Euromoney (May Issue)
Trading in fixed income, currencies and commodities (FICC) is being transformed in a manner that’s benefiting investors and putting the squeeze on many big banks. “The move to electronic trading is accelerating; margins are getting tighter (no sign of oligopolistic pricing here), as competition and transparency grows, and the costs of maintaining a leading tech platform, once built, never go away.”
Tags: Banks, Commodities, Competition, Currencies, Fixed income, Investors, Margins, Oligopolistic pricing, Tech platform, Trading, Transparency
Institutional Investor (April 24)
To strengthen their balance sheets, large banks (including Deutsche Bank, Royal Bank of Scotland, UBS, Morgan Stanley, JPMorgan Chase and Barclays) have been reducing their commodities businesses, mainly through sales to independent trading companies. With these sales “to smaller players, conflicts of interest remain a potential problem” and nobody’s sure whether new problems will accompany this major shift. Given the skinnier balance sheets of the new players, market liquidity could conceivably suffer. In addition, “concerns abound that the underlying problems that have traditionally beset the commodities markets are simply being pushed onto a new and less tightly regulated set of actors.”
Tags: Balance sheets, Banks, Barclays, Commodities, Conflicts of interest, Deutsche Bank, JPMorgan Chase, Liquidity, Morgan Stanley, Regulated, Royal Bank of Scotland, Shift, Trading, UBS
The Economist (March 8)
“Western firms have piled into emerging markets in the past 20 years. Now comes the reckoning.” The Fed’s quantitative easing, an over-exuberant investment cycle, rising local currency prices for commodities, and other factors are undermining the emerging market paradigm. “Plenty of firms and some whole industries need a rethink. The emerging-market rush may end up like a giant version of the first internet boom 15 years ago. The broad thrust was right but some big mistakes were made.”
Tags: Commodities, Currency prices, Emerging markets, Fed, Firms, Industries, Internet boom, Investment, Over-exuberant, Quantitative easing, Rethink
Investment Week (May 14, 2013)
A recent sentiment poll by Bank of America Merrill Lynch shows that worries over the commodity sector are moving to the fore as fears over Europe dissipate. “A quarter of respondents to the Bank of America Merrill Lynch’s monthly poll on manager sentiment said a commodity collapse is the number one tail risk, an increase from 18% in April.” In contrast, respondents identifying “EU sovereigns and banks as the number one tail risk dropped to 29% from 42% in April.”
Tags: Bank of America Merrill Lynch, Banks, Commodities, EU, Fund managers, Sentiment, Sovereigns, Tail risk
The Economist (September 3)
Japan’s not alone in living with an overvalued currency. The commodities “boom has lifted the Australian dollar by more than 43% since the start of 2009” and “pushed up Brazil’s real by even more.” Switzerland escaped this boom, but it’s blessed (or cursed) “with a commodity prized more than iron ore or soyabeans in uncertain times: safety.” As a result the Swiss franc has shot upward. Policymakers in all three countries are concerned, but efforts to weaken their currencies have born little fruit. “Instead of trying to prevent a rise in the currency, countries can, of course, learn to live with it.”
Financial Times (May 6)
In a single trading session, commodities prices came crashing down on Thursday, with silver falling 13%, oil 10% and gold 4%. While the sharp correction was not predicted, a slew of rationale has subsequently been offered to objectively explain the dip. The Financial Times finds most of this reasoning specious, writing “the ease with which we explain price swings – in any direction – suggests that we do not really understand them at all.” Instead, the FT opts for a simpler explanation. “Last week’s slide probably just means that a self-inflated bubble self-deflated a little, in accordance with its own internal mass-psychological dynamics. Put simply, investors took fright.” Trying to explain what caused the fright or predict where it may lead is a fool’s game. Commodities may go up or they may go down. We cannot know.In a single trading session, commodities prices came crashing down on Thursday, with silver falling 13%, oil 10% and gold 4%. While the sharp correction was not predicted, a slew of rationale has subsequently been offered to objectively explain the dip. The Financial Times finds most of this reasoning specious, writing “the ease with which we explain price swings – in any direction – suggests that we do not really understand them at all.” Instead, the FT opts for a simpler explanation. “Last week’s slide probably just means that a self-inflated bubble self-deflated a little, in accordance with its own internal mass-psychological dynamics. Put simply, investors took fright.” Trying to explain what caused the fright or predict where it may lead is a fool’s game. Commodities may go up or they may go down. We cannot know.
Tags: Commodities, Gold, Oil, Price Swings, Silver
