While it may seem counter-intuitive to think that a bubble in the credit markets would be fueled by excess credit, that appears may just the case. At the time of writing this article, people are contemplating asking for negative T-Bill returns, even before inflation has been factored in. That is an economic reality that should not persist.

A very belated Happy New Year from Bearing Capital Partners, and all the best for a prosperous 2012.  January has come and gone, but we can still look back on the previous year, and also look forward to some of the major issues and items we see down the road for the coming year.
Last January, [...]

The newswires are buzzing about the meeting of the ECU in Brussels Thursday and Friday, and there will surely be loads of volatility arising from the announcements over the next two days.

The markets have experienced very high volatility over last couple of months. However, that volatility seems to be focused on politics rather than the economy itself. What appears to be unfolding is a game of high stakes political brinksmanship. German and French politicians are reluctant to provide a solution to the Greek (and other PIIGS) debt crisis, for fear of losing popularity at home. But in order to save the European Union, and its currency the Euro, it seems to be the case that Greece must be saved.

Tim Geithner, the U.S. Treasury Secretary, has called the move irresponsible. As for S&P, let’s not fault them for their actions. While time might prove that they are incorrect, we should also be reminded of the poor judgement that S&P (and other rating agencies) showed by NOT downgrading toxic Mortgage-Backed Securities soon enough. Click through to read more on the decision.

We still feel as though there are many risks in the market; more than make us comfortable. For reasons stated above factors, plus the continued concern about the debt crisis in the Eurozone, we maintain a long term view that involves a considerable amount of market volatility. Read on to hear more about our outlook.

Much has been said and written about the economic impacts of the Japanese tragedy. For certain, there will be after-effects to the crisis, but it is too soon to make any conclusions. Most critically, this has come at a time when the world is reeling from high oil prices and rampant instability in the Middle East – all at the start of a nascent economic recovery from one of the worst global recessions in generations.

The ever-sinking VIX numbers are reinforcing our suspicion that the upward path to recovery will have some very bumpy moments. The fact that the VIX is this low so soon after 2008 could signal that one of those bumps is about to occur.

Click through to download a PDF of a quarterly update of world markets, performance of various asset classes, and some historical perspective on returns around the world.

Happy New Year: So what about 2011? We continue to be of the mind that the equity markets have the potential for downside risk in them. Although we continue to see value in equity over fixed income over this business cycle, we are unwilling to be fully invested in equities, as the potential for loss is still greater in equities than in fixed income.