Dry weather, wet money: the fatal tandem for food price

Posted on 30. Jul, 2012 by Steve Ohana in Weekly Focus

Food, unlike money, cannot be printed. Even worse, whereas the printing press may have the power to decrease the cost of money, it also has the power to increase the price of food. One year and a half after the Tunisian and Algerian food riots which triggered the Arab spring, will QE3 spark a fresh [...]

How long can the “risk-on” “risk-off” schizophrenia last?

Posted on 24. Jul, 2012 by Jean Jacques Ohana in Weekly Focus

The high level of financial integration shown in Figure 1 masks an increasing rift across risky assets. This rift is well-reflected in Figure 2, representing the divergent dynamics of the IBEX and banks, on the one hand, and the DAX and Food and Beverage sector, on the other hand, since 2010. It is also [...]

The bubbles created from the race to negative rates

Posted on 16. Jul, 2012 by Jean Jacques Ohana in Weekly Focus

As the ECB cut the main refinancing rate and the deposit rate by 25 basis points to 0.75 percent and zero respectively, the Denmark responded and cut its key interest rate by 25 basis points to a negative 0.20 percent. France issued a short term bill at 0%,

Last week, 6 European countries’ two years maturity [...]

Portfolios to hold for the long run

Posted on 11. Jul, 2012 by Jean Jacques Ohana in Weekly Focus

In times where extreme financial scenarios become possible, balanced portfolios can be built with the objective of capturing diversified risk premiums in diverse macroeconomic configurations. As shown in figure 1, there are 4 categories of assets in financial markets:

Equities represent the most risky assets, with a positive loading on each of the first two [...]

Another euro zone bailout: show me the money!

Posted on 06. Jul, 2012 by Jean Jacques Ohana in Weekly Focus

The European Summit on 28th and 29th June (the official statement can be read here) has permitted two political breakthroughs in the euro zone financial solidarity:

The design of a banking union. The European leaders plan to establish a single banking supervisory mechanism run the by the ECB, and, once this mechanism has been created, the [...]