Time flies and we are into the year-end holiday mood again. While everyone is planning to go for their block leave and celebrating Christmas/New Year parties soon, this December feels a bit different…
Global banks are still retrenching people last week to cut expenses and save on bonuses. Mostly European banks as the EU environment is going to get worst and we have not seen a bottom yet.
Come Monday morning, we will see the Italian referendum results. If it is a no, Renzi will resign and we might get a Brexit reaction again. All hell may break loose in an illiquid month as banks close their books for the year. My dealer friends are resigned to the fact that bonus will be bad and what is the point of making money now if you are not going to get paid? Get it wrong and your job is on the line.
The following week, we will have the much anticipated US FOMC meeting. Thanks to Trump winning, bond yield have shot up on expectations of a crazy fiscal expansion coming which will be inflationary. The Fed last hiked in Dec 2015 and most economists are certain that Yellen will increase rates by another 25 bps now.
After Trump and Brexit so far, investors are hard pressed to try to figure out what is a sure thing nowadays. The 2 events above could have totally unexpected outcomes, damn the polls. We seem to be going into a really choppy December where the brakes of the running train will malfunction and volatility skyrockets.
I came across an interesting article this week on why social media got things so wrong for the Trump/Clinton elections. It cited Facebook as a prime example. FB’s algo is able to learn from your likes and then it will show you more of the same, the things that you prefer. Hence if you support Clinton, the FB machine will likely show you only pro-Clinton news. The opposite is true for a Trump fan – he will be directed to a pro-Trump news feed. This inherent FB social media situation prevents one side from knowing about the existence of the other side. Hence Clinton was never aware of how big a following Trump had. And the polls got it wrong too, as they were looking at all the wrong places.
Food for thought today… Social media is changing and we learn new things every day as the eco-system is evolving.
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