Wednesday, December 09, 2009

Black Swans in 2010?

I've been looking for an excuse to use this picture for the past month --- this pair of swans took up residence in Carrier Bay just outside of Clayton in early October before moving on to warmer water.

A Black Swan event is something unforeseen that shocks the financial or political system (the name originates from the discovery of black swans in Australia which were assumed to be impossible but later found to be quite real). Think about the Bear Stearns/Lehman collapses.

Well, as we are coasting into the end of the remarkable year that has been 2009 we're getting some weird market action around the world in many small markets. Dubai is down about 43% in the past 2 weeks as their credit crisis has intensified. Greece, the Baltics, Spain and Ireland are all in deep trouble. I think there is a possibility that 2010 could be the year of "sovereign defaults". This is on everyone's radar because of the problems in Dubai, but I don't think people have placed very large odds a major nation defaulting. If a G-20 nation defaulted it would be akin to Lehman or Bear Stearns going under. I'd say it's under a 10% chance right now but it's something to watch.

Tall Paul Volcker clearly had the quote of the day:

"I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence,” said Mr Volcker, who ran the Fed from 1979 to 1987."

As bankers demanded that new regulation should not stifle innovation, a clearly irritated Mr Volcker said that the biggest innovation in the industry over the past 20 years had been the cash machine.


Citibank is moving toward repaying it's TARP borrowings, not with earnings or recovered assets, no that would be hard, they're doing it the old fashioned 2006 way -- by issuing STOCK!!

Weird fact of the day: Amazon is worth more than Target and Costco combined.


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