Finance Trends Letter

John Authers provides an interesting summary of first quarter stock market returns in today's FT print Short View column . It turns out that just about everything was down in US dollar terms, save one hedge fund strategy area: "Anyone who made money in stocks during the first quarter has some tough questions to answer. The sell-off was so wide that you could only have done so by taking extravagant risks - unless you bet stocks would fall. International equities fell almost equally once currency is taken into account; the S&P 500 fell 9.5 per cent and, in dollar terms, the MSCI EAFE index of non-US developed markets fell 8.8 per cent. MSCI's emerging markets index fell 11 per cent. " There was, as previously noted, one bright spot for hedge fund investors mentioned further down in the column. "But there was much money to be made by anyone making bold bets between asset classes, the terrain of macro hedge funds. Early figures from Hedge Fund Research of Chica...

Well, it didn't take long for the rumors of a new Federal Reserve-led regulatory regime to blossom into a full blown policy announcement. Today, Treasury Secretary Hank Paulson announced plans for the an overhaul of the nation's financial regulatory structure. In what MSNBC.com calls the "most sweeping changes since the Great Depression" , the plan set forth by the Bush administration would enlarge the regulatory role of the Federal Reserve and the SEC and create a "superagency" to oversee financial markets. Here's more from the LA Times : "Treasury Secretary Henry Paulson today unveiled a 218-page blueprint for regulatory reform that would represent the largest federal overhaul since the Great Depression. The blueprint, widely previewed before the secretary's remarks, would give the Federal Reserve more authority to oversee the markets and would create one superagency to oversee both investor protection and market stability, assuming many of t...

Glad to see that we made it to the end of another week. Now, sit back and relax. Hope you enjoy our latest edition of, "Features of the week" . 1. Whitney Tilson joins FT.com for "View from the Markets". 2. Wall Street firms cut 34,000 jobs , most since 2001 dot-com bust. 3. Jim Rogers sees investment opportunities in Taiwan, and a looming disaster in the Federal Reserve's recent efforts to prop up the markets and save the investment banks. 4. We're living in a bailout nation, says The Big Picture. 5. "Bailouts 101" . Minyanville's Mr. Practical, via Bear Mountain Bull. 6. Mugabe's days are numbered regardless of vote , mining industry bets. 7. Famine, farm prices, and aid . Economist reports on rising food prices and resulting social unrest. 8. Globe and Mail on "G-d's Sugar Daddy", investor John Templeton . 9. Book review: The Complete Turtle Trader . M.A. Nystrom. 10. Lew Rockwell details the folly of, "The War on ...

Are US stock markets set to go higher? While the current financial environment is dominated by a wave of bad news related to the credit crisis and weaker corporate profits in the tech and financial sectors, recent action in the leading Dow Jones averages may be painting a different picture for US shares: one of strength. Dow Theory Letters writer Richard Russell has recently made repeated references to the surprising strength in both the Dow Jones Industrial Average and the Dow Transports since the time of their January lows. While the DJIA has been something of a laggard between the two, the Industrials have remained stubbornly above their January lows (Edit: this is true only in terms of intraday lows reached on January 22, and not in terms of closing prices . My apologies.). Meanwhile, the Dow Transports continue to move higher, having recently broken through the 200-day moving average on the daily chart, and above their old February highs. Are we witnessing a brief bear market...

So now it seems the central banks are angry that they can't get banks to lend, in spite of the Federal Reserve's recent rate cuts and newfangled lending facilities. For some strange reason (like, I don't know, fear of insolvency?) banks and other financial institutions don't want to make a bunch of new loans in the midst of a steadily worsening credit crunch. Here's how the FT put it: "Hoarding by banks stokes fear over crisis" . "Central banks' efforts to ease strains in the money markets are failing to stop financial institutions from hoarding cash, stoking fears that the recent respite in equity markets may not signal the end of the credit crisis. Banks' borrowing costs - a sign of their willingness to lend to each other - in the US, eurozone and the UK rose again even after the Federal Reserve's unprecedented activity in lending to retail and investment banks against weaker than usual collateral and similar action in Europe." I se...

Are the Federal Reserve's recent efforts to stop investment bank failures, while providing credit to non-commercial banks, a sign of its future involvement on Wall Street? Writers at the Financial Times and Barron's believe it is. While doing a bit of weekend reading, I came across the following article in the weekend edition (March 22/March 23 2008) of the Financial Times. Entitled, "Wall St detects shift in regulatory power" , the piece outlined the possibility of a new "unified regulatory regime" that would involve closer Fed supervision over Wall Street investment banks: "With the credit crunch worsening and public money at stake, the Fed and the Treasury are taking a hands-on approach to the oversight of Wall Street banks, whose primary regulator for the past 70 years has been the Securities and Exchange Commission. Senior bankers say that officials from the Treasury and the Fed are in constant contact with Wall Street firms, checking on their liqu...

Welcome to this Friday's edition of, "Features of the week" . 1. The financial system: What went wrong . Economist report. 2. "Ask the oil producers to rescue Wall Street" . FT Comment piece notes that, "banks' appetite for risk-taking has vanished", and that the recent crisis could signal, "the beginning of a massive global credit crunch". A key paragraph explains the recent shift in risk appetites: "Banks want to shrink risk exposure, not maintain or expand it. Liquidity support by the Fed is an invitation to borrow from the central bank for on-lending to others – that is, to expand balance sheets. On the contrary, the banks and brokers want to contract their balance sheets." For more on this, see the following item. 3. "Can't get a loan? You're not alone" . A follow-up to our recent post, "Money is cheap and unavailable" , that explains why credit is suddenly so tight. 4. FT's John Authers on t...