Skip to main content

Market Capitulation

Markets capitulate when all policy options run out, and it becomes clear that a definite new policy direction must be undertaken. We are getting quite close to that point in the current market volatility. As various commentators take the economic temperature after their return from some agreeable foreign holiday, it is becoming clear that we are close to a major failure of confidence. The inter-bank market is beginning to freeze again, and the implications are plain: banks are finding it ever more difficult to finance themselves, and governments and central banks are running out of options to support them.

Clearly governments are finding it more and more difficult to get their sums to add up, as the nascent economic recovery stalls. However, perhaps paradoxically, the failure of confidence may end up reducing uncertainty: it will be clear that the crisis continues, and that therefore the policy prescriptions will be clearer too. In other words, I think we are on course for a classic market capitulation.

Equity markets, after the August debacle, are indeed looking relatively attractive, yet there is still the lurking problem of the banks: buying the market at the moment leaves you exposed to what are very likely to be further losses in that sector. So, selective purchases of good quality non financials? That is certainly worth considering- it all depends on the collateral damage from the next fall.

Market capitulation is tricky to manage, even if you expect it to happen.


Popular posts from this blog

Trump and Brexit are the Pearl Harbor and the Fall of Singapore in Russia's Hybrid war against the West.

In December 1941, Imperial Japan launched a surprise attack on the United States at Pearl Harbor. After the subsequent declaration of war, within three days, the Japanese had sunk the British warships, HMS Prince of Wales and HMS Repulse, and the rapid Japanese attack led to the surrender of Hong Kong on Christmas Day 1941 and the fall of Singapore only two months after Pearl Harbor. These were the opening blows in the long war of the Pacific that cost over 30,000,000 lives and was only ended with the detonations above Hiroshima and Nagasaki.

"History doesn't often repeat itself, but it rhymes" is an aphorism attributed to Mark Twain, and in a way it seems quite appropriate when we survey the current scene. 

In 1941, Imperial Japan, knowing its own weakness, chose a non-conventional form of war, the surprise attack. Since the end of his first Presidential term, Vladimir Putin, knowing Russia's weakness, has also chosen non-conventional ways to promote his domestic powe…

Cicero ReDux

By Special Request of Baroness Scott and Mark Valladares... Cicero's Songs returns: bigger, longer and uncut.
October 1st marked the half way point of the Estonian Presidency of the European Union.  Perhaps for many people such an anniversary is of passing interest at best.  Yet the conduct of the Estonian Presidency is reinforcing just how forward looking and innovative the most northerly of the Baltic States has become.
Estonia is a country that wants to live in the future, and with its openness and innovation, that future seems a lot closer than almost anywhere else in Europe
It is not that Estonia does not “do” the past: the picturesque cobbled streets of old Tallinn have tourist crowds a-plenty enjoying the mediaeval architecture in an Indian summer of sunshine and blue skies.  The real point is that Estonia refuses to be a prisoner of its past. Lennart Meri, Estonia’s President in the 1990s- who spent years of his childhood in Siberia- once told me that the country had to conc…

The American National nightmare becomes a global nightmare

It is a basic contention of this blog that Donald J Trump is not fit for office.

A crooked real estate developer with a dubious past and highly questionable finances. he has systematically lied his way into financial or other advantage. His personal qualities include vulgarity, sexual assault allegations and fraudulent statements on almost every subject. 

He lost the popular vote by nearly three million votes.

He has, of course, been under criminal investigation practically since before he took the oath of office. The indictment of some of closest advisers is just the beginning. His track record suggests that in due course there is no action he will not take, whether illegal or unconstitutional in order to derail his own inevitable impeachment and the indictments that must surely follow the successful investigation of Robert Mueller into his connections with Russia.

However, all of that is a matter for the American people. 

It is also a matter for the American people that Trump is cheating…