Inflation and the Stock Market: Does Anyone Remember the Seventies?
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We live in an era of particular asset appreciation. In spite of the much ballyhooed report of the real estate bubble bursting, I just saw recently on a financial news show that an 80 million dollar home/estate for sale had attracted more than one bidder, and that the bidders were, of course, in the financial field. Stock prices are hitting records. The price of oil is still high, and even the agricultural commodities are moving now. So where is all this commodity inflation now, what will it do to our stock market, and how does this relate to our past economic experience?
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Hedge Funds, Derivatives, Debt, China and the Risk of Systemic Market Panic
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It seems that with every significant market swoon, commentators come out of the woodwork on financial television and speak of the risk of systemic risk to the financial markets, more recently from hedge fund or complex derivative blow ups, or events from China. I think there is always the risk, however small, that such an event could occur and cause a large scale meltdown, and we would be foolhardy to say this would never happen.
But really, what is the likelihood of such a catalyst now for a catastrophic market event? I think the catalyst could be either caused by one or more of four factors: hedge fund (s) seizing up, a massive derivatives transaction or series of transactions gone seriously awry, the level of our public and private debt, or events from Asia, specifically China.
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