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Archive for October, 2015

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Posted On 30  Oct  2015  

Is the commodity Bear Market at an end?

30/10/2015   One of the key lessons that the financial crisis has taught us is that managers and CEOs of our financial institutions usually don’t have a clue about their own businesses and should always be treated with scepticism. This is even truer of the people who run natural resource companies and those who produce materials. They have no idea what future demand is going to look like and how much they should be investing today to meet that demand. Having spent like madmen at the peak of the last commodity cycle, taking supply out of the market has become very tricky. Just as banks became dependent on trading, repackaging derivative and asset backed securities, the miners piled billions into new capacities. It all came unstuck when China decided to change its business model. The ways in which the financial crisis and the resulting troubles in the US and Europe

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Posted On 30  Oct  2015  

Deutsche Bank – the need to go back to its roots

30/10/2015 Many years ago I use to work at Deutsche Bank Capital Markets. Most of the Managing Directors had been shipped from Frankfurt. Their command of the English language was poor and they had little idea about the workings of the London financial markets. But in addition to those staid seniors, I had the privilege of working with some very intelligent Germans. The insights I had into their rather conservative ways has shaped my own thinking over the years. There was some comfort in working for an institution which owned significant stakes in corporate Germany and appeared steady. Driven from a strong German client base Deutsche Bank was a powerful player in global markets. Deutsche Bank was never at the forefront of anything new. They allowed the American banks to test the waters. But when DB started to participate in a given market, it was a force to be reckoned

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Posted On 29  Oct  2015  

Questioning the perceived wisdom of markets

29/10/2015 It is the established wisdom that provided industries are not subsidised by taxpayer money, companies can sell their products in global markets without being accused of dumping. In recent days the Chinese are being accused of dumping cheap steel into the global markets. Apparently there is some proof that the State lenders have been subsidizing the steel producers with cheap loans or other forms of credits. It is common for governments to use all types of incentives to attract foreign investments. These are not materially different from subsidies. Subsidies can take many forms. One can argue that many oil and gas producing nations are dumping. Saudi Arabia is certainly a case in point. They have a free resource in the form of oil reserves. They have decided to dump the commodity in order to take greater market share at the expense of current income. The United States has given

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Posted On 09  Oct  2015  

What could be the inflation outlook for 2016 and beyond?

Fed up with a 2% inflation target? Most developed country central banks are targeting a fixed rate of inflation in their dynamic and evolving global economies. One can argue that this is an unattainable goal. Inflation may stay low for longer and then shoot up substantially beyond their target. But is it even a worthy goal? And what is the inflation outlook for different countries? What CPI measures CPI is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. The basket constituents are revised from time to time. Each country has its own basket of goods and services. In addition there are inflation indexes for regions such as the Pan European