2001年11月10日，美国《财富》发表了《巴菲特谈股市》这篇文章，文中巴菲特重申了股市整体表现长期来说与美国经济整体增长性相关，长期来说，过度高估（Overpricing）或过度低估（Underpricing）的股价肯定会回归于其内在价值。
在该文中，股神以翔实的历史数据解释说明了1899年—1998年的100年间美国股市整体走势与GNP走势完全相背离的现象。股神的实证研究证明，美国股市长期平均年复合回报率约为7%，但短期投资回报率会因为利率、投资者预期收益率和心理因素的综合作用而不断波动。这也就是格老所说的：“从短期来看，市场是一台投票机；但从长期看，它是一台是称重机”。
一、1964年—1998年间美国股市整体走势与GNP走势完全相背离的现象
美国道.琼斯指数在1964年—1998年间的前17年和后17年的走势完全不同。
第一个17年：1964年年底道.琼斯指数为874.12点，1981年年底为875.00点，17年间增长0.1个百分点，几乎原地踏步。
第二个17年：1981年年底道.琼斯指数为875.00点，1998年年底为9181.43点，17年间上涨超过10倍，为典型的令人难以置信的大牛市行情。
美国股市在两个17年间有完全不同的表现，原因何在呢？
专业人士想到的原因是GNP的波动导致股市的相应波动，也就是经济学和金融学教科书上通常所说的“股市是宏观经济的晴雨表”。
但事实并非如此。这一现象无法单纯以美国宏观经济的波动来解释：1964年—1998年间美国股市整体走势与GNP走势完全相背离。在股市低迷的第一个17年间，美国GNP增长率为373%，而在第二个17年的大牛市期间，美国GNP增长率只有177%，二者相差近一倍。
是偶然的巧合亦或其他？后视镜看法一目了然。实际上，不仅仅是过去34年间美国股市整体走势与GNP走势完全相背离，在整个20世纪也是经常如此。
20世纪可以说是美国人的世纪，先后发明了汽车、飞机、收音机、电视与电脑。扣除通货膨胀因素，美国GNP破记录地净增长了702%。尽管其中也包括1929年—1933年的大衰退和两次世界大战，但以10年为一个阶段来比较，人们发现每个10年的人均实际GNP都在持续增长。或许人们认为稳定的经济增长反映在股市上也应该会有股票指数的稳定增长才对。但事实远非如此。
1900年—1920年美国人均实际GNP（以1996年美元价值计算）从4073美元增长到5444美元，增长了33.7%。而同期股票市场却一点动静也没有，1900年初道.琼斯指数为66.08点，1920年年底道.琼斯指数为71.95点，20年间只有0.4%的年增长率，这种反差与1964年—1981年的情况相似。
接下来的1920年—1930年的10年间，股市则一飞冲天，到1929年9月道.琼斯指数一度大涨到381点，上升了430%。
随后的1930年—1948年的19年间，道.琼斯指数几乎下跌了一半。1948年道.琼斯指数只有177点。但同期的GNP却增长了50%。
结果，接下来的1948年—1964年的17年间，道.琼斯指数大涨5倍之多。之后就是上面提到的1964年—1998年的两个截然不同的17年，先冷后热，令世人惊异的大牛市结束了辉煌的20世纪。
如果用一种不同的时间分段法，在过去的100年间，经历了3个时期的大牛市，包括44个年份，期间道.琼斯指数总计上涨11000点。同时经历了3次熊市，包括56个年份，尽管在这56年间美国经济大幅增长，期间道.琼斯指数却总计下跌了292点。
那么，究竟是什么原因造成股市的表现与宏观经济如此反常呢？请看下面股神巴菲特的解释。
二、影响股市波动的三个关键因素
股神将股市如此反常的现象归诸于利率、预期投资收益率两个关键的经济因素，以及一个与心理有关的因素。
影响股市的第一个关键经济因素是利率。在经济学中，利率就好比物理学中的地心引力一样，不论何时何地，利率任何的微小波动都会影响全世界所有资产的价值。假设今天市场利率是7%，那么，未来你1美元的投资收益的价值就与市场利率为4%时的价值有很大的差别。
分析过去34年长期债券利率的变化，人们可以发现第一个17年间利率从1964年底的4.20%大幅上升到1981年的13.65%，这对股票投资人来说实在不是什么好事。但在第2个17年期间利率又从1981年的13.65%大幅下挫到1998年的5.09%，为股票投资人带来了福音。
影响股市的第2个关键经济因素是人们对未来投资收益率的预期。在第一个17年间，由于公司获利前景不佳，投资者预期显著下调。但在1980年代初期里根政府大力刺激经济增长，使得企业获利水平达到1930年以来前所未有的高峰。
在1964年—1981年的第一个17年间，两个不利因素是使投资人对美国经济失去信心的原因，一方面在于过去企业获利成绩不佳，另一方面在于利率过高使投资者对企业未来盈利预期大大折扣。两项因素综合，导致1964年—1981年间尽管同期GNP大幅增长但美国股市却停滞不前。
不过这些因素在1981年—1998年的第2个17年间完全反转，一方面企业收益率大幅提高，另一方面利率又不断下降使得投资者对企业未来盈利预期进一步提高。这两个因素为一个大牛市提供了产生巨大上升的燃料，形成GNP下降的同时股市却猛涨的奇异现象。
第三个因素是心理因素，人们看到股市大涨，投机性交易疯狂爆发，终于导致危险的悲剧一幕一再重演。
三、衡量股市是否过热或过冷的定量分析指标
巴菲特认为，回顾过去近100年的股市表现，可以看到股市整体走势经常与宏观经济发展相背离，这种极端的非理性行为是周期性爆发的。人们认识这种现象对于投资人来说具有重要的意义。要想在股票市场上取得良好的收益，就应该学会如何应对股市非理性行为的爆发。
巴菲特认为要想在股市非理性波动中保持理性，其中最重要的是学会定量分析，从而能够准确判断股市是否过热或过冷。如果投资人能够进行定量分析，尽管不会因此就能把分析能力提高到超人的水平，却能够使自己因此而避免随波逐流陷入股市的群体性疯狂，做出非理性的错误决策。如果投资人根据定量分析发现股市过热，就可以理性地决策不再追涨，乘机高价离场。如果投资人根据定量分析发现股市过冷，就可以理性地决策选择合适的股票低价买入。
巴菲特向美国投资者推荐了一个非常简单但却非常实用的股市整体定量分析指标“所有上市公司总市值占GNP的比率”（可惜的是由于特殊的历史原因，对我国股市却不能直接使用）。
虽然所有上市公司总市值占GNP的比率这项指标只能告诉投资人有限的信息，但它却可能是任何时候评判公司价值是否合理的最理想的单一指标。分析80年来所有上市公司总市值占GNP的比率可以发现，这项指标在1999年达到前所未有的高峰，这本应该是一个很重要的警告信号。如果投资人财富增加的速度比美国宏观经济增长的速度更高，那么所有上市公司总市值占GNP的比率必须不断提高，直到无穷大，事实上这是不可能的。
巴菲特认为所有上市公司总市值占GNP的比率在70%——80%之间可以买入股票，长期而言可能会让投资者有相当不错的收益，但如果这个比率达到200%，象1999年和2000年中的一段时间那样，那么购买股票简直无疑于玩火自焚。
四、股市短期波动不可预测，长期波动容易预测
巴菲特认为预测股市的短期波动是不可能的，相反，巴菲特认为股市长期波动具有非常稳定的趋势，非常容易预测。
1999年，巴菲特大胆预测未来10年甚至20年内，美国投资人股票投资预期收益率（包含股利以及预期2%的通货膨胀率）大概在7%左右，这正好与沃顿奇才杰里米.席格尔教授经过统计分析得出的美国股市200年来长期平均实际收益率为7%左右的结论非常吻合。哈哈，果真是英雄所见略同！
五、启示
在过去的200年间，美国股市的年复合实际收益率为7%，并显示出惊人的稳定性。世界其他主要国家的股票实际收益率也与美国的情况相吻合。股票投资收益率的长期稳定性的原因目前还没有得到很好的解释。
杰里米.席格尔教授认为，股票投资收益率取决于经济增长、生产力和风险的收益。但是，创造价值的能力也同样来自于卓有成效的管理、对财产权利尊重的稳定的政治体系以及在竞争的环境中象消费者提供价值的意愿。政治或经济危机可以导致股票偏离其长期发展的方向，但是市场体系的活力能让它重新返回长期的趋势。或许这就是股票收益为什么能够超越在过去两个世纪中影响全世界的政治、经济和社会的异常变化，保持稳定性的原因。
其实没有人能够完全解释股市长期内向价值回归的根本原因。格雷厄姆曾说：这正是我们行业的一个神秘之处。对我和对其他任何人而言，它一样神奇。但我们从经验上知道最终市场会使股价达到它的价值。
附录:
什么是GNP（国民生产总值）？GNP是什么意思？
GNP英文全称Gross National Product，国民生产总值。
国民生产总值是指一个国家或地区范围内的所有常住单位，在一定时期内实际收到的原始收入（指劳动者报酬、生产税净额、固定资产折旧和营业盈余等）总和价值。
本国常住者通过在国外投资或到国外工作所获得的收入（称之为从国外得到的要素收入），应计入本国国民生产总值。
而非本国国民在本国领土范围内的投资或工作所获得的收入（称之为支付给国外的要素收入），则不应计入本国的国民生产总值中去。
因此，国民生产总值可以用国内生产总值加上本国常住单位从国外得到的净要素收入（从国外得到的要素收入－支付给国外的要素收入）。
更直观地讲，国民生产总值等于国内生产总值加上从国外获得的劳动报酬、投资收益（包括红利、股息和利息等）的净额。即：国民生产总值＝国内生产总值＋国外净要素收入。
国内生产总值与国民生产总值之间的主要区别
GDP强调的是创造的增加值，它是“生产”的概念，GNP则强调的是获得的原始收入。一般讲，各国的国民生产总值与国内生产总值二者相差数额不大，但如果某国在国外有大量投资和大批劳工的话，则该国的国民生产总值往往会大于国内生产总值。
Thursday, October 9, 2008
为什么：危机总是与巴菲特无关？
巴菲特在危机中为什么毫发无损？苦思中 ... ...
其实，对于这个问题，我也一直以来就在进行思考，我也曾经发过相关的博文《我自己的斤两》来进行说明。确实，投资永远是两个部分：1.获取收益；2.规避危机（系统性的风险不属于危机）。
对于巴菲特，其从可口可乐，箭牌，华盛顿邮报等获取收益的故事举世流传，但对于其规避危机的故事与能力却相对未被人们进行发掘。其实，如果没有足够的规避危机的能力，再高的收益也可能是一场泡沫。
巴菲特规避危机的故事至少如下：
1.在网络技术股票火爆美国的时候,巴菲特冷眼旁观,没有任何的参与,也成功的避开了后来的惊人的大狂跌;
2.在"中国石油"成为全亚洲最赚钱的公司的时候, 巴菲特全部抛售了所有的"中国石油"的股票;在他自己笑谈"买早了一点"的几个月后的今天,确定巴老的又一次的正确;
3.在今天,拥有"房利美"和"房地美"的股票以及债券是一件耻辱的事情,但巴菲特曾是"两房"的大股东.并且挣了很多钱,一直持有8.5%的股份.只是到了2001年,便抛尽"两房"的股票.两房"出事后,股票价从近百美元,爆跌到几美元,跌幅达90%.投资人血流成河.而巴老,早以成功淡出;
对于巴菲特规避危机的能力，我自己思考后大致得出一下结论：
1.巴菲特基于实业投资的原则。对于"房利美"和"房地美"债券，巴菲特认为已经偏离了实业的轨道，大家做的是一个击鼓传花的风险游戏；
2.巴菲特基于能力圈投资的原则。对于网络技术与中国石油，巴菲特认为已经超过其能力圈的判断与遇见能力的范围。
其实，对于这个问题，我也一直以来就在进行思考，我也曾经发过相关的博文《我自己的斤两》来进行说明。确实，投资永远是两个部分：1.获取收益；2.规避危机（系统性的风险不属于危机）。
对于巴菲特，其从可口可乐，箭牌，华盛顿邮报等获取收益的故事举世流传，但对于其规避危机的故事与能力却相对未被人们进行发掘。其实，如果没有足够的规避危机的能力，再高的收益也可能是一场泡沫。
巴菲特规避危机的故事至少如下：
1.在网络技术股票火爆美国的时候,巴菲特冷眼旁观,没有任何的参与,也成功的避开了后来的惊人的大狂跌;
2.在"中国石油"成为全亚洲最赚钱的公司的时候, 巴菲特全部抛售了所有的"中国石油"的股票;在他自己笑谈"买早了一点"的几个月后的今天,确定巴老的又一次的正确;
3.在今天,拥有"房利美"和"房地美"的股票以及债券是一件耻辱的事情,但巴菲特曾是"两房"的大股东.并且挣了很多钱,一直持有8.5%的股份.只是到了2001年,便抛尽"两房"的股票.两房"出事后,股票价从近百美元,爆跌到几美元,跌幅达90%.投资人血流成河.而巴老,早以成功淡出;
对于巴菲特规避危机的能力，我自己思考后大致得出一下结论：
1.巴菲特基于实业投资的原则。对于"房利美"和"房地美"债券，巴菲特认为已经偏离了实业的轨道，大家做的是一个击鼓传花的风险游戏；
2.巴菲特基于能力圈投资的原则。对于网络技术与中国石油，巴菲特认为已经超过其能力圈的判断与遇见能力的范围。
复利的魔力
在投资时，除了报酬率之外，还有一项很重要的决胜因素，就是---时间。许多人理财得法，并不是他们选择了获利多高投资工具，而只是利用一些稳健的投资管道，按部就班地来，但重要地，便是他们比别人早了几步开始。
从投资的角度来看，以复利计算的投资报酬效果是相当惊人的，许多人都知道复利计算的公式：本利和=本金×（1＋利率）期数。而对于复利观念，若以一般所说的“利滚利”来说明最容易明白。也就是说把运用钱财所获取的利息或赚到的利润加入本金，继续赚取报酬。
因此采用复利的方式来投资，最后的报酬将是每期报酬率加上本金后，不断相乘的结果，期数愈多（即愈早开始），当然获利就愈大。
一般常与复利相提并论的评估方式是“单利”，指的是获利不滚入本金，每次都以原有的本金计利。
举例来说，假定某投资每年有10%的获利，若以单利计算，投资100万元，每年可赚10万元，十年可以赚100万元，多出一倍。但如果以复利计算，虽然年获利率也是10%，但每年实际赚取的“金额”却会不断增加，以前述的100万元投资来说，第一年赚10万元，但第二年赚的却是110万元的10%，即是11万元，第三年则是12.1万元，等到第十年总投资获得是将近160万元，成长了1.6倍。这就是一般所说“复利的魔力”。
进行投资理财时，很多时候应以复利盘算才不会与实际情况造成差距。举例来说，如果现在3万元可以买得到的东西，由于物价会上涨，每年平均通货膨胀率若以5%计算，五年后必须花38289元才买得到，这也是复利造成的效果。当我们在做财务规划时，了解复利的运作和计算是相当重要的，我们常喜欢用“利上滚利”来形容某项投资，获得快速、报酬惊人，比方说拿1000万元去买年报酬率20%的股票，若一切顺利，约莫三年半的时间，1000万元就变成2000万元。
虽然复利公式并不难懂，但若是期数很多，算起来还是相当麻烦，有一个简单的“七十二法则”可以取巧。
所谓的“七十二法则”就是------“以1%的复利来计息，经过七十二年以后，你的本金就会变成原来的一倍”。这个公式好用的地方在于它能以一推十，例如：利用5%年报酬率的投资工具，经过约14.4年（72÷5）本金就变成一倍；利用12%的投资工具，则要六年左右（72÷12），才能让一块钱变成二块钱。
因此，今天如果你手中有100万元，运用了报酬15%的投资工具，你可以很快便知道，经过约4.8年，你的100万元就会变成200万元。
同样的道理，若是你希望在十年内将50万元变成100万元，就该找到至少报酬率7.2%以上的投资工具来帮助你达成目标；想在七年后加倍本金，投资率就应至少为10.3%才行。
虽然利用七十二法则不像查表计算那么精确，但也已经十分接近了，因此当你手中少了一份复利表时，记住简单的七十二法则，或许能够帮你不少的忙。
从投资的角度来看，以复利计算的投资报酬效果是相当惊人的，许多人都知道复利计算的公式：本利和=本金×（1＋利率）期数。而对于复利观念，若以一般所说的“利滚利”来说明最容易明白。也就是说把运用钱财所获取的利息或赚到的利润加入本金，继续赚取报酬。
因此采用复利的方式来投资，最后的报酬将是每期报酬率加上本金后，不断相乘的结果，期数愈多（即愈早开始），当然获利就愈大。
一般常与复利相提并论的评估方式是“单利”，指的是获利不滚入本金，每次都以原有的本金计利。
举例来说，假定某投资每年有10%的获利，若以单利计算，投资100万元，每年可赚10万元，十年可以赚100万元，多出一倍。但如果以复利计算，虽然年获利率也是10%，但每年实际赚取的“金额”却会不断增加，以前述的100万元投资来说，第一年赚10万元，但第二年赚的却是110万元的10%，即是11万元，第三年则是12.1万元，等到第十年总投资获得是将近160万元，成长了1.6倍。这就是一般所说“复利的魔力”。
进行投资理财时，很多时候应以复利盘算才不会与实际情况造成差距。举例来说，如果现在3万元可以买得到的东西，由于物价会上涨，每年平均通货膨胀率若以5%计算，五年后必须花38289元才买得到，这也是复利造成的效果。当我们在做财务规划时，了解复利的运作和计算是相当重要的，我们常喜欢用“利上滚利”来形容某项投资，获得快速、报酬惊人，比方说拿1000万元去买年报酬率20%的股票，若一切顺利，约莫三年半的时间，1000万元就变成2000万元。
虽然复利公式并不难懂，但若是期数很多，算起来还是相当麻烦，有一个简单的“七十二法则”可以取巧。
所谓的“七十二法则”就是------“以1%的复利来计息，经过七十二年以后，你的本金就会变成原来的一倍”。这个公式好用的地方在于它能以一推十，例如：利用5%年报酬率的投资工具，经过约14.4年（72÷5）本金就变成一倍；利用12%的投资工具，则要六年左右（72÷12），才能让一块钱变成二块钱。
因此，今天如果你手中有100万元，运用了报酬15%的投资工具，你可以很快便知道，经过约4.8年，你的100万元就会变成200万元。
同样的道理，若是你希望在十年内将50万元变成100万元，就该找到至少报酬率7.2%以上的投资工具来帮助你达成目标；想在七年后加倍本金，投资率就应至少为10.3%才行。
虽然利用七十二法则不像查表计算那么精确，但也已经十分接近了，因此当你手中少了一份复利表时，记住简单的七十二法则，或许能够帮你不少的忙。
吉姆‧罗杰斯的一封信
吉姆．罗杰斯（Jim Rogers），一个在10年间，赚到足够一生花用财富的投资家；一个被股神巴菲特誉为对市场变化掌握无人能及的趋势家；一个两度环游世界，一次骑车、一次开车的梦想家。21岁开始接触投资，之后进入华尔街工作，与索罗斯共创全球闻名的量子基金，1970年代，该基金成长超过4000%，同期间标准普尔500股价指数才成长不到50%。吉姆．罗杰斯的投资智能，数字已经说话。而从口袋只有600美元的投资门外汉，到37岁决定退休时家财万贯的世界级投资大师，吉姆．罗杰斯用自己的故事证明，投资，可以没有风险；投资，真的可以致富。
亲爱的朋友：
你喜欢投资市场吗？你对投资有热情吗？当我21岁开始接触投资市场时，我就知道这是我这辈子最有兴趣的领域。因为喜欢，所以有热情；因为充满热情，所以我花很多时间在做研究，研究竞争对手、研究市场信息、研究所有可能影响投资结果的因素。
找到热情所在，就找得到机会。所以每个人都要问问自己：最喜欢的领域是什么？如果喜欢园艺，就应该去当园艺家；喜欢当律师，就朝这个方向努力前进。不要管别人怎么说，也不论有多少人反对，反正只要是自己喜欢的，就去追寻，这样就会成功。
我强调「专注」，在做投资决策前，必定要做很多功课，也因此我并不赞同教课书上所说的「多元投资」。看看全世界所有有钱人的故事，哪一个不是「聚焦投资」而有的成果？
投资成功致富是来自事前努力的做功课，因为做足了功课，了解投资的产品价格被低估才买进，所以风险已经降到最低。并不是分散投资就叫做低风险，如果你对于所投资的市场、股票不熟悉，只是把鸡蛋分别放在不同的篮子里，这绝对不是低风险的投资，谁说只有一个篮子会掉在地上？
就好比有人认为分散投资于50家公司，一定比投资于5家公司的风险低。但是是这样吗？你不可能完全掌握50家公司的详细状况，相对来说，如果只集中投资在5家公司，就可以做比较仔细的研究。所以说，5颗鸡蛋放在一个相当稳固、安全的袋子，一定比放在50个不牢固的袋子要好得太多了。
尤其我并不是一个喜欢冒险的人，相反地，我讨厌冒险，就是因为这样，所以我才要做很多功课。成功投资者的方法，通常是什么也不做，一直到看到钱放在那里，才走过去把钱捡起来。所以除非东西便宜、除非看到好转的迹象，否则不买进。当然买进的机会很少，一生中不会有多少次看到钱放在那里。
另外，很重要的一点是，我总是对于我所收到、听到的信息，都抱持存疑的态度，我会小心求证，找出当中的逻辑、并且问为什么。所以我并没有任何导师，全部仰赖自己的研究与判断。
一旦我清楚知道自己在做什么时，是不会有风险的。当然市场有可能在我决定投资、也投入金钱后继续修正，这时候我会回过头来检视，我究竟有没有彻底了解、做足功课，如果没有，那么风险是来自于我没有做好研究。倘若我有确实做好功课，那么面对市场超跌的状况，我会投入更多金钱。所以风险高不高的症结在于有没有做功课，而不是集中投资就是高风险。
至于该怎么做足功课呢？那就要看是哪方面的议题，如果是跟栽培作物有关，就要去注意有多少农民、有多少库存农作物、这个领域谁在做什么规画、市场上有什么需求上的变化、是不是才刚播种、刚施肥？……找出包括生产、需求的基本因素，事实上，这些问题可以适用到各种行业上。
另外，媒体也可以当作一个很好的指针，媒体向来是反应大众的看法、反应大家已经知道的事情，所以当媒体都在做类似的报导时，这就表示该项信息已经被充分传递了。
就好像1999年的时候，随便找一本杂志、随便哪一个广播或电视媒体，都在提「.com」这个新经济将带来不同的投资思维，加上每个人都在投资.com，这就是一个强烈的警讯。真正有价值的信息其实是充分不足的信息，当某些信息得花很多力气才能取得，这样的信息才可帮助你获利。
所以说，大家都知道的信息，存在当中的机会相当有限。像近几年，大家热烈讨论新兴市场，投资人就要去思考，新兴市场的好是否已经反应了呢？大家是不是都进去投资了呢？如果你发现身边的人，都在买新兴市场的股票或基金，这就表示市场已经在反应了，想要从中获利，当然有限。
不过，中国大陆的状况除外，因为中国大陆股票从2005年6月起涨到现在，不过10几个月的时间，相较于很多新兴市场股市已经涨了好几年，中国大陆股市尚未过热。
我还是要强调，信息愈少、机会就愈多。举个例来说，当你翻开华尔街日报，你会发现整版都在讲股票、讲基金，但是商品（commodity）信息却只有一小块，可见商品未被重视，这就是商品的机会所在。而且问问身边的人，有谁在投资商品？如果答案是极少数，这就更证明了商品的投资价值。
投资致富的轨迹在于，做自己喜欢的事，拥有热情，愿意不断的学习、做功课，发掘别人还没有看到的机会，这是我永恒不变的投资哲学。而跟随群众是永远不会成功的。
亲爱的朋友：
你喜欢投资市场吗？你对投资有热情吗？当我21岁开始接触投资市场时，我就知道这是我这辈子最有兴趣的领域。因为喜欢，所以有热情；因为充满热情，所以我花很多时间在做研究，研究竞争对手、研究市场信息、研究所有可能影响投资结果的因素。
找到热情所在，就找得到机会。所以每个人都要问问自己：最喜欢的领域是什么？如果喜欢园艺，就应该去当园艺家；喜欢当律师，就朝这个方向努力前进。不要管别人怎么说，也不论有多少人反对，反正只要是自己喜欢的，就去追寻，这样就会成功。
我强调「专注」，在做投资决策前，必定要做很多功课，也因此我并不赞同教课书上所说的「多元投资」。看看全世界所有有钱人的故事，哪一个不是「聚焦投资」而有的成果？
投资成功致富是来自事前努力的做功课，因为做足了功课，了解投资的产品价格被低估才买进，所以风险已经降到最低。并不是分散投资就叫做低风险，如果你对于所投资的市场、股票不熟悉，只是把鸡蛋分别放在不同的篮子里，这绝对不是低风险的投资，谁说只有一个篮子会掉在地上？
就好比有人认为分散投资于50家公司，一定比投资于5家公司的风险低。但是是这样吗？你不可能完全掌握50家公司的详细状况，相对来说，如果只集中投资在5家公司，就可以做比较仔细的研究。所以说，5颗鸡蛋放在一个相当稳固、安全的袋子，一定比放在50个不牢固的袋子要好得太多了。
尤其我并不是一个喜欢冒险的人，相反地，我讨厌冒险，就是因为这样，所以我才要做很多功课。成功投资者的方法，通常是什么也不做，一直到看到钱放在那里，才走过去把钱捡起来。所以除非东西便宜、除非看到好转的迹象，否则不买进。当然买进的机会很少，一生中不会有多少次看到钱放在那里。
另外，很重要的一点是，我总是对于我所收到、听到的信息，都抱持存疑的态度，我会小心求证，找出当中的逻辑、并且问为什么。所以我并没有任何导师，全部仰赖自己的研究与判断。
一旦我清楚知道自己在做什么时，是不会有风险的。当然市场有可能在我决定投资、也投入金钱后继续修正，这时候我会回过头来检视，我究竟有没有彻底了解、做足功课，如果没有，那么风险是来自于我没有做好研究。倘若我有确实做好功课，那么面对市场超跌的状况，我会投入更多金钱。所以风险高不高的症结在于有没有做功课，而不是集中投资就是高风险。
至于该怎么做足功课呢？那就要看是哪方面的议题，如果是跟栽培作物有关，就要去注意有多少农民、有多少库存农作物、这个领域谁在做什么规画、市场上有什么需求上的变化、是不是才刚播种、刚施肥？……找出包括生产、需求的基本因素，事实上，这些问题可以适用到各种行业上。
另外，媒体也可以当作一个很好的指针，媒体向来是反应大众的看法、反应大家已经知道的事情，所以当媒体都在做类似的报导时，这就表示该项信息已经被充分传递了。
就好像1999年的时候，随便找一本杂志、随便哪一个广播或电视媒体，都在提「.com」这个新经济将带来不同的投资思维，加上每个人都在投资.com，这就是一个强烈的警讯。真正有价值的信息其实是充分不足的信息，当某些信息得花很多力气才能取得，这样的信息才可帮助你获利。
所以说，大家都知道的信息，存在当中的机会相当有限。像近几年，大家热烈讨论新兴市场，投资人就要去思考，新兴市场的好是否已经反应了呢？大家是不是都进去投资了呢？如果你发现身边的人，都在买新兴市场的股票或基金，这就表示市场已经在反应了，想要从中获利，当然有限。
不过，中国大陆的状况除外，因为中国大陆股票从2005年6月起涨到现在，不过10几个月的时间，相较于很多新兴市场股市已经涨了好几年，中国大陆股市尚未过热。
我还是要强调，信息愈少、机会就愈多。举个例来说，当你翻开华尔街日报，你会发现整版都在讲股票、讲基金，但是商品（commodity）信息却只有一小块，可见商品未被重视，这就是商品的机会所在。而且问问身边的人，有谁在投资商品？如果答案是极少数，这就更证明了商品的投资价值。
投资致富的轨迹在于，做自己喜欢的事，拥有热情，愿意不断的学习、做功课，发掘别人还没有看到的机会，这是我永恒不变的投资哲学。而跟随群众是永远不会成功的。
Wednesday, October 8, 2008
European, U.S. Stock Futures Advance on Rate-Cut Speculation
European and U.S. stock futures rose as Australia's bigger-than- expected interest-rate cut spurred speculation central banks around the world will reduce borrowing costs to cushion their economies from the credit freeze. BP Plc, Europe's second-largest oil company, and Royal Dutch Shell Plc may follow their U.S.-traded securities higher after crude climbed for the first time in five days.
Asian shares pared losses, the yen retreated and Treasuries fell after Australia's central bank cut its benchmark rate by one percentage point. Europe's Dow Jones Stoxx 600 Index tumbled the most since 1987 yesterday as bank bailouts spread and falling commodities dragged down raw-materials producers. The Dow Jones Industrial Average fell as much as 800 points yesterday, then recouped more than half its losses in the final 75 minutes of trading on speculation the Federal Reserve will lower rates. Futures on the Euro Stoxx 50, a benchmark for the euro region, gained 68, or 2.4 percent, to 2,943 at 7:45 a.m. in London.
The U.K.'s FTSE 100 Index may climb 99, according to CMC Markets, a betting firm. Futures on the Standard & Poor's 500 Index rose 1.7 percent. The MSCI Asia Pacific Index fell 1.1 percent, after earlier dropping as much as 3.2 percent. ``European markets are pinning all their hopes on a series of coordinated rate cuts,'' said Oliver Stevens, head of dealing at IG Markets in Melbourne. The Stoxx 600, down 34 percent this year, is valued at 10.05 times the reported earnings of companies in the index, the cheapest since Bloomberg began compiling the data in January 2002. Rate Cut The yen fell from a three-year high against the euro, and Treasuries retreated for the first time in a week after Australia cut its key rate by the most since a recession in 1992 and twice as much as most economists forecast.
At least two dozen central banks around the world are scheduled to meet this month, according to Bloomberg data. The Bank of England, set to meet on Oct. 9, should cut its key lending rate by a half point to 4.5 percent, the British Chambers of Commerce said today. There's speculation ``that the next step will be for central banks to drop interest rates, possibly in a coordinated move,'' Matthew Buckland, a dealer at CMC Markets in London, wrote in a note to clients. ``This would certainly send a message to the markets, but again the success in sustaining a rally here would presumably be reliant on traders overlooking the panic aspects of this outcome.'' Bernanke, Trichet Fed Chairman Ben S. Bernanke and his fellow global policy makers may move to unblock markets for loans between banks and commercial paper as additional steps to combat the credit crisis.
Bernanke yesterday signaled he's preparing measures with Treasury Secretary Henry Paulson to unfreeze markets where loans aren't secured by assets. Bernanke is scheduled to speak on the economic outlook from 12:30 p.m. in Washington today. He and Paulson will meet with European Central Bank President Jean-Claude Trichet and their other Group of Seven major-nation counterparts Oct. 10 in Washington. Futures on the Chicago Board of Trade show a 58 percent probability the Fed will reduce its 2 percent target rate by three-quarters of a percentage point to 1.25 percent at its Oct. 29 meeting. Traders saw no chance of a cut of that magnitude a month ago. The odds of a half-point reduction are 42 percent.
Russian Delays Trading Russian regulators delayed the start of trading today on Moscow's Micex Stock Exchange and RTS after shares tumbled the most ever yesterday. European finance ministers failed to agree on steps to shore up the banking system hours after their countries' leaders pledged to do whatever was needed to restore confidence. There appeared to be little support for suggestions from France and Italy that Europe create a U.S.-style bank rescue fund at yesterday's monthly meeting of euro-area finance ministers in Luxembourg. The U.S. Congress approved a $700 billion plan to buy mortgages and other debt-related securities from banks last week. U.K. Chancellor of the Exchequer Alistair Darling discussed last night with leading bankers a plan to shore up the banks by channeling taxpayers' money into them, in effect partly nationalizing them, the Financial Times reported, citing unidentified government officials. BP's U.S.-traded securities ended the day 0.9 percent higher than the close in Europe. American depositary receipts of Shell, Europe's biggest oil company, finished 1.7 percent above the European close. Oil Rebounds Crude for November delivery jumped as much as $2.94, or 3.4 percent, to $90.75 a barrel in New York as some traders deemed yesterday's 6.5 percent decline excessive and investors speculated OPEC may announce output cuts at its December meeting as demand slows. Gasoline, natural gas and heating oil also rose.
Asian shares pared losses, the yen retreated and Treasuries fell after Australia's central bank cut its benchmark rate by one percentage point. Europe's Dow Jones Stoxx 600 Index tumbled the most since 1987 yesterday as bank bailouts spread and falling commodities dragged down raw-materials producers. The Dow Jones Industrial Average fell as much as 800 points yesterday, then recouped more than half its losses in the final 75 minutes of trading on speculation the Federal Reserve will lower rates. Futures on the Euro Stoxx 50, a benchmark for the euro region, gained 68, or 2.4 percent, to 2,943 at 7:45 a.m. in London.
The U.K.'s FTSE 100 Index may climb 99, according to CMC Markets, a betting firm. Futures on the Standard & Poor's 500 Index rose 1.7 percent. The MSCI Asia Pacific Index fell 1.1 percent, after earlier dropping as much as 3.2 percent. ``European markets are pinning all their hopes on a series of coordinated rate cuts,'' said Oliver Stevens, head of dealing at IG Markets in Melbourne. The Stoxx 600, down 34 percent this year, is valued at 10.05 times the reported earnings of companies in the index, the cheapest since Bloomberg began compiling the data in January 2002. Rate Cut The yen fell from a three-year high against the euro, and Treasuries retreated for the first time in a week after Australia cut its key rate by the most since a recession in 1992 and twice as much as most economists forecast.
At least two dozen central banks around the world are scheduled to meet this month, according to Bloomberg data. The Bank of England, set to meet on Oct. 9, should cut its key lending rate by a half point to 4.5 percent, the British Chambers of Commerce said today. There's speculation ``that the next step will be for central banks to drop interest rates, possibly in a coordinated move,'' Matthew Buckland, a dealer at CMC Markets in London, wrote in a note to clients. ``This would certainly send a message to the markets, but again the success in sustaining a rally here would presumably be reliant on traders overlooking the panic aspects of this outcome.'' Bernanke, Trichet Fed Chairman Ben S. Bernanke and his fellow global policy makers may move to unblock markets for loans between banks and commercial paper as additional steps to combat the credit crisis.
Bernanke yesterday signaled he's preparing measures with Treasury Secretary Henry Paulson to unfreeze markets where loans aren't secured by assets. Bernanke is scheduled to speak on the economic outlook from 12:30 p.m. in Washington today. He and Paulson will meet with European Central Bank President Jean-Claude Trichet and their other Group of Seven major-nation counterparts Oct. 10 in Washington. Futures on the Chicago Board of Trade show a 58 percent probability the Fed will reduce its 2 percent target rate by three-quarters of a percentage point to 1.25 percent at its Oct. 29 meeting. Traders saw no chance of a cut of that magnitude a month ago. The odds of a half-point reduction are 42 percent.
Russian Delays Trading Russian regulators delayed the start of trading today on Moscow's Micex Stock Exchange and RTS after shares tumbled the most ever yesterday. European finance ministers failed to agree on steps to shore up the banking system hours after their countries' leaders pledged to do whatever was needed to restore confidence. There appeared to be little support for suggestions from France and Italy that Europe create a U.S.-style bank rescue fund at yesterday's monthly meeting of euro-area finance ministers in Luxembourg. The U.S. Congress approved a $700 billion plan to buy mortgages and other debt-related securities from banks last week. U.K. Chancellor of the Exchequer Alistair Darling discussed last night with leading bankers a plan to shore up the banks by channeling taxpayers' money into them, in effect partly nationalizing them, the Financial Times reported, citing unidentified government officials. BP's U.S.-traded securities ended the day 0.9 percent higher than the close in Europe. American depositary receipts of Shell, Europe's biggest oil company, finished 1.7 percent above the European close. Oil Rebounds Crude for November delivery jumped as much as $2.94, or 3.4 percent, to $90.75 a barrel in New York as some traders deemed yesterday's 6.5 percent decline excessive and investors speculated OPEC may announce output cuts at its December meeting as demand slows. Gasoline, natural gas and heating oil also rose.
Tuesday, October 7, 2008
Approaching terminal point of wave 3; cover shorts
We had been bearish on the equity markets for some time and had repeatedly recommended selling into rallies. We had also stated that equity markets would decline even if the Paulson bailout get voted through by the US Senate. Last Friday’s initial rally of more than 250 points on the Dow Jones Industrial Average (DJIA) on expectation of the move and the subsequent 157-point decline underscores this point.
However, we think, there will be large countertrend swings near this period and recommend readers to close out shorts and position for a rebound. DBS, for example, could find support near S$15.60-15.70 while Keppel Corp appears grossly oversold and could stabilise near S$6.60-6.70. At S$1.36-1.40, Cosco Corporation likewise appears attractive.
For FSSTI, we maintain our downside objective of 2,200 and based on last Friday’s close of 2,297, this represents downside potential of 97 points. Do note that we are not calling for a bottom or an end to the bear market, but an important inflexion point. On wave count, we think a major wave 3 of C low could form near that level, before 200-250-point consolidation unfolds.
For the DJIA, an alternative wave count suggests support at 10,000-10,050 as opposed to an earlier and still preferred wave count with support near the 9,500-9,600 range.
However, we think, there will be large countertrend swings near this period and recommend readers to close out shorts and position for a rebound. DBS, for example, could find support near S$15.60-15.70 while Keppel Corp appears grossly oversold and could stabilise near S$6.60-6.70. At S$1.36-1.40, Cosco Corporation likewise appears attractive.
For FSSTI, we maintain our downside objective of 2,200 and based on last Friday’s close of 2,297, this represents downside potential of 97 points. Do note that we are not calling for a bottom or an end to the bear market, but an important inflexion point. On wave count, we think a major wave 3 of C low could form near that level, before 200-250-point consolidation unfolds.
For the DJIA, an alternative wave count suggests support at 10,000-10,050 as opposed to an earlier and still preferred wave count with support near the 9,500-9,600 range.
Fed May See Lending to Companies, States as Next Crisis Fronts
Federal Reserve Chairman Ben Bernanke may find the next fronts of the financial
crisis to be just as chilling as last month's downfall of Wall Street titans: its spread to corporate America and state and local
governments.
Companies from Goodyear Tire & Rubber Co. and Duke Energy Corp. to Gannett Co. and Caterpillar Inc. are being forced to tap emergency credit lines or pay more to borrow as investors flee even firms with few links to the subprime-mortgage debacle. California Governor Arnold Schwarzenegger says his and other states may need emergency federal loans as funding dries
up.
A cash crunch on Main Street would endanger companies' basic functions -- paying suppliers, making payrolls and rolling over debt. The widening of the crisis suggests that Bernanke and Treasury Secretary Henry Paulson may have further fires to put out even as the Treasury sets up the $700 billion financial- industry rescue plan approved last
week.
``The rest of the economy is clearly being affected right now by the tightness of credit,'' said Kurt Karl, chief U.S. economist at Swiss Reinsurance Co. in New York. ``It's just gathering momentum in the wrong direction.''
The market for commercial paper, which typically matures in 270 days or less and is used to help pay for expenses such as payroll and rent, shrank to a three-year low of $1.6 trillion in the week to Oct. 1, Fed data show.
Gannett, the largest U.S. newspaper publisher, said Oct. 1 it drew on a revolving credit line to ensure it had funds to repay its commercial paper.
Duke,Caterpillar Duke Energy, the owner of utilities in five U.S. states, last week tapped about $1 billion from a $3.2 billion credit agreement after concluding it may not be able to meet its plan for new financing. Caterpillar, the biggest
maker of earthmoving equipment, had to pay the biggest premiums over Treasuries in at least three decades at a sale
of five-year and 10-year notes.
``Credit is the lubricant that oils the engine of the economy'' and if it dries up ``then the engine seizes up,'' said Republican Representative Michael Conaway of Texas, who switched his vote last week to support the financial rescue. The inability of a major corporation to renew its short-term loans would have ``a devastating impact on the
economy.''
Even as confidence grew that Congress would pass the bailout, banks hoarded cash, indicating the proposed purchases of devalued mortgage assets may not be able to stop the credit crunch from widening.
No `Quick
Turnaround' ``It's not going to solve all the problems, and don't expect a quick turnaround,'' said Mickey Levy, chief economist at Bank of America Corp. in New York. ``This is the typical time of the credit cycle where banks are tightening lending standards.''
Corporate bond sales shrank to $1.25 billion last week, capping the worst four-week slump since 1999.
Lending between banks is also seizing up. The gap between the three-month London interbank offered rate and the overnight indexed swap rate, a gauge of cash scarcity among banks, climbed to a record 2.80 percentage points three days
ago.
Republican Representative Jerry Moran of Kansas, in an interview with Bloomberg Television, encouraged the Fed to consider guaranteeing loans between banks.
``We will continue to use all of the powers at our disposal to mitigate credit-market disruptions,'' Bernanke said
in a statement Oct. 3. He delivers a speech on the economy tomorrow.
Fed Powers
The central bank has power to extend credit to any company under ``unusual and exigent circumstances.'' It already
used that authority this year to avert the failure of Bear Stearns Cos., take over American International Group
Inc. and lend to banks to shore up money-market funds. The Treasury last month set up a program selling debt to
help the Fed expand its balance sheet.
Investors anticipate the Fed will cut rates in an attempt to lower borrowing costs and encourage banks to lend.
Futures prices show 100 percent odds of a half-point reduction in the 2 percent benchmark rate at or before the
Oct. 28-29 policy meeting.
State and local governments having trouble meeting cash needs may push for help. Schwarzenegger told Paulson in an
Oct. 2 letter that California and other states ``may be forced to turn to the federal Treasury for short-term
financing'' if the crisis doesn't ease.
``If states can't access the credit markets because of market conditions, then the Treasury should consider
providing it,'' said Ben Watkins, a member of the debt committee of the Government Finance Officers Association, a
group of public finance officials.
Services Endangered
Without funding, states ``can't operate the health-care system, schools, roads and other services they provide,''
said Watkins, who also serves as head of Florida's bond sales.
Market disruptions forced Oregon to cancel a $21 million sale of bonds for the state university system and several
other planned issues are in jeopardy, State Treasurer Randall Edwards said. ``There's really no market, there's no
buyers out there,'' Edwards said.
State and local government funding ``has to be a concern for Bernanke and Paulson,'' said Adam Posen, deputy
director of the Peterson Institute for International Economics in Washington. ``There are two issues now: stop the
immediate panic and restructure the financial system.''
Those aren't the only areas Fed and Treasury officials may be concerned about.
Since 2005, New York Fed President Timothy Geithner has been pushing to reduce risks in the $54.6 trillion credit-
default swaps market. Concerns rose after the Fed had to rescue AIG with an $85 billion loan to cover obligations
at a unit that sold protection against debt default.
``We're not at the end of the line yet,'' said former Fed Governor Lyle Gramley, now senior economic adviser at
Stanford Group Co. in Washington.
crisis to be just as chilling as last month's downfall of Wall Street titans: its spread to corporate America and state and local
governments.
Companies from Goodyear Tire & Rubber Co. and Duke Energy Corp. to Gannett Co. and Caterpillar Inc. are being forced to tap emergency credit lines or pay more to borrow as investors flee even firms with few links to the subprime-mortgage debacle. California Governor Arnold Schwarzenegger says his and other states may need emergency federal loans as funding dries
up.
A cash crunch on Main Street would endanger companies' basic functions -- paying suppliers, making payrolls and rolling over debt. The widening of the crisis suggests that Bernanke and Treasury Secretary Henry Paulson may have further fires to put out even as the Treasury sets up the $700 billion financial- industry rescue plan approved last
week.
``The rest of the economy is clearly being affected right now by the tightness of credit,'' said Kurt Karl, chief U.S. economist at Swiss Reinsurance Co. in New York. ``It's just gathering momentum in the wrong direction.''
The market for commercial paper, which typically matures in 270 days or less and is used to help pay for expenses such as payroll and rent, shrank to a three-year low of $1.6 trillion in the week to Oct. 1, Fed data show.
Gannett, the largest U.S. newspaper publisher, said Oct. 1 it drew on a revolving credit line to ensure it had funds to repay its commercial paper.
Duke,Caterpillar Duke Energy, the owner of utilities in five U.S. states, last week tapped about $1 billion from a $3.2 billion credit agreement after concluding it may not be able to meet its plan for new financing. Caterpillar, the biggest
maker of earthmoving equipment, had to pay the biggest premiums over Treasuries in at least three decades at a sale
of five-year and 10-year notes.
``Credit is the lubricant that oils the engine of the economy'' and if it dries up ``then the engine seizes up,'' said Republican Representative Michael Conaway of Texas, who switched his vote last week to support the financial rescue. The inability of a major corporation to renew its short-term loans would have ``a devastating impact on the
economy.''
Even as confidence grew that Congress would pass the bailout, banks hoarded cash, indicating the proposed purchases of devalued mortgage assets may not be able to stop the credit crunch from widening.
No `Quick
Turnaround' ``It's not going to solve all the problems, and don't expect a quick turnaround,'' said Mickey Levy, chief economist at Bank of America Corp. in New York. ``This is the typical time of the credit cycle where banks are tightening lending standards.''
Corporate bond sales shrank to $1.25 billion last week, capping the worst four-week slump since 1999.
Lending between banks is also seizing up. The gap between the three-month London interbank offered rate and the overnight indexed swap rate, a gauge of cash scarcity among banks, climbed to a record 2.80 percentage points three days
ago.
Republican Representative Jerry Moran of Kansas, in an interview with Bloomberg Television, encouraged the Fed to consider guaranteeing loans between banks.
``We will continue to use all of the powers at our disposal to mitigate credit-market disruptions,'' Bernanke said
in a statement Oct. 3. He delivers a speech on the economy tomorrow.
Fed Powers
The central bank has power to extend credit to any company under ``unusual and exigent circumstances.'' It already
used that authority this year to avert the failure of Bear Stearns Cos., take over American International Group
Inc. and lend to banks to shore up money-market funds. The Treasury last month set up a program selling debt to
help the Fed expand its balance sheet.
Investors anticipate the Fed will cut rates in an attempt to lower borrowing costs and encourage banks to lend.
Futures prices show 100 percent odds of a half-point reduction in the 2 percent benchmark rate at or before the
Oct. 28-29 policy meeting.
State and local governments having trouble meeting cash needs may push for help. Schwarzenegger told Paulson in an
Oct. 2 letter that California and other states ``may be forced to turn to the federal Treasury for short-term
financing'' if the crisis doesn't ease.
``If states can't access the credit markets because of market conditions, then the Treasury should consider
providing it,'' said Ben Watkins, a member of the debt committee of the Government Finance Officers Association, a
group of public finance officials.
Services Endangered
Without funding, states ``can't operate the health-care system, schools, roads and other services they provide,''
said Watkins, who also serves as head of Florida's bond sales.
Market disruptions forced Oregon to cancel a $21 million sale of bonds for the state university system and several
other planned issues are in jeopardy, State Treasurer Randall Edwards said. ``There's really no market, there's no
buyers out there,'' Edwards said.
State and local government funding ``has to be a concern for Bernanke and Paulson,'' said Adam Posen, deputy
director of the Peterson Institute for International Economics in Washington. ``There are two issues now: stop the
immediate panic and restructure the financial system.''
Those aren't the only areas Fed and Treasury officials may be concerned about.
Since 2005, New York Fed President Timothy Geithner has been pushing to reduce risks in the $54.6 trillion credit-
default swaps market. Concerns rose after the Fed had to rescue AIG with an $85 billion loan to cover obligations
at a unit that sold protection against debt default.
``We're not at the end of the line yet,'' said former Fed Governor Lyle Gramley, now senior economic adviser at
Stanford Group Co. in Washington.
Deflation May Be Next Threat as Commodities, Asset
As Federal Reserve Chairman Ben Bernanke and his global colleagues fight the worst financial crisis since the 1930s, one danger is looming larger by the day:deflation.
With asset markets tumbling, commodity prices plunging the most in 50 years and banks keeping a tighter grip on credit, the ingredients for a sustained period of falling prices are coalescing. While inflation is still a concern for many policy makers only months after oil and food prices peaked, the risk is their patchwork of rescue and stimulus packages will fail, and prices will start to fall throughout the broader economy.
``The ghost of deflation could be dragged out of the closet again in coming months,'' says Joerg Kraemer, chief economist at Commerzbank AG in London.
A global recession is already looking more likely, with the credit freeze stirring memories of Japan's decade-long struggle with deflation in the 1990s. So European Central Bank President Jean-Claude Trichet and Bank of England Governor Mervyn King may be forced to follow Bernanke, whose Fed has chopped its benchmark rate by 3.25 percentage points since August 2007 to 2 percent -- its most aggressive round of easing in two decades.
The deflation scenario might go like this: Banks worldwide, stung by $588 billion in writedowns related to toxic assets -- especially mortgage-related securities -- will further reduce the flow of credit, strangling growth. That will push house prices lower, forcing additional losses and making banks even more reluctant to lend. As the credit crisis worsens, businesses will find it almost impossible to raise prices.
A `Vicious' Cycle
``A vicious deflationary cycle'' could then ensue, says Tony Tan, deputy chairman of Government of Singapore Investment Corp., a sovereign-wealth fund that oversees more than $100 billion.
Prices are already falling in parts of the world economy.
Home values dropped more than 10 percent in the U.K. and in the U.S. in the past year. Oil, copper and corn drove commodities toward their biggest weekly decline since at least 1956 on Oct.3, with the Reuters/Jefferies CRB Index of 19 raw materials tumbling 10.4 percent. The Baltic Dry Index, a measure of commodity shipping costs, has dropped 75 percent since May.
``We are certainly more worried about deflation than inflation,'' says David Owen, chief European economist at Dresdner Kleinwort Group Ltd. in London. Central bankers need to ``get rates down and keep them there for quite some time,'' he says.
Aggressive Easing
Trichet said Oct. 2 that European policy makers have considered reversing their decision in July to raise their benchmark rate by a quarter point to 4.25 percent. Forty-six of the 61 economists surveyed by Bloomberg News expect the Bank of England to cut its key rate by at least a quarter point Oct. 9 from 5 percent.
The Fed has already responded to one deflationary scare this decade. With inflation approaching 1 percent in 2003, then- Chairman Alan Greenspan slashed its rate to a 45-year low of 1 percent and kept it there for a year, which its critics say helped fuel the property and credit boom that is now unraveling.
This time, the crisis is an increasingly dysfunctional banking system that may not be able to continue making loans that grease economic activity. Such a pullback, combined with slowing growth and falling asset and commodity prices, makes deflation more of a threat, Owen says.
Restricting Credit
Spooked by the collapse of Lehman Brothers Holdings Inc. and other institutions, banks are restricting access to credit.
The London interbank offered rate, or Libor, they charge each other for three-month loans in dollars rose to 4.33 percent on Oct, 3, the highest since January.
Not all economists share Owen's gloomy outlook. Some say Bernanke and other central bankers have learned the lessons of Japan and the Great Depression so well they will do everything necessary to head off trouble.
Former Fed Governor Lyle Gramley says that while deflation is a risk ``if we were to go into a very, very prolonged recession and nobody did anything about it,'' he is ``not worried,'' because he's confident the Fed will act ``very, very, very aggressively.''
Bernanke, who has studied the Great Depression since he was a graduate student, has said that one key reason the U.S. stock- market crash of 1929 had such severe consequences was that lenders were forced to close and the banking system was deprived of liquidity.
`Lost Decade'
He has also studied Japan's ``lost decade '' of deflation, which was partly caused by a banking crisis, and has argued that its policy makers waited too long to respond to a stock-and- property price crash at the start of the 1990s. In a 2002 speech that earned him the nickname ``Helicopter Ben,'' he said governments and central banks must respond immediately to such a deflationary shock by dropping money into the banking system.
The caution of Japan's leaders -- who waited until 1999 before using taxpayers' money to bail out the banks -- cost their economy dearly. Lending shrank, unemployment more than doubled to 5.5 percent, and Japan experienced three recessions between 1990 and 2002. From 1997 to 2007, consumer prices dropped 2.2 percent. In the U.S., prices climbed 29 percent in the same period.
When credit markets started seizing up in August 2007, Bernanke set up $1.4 trillion in emergency borrowing for financial institutions. The ECB, the Bank of Japan and other central banks have set up similar lifelines. On Oct. 3, President George W. Bush signed into law Treasury Secretary Henry Paulson's $700 billion bank-rescue plan.
`Last Resort'
Commerzbank's Kraemer says the Fed might also consider further easing collateral requirements or purchases of government bonds ``as a last resort.''
Kraemer says he thinks a slowdown in inflation is more likely than deflation. The surge in commodity prices earlier this year drove inflation in the U.S., Europe and Asia to the strongest pace in at least a decade. Strategists have pointed to Paulson's rescue plan as an additional risk.
Japanese core consumer prices, which exclude fresh food, climbed 2.4 percent in August from August 2007. The U.S. core rate, which strips out food and energy, rose 2.5 percent from a year earlier.
Still, deflationary forces are mounting in the U.S. and other parts of the world economy. In Britain, the Nationwide Building Society says house prices have dropped 12.4 percent in the past year as banks restrict the supply of mortgages, putting the economy on course for its first recession since the early 1990s.
Deflationary Consequences
``The risk we must be careful not to underestimate is the deflationary consequences of the credit crisis,'' Bank of England Deputy Governor John Gieve said last month.
In the U.S., prices manufacturers paid for materials last month plunged the most since at least 1948, with the Institute for Supply Management's index dropping 23.5 points to 53.5 points.
The breakeven rate on U.S. 10-year Treasuries, a measure of price expectations, dropped to 1.5 percent from 2.6 percent in July. Japan is the only country whose bond market implies a lower inflation rate than the U.S.
All this is likely to make the Fed resume rate cuts, says Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh, Pennsylvania.
``If we're going over a cliff, we're not going to go over a cliff with a 2 percent federal funds rate,'' he says. ``What's the point of holding back?''
With asset markets tumbling, commodity prices plunging the most in 50 years and banks keeping a tighter grip on credit, the ingredients for a sustained period of falling prices are coalescing. While inflation is still a concern for many policy makers only months after oil and food prices peaked, the risk is their patchwork of rescue and stimulus packages will fail, and prices will start to fall throughout the broader economy.
``The ghost of deflation could be dragged out of the closet again in coming months,'' says Joerg Kraemer, chief economist at Commerzbank AG in London.
A global recession is already looking more likely, with the credit freeze stirring memories of Japan's decade-long struggle with deflation in the 1990s. So European Central Bank President Jean-Claude Trichet and Bank of England Governor Mervyn King may be forced to follow Bernanke, whose Fed has chopped its benchmark rate by 3.25 percentage points since August 2007 to 2 percent -- its most aggressive round of easing in two decades.
The deflation scenario might go like this: Banks worldwide, stung by $588 billion in writedowns related to toxic assets -- especially mortgage-related securities -- will further reduce the flow of credit, strangling growth. That will push house prices lower, forcing additional losses and making banks even more reluctant to lend. As the credit crisis worsens, businesses will find it almost impossible to raise prices.
A `Vicious' Cycle
``A vicious deflationary cycle'' could then ensue, says Tony Tan, deputy chairman of Government of Singapore Investment Corp., a sovereign-wealth fund that oversees more than $100 billion.
Prices are already falling in parts of the world economy.
Home values dropped more than 10 percent in the U.K. and in the U.S. in the past year. Oil, copper and corn drove commodities toward their biggest weekly decline since at least 1956 on Oct.3, with the Reuters/Jefferies CRB Index of 19 raw materials tumbling 10.4 percent. The Baltic Dry Index, a measure of commodity shipping costs, has dropped 75 percent since May.
``We are certainly more worried about deflation than inflation,'' says David Owen, chief European economist at Dresdner Kleinwort Group Ltd. in London. Central bankers need to ``get rates down and keep them there for quite some time,'' he says.
Aggressive Easing
Trichet said Oct. 2 that European policy makers have considered reversing their decision in July to raise their benchmark rate by a quarter point to 4.25 percent. Forty-six of the 61 economists surveyed by Bloomberg News expect the Bank of England to cut its key rate by at least a quarter point Oct. 9 from 5 percent.
The Fed has already responded to one deflationary scare this decade. With inflation approaching 1 percent in 2003, then- Chairman Alan Greenspan slashed its rate to a 45-year low of 1 percent and kept it there for a year, which its critics say helped fuel the property and credit boom that is now unraveling.
This time, the crisis is an increasingly dysfunctional banking system that may not be able to continue making loans that grease economic activity. Such a pullback, combined with slowing growth and falling asset and commodity prices, makes deflation more of a threat, Owen says.
Restricting Credit
Spooked by the collapse of Lehman Brothers Holdings Inc. and other institutions, banks are restricting access to credit.
The London interbank offered rate, or Libor, they charge each other for three-month loans in dollars rose to 4.33 percent on Oct, 3, the highest since January.
Not all economists share Owen's gloomy outlook. Some say Bernanke and other central bankers have learned the lessons of Japan and the Great Depression so well they will do everything necessary to head off trouble.
Former Fed Governor Lyle Gramley says that while deflation is a risk ``if we were to go into a very, very prolonged recession and nobody did anything about it,'' he is ``not worried,'' because he's confident the Fed will act ``very, very, very aggressively.''
Bernanke, who has studied the Great Depression since he was a graduate student, has said that one key reason the U.S. stock- market crash of 1929 had such severe consequences was that lenders were forced to close and the banking system was deprived of liquidity.
`Lost Decade'
He has also studied Japan's ``lost decade '' of deflation, which was partly caused by a banking crisis, and has argued that its policy makers waited too long to respond to a stock-and- property price crash at the start of the 1990s. In a 2002 speech that earned him the nickname ``Helicopter Ben,'' he said governments and central banks must respond immediately to such a deflationary shock by dropping money into the banking system.
The caution of Japan's leaders -- who waited until 1999 before using taxpayers' money to bail out the banks -- cost their economy dearly. Lending shrank, unemployment more than doubled to 5.5 percent, and Japan experienced three recessions between 1990 and 2002. From 1997 to 2007, consumer prices dropped 2.2 percent. In the U.S., prices climbed 29 percent in the same period.
When credit markets started seizing up in August 2007, Bernanke set up $1.4 trillion in emergency borrowing for financial institutions. The ECB, the Bank of Japan and other central banks have set up similar lifelines. On Oct. 3, President George W. Bush signed into law Treasury Secretary Henry Paulson's $700 billion bank-rescue plan.
`Last Resort'
Commerzbank's Kraemer says the Fed might also consider further easing collateral requirements or purchases of government bonds ``as a last resort.''
Kraemer says he thinks a slowdown in inflation is more likely than deflation. The surge in commodity prices earlier this year drove inflation in the U.S., Europe and Asia to the strongest pace in at least a decade. Strategists have pointed to Paulson's rescue plan as an additional risk.
Japanese core consumer prices, which exclude fresh food, climbed 2.4 percent in August from August 2007. The U.S. core rate, which strips out food and energy, rose 2.5 percent from a year earlier.
Still, deflationary forces are mounting in the U.S. and other parts of the world economy. In Britain, the Nationwide Building Society says house prices have dropped 12.4 percent in the past year as banks restrict the supply of mortgages, putting the economy on course for its first recession since the early 1990s.
Deflationary Consequences
``The risk we must be careful not to underestimate is the deflationary consequences of the credit crisis,'' Bank of England Deputy Governor John Gieve said last month.
In the U.S., prices manufacturers paid for materials last month plunged the most since at least 1948, with the Institute for Supply Management's index dropping 23.5 points to 53.5 points.
The breakeven rate on U.S. 10-year Treasuries, a measure of price expectations, dropped to 1.5 percent from 2.6 percent in July. Japan is the only country whose bond market implies a lower inflation rate than the U.S.
All this is likely to make the Fed resume rate cuts, says Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh, Pennsylvania.
``If we're going over a cliff, we're not going to go over a cliff with a 2 percent federal funds rate,'' he says. ``What's the point of holding back?''
Dr. Marc Faber Market Commentary October 1, 2008
Should you Trust them?
My very good friend Fred Sheehan, a book author, economist and market historian recently wrote a report entitled “Anatomy of the Bubble” in which he quoted the views, among others, of some senior economic policy members in 2007 – dead ahead of one of the most serious financial crisis in history (Frederick J. Sheehan (Fsheehan@AuContrarian.com;www.AuContrarian.com).
Now, I do not wish to be unfair to our brilliant economic policy makers and business leaders, after all I also made many bad calls in my life as an investment advisor. But I find it rather amusing that the very people who brought about the current financial mess or were major contributors to the problems we are faced with today (Hank Paulson as a CEO of Goldman Sachs and Jack Welsh overseeing GE Capital) should
now be in charge of bailing out the system. Not to mention Ben Bernanke, who significantly aggravated the crisis with his abstruse monetary philosophy and theories! Mr. Bernanke became Fed governor in 2002 and under his influence the Fed fund rate was cut to 1% and left there until June 2004 although the US economic recovery had begun in November 2001. By focusing almost entirely on “core inflation” he failed to observe the increase in commodity prices and the enormous growth in
credit, which led to the housing bubble, and was accompanied by a huge expansion of leverage among financial institutions.
Incidentally, excessive credit growth between 1921 and 1929 was also largely
responsible for the depression of the 1930s and not, as Bernanke thinks,policy errors at the time by the Fed. Then, after having raised the Fed funds rate in baby steps between June 2004 and August 2006, he slashed the rate from 5¼% to 2% between September 2007 and January 2008.
The result was that commodity prices took off (oil rose from $75 before the rate cuts to close to $150 per barrel), the US dollar weakened further and most importantly his rate cuts sent the wrong message to leveraged financial institutions because it gave them a false sense of security. Had the Fed funds rate at the time not been cut, financial institutions would have begun immediately to deleverage. But by cutting rates further not only was leverage actually encouraged but it also fostered another huge increase in the volume of outstanding Credit Default Swaps (CDS) to currently approximately $62 trillion (compared to just $1 trillion in subprime mortgages). The CDS market is, I may add, a far more powerful time bomb than the sub-prime mortgage market and is likely to explode at some point (that’s why AIG had to be bailed out). Ben Stein writing for the New York Times echoes a similar view. According to Stein, “what I hear from my betters in the world of finance, the most serious problems are not with the bundles of subprime mortgages themselves — a large but not lethal quantum as far as I can tell — but with derivatives contracts tied to subprime and other dicey debt. These contracts are superficially an attempt to “insure” against risks of default, hence the name ‘credit-default swaps.’ In fact, they are an immense wager — which anyone with lots of money or borrowing ability can enter — about how mortgage-backed bonds, leveraged loan bonds, student loan bonds, credit card bonds and the like will perform.”
I should add that, unlike what Mr. Paulson says, falling house prices are not the problem. It is the huge leverage that is the problem. If your house is 100% self-financed (no mortgage outstanding) a rise or a decline in the value of your house has no direct economic or financial impact. In short, my view is that the bail-out plan is not addressing the cause of the problem, which is excessive leverage. Moreover, it is unlikely to help struggling homeowners but is designed to encourage even more speculation by financial companies. Peter Boockvar of Millar Tabak is
furthermore concerned that it will lead to further bailout.
According to him, “the Paulson bailout plan is a government bailout of the previously failed government bailout which was a bailout of the previously failed government bailout etc… Each bailout had its own unintended consequences which the next bailout tried to address. Greenspan bailed out the economy after the stock market bubble popped with 1% interest rates which sowed the seeds for the credit bubble. In order to bail us out, Bernanke slashed interest rates to 2% and a dramatic rise in commodity prices ensued. When that bailout didn’t work, he instituted a bailout of the investment banks with the initiation of the TSLF and PDCF credit facilities for investment banks. That slowed down the deleveraging process as it gave the investment banks a false sense of security. I highlight Dick
Fuld’s comments soon after it began where he said it takes the liquidity issue off the table. The lack of dramatic deleveraging brought us to last week’s panic in GS and MS, a failed LEH and a shotgun wedding for MER which led us to the Paulson bailout. The unintended consequence of this bailout will be a much lower US$ and
selloff in the US bond market which will leave us with higher interest rates and higher mortgage rates throw’s the intentions of the Paulson plan out the window. Who will bailout this bailout”?
One solution Boockvar proposes would be for banks to cut their dividends in order to strengthen their capital.
According to Boockvar, “here's a plan for Washington DC, tel l the banksto stop paying dividends to their shareholders. I went back and looked at just 20 of the top banks, including GS, MS and MER and saw that they are paying out $40 Billion per year out in dividends. The lending rule of thumb is $1 of capital can service $10 of lending. That is $400 Billion in lending capacity that can get freed up. That is more than half of the Paulson bailout plan and it costs the taxpayer ZERO.”
Equally critical of the bailout plan is Professor Nouriel Roubini who correctly forecasted the current crisis. In a recent report he writes that the bailout plan “is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks.” Professor Roubini then discusses a recent IMF study:
“A recent IMF study of 42 systemic banking crises across the world provides evidence on how different crises were resolved. First of all only in 32 of the 42 cases there was government financial intervention of any sort; in 10 cases systemic banking crises were resolved without any government financial intervention. Of the 32 cases where the government recapitalized the banking system only seven included a program of purchase of bad assets/loans (like the one proposed by the US Treasury).
In 25 other cases there was no government purchase of such toxic assets.
In 6 cases the government purchased preferred shares; in 4 cases the government purchased common shares; in 11 cases the government purchased subordinated debt; in 12 cases the government injected cash in the banks; in 2 cases credit was extended to the banks; and in 3 cases the government assumed bank liabilities. Even in cases where bad assets were purchased – as in Chile – dividends were suspended and all profits and recoveries had to be used to repurchase the bad assets. Of course in
most cases multiple forms of government recapitalization of banks were used.
But government purchase of bad assets was the exception rather than the rule. It was used only in Mexico, Japan, Bolivia, Czech Republic, Jamaica, Malaysia, and Paraguay. Even in six of these seven cases where the recapitalization of banks occurred via the government purchase of bad assets such recapitalization was a combination of purchase of bad assets together with other forms of recapitalization (such as government purchase of preferred shares or subordinated debt).
In the Scandinavian banking crises (Sweden, Norway, Finland) that are a model of how a banking crisis should be resolved there was not government purchase of bad assets; most of the recapitalization occurred through various injections of public capital in the banking system.
Purchase of toxic assets instead – in most cases in which it was used – made the fiscal cost of the crisis much higher and expensive (as in Japan and Mexico).
Thus the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification. This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer - the common and preferred shareholders and even unsecured creditors of the banks. Even the late addition of some warrants that the government will get in exchange of this massive injection of
public money is only a cosmetic fig leaf of dubious value as the form and size of such warrants is totally vague and fuzzy.
So this rescue plan is a huge and massive bailout of the shareholders and the unsecured creditors of the financial firms (not just banks but also other non bank financial institutions); with $700 billion of taxpayer money the pockets of reckless bankers and investors have been made fatter under the fake argument that bailing out Wall Street was necessary to rescue Main Street from a severe recession. Instead, the restoration of the financial health of distressed financial firms could have been achieved with a cheaper and better use of public money.
Indeed, the plan also does not address the need to recapitalize those financial institutions that are badly undercapitalized: this could have been achieved by using some of the $700 billion to inject public funds in ways other and more effective than a purchase of toxic assets: via public injections of preferred shares into these firms; via required matching injections of Tier 1 capital by current shareholders to make sure that such shareholders take first tier loss in the presence of public recapitalization; via suspension of dividends payments; via a conversion of some of the unsecured debt into equity (a debt for equity swap). All these actions would have implied a much lower fiscal costs for the government as they
would have forced the shareholders and creditors of the banks to contribute to the recapitalization of the banks. So less than $700 billion of public money could have been spent if the private shareholders and creditors had been forced to contribute to the recapitalization; and whatever the size of the public contribution were to be its distribution between purchases of bad assets and more efficient and fair forms of
recapitalization (preferred shares, common shares, sub debt) should have been different.”
In my humble opinion the bailout plan is badly flawed. But what else would you expect from the people Fred Sheehan quoted above! The plan is poorly designed because it fails to address how the excessive leverage in the system can be reduced at a measured pace and it also prevents the market from clearing at prices which would induce the private sector (private equity firms, sovereign and hedge funds) to recapitalize the financial sector. Also, compared to total credit market debt of $51 trillion, a CDS market of $ 62 trillion and a global derivatives market of notional
$1,400 trillion, a bailout with just $700 billion is really just a drop in the bucket. Finally, I very much doubt that the bailout plan does anything to resolve the stress in money and the interbank markets.
David Rosenberg observed that “the spread between 3-month Treasuries and Eurodollars, the so-called TED spread, is the widest in history going back to the mid 1970s, telling us that banks are not lending to each other.
We had news of a large commercial bank failure, and equity stake holders are growing increasingly concerned about several other large deposit taking institutions. Make no mistake, the financial sector is in the midst of a massive deleveraging cycle, and that means it is only a matter of time before the capital market screws – from lines of credit to car loans – are turned even tighter for consumers and nonfinancial businesses”
But enough academic talk! More important for us are the investment implications of the bailout plan (no matter how poorly designed) and the increasingly poor economic conditions around the world. Recently, a reader of this comment (I read all emails I receive), suggested that there is no logic in my call for a stronger US dollar. I think I have tried to demonstrate in earlier reports that in an environment of a relative shrinking global liquidity (declining US current account deficit) the US
dollar should strengthen. However, I should also like to point out that in the world of investments logic should be used only very carefully. For instance, there is no logic in my mind why the Nikkei rose in 1989 to 39,000, why Hong Kong property prices continued to rise into 1997, why the NASDAQ rose above 5,000 in March 2000 and why the recent Damien Hirst sale was such a success. In fact, I need to admit that thinking logically cost me a fortune in 1999 because I had shorted high
tech stocks already in 1998! Also, if you try to understand women logically you will never understand them – now I know that I shall again receive hundreds of emails about not being “politically correct” but trust me; I love them and I speak from some modest experience. I also have to admit that men are no better. As Charles McKay already observed at the beginning of the 19th century, “Men, it has been well said, think in herds;it will be seen that they go mad in herds while they recover their senses slowly and one by one.” Markets can simply move in a direction that seems illogical to us. Take as an example the correlation between US fiscal imbalances and the US dollar. According to Deutsche Bank, there have been two regimes of correlation between US fiscal balance and the dollar: negative -0.63 during 1973-1988 and positive +0.42 since 1988, thereby supporting both views that larger deficits can result in a weaker or a stronger dollar.
Similarly, the US current account deficit exploded between 1981 and 1986 and the US dollar strengthened while after 1986 the current account deficit shrank and the dollar weakened. I suppose that market movements depend largely on the starting point of a market. In 1979, the USD was grossly undervalued and oversold and in 1985 it was grossly overvalued and overbought. Other important factors are of course interest rate differentials, which worked in favor of the USD between 1979 and 1985.
But what I want to emphasize is that whereas in the very long run markets are probably rational and their movements logical, in the short to intermediate term they can be irrational and illogical. Personally, I did not understand why the Baltic Dry Index managed to make a new high in May 2007, when a global economic slowdown was already evident. More rational was the performance of shipping stocks, which failed to confirm the new high in the Baltic Dry Index.
As an aside, I think investors should pay close attention to the reaction of markets to news. If the news is very good and a market or a stock fails to make a new high some caution is in order. Conversely, if the news is very bad and a market or stock fails to make a new low it might be a sign that the bad news has already been discounted by the market.
But getting back to the US dollar, one reason it may perform relatively well is that although the financial news coming out of the US is horrible, financial conditions in Europe could be even worse. According to Daniel Gross, director of the Centre for European Policy Studies in Brussels, “the crucial problem on this side of the Atlantic is that the largest European banks have become not only too big to fail, but also too big to be saved. For example, the total liabilities of Deutsche Bank (leverage ratio over 50!) amount to about €2,000bn (more than Fannie Mae) or more than 80 per cent of the gross domestic product of Germany. This is simply too much for the Bundesbank or even the German state, given that the German budget is bound by the rules of the European Union’s stability pact and the German government cannot order (unlike the US Treasury) its central bank to issue more currency. Similarly, the total liabilities of Barclays of around £1,300bn (leverage ratio 60!) are roughly
equivalent to the GDP of the UK. Fortis Bank has a leverage ratio of “only” 33, but its liabilities are three times the GDP of its home country of Belgium” (emphasis added). In addition, I am not sure investors fully appreciate that earnings in emerging economies could be decimated next year.
I should add that earnings in Latin America are way above the trend-line of the last 20 years and vulnerable to significant downward adjustments.
So, whereas we are all aware of the problems in the US, emerging market investors who were dreaming of the decoupling theme could be in for some rude surprises (a friend of mine, Jim Walker, a top economist in Asia, thinks that in 2009 economic growth in Asia could decline to just 2%). Obviously, disappointing growth, which also seems to be indicated by the collapse in the Baltic Dry Index, would also weigh in on emerging market currencies.
Concerning the US stock market we note that there are several indicators, which suggest that a bottom should be reached shortly or has already been reached. New yearly lows exceed new highs by a wide margin, volume has picked up and volatility is extremely high.
In addition, sentiment is now extremely bearish. I should add that the same way in a bull market sentiment can remain positive for a long time, in bear markets sentiment can stay negative for an extended period of time (please note how bullish sentiment remained extremely high in 2004 as the bull market was unfolding)
Lastly, as I indicated in earlier reports, a precondition for a low was the breakdown of until recently strong stocks such as Apple, Research in Motion, Amazon.com as well as of cyclical stocks such as steels, shipping and iron ore companies. So, whereas I find it hard to make a case for a strong bull market (new highs are almost out of the question) I could easily envision a powerful bear market rally beginning in October, which could propel the S&P 500 up between 10% and 15% and the extremely over-sold emerging markets by 20% or so.
As always, I continue to recommend investors to accumulate physical gold.
My very good friend Fred Sheehan, a book author, economist and market historian recently wrote a report entitled “Anatomy of the Bubble” in which he quoted the views, among others, of some senior economic policy members in 2007 – dead ahead of one of the most serious financial crisis in history (Frederick J. Sheehan (Fsheehan@AuContrarian.com;www.AuContrarian.com).
Now, I do not wish to be unfair to our brilliant economic policy makers and business leaders, after all I also made many bad calls in my life as an investment advisor. But I find it rather amusing that the very people who brought about the current financial mess or were major contributors to the problems we are faced with today (Hank Paulson as a CEO of Goldman Sachs and Jack Welsh overseeing GE Capital) should
now be in charge of bailing out the system. Not to mention Ben Bernanke, who significantly aggravated the crisis with his abstruse monetary philosophy and theories! Mr. Bernanke became Fed governor in 2002 and under his influence the Fed fund rate was cut to 1% and left there until June 2004 although the US economic recovery had begun in November 2001. By focusing almost entirely on “core inflation” he failed to observe the increase in commodity prices and the enormous growth in
credit, which led to the housing bubble, and was accompanied by a huge expansion of leverage among financial institutions.
Incidentally, excessive credit growth between 1921 and 1929 was also largely
responsible for the depression of the 1930s and not, as Bernanke thinks,policy errors at the time by the Fed. Then, after having raised the Fed funds rate in baby steps between June 2004 and August 2006, he slashed the rate from 5¼% to 2% between September 2007 and January 2008.
The result was that commodity prices took off (oil rose from $75 before the rate cuts to close to $150 per barrel), the US dollar weakened further and most importantly his rate cuts sent the wrong message to leveraged financial institutions because it gave them a false sense of security. Had the Fed funds rate at the time not been cut, financial institutions would have begun immediately to deleverage. But by cutting rates further not only was leverage actually encouraged but it also fostered another huge increase in the volume of outstanding Credit Default Swaps (CDS) to currently approximately $62 trillion (compared to just $1 trillion in subprime mortgages). The CDS market is, I may add, a far more powerful time bomb than the sub-prime mortgage market and is likely to explode at some point (that’s why AIG had to be bailed out). Ben Stein writing for the New York Times echoes a similar view. According to Stein, “what I hear from my betters in the world of finance, the most serious problems are not with the bundles of subprime mortgages themselves — a large but not lethal quantum as far as I can tell — but with derivatives contracts tied to subprime and other dicey debt. These contracts are superficially an attempt to “insure” against risks of default, hence the name ‘credit-default swaps.’ In fact, they are an immense wager — which anyone with lots of money or borrowing ability can enter — about how mortgage-backed bonds, leveraged loan bonds, student loan bonds, credit card bonds and the like will perform.”
I should add that, unlike what Mr. Paulson says, falling house prices are not the problem. It is the huge leverage that is the problem. If your house is 100% self-financed (no mortgage outstanding) a rise or a decline in the value of your house has no direct economic or financial impact. In short, my view is that the bail-out plan is not addressing the cause of the problem, which is excessive leverage. Moreover, it is unlikely to help struggling homeowners but is designed to encourage even more speculation by financial companies. Peter Boockvar of Millar Tabak is
furthermore concerned that it will lead to further bailout.
According to him, “the Paulson bailout plan is a government bailout of the previously failed government bailout which was a bailout of the previously failed government bailout etc… Each bailout had its own unintended consequences which the next bailout tried to address. Greenspan bailed out the economy after the stock market bubble popped with 1% interest rates which sowed the seeds for the credit bubble. In order to bail us out, Bernanke slashed interest rates to 2% and a dramatic rise in commodity prices ensued. When that bailout didn’t work, he instituted a bailout of the investment banks with the initiation of the TSLF and PDCF credit facilities for investment banks. That slowed down the deleveraging process as it gave the investment banks a false sense of security. I highlight Dick
Fuld’s comments soon after it began where he said it takes the liquidity issue off the table. The lack of dramatic deleveraging brought us to last week’s panic in GS and MS, a failed LEH and a shotgun wedding for MER which led us to the Paulson bailout. The unintended consequence of this bailout will be a much lower US$ and
selloff in the US bond market which will leave us with higher interest rates and higher mortgage rates throw’s the intentions of the Paulson plan out the window. Who will bailout this bailout”?
One solution Boockvar proposes would be for banks to cut their dividends in order to strengthen their capital.
According to Boockvar, “here's a plan for Washington DC, tel l the banksto stop paying dividends to their shareholders. I went back and looked at just 20 of the top banks, including GS, MS and MER and saw that they are paying out $40 Billion per year out in dividends. The lending rule of thumb is $1 of capital can service $10 of lending. That is $400 Billion in lending capacity that can get freed up. That is more than half of the Paulson bailout plan and it costs the taxpayer ZERO.”
Equally critical of the bailout plan is Professor Nouriel Roubini who correctly forecasted the current crisis. In a recent report he writes that the bailout plan “is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks.” Professor Roubini then discusses a recent IMF study:
“A recent IMF study of 42 systemic banking crises across the world provides evidence on how different crises were resolved. First of all only in 32 of the 42 cases there was government financial intervention of any sort; in 10 cases systemic banking crises were resolved without any government financial intervention. Of the 32 cases where the government recapitalized the banking system only seven included a program of purchase of bad assets/loans (like the one proposed by the US Treasury).
In 25 other cases there was no government purchase of such toxic assets.
In 6 cases the government purchased preferred shares; in 4 cases the government purchased common shares; in 11 cases the government purchased subordinated debt; in 12 cases the government injected cash in the banks; in 2 cases credit was extended to the banks; and in 3 cases the government assumed bank liabilities. Even in cases where bad assets were purchased – as in Chile – dividends were suspended and all profits and recoveries had to be used to repurchase the bad assets. Of course in
most cases multiple forms of government recapitalization of banks were used.
But government purchase of bad assets was the exception rather than the rule. It was used only in Mexico, Japan, Bolivia, Czech Republic, Jamaica, Malaysia, and Paraguay. Even in six of these seven cases where the recapitalization of banks occurred via the government purchase of bad assets such recapitalization was a combination of purchase of bad assets together with other forms of recapitalization (such as government purchase of preferred shares or subordinated debt).
In the Scandinavian banking crises (Sweden, Norway, Finland) that are a model of how a banking crisis should be resolved there was not government purchase of bad assets; most of the recapitalization occurred through various injections of public capital in the banking system.
Purchase of toxic assets instead – in most cases in which it was used – made the fiscal cost of the crisis much higher and expensive (as in Japan and Mexico).
Thus the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification. This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer - the common and preferred shareholders and even unsecured creditors of the banks. Even the late addition of some warrants that the government will get in exchange of this massive injection of
public money is only a cosmetic fig leaf of dubious value as the form and size of such warrants is totally vague and fuzzy.
So this rescue plan is a huge and massive bailout of the shareholders and the unsecured creditors of the financial firms (not just banks but also other non bank financial institutions); with $700 billion of taxpayer money the pockets of reckless bankers and investors have been made fatter under the fake argument that bailing out Wall Street was necessary to rescue Main Street from a severe recession. Instead, the restoration of the financial health of distressed financial firms could have been achieved with a cheaper and better use of public money.
Indeed, the plan also does not address the need to recapitalize those financial institutions that are badly undercapitalized: this could have been achieved by using some of the $700 billion to inject public funds in ways other and more effective than a purchase of toxic assets: via public injections of preferred shares into these firms; via required matching injections of Tier 1 capital by current shareholders to make sure that such shareholders take first tier loss in the presence of public recapitalization; via suspension of dividends payments; via a conversion of some of the unsecured debt into equity (a debt for equity swap). All these actions would have implied a much lower fiscal costs for the government as they
would have forced the shareholders and creditors of the banks to contribute to the recapitalization of the banks. So less than $700 billion of public money could have been spent if the private shareholders and creditors had been forced to contribute to the recapitalization; and whatever the size of the public contribution were to be its distribution between purchases of bad assets and more efficient and fair forms of
recapitalization (preferred shares, common shares, sub debt) should have been different.”
In my humble opinion the bailout plan is badly flawed. But what else would you expect from the people Fred Sheehan quoted above! The plan is poorly designed because it fails to address how the excessive leverage in the system can be reduced at a measured pace and it also prevents the market from clearing at prices which would induce the private sector (private equity firms, sovereign and hedge funds) to recapitalize the financial sector. Also, compared to total credit market debt of $51 trillion, a CDS market of $ 62 trillion and a global derivatives market of notional
$1,400 trillion, a bailout with just $700 billion is really just a drop in the bucket. Finally, I very much doubt that the bailout plan does anything to resolve the stress in money and the interbank markets.
David Rosenberg observed that “the spread between 3-month Treasuries and Eurodollars, the so-called TED spread, is the widest in history going back to the mid 1970s, telling us that banks are not lending to each other.
We had news of a large commercial bank failure, and equity stake holders are growing increasingly concerned about several other large deposit taking institutions. Make no mistake, the financial sector is in the midst of a massive deleveraging cycle, and that means it is only a matter of time before the capital market screws – from lines of credit to car loans – are turned even tighter for consumers and nonfinancial businesses”
But enough academic talk! More important for us are the investment implications of the bailout plan (no matter how poorly designed) and the increasingly poor economic conditions around the world. Recently, a reader of this comment (I read all emails I receive), suggested that there is no logic in my call for a stronger US dollar. I think I have tried to demonstrate in earlier reports that in an environment of a relative shrinking global liquidity (declining US current account deficit) the US
dollar should strengthen. However, I should also like to point out that in the world of investments logic should be used only very carefully. For instance, there is no logic in my mind why the Nikkei rose in 1989 to 39,000, why Hong Kong property prices continued to rise into 1997, why the NASDAQ rose above 5,000 in March 2000 and why the recent Damien Hirst sale was such a success. In fact, I need to admit that thinking logically cost me a fortune in 1999 because I had shorted high
tech stocks already in 1998! Also, if you try to understand women logically you will never understand them – now I know that I shall again receive hundreds of emails about not being “politically correct” but trust me; I love them and I speak from some modest experience. I also have to admit that men are no better. As Charles McKay already observed at the beginning of the 19th century, “Men, it has been well said, think in herds;it will be seen that they go mad in herds while they recover their senses slowly and one by one.” Markets can simply move in a direction that seems illogical to us. Take as an example the correlation between US fiscal imbalances and the US dollar. According to Deutsche Bank, there have been two regimes of correlation between US fiscal balance and the dollar: negative -0.63 during 1973-1988 and positive +0.42 since 1988, thereby supporting both views that larger deficits can result in a weaker or a stronger dollar.
Similarly, the US current account deficit exploded between 1981 and 1986 and the US dollar strengthened while after 1986 the current account deficit shrank and the dollar weakened. I suppose that market movements depend largely on the starting point of a market. In 1979, the USD was grossly undervalued and oversold and in 1985 it was grossly overvalued and overbought. Other important factors are of course interest rate differentials, which worked in favor of the USD between 1979 and 1985.
But what I want to emphasize is that whereas in the very long run markets are probably rational and their movements logical, in the short to intermediate term they can be irrational and illogical. Personally, I did not understand why the Baltic Dry Index managed to make a new high in May 2007, when a global economic slowdown was already evident. More rational was the performance of shipping stocks, which failed to confirm the new high in the Baltic Dry Index.
As an aside, I think investors should pay close attention to the reaction of markets to news. If the news is very good and a market or a stock fails to make a new high some caution is in order. Conversely, if the news is very bad and a market or stock fails to make a new low it might be a sign that the bad news has already been discounted by the market.
But getting back to the US dollar, one reason it may perform relatively well is that although the financial news coming out of the US is horrible, financial conditions in Europe could be even worse. According to Daniel Gross, director of the Centre for European Policy Studies in Brussels, “the crucial problem on this side of the Atlantic is that the largest European banks have become not only too big to fail, but also too big to be saved. For example, the total liabilities of Deutsche Bank (leverage ratio over 50!) amount to about €2,000bn (more than Fannie Mae) or more than 80 per cent of the gross domestic product of Germany. This is simply too much for the Bundesbank or even the German state, given that the German budget is bound by the rules of the European Union’s stability pact and the German government cannot order (unlike the US Treasury) its central bank to issue more currency. Similarly, the total liabilities of Barclays of around £1,300bn (leverage ratio 60!) are roughly
equivalent to the GDP of the UK. Fortis Bank has a leverage ratio of “only” 33, but its liabilities are three times the GDP of its home country of Belgium” (emphasis added). In addition, I am not sure investors fully appreciate that earnings in emerging economies could be decimated next year.
I should add that earnings in Latin America are way above the trend-line of the last 20 years and vulnerable to significant downward adjustments.
So, whereas we are all aware of the problems in the US, emerging market investors who were dreaming of the decoupling theme could be in for some rude surprises (a friend of mine, Jim Walker, a top economist in Asia, thinks that in 2009 economic growth in Asia could decline to just 2%). Obviously, disappointing growth, which also seems to be indicated by the collapse in the Baltic Dry Index, would also weigh in on emerging market currencies.
Concerning the US stock market we note that there are several indicators, which suggest that a bottom should be reached shortly or has already been reached. New yearly lows exceed new highs by a wide margin, volume has picked up and volatility is extremely high.
In addition, sentiment is now extremely bearish. I should add that the same way in a bull market sentiment can remain positive for a long time, in bear markets sentiment can stay negative for an extended period of time (please note how bullish sentiment remained extremely high in 2004 as the bull market was unfolding)
Lastly, as I indicated in earlier reports, a precondition for a low was the breakdown of until recently strong stocks such as Apple, Research in Motion, Amazon.com as well as of cyclical stocks such as steels, shipping and iron ore companies. So, whereas I find it hard to make a case for a strong bull market (new highs are almost out of the question) I could easily envision a powerful bear market rally beginning in October, which could propel the S&P 500 up between 10% and 15% and the extremely over-sold emerging markets by 20% or so.
As always, I continue to recommend investors to accumulate physical gold.
Monday, October 6, 2008
央行发言人称从未发布中国2000亿助美救市消息
多家中国媒体今天都引述报道称央行新闻发言人白力对于“中国央行2000亿助美救市消息”，表示“我是第一次听说这种说法”。
联合早报网今天也对此报道做了转载，不过中国央行职员却致电给本网，表示媒体在转载该报道有误。
本网在网上搜讯该文章时发现，海外媒体今天都曾引述晨报和第一财经日报对该消息的报道，不过央行的说法在两则报道都不相同。
凤凰网在凌晨4时26分引述晨报的报道，该媒体如此报道：“晨报就此事致电央行新闻处发言人白力，他却表示是“第一次听说这种说法”。他还说:“我们从未发表过任何有关认购的信息，而对于救市计划通过的回应我们已经在银行网站上予以发布”。他同时告诉记者，虽然对于该媒体报道的信源不得而知，但是他认为，中国参与稳定国际金融市场的工作，应当不会是仅仅购买美国国债这么简单。”
该报道也被多家中国及国外媒体转载。
较迟第一财经日报的报道：“不过，在记者致电央行新闻发言人时，其表示不能证实该消息，不予置评。”
另外，法制晚报在中午时发表的报道则引述白力称：“今日上午，记者致电央行新闻发言人白力，他告诉记者，他们也注意到了这一消息，目前唯一可以确定的是，央行未做过此类表态。 不过白力告诉记者，关于美国救市举措，央行的态度还是希望美国金融市场稳定，希望美国经济健康发展。 白力说，中国方面希望这一法案能尽快得以实施并收到积极成效，以稳定美国金融市场和全球金融市场，恢复投资者信心。在稳定金融市场方面，中美两国有着共同利益。”
5日，香港明报的报道道称，一旦美国开始筹集资金“救市”，中国将可能认购多达2000亿美元美国国债，协助美国渡过难关。
该媒体报道分析认为，作为美国国债近年最大买家的中国，已成为美国救市融资的成败关键。据该媒体称，“中国已向美国承诺购入救市方案所需的融资金额中的2000亿美元”，并同时透露“救巿方案首阶段筹集的2500亿美元，中国会购入其中700亿至800亿美元美国国债”。但在报道这一消息时，该媒体并未说明这则消息的来源。
联合早报网今天也对此报道做了转载，不过中国央行职员却致电给本网，表示媒体在转载该报道有误。
本网在网上搜讯该文章时发现，海外媒体今天都曾引述晨报和第一财经日报对该消息的报道，不过央行的说法在两则报道都不相同。
凤凰网在凌晨4时26分引述晨报的报道，该媒体如此报道：“晨报就此事致电央行新闻处发言人白力，他却表示是“第一次听说这种说法”。他还说:“我们从未发表过任何有关认购的信息，而对于救市计划通过的回应我们已经在银行网站上予以发布”。他同时告诉记者，虽然对于该媒体报道的信源不得而知，但是他认为，中国参与稳定国际金融市场的工作，应当不会是仅仅购买美国国债这么简单。”
该报道也被多家中国及国外媒体转载。
较迟第一财经日报的报道：“不过，在记者致电央行新闻发言人时，其表示不能证实该消息，不予置评。”
另外，法制晚报在中午时发表的报道则引述白力称：“今日上午，记者致电央行新闻发言人白力，他告诉记者，他们也注意到了这一消息，目前唯一可以确定的是，央行未做过此类表态。 不过白力告诉记者，关于美国救市举措，央行的态度还是希望美国金融市场稳定，希望美国经济健康发展。 白力说，中国方面希望这一法案能尽快得以实施并收到积极成效，以稳定美国金融市场和全球金融市场，恢复投资者信心。在稳定金融市场方面，中美两国有着共同利益。”
5日，香港明报的报道道称，一旦美国开始筹集资金“救市”，中国将可能认购多达2000亿美元美国国债，协助美国渡过难关。
该媒体报道分析认为，作为美国国债近年最大买家的中国，已成为美国救市融资的成败关键。据该媒体称，“中国已向美国承诺购入救市方案所需的融资金额中的2000亿美元”，并同时透露“救巿方案首阶段筹集的2500亿美元，中国会购入其中700亿至800亿美元美国国债”。但在报道这一消息时，该媒体并未说明这则消息的来源。
世界金融危机中国将成赢家？
中国总理温家宝上周末在天津出席世界经济论坛之“夏季达沃斯年会”时高调提出：面对当前的危机，各国要加强合作，只有合作才能有力地应对危机；在经济困难面前，信心比货币、黄金还要贵重。
在谈到国内经济时，他形容中国劳动力和资金供给充裕，基本面没有变化，消费和投资需求持续增长的潜力还很大。
当时，国内主流媒体尚未积极解读温总理的这场演讲的含义。但到最近这一两天，中国的所谓合作即出手参与国际救市的信号已明朗化。
更多媒体刊载了更早前，温家宝9月24日在纽约与美国经济金融界知名人士对话的全文。其中包括温家宝的话：“中国对外传递的是稳定和合作的信号。尽管我们也存在对资金安全问题的关切，但我们对美国经济还是有信心，愿发挥自己的作用。”
官方媒体新华社在9月30日的电讯中报道上述对话，标题是《温家宝总理：已准备好参与国际救市》。
拥有世界第一，总额超过1万8000亿美元的雄厚外汇储备；又持有仅次于日本的美国债券数额，在本次世界金融危机不断深化的当儿，美国金融深陷泥泽，外界的期盼慢慢转移到中国身上。美国联储局前主席格林斯潘形容，这是“百年一遇”的金融危机，对中国而言，这可能也是一个参与世界金融体系，拥有美国金融资产，直接与华尔街金融挂钩的历史性时机。
目前，中国准备出手已没有悬念，问题是在于中国可能出手的时机与方式，以及过程中如何做明智的投资判断，并应对处理西方世界对中国的战略性的疑虑。显然下周四的中共十七届三中全会，将是讨论这一议题的时机。
上个月中，香港凤凰卫视的财经评论员认为，中国可以考虑与新加坡淡马锡控股合作。
在微观的领域里，中国也在积极观察国际局势，以求在未来的全球金融监管秩序中，占据更有利位置。在上周末的达沃斯年会里，美国花旗银行总裁罗兹证实，中国银监会和央行以及美联储正紧密合作，可能会采取一些措施。银监会主席刘明康也透露，中国将充分利用这次机会来提升银监会的信息体系，银行业也正准备吸纳最近在华尔街失业的国际人才，请他们担任独立董事或者是高管层成员。
换句话说，一些原本在华尔街工作的金融人员，风暴后可能发现自己正前往中国觅职。
无论如何，金融危机可能催生的国际金融秩序重组，乃至政治格局的变化正引起注意。西方的学者与媒体已表示警惕，哈佛大学历史教授弗格森最近在《华盛顿邮报》撰文说，这场危机削减了美国称霸全球论调的可信性，中国经济将提早超越美国。
国际投行高盛证券2006年曾预计，中国将在2040年超越美国。到了今年4月，这个年份提前到2027年。弗格森认为这个日子可能更早来到。
中国在迎接改革开放30周年纪念的时间点上，突然面对这场金融海啸的危机与机遇，看似奇异的巧合。不过，不能忽视的是中国经济与社会基础也还不牢固，国内存在贫富差距，收入分配不合理，内需不振，出口疲软，楼市股市低迷，食品安全危机，以及因食品安全丑闻引发的政府信用危机，环境恶化等一系列亟待处理的问题。全球危机的一个间接效应，是在西方国家自顾不暇时，他们难免减少对中国民主与人权做文章，但这就意味着，催促中国改变的外在压力减少了，而中国需要允许来自社会内部的压力来推进自身的继续改革。中国能否笑到最后，将决定它是不是真正的赢家。
在谈到国内经济时，他形容中国劳动力和资金供给充裕，基本面没有变化，消费和投资需求持续增长的潜力还很大。
当时，国内主流媒体尚未积极解读温总理的这场演讲的含义。但到最近这一两天，中国的所谓合作即出手参与国际救市的信号已明朗化。
更多媒体刊载了更早前，温家宝9月24日在纽约与美国经济金融界知名人士对话的全文。其中包括温家宝的话：“中国对外传递的是稳定和合作的信号。尽管我们也存在对资金安全问题的关切，但我们对美国经济还是有信心，愿发挥自己的作用。”
官方媒体新华社在9月30日的电讯中报道上述对话，标题是《温家宝总理：已准备好参与国际救市》。
拥有世界第一，总额超过1万8000亿美元的雄厚外汇储备；又持有仅次于日本的美国债券数额，在本次世界金融危机不断深化的当儿，美国金融深陷泥泽，外界的期盼慢慢转移到中国身上。美国联储局前主席格林斯潘形容，这是“百年一遇”的金融危机，对中国而言，这可能也是一个参与世界金融体系，拥有美国金融资产，直接与华尔街金融挂钩的历史性时机。
目前，中国准备出手已没有悬念，问题是在于中国可能出手的时机与方式，以及过程中如何做明智的投资判断，并应对处理西方世界对中国的战略性的疑虑。显然下周四的中共十七届三中全会，将是讨论这一议题的时机。
上个月中，香港凤凰卫视的财经评论员认为，中国可以考虑与新加坡淡马锡控股合作。
在微观的领域里，中国也在积极观察国际局势，以求在未来的全球金融监管秩序中，占据更有利位置。在上周末的达沃斯年会里，美国花旗银行总裁罗兹证实，中国银监会和央行以及美联储正紧密合作，可能会采取一些措施。银监会主席刘明康也透露，中国将充分利用这次机会来提升银监会的信息体系，银行业也正准备吸纳最近在华尔街失业的国际人才，请他们担任独立董事或者是高管层成员。
换句话说，一些原本在华尔街工作的金融人员，风暴后可能发现自己正前往中国觅职。
无论如何，金融危机可能催生的国际金融秩序重组，乃至政治格局的变化正引起注意。西方的学者与媒体已表示警惕，哈佛大学历史教授弗格森最近在《华盛顿邮报》撰文说，这场危机削减了美国称霸全球论调的可信性，中国经济将提早超越美国。
国际投行高盛证券2006年曾预计，中国将在2040年超越美国。到了今年4月，这个年份提前到2027年。弗格森认为这个日子可能更早来到。
中国在迎接改革开放30周年纪念的时间点上，突然面对这场金融海啸的危机与机遇，看似奇异的巧合。不过，不能忽视的是中国经济与社会基础也还不牢固，国内存在贫富差距，收入分配不合理，内需不振，出口疲软，楼市股市低迷，食品安全危机，以及因食品安全丑闻引发的政府信用危机，环境恶化等一系列亟待处理的问题。全球危机的一个间接效应，是在西方国家自顾不暇时，他们难免减少对中国民主与人权做文章，但这就意味着，催促中国改变的外在压力减少了，而中国需要允许来自社会内部的压力来推进自身的继续改革。中国能否笑到最后，将决定它是不是真正的赢家。
新興市場的風險
一直有留意本部落格的讀者應該不難察覺筆者近月來開始對亞洲市場的看法變得十分審慎，可以借機再道出固中原因:
1) 2006年至2007年，遊資太多以及弱美元令全球資金炒賣各新興市場的房地產、股市，並有不少熱錢投資於區內的基建、生產線、地產發展等商業投資項目。
2) 弱美元，再加上經濟前景不俗令不少亞洲企業借入大量美元債
3) 在新興市場的需求強勁，再加上全球資金炒賣的推波助瀾下，各商品價格暴升至經濟不能維持的水平，亦即大泡沫
4) 過度投資亦導致生產量開始過剩的情況，其後的需求放緩是十分可怕的情況
5) 去到2007年末，2008年初，房地產和股票的價格達到過熱的水平，其中以中印兩地的泡沬更是大得可怕。
正所謂物極必反，不管源頭是美國經濟放緩、歐洲經濟放緩、全球金融危機、商品價格所導致的通漲問題、或是有人獲利回吐也好，最後都是導致最麻煩的情況 --- 熱錢流走(沒錯，全球最有錢的還是歐美的投資者和企業)
接著的反高潮是不能避免(問題是震盪有多少)，資產價格大瀉、貸款放緩、需求放緩、企業盈利率下跌、亞洲貨幣貶值、以亞洲貨幣計的債務大增、失業率上升(低增值製造業職位的穩定性不高)、銀行壞帳大增.......
上述負面趨勢當然有停止的一天，不過還是要等待美國經濟復蘇所推動的亞洲出口增長，另外又要等待亞洲資產價格大幅調整、利息見底、銀行壞帳以及失業率見頂吧!
沒錯，內需以及政府持有的財富是能夠減低上述的震盪，但仍無法阻止大形勢的發生。De-Coupling還是說笑好吧，全球經濟一脈相連(萬物相依而生)，除非自己完全不出口，不進口。
這就是經濟的現實!
1) 2006年至2007年，遊資太多以及弱美元令全球資金炒賣各新興市場的房地產、股市，並有不少熱錢投資於區內的基建、生產線、地產發展等商業投資項目。
2) 弱美元，再加上經濟前景不俗令不少亞洲企業借入大量美元債
3) 在新興市場的需求強勁，再加上全球資金炒賣的推波助瀾下，各商品價格暴升至經濟不能維持的水平，亦即大泡沫
4) 過度投資亦導致生產量開始過剩的情況，其後的需求放緩是十分可怕的情況
5) 去到2007年末，2008年初，房地產和股票的價格達到過熱的水平，其中以中印兩地的泡沬更是大得可怕。
正所謂物極必反，不管源頭是美國經濟放緩、歐洲經濟放緩、全球金融危機、商品價格所導致的通漲問題、或是有人獲利回吐也好，最後都是導致最麻煩的情況 --- 熱錢流走(沒錯，全球最有錢的還是歐美的投資者和企業)
接著的反高潮是不能避免(問題是震盪有多少)，資產價格大瀉、貸款放緩、需求放緩、企業盈利率下跌、亞洲貨幣貶值、以亞洲貨幣計的債務大增、失業率上升(低增值製造業職位的穩定性不高)、銀行壞帳大增.......
上述負面趨勢當然有停止的一天，不過還是要等待美國經濟復蘇所推動的亞洲出口增長，另外又要等待亞洲資產價格大幅調整、利息見底、銀行壞帳以及失業率見頂吧!
沒錯，內需以及政府持有的財富是能夠減低上述的震盪，但仍無法阻止大形勢的發生。De-Coupling還是說笑好吧，全球經濟一脈相連(萬物相依而生)，除非自己完全不出口，不進口。
這就是經濟的現實!
Roubini: 'Much More Radical' Action Needed as Bailout Fails to Lift Confidence
The House passed the bailout bill Friday with much pomp, circumstance and by a wide margin. President Bush quickly signed it into law.
So how did the market react? If you have to ask, you probably can't afford it anymore.
Wells Fargo's bid for Wachovia and hopes the dismal September jobs number would spur the Fed to cut rates helped push the Dow as high as 10,796 ahead of the House's midday vote. But the index tumbled after the affirmative vote, closing down 1.5% to 10,325. Following a similar pattern, the S&P shed 1.4% and the Nasdaq lost 1.5%.
For the week, the worst for stocks since September 2001, the Dow lost 7.3%, the S&P shed 9.4% and the Nasdaq shed 10.8%.
One explanation for the market's reaction: The bailout won't work as structured and now the government is going to throw (another) $850 billion down the rat hole ($700B bailout + $150B in tax breaks and pork).
More alarming than the stock market's decline, credit spreads widened further with LIBOR - a key measure of bank-to-bank lending - hitting an all-time high Friday, Bloomberg reports.
"Unfortunately, we are one accident away from a systemic financial meltdown," says NYU economics professor Nouriel Roubini of RGE Monitor, whose predictions about this credit cycle have been scary - and frighteningly accurate. "It is a situation of generalized panic."
In a conference call Thursday evening, Roubini noted government interventions this year have been getting increasingly bigger - starting with the $29 billion for Bear Stearns-JPMorgan in March to $700 billion today - with increasingly diminished returns, as detailed here.
So what, if anything, can the government do at this point to restore investor confidence, which was the underlying point of this exercise?
Forget rate cuts, or even a bank holiday, as some are chattering about. Roubini says the government needs to take "much more radical" action:
Provide blanket FDIC insurance on all deposits, without limitations. This will stress the Fed's balance sheet but will stop a "silent run on the banking system" that's occurring because large institutions don't want exposure to any banks above the (new) $250,000 insurance cap, Roubini says. "[They] don't know who's next to go belly up and want to pull out."
Do "triage" on the banking system to separate those banks that are merely "distressed but solvent" and can survive with liquidity injections vs. those that should be shut down.
At this point it's pretty foolish to rule anything out, including the possibility of a crash. About the only thing to be optimistic about is that it's always darkest before the dawn and it's very dark right now.
So how did the market react? If you have to ask, you probably can't afford it anymore.
Wells Fargo's bid for Wachovia and hopes the dismal September jobs number would spur the Fed to cut rates helped push the Dow as high as 10,796 ahead of the House's midday vote. But the index tumbled after the affirmative vote, closing down 1.5% to 10,325. Following a similar pattern, the S&P shed 1.4% and the Nasdaq lost 1.5%.
For the week, the worst for stocks since September 2001, the Dow lost 7.3%, the S&P shed 9.4% and the Nasdaq shed 10.8%.
One explanation for the market's reaction: The bailout won't work as structured and now the government is going to throw (another) $850 billion down the rat hole ($700B bailout + $150B in tax breaks and pork).
More alarming than the stock market's decline, credit spreads widened further with LIBOR - a key measure of bank-to-bank lending - hitting an all-time high Friday, Bloomberg reports.
"Unfortunately, we are one accident away from a systemic financial meltdown," says NYU economics professor Nouriel Roubini of RGE Monitor, whose predictions about this credit cycle have been scary - and frighteningly accurate. "It is a situation of generalized panic."
In a conference call Thursday evening, Roubini noted government interventions this year have been getting increasingly bigger - starting with the $29 billion for Bear Stearns-JPMorgan in March to $700 billion today - with increasingly diminished returns, as detailed here.
So what, if anything, can the government do at this point to restore investor confidence, which was the underlying point of this exercise?
Forget rate cuts, or even a bank holiday, as some are chattering about. Roubini says the government needs to take "much more radical" action:
Provide blanket FDIC insurance on all deposits, without limitations. This will stress the Fed's balance sheet but will stop a "silent run on the banking system" that's occurring because large institutions don't want exposure to any banks above the (new) $250,000 insurance cap, Roubini says. "[They] don't know who's next to go belly up and want to pull out."
Do "triage" on the banking system to separate those banks that are merely "distressed but solvent" and can survive with liquidity injections vs. those that should be shut down.
At this point it's pretty foolish to rule anything out, including the possibility of a crash. About the only thing to be optimistic about is that it's always darkest before the dawn and it's very dark right now.
海峡时报指数(STI)
本栏于上周一(9月29日)曾预估指数仍然可能回扯以填补介于2605.09点至2622.41点及介于2655.43点至2673.21点间的缺口，过后再向下跌穿2307.79点朝2277.91点前进。可是指数却不争气，见报当天仅回扯2449.20点就迅速回落，30日终于跌穿上述的2307.79点更直下2239.75点，已经低过2006年6月的低点了。
从技术分析看来，回扯填补介于2504.35点至2544.13点间的缺口的机会依然存在，不过，若从其长期周期分析，则指数当朝1750点的支撑线前进，一旦穿下此价位，指数将挑战2001年9月的低点了。然而，这还需要一段时间呢。
从技术分析看来，回扯填补介于2504.35点至2544.13点间的缺口的机会依然存在，不过，若从其长期周期分析，则指数当朝1750点的支撑线前进，一旦穿下此价位，指数将挑战2001年9月的低点了。然而，这还需要一段时间呢。
本周股市需好消息刺激
投资者度过了历史性的一周、一个月、一个季度：拯救华尔街方案上周一被否决、周五重新通过，造成股市激烈波动。
刚过去的季度，写下各地股市历史上重大的一章。我国海峡时报指数暴跌588.63点（约20％），以下跌点数来说，这无疑是它历史上最黑暗的季度。
目前投资者最需要一些利好消息提振士气，但本周要迎接的消息看来却是乏善可陈。交易员相信，市场将关注美国发布的经济数据，期待出现“意外的惊喜”，以得到鼓舞。
回顾上周股市，投资者不等拯救方案正式通过便已打退堂鼓，海峡指数宣告连续五周受挫，连续四个月败北，最终写下它史上下跌点数最大的季度。过去两周经历7000亿美元拯救方案的酝酿和各地禁止卖空、国际信贷迅速干涸、投资银行时代结束等，海指期间共失去261.95点或超过10％，第三季创纪录下跌点数，一半在这两周造成。
信贷吃紧让市场对船厂和房地产股感到畏惧，海指因而面对巨大压力，它最终跌破2300点的支持线，上周五闭市报2297.12点，全周则跌114.34点或4.7％。
展望本周，因美国纽约股市上周五尾市挫跌，三个主要指数皆跌1.3％以上，失去一个可能稳定本地股价的因素。上周五，道琼斯指数挫跌157.47点或1.5％，标准普尔500指数败跌15.05点或1.35％，纳斯达克综合指数也失去29.33点或1.48％。
为什么的拯救方案通过了，美国华尔街的股价还继续挫跌？分析员指出，市场认为修订后的方案恐怕无法扭转局势，而且“迟”水救不了“急”火，因信贷吃紧地情况已堪称“水深火热”，并且已冲击全球；
另外，上周五本地股市败跌，因投资者既然认定方案将通过，就该“见好就收”，赶紧乘高卖出，因为经济前景实在欠佳，股价接下来难保不会被经济衰退、倒闭事件等坏消息打击。
美国上周五也发布5年半来最高的月度失业数字，使美国经济即将衰退的看法，又取得多一个佐证。
美国总统布什上周在方案立法后说：“我们已向全世界显示，美国将稳定我们的金融市场，并维持它在环球经济的领导角色。”
但法国巴黎银行在纽约的经济师安娜对路透社表示：“这（拯救方案）可能来得有点太迟了。如果它早一点敲定，就比较可能对信心的恢复有较大的作用。”
分析员认为，拯救方案是否能取得预期的效果，目前还不清楚。JP摩根资产管理公司首席市场策略师大卫凯利指出：“问题远比答案还要多。银行因此能够剔除问题贷款，但它们究竟还有多少意愿去发放新贷款？”
在本地，联昌国际研究部区域经济师宋生文上周对法新社表示：“这个方案不是什么灵丹妙药。它有如为病人输血。但病人还是病得很重。”
投资者将密切关注美国本周五将发布的劳动市场数据，以及供应管理学院的服务业报告。
投资者可能观望
宋生文说，投资者将期望该数据能提供“意外的惊喜”。但若数据让人失望，则股市将下跌。投资者本周因此将会采取观望态度。
本地方面，我国政府周五将发布第三季经济增长预估数字。据经济师预测，我国经济将进入技术性的衰退，即连续两个季度出现季对季的收缩。金管局本周五也将发布半年一次的货币政策声明。
刚过去的季度，写下各地股市历史上重大的一章。我国海峡时报指数暴跌588.63点（约20％），以下跌点数来说，这无疑是它历史上最黑暗的季度。
目前投资者最需要一些利好消息提振士气，但本周要迎接的消息看来却是乏善可陈。交易员相信，市场将关注美国发布的经济数据，期待出现“意外的惊喜”，以得到鼓舞。
回顾上周股市，投资者不等拯救方案正式通过便已打退堂鼓，海峡指数宣告连续五周受挫，连续四个月败北，最终写下它史上下跌点数最大的季度。过去两周经历7000亿美元拯救方案的酝酿和各地禁止卖空、国际信贷迅速干涸、投资银行时代结束等，海指期间共失去261.95点或超过10％，第三季创纪录下跌点数，一半在这两周造成。
信贷吃紧让市场对船厂和房地产股感到畏惧，海指因而面对巨大压力，它最终跌破2300点的支持线，上周五闭市报2297.12点，全周则跌114.34点或4.7％。
展望本周，因美国纽约股市上周五尾市挫跌，三个主要指数皆跌1.3％以上，失去一个可能稳定本地股价的因素。上周五，道琼斯指数挫跌157.47点或1.5％，标准普尔500指数败跌15.05点或1.35％，纳斯达克综合指数也失去29.33点或1.48％。
为什么的拯救方案通过了，美国华尔街的股价还继续挫跌？分析员指出，市场认为修订后的方案恐怕无法扭转局势，而且“迟”水救不了“急”火，因信贷吃紧地情况已堪称“水深火热”，并且已冲击全球；
另外，上周五本地股市败跌，因投资者既然认定方案将通过，就该“见好就收”，赶紧乘高卖出，因为经济前景实在欠佳，股价接下来难保不会被经济衰退、倒闭事件等坏消息打击。
美国上周五也发布5年半来最高的月度失业数字，使美国经济即将衰退的看法，又取得多一个佐证。
美国总统布什上周在方案立法后说：“我们已向全世界显示，美国将稳定我们的金融市场，并维持它在环球经济的领导角色。”
但法国巴黎银行在纽约的经济师安娜对路透社表示：“这（拯救方案）可能来得有点太迟了。如果它早一点敲定，就比较可能对信心的恢复有较大的作用。”
分析员认为，拯救方案是否能取得预期的效果，目前还不清楚。JP摩根资产管理公司首席市场策略师大卫凯利指出：“问题远比答案还要多。银行因此能够剔除问题贷款，但它们究竟还有多少意愿去发放新贷款？”
在本地，联昌国际研究部区域经济师宋生文上周对法新社表示：“这个方案不是什么灵丹妙药。它有如为病人输血。但病人还是病得很重。”
投资者将密切关注美国本周五将发布的劳动市场数据，以及供应管理学院的服务业报告。
投资者可能观望
宋生文说，投资者将期望该数据能提供“意外的惊喜”。但若数据让人失望，则股市将下跌。投资者本周因此将会采取观望态度。
本地方面，我国政府周五将发布第三季经济增长预估数字。据经济师预测，我国经济将进入技术性的衰退，即连续两个季度出现季对季的收缩。金管局本周五也将发布半年一次的货币政策声明。
Sunday, October 5, 2008
Soros' Reflexivity, financial markets, and economic theory
Soros' writings focus heavily on the concept of reflexivity, where the biases of individuals enter into market transactions, potentially changing the fundamentals of the economy. Soros argues that such transitions in the fundamentals of the economy are typically marked by disequilibrium rather than equilibrium, and that the conventional economic theory of the market (the 'efficient market hypothesis') does not apply in these situations. Soros has popularized the concepts of dynamic disequilibrium, static disequilibrium, and near-equilibrium conditions.
Reflexivity is based on three main ideas:
1. Reflexivity is best observed under special conditions where investor bias grows and spreads throughout the investment arena. Examples of factors that may give rise to this bias include (a) equity leveraging or (b) the trend-following habits of speculators.
2. Reflexivity appears intermittently since it is most likely to be revealed under certain conditions; i.e., the equilibrium process's character is best considered in terms of probabilities.
3. Investors' observation of and participation in the capital markets may at times influence valuations AND fundamental conditions or outcomes.
A current example of reflexivity in modern financial markets is that of the debt and equity of housing markets. Lenders began to make more money available to more people in the 1990s to buy houses. More people bought houses with this larger amount of money, thus increasing the prices of these houses. Lenders looked at their balance sheets which not only showed that they had made more loans, but that their equity backing the loans--the value of the houses, had gone up (because more money was chasing the same amount of housing, relatively). Thus they lent out more money because their balance sheets looked good, and prices went up more, and they lent more, etc. Prices increased rapidly, and lending standards were relaxed. The salient issue regarding reflexivity is that it explains why markets gyrate over time, and do not just stick to equilibrium--they tend to overshoot or undershoot.
View of potential problems in the free market system
Despite working as an investor and currency speculator, he argues that the current system of financial speculation undermines healthy economic development in many underdeveloped countries. Soros blames many of the world's problems on the failures inherent in what he characterizes as market fundamentalism. His opposition to many aspects of globalization has made him a controversial figure.
Victor Niederhoffer said of Soros: "Most of all, George believed even then in a mixed economy, one with a strong central international government to correct for the excesses of self-interest."
Soros claims to draw a distinction between being a participant in the market and working to change the rules that market participants must follow.
Reflexivity is based on three main ideas:
1. Reflexivity is best observed under special conditions where investor bias grows and spreads throughout the investment arena. Examples of factors that may give rise to this bias include (a) equity leveraging or (b) the trend-following habits of speculators.
2. Reflexivity appears intermittently since it is most likely to be revealed under certain conditions; i.e., the equilibrium process's character is best considered in terms of probabilities.
3. Investors' observation of and participation in the capital markets may at times influence valuations AND fundamental conditions or outcomes.
A current example of reflexivity in modern financial markets is that of the debt and equity of housing markets. Lenders began to make more money available to more people in the 1990s to buy houses. More people bought houses with this larger amount of money, thus increasing the prices of these houses. Lenders looked at their balance sheets which not only showed that they had made more loans, but that their equity backing the loans--the value of the houses, had gone up (because more money was chasing the same amount of housing, relatively). Thus they lent out more money because their balance sheets looked good, and prices went up more, and they lent more, etc. Prices increased rapidly, and lending standards were relaxed. The salient issue regarding reflexivity is that it explains why markets gyrate over time, and do not just stick to equilibrium--they tend to overshoot or undershoot.
View of potential problems in the free market system
Despite working as an investor and currency speculator, he argues that the current system of financial speculation undermines healthy economic development in many underdeveloped countries. Soros blames many of the world's problems on the failures inherent in what he characterizes as market fundamentalism. His opposition to many aspects of globalization has made him a controversial figure.
Victor Niederhoffer said of Soros: "Most of all, George believed even then in a mixed economy, one with a strong central international government to correct for the excesses of self-interest."
Soros claims to draw a distinction between being a participant in the market and working to change the rules that market participants must follow.
索氏投资理论的诞生
索罗斯开始从哲学的角度思考金融市场的运作。思考的越多、越深入，索罗斯越感到自已被以往的经济学理论所愚弄。
传统的经济学家认为市场是具有理性的，其运作有其内在的逻辑性。由于投资者对上市公司的情况能够作充分的了解，所以每一只股票的价格都可以通过一系列理性的计算得到精确的确定。当投资者入市操作时，可以根据这种认知理智地挑选出最佳品种的股票进行投资。而股票的价格将与公司未来的收入预期保持理性的相关关系，这就是有效市场假设，它假设了一个完美无瑕的、基于理性的市场，也假设了所有的股票价格都能反映当前可掌握的信息。另外，一些传统的经济学家还认为，金融市场总是“正确”的。市场价格总能正确地折射或反映未来的发展趋势，即使这种趋势仍不明朗。
索罗斯经过对华尔街的考察，发现以往的那些经济理论是多么的不切实际。他认为金融市场是动荡的、混乱的，市场中买人卖出决策并不是建立在理想的假设基础之上，而是基于投资者的预期，数学公式是不能控制金融市场的。而人们对任何事物能实际获得的认知都并不是非常完美的，投资者对某一股票的偏见，不论其肯定或否定，都将导致股票价格的上升或下跌，因此市场价格也并非总是正确的、总能反映市场未来的发展趋势的，它常常因投资者以俯赅全的推测而忽略某些未来因素可能产生的影响。实际上，并非目前的预测与未来的事件吻合，而是目前的预测造就了未来的事件。所以，投资者在获得相关信息之后做出的反应并不能决定股票价格。其决定因素与其说是投资者根据客观数据作出的预期，还不如说是根据他们自己心理感觉作出的预期。投资者付出的价格已不仅仅是股票自身价值的被动反映，还成为决定股票价值的积极因素。同时，索罗斯还认为，由于市场的运作是从事实到观念，再从观念到事实，一旦投资者的观念与事实之间的差距太大，无法得到自我纠正，市场就会处于剧烈的波动和不稳定的状态，这时市场就易出现“盛——衰"序列。投资者的赢利之道就在于推断出即将发生的预料之外的情况，判断盛衰过程的出现，逆潮流而动。但同时，索罗斯也提出，投资者的偏见会导致市场跟风行为，而不均衡的跟风行为会因过度投机而最终导致市场崩溃。
索罗斯在形成自己独特的投资理论后，毫不犹豫地摒弃了传统的投资理论，决定在风云变换的金融市场上用实践去检验他的投资理论。
1981年1月，里根就任总统。索罗斯通过对里根新政策的分析，确信美国经济将会开始一个新的"盛——衰"序列，索罗斯开始果断投资。正如索罗斯所预测的，美国经济在里根的新政策刺激下，开始走向繁荣。"盛——衰"序列的繁荣期已经初现，1982年夏天，贷款利率下降，股票不断上涨，这使得索罗斯的量子基金获得了巨额回报。到1982年年底，量子基金上涨了56．9％，净资产从1．933亿美元猛增至3．028亿美元。索罗斯渐渐从1981年的阴影中走出来。
随着美国经济的发展，美元表现得越来越坚挺，美国的贸易逆差以惊人的速度上升，预算赤字也在逐年增加，索罗斯确信美国正在走向萧条，一场经济风暴将会危及美国经济。他决定在这场即将到来的风暴中大大地搏击一场。他密切关注着政府及其市场的动向。
随着石油输出国组织的解体，原油价格开始下跌，这给美元带来巨大的贬值压力。同时石油输出国组织的解体，美国通货膨胀开始下降，相应地利率也将下降，这也将促使美元的贬值。索罗斯预测美国政府将采取措施支持美元贬值。同时，他还预测德国马克和日元即将升值，他决定做一次大手笔。
从1985年9月开始，索罗斯开始做多马克和日元。他先期持有的马克和日元的多头头寸达7亿美元，已超过了量子基金的全部价值。由于他坚信他的投资决策是正确的，在先期遭受了一些损失的情况下，他又大胆增加了差不多8亿美元的多头头寸。
索罗斯一直增加投入，是因为他认为浮动汇率的短期变化只发生在转折点上，一旦趋势形成，它就消失了。他要趁其他投机者还没有意识到这一转折点之时，利用美元的下跌赚更多的钱。当然，索罗斯增加投人的前提是他深信逆转已不复存在，因为一旦趋势逆转，哪怕是暂时的，他也将拥抱灾难。
到了1985年9月22日，事情逐渐朝索罗斯预测的方向发展。美国新任财长詹姆土·贝克和法国、西德、日本、英国的四位财政部部长在纽约的普拉扎宾馆开会，商讨美元贬值问题。会后五国财长签订了《普拉扎协议》。该协议准出通过"更紧密地合作"来"有序地对非美元货币进行估价"。这意味着中央银行必须低估美元价值，迫使美元贬值。
《普拉扎协议》公布后的第一天，美元被宣布从239B元降到222．5日元，即下降了4．3％，这一天的美元贬值使索罗斯一夜之间赚了4000万美元。接下来的几个星期，美元继续贬值。10月底，美元已跌落13％，且美元兑换205日元。到了1986年9月，美元更是跌至1美元兑换153日元。索罗斯在这场大手笔的金融行动中前后总计赚了大约1．5亿美元。这使得量子基金在华尔街名声大噪。
传统的经济学家认为市场是具有理性的，其运作有其内在的逻辑性。由于投资者对上市公司的情况能够作充分的了解，所以每一只股票的价格都可以通过一系列理性的计算得到精确的确定。当投资者入市操作时，可以根据这种认知理智地挑选出最佳品种的股票进行投资。而股票的价格将与公司未来的收入预期保持理性的相关关系，这就是有效市场假设，它假设了一个完美无瑕的、基于理性的市场，也假设了所有的股票价格都能反映当前可掌握的信息。另外，一些传统的经济学家还认为，金融市场总是“正确”的。市场价格总能正确地折射或反映未来的发展趋势，即使这种趋势仍不明朗。
索罗斯经过对华尔街的考察，发现以往的那些经济理论是多么的不切实际。他认为金融市场是动荡的、混乱的，市场中买人卖出决策并不是建立在理想的假设基础之上，而是基于投资者的预期，数学公式是不能控制金融市场的。而人们对任何事物能实际获得的认知都并不是非常完美的，投资者对某一股票的偏见，不论其肯定或否定，都将导致股票价格的上升或下跌，因此市场价格也并非总是正确的、总能反映市场未来的发展趋势的，它常常因投资者以俯赅全的推测而忽略某些未来因素可能产生的影响。实际上，并非目前的预测与未来的事件吻合，而是目前的预测造就了未来的事件。所以，投资者在获得相关信息之后做出的反应并不能决定股票价格。其决定因素与其说是投资者根据客观数据作出的预期，还不如说是根据他们自己心理感觉作出的预期。投资者付出的价格已不仅仅是股票自身价值的被动反映，还成为决定股票价值的积极因素。同时，索罗斯还认为，由于市场的运作是从事实到观念，再从观念到事实，一旦投资者的观念与事实之间的差距太大，无法得到自我纠正，市场就会处于剧烈的波动和不稳定的状态，这时市场就易出现“盛——衰"序列。投资者的赢利之道就在于推断出即将发生的预料之外的情况，判断盛衰过程的出现，逆潮流而动。但同时，索罗斯也提出，投资者的偏见会导致市场跟风行为，而不均衡的跟风行为会因过度投机而最终导致市场崩溃。
索罗斯在形成自己独特的投资理论后，毫不犹豫地摒弃了传统的投资理论，决定在风云变换的金融市场上用实践去检验他的投资理论。
1981年1月，里根就任总统。索罗斯通过对里根新政策的分析，确信美国经济将会开始一个新的"盛——衰"序列，索罗斯开始果断投资。正如索罗斯所预测的，美国经济在里根的新政策刺激下，开始走向繁荣。"盛——衰"序列的繁荣期已经初现，1982年夏天，贷款利率下降，股票不断上涨，这使得索罗斯的量子基金获得了巨额回报。到1982年年底，量子基金上涨了56．9％，净资产从1．933亿美元猛增至3．028亿美元。索罗斯渐渐从1981年的阴影中走出来。
随着美国经济的发展，美元表现得越来越坚挺，美国的贸易逆差以惊人的速度上升，预算赤字也在逐年增加，索罗斯确信美国正在走向萧条，一场经济风暴将会危及美国经济。他决定在这场即将到来的风暴中大大地搏击一场。他密切关注着政府及其市场的动向。
随着石油输出国组织的解体，原油价格开始下跌，这给美元带来巨大的贬值压力。同时石油输出国组织的解体，美国通货膨胀开始下降，相应地利率也将下降，这也将促使美元的贬值。索罗斯预测美国政府将采取措施支持美元贬值。同时，他还预测德国马克和日元即将升值，他决定做一次大手笔。
从1985年9月开始，索罗斯开始做多马克和日元。他先期持有的马克和日元的多头头寸达7亿美元，已超过了量子基金的全部价值。由于他坚信他的投资决策是正确的，在先期遭受了一些损失的情况下，他又大胆增加了差不多8亿美元的多头头寸。
索罗斯一直增加投入，是因为他认为浮动汇率的短期变化只发生在转折点上，一旦趋势形成，它就消失了。他要趁其他投机者还没有意识到这一转折点之时，利用美元的下跌赚更多的钱。当然，索罗斯增加投人的前提是他深信逆转已不复存在，因为一旦趋势逆转，哪怕是暂时的，他也将拥抱灾难。
到了1985年9月22日，事情逐渐朝索罗斯预测的方向发展。美国新任财长詹姆土·贝克和法国、西德、日本、英国的四位财政部部长在纽约的普拉扎宾馆开会，商讨美元贬值问题。会后五国财长签订了《普拉扎协议》。该协议准出通过"更紧密地合作"来"有序地对非美元货币进行估价"。这意味着中央银行必须低估美元价值，迫使美元贬值。
《普拉扎协议》公布后的第一天，美元被宣布从239B元降到222．5日元，即下降了4．3％，这一天的美元贬值使索罗斯一夜之间赚了4000万美元。接下来的几个星期，美元继续贬值。10月底，美元已跌落13％，且美元兑换205日元。到了1986年9月，美元更是跌至1美元兑换153日元。索罗斯在这场大手笔的金融行动中前后总计赚了大约1．5亿美元。这使得量子基金在华尔街名声大噪。
美国能屈尊接受外来援助吗？
各界热议美国金融危机解决之道，悲观情绪弥漫。
美国彼得森国际经济研究所日前举办研讨会，讨论“万亿美元俱乐部”国家对世界经济的影响。“万亿美元俱乐部”指GDP超过1万亿美元的新兴国家。彼得森国际经济研究所所长弗雷德·伯格斯腾在会上表示，中国无疑是“万亿美元俱乐部”中单个影响力最大、最重要的国家，中国经济增长占全球经济增长的比重高达 25%；中国的初级产品制造量是西方国家的3-5倍，这对世界经济结构将产生巨大影响。
近日，银行家称当前的金融危机是大萧条以来最严重的一次，美国将进入缓慢增长期。
“公平地讲，我们正处在自大萧条以来最严重的金融危机中。”花旗集团高级副总裁威廉·罗兹（William Rhodes）说。去年年初，他曾成功地预测到次贷危机的到来。在次贷危机影响开始前，他提出必须采取紧急措施来恢复对金融市场的信心。他说，“我们现在开始感受到危机对实体经济的影响。”他预测，未来几个季度，美国经济增长可能放缓。
摩根士丹利亚洲董事长史蒂芬·罗奇（Stephen Roach）呼吁用“有力和有效的”行动使经济形势得到控制。他说，近几年持续的房地产和信贷泡沫表明，美国住房市场的疲软很可能会蔓延到个人消费领域。
《财经》杂志特约经济学家谢国忠认为，7000亿美元援救计划只能短期提振市场信心，无法扭转美国经济颓势；他认为，排斥来自非西方国家的投资，才是美国解决当前问题的主要障碍。
他讽刺说，作为世界上最大的债务国，美国表现得却像最大的债权国。
有的学者和政府官员们对保尔森和伯南克处理危机的方式赞不绝口。谢国忠并不同意。他认为，二人都没有找到这场危机的根源。这场危机标志着“格林斯潘债务王国”的倒塌。华尔街贵族们通过将债务反复打包——它们被称作衍生品，每年获得数十亿美元收入。但是，政府不可能维持住这个大泡沫。
谢国忠认为，危机过后，金融体系必会改弦更张。政府应该查封所有破产的金融机构，清理股东和债权人，迅速降低杠杆率，吸引国外投资，以重建规模更小但生机盎然的金融体系。事实却相反，美国政府还在指望制造泡沫的人来解决问题。
他指出，即便B计划为不良资产的损失埋了单，美国经济的杠杆率仍然很高。重组美国经济需要大笔资金。美国人即使勒紧皮带，提高储蓄，这个过程也会很漫长，难以平稳市场情绪。美国所需资金的一半，需要借助外国资本。因此，必须让美国的债权人——大多是外国央行，成为美国几大金融机构的主要所有者。
谢国忠强调，问题的关键是，美国要改变对待外国投资的政策。美国人不太适应亚洲国家以及石油出口国成为其公司的所有者，但是，它别无选择。在对待国外投资者方面，美国应该向英国学习。
谢国忠说，虽然上述建议对全世界而言会是共赢的，但是，被采纳的可能性很低。美国的自我评价仍然不太现实。美国需要更多的磨砺，来改变他们的认识。
他表示，B计划将最终导致美元体系崩溃，美国出现恶性通货膨胀。全世界都应该极力防止出现这样悲惨的结局。中国、日本、科威特、沙特阿拉伯、阿联酋等有巨额外汇储备的国家，应该同美国政府坐下来一起商讨，找出美国资产重组的方案。这些国家应该将它们的美元债权，交换成股权类资产。
美国彼得森国际经济研究所日前举办研讨会，讨论“万亿美元俱乐部”国家对世界经济的影响。“万亿美元俱乐部”指GDP超过1万亿美元的新兴国家。彼得森国际经济研究所所长弗雷德·伯格斯腾在会上表示，中国无疑是“万亿美元俱乐部”中单个影响力最大、最重要的国家，中国经济增长占全球经济增长的比重高达 25%；中国的初级产品制造量是西方国家的3-5倍，这对世界经济结构将产生巨大影响。
近日，银行家称当前的金融危机是大萧条以来最严重的一次，美国将进入缓慢增长期。
“公平地讲，我们正处在自大萧条以来最严重的金融危机中。”花旗集团高级副总裁威廉·罗兹（William Rhodes）说。去年年初，他曾成功地预测到次贷危机的到来。在次贷危机影响开始前，他提出必须采取紧急措施来恢复对金融市场的信心。他说，“我们现在开始感受到危机对实体经济的影响。”他预测，未来几个季度，美国经济增长可能放缓。
摩根士丹利亚洲董事长史蒂芬·罗奇（Stephen Roach）呼吁用“有力和有效的”行动使经济形势得到控制。他说，近几年持续的房地产和信贷泡沫表明，美国住房市场的疲软很可能会蔓延到个人消费领域。
《财经》杂志特约经济学家谢国忠认为，7000亿美元援救计划只能短期提振市场信心，无法扭转美国经济颓势；他认为，排斥来自非西方国家的投资，才是美国解决当前问题的主要障碍。
他讽刺说，作为世界上最大的债务国，美国表现得却像最大的债权国。
有的学者和政府官员们对保尔森和伯南克处理危机的方式赞不绝口。谢国忠并不同意。他认为，二人都没有找到这场危机的根源。这场危机标志着“格林斯潘债务王国”的倒塌。华尔街贵族们通过将债务反复打包——它们被称作衍生品，每年获得数十亿美元收入。但是，政府不可能维持住这个大泡沫。
谢国忠认为，危机过后，金融体系必会改弦更张。政府应该查封所有破产的金融机构，清理股东和债权人，迅速降低杠杆率，吸引国外投资，以重建规模更小但生机盎然的金融体系。事实却相反，美国政府还在指望制造泡沫的人来解决问题。
他指出，即便B计划为不良资产的损失埋了单，美国经济的杠杆率仍然很高。重组美国经济需要大笔资金。美国人即使勒紧皮带，提高储蓄，这个过程也会很漫长，难以平稳市场情绪。美国所需资金的一半，需要借助外国资本。因此，必须让美国的债权人——大多是外国央行，成为美国几大金融机构的主要所有者。
谢国忠强调，问题的关键是，美国要改变对待外国投资的政策。美国人不太适应亚洲国家以及石油出口国成为其公司的所有者，但是，它别无选择。在对待国外投资者方面，美国应该向英国学习。
谢国忠说，虽然上述建议对全世界而言会是共赢的，但是，被采纳的可能性很低。美国的自我评价仍然不太现实。美国需要更多的磨砺，来改变他们的认识。
他表示，B计划将最终导致美元体系崩溃，美国出现恶性通货膨胀。全世界都应该极力防止出现这样悲惨的结局。中国、日本、科威特、沙特阿拉伯、阿联酋等有巨额外汇储备的国家，应该同美国政府坐下来一起商讨，找出美国资产重组的方案。这些国家应该将它们的美元债权，交换成股权类资产。
格林斯潘接受美国全国广播公司采访
美国联邦储备委员会前主席艾伦·格林斯潘14日说，美国正陷于“百年一遇”的金融危机中；这场危机引发经济衰退的可能性正在增大。
格林斯潘在接受美国全国广播公司采访时说，这是他职业生涯中所见最严重的一次金融危机，可能仍将持续相当长时间，并继续影响美国房地产价格。
格林斯潘认为，这场危机将持续成为一股“腐蚀性”力量，直至美国房地产价格稳定下来；危机还将诱发全球一系列经济动荡。
当被问及美国躲过经济衰退的几率能否超过5成时，格林斯潘回答说，他认为这一几率小于50%。
“我不相信，一场百年一遇的金融危机不对实体经济造成重创，我认为这正在发生，”他说。
格林斯潘还预测，将有更多大型金融机构在这场危机中倒下。
格林斯潘在接受美国全国广播公司采访时说，这是他职业生涯中所见最严重的一次金融危机，可能仍将持续相当长时间，并继续影响美国房地产价格。
格林斯潘认为，这场危机将持续成为一股“腐蚀性”力量，直至美国房地产价格稳定下来；危机还将诱发全球一系列经济动荡。
当被问及美国躲过经济衰退的几率能否超过5成时，格林斯潘回答说，他认为这一几率小于50%。
“我不相信，一场百年一遇的金融危机不对实体经济造成重创，我认为这正在发生，”他说。
格林斯潘还预测，将有更多大型金融机构在这场危机中倒下。
The Theory of Reflexivity by George Soros
When Rudi Dornbusch invited me to speak at this conference, he gave me a totally free hand in deciding what I wanted to talk about. Well, I want to discuss a subject which fascinates me but doesn’t seem to interest others very much. That is my theory of reflexivity which has guided me both in making money and in giving money away, but has received very little serious consideration from anybody else. It is really a very curious situation. I am taken very seriously; indeed, a bit too seriously. But the theory that I take seriously and, in fact, rely on in my decision-making process is pretty completely ignored. I have written a book about it which was first published in 1987 under the title The Alchemy of Finance; but it received practically no critical examination. It has been out of print for the last several years but demand has been building up as a result of my increased visibility, not to say notoriety, and now the book is being re-issued. I think this is a good time to get the theory seriously considered.
I was invited to testify before Congress last week and this is how I started my testimony. I quote: “I must state at the outset that I am in fundamental disagreement with the prevailing wisdom. The generally accepted theory is that financial markets tend towards equilibrium, and on the whole, discount the future correctly. I operate using a different theory, according to which financial markets cannot possibly discount the future correctly because they do not merely discount the future; they help to shape it. In certain circumstances, financial markets can affect the so-called fundamentals which they are supposed to reflect. When that happens, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. Such boom/bust sequences do not arise very often, but when they do, they can be very disruptive, exactly because they affect the fundamentals of the economy.” I did not have time to expound my theory before Congress, so I am taking advantage of my captive audience to do so now. My apologies for inflicting a very theoretical discussion on you.
The theory holds, in the most general terms, that the way philosophy and natural science have taught us to look at the world is basically inappropriate when we are considering events which have thinking participants. Both philosophy and natural science have gone to great lengths to separate events from the observations which relate to them. Events are facts and observations are true or false, depending on whether or not they correspond to the facts.
This way of looking at things can be very productive. The achievements of natural science are truly awesome, and the separation between fact and statement provides a very reliable criterion of truth. So I am in no way critical of this approach. The separation between fact and statement was probably a greater advance in the field of thinking than the invention of the wheel in the field of transportation.
But exactly because the approach has been so successful, it has been carried too far. Applied to events which have thinking participants, it provides a distorted picture of reality. The key feature of these events is that the participants’ thinking affects the situation to which it refers. Facts and thoughts cannot be separated in the same way as they are in natural science or, more exactly, by separating them we introduce a distortion which is not present in natural science, because in natural science thoughts and statements are outside the subject matter, whereas in the social sciences they constitute part of the subject matter. If the study of events is confined to the study of facts, an important element, namely, the participants’ thinking, is left out of account. Strange as it may seem, that is exactly what has happened, particularly in economics, which is the most scientific of the social sciences.
Classical economics was modeled on Newtonian physics. It sought to establish the equilibrium position and it used differential equations to do so. To make this intellectual feat possible, economic theory assumed perfect knowledge on the part of the participants. Perfect knowledge meant that the participants’ thinking corresponded to the facts and therefore it could be ignored. Unfortunately, reality never quite conformed to the theory. Up to a point, the discrepancies could be dismissed by saying that the equilibrium situation represented the final outcome and the divergence from equilibrium represented temporary noise. But, eventually, the assumption of perfect knowledge became untenable and it was replaced by a methodological device which was invented by my professor at the London School of Economics, Lionel Robbins, who asserted that the task of economics is to study the relationship between supply and demand; therefore it must take supply and demand as given. This methodological device has managed to protect equilibrium theory from the onslaught of reality down to the present day.
I don't know too much about the prevailing theory about financial markets but, from what little I know, it continues to maintain the approach established by classical economics. This means that financial markets are envisaged as playing an essentially passive role; they discount the future and they do so with remarkable accuracy. There is some kind of magic involved and that is, of course, the magic of the marketplace where all the participants, taken together, are endowed with an intelligence far superior to that which could be attained by any particular individual. I think this interpretation of the way financial markets operate is severely distorted. That is why I have not bothered to familiarize myself with efficient market theory and modern portfolio theory, and that is why I take such a jaundiced view of derivative instruments which are based on what I consider a fundamentally flawed principle. Another reason is that I am rather poor in mathematics.
It may seem strange that a patently false theory should gain such widespread acceptance, except for one consideration; that is, that all our theories about social events are distorted in some way or another. And that is the starting point of my theory, the theory of reflexivity, which holds that our thinking is inherently biased. Thinking participants cannot act on the basis of knowledge. Knowledge presupposes facts which occur independently of the statements which refer to them; but being a participant implies that one’s decisions influence the outcome. Therefore, the situation participants have to deal with does not consist of facts independently given but facts which will be shaped by the decision of the participants. There is an active relationship between thinking and reality, as well as the passive one which is the only one recognized by natural science and, by way of a false analogy, also by economic theory.
I call the passive relationship the “cognitive function” and the active relationship the “participating function,” and the interaction between the two functions I call “reflexivity.” Reflexivity is, in effect, a two-way feedback mechanism in which reality helps shape the participants’ thinking and the participants’ thinking helps shape reality in an unending process in which thinking and reality may come to approach each other but can never become identical. Knowledge implies a correspondence between statements and facts, thoughts and reality, which is not possible in this situation. The key element is the lack of correspondence, the inherent divergence, between the participants’ views and the actual state of affairs. It is this divergence, which I have called the “participant’s bias,” which provides the clue to understanding the course of events. That, in very general terms, is the gist of my theory of reflexivity.
The theory has far-reaching implications. It draws a sharp distinction between natural science and social science, and it introduces an element of indeterminacy into social events which is missing in the events studied by natural science. It interprets social events as a never-ending historical process and not as an equilibrium situation. The process cannot be explained and predicted with the help of universally valid laws, in the manner of natural science, because of the element of indeterminacy introduced by the participants’ bias. The implications are so far-reaching that I can’t even begin to enumerate them. They range from the inherent instability of financial markets to the concept of an open society which is based on the recognition that nobody has access to the ultimate truth. The theory gives rise to a new morality as well as a new epistemology. As you probably know, I am the founder—and the funder—of the Open Society Foundation. That is why I feel justified in claiming that the theory of reflexivity has guided me both in making and in spending money.
But is it possible to come up with a valid new theory about the relationship between thinking and reality? It seems highly unlikely. The subject has been so thoroughly explored that probably everything that can be said has been said. In my defense, I did not produce the theory in a vacuum. The logical indeterminacy of self-referring statements was first discussed by Epimenides, the Cretan philosopher, who said, “Cretans always lie,” and the paradox of the liar was the basis of Bertrand Russell's theory of classes. But I am claiming more than a logical indeterminacy. Reflexivity is a two-way feedback mechanism, which is responsible for a causal indeterminacy as well as a logical one. The causal indeterminacy resembles Heisenberg’s uncertainty principle, but there is a major difference: Heisenberg’s theory deals with observations, whereas reflexivity deals with the role of thinking in generating observable phenomena.
I am thrilled by the possibility that I may have reached a profound new insight, but I am also scared because such claims are usually made by insane people and there are many more insane people in the world than there are people who have reached a profound new insight. I wonder whether my insight has an objective validity or only a subjective significance.
That is why I am so eager to submit my ideas to a critical examination and that is why I find the present situation, where I am taken so seriously but my theory is not, so frustrating. As I have said before, the theory of reflexivity has received practically no serious consideration. It is treated as the self-indulgence of a man who made a lot of money in the stock market. It is generally summed up by saying that markets are influenced by psychological factors, and that is pretty trite. But that is not what the theory says. It says that, in certain cases, the participants’ bias can change the fundamentals which are supposed to determine market prices.
I ask myself, why did I fail to communicate this point? The answer I come up with is that I tried to say too much, too soon. I tried to propound a general theory of reflexivity at a time when reflexivity as a phenomenon is not even recognized. In retrospect, I think I should have started more modestly; I should have tried to prove the existence of reflexivity as a phenomenon before I tried to revise our view of the world based on that phenomenon. It can be done relatively easily, and the financial markets provide an excellent laboratory in which to do it. And that is what I should like to do here today.
What I need to do is to demonstrate that there are instances where the participants’ bias is capable of affecting not only market prices but also the so-called fundamentals that market prices are supposed to reflect. I have collected and analyzed such instances in The Alchemy of Finance, so all I need to do here is simply to enumerate them. In the case of stocks, I have analyzed two particular instances which demonstrate my case perfectly; one is the conglomerate boom and bust of the late 1960s, and the other is the boom and bust of real estate investment trusts in the early 70s. I cite may other instances, such as the leveraged buyout boom of the 1980s and the boom/bust sequences engendered by foreign investors. But these cases are less clear cut.
The common thread in the two instances I have mentioned is so-called equity leveraging; that is to say, companies can use inflated expectations to issue new stock at inflated prices, and the resulting increase in earnings per share can go a long way to validate the inflated expectations. But equity leveraging is only one of many possible mechanisms for transmitting the participants’ bias to the underlying fundamentals. Consider, for instance, the boom in international lending which occurred in the 1970s and led to the bust of 1982. In the boom, banks relied on so-called debt ratios, which they considered as objective measurements of the ability of the borrowing countries to service their debt, and it turned out that these debt ratios were themselves influenced by the lending activity of the banks.
In all these cases, the participants’ bias involved an actual fallacy: in the case of the conglomerate and mortgage trust booms, the growth in earnings per share was treated as if it were independent of equity leveraging; and in the case of the international lending boom, the debt ratio was treated as if it were independent of the lending activities of the banks. But there are other cases where no such fallacy is involved. For instance, in a freely-fluctuating currency market, a change in exchange rates has the capacity to affect the so-called fundamentals which are supposed to determine exchange rates, such as the rate of inflation in the countries concerned; so that any divergence from a theoretical equilibrium has the capacity to validate itself. This self-validating capacity encourages trend-following speculation, and trend-following speculation generates divergences from whatever may be considered the theoretical equilibrium. The circular reasoning is complete. The outcome is that freely-fluctuating currency markets tend to produce excessive fluctuations and trend-following speculation tends to be justified.
I believe that these examples are sufficient to demonstrate that reflexivity is real; it is not merely a different way of looking at events; it is a different way in which events unfold. It doesn't occur in every case but, when it does, it changes the character of the situation. Instead of a tendency towards some kind of theoretical equilibrium, the participants’ views and the actual state of affairs enter into a process of dynamic disequilibrium which may be mutually self-reinforcing at first, moving both thinking and reality in a certain direction, but is bound to become unsustainable in the long run and engender a move in the opposite direction. The net result is that neither the participants’ views nor the actual state of affairs returns to the condition from which it started. Once the phenomenon of reflexivity has been isolated and recognized, it can be seen to be at work in a wide variety of situations. I studied one such situation in The Alchemy of Finance which was particularly relevant at the time the book was written. I called it “Reagan’s Imperial Circle.” It consisted of financing a massive armaments program with money borrowed from abroad, particularly from Japan. I showed that the process was initially self-reinforcing but it was bound to become unsustainable. A similar situation has arisen recently with the reunification of Germany, which eventually led to the breakdown of the European Exchange Rate Mechanism. The ERM operated in near- equilibrium conditions for about a decade before the reunification of Germany created a dynamic disequilibrium.
What renders reflexivity significant is that it occurs only intermittently. If it were present in all situations all the time, it would merely constitute a different way of looking at events and not a different way for events to evolve. That is the point I failed to make sufficiently clear in my book. I presented my theory of reflexivity as a general theory in which the absence of reflexivity appears as a special case. I was, of course, trying to imitate Keynes, who proposed his general theory of employment in which full employment was a special case. But Keynes proposed his theory when unemployment was a well-established fact, whereas I proposed the theory of reflexivity before the phenomenon has been recognized. In doing so, I both overstated and understated my case. I overstated it by arguing that the methods and criteria of the natural sciences are totally inapplicable to the study of social phenomena. I called social science a false metaphor. That is an exaggeration because there are many normal, everyday, repetitive situations which can be explained and predicted by universally valid laws whose validity can be tested by scientific method. And even historical, reflexive processes have certain repetitive aspects which lend themselves to statistical generalizations. For instance, the trade cycle follows a certain repetitive pattern, although each instance may have some unique features and there is a lot more to be gained from understanding the unique features than the repetitive pattern.
I have also understated my case by presenting reflexivity as a different way of looking at the structure of social events rather than a different way in which events unfold when reflexivity comes into play. I made the point that, in natural science, one set of facts follows another irrespective of what anybody thinks; whereas in the events studied by social science, there is a two-way interaction between perception and facts. I also drew a distinction between humdrum, everyday events in which the element of indeterminacy introduced by the reflexive connection can be treated as mere noise, and historical events where the reflexive interaction brings about an irreversible change both in the participants' views and the actual state of affairs. All this is very profound and very significant, but the really interesting undertaking is to study the difference between humdrum and historical events and to gain a better understanding of historical processes.
I have done a lot of work in that direction since I wrote The Alchemy of Finance, not so much in the financial markets as in the historical arena. I have come to distinguish between normal conditions and far-from-equilibrium conditions. In normal conditions, there is a tendency for the participants’ views and the actual state of affairs to converge or, at least, there are mechanisms at work to prevent them from drifting too far apart. I call these conditions “normal,” because that is what our intellectual traditions—including philosophy and scientific method —have prepared us for. I contrast them with far-from- equilibrium conditions, where the participants’ views are far removed from the actual state of affairs and there is no tendency for the two of them to come together. I have always found the far-from-equilibrium conditions much more fascinating, and I have studied them both in theory and in practice.
There are two very different kinds of far-from-equilibrium conditions: one is associated with the absence of change, and the other with revolutionary change. These two opposite poles act as “strange attractors”—an expression with which has become familiar since chaos theory has come into vogue.
So we can observe three very different conditions in history: the “normal,” in which the participants’ views and the actual state of affairs tend to converge; and two far-from- equilibrium conditions, one of apparent changelessness, in which thinking and reality are very far apart and show no tendency to converge, and one of revolutionary change in which the actual situation is so novel and unexpected and changing so rapidly that the participants’ views cannot keep up with it.
Interestingly, the rise and fall of the Soviet system presents both extremes. During Stalin’s time, reality and dogma were very far apart, but both of them were very rigid and showed no tendency to come together. Indeed, the divergence increased with the passage of time. When the system finally collapsed, people could not cope with the pace of change and events spun out of control. That is what we have witnessed recently.
But the two extremes can also be observed in totally unrelated contexts. Take, for instance, the banking industry in the United States. After the breakdown of the banking system in the Great Depression, it became closely regulated and very rigid; but when the restrictions were relaxed, the industry swung to the other extreme and entered a period of revolutionary change. I can locate the transition point with great precision: it was on that evening in 1973 when the management of First National City Bank held an unprecedented meeting for securities analysts in order to promote the stock as a growth stock. The pattern in the rise and fall of the Soviet system closely parallels the pattern in the fall and rise of the American banking system.
These three conditions are perhaps better explained by using an analogy. The analogy is with water, which also can be found in nature in three conditions: as a liquid, a solid or a gas. The three historical conditions I am trying to describe are as far apart as water, ice and steam. In the case of H2O, we can define exactly the three conditions; it has to do with temperature. Can we establish a similar demarcation line among the three conditions of historical change? I believe we can, and it has to do with the values that guide people in their actions. But I am not yet ready to give a firm answer. That is the problem that I am currently working on. But I feel rather exposed in dealing with such an esoteric issue. I need to know whether what I have said so far makes any sense; that is why I have imposed on you by giving you this rather heavy theoretical lecture, and I would welcome your comments either here or on another occasion.
I was invited to testify before Congress last week and this is how I started my testimony. I quote: “I must state at the outset that I am in fundamental disagreement with the prevailing wisdom. The generally accepted theory is that financial markets tend towards equilibrium, and on the whole, discount the future correctly. I operate using a different theory, according to which financial markets cannot possibly discount the future correctly because they do not merely discount the future; they help to shape it. In certain circumstances, financial markets can affect the so-called fundamentals which they are supposed to reflect. When that happens, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. Such boom/bust sequences do not arise very often, but when they do, they can be very disruptive, exactly because they affect the fundamentals of the economy.” I did not have time to expound my theory before Congress, so I am taking advantage of my captive audience to do so now. My apologies for inflicting a very theoretical discussion on you.
The theory holds, in the most general terms, that the way philosophy and natural science have taught us to look at the world is basically inappropriate when we are considering events which have thinking participants. Both philosophy and natural science have gone to great lengths to separate events from the observations which relate to them. Events are facts and observations are true or false, depending on whether or not they correspond to the facts.
This way of looking at things can be very productive. The achievements of natural science are truly awesome, and the separation between fact and statement provides a very reliable criterion of truth. So I am in no way critical of this approach. The separation between fact and statement was probably a greater advance in the field of thinking than the invention of the wheel in the field of transportation.
But exactly because the approach has been so successful, it has been carried too far. Applied to events which have thinking participants, it provides a distorted picture of reality. The key feature of these events is that the participants’ thinking affects the situation to which it refers. Facts and thoughts cannot be separated in the same way as they are in natural science or, more exactly, by separating them we introduce a distortion which is not present in natural science, because in natural science thoughts and statements are outside the subject matter, whereas in the social sciences they constitute part of the subject matter. If the study of events is confined to the study of facts, an important element, namely, the participants’ thinking, is left out of account. Strange as it may seem, that is exactly what has happened, particularly in economics, which is the most scientific of the social sciences.
Classical economics was modeled on Newtonian physics. It sought to establish the equilibrium position and it used differential equations to do so. To make this intellectual feat possible, economic theory assumed perfect knowledge on the part of the participants. Perfect knowledge meant that the participants’ thinking corresponded to the facts and therefore it could be ignored. Unfortunately, reality never quite conformed to the theory. Up to a point, the discrepancies could be dismissed by saying that the equilibrium situation represented the final outcome and the divergence from equilibrium represented temporary noise. But, eventually, the assumption of perfect knowledge became untenable and it was replaced by a methodological device which was invented by my professor at the London School of Economics, Lionel Robbins, who asserted that the task of economics is to study the relationship between supply and demand; therefore it must take supply and demand as given. This methodological device has managed to protect equilibrium theory from the onslaught of reality down to the present day.
I don't know too much about the prevailing theory about financial markets but, from what little I know, it continues to maintain the approach established by classical economics. This means that financial markets are envisaged as playing an essentially passive role; they discount the future and they do so with remarkable accuracy. There is some kind of magic involved and that is, of course, the magic of the marketplace where all the participants, taken together, are endowed with an intelligence far superior to that which could be attained by any particular individual. I think this interpretation of the way financial markets operate is severely distorted. That is why I have not bothered to familiarize myself with efficient market theory and modern portfolio theory, and that is why I take such a jaundiced view of derivative instruments which are based on what I consider a fundamentally flawed principle. Another reason is that I am rather poor in mathematics.
It may seem strange that a patently false theory should gain such widespread acceptance, except for one consideration; that is, that all our theories about social events are distorted in some way or another. And that is the starting point of my theory, the theory of reflexivity, which holds that our thinking is inherently biased. Thinking participants cannot act on the basis of knowledge. Knowledge presupposes facts which occur independently of the statements which refer to them; but being a participant implies that one’s decisions influence the outcome. Therefore, the situation participants have to deal with does not consist of facts independently given but facts which will be shaped by the decision of the participants. There is an active relationship between thinking and reality, as well as the passive one which is the only one recognized by natural science and, by way of a false analogy, also by economic theory.
I call the passive relationship the “cognitive function” and the active relationship the “participating function,” and the interaction between the two functions I call “reflexivity.” Reflexivity is, in effect, a two-way feedback mechanism in which reality helps shape the participants’ thinking and the participants’ thinking helps shape reality in an unending process in which thinking and reality may come to approach each other but can never become identical. Knowledge implies a correspondence between statements and facts, thoughts and reality, which is not possible in this situation. The key element is the lack of correspondence, the inherent divergence, between the participants’ views and the actual state of affairs. It is this divergence, which I have called the “participant’s bias,” which provides the clue to understanding the course of events. That, in very general terms, is the gist of my theory of reflexivity.
The theory has far-reaching implications. It draws a sharp distinction between natural science and social science, and it introduces an element of indeterminacy into social events which is missing in the events studied by natural science. It interprets social events as a never-ending historical process and not as an equilibrium situation. The process cannot be explained and predicted with the help of universally valid laws, in the manner of natural science, because of the element of indeterminacy introduced by the participants’ bias. The implications are so far-reaching that I can’t even begin to enumerate them. They range from the inherent instability of financial markets to the concept of an open society which is based on the recognition that nobody has access to the ultimate truth. The theory gives rise to a new morality as well as a new epistemology. As you probably know, I am the founder—and the funder—of the Open Society Foundation. That is why I feel justified in claiming that the theory of reflexivity has guided me both in making and in spending money.
But is it possible to come up with a valid new theory about the relationship between thinking and reality? It seems highly unlikely. The subject has been so thoroughly explored that probably everything that can be said has been said. In my defense, I did not produce the theory in a vacuum. The logical indeterminacy of self-referring statements was first discussed by Epimenides, the Cretan philosopher, who said, “Cretans always lie,” and the paradox of the liar was the basis of Bertrand Russell's theory of classes. But I am claiming more than a logical indeterminacy. Reflexivity is a two-way feedback mechanism, which is responsible for a causal indeterminacy as well as a logical one. The causal indeterminacy resembles Heisenberg’s uncertainty principle, but there is a major difference: Heisenberg’s theory deals with observations, whereas reflexivity deals with the role of thinking in generating observable phenomena.
I am thrilled by the possibility that I may have reached a profound new insight, but I am also scared because such claims are usually made by insane people and there are many more insane people in the world than there are people who have reached a profound new insight. I wonder whether my insight has an objective validity or only a subjective significance.
That is why I am so eager to submit my ideas to a critical examination and that is why I find the present situation, where I am taken so seriously but my theory is not, so frustrating. As I have said before, the theory of reflexivity has received practically no serious consideration. It is treated as the self-indulgence of a man who made a lot of money in the stock market. It is generally summed up by saying that markets are influenced by psychological factors, and that is pretty trite. But that is not what the theory says. It says that, in certain cases, the participants’ bias can change the fundamentals which are supposed to determine market prices.
I ask myself, why did I fail to communicate this point? The answer I come up with is that I tried to say too much, too soon. I tried to propound a general theory of reflexivity at a time when reflexivity as a phenomenon is not even recognized. In retrospect, I think I should have started more modestly; I should have tried to prove the existence of reflexivity as a phenomenon before I tried to revise our view of the world based on that phenomenon. It can be done relatively easily, and the financial markets provide an excellent laboratory in which to do it. And that is what I should like to do here today.
What I need to do is to demonstrate that there are instances where the participants’ bias is capable of affecting not only market prices but also the so-called fundamentals that market prices are supposed to reflect. I have collected and analyzed such instances in The Alchemy of Finance, so all I need to do here is simply to enumerate them. In the case of stocks, I have analyzed two particular instances which demonstrate my case perfectly; one is the conglomerate boom and bust of the late 1960s, and the other is the boom and bust of real estate investment trusts in the early 70s. I cite may other instances, such as the leveraged buyout boom of the 1980s and the boom/bust sequences engendered by foreign investors. But these cases are less clear cut.
The common thread in the two instances I have mentioned is so-called equity leveraging; that is to say, companies can use inflated expectations to issue new stock at inflated prices, and the resulting increase in earnings per share can go a long way to validate the inflated expectations. But equity leveraging is only one of many possible mechanisms for transmitting the participants’ bias to the underlying fundamentals. Consider, for instance, the boom in international lending which occurred in the 1970s and led to the bust of 1982. In the boom, banks relied on so-called debt ratios, which they considered as objective measurements of the ability of the borrowing countries to service their debt, and it turned out that these debt ratios were themselves influenced by the lending activity of the banks.
In all these cases, the participants’ bias involved an actual fallacy: in the case of the conglomerate and mortgage trust booms, the growth in earnings per share was treated as if it were independent of equity leveraging; and in the case of the international lending boom, the debt ratio was treated as if it were independent of the lending activities of the banks. But there are other cases where no such fallacy is involved. For instance, in a freely-fluctuating currency market, a change in exchange rates has the capacity to affect the so-called fundamentals which are supposed to determine exchange rates, such as the rate of inflation in the countries concerned; so that any divergence from a theoretical equilibrium has the capacity to validate itself. This self-validating capacity encourages trend-following speculation, and trend-following speculation generates divergences from whatever may be considered the theoretical equilibrium. The circular reasoning is complete. The outcome is that freely-fluctuating currency markets tend to produce excessive fluctuations and trend-following speculation tends to be justified.
I believe that these examples are sufficient to demonstrate that reflexivity is real; it is not merely a different way of looking at events; it is a different way in which events unfold. It doesn't occur in every case but, when it does, it changes the character of the situation. Instead of a tendency towards some kind of theoretical equilibrium, the participants’ views and the actual state of affairs enter into a process of dynamic disequilibrium which may be mutually self-reinforcing at first, moving both thinking and reality in a certain direction, but is bound to become unsustainable in the long run and engender a move in the opposite direction. The net result is that neither the participants’ views nor the actual state of affairs returns to the condition from which it started. Once the phenomenon of reflexivity has been isolated and recognized, it can be seen to be at work in a wide variety of situations. I studied one such situation in The Alchemy of Finance which was particularly relevant at the time the book was written. I called it “Reagan’s Imperial Circle.” It consisted of financing a massive armaments program with money borrowed from abroad, particularly from Japan. I showed that the process was initially self-reinforcing but it was bound to become unsustainable. A similar situation has arisen recently with the reunification of Germany, which eventually led to the breakdown of the European Exchange Rate Mechanism. The ERM operated in near- equilibrium conditions for about a decade before the reunification of Germany created a dynamic disequilibrium.
What renders reflexivity significant is that it occurs only intermittently. If it were present in all situations all the time, it would merely constitute a different way of looking at events and not a different way for events to evolve. That is the point I failed to make sufficiently clear in my book. I presented my theory of reflexivity as a general theory in which the absence of reflexivity appears as a special case. I was, of course, trying to imitate Keynes, who proposed his general theory of employment in which full employment was a special case. But Keynes proposed his theory when unemployment was a well-established fact, whereas I proposed the theory of reflexivity before the phenomenon has been recognized. In doing so, I both overstated and understated my case. I overstated it by arguing that the methods and criteria of the natural sciences are totally inapplicable to the study of social phenomena. I called social science a false metaphor. That is an exaggeration because there are many normal, everyday, repetitive situations which can be explained and predicted by universally valid laws whose validity can be tested by scientific method. And even historical, reflexive processes have certain repetitive aspects which lend themselves to statistical generalizations. For instance, the trade cycle follows a certain repetitive pattern, although each instance may have some unique features and there is a lot more to be gained from understanding the unique features than the repetitive pattern.
I have also understated my case by presenting reflexivity as a different way of looking at the structure of social events rather than a different way in which events unfold when reflexivity comes into play. I made the point that, in natural science, one set of facts follows another irrespective of what anybody thinks; whereas in the events studied by social science, there is a two-way interaction between perception and facts. I also drew a distinction between humdrum, everyday events in which the element of indeterminacy introduced by the reflexive connection can be treated as mere noise, and historical events where the reflexive interaction brings about an irreversible change both in the participants' views and the actual state of affairs. All this is very profound and very significant, but the really interesting undertaking is to study the difference between humdrum and historical events and to gain a better understanding of historical processes.
I have done a lot of work in that direction since I wrote The Alchemy of Finance, not so much in the financial markets as in the historical arena. I have come to distinguish between normal conditions and far-from-equilibrium conditions. In normal conditions, there is a tendency for the participants’ views and the actual state of affairs to converge or, at least, there are mechanisms at work to prevent them from drifting too far apart. I call these conditions “normal,” because that is what our intellectual traditions—including philosophy and scientific method —have prepared us for. I contrast them with far-from- equilibrium conditions, where the participants’ views are far removed from the actual state of affairs and there is no tendency for the two of them to come together. I have always found the far-from-equilibrium conditions much more fascinating, and I have studied them both in theory and in practice.
There are two very different kinds of far-from-equilibrium conditions: one is associated with the absence of change, and the other with revolutionary change. These two opposite poles act as “strange attractors”—an expression with which has become familiar since chaos theory has come into vogue.
So we can observe three very different conditions in history: the “normal,” in which the participants’ views and the actual state of affairs tend to converge; and two far-from- equilibrium conditions, one of apparent changelessness, in which thinking and reality are very far apart and show no tendency to converge, and one of revolutionary change in which the actual situation is so novel and unexpected and changing so rapidly that the participants’ views cannot keep up with it.
Interestingly, the rise and fall of the Soviet system presents both extremes. During Stalin’s time, reality and dogma were very far apart, but both of them were very rigid and showed no tendency to come together. Indeed, the divergence increased with the passage of time. When the system finally collapsed, people could not cope with the pace of change and events spun out of control. That is what we have witnessed recently.
But the two extremes can also be observed in totally unrelated contexts. Take, for instance, the banking industry in the United States. After the breakdown of the banking system in the Great Depression, it became closely regulated and very rigid; but when the restrictions were relaxed, the industry swung to the other extreme and entered a period of revolutionary change. I can locate the transition point with great precision: it was on that evening in 1973 when the management of First National City Bank held an unprecedented meeting for securities analysts in order to promote the stock as a growth stock. The pattern in the rise and fall of the Soviet system closely parallels the pattern in the fall and rise of the American banking system.
These three conditions are perhaps better explained by using an analogy. The analogy is with water, which also can be found in nature in three conditions: as a liquid, a solid or a gas. The three historical conditions I am trying to describe are as far apart as water, ice and steam. In the case of H2O, we can define exactly the three conditions; it has to do with temperature. Can we establish a similar demarcation line among the three conditions of historical change? I believe we can, and it has to do with the values that guide people in their actions. But I am not yet ready to give a firm answer. That is the problem that I am currently working on. But I feel rather exposed in dealing with such an esoteric issue. I need to know whether what I have said so far makes any sense; that is why I have imposed on you by giving you this rather heavy theoretical lecture, and I would welcome your comments either here or on another occasion.
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