The probability that Greece is out of the euro in the next 2 months has increased to high levels. The risk of contagion to Spain and others is significant. This is clear to EU policy makers, which means they ought to be thinking about the response, which in this case needs to be a big read more

There are clearly three main drivers in today’s markets, which explain the recent volatility and lack of direction. The three factors are: the slowdown in China and fears of a hard landing; the US business cycle; and, crisis flares from the Eurozone periphery. To some extent these show the market is addicted to extravagant Chinese read more

Markets in March seem directionless, confused. There are a few important issues that provide reason for caution. None of the issues that cause concern are new. Last week the Fed decided to provide its first signal that it could rid markets from its ‘training wheels’ when it characterize the economic situation as improving, including the read more

Last year’s volatility was mostly due to the euro crisis, though there were other shocks (especially oil during the first quarter). The euro crisis is not over, but most likely its potential for contagion has been minimized significantly by the actions of the European Central Bank (ECB), which we had highlighted as the key pillar read more

Over the last four weeks of market turmoil we have communicated with clients mostly via email and the monthly letter. Here is a brief summary of those communications (click on each for the full communication, though it is only in Spanish, emails from Aug 5th and Aug 9th, letter from Sept. 1st), with only a read more

Reality bites. Europe recently admitted a eurozone member could restructure debt. The US government would soon be downgraded. These are realities that took time to sink in. Markets are taking these gradually, though some asset classes react more than others. The key issue here is that so much policy uncertainty in G7 for so long read more

The selloff this week is due to the quick and simultaneous effects of concerns on the 3 main risks on the global economy. For some time now we had identified 3 key risks, and after a quick recovery from May-June’s volatility, those 3 risks came to center stage at once: 1-    Euro crisis, due to read more

Many of the portfolios that we have seen in the last two years (not managed by Baffin), had an excessive concentration of domestic assets: stocks, bonds, real estate, etc. The tendency to overinvest in local assets is known as “home bias” and it is still a puzzle in the academic world. Assuming that the investors read more

The convergence of shocks over the last 2-3 weeks is nothing short of impressive.  Some of the shocks are: the escalation of events in the Middle East (different but concerning, Libya and Bahrain), the potential juncture for the euro with a sequence of high level meetings while a new bailout is about to be needed read more

Our first reaction to Egypt (to read that post click on ‘Our first reaction’) and the approach thereafter proved to be the right, so far. However, we do think the events in Tunisia and Egypt introduce a new theme that was not there earlier and that merits careful attention. The Middle East is inevitably changing. read more