21st June 2013
1) The Fed may commence QE ‘tapering’ by the end of this year and finish the programme next year. Fed Chairman Ben Bernanke surprised experts with something close to a firm timetable as FoxBusiness reports. Cue market mayhem and indeed falls in equities, bonds and commodities. Mindful Money’s economics writer Shaun Richards says reversing the policy was always going to be difficult and never thought through.
2) Investors learned that Government may return the 40 per cent of Lloyds banking group which it owns to private hands as reported in Chancellor George Osborne’s Mansion House speech. RBS may be split into a good and a bad bank before anyone considers an IPO for it.
3) Strong words as Fitch raises concerns about a credit bubble in China, unprecedented in world history. A mere £2 trillion dollars worth of loans may be hidden off balance sheet in banks. Ambrose Evans-Pritchard assess the issues in the Telegraph. He quotes Charlene Chu, the agency’s senior director in Beijing. “There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling”. The BBC’s Robert Peston says history suggests that not even China’s can avoid the consequences – over-capacity, deflations, firm failures and all.
4) The language is a little technical but we think the boffins from Allianz, who pride themselves on their detailed understanding of risk as well as their investment credentials put it very well this week – “James Dilworth, CEO Allianz GI Europe says: “Investors need returns and traditional holdings will not provide it. The low interest rates of traditional fixed income investments will barely deliver positive real returns and the risk they bear with regard to rising rates seems to be widely underestimated.”
5) Well if that’s all bit too much and you don’t fancy banks but do like, edgy, trendy, punkish brewers, BrewDog is seeking funds. In its Equity for Punks online crowdfunding scheme, it is making 42,000 shares available at £95 each as it seeks to fund expansion. Founder James Watts has the following harsh words for the tradional City establishment. “It proves that there is a viable alternative to the financial establishment, and as the self-interested banks continue to stunt economic growth, people are looking for better places to put their money.”