Wednesday, June 27, 2007
Huge currency misalignments are leading to enormous current account imbalances. The Turkish and New Zealand current account deficits, for instance,
Concerns that the credit cycle may be turning down are growing. But so far, the impact on stock markets has been fairly limited. Investors take comfort in three misguided beliefs. They believe that equities are not expensive and that there is no sign of any diminution in the flood of global "liquidity". Furthermore, they believe that if the worst happens, the US Federal Reserve will come to the rescue.