Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Give us fiscal austerity, but not quite yet
Financial crises have devastating impacts on the public finances. The impact is also most severe where the pre-crisis excesses were greatest. Among G7 member countries, this means the bubble-infected US and UK. The question both countries confront is how soon and how far to tighten. Tightening will have to be substantial. But premature action could be a devastating error.
John Coates: Alpha males must trade on more than machismo
Male traders, like animals in the wild, take more risk when their testosterone levels rise, writes Coates, a research fellow in neuroscience and finance at Cambridge university and a former Wall Street trader. Research by myself and my colleagues found that moderately elevated levels of this hormone increased the profits of high-frequency traders — although at higher levels it can cause overconfidence and risky behaviour, morphing traders into “Masters of the Universe”.
Insight – John Plender: The EU’s deteriorating fundamentals
Here we go again, says Plender. The stability of the eurozone is once again in question as punters bet heavily in the credit default swaps market on an Italian sovereign default, while the yields on government debt in peripheral countries such as Greece move out further against the German benchmark. Is this a blip or a reflection of deteriorating fundamentals?
Robert Zoellick: Heed the danger of asset bubbles
As the world begins to recover from the worst downturn since the Great Depression, the conventional wisdom is that we have employed lessons of the past effectively: a flood of money; a dose of fiscal stimulus; and an avoidance of the worst trade protectionism, writes Zoellick, president of the World Bank Group. We even have Ben Bernanke, a scholar of the Depression, at the helm of the US Federal Reserve. So what could we be missing?
Lex: The US recovery
It is going to be a long slog. The US economy only grew at 2.8 per cent in the third quarter compared with the second, rather than the original estimate of 3.5 per cent, thanks in part to weaker consumer spending. The downwards revision compounds worries that, particularly as the the effect of short-term boosts such as clunkers fades, the economy is not growing strongly enough to start meaningfully generating jobs.
Money-supply blog: Chris Giles
UK bank regulators really need to decide whether most effort will be spent trying to change the structure of living banks such that they can be allowed to fail, or whether effort is better directed to drawing up emergency plans for banks’ failure in a future crisis. What there is no doubt about is that there are big differences within the Bank of England about what to do about the “too important to fail” issue.
The Short View, video: Technical analysis and the S&P500
One group of investors has few doubts about the direction of the US stock market. Technical analysts – who scour price moves in charts for patterns of behaviour that they think will be repeated and drive future action – see plenty of signals that justify a continued move higher in the S&P 500 index of US stocks. But is it justified? Text version here.
FT Trading Room, video: NYSE Euronext, why a fifth MTF in Europe?
Cees Vermaas, head of European cash markets at NYSE Euronext, explains why NYSE Arca Europe launched a multilateral trading facility despite being a late entrant.