Charlie Rose interviews Paul Krugman

Charlie Rose talks to Paul Krugman, in this interview we see an opinion that is contrary to the previous interview with Pete Peterson in which higher debt levels are encouraged. This is a fascinating opportunity to look at two sides of financial thought, that of the practitioner and that of the academic.

Peterson is totally adverse to defecits whereas Krugman is happy to see them baloon in order to get the Keynesian reaction in the market that he believes will come about, so now we have a grand scale and real life experiment, something that hasn’t really existed since the 30’s, that of seeing what comes about as a result of massive bailout plans when markets collapse, my hope lies with Krugman but by heart is with Peterson.

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When will bonds be available online?

Typically the bond market is something that institutional investors, sovereign funds, and the very wealthy tend to invest in. Take for instance Dolmen Securities ‘Bond of the week’ (which is CRH this week), when I enquired about minimum order sizes I was told it was €50,000.00 which is fine if you are a bank but the majority of private investors would not have that kind of money to put into a bond – or at least not at that price tag or it would affect their diversification. Dolmen are a great house btw, I like their analysis, and in general what they do. However, CRH are trying to raise a bond in a market where literally everybody is trying to raise funds or roll over debt.

The competition is high, the US Treasury and HM Treasury in the UK are leading the way, that’s before we even get into municipal bonds and corporates. So what can be done? The Treasury in the US have alwasy taken the view …

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The tipping point?

Today I am taking out the crystal ball, and asking it if these final weeks of December 2008 and the start of January 09′ are the tipping point of the greatest bear market since the 1930’s. The recession is huge, there has been billions in wealth wiped out, we passed the one trillion mark last month, the total is expected to be over 1.5 trillion USD in total.

The question is, how low will the path of this bear market go? [note: this is about the stock market and not the Irish property market] Central banks around the world are chopping rates, forming bailout packages and doing all possible to get the economy back on track. Today we will consider some of the reasons that we may be actually seeing the start of a tipping point.

I believe the trend will be that we saw what amounted to the greatest financial crash in modern history in nominal terms. The fallout in Q4 only escaped the ‘crash’ moniker (but ‘worldwide financial crisis’ doesn’t exactly have a …

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