Reuters blog archive
from Anatole Kaletsky:
Oscar Wilde described marriage as the triumph of hope over experience. In finance and geopolitics, by contrast, experience must always prevail over hope, and realism over wishful thinking.
A grim case in point is the confrontation between Russia and the West in Ukraine. What makes this conflict so dangerous is that U.S. and EU policy seems to be motivated entirely by hope and wishful thinking. Hope that Russian President Vladimir Putin will “see sense” -- or at least be deterred by the threat of sanctions to Russia’s economic interests and the personal wealth of his oligarch friends. Wishful thinking about “democracy and freedom” inevitably overcoming dictatorship and military bullying.
Investors and businesses cannot afford to be so sentimental. Though we should never forget Nathan Rothschild’s advice at the battle of Waterloo -- “buy on the sound of gunfire” -- the market response to this week’s events in Ukraine makes sense only if we believe that Russia has won.
The alternative to acquiescence in the Russian annexation of Crimea would be for the Ukrainian government to try to fight back, either by military means or by pressuring the Russian minority in the rest of the country. That, in turn, would almost inevitably imply a descent into Yugoslav-style civil war -- with the strong possibility of sucking in Poland, the North Atlantic Treaty Organization and the United States.
Opinions vary right now as to whether we're seeing the return of bubble-like qualities across a broad swath of the market or just in select names (which really isn't a bubble, then, bubeleh, just overvalued stocks).
With the Ukraine issue subsiding a bit, investors had a chance to sink their teeth back into the market, including a number of areas that seemed ripe for buying, like small-cap names, which saw a very strong 2.6 percent increase on Tuesday that outdid the larger-cap stocks.
from Expert Zone:
(Any opinions expressed here are those of the author and not of Thomson Reuters)
The week started on a sombre note but with institutional activity picking up, the Nifty closed with gains of 1.97 percent at 6276 despite a mid-week trading holiday. Political activity also gained momentum with 11 parties coming together to form a Third Front to oppose both national parties.
The Election Commission may announce election dates in the coming week -- the code of conduct coming in will halt any policy decisions.
United States markets have hit a relatively calm period. Where problems in Ukraine and Russia are giving a modest safety bid to treasuries, the U.S. stock market continues its climb after a better-than-expected earnings season, though concerns remain over the weather's impact on some recent weak economic data.
The more interesting action is taking place in the world of bitcoin, where the biggest exchange Mt. Gox, filed for bankruptcy after several months of dwindling as the most influential exchange in this fledgling market.
By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
No one has yet been accused of a crime in the foreign exchange market, but there is a lot of talk of disturbing practices, including dealing in personal accounts against clients’ interests. This could be a scandal as big as the fixing of interbank lending rates. However, the probes seem unlikely to address the hardest questions about how the whole currency business works.
Monday was the worst day in the stock market since June. And while you can go through all the machinations and point out that the market is still down just 5 to 6 percent from its record high - and you'd be right - that doesn't really translate to a strong environment at this time.
Not when the selloff continues through to overseas markets, with the Nikkei down 4 percent, Hong Kong losing more than 2 percent and ending at the day's lows, and Europe down as well. So far the US market is experiencing something of a dead-cat bounce, but we’ll see how long that can last.
The parade of earnings releases continues Thursday, with bellwethers ranging from McDonald's to Microsoft on tap. Discount airline Southwest was out before the bell, and Starbucks, Intuitive Surgical and Federated Investors are all due after the closing bell.
The technology industry's equivalent of a boring utility, Microsoft is more of a candidate for lively activity this time around, as the software giant looks for a new chief executive, a task many investors had expected to be done by now. The company's sales of its Windows product are expected to have been weak in the fourth quarter and its new Xbox also left some people nonplussed.
The week opened with the earnings of a number of high-profile corporate names that disappointed investors. Most notable of these was International Business Machines, which really ought to be called International Buyback Machines, given Big Blue's penchant for driving earnings through financial engineering rather than, y'know, the real kind of engineering.
IBM fell short on revenue estimates, saw shrinking demand in part because of reduced government spending (China's government, not the US), yet exceeded net income estimates because of - what else - a lower tax rate, now at 11 percent vs 14 pct a year ago.
The first couple of weeks of the year have caused some investors to examine the hyper-bullishness that closed out 2013 - the most successful year for equity-market investing in more than 15 years. Still, a few weeks of softness this year didn't stop the S&P 500 from hitting a new record Wednesday, however briefly.
Short of the perma-bears, who only see the market as a walking disaster, some notes of caution have rung from those who expect stocks to continue higher, yet struggle through what's been a mixed start to earnings season.
The market's meandering performance so far in January has brought out a bit of the worrying (the first down 5 days of the year since 2005, and all the other various "indicators" that point to things not working out in 2014, even though it's early for this sort of thing).
But the December jobs figure, however weather-addled, holds investors back a bit and adds to the bit of malaise of late because investors are staring at the priciest market in about seven years (trailing P/E ratio is near 15, per Thomson Reuters I/B/E/S) as earnings start to come down the pike. Of course, the S&P is only down 0.3 percent so far this month, so it's not a full-blown selloff.