All GLG News Analyses Filed Under: Exchanges & Capital Markets

Marshall MaysFounder & DirectorEmerging Alpha Advisors, Ltd.

Nearing the End of a Sucker Rally

April 17, 2009

Analysis of:Asian markets trim gains after weaker China growth | www.telegraph.co.uk

1. This article under-plays the importance of the global recession for Asia; thus, it misrepresents the risks and opportunities in Asia. 2. Its expert quotes reflect sell-side hopes and time frame, not the longer cycle in which this problem is unwinding. 3. By looking at the bigger picture of consumer demand for Asian production, and the way it is priced in Asia (vs Europe or the US), one can see that the last 6-week rally is petering out, as the victory of experience over hope. Yes, we can, but not this quarter.

Michael LynchConsultantMichael E. Lynch

China Central Bank vigilant and cautious about U.S. Treasuries

April 13, 2009

Analysis of:China Slows Purchases of U.S. and Other Bonds | www.nytimes.com

Keith Bradsher in Hong Kong reported on April 13 in the New York Times that the Chinese government sold U.S. Treasuries in January and February. China’s foreign reserves grew slowly in the first quarter of 2009. Of the $1.95 trillion in foreign reserves, two-thirds are in American securities. Premier Wen Jibao has expressed unease about the country’s exposure to the U.S. financial well-being. But reserves rose in March. The main effect of slower bond purchases may be a weakening of Beijing’s influence in Washington. With private investors from around the world buying American bonds, Chinese money is less important. U.S. interest rates remain low even in the face of reduced Chinese buying. The main Chinese worry is that American efforts to fight the downturn will result in inflation. China’s economy seems to be bouncing back faster from the global downturn than its trading partners. If true, the result could limit Chinese trade surpluses.

Michael LynchConsultantMichael E. Lynch

Nobelist Soddy’s solution to financial crisis suggests a new approach

April 13, 2009

Analysis of:Mr. Soddy’s Ecological Economy | www.nytimes.com

Eric Nency in Montpelier, Vt., professor of historical and political studies at Empire State College reported in the New York Times on Sunday that a more lucid explanation for the great financial crisis of 2008 can perhaps be traced back to an obscure 1921 Nobel Prize winner. Frederick Soddy (1877), a British Chemist turned to economics after studying the destruction caused by World War I. He wrote four books from 1921 to 1934 that laid out his ideas about how national economies work. He likened a national economy to a machine governed by the laws of thermodynamics. Low entropy matter and energy went in and high entropy waste products were expelled. Energy in particular, once used is forever unavailable at that level again. By extension, wealth is real but debt is an abstraction. Finite limits to wealth exist but debt, being intangible, can be multiplied endlessly. When debt grows faster than wealth, the system becomes unstable and something goes wrong.

Three Misconceptions Regarding CLOs

April 7, 2009

Analysis by: GLG Expert Contributor

Analysis of:Investors face new round of damage as CLOs falter | uk.reuters.com

Three misconceptions need to be drawn out from this article. The first is that if the Collateral Manager suffers so will the investor. The second assumption made is that consolidation will be rife amongst Collateral Managers. Thirdly, CLOs have term funding so current mark-to-market levels do not mean mezzanine and equity bonds have no value.

Is GM now Government Motors?

April 5, 2009

Analysis by: GLG Expert Contributor

Analysis of:Obama fires GM's CEO | www.suntimes.com

President Obama recently fired GM's CEO. Why was the President of the UAW not terminated.? President Obama's action may infringe upon the capitalistic endeavors of American corporations.

Michael LynchConsultantMichael E. Lynch

President Obama at the cross roads of world history: Surrender or retreat

March 30, 2009

Analysis of:obama will face a defiant world on foreign visit - nytimes.com | www.nytimes.com

Despite his popularity, Mr. Obama will face resentment over what appears to be a bankrupt American capitalism. His prescriptions for economic recover will be quickly and quietly written off. He will be unable to discuss Afghanistan in any meaningful way. His attempted dialogue with Iran will die on the vine. China and Russia appear to be ready to pull the plug on American dominance of world affairs. His attempts to force the Europeans to spend more will founder. The U.S. banking collapse and its consequent disastrous effects on the world's economy calls into question the American prosperity model. Mr. Obama will be welcomed as the embodiment of American ideals. Nothing more. The meeting of the Group of 20 faces bleak prospects.

Justin HupetConsultantJustin Hupet

Hedge Funds Need A Survival Strategy

March 26, 2009

Analysis of:Pensions seen fueling hedge fund industry growth | www.reuters.com

Hedge funds lost more than $700 billion in second half of 2008, and 2009 might be even worse given the current outlook for the financial and economic environment.  Hedge funds need a survival strategy and more metrics need to be shared on both sides of the conversation between the hedge fund and institutional client.  Those hedge funds that survive need to offer, among other things; repeatable performance, fair fees, top-notch client service, robust risk management, transparency, sound operational infrastructure, and a safety guarantee for custody of and institutions assets.

Patrick YoungFounder and ChairmanDerivatives Vision

BATS Beats Turquoise, Europe's MTFs Look More Volatile Than Ever Under Mifid

March 26, 2009

Analysis of:BATS Europe Passes Turquoise In Market Share, Sets Numerous Volume Records | www.mondovisione.com

The fact that Turquoise has lost its shareholder market makers has caused its volume to slump, allowing upstart (and US 500lb gorilla) BATS Europe to leap ahead in market share. Takeovers by legacy exchanges now look more likely than ever.

Justin HupetConsultantJustin Hupet

Recent Moves by the FED and Treasury: Do They Raise More Questions Than They Answer?

March 25, 2009

Analysis of:Confidence Returning to Equities | www.bloomberg.com

Critical questions remain unanswered, and these questions will in all likelihood not be cleared up until the plan begins operation, such as:  Will investors (through auction via FDIC) offer high enough bids to entice bankers to sell illiquid assets?  Will regulators force banks to participate regardless of where bids are at?  How quickly will the plan be implemented?  What loans are eligible for the auction?  Is this whole process too bureaucratic?

Central Banks are buying gold for their reserves

March 25, 2009

Analysis by: GLG Expert Contributor

Analysis of:GLG News - Council Member Homepage | news.glgroup.com

Gold is slowly returning to a background monetary metal. What central banks do will dictate this.   This article discusses that. Central Banks have been sellers of gold for 30 years, but are changing their attitude now.

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