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Juan Toro

The sudden drop in oil prices is worrying policy maker to the extent that some economist show the equivalence between the sharp drop in oil prices and the effect of a rate cut (whether it is Eonia or Fed Fund). Merril Lynch & co belives this recent drop in oil prices is equivalent to three rate cuts (of 25 basis points each) by the Federal Reserve. This seems a bit of an exaggeration. Some other economists were doing similar studies at the end of last year comparing the dollar depreciation with a given cut in rates. No doubts that this large price movements (either oil, exchange rates, or housing prices) have consequences when Central Banks set rates and it changes the scenario within which policy makers revise any upward/downward decision on rates. May be the hardest thing is always to distinguish between shot term and long term asset price movements that might need correction. This has puzzled Central Banks in the last ten years quite a bit. It did with the dot com bubble and it has done recently with the surge in real state prices.

Continue reading 'Is the recent drop in oil prices a positive supply shock?'

Juan Toro

In a previous article I discussed the huge current account surpluses that some oil producing countries have accumulated in the last four years and how this has implications both from an asset allocation and an asset pricing perspective. I focussed there on where the inflows have been channelled from oil producing countries. I would like now to pay a bit more of attention on the asset pricing side of this story. Has the inflow from oil income affected asset prices worldwide? Which assets have been affected most?

Continue reading 'Have petrodollars affected some asset prices?'

Juan Toro

The rise in oil prices during the last four years has led to important income transfers from oil consuming countries to oil producing countries. Oil prices have gone from 20 $ up to 60 $ a barrel in this period generating important current account surpluses in oil producing countries. These important income transfers have consequences in terms of financial flows, asset allocation and worldwide asset prices.

Continue reading 'Petrodollars, where are they going?'

Juan Toro

Oil markets have had a bumpy road from the start of the year 2007. On the first week of January the WTI (West Texas Intermediate) price dropped over 9 %. This drop in prices has been justified on warmer weather than usual and by some index fund initiated sell offs (one major commodity index seems to have reduced the share of petroleum in its portfolio). This trend has been exacerbated by some so called black box investors. It seems odd that this type of blind investors could have led prices plummeting towards 50 $ the barrel, but more than one source has reported these type of sellers being very active in the first two weeks of the month.

Continue reading 'Why are oil prices falling?'

Juan Toro

Hedge funds have seemed to be attracted by renewable energies. Not so much because of private equity engineering into renewable firms but because of their movements into low carbon related assets.

Continue reading 'Hedge funds look into uranium.'

Juan Toro

This has much looked like a movie award ceremony. And the winner is: The government of Japan. Last week there have been disputes on monetary policy in Japan between the Central Bank (BoJ) and the Government on different views about the future of economic developments and the appropriate interest rate policy. Finally the arguments (or influence) of the government of Japan have succeeded and any interest rates decision has been postponed.

Continue reading 'The Bank of Japan delays its decision'

Juan Toro

Last week Central Bankers came into stage with vengeance. Though only one took definite actions (the Bank of England –BoE- raised rates 25 basis points), the main monetary authorities from Europe, Japan and the US set guidelines with relevant consequences for the markets. The Bank of England surprised the markets raising UK interest rates up to 5,25%, one month earlier than expected. On the other hand, the European Central Bank (ECB)lack of action was expected but the words from Jean Claude Trichet in the press conference were widely unexpected.

Continue reading 'Centrals Banks might be back together'

Manuel Gutiérrez

¿Son las pymes más conservadoras a la hora de recurrir a la deuda como fuente de financiación de sus proyectos? Y si es así, ¿por qué razón? La teoría nos dice que las empresas poseen una estructura óptima de financiación, donde la deuda debe representar un recurso importante para el crecimiento del negocio, que además posee ciertas ventajas fiscales derivadas del hecho de que al incurrir en deuda para financiar nuevas inversiones, las empresas ven reducidos los beneficios sobre los cuales deben tributar.

Continue reading '¿Las pymes son más conservadoras a la hora de endeudarse?'

Manuel Gutiérrez

Con este sugerente título, Ignacio de la Torre, miembro de nuestra Comunidad de Finanzas, profesor del Instituto de Empresa y también Executive Director (Equity Sales) en UBS, ha puesto sobre nuestra mesa virtual un tema de análisis que debe ser de obligado interés para cualquier gestor de fondos. Y es que a veces, citando a Ignacio "tendemos a creernos que las recompras de acciones en realidad ocurren, y computamos su efecto en el WACC y en la creación eventual de valor sin ni siquiera asegurarnos si son en realidad recompras de acciones a los accionistas".

Continue reading '¿Son las recompras de acciones verdaderas?'

Juan Toro

The Hedge Fund Forum has recently listed an article appearing in the Spanish newspaper Cinco Días on the Hedge Fund regulation in the aftermath of the Amaranth collapse. Amaranth is probably the fallen angel and a bad story in this year’s hedge funds performance. The other side of the coin is probably Centaurus Energy Fund, which held an opposing view and hence, the opposite position, as that managed by Amaranth in autumn. Both funds traded energy products and were heavily involved in natural gas spot and futures trading for delivery in the US. Notwithstanding, they had very different views on how the natural gas market was going to evolve after the summer.

Continue reading 'Centaurus vs Amaranth two tales of a trade:'