From: Esteban Rosberg
Esteban Rosberg, Buenos Aires, Argentina – Biography
Steve Rosberg is an independent financial consultant, residing in Argentina. He specialises in international business opportunities and offshore structures for individuals, companies and financial institutions. He has over twenty years experience in a variety of international banking organizations and has occupied senior management positions in several companies, including Banco Frances (Argentina) and Coutts & Co.(Cayman) Ltd. Mr. Rosberg holds a degree in Economics of the Universidad Catolica Argentina, and is bilingual in English and Spanish.
Comments froma Distance…
So I will make a couple of comments from a distance, from this “deep south” that is Argentina. But before doing so, an apology and a disclaimer. I apologise if this ends up by being on both sides of the fence and aim only to add some thoughts to the internal discussion of persons taking decisions of what to do with their wealth, or other persons'.
I have always held it against my fellow economists that after several hours of presentations, charts, and wonderful reasoning, their summary tends to be “it may go up, but then again it may go down, or remain stationary.” They should be able to tell us “buy” or “sell” or “short it.”
The main reason why they can't do so is at the center of what “value” is. Value is what everybody thinks it is, and it changes with the sum of the subjective changes in perception of value. That's what's happening today. Everybody KNOWS there is overvaluation. Question one is will it hit today or will the game continue (until when?), question two, how much is the overvaluation. And finally, what stocks are in the red.
With a rise in volatility, I think the game will go on with changes in relative prices being sharper. Meaning that the tide will drop somewhat, but there will be (probably moderate) winners and great losers.
Why do I think this way?
– What triggered Friday was the confirmation of the perception that inflation is rising and interest rates might rise to brake it. Rising interest rates would trash the frothy market as margin borrowing became more expensive against a progressively uncertain return on investment.
– However, the inflation has been fueled (and multiplied by leverage) by rising financial and real estate asset values. These came about as mentioned above: increased value perception makes people “richer” and more creditworthy. Credit creates money to further fuel this cycle.
However, as soon as this slows or corrects, the inflationary pressure falls dramatically. There is an acute perception of impoverishment. As markets fall, people will start talking not of raising interest rates, but of cutting them!
Then where will we be? Will interest rates rise or drop? And more importantly, what will people expect them to do?
As to the value of the Dollar, I don't know enough about the subject to venture an opinion. However, in the scenario of a Dollar losing value, it should be interesting to start looking into gold options. I would imagine that it could be a relatively low cost (and understandable!) insurance against devaluation. To be researched.
My friends in private banking have been having a busy time fielding phone calls from customers all weekend. Here is an excerpt of mail sent to me from New Yokd by a friend in the trade:
BUYING THAT .COM/.NET ON MARGIN & ON YOUR CREDIT CARD (A FUNCTION OF YOUR NEW HOME EQUITY LINE OF CREDIT, (INCIDENTALY A DIRECT FUNCTION OF THE OVER- BLOWN MKT VALUE OF YOUR NEW HOME) WASN'T THAT GREAT AN
IDEA AFTER ALL. YET THE SHARP FALL IN THE MKTS TODAY WAS AN UTTERLY SOBERING EXPERIENCE, AND WE WRITE HOPING TO OFFER A BIT OF PERSPECTIVE. IT IS IMPORTANT THAT WE BE ABLE TO SEE THE FOREST THROUGH THE TREES. A STEALTH BEAR MARKET WAS ALIVE AND WELL IN THE BROADER AVERAGES, WHAT WE HAVE NOW SEEN IS A CALL TO REALITY IN THE SECTORS THAT MOST DESPERATELY
NEEDED THEIR BUBBLE BURST INFLATIONARY PRESSURES DO EXIST. THIS IS NOT NEW. NOR WILL THEY GO AWAY WITH ONE TAP OF A MAGIC WAND. WE BELIEVE THE MKTS OFFER OPPORTUNITIES FOR THOSE WILLING TO BE PATIENT AND WAIT. – HAVE A GOOD WEEKEND. MONDAY PROMISES TO BE ONE HELL OF A WAY TO START THE WEEK – REGARDLESS OF WHAT HAPPENS.