LSE: financial markets underestimating costs of climate change

“Coastal real estate in cities like Miami are one type of asset that may be dangerously overvalued, if climate change proceeds as scientists predict.”

MiamiNew research from the London School of Economics estimates that a broad range of global stocks and other financial assets are overvalued because investment managers don’t take the risks of climate change into account.

The LSE research estimates financial assets worldwide are presently overvalued by $2.5 trillion — and, in the worst case, $24 trillion.

Massive climate-related writedowns are not far off in the future, which would mean huge losses for investors who ignore the risks, says Alex Bowen of the Grantham Research Institute on Climate Change at LSE and co-author of the new study, published in Nature Climate Change.  Here is a direct audio link.

 

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Japan shocker: Negative rates spur saving not spending

What!! Negative and zero rates prompt people to save more? Inconceivable!
Here is a direct video link.

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Gross: QE ‘off the deep end’ and intelligent investors know system broken

Refreshingly candid comments in these segments…

Bill Gross, Janus Capital Management fund manager, comments on systemic risk. Here is a direct video link.

Bill Gross, Janus Capital Management fund manager, comments on BOJ policy. Here is a direct video link.

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Former Fed Fisher laments market’s drug addiction

Another former central banker now warning that asset market declines are in order as the QE pump ‘n dump completes.  Poor central bankers, they have made market participants into a pack of mindless crack addicts and now they are annoyed with the insatiable depths of the addiction…Oh, but do keep using a bit longer, he adds…

An interest rate hike will surely cause market pain, but the Federal Reserve should get it over with, former Dallas Fed President Richard Fisher said Wednesday.

“I would be prepared when they move — and I hope they move some time in June — there’ll be a settling in of the market place. There will be a correction. Suck it up. Deal with it. That’s reality,” he told CNBC’s “Squawk on the Street.” Here is a direct video link.

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Snowden, official trailer

As Edward Snowden remains exiled in Russia, a wanted enemy of the US, Hollywood offers another take…

Academy Award®-winning director Oliver Stone, who brought Platoon, Born on the Fourth of July, Wall Street and JFK to the big screen, tackles the most important and fascinating true story of the 21st century. Snowden, the politically-charged, pulse-pounding thriller starring Joseph Gordon-Levitt and Shailene Woodley, reveals the incredible untold personal story of Edward Snowden, the polarizing figure who exposed shocking illegal surveillance activities by the NSA and became one of the most wanted men in the world. He is considered a hero by some, and a traitor by others. No matter which you believe, the epic story of why he did it, who he left behind, and how he pulled it off makes for one of the most compelling films of the year. Here is a direct video link.

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Former BOE head calls for an end of financial alchemy

Interesting way of framing the issues, “it’s not debt” that’s the problem says King in the below CBC interview, “it’s the imbalance between spending and saving”. In other words, central bankers encouraged overspending, under-saving habits with continual easing efforts over the past 20 years, and now the credit monster has turned on us, ravaging world growth and terrifying its architects. They can’t admit their theories were recklessly misguided, but those like King (and Greenspan) who have left office are now trying to warn that the global banking crisis is coming round again.

This reminds of the Bank of England’s 2011 QE impact report that included the below chart outlining their expected economic impact on money supply, inflation, GDP and asset prices (see red line).  They always saw the dramatic spike in asset prices as temporary with full mean reversion thereafter.  They had hoped the economy and banking system would have recovered enough strength to withstand the next financial market shock.  But it hasn’t and leverage and debt have grown much larger in the past 5 years.  It’s the mean reversion phase overdue in asset prices which is haunting the consensus now…

Screen Shot 2016-04-27 at 11.05.41 AMFormer Bank of England governor Mervyn King, who has penned a book, says global banking system must change to avoid another financial catastrophe. Here is a direct video link.

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