The Fed's decision NOT to taper has unwound much of the recent market pressures related to the expected end of monetary easing. The dollar has begun to fall again, the Indian rupee is recovering, and markets have begun to seek higher spreads and the attendant higher risk. It makes one wonder how many times the markets will believe the Fed when it cries wolf.
There continue to be growing signs of a credit bubble manifesting around the globe. In the United States, it appears that credit quality is starting to slip as banks are becoming more friendly to lower credit borrows. In private equity, Blackstone sees an "epic" credit bubble. Real estate in China appears to be frothy. And, with the Federal Reserve presently unable to unwind easing, these bubbles could and should grow in magnitude materially.
Here's a wrap-up of key issues affecting global markets for fundamental investors.
Currencies
- "No Taper Brings Back Talk of a Currency War" (CNBC)
- "India Suffers Fresh Currency Concern" (Financial Times)
- "Indonesia's Rupiah Slides to Fresh Low" (Financial Times)
- China launching a new free trade zone in Shanghai. (China Daily)
Commodities
- Iron ore ship rates rise to 33-month high. (Bloomberg)
- Vale and Fortescue see strong iron ore demand from China. (Reuters)
China’s Direction
- Chinese real estate is untamed. (Bloomberg)
- China's debt service ratio is 39%. (Quartz)
- World Bank says China will reach its GDP target for 2013. (New York Times)
Credit Markets
- Blackstone's Baratta: "We are in the middle of an epic credit bubble." (CNBC)
- US mortgage apps rise as rates ease after no taper. (Reuters)
- US lenders are easing credit standards. (Washington Post)
Derivatives
- "Bond Risk in Asia-Pacific Rises, Credit-Default Swap Prices Show" (Bloomberg)
- Markit's list of the biggest credit movers in CDS market. (Markit, PDF)
Energy
- "Nano Labs Reports Octane Test Results for Nanotech Gasoline" (Wall Street Journal)
- "South Korean Scientists Use E. Coli to Make Gasoline" (Wall Street Journal)
- Israel's major natural gas find is changing geopolitics in the region. (PBS NewsHour, video)
Euro Crisis
- "France Says 'Unprecedented Cuts' in Next Budget" (Global Post)
- "Is Germany Responsible for the Euro Crisis?" (Businessweek)
- "Poll: Will Angela Merkel’s Position on Financial Reform in Europe Soften?" (Enterprising Investor)
Hedge Fund Money
- "Culture and Anticipation Helped Ray Dalio Survive the Financial Crisis" (Institutional Investor)
- Hugh Hendry's commentary for August. (Value Walk)
- Carl Icahn: Apple is a "no-brainer." (Forbes)
Interest Rates and Central Banks
- "Fed: No Taper" (CNN Money)
- "Taper Delay Could Push Stocks and Bonds Higher" (Financial Times)
Japanese Debt and Inflation
- Tax hike raises fear of economic slowdown in Japan. (New York Times)
- Japan economic growth revised higher for second quarter. (BBC)
- Japanese land prices are rising for first time in five years. (Bloomberg)
Stock Market
- Monthly wrap-up of performance of the S&P 500 by T. Rowe Price. (T. Rowe Price)
- "India Shocks Market with Rate Hike" (CNN Money)
US Real Estate Bubble 2.0?
- "Home Price Appreciation Expected to Continue" (Housing Wire)
- Fannie Mae Survey indicates mortgage credit is loosening. (The Mortgage Reports)
- "US Home Prices Climb at Fastest Clip in 7 Years" (Wall Street Journal)
Time Capsule
- What follows in this link is a fascinating article about the solution to the Latin American debt crisis of the 1980s. This article is a close look at the role that Japan (and America) played in sorting through and ultimately resolving the Third World debt problems. (University of Michigan, PDF)
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