Turning Points: Real Estate, Emerging Markets, and Politics
While the world is seemingly distracted with the loss of Malaysian Airlines Flight 730, the big news this month of course is Russia’s invasion and annexation of Crimea. The Fed continues with its taper, and Yellen even gave us some indication that the Fed may start increasing rates late in 2014.
Emerging markets around the world are feeling shaky as the stimulus pumped into those economies is finally starting to wear a little thin. China’s real estate market is sputtering, Brazil’s real estate market is way beyond affordable, and interest rates in these markets are rising as they try to contain leaking capital flows. Many of these markets are slowly digesting this change in the status quo.
As far as developed markets go, Japan’s Abenomics is looking a little sickly, Europe’s recovery is looking feeble, and the United States is looking like the nicest house in a crummy neighborhood. This is indeed a year of change in the status quo.
Here’s a wrap-up of key issues affecting global markets for fundamental investors.
Currencies
- US and Japan monetary policy are hitting Asia hard. (Financial Times)
- Emerging market currency crises are really banking crises. (Forbes)
- A Putin adviser warns Moscow might be forced to drop the dollar as a reserve currency. (FX Street)
Commodities
- Copper posts biggest decline since 2011 on China demand concern.(Bloomberg)
- Iron ore slumps after China trade numbers disappoint. (Financial Times, tiered subscription)
- Experts foresee a drop in farmland returns by 20%. (AgWeb)
China’s Direction
- As China’s economy slows, the pain hits home. (New York Times)
- China faces a year of defaults. (Bloomberg, video)
- “Beijing Tests Tools to Tackle Bad Debt” (Wall Street Journal, tiered subscription)
Credit Markets
- Emerging markets debt wall is meeting up with higher rates. (Financial Times)
- The Fed has squeezed all the toothpaste out of the tube. Junk bonds face the double whammy of rising Treasury bond yields and widening credit spreads. (Bloomberg)
- China’s credit markets are under pressure. (Sober Look)
- Credit markets are getting frothy again. (The Economist)
Derivatives
- Tera Exchange announced it’s first bitcoin derivative. (Reuters)
- Obama appoints Massad to run CFTC. (USA Today)
Energy
- Oil demand won’t peak for decades. (Financial Times)
- Oil demand revised upward on stronger data. (Oil & Gas Journal)
- US to sell strategic oil reserves. (RT)
Euro Crisis
- European volatility the most since 2011 debt crisis. (Bloomberg)
Hedge Fund Money
- Griffin boosts stake in Arch Coal. (Insider Monkey)
- Einhorn ups his bet on Greece’s Alpha Bank. (CNBC)
- Icahn may sue Ackman’s Pershing Square. (Value Walk)
Interest Rates and Central Banks
- Why were some emerging market countries hit harder by taper talk? (Wall Street Journal)
- Fed seen hiking rates in second half of 2015. (Reuters)
Japanese Debt and Inflation
- Japan’s trade deficit greater than analyst expectations as tax hike looms. (Reuters)
- Blow for Abenomics as Japan economy grows less than expected in 4q 2013. (The Telegraph)
Stock Market
- Why the stock market isn’t a bubble. (Seeking Alpha)
- Bubble fears grow as US stocks break records. (Financial Times)
Follow the Bubble
- Osborne told to curb UK housing aid to prevent bubble. (Bloomberg)
- House prices surpass bubble peaks in some Southland/Los Angeles zips. (Los Angeles Times)
- Real estate boom in Brazil, a bubble could soon burst. (Brazil Investment Guide)
Time Capsule
- Given Russia’s abrupt invasion and annexation of Crimea last week, it is informative to look at Putin’s invasion of Georgia back in 2008 to compare and contrast. It appears that if there are no meaningful consequences this time around, then the world can expect more of the same from Putin. (The Washington Post)
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.
