After the market mayhem on Wall Street come the recriminations.
If critics of Anglo-Saxon capitalism and retail investors needed any encouragement in thinking that the stock market is no more than a play space for plutocrats, then the wild gyrations on global stock markets will have confirmed that view. The preferred term of brokers and analysts for a market fall of about 10 per cent is ‘correction’.
It is a beguiling word because it suggests no more than a small adjustment before the good times roll again.
The origins of the fear or volatility products at the core of recent turmoil dates back to 2003 and meetings between the Chicago Board of Exchange (CBOE) and traders from Goldman Sachs
Nothing could be further from the truth about events of the last week. There was nothing calm about them – just blind panic and herd instinct.
Market gurus have struggled to come up with a believable narrative.
The only certainty about recent events has been a recognition that inflation is rebounding and that this is having an effect on interest rates with bond yields in the US jumping to a four-year high of 2.85 per cent over ten years.
Regulators have been all but invisible.
They are so busy fighting previous crises and assuring the public, among other things, that the banking system has been stress-tested that the creation of a new series of nasties has been barely noticed.
The origins of the fear or volatility products at the core of recent turmoil dates back to 2003 and meetings between the Chicago Board of Exchange (CBOE) and traders from Goldman Sachs.
Together they built a series of products based on the idea that there was big money to be made by betting for or against volatility in financial markets. These funds effectively became the source of the violent swings in stock markets.
After the Lord Mayor’s show, the enforcers are swinging into action. America’s share regulator the Securities & Exchange Commission (SEC) is probing the background to a decision by Credit Suisse to shut down its volatility fund after most of the cash fled following the wild ride on the Standard & Poor’s (S&P) 500 and the Dow.
Which data set from the Office for National Statistics is of greater interest: those detailing the labour market or those monitoring prices? It’s a movable feast
In particular the SEC has been anxious to establish how the bank calculated the performance of the fund and whether its sudden extinction directly affected any retail investors.
The SEC, together with the Commodities Futures Trading Commission, is also following up on a whistleblower letter sent to them by a major Washington law firm.
It alleges that Wall Street’s gauge of fear, the Vix, was manipulated during the market turmoil to make exceptional profits. The allegation is that a flaw in the CBOE volatility index made it easy to cheat.
Firms with advanced algorithms have been able to move the Vix up and down without putting any capital on the line or engaging in actual trading on behalf of clients.
Sound familiar? It was exactly what traders did in the Libor scandal, spurred on in the knowledge that senior executives wouldn’t notice as long as the earnings rolled in. All of which is thoroughly depressing.
Which data set from the Office for National Statistics is of greater interest: those detailing the labour market or those monitoring prices?
It is a movable feast, depending on where we are in the economic cycle. Indeed, with interest rates currently heading upwards and household incomes squeezed, it could easily be argued that the consumer, producer and housing price indexes will be hogging the limelight especially if the consumer price index (CPI) remains above target at 3pc.
The ONS has decided otherwise. It thinks the release of jobs figures on the same day as Prime Minister’s Questions should change because the data (so favourable in recent times) is ‘complicated and multifaceted’ and presumably vulnerable to misinterpretation by our brilliant MPs.
So the ONS has decided to swap release days with jobs on Tuesday each month and inflation on Wednesday. Might not the national statistician be better deployed sprucing up the productivity data?
Stefano Pessina, pictured, is targeting £14.3bn AmerisourceBergen, one of the US’s big wholesale drug distributors
No one can accuse Stefano Pessina, septuagenarian proprietor of Walgreens Boots, of resting on his laurels.
His new target is £14.3bn AmerisourceBergen, one of the US’s big wholesale drug distributors.
It is the kind of enterprise which Pessina knows well from experience as one of Europe’s top pharmacy suppliers. Like so many recent deals in retail, the aim is to keep Amazon at bay.
Good luck with that.