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Times Business - World Markets At Crunch Point

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Quite bearish headline lead in today's Times Business section about the coming liquidity crunch!


Here are few samples from the article:

The earth moved in global financial markets at the end of last week. After March’s sharp tremors across the world’s stock markets, this time it was the turn of the bond markets to shake up investors.

There now seems little doubt that we are approaching a watershed at which global financial conditions, which have been remarkably benign for a protracted period, are shifting to a new and more unpredictable dynamic – one with far-reaching repercussions.

Yet far from being arcane or irrelevant, last week’s moves are almost certainly the precursors of a global sea-change in financial markets that will wipe out the key assumptions underpinning dozens of high-risk investment strategies, and undercut the financial logic behind at least some of the present wave of highly leveraged corporate mergers.

It was not merely the scale and speed of the shift in bond markets on Thursday and Friday that hinted at its significance, but also the shattering of an historic trend that embodied the recent, prolonged era of abundant capital and low volatility that has proved so fertile for markets, investors, speculators, and corporate players.

The past global glut of cheap capital created by low official interest rates flooded into every corner of financial markets. As prices rose, and returns were depressed, the much-vaunted “search for yield” encouraged moves into ever riskier assets and strategies in a hunt for enhanced performance.

Much of this is, if not quite over, now coming to an end. And the adjustment to a new era will bring casualties as speculators are wrong-footed and miscalculations are unmasked.

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Derivatives are weapons of mass financial destruction and with Ford and GMC struggling to shift cars and being big players in this market I can see the $400tr derivatives market making the USA deficit seem insignificant.

Gambling on something you don’t own with borrowed more or profit yet to be banked is a recipe for disaster if ever I saw one

Does anyone know what happened to RBS last week or was what Mrs X said to Mrs Y more important to the news presenters.

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