Despite Hungary not sharing the euro, what the EU does about Hungary should have very relevant implications for the euro and the credibility of the reforms Merkel and Sarkozy are trying to implement. Hungary is not only in the middle of mini fiscal and political crises, but is potentially the most recent and clear-cut test read more

The EU leaders are most likely close to key decisions about the future of the euro. The financial rescue package announced during the Greek episode of the crisis last year was designed to buy time in order to work on solving the fundamental problems. That package was not enough to stop the crisis domino at read more

Many have already pointed out the irony of UST yields making a most drastic upward move while QE2 (the second round of Fed asset purchases) is being implemented. In other words, as the Fed is buying UST bonds, their prices are falling impressively.  As can be seen in the chart, 10-year UST yields started a read more

Last weekend Europe took a step towards fixing a key structural problem underlying the euro: a future debt restructuring mechanism for insolvent members. Far from perfect, but a very decent effort nonetheless. It sets the stage for what could be an orderly debt restructuring (potentially avoiding an actual default) of a country’s debt if deemed read more

This last bout of the euro crisis was to a large extent triggered by the debate on how to improve the EU institutions. It is paradoxical that the right conceptual issues can accelerate the crisis that originates from the euro fundamental institutional flaws, but it is what is happening. The Germans decided to openly discuss read more

The current debate about currency wars, the G20 meeting, QE2 (quantitative easing by the US Fed), it all makes for great Op-ed opportunities and commentary. One relevant question we prefer to focus on is that of asset pricing implications (preferably in the medium-term) and how to position our portfolios accordingly. This note is not a read more

We are at an interesting junction in the markets, with this non-trivial rally in front of significant uncertainties around the world: elections in the US next week as well as very relevant announcements expected from the Fed, while global rebalancing is being ‘designed’, the EU discussing major institutional reform and the developing world continues to read more

The still incipient September market recovery appears to respond to data that negates the double-dip view and increases credence to the gradual recovery view. Our approach has been to cautiously position for the latter, within a broader theme of a structural change in favor of EM and other non-G7 countries. In other words, we continue read more

The high volatility of the last few months has generated panic moments in the markets, perceived uncertainty about future scenarios, and sharp inconsistencies in some of the public policy debates. Though there are reasons to marginally re-shuffle the probability distribution among the most likely scenarios, there is no real reason to change the base-case scenario. read more

The lower house of congress in the US has just approved the Healthcare Bill that the senate had approved recently. This has not been priced into the market with a very high probability, at least not with this timing. Futures (that trade overnight) is showing the S&P500 at -0.8%. The negative interpretation markets seem to read more