Chief Market Analyst,Briefing.com
Provider of independent, live market analysis
of the U.S. and international equity markets
Can you give us a brief overview on what has been occurring with the world’s stock markets?
For one thing, there has been a lot of selling in the world’s stock markets in the first half of the year. That activity has been driven by a number of things, including: a fear of recession in the U.S.; the semblance of a stock market bubble in China and other emerging markets; concerns about social unrest arising from escalating food and energy costs; and the dislocation in major credit markets that has followed the subprime mortgage crisis in the U.S. In brief, there has been a global risk aversion trade that has stemmed from a massive unwinding of speculative positions. The U.S. Treasury market has been the beneficiary of a flight to-safety trade; meanwhile, commodities, aided by the weakening U.S. dollar and growth in developing markets, have become an increasingly crowded outpost for participants fleeing equities and seeking extra return on their investments.
What is your position on what has recently occurred with Bear Stearns (how it came to be and how to avoid this in the future)?
Bear Stearns made liberal use of leverage in a bid to enhance its investment returns. In simple terms, the investment bank bit off more than it could chew and it ended up choking on that leverage as the credit market seized up and customer confidence eroded. Essentially, the fear that Bear Stearns wouldn’t be able to make good on its obligations to counterparties set into motion a chain of events that led to a modern day run on the [investment] bank. The remarkable consideration here is that it was the market, and not the economy, that drove the 85-year old firm to the brink of a bankruptcy filing, and ultimately, to agree to a fire-sale to JPMorgan Chase. The latter, while calamitous for most Bear Stearns investors and employees, prevented what would have likely been an epic sell-off in the stock market had Bear Stearns been allowed to fail altogether. A starting point to ensure something like this doesn’t happen again is to have a stronger appreciation for, and greater attention to risk controls. Sadly though, history and human nature suggest this won’t be the last of such trying episodes.
What are the markets currently worried about?
Earnings drive the stock market, and the biggest worry right now is the idea that the U.S. economy could fall into a deep and protracted recession, which would be very negative in terms of earnings prospects. Beyond this, sharply rising food and fuel costs have fostered inflation concerns. The specter of inflation isn’t a calming consideration for either equity or fixed income investors. Briefing.com for its part doesn’t subscribe to the recession fears. We also believe the sub-par economic growth will help contain inflation at the core level as workers, wanting simply to keep their jobs, will table increased wage demands.
As an analyst, what business motto do you follow?
Don’t make things any more complicated than they need to be. We are a smart society, but when doing business, keep things simple. When something is easy to understand, it breeds confidence in decision-making. Importantly, it also promotes a greater sense of trust for the person with whom you are doing business with. When people trust you, they keep doing business with you.
What do you consider to be the driving factor behind your success?
The driving factor behind my success is knowing what I don’t know—and the stock market reminds me all too often that I still have a lot to learn. This acknowledgment goes hand-in-hand with an insatiable desire to keep learning so I can keep advancing in my career.
What is Briefing.com’s key differentiation from the competition in the industry?
We are an objective and trustworthy source of information that provides the news, but goes beyond that to analyze what the news means and how it will impact our trader and investor audiences.
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