Spread Betting Indices Continue to See Volatility on Speculation of QE3
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Spread Betting Indices Continue to See Volatility on Speculation of QE3

Spread Betting Indices Continue to See Volatility on Speculation of QE3


Rallies and falls are becoming the name of the game for the spread betting indices markets at the moment, with investors grasping at any indication to justify their particular 'take' on events.

Bernanke's statement due out later this week from Jackson Hole is just such a red herring as in reality what can he realistically do? Investors have been speculating about the potential for him to announce yet another round of QE.

Forgive me for sounding cynical but QE I and QE II failed to make much of an impact, except of course to hustle S&P into downgrading US debt. As a result, I am not sure exactly what all these eminent economists would be expecting QE III to do? Aside from being used to indicate that the Fed was doing something.

It seems that all of the efforts of the past three years have been solely an attempt to get the Western nations painlessly out of the debt and budget situation we have created.

The famous saying that "if you are in a hole the first thing you do is to stop digging" seems to have been lost. The politicians are, by the nature of their office, desperate to win 'the next election' rather than actually solve the problems.

At some point, and that point is closer than ever, we will have to endure some serious economic pain. The wasted money of the last few years seems to have merely been spent trying to get one more turn of the wheel, whilst almost certainly making the eventual medicine even nastier.

Corporate reporting has started to turn a shade grimmer in recent weeks, with headline companies starting to miss earnings, and this is not exactly helping the current malaise on the shares spread betting markets.

That said, dividend yields in many areas are very attractive and the total corporate cash pile seems to just get higher and higher, with bond yields slumping to ever lower numbers.

The attraction of yield hunting is getting more and more commented on in the print media and news channels. The problem with this is that it is always focused on last year's divvy and, as we are all now aware, companies are not frightened of cutting the investors' returns if profits do not warrant it.

This morning has seen BHP Billiton announce results almost identical to Antofagasta yesterday, with profits up 51% YOY. Tullow Oil has also knocked back the rumours by reporting a 270% increase to $330m H1 result.

With commodities and crude oil still flying high it is no particular surprise to see these numbers. However, raw material profits can, effectively, be directly linked to margin squeezes and inflation down the line which might not be such good news on the corporate profit and growth front.

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'Spread Betting Indices Continue to See Volatility on Speculation of QE3' by DB, updated 24-Aug-11

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