Twitter, bitcoin and a new class system

 April 1-5, 2013

AMERICAS 

Market comments: Last week, the S&P suffered its worst weekly decline since the beginning of the year and the TSX shed its 2013 gains. This is particularly note-worthy as the S&P index had reached a new high just days before. Yet, weak US employment numbers and geopolitical concerns - that North Korea will take military action against the US - impacted market confidence.

In the wake of Cyprus, Sprott Asset Management analysed the exposure among the G7 countries to their too-big-to-fail banks. It seems that Canada falls in the middle of its G7 peers when bank asset size is compared to the country’s economy. “Canada’s big banks have assets nearly twice the size of the economy. The United Kingdom is the worst by this metric, with big bank assets nearly three times the size of the economy, followed by France, at nearly 2.5 times, putting Canada in third place.

International News:  Japanese markets did particularly well last a “new phase of monetary easing” was unveiled by the Bank of Japan. The Bank aims to double the monetary base by 2015 through the purchase of long-term bonds.

Perhaps the Eurozone was quiet last week, or perhaps other nations just made a bigger splash. Yet, some brutal facts about the Eurozone remain:

  • Euro area economy has definitionally been in a recession sine the third quarter of 2011
  • The euro-area unemployment rate is at a record 12% high, up 2% since 2011
  • Year on year inflation is falling, now down to 1.7% .

Portugal is the issue this coming week, as their austerity plans (and complete compliance) fails to keep the bailout programme on track.

Otherwise: Bitcoin, a digital currency, sky rocketed in price last week.  A single coin is worth more than $100, and the total value of Bitcoin stock past $1.5bn.The coin is used online and outside of government control, and is extremely volatile. While no one questions that we are seeing an asset bubble, what will happen after the bubble pops remains to be seen.

Also, market moving information can now legally be found on social media. The SEC ruled that companies can use Facebook and Twitter to disseminate information, as long as investors are told about the companies social media strategy. 

UK/EMEA

Disappointing US jobs data impacted UK markets and the FTSE had its largest one day loss since February. Verizon/Vodafone rumours - whether Verizon is planning on buying out Vodafone in a hostile takeover - is also sending investors running (running seems like an overstatement, but renewed investor caution is evident). 

The BBC has decided that the old class system (upper, middle, lower) is no longer adequate. People should instead be divided into seven distinct classes. Personally, I'm an emergent service worker. What are you?  Take the test: http://www.bbc.co.uk/news/magazine-22000973

Vince Cable is pushing for the three former HBOS directors (Chairman Lord Stevenson, and Chief Executives Sir James Crosby and Andy Hornby) to be banned from holding any director position. Last Friday, the Parliamentary Commission on Banking Standards accused the three executives of presiding over a “colossal failure” and said they should not be allowed to run a financial company in the future. 

Many are wondering whether Fitch will downgrade UK credit. Moody downgraded the UK from triple A status last February. Last week, the S&P reaffirmed the rating, while cautioning of a continued negative outlook to the economy.