The fence at the edge of the cliff

The fence at the edge of the cliff

This weekend will take the business community to the edge of a Greek tragedy and the repeat of the bonfire of the vanities associated with quadruple witching.

At the same time central bankers in Canada, the UK, Europe and Japan are rapidly constructing fences at the edge of the cliff in case there is a run on the bank tomorrow.

Earlier this week we suggested that it was time to put up the shutters. Now we are merely saying it will be necessary to batten down the hatches. We face an extremely volatile weekend and the results of Julia Gillard’s meeting with President Obama and the investors in a Mexican standoff between the gloom and doom brigade and the central bankers telling us to guard against a crisis in business confidence.

Stock market jockeys will be pushing equities markets faster than a Columbian drug runner feeding a cocaine market. Volatility will pit the traders against long-term investors. Brokers will be encouraging a sell on Friday, wait until Tuesday and buy on Thursday strategy.

Quadruple witching refers in the US stock markets on the third Friday of every March, June, September and December. On these days, market index futures, market index options, stock options and stock futures expire, usually resulting in increased volatility.

Already we have seen Mervyn King, Governor of the Bank of England and Chairman of the Monetary Policy Committee rush out into the high streets with a plan to guarantee the bonuses of the bankers. The newly minted leftist President of France French President Francois Hollande has called for the European Stability Mechanism to be used to bail out European banks and says that Italy has been unjustly attacked by financial markets and that Europe needs mechanisms to counter speculation.

The Bank of Canada has warned its householders that they could be hit by two interrelated shocks – a big slump in house prices and a sharp deterioration in labour market conditions, and says that it stands by our banks with a bank of liquidity.

The Institute of International Finance wants Julia Gillard and other international global leaders meeting in Mexico next week to take action on reviving economic growth. IIF Managing Director Charles Dallara said in a letter today to leaders attending the Group of 20,  “Markets will be looking expectantly for evidence of a globally coordinated policy response targeted to revive growth prospects worldwide on a sustainable basis.”

European governments are more focused on building a consensus for another summit they are holding later this month, a US official said yesterday on condition of anonymity. Europe’s “vital near-term crisis-fighting measure” 100 billion-euro ($126 billion) bailout last weekend of Spain’s banks showed “evidence of a willingness to take collective and coordinated action,” Dallara said.

Leading companies should hedge their bets by waiting a week. Leading Australian companies will remain confident that the central bank cavalry is mounting a global confidence campaign and will stand by their (mainly) men. The rest of us should watch CNN to get some idea of reality in the face of global uncertainties. Nothing has changed as we wait for the results of the election, the central banker’s response and the news from Mexico.

Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.


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