|
So apparently Societe' Generale was liquidating an ill equity position of $40bn. Even in todays liquid mkts that is a sizeable positions.
What is scary is that the Fed seems to have been tricked into easing by a rogue french trader. Surely the cut was on the cards for the FOMC meeting next 30th of Jan, but 75bp in between meeting is something of hystorical proportions.
The credibility of the most important central bank has suffered a little bit of a set back. Let's see what they do next week, with the mkt expecting another 50bp cut.
As per the stock mkt... I don't know... this thing is up or down 3-4% in a day. The expected return of an asset with such a volatility should be above 20% for the year....
If uncertainty stays high and earnings stay low then there is only one way for Prices to go in the long term.... especially as we have just slashed the free risk returns by 100bp in 1 week.
|