The fall of crypto exchange FTX is a brutal lesson in fear and greed. Not the fear of losing but the fear of missing out or FOMO. FTX founder Sam Bankman-Fried (SBM) said this on the podcast “Odd Lots” describing how venture capitalists pick investments (highlighted by Jason Zweig in his WSJ column the “Intelligent Investor”): You get a bizarre f—ing process that does not look like the paragon of efficient markets that you might expect. [Venture capitalists] see what all their friends are chattering about, and their friends keep talking about this company…and they start FOMOing [feeling the … [Read more...]
Gold, Silver, and Currencies
Young Research & Publishing has been providing research and insights on precious metals and currency markets to institutional investors, corporate financial officers, business owners, and individual investors for over four decades. Richard C. Young started Young Research & Publishing in the 70s to publish the authoritative Young's World Money Forecast, a 50-page monthly investment report on the precious metals and currency markets. Today, our research on gold, silver, and currencies is geared toward investors in or nearing retirement who are looking to preserve and protect wealth.
CRYPTO CONTAGION: Will Exchange Troubles Cause a Panic?
Cryptocurrency exchange FTX has been forced to seek a rescue from its rival, Binance, in order to avoid collapse. Joshua Oliver reports in the Financial Times: Contagion fears are sweeping across the crypto industry as market participants race to determine who is exposed to Sam Bankman-Fried’s secretive digital asset trading company Alameda Research. Alameda, a proprietary trader, has been a low-profile part of the entrepreneur’s crypto empire, but is at the centre of the storm that has engulfed his crypto exchange FTX. Market worries over Alameda’s financial health accelerated, … [Read more...]
Is Currency Hedging a Future Systemic Risk?
In the Financial Times, Antonio Foglia makes the case that currency hedging as being done today could pose significant risks to the world's financial system. Foglia concludes: Over the past year, investors have suffered substantial losses as the price of bonds fell worldwide as interest rates have risen. And since the value of their dollar bond portfolios fell, foreign investors had to adjust their hedges down, buying back dollars and selling their home currencies. This is an activity usually carried out by back offices which at least on a quarterly basis adjust the size of their currency … [Read more...]
How Long Can Japan Maintain Yield Curve Control?
Mohamed El-Erian suggests that Japan's policy of yield curve control will inevitably be ended. So how long can it last? He writes in the Financial Times: After occupying a central role in international trade and currency developments in the 1980s and 1990s, Japan’s influence on the global economy and markets gradually declined. “What happens in Japan stays in Japan” became the mantra for many. But this could change if the Japanese authorities do not prepare well for what increasingly looks like an inevitable exit from its “yield curve control” policy. YCC is a monetary policy regime … [Read more...]
Could America’s Markets Melt Down Like the UK’s?
UK Prime Minister Liz Truss resigned today, largely in the wake of a market meltdown in UK bonds (gilts) that followed the unveiling of her government's tax and spending plan. You've read about the effects that plan had on markets and especially on UK pension funds here, here, and here. Now, analysts are considering whether or not a similar meltdown could happen in the United States. Jeanna Smialek, Jim Tankersley, and Joe Rennison report for the NY Times: The Bank of England had to swoop in to buy bonds and soothe markets after the British government released a fiscal spending plan that … [Read more...]
Pensions Snagged by LDIs Rescued by Bank of England
UK pension funds that were engineering their way around the Bank of England's super low-interest rates have now had to be saved by, you guessed it, the Bank of England, from its rapidly increasing interest rates. The Bank of England’s gilt bailout is based on guilt for pensions that were recklessly exposed to LDIs. Such action promotes more of the same behavior if the BOE is always there as a safety net. The pro-growth supply-side tax cuts are being blamed, but that’s misplaced. A mirror might be a good tool for the elites. The Wall Street Journal's Paul Hannon reports: The central bank … [Read more...]
TRUST BUSTING: Binance Hit by Hack Demoralizes Crypto Owners
Hackers stole $570 million in tokens from Binance, the world's largest crypto exchange on Friday. The theft is another blow to the trust of crypto owners. Philip Stafford and Scott Chipolina report in the Financial Times: Hackers have stolen around $570mn in tokens from Binance, in a rare blow to the world’s biggest crypto exchange and another dent to the troubled digital assets industry struggling to regain trust after a collapse in prices. Binance initially estimated on Friday that tokens worth about $100mn to $110mn had been taken, pausing the operation of the affected blockchain for … [Read more...]
American Multinationals Face Dollar Domination Reckoning
American companies that generate a lot of their revenues overseas are facing uncertainty over the dollar's surge. The Financial Times reports: A surging dollar creates good headlines for Americans looking to travel or send money abroad. But for US companies that generate a big chunk of their earnings overseas, the greenback’s gain has become a serious pain. The US Dollar Index, which tracks the buck against six other important currencies, is at a near 20-year high. It is up 19 per cent since the start of the year and continues rising. The euro has slipped below parity against the dollar … [Read more...]
UK PLAN: Spend More, Collect Less
New Prime Minister of the UK, Liz Truss, and her team have announced a new plan to cut taxes and spend more. Max Colchester, Anna Hirtenstein, and David Luhnow report for The Wall Street Journal: The British government unveiled the country’s biggest tax cuts since the early 1970s, the boldest move by an industrialized country to kick-start growth at a time when stubbornly high inflation stalks the global economy. Financial markets reacted negatively, prompting a slide in the pound and a big jump in government bond yields, underscoring the difficult choices facing governments as they face a … [Read more...]
Japan Steadies Wobbling Yen
Japan has intervened in its currency market for the first time since 1998 to stablilize the yen. Kana Inagaki and Leo Lewis report for the Financial Times: Japan intervened to strengthen the yen for the first time since the late 1990s on Thursday, after the currency tumbled to a 24-year low on pledges by the central bank to stick with its ultra-loose policy. Masato Kanda, the country’s top currency official, said the government had “taken decisive action” to address what it warned was a “rapid and one-sided” move in the foreign exchange market. It was the first time Japan had sold dollars … [Read more...]
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