Funding markets and your business plan

Corporate Implications of the Supply/Demand Imbalance for Cash & US Treasuries:


QE2, markets and your strategic plan

QE2, Markets and Your Strategic Plan

  • The growth of money/credit during QE1 and QE2 had discernible effects on stock prices, credit spreads, commodity prices and the US dollar. Less obvious but still true, these programs also boosted business revenues
  • Creating new money & credit results in higher stock and other financial asset prices. But the new liquidity impacts fundamentals at the business level, in addition to providing a new source of purchasing power for financial assets
  • The cyclical margin boost that arises as new money/credit boosts revenues is temporary and subject to a reversal of the processes that helped create the initial margin expansion
  • Historically, commodities moved in opposition to financial assets (stocks and bonds). Now, commodities tend to move with equities and together against bonds. QE enhanced this trend
  • The 2008 credit bust slowed leverage growth in the US economy, but did not reverse it. By contrast, Japan and the Eurozone have deleveraged to different degrees. All three areas are printing money faster than credit is growing
  • Bank reserves have grown exponentially during QE1 & QE2. While US banks have not grown their cash reserves substantially, the US subsidiaries of foreign banks have exponentially grown their cash reserves

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Morgan Stanley: Inflation Uncertainty and Corporate Finance

By kind permission of Morgan Stanley’s Caitlin Long, The Cobden Centre is delighted to publish their report, Inflation Uncertainty and Corporate Finance.

Some key points:

  • Inflationary pressures are rising.
  • A devaluing US Dollar produces rising commodity prices and devaluing pegged currencies in many emerging markets.
  • The pendulum could swing back to deflation again.
  • MIT’s Billion Prices Project shows US prices running at over 10% annualised.
  • Commodity prices are at all-time highs.
  • Food prices are key to inflation in emerging markets.

You can download the report here.


Wall of Maturing Debt: A Mid-Course Update


Economic Growth in a Deleveraging World

Can economies grow amid deleveraging? How well do traditional economic measures, such as GDP, reflect the factors that matter to business performance—and is there a better measure?

Download the full report.