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How markets ignore and ignore events and then at some point a catalyst eventually triggers a reaction. John Authers in Saturday’s Financial Times found more than thirty separate entries when they reported that the Turkish lira has hit a new low. Donald Trump’s political intervention adding fuel to a smouldering situation last week appeared to be the catalyst for investors to start to take note. Dollar strength and emerging market currency weakness fuelling contagion concerns. Mark Twain is quoted to say, “History it was said does not repeat itself but does rhyme”, and the behaviour of banks is a prime example as the Turkish economy boomed so did lending.
We almost made six straight weeks of gains for the S&P 500 but a correction on Friday as a collapse in the Turkish Lira resurrected emerging market concerns, and memories of 1997/1998 Asian crisis. For those who are not old enough to remember, the Asian crisis was a sequence of currency devaluations starting in the summer of 1997, spreading through the Asian markets. The contagion started with Thailand, not an economy that you would have thought could have an impact on global markets, however the contagion it caused, did. The catalyst for the Asian crisis was the Federal Reserve’s raising interest rates. Equities around the globe fell sharply, the S&P 500 lost 20% until the IMF stepped in to lend to the emerging economies.
Tesla CEO Elon Musk tweeted, as you do these days, that he was exploring the possibility of taking Tesla back into private ownership. He even gave a price, 420 dollars a share, and claimed he has the backing to do it at that price. CEO’s look to take company’s back into private ownership when the company, in their opinion, is undervalued by the open market. Elon Musk and maybe the Saudi’s believe this is the case, as there was a report in the Financial Times that the wealth fund had acquired a stake in the company. Mr Musk’s turbulent relationship with the capital markets, in which he believes they focus too much on short-term targets, could also influence his desire to take the company back into private hands.
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