenario that has plagued Japan since 1990. Therefore, US monetary policy is likely to err on the side of being too loose rather than [...]

On Saturday, 19 June, China signalled the end of its currency peg which fixed the CNY at 6.83 to the USD and said it would gradually make the its currency more flexible. The CNY appreciated to 6.80 on Monday.
A stronger CNY it was hoped would:

Address the trade imbalances between the US and China.
Address inflationary pressures [...]

With the acceleration of globalization in the last 20 years up until 2008 sector risk has risen relative to country risk. The classic example is in Europe where a stock like RWE starts trading less like a German stock and more like a European utility stock. With the credit crisis of 2008 came a number [...]

Prior to the adoption of the EUR, European equity markets were segmented by country. Since the adoption of the EUR, however, European equity markets became segmented by sector, as the funding costs between countries converged. With the recent rise of country risk and the divergence of funding costs, Europe is trading by country segmentation again. [...]

 
In a simple world, we eat what we kill today, we consumer what we produce today. With trade in its simplest form, barter, we are able to specialize and be more efficient, focusing our talents and gifts on what we have an advantage in. The invention of money, whether gold or fiat currency, allowed us [...]

20% of Nestles business is Europe, 30% in the US, the rest are in emerging markets. 34% of Givaudan’s business in in Europe, 26% is in the US, the rest are in emerging markets. 46% of Swatch’s business in Asia. 30% of LVMH’s business is in emerging markets and Japan. 20% of Carrefour’s business is [...]

The role of ratings agencies has been placed under intense scrutiny in the wake of the 2008 credit crisis.
Clearly the ratings agencies have failed in one glaring respect. The creditworthiness of a borrower is tied not only to its solvency but to its ability to generate cash flow to repay, as well as its ability [...]

Year to date the top performing strategies have been Event Driven, Distress and Fixed Income Arb. The weakest strategies were Global Macro, CTAs, and Market Neutral. Over a 12 month period Convertible Arbitrage continues its strong run, followed by Distress and Emerging Markets. The weakest strategies year to date were also the weakest over a [...]