There were fears that Britain could follow Greece into a financial crisis after a global finance chief warned of economic “contagion” spreading across Europe.
The head of the International Monetary Fund urged politicians to finalise a bail-out for the debt-laden Mediterranean country, saying that every day lost in resolving the problems risked spreading the impact “far away”.
Dominique Strauss-Kahn’s comments came amid more evidence of Europe’s mounting fiscal problems after Spain’s debt was downgraded – a move recently applied to its under-pressure neighbour Portugal as well as Greece.
On Wednesday, shadow chancellor George Osborne raised the spectre of the crisis affecting the public finances of the UK, which faces dealing with its own £163 billion mountain of public borrowing. (more…)
All traders who last long enough will go through periods of winning and losing streaks.Mathematicians refer to the process as the theory or run known to gamblers as a “streak.”Games of chance such as roulette ,craps and blackjack are predicated that the house has an edge over the player.Trading has a distinct advantage because the trader has the ability to be the house.A mathematical edge is all that is all that is needed by the trader to increase his probability of success.Sound money management advantage begins to work.What happiness in real time trading is that after a series of losing trades the trader will begin to question the system or his ability to execute the system properly.
Tow things are necessary to get though the bad losing times !Belief in your system is very important but it ranks second to the sound money management system.Mediocre trading systems can have positive results with the use of a good money management system.The rule of thumb is to reduce your risk on any trade to 2% of working capital.This should prevent a meltdown but remember trading is about probability not certainty !
Note: The commentary that follows has been taken from Jim Chanos’ speech to a group of investors, on the subject of China’s economy. The video of this speech can be viewed below.
Hedge fund manager Jim Chanos has generated some controversy over the past few months because he has had the temerity to argue that China is experiencing an asset bubble. Skeptics argue that he misunderstands the nature of the Chinese economy.
There are four main parts to his argument:
• GDP drives economic activity.
• Local party bosses have an incentive to game the system
• Real estate speculation
• Overbuilding of industrial and commercial real estate
Let’s take these arguments one by one.
1) GDP drives economic activity
In most industrialized countries, GDP is what Chanos calls a residual: it is the result of economic activity. But in China, GDP growth is seen as sacrosanct, and Beijing sets a GDP growth target every year. Local party bosses act to ensure that they meet this target.
2) Local party bosses have an incentive to game the system
Since GDP growth is explicitly stated as a public policy, local political bosses have an incentive to make sure that they contribute to the country’s efforts to meet the GDP target growth rate. In practice, this means that local municipalities can, for example, meet revenue targets by selling off land to developers. Party bosses have an incentive to sell as much land as possible, regardless of whether doing so creates too much supply.
3) Real estate speculation
One of the main arguments advanced against Chanos’ China thesis is that real estate speculators in China have to have more equity than do their American counterparts. The implication is that China won’t suffer from a meltdown of real estate. But this argument, while possibly correct, misses Chanos’ larger point. Speculators in Beijing buy up multiple apartments, seeing them as a store of value, akin to commodities like gold or palladium.
Implicit in this practice is the notion that there is a greater fool down the line. Treating real estate as a store of value, rather than an investment that produces real or imputed monthly cash flows in the form of rent defies economic logic. (more…)
There were fears that Britain could follow Greece into a financial crisis after a global finance chief warned of economic “contagion” spreading across Europe.