Good morning from Paul & Graham! Today's report is now finished. I'm shortly speaking to Beeks Financial Cloud (LON:BKS) (I hold) so will publish the written summary of that interview in tomorrow's report.
It's going to be a crazy day today, as I (Paul) am recording two CEO interviews! Plus the usual report, so my head will probably be spinning on its axis by the end of the day! Still, it's all very interesting.
Brief macro/markets thoughts from Paul
Plummeting markets create opportunities for our bulging watch lists. Although as mentioned in my most recent couple of podcasts, I'm becoming increasingly worried at signs of stress in the global financial system (these problems are certainly not confined to the UK, as the parochial/clueless UK media would have us believe) - e.g. look at double digit inflation in some European countries (17% in Holland, 16% in Poland), plus the Euro is now below parity against the dollar, and showing little signs of recovering.
Another sovereign debt crisis looks to be brewing, with Italian 10-year Govt bond yields now up to 4.8% (higher than the UK), against 2.4% for Germany. So I think the next big crisis could be strain on the single currency, which was never going to work in my opinion, as the countries in it are far too diverse, and there are now massive imbalances, e.g. the ECB propping things up by buying Italian debt on a gigantic scale (something like 500bn Euros, I believe). What happens when that stops?
It seems obvious to me that central banks (esp the Fed, and the BoE) have made major policy errors, in ending QE too abruptly, and allowing bond yields to rise far too quickly. That's triggered plunges in bond, equity, and property values, so that's bound to cause major problems. Unless they change course, I think we're possibly heading into a major financial crisis, I'm sorry to say.
The early signs are already there - this pensions derivatives fiasco, clumsy handling of it by the Bank of England which I think urgently needs a more switched-on Governor, open-ended funds beginning to "gate", i.e. suspend redemptions (e.g. Columbia Threadneedle open-ended UK property funds). Close your eyes, and it almost feels like 2007 again, when the credit crunch was beginning to build up, and forced liquidations of assets began.
I don't like the…
