MARKET UPDATE – SEPTEMBER 2014

In This Issue

MARKET

  • Warning sign – top banker who forecast the 2008 crash is worried again.
  • Hacking – Just what we need; another source of financial risk.

 

ECONOMY

  • Wall Street goes green – why is solar booming?

 

GEO-POLITICS

  • Henry Kissinger explains the new world dis-order.

 

 

 

MARKET

 

WARNING SIGN – TOP BANKER WHO FORECAST THE 2008 CRASH IS WORRIED AGAIN

In 2005 Raghuram Rajan told the economic experts meeting at Jackson Hole that a global financial collapse was looming. They ignored his warning as the economy was “booming.”

Mr. Rajan is now the Governor of the Central Bank of India and he is again concerned about major weaknesses in the global financial system. He is concerned that long-term low interest rates, as manipulated by central banks, have distorted our economies and our markets by creating asset bubbles to the point that any attempt to reverse rates will do “substantial amounts of damage.”

As we know, we desperately need higher rates to make safe investments more attractive, but can we stand the pain

 

 

HACKING – JUST WHAT WE NEED; ANOTHER SOURCE OF FINANCIAL RISK

 Greg Medcraft, chairman of the board of the International Organization of Securities Commissions has made a prediction that the next major financial shock – or “black swan event” – will come from cyber space following a succession of attacks on financial players.

Mary Jo White, chairman of the SEC has said that the threats are “extraordinary and of long-term seriousness.”

Financial markets are globally interconnected and dependent and the financial system is only as strong as its’ weakest link. Some 89% of the exchanges surveyed said they viewed cybercrime as a potential systemic risk.

 

 

ECONOMY

 

WALL STREET GOES GREEN – WHY IS SOLAR BOOMING?

The solar energy market has become so successful that it no longer interests the big players like Bank of America, Citigroup, or Goldman Sachs.   It’s gotten too mainstream. There is not enough risk anymore to make “a killing.”

Now that better solar panels, wind turbines, cheaper batteries and bio-fuels have reduced the cost for the mainstream buyer, the next step must be taken by the investment banking world.

They must back new energy investments with big money that will no longer come from the giant players. The word “securitization” is in play again, but this time rather than grouping sub-prime mortgages and auto loans, Wall Street is beginning to package renewable energy programs to sell to individual investors. Is this a good idea? Time and the quality of the energy companies will tell.

 

 

GEO-POLITICS

 

HENRY KISSINGER EXPLAINS THE NEW WORLD DIS-ORDER

Henry Kissinger who served as National Security Advisor and Secretary of State under Presidents Nixon and Ford has written a new book entitled World Order.

Mr. Kissinger’s premise is that the concepts that have underpinned the modern geopolitical era are now in crisis. America’s belief that capitalism and democracy will solve all problems has not worked.

Also, the economic system today has become global while the political structure of the world remains based on the nation state. These two are often at odds and create pressures within nations that cannot be addressed by economic cooperation alone.   He believes that there is a need for effective organizations that address not just short-term needs as is currently the case, but also long-term strategies as to how to best work out these issues and provide balance between economic and political goals.

The problem is, we humans are very poor at making long term plans and sticking to them. We have been, and most likely will be, always at war.

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