Tag Archives: Investors

Targeting Fat Cats

Wealthy depositors with funds in the Bank of Cyprus are facing massive losses as the small island nation is struggling to keep its ailing banks afloat. According to the bailout conditions, depositors with over €100,000 in their accounts will receive Bank of Cyprus shares in exchange for the initial 37.5 per cent haircut. However, recent reports suggest that the cut might rise to 60 per cent in light of the worse than expected banking crisis shaking Cyprus. Many foreign depositors begun to withdraw funds from Cypriot accounts as soon rumours about the rescue package started circulating. Cypriot leaders have signalled that despite of the cots, the country is determined to stay in the eurozone.

Cyprus Reopens Banks Amid Tension

Cyprus reopened banks on Thursday, first time in almost two weeks, after a decision to close the country’s banks amid fears of a massive outflow of cash. The local police had a hefty presence as they prepared to protect the banks, prevent riots and secure that the $6.3 billion cargo shipped from the European Central Bank - to meet depositors’ demands that enough cash was available - was delivered to the banks safely.

Under the bailout terms, the tiny island nation’s two largest banks will go through massive restructuring, impacting the country’s economy significantly. Earlier this week Cyprus and the Troika hammered out a deal, securing a $20.5-billion bailout. According to the terms, depositors with accounts over $130k on Cypriot bank accounts are required to chip in to foot the costs of the rescue package.

Euro Down Despite Cyprus Deal

The single currency hit a new 4-month low against the dollar as Cyprus bailout implications are still unclear. Investors worry that the rescue package terms for Cyprus will set a precedent and ultimately become a blueprint for future bailouts. Cyprus is expected to finalise capital control actions on Wednesday following the country’s acceptance of the bailout conditions. During trading hours in Europe, the fell to $1.28175. German bonds were high due to the uncertainty surrounding the details of the Cypriot bailout. Investors have shown great dubiousness over the eurozone’s future and it’s unlikely that we will see massive euro rallies in the near future.

Curb Your Enthusiasm, Say Analysts

The Dow and S&P 500 continued their high runs for the sixth consecutive week and were up by 2 per cent by the end of the week, but the continued stock rally in the US and Japan is not necessarily cause for optimism, some analysts say.

These analysts take the rally-induced enthusiasm with a pinch of salt. For instance, CNBC’s Marc Faber pointed out that what we are seeing now in terms of investor behaviour was exactly what we saw four years ago when such short-lived enthusiasm ended badly.

“We’re up very substantially, I think investors who today rush into stocks should be reminded of that,” Faber observed. He said that the current rally will end in “a 20 per cent correction or a more nasty sell off at some point this year.”

While some express caution, the S&P 500 is nearing its all-time highs and the Nasdaq hiked up by 0.4 per cent, both driven by robust jobs data which inspired many investors to express faith in the economy’s ability to bounce back.

The Land of The Rising Stocks

The weaker yen coupled with positive job numbers from the US spurred Asian stocks to a highest close since August 2011. Moreover, the U.S. jobs data indicates that the world’s most dynamic economy is beginning to show real momentum.

Haruhiko Kuroda, candidate for the BOJ governorship and an advocate of quantitative easing is looking to buy derivatives if confirmed. Kuroda’s aim is to bring the inflation down to 2 per cent, a level unseen since the early 90’s. However, Kuroda’s, perhaps slightly premature, words are music to investors’ ears who are looking to cash in on the stocks rallies in Japan and the US.

Many analysts are expecting Japanese stocks to keep rising in the coming months.

The Bullish Retailers

Based on TD Ameritrade’s sentiment index for February, retail investors were buying stocks more forcefully than in the previous three years. Interestingly the audacious investors were not intimidated by the automatic spending cuts - better known as sequestration - agreed upon by DC policy makers.

Instead, stockholders invested in stocks that would take them to the next bull market, purchasing underachieving assets such as Apple and Facebook.

TD’s logic dictates that robust retail trade might gesture more positive numbers in the near future. According to TD, many retail sentiment methods have a tendency to have a contrarian character based on the principle that by the time the investor has reached a bullish trend, it’s too late in the game and at this point the big shots have begun to go short.

More Predictable Predictions For 2013

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