News Brief from AXA Equitable: Highlights from recent notable market news reports
December 16, 2011
Uncertainty over how the eurozone financial crisis will play out is dominating investment decisions and overshadowing fundamentals driving earnings (“BlueCrest’s Platt Says Europe Banks Insolvent as Bass Sees Run,” by Jesse Westbrook and Saijel Kishan, Dec. 15, 2011, Bloomberg).
Michael Platt of BlueCrest Capital Management told Bloomberg his hedge fund has avoided buying assets from European banks trying to deleverage, citing concerns about liquidity risks like those that quickly surfaced in the 2008 financial crisis. “I would not touch them with a barge pole,” he said, “The major opportunities will come post-blowout.”
Platt told Bloomberg he believes that most European lenders would be deemed insolvent if, like hedge funds, they had to mark their books to market every day. Platt said his firm is buying U.S. Treasurys and short-term German debt.
Concerns about the eurozone – and related rating agency responses – have caused a sustained period of market volatility that many investors say they have never encountered before and are struggling as a result (“Wall Street Traders Confounded as Volatility Extends Record Run,” by Saijel Kishan and Jeff Kearns, Dec. 15, 2011, Bloomberg).
“Markets seem to be driven more by the latest news out of Europe than by a company’s earnings prospects,” Duke Buchan III wrote in a recent investor letter, according to Bloomberg. “We have not weathered the ensuing volatility well,” he wrote in connection with his decision to close his firm, Hunter Global Investors LP. “It has not been our kind of market: macro-driven and highly correlated, with little regard to individual company fundamentals.”
Against this backdrop, Treasurys have been generating returns north of 8% as investors seek a safe haven, causing Michael Shaoul of brokerage firm Oscar Gruss to worry what would happen to these bond holders if Europe suddenly became less worrisome (“U.S. Treasury Buyers Flip the Script,” by Matt Phillips, Dec. 14, 2011, The Wall Street Journal). “You can lose a surprising amount of money” if interest rates rose just one or two percentage points, he told The Journal.
Kenneth Volpert of Vanguard Group, however, told The Journal, “We don’t think there’s a lot of risk to rates rising here, and we think that the uncertainty around Europe could potentially cause them to go a little bit lower.”
IMPORTANT — AXA Equitable, AXA Advisors, LLC (member SIPC) and their affiliates do not provide tax/legal advice, or investment or market research. The quotes provided in this News Brief have been excerpted from media reports for general informational purposes only and do not represent the opinions of AXA Equitable, AXA Advisors or their affiliates, associates or employees. AXA Equitable and its affiliates make no representation as to the accuracy or completeness of any statements, statistics, data, opinions, forecasts, or predictions provided herein, nor will this information necessarily be updated or supplemented at any time. Any reference to market or index performance is for informational purposes only. It is not possible to invest directly in an index. This material is not intended, and should not be relied upon, as investment or financial advice and does not constitute an offer or solicitation of any kind.
