Some investors have been astonished by the run–up in raw material prices so far this year – after all, chocolate was not supposed to be high on the shopping list in a global recession! Well, the resurgence of commodities should not come as a surprise to Risk Watchdog’s faithful readership. My colleagues at BMI have [Read more...]

Calls by China and Russia for a new global reserve currency – possibly based on the IMF’s special drawing rights (SDRs) – reflect Beijing’s and Moscow’s concerns about a potential decline in the US dollar, and by extension, the value of their own substantial dollar holdings. Indeed, yesterday was the second time in as many [Read more...]

This week’s announcement that Ben Bernanke’s Federal Reserve would up the ante in its purchase of debt securities has certainly made things interesting.

The Federal Reserve’s plan is to buy up to an additional US$750bn of agency mortgage-backed securities, bringing the total to US$1.25trn; increase agency debt purchases by up to US$100bn, to US$200bn; and grease [Read more...]

As the charts below show, the JAMAICAN DOLLAR IS IN FREEFALL versus the US dollar. As the charts below also show, it’s just hit a NEW HIGH AGAINST STERLING.

[caption id="" align="alignnone" width="378" caption="Exchange rate, JMD/US$"][/caption]

I’m no maths genius, but to me this suggests that the UK is in serious, serious trouble.

[caption id="" align="alignnone" width="378" caption="Exchange [Read more...]

Last Wednesday, Watchdog pointed out that the move through US$1.3000/EUR would set up euro gains towards US$1.3800/EUR. At US$1.3400/EUR, I wrote on www.businessmonitor.com that US$1.4900/EUR was a realistic possibility, as the dollar would come under renewed pressure due to Fed easing, in both conventional monetary policy and quantitative terms.

In fact the dollar has depreciated against [Read more...]

Wow, what a week. Not that markets ended up moving much, mind: as others have noticed, everything in the US closed pretty much where it opened the previous week (see Barry Ritholtz’s post on the subject). But even if those indicators indicate that nothing has changed, it is pretty clear that everything has changed. And [Read more...]

Although market developments are moving quickly, I am going reiterate that the Watchdogs fundamental outlook for the second half of 2008 is playing out.

The core scenario envisaged the collapse of a major US financial institution in H208. If you count Fannie Mae and Freddie Mac in that category (or, for that matter, IndyMac, which on [Read more...]