As if Americans don’t have enough to worry about with the impending fiscal cliff; now there is a greater long-term danger laying in wait in dark financial corners for 2013. Its called the “Great Rotation”!
A ‘great rotation’ is a cyclic general swing by investors away from buying bonds into buying stocks. Sounds innocent enough, but this time will spell big trouble for long-term U.S. federal government debt.
There are numerous reasons investors feel the time is ripe for another great rotation.
The Dynamics of a Great Rotation
According to experts the reasoning behind a rotation are quite simple. Stocks become risky for one reason or another, lose money and so skittish investors head for safer investments to prevent losses from volitile or declining stock…
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Back in mid-2010, I wrote that Portugal was going to exacerbate its fiscal problems by raising taxes.
Needless to say, I was right. Not that this required any special insight. After all, no nation has ever taxed its way to prosperity.
We’re now at the end of 2012 and Portugal is still saddled with a weak economy. And the higher taxes haven’t resulted in less red ink. Indeed, according to the Economist Intelligence Unit, government debt has jumped from 93 percent of GDP in 2010 to 124 percent of GDP this year.
- Higher taxes undermine incentives for productive behavior, thus reducing an economy’s potential for growth. This means less economic output, which also…
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Background and key principles
Under Islamic principles, Sharia law (prescribed in the Koran) defines the framework within which Muslims should conduct their lives.
The overarching principle of Islamic finance and banking products is that all forms of interest are forbidden. The Islamic financial model works on the basis of risk sharing. The customer and the bank share the risk of any investment on agreed terms, and divide any profits or losses between them. In addition, investments should only support practices that are not forbidden – trades in alcohol, betting and pornography are not allowed. Moreover, an Islamic banking institution is not permitted to lend to other banks at interest.
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“JPM is #1 in Global Investment Banking fees. It is #1 in Fixed Income Markets income share. It is one of the biggest derivatives traders. One might at first think that the new rules for FinReg that are set to be implemented in 2013 would hurt JPM more than others. However, the opposite may be true. There are two derivatives laws that are particularly important.”
“The first law would require that most derivatives be traded on open electronic platforms, with prices visible to all participants before deals are done. This would over time lead to much lower prices for derivatives. It would mean lower prices (margins) for JPM in this area. However, the big traders say that large transactions if done openly would disrupt the markets. They are lobbying for exemptions. The big traders such as JPM will be the ones to get these exemptions. They are the ones…
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