Market Views 14 December 2011

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Ideas

Macro

Federal Reserve policy makers refrained from taking new actions to bolster growth at the world’s largest economy.
Comment: Ben Bernanke spent his 58 birthday on the FOMC with no presents. Let's give him credit for that. Considering the direction
of the USD and the resilience of the US markets, there is no immediate concern for the FED to push out more measures. All eyes on
Europe as the EURUSD pair pushes towards 1.3000. As I have mentioned to some, 2 views are in force as the EURUSD pair moves
towards a 1.2000 consensus, 1) ECB printing money 2) EU zone break up which includes but but limited to an exit by Germany


Market-Juice Special - How Ponzi Schemes form
Everyone has heard how bad or evil Ponzi Schemes are with Madoff being a hallmark example.
Market-Juice now shows you how innocently a Ponzi Scheme can be devised.
1) Imagine you are a fund manager and you canvassed $100m from investors and you contractually promise to give them a 10% return
2) When the market is good everything is fine however, sometimes you do not make 10% but that is fine as there is enough money
in the pot to distribute and, still have investable money
3) When the market is bad, you start making losses
4) Now lets say you start a year with $100m and end the year with $100m, flat
5) You still have to pay out $10m (10%) so you are left with $90m
6) The following year, you start with $90m when your investors assume you have $100m7) Even if you make 10%, you have $99m, you pay out $10m but now you have $89m left
8) It is a vicious cycle if you cannot outperform the 10% benchmark after a bad year and you end up drawing down on the money pot
9) Up to a certain point, you realise that you have to canvass more money to add to the money pot to pay off your initial investors
10) Voila! Ponzi Scheme formed!


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements