Today there are protests in many countries although the message isn't 100% clear. The two main issues seem to be corporate greed and government spending cuts. The mainstream media and the vocal majority seem to think that this is where the problems lie although they don't seem to have any reasonable solutions or understanding of the subtleties of the situation.
Firstly corporate greed - the vocal majority would prefer to live in a world where corporate profits are distributed to the poor and needy. Whilst this might seem fair it goes against capitalism as well common sense. Companies must seek to be profitable otherwise they won't attract investors and won't exist. Companies must act in the interests of their shareholders.
So what about Governments? Our Governments are given te responsibility of managing the public interest and therefore raise money through taxation and spend this money for our benefit. They, at least in theory, have the ability to improve the current economic situation. However many seem to miss the subtleties of their actions. For example most are calling for heavy taxes or company profits and high earners to raise money and prevent the austerity measures. However companies and individuals can often move countries to lower their tax burden - as noted in a previous post where Wolseley's move to Switzerland cost the UK over £20m in tax revenue. The Government's job is very difficult and the only long term solution is to try to encourage growth and job creation in the private sector. Public sector jobs are important but shouldn't be created just for the sake of the employment figures as it is public money paying those salaries.
Sunday 16 October 2011
Saturday 8 October 2011
It's all on the Timing
As markets continue to be nervous and downgrades of both banks and countries sweep across Europe you might be thinking I'd be changing my mind regarding my positive medium / long term outlook. This goes to show why timing is so difficult and why a short term strategy can fail.
The reality is that it's very difficult to pick the bottom and top of markets. Many industry experts were calling the top of the UK property market as early as 2005 / 2006 but it rallied well beyond then. However if you take a longer term view, short term fluctuations are only loses on paper, and might even be opportunities to invest further.
My strategy of buying what I believe to be good value stocks as I wrote about a few weeks ago is continuing and my outlook remains the same. Anything short of total Eurozone meltdown is not a problem and non of Europe's leaders can afford to let that happen. Short term traders trading of margin may have gotten their fingers burnt with this volatility, especially if they've been trying to call tops and bottoms. Taking a longer term view actually gives you a much wider window of timing which even the most respected traders and hedge fund managers rely on.
The reality is that it's very difficult to pick the bottom and top of markets. Many industry experts were calling the top of the UK property market as early as 2005 / 2006 but it rallied well beyond then. However if you take a longer term view, short term fluctuations are only loses on paper, and might even be opportunities to invest further.
My strategy of buying what I believe to be good value stocks as I wrote about a few weeks ago is continuing and my outlook remains the same. Anything short of total Eurozone meltdown is not a problem and non of Europe's leaders can afford to let that happen. Short term traders trading of margin may have gotten their fingers burnt with this volatility, especially if they've been trying to call tops and bottoms. Taking a longer term view actually gives you a much wider window of timing which even the most respected traders and hedge fund managers rely on.
Wednesday 5 October 2011
Introduction to Credit Rating Agencies
There has been a lot of press over the last fee months about countries being downgraded by credit rating agencies. The US made the headlines over the summer and more recently Italy has had it's economy both formally downgraded and generally ridiculed. Despite this many still aren't too sure what credit rating agencies really are, what they do and what the implications are of these downgrades.
What are credit rating agencies? The big 3 agencies are Standard & Poor's, Moody's and Fitch and they are widely regarded as credible and independent in assessing credit worthiness of large-scale borrowers. These borrowers being large corporations, banks and countries who typically borrow by issuing bonds. The agencies assign credit scores to enable investors (lenders) to quickly assess the risk of purchasing various bonds.
Why does it matter if a country is downgraded? As with consumer credit the lower tour credit rating the more costly your borrowing and the more difficult it is to raise money. The implications for countries, particularly certain ones in Europe, are potentially very damaging. Rating downgrades mean the government bonds have to carry a higher yield to attract investors and are therefore more expensive to repay. Countries like Italy, who already have significant debts and little or no economic growth to help manage repayments, could experience long term economic problems as a result.
Are credit ratings agencies ever wrong? The short answer is yes - most recently the subprime mortgage crisis was in part blamed on the agencies for giving financial products far too high a rating when the underlying security was actually very high risk and carried a high chance of default. Bankers took the brunt of the wrath from the press but the credit rating agencies were equally at fault.
What are credit rating agencies? The big 3 agencies are Standard & Poor's, Moody's and Fitch and they are widely regarded as credible and independent in assessing credit worthiness of large-scale borrowers. These borrowers being large corporations, banks and countries who typically borrow by issuing bonds. The agencies assign credit scores to enable investors (lenders) to quickly assess the risk of purchasing various bonds.
Why does it matter if a country is downgraded? As with consumer credit the lower tour credit rating the more costly your borrowing and the more difficult it is to raise money. The implications for countries, particularly certain ones in Europe, are potentially very damaging. Rating downgrades mean the government bonds have to carry a higher yield to attract investors and are therefore more expensive to repay. Countries like Italy, who already have significant debts and little or no economic growth to help manage repayments, could experience long term economic problems as a result.
Are credit ratings agencies ever wrong? The short answer is yes - most recently the subprime mortgage crisis was in part blamed on the agencies for giving financial products far too high a rating when the underlying security was actually very high risk and carried a high chance of default. Bankers took the brunt of the wrath from the press but the credit rating agencies were equally at fault.
Tuesday 4 October 2011
Taxing Times
Over the last few years the public cry, largely driven by an uninformed press, has been for new higher levels of tax for companies and in particular for high earning individuals (in the UK at least). In theory this generates a lot more income to help the government reduce the deficit. It would also in theory bash the banker's bonus which seems to be to top priority for the mainstream media.
The problem with onerous tax levels is that it is anti business and talented / high earning employees will simply leave the country. They are a mobile workforce and typically work in financial jobs in London which could be replicated in other global financial sectors. I personally know several brokers and bankers who have already made the move - most seem to be heading to Zurich or Singapore. Interestingly they say one issue for the move is tax but another reason is the public sentiment over high earners at the moment. Even if their job was completely unrelated to the financial crisis they are still being branded with the same 'banker' label which is now considered a derogatory term. It's not only people that are moving - last year Wolseley, a large building company, took their HQ and £391m profit to Switzerland. The UK missed out on a £23m tax bill as a result.
The UK needs to remain pro business and encourage high earners to excel. The top5% already pay 25% of the UK's income tax. High earners should definitely pay more tax but anything beyond the current level would be counterproductive and the 50p bracket should be reversed soon before too much damage is done. There also needs to be a sentiment change - companies are generally speaking efficient and wouldn't pay big bonuses unless the person receiving that bonus was worth considerably more. There tax bills are already larger than most people's paychecks so just think of what can be done with the tax they generate.
The problem with onerous tax levels is that it is anti business and talented / high earning employees will simply leave the country. They are a mobile workforce and typically work in financial jobs in London which could be replicated in other global financial sectors. I personally know several brokers and bankers who have already made the move - most seem to be heading to Zurich or Singapore. Interestingly they say one issue for the move is tax but another reason is the public sentiment over high earners at the moment. Even if their job was completely unrelated to the financial crisis they are still being branded with the same 'banker' label which is now considered a derogatory term. It's not only people that are moving - last year Wolseley, a large building company, took their HQ and £391m profit to Switzerland. The UK missed out on a £23m tax bill as a result.
The UK needs to remain pro business and encourage high earners to excel. The top5% already pay 25% of the UK's income tax. High earners should definitely pay more tax but anything beyond the current level would be counterproductive and the 50p bracket should be reversed soon before too much damage is done. There also needs to be a sentiment change - companies are generally speaking efficient and wouldn't pay big bonuses unless the person receiving that bonus was worth considerably more. There tax bills are already larger than most people's paychecks so just think of what can be done with the tax they generate.
Saturday 1 October 2011
Businesses can't Bank on it
Despite some of the PR banks have managed to get out there about supporting small business the reality is very different. I've worked with many SMEs in helping them raise capital and seen how the reality of getting a business loan, even for established companies with strong cash flow, is as hard as it's even been. The FT today reported that loans to SMEs has fallen significantly again; I'm also keen for more to be revealed about the criteria for these loans as even those that are being approved are not really company loans. They are in fact asset backed loans as currently banks will nearly always want to see their loans 100% by tangling assets. Often these assets are personal assets of the directors and not even company assets.
Most SME don't have big balance sheets with lots of assets and apply for loans on the basis that the projected cash flows (supported by orders and / or historic cash flow) demonstrate repayment of the loan. However to get a business loan approved these days you'll typically have to personal guarantees supported by a personal asset and liabilities statement and have a net asset position large enough to cover 100% of the loan. This typically means putting the family home on the line and defeats the purposes of setting up a limited liability company in the first place. Also should this really be classed as a business loan?
Entrepreneurs in the UK have always formed an essential part of the economy, creating value, employing people and paying taxes. Without support from the financial sector the economy will struggle to recover.
Most SME don't have big balance sheets with lots of assets and apply for loans on the basis that the projected cash flows (supported by orders and / or historic cash flow) demonstrate repayment of the loan. However to get a business loan approved these days you'll typically have to personal guarantees supported by a personal asset and liabilities statement and have a net asset position large enough to cover 100% of the loan. This typically means putting the family home on the line and defeats the purposes of setting up a limited liability company in the first place. Also should this really be classed as a business loan?
Entrepreneurs in the UK have always formed an essential part of the economy, creating value, employing people and paying taxes. Without support from the financial sector the economy will struggle to recover.
Tuesday 27 September 2011
Consumer Spendthrifts
About a week ago I suggested that I thought the Eurozone would eventually act decisively to dampen fears of a total Euro meltdown. Despite a turbulent week I still feel this is the case although I am being accused of being overly optimistic in what are undoubtedly very tough economic times. So I thought I'd address an area I am less optimistic about, that of consumer spending, or lack of, and the struggle ahead for retailers.
Many retailers have been struggling for sometime with some notable names completely absent from the high street. Consumers are being far more frugal and the austerity measures to keep the national debts in check are likely to mean it will be an even slower recovery for many retailers. Many towns and cities across the UK have many vacant units
In their centres and I expect this to continue to worsen in the short term. The demise
Of the high street may also be part of a longer term trend towards online shopping meaning retailers will need to change there business models to survive.
The most resilient section of the consumer spenders has been tourists from overseas. A weak pound has helped attract record tourist numbers although this only applies to certain locations, most notably London. It will also be sensitive to exchange rate fluctuations.
From an investor perspective I would focus on retailers offering essential items, such as the more aggressive supermarket chains, rather than what might be considered less essential retailers such as high street fashion. I'd particularly be wary of those who haven't got a strong web presence.
Many retailers have been struggling for sometime with some notable names completely absent from the high street. Consumers are being far more frugal and the austerity measures to keep the national debts in check are likely to mean it will be an even slower recovery for many retailers. Many towns and cities across the UK have many vacant units
In their centres and I expect this to continue to worsen in the short term. The demise
Of the high street may also be part of a longer term trend towards online shopping meaning retailers will need to change there business models to survive.
The most resilient section of the consumer spenders has been tourists from overseas. A weak pound has helped attract record tourist numbers although this only applies to certain locations, most notably London. It will also be sensitive to exchange rate fluctuations.
From an investor perspective I would focus on retailers offering essential items, such as the more aggressive supermarket chains, rather than what might be considered less essential retailers such as high street fashion. I'd particularly be wary of those who haven't got a strong web presence.
Thursday 22 September 2011
The Poor are Getting Richer
There is a global long term trend of wealth creation and the common misconeption is that it is only making the world's wealthiest even richer. Whilst it is true that the rich are getting richer, the poor are not getting poorer. Generally speaking the poor are getting wealthier over the long term and despite some recent large economic wobbles the wealth creation machine is still firing across most of the world.
Poverty as is a huge problem and is a long way from being solved. However in countries known for having large populations of people living in poverty, the improvements are encouraging. Take Brazil, a country known for a huge wealth divide, according to IPEA those living in extreme poverty halved in just 5 years to 2008. In that period those labeled as 'middle class' increased by 10% which in turn has increased consumption and expanded access to credit fueling further economic growth. India's growth has also been driven by an expanding middle class and those living below the poverty line has halved over the last 20 years.
Similar statistics can be found for most developing countries and with it comes consumption of covetted products such as mobile phones, consumer electronics and cars. This consumption has some far reaching implications for other problems, most notably global warming but certainly debunks the myth that the poor are getting poorer. This certainly needs to be addressed and there is still a long way to before poverty is defeated - India aims to have eradicted poverty by 2020 which seems unlikely but no doubt progress will have been made.
From an investment point of view I put a lot of faith in robust long term trends and their implications. In this case of the growing middle classes the desirable global brands should continue to thrive. Apple have seen unbelievable growth in the last decade but there are still huge markets in the developing world that are relatively untapped. The luxury goods market has also continued to expand - most of these brands are from the US or Europe where domestic consumption has been slow, however global consumption has more than comensated for it.
Poverty as is a huge problem and is a long way from being solved. However in countries known for having large populations of people living in poverty, the improvements are encouraging. Take Brazil, a country known for a huge wealth divide, according to IPEA those living in extreme poverty halved in just 5 years to 2008. In that period those labeled as 'middle class' increased by 10% which in turn has increased consumption and expanded access to credit fueling further economic growth. India's growth has also been driven by an expanding middle class and those living below the poverty line has halved over the last 20 years.
Similar statistics can be found for most developing countries and with it comes consumption of covetted products such as mobile phones, consumer electronics and cars. This consumption has some far reaching implications for other problems, most notably global warming but certainly debunks the myth that the poor are getting poorer. This certainly needs to be addressed and there is still a long way to before poverty is defeated - India aims to have eradicted poverty by 2020 which seems unlikely but no doubt progress will have been made.
From an investment point of view I put a lot of faith in robust long term trends and their implications. In this case of the growing middle classes the desirable global brands should continue to thrive. Apple have seen unbelievable growth in the last decade but there are still huge markets in the developing world that are relatively untapped. The luxury goods market has also continued to expand - most of these brands are from the US or Europe where domestic consumption has been slow, however global consumption has more than comensated for it.
Monday 19 September 2011
Stocks
Further to my post yesterday about buying opportunities in stocks there has been further fall out in the markets due to continued fear over the economic situation. I'll reanalysed some of my positions and still feel that the long term market outlook is positive. The instability and stock volatility will be around for the short term but as mentioned before I'm not day trading. Any meaningful response to the debt crisis, which as I mentioned in other posts I believe will come through, should give the markets a shot in the arm. Thereafter the growth is likely to be much more steady with less volatility.
This shouldn't be construed as investment advice but banking stocks in particular have taken a hit and I think this is a buying opportunity. For example you can pick up RBS and Barclays stocks today for 22p and 151p respectively. Will be interesting to see where they are in 2 - 3 years time! Whilst liquidity is still tight the larger UK banks are generally maintaining their market share and the margins on lending activity are still very high.
This shouldn't be construed as investment advice but banking stocks in particular have taken a hit and I think this is a buying opportunity. For example you can pick up RBS and Barclays stocks today for 22p and 151p respectively. Will be interesting to see where they are in 2 - 3 years time! Whilst liquidity is still tight the larger UK banks are generally maintaining their market share and the margins on lending activity are still very high.
Sunday 18 September 2011
Where I'm Investing Now
This is my first post about where I am actually discussing investments. I won't be giving specific stock picks as I don't want this to appear to be investment advise, however I will be stating where my money is going for the record and to track progress of my expectations. I should also note that I'm not a day trader and take a view over the medium / long term.
Over the last few months I have been increasing my exposure to the stock market and will be continuing to do this over the next few months at least. My aim being to select stocks that I believe are significantly undervalued with particular focus on stocks with good dividend yields. I'm attracted for two related reasons, firstly the low interest rate environment makes them an attractive income source and secondly for this very reason I expect that these stocks will be the first to recover and show the best growth over the next 2 to 3 years. Even the most bearish stock investors will struggle to resist the dividends of blue chip / high yielding stocks as interest rates continue to remain low. I do reassess my portfolio regularly but generally don't by a stock unless I think I'll be happy holding for at least 2 years. Also I am referring mainly to UK stocks simply because this is my native market and one I am more comfortable with; I do also have some exposure to European and US equities.
The looming shadows over the stock market that have caused the deep decline are well reported and at present the Eurozone crisis is the main factor. As touched on in a previous post I feel that the problem will soon be properly address simply because it has to be. Eurozone leaders have been guilty of just doing enough but have reacted when emergency looms and that is the situation now. The solution I expect to be a central European Treasury and formation of this institution will give the markets a confidence boost that the Eurozone crisis will be managed through. There will almost certainly follow a period of austerity in most of Europe but these factors have already been factored in to stock prices. Due to these continued austerity measures the market recovery will be slow but with a formal 'lender of last resort' in place in Europe there will be a feeling of stability and slow change in sentiment.
It is currently Sunday afternoon in London so all the stock markets are closed. The FTSE, DJIA, S&P and the DAX closed at 5368, 11509, 1216 and 5573 respectively on Friday.
Over the last few months I have been increasing my exposure to the stock market and will be continuing to do this over the next few months at least. My aim being to select stocks that I believe are significantly undervalued with particular focus on stocks with good dividend yields. I'm attracted for two related reasons, firstly the low interest rate environment makes them an attractive income source and secondly for this very reason I expect that these stocks will be the first to recover and show the best growth over the next 2 to 3 years. Even the most bearish stock investors will struggle to resist the dividends of blue chip / high yielding stocks as interest rates continue to remain low. I do reassess my portfolio regularly but generally don't by a stock unless I think I'll be happy holding for at least 2 years. Also I am referring mainly to UK stocks simply because this is my native market and one I am more comfortable with; I do also have some exposure to European and US equities.
The looming shadows over the stock market that have caused the deep decline are well reported and at present the Eurozone crisis is the main factor. As touched on in a previous post I feel that the problem will soon be properly address simply because it has to be. Eurozone leaders have been guilty of just doing enough but have reacted when emergency looms and that is the situation now. The solution I expect to be a central European Treasury and formation of this institution will give the markets a confidence boost that the Eurozone crisis will be managed through. There will almost certainly follow a period of austerity in most of Europe but these factors have already been factored in to stock prices. Due to these continued austerity measures the market recovery will be slow but with a formal 'lender of last resort' in place in Europe there will be a feeling of stability and slow change in sentiment.
It is currently Sunday afternoon in London so all the stock markets are closed. The FTSE, DJIA, S&P and the DAX closed at 5368, 11509, 1216 and 5573 respectively on Friday.
Saturday 17 September 2011
Who lends money to countries?
The occasional post will look at some basics of how the financial world works. Having worked in the markets for some time it is easy to unknowingly speak in financial jargon and make some fairly sweeping assumptions when speaking to those who may be less familiar with the workings of the financial system. So I'm also going to cover a few questions that may have been asked by friends of family when discussing these issues.
A common question is that countries are often described as having huge debts, but who lends them all that money?
It isn't like you or I filling out an application form to get a bank loan. Firstly to understand where most countries borrow their money from you must understand what a bond is. A bond is essentially debt - those who issue bonds are taking on a debt. A bond will be sold for a fixed amount of money, a fixed term and the issuer will pay the buyer an annual return during the term of the bond. At the end of the term the borrower (the issuer of the bond) must repay the lender (the buyer of the bond) in full. Therefore to raise money countries issue bonds to the market. The annual return (yield) an issuer bonds must pay depends on their apparent credit worthiness. Europe demonstrated this well with yields on Portuguese and Greece debt being significantly higher than Germany.
So who buys bonds?
Anyone can in theory buy bonds but due to their large denominations Government bonds are typically purchased by pension funds, investment trusts, sovereign wealth funds etc.... So these are essentially those who lend to countries. In times of economic turmoil government bonds from countries like the US are seen as a safe haven for money so they tend not to have a problem finding investors. Once an investor has bought a bond they can sell it to another investor if they wish and this is called the secondary market, but I won't go into too much detail there.......
A common question is that countries are often described as having huge debts, but who lends them all that money?
It isn't like you or I filling out an application form to get a bank loan. Firstly to understand where most countries borrow their money from you must understand what a bond is. A bond is essentially debt - those who issue bonds are taking on a debt. A bond will be sold for a fixed amount of money, a fixed term and the issuer will pay the buyer an annual return during the term of the bond. At the end of the term the borrower (the issuer of the bond) must repay the lender (the buyer of the bond) in full. Therefore to raise money countries issue bonds to the market. The annual return (yield) an issuer bonds must pay depends on their apparent credit worthiness. Europe demonstrated this well with yields on Portuguese and Greece debt being significantly higher than Germany.
So who buys bonds?
Anyone can in theory buy bonds but due to their large denominations Government bonds are typically purchased by pension funds, investment trusts, sovereign wealth funds etc.... So these are essentially those who lend to countries. In times of economic turmoil government bonds from countries like the US are seen as a safe haven for money so they tend not to have a problem finding investors. Once an investor has bought a bond they can sell it to another investor if they wish and this is called the secondary market, but I won't go into too much detail there.......
European Treasury?
Inaction in Europe to meaningfully address the Eurozone criss is not a maor surprise due to the political forces but we're comign to a point where something has to give. They have responded with emergency action when required, typically by buying up bonds of the deificit nations, which shows that they can move swiftly to avoid disaster. They have been necessary measures but the heart of the problem lies in the structure of the Euro which can't be solved by buying up bonds.
During the turmoil of the summer there was a feeling that certain countires may consider exiting the Euro to save themselves and this is still a widely supported strategy in Germany. The alternative is to commit fully to the Euro, pool national debts and have a central European Treasury able to issue jointly backed Eurobonds. Up until recently this idea has been opposed in Germany as it is likely to be very costly to them however they are begining to digest the implications of abandoning the Euro altogether, which is likely to result in a total meltdown and deep recession.
In my opinion the common European Treasury is the only feasible option and may finally settle the markets and convince the wider populous that the heart of the problem has been address. There would be significant austerity measures to pay for the move so it won't be an overnight solution but the sentiment should change for the better.
During the turmoil of the summer there was a feeling that certain countires may consider exiting the Euro to save themselves and this is still a widely supported strategy in Germany. The alternative is to commit fully to the Euro, pool national debts and have a central European Treasury able to issue jointly backed Eurobonds. Up until recently this idea has been opposed in Germany as it is likely to be very costly to them however they are begining to digest the implications of abandoning the Euro altogether, which is likely to result in a total meltdown and deep recession.
In my opinion the common European Treasury is the only feasible option and may finally settle the markets and convince the wider populous that the heart of the problem has been address. There would be significant austerity measures to pay for the move so it won't be an overnight solution but the sentiment should change for the better.
Friday 16 September 2011
Introduction
To expand a little on my profile. I am an active financier working in London and have a broad interest in the financial markets, alternative investments and economics. I have started this blog primarily to record my thoughts and actions in real time rather than looking back with the considerable bias of hindsight to explain events and actions.
I'm an avid reader of any genres and will be commenting on new theories and practises I encounter and what I feel that I can learn and use. At the time of beginning this blog the developed world is still very unsure and unsettled the economic situation. The 'credit crunch' and failure of Lehman Brothers is now around 3 years old although there seems to be little light at the end of the tunnel. Bank lending and liquidity is still severly restricted and the extent to which banks require to raise new capital is still not fully known, particularly in Europe. However whilst Governments make statements about banks needed to lend to small businesses at the same time they are imposign stricter regulations. Whilst most would welcome regulations to prevent economic catosthrophe like we've seen over the sub-prime crisis, we've also seen this reaction after every recession and all it does is try to address issues that caused the last crisis and not fundamental market issues that may already be contributing to the next. Also like it or not the politicians tend to think politics before economics so the current trend of 'banker bashing' is likely to continue, whether or not it actually helps or harms the economy. (nb I'm not a banker!)
I'm also interested in the differing opinions of respected economic advisers and successful practisioners such as George Soros who's investment decisions often contradict traditional and widely believed economic theories such as market equilibrium. However with Soros' investment record surely he has to be winning over some of his critics and for those who've read his reflexivity theory there is a good dose of common sense - something many investment decisions lack. Will economic theory, as taught to the next batch of bankers and CEOs, catch up with the practises of the most successful hedge fund managers?
Finally a quick point on the blog title - many investors define themselves by either being a 'top down' or 'bottom up' strategists. I don't really see how you can make an investment decision without considering the wider economic context or without specific research into who or what you are investing in so the two shouldn't be mutually exclusive.
I'm an avid reader of any genres and will be commenting on new theories and practises I encounter and what I feel that I can learn and use. At the time of beginning this blog the developed world is still very unsure and unsettled the economic situation. The 'credit crunch' and failure of Lehman Brothers is now around 3 years old although there seems to be little light at the end of the tunnel. Bank lending and liquidity is still severly restricted and the extent to which banks require to raise new capital is still not fully known, particularly in Europe. However whilst Governments make statements about banks needed to lend to small businesses at the same time they are imposign stricter regulations. Whilst most would welcome regulations to prevent economic catosthrophe like we've seen over the sub-prime crisis, we've also seen this reaction after every recession and all it does is try to address issues that caused the last crisis and not fundamental market issues that may already be contributing to the next. Also like it or not the politicians tend to think politics before economics so the current trend of 'banker bashing' is likely to continue, whether or not it actually helps or harms the economy. (nb I'm not a banker!)
I'm also interested in the differing opinions of respected economic advisers and successful practisioners such as George Soros who's investment decisions often contradict traditional and widely believed economic theories such as market equilibrium. However with Soros' investment record surely he has to be winning over some of his critics and for those who've read his reflexivity theory there is a good dose of common sense - something many investment decisions lack. Will economic theory, as taught to the next batch of bankers and CEOs, catch up with the practises of the most successful hedge fund managers?
Finally a quick point on the blog title - many investors define themselves by either being a 'top down' or 'bottom up' strategists. I don't really see how you can make an investment decision without considering the wider economic context or without specific research into who or what you are investing in so the two shouldn't be mutually exclusive.
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