Asian Markets Are Taking A Breather Today

Today all Asian markets except China, are taking breather after moving up for the last couple of days. It seems investors and traders are back again in buying riskier assets like emerging market stocks, currencies and bonds. Crude oil is also trading below U.S.$70 per barrel mark and is a welcome sign. Yen seems to be stabalising around 116 mark against the U.S.Dollar. Agri commodities are however, ruling strong due to inevitable reason that population is growing and due to global warming, floods and other natural peril's will keep demand far more than the actual supply of these farm outputs.

Bonds are rallying

U.S. bonds for the past two weeks are rallying due to carnage in the stocks, as investors/traders flock to safer money avenues in these highly uncertain and volatile times in order to protect their capital from any sharp drop in stocks.

They are not bothered at the moment about low returns from bonds but rather concerned about capital erosion from risky assets like stocks. They are right in their approach as sometimes remaining in cash can give excellent buying opportunities in blue chip stocks in case they fall sharply because of some external reasons not related to their business performance.

Problem Of Plenty

For the past two and a half decades, U.S. federal reserve has done nothing but to print more and more dollars and that has created the problem of too much money chasing few asset classes and hence bubble like situation in each and every asset.
Asian countries are holding U.S.treasuries worth trillion of dollars just to finance U.S. consumer's shopping list and keep their growth going.
This never ending credit cycle has turned financial markets across the globe at very risk of un-sustainable inflated levels. After all where does that huge sum of money goes other than stocks, bonds, real estate, currency, they have to park it somewhere. And thats the problem for these markets.

Mutual Funds

I have always believed Mutual Funds are the best way to approach Financial Markets. Mutual Funds offers diversification, expert approach, cost optimization, spreading of risk etc.
One can invest in stocks, commodities, real estate, bonds etc through Mutual Funds.
They are the best suited in a volatile market like stock markets.
One should examine the past performance of a Mutual Fund scheme before making a investment decision, it gives a fair idea about its consistancy in past performances, dividend pay-outs, performance in bad market conditions etc.
More about mutual funds on my next post.

Global Liquidity And Financial Markets

Every asset class one can imagine is going through a massive bull phase un-seen in the history of financial markets. Whether it be Stocks, Bonds, Commodities, Real Estate, Art, Mortgage market. Never before we had a secular bull run in all these asset classes at the same time.

Huge liquidity (money) unleashed by central banks across the world has been fuelling this asset price inflation for the past 4 years and its in the interest of wealth managers, portfolio managers, investment advisors, financial planners to continue advising wealthy individuals/corporates to keep pouring money in these assets in order to out-perform or out-do each other. These individual/corporates also desire to out-do each other and hence raising their risk appetite in order to achieve more returns and hence take more risks in the form of leveraged by-outs/take overs as shown by some large PE funds.
Also they leverage in financial markets across the world in order to gain large profits and hence open the window for disaster if someting goes wrong in terms of rise in interest rates, big fluctuation in cheap to borrow currencies like Yen, an epidemic spread likes of bird-flu across a continent like europe, major terriorism attack on developed countries, sharp increase in crude oil prices.
Any adverse event can thus poses great risk to investors/traders financial health.