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« Weighing the Week Ahead: Thinking about 9/11 | Main | Finding the Best Information about Europe »

September 12, 2011

Comments

Angel Martin

Jeff - I believe that even a catastrophic meltdown in europe may have a lot less impact long term on the US market than many expect. S&P 500 company revenues from europe are only about 10%. The US financial companies have about 2 bil in cash on balance sheet so they won't have the same funding issues they had in 2008. In that context the St Louis index may be doing a good job of measuring US systematic risk.

That said, a bad outcome from europe will drive the US market down, probably a lot.

oldprof

Angel -- I'm sure you noted my statement about making no predictions. It is a funny thing about these rumors -- they are best as sources of confirmation bias.

The SLFSI was not designed specifically for European issues. As far as I can see, it is doing a good job concerning the implications for US risk. The article you cite (and thanks for the pointer) suggests that US institutions are being pretty cautious with their collateral demands.

Thanks,

Jeff

Angel Martin

Jeff. I don't buy the chinese as the savior in this case. They were supposed to be supporting Spain earlier this year but Spanish bonds still needed massive ECB buying in the last few weeks.

On the larger question of the risks in europe. I have argued for months that there are huge risks in europe that are not being captured by financial stress measures - such as the ST Louis Index.

I am still researching but one reason why that might be the case is because, as this article summarizes, there are new funding mechanisms being used by the most risky players, so funding stress may not be showing up in the components of the St Louis index.

http://ftalphaville.ft.com/blog/2011/09/14/677201/rise-of-the-pawn-swan/#comments

ron glandt

If you traded 100% of your portfolio on the proven 100 day Nasdaq moving average method, you would have been out of the market in August to preserve wealth. Then you could get back into the market when the Nasdaq reaches the 100 day moving average again (with a fudge factor to avoid whipsawing). All the other ego speak marketing stuff is fluff to justify 96% of brokers never beating the market.

I do enjoy the intelligence of your fluff!

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