Russia again. Depressingly predictable.

As always the panic rate hike has failed. All it did was kill the domestic economy. That has been recognized and a cut from 17 to 15% toady is likely to be only the first of many. At least the rouble's decline is no longer disorderly. That should allow them to embrace the currency weakness as the saviour it needs to be for the Russian economy. Sanctions are not going to be lifted in a hurry, and while I expect oil prices to start drifting higher from the current oversold position in the next few months it will be a long time till they're at the $100+ levels that the Russian government needs to make its numbers add up.

If I were the Central Bank I'd keep cutting in 1-2% slices and toast the weaker currency that follows. 

ECB - to QE or not to QE?

Tomorrow may or may not be QE day in Europe (the carefully orchestrated leaks lend me to suspect it will be). At this stage the only comment I have is to remind you of the old trading adage -  buy the rumour, sell the fact.

Russia - I hate to say I told you so....

But, from the Telegraph - "Russia set to slash interest rates just a month after hike 'mistake'"

It was always going to happen. Emergency rate hikes just make a situation worse by bringing attention to an already bad position.

The new American tactics of simply excluding countries from the world's financial markets are far more effective than the old sabre-rattling threats of yore, especially when the major corporate and bank entities of the country in question have spent the last 15 years loading up on US$ debt. If Russia is determined to stay the current course then it will have to spend its reserves on either bailing out its companies as they fail to roll over their US$ debt or defend its currency. But probably not both - there simply isn't enough cash available.

It's going to be a long and painful (for Russia's people, if not for him) death for Putin's dream of reinstating the USSR.

Ouch

Who'd have thought the Swiss National Bank would ever be the most hated entity in financial markets, but that's where it finds itself.

It's abrupt decision to abandon its currency peg to the Euro has wiped out at least 3 retail FX brokers and left FX traders and Swiss multinationals floundering.

The immediate effect should be deflation and possibly recession in Switzerland, but also a loss of a significant buyer of eurozone government bonds. The SNB was mopping up huge chunks of debt as a buy-product of it's policy. If the ECB steps into the breach with QE then all will be fine in Eurozone govvies. If not, then some of the weaker members may find their bonds drifting lower in price as a significant source of demand has been removed.

All eyes on the ECB next week then. 

Happy 2015?

And so it goes on.....

Russia has managed to put a temporary halt to the unfolding disaster but only by spending a quarter of its reserves and forcing local companies to buy roubles. The rout will resume

The U.S. seems to be doing well and the oil price fall will allow the fed to keep rates low for a lot longer. There may be a token raise of 10-20bp over the next 6 months but that'd be it, and even that would surprise me.

Europe is still screwed. All eyes are on the ECB and its hoped for QE. There will be no shock and awe here though. Any QE will be mild in scope and scale to appease Germany. The real hope for ant european QE will be to weaken the Euro and so restore lost competitive to some companies via a devaluation. The U.S. and U.K. both did it quietly, now the Japanese are doing it - and shouting about it. Next up is Europe.

What to buy? There's no real value in bonds - not much is likely to change in the foreseeable future and yields are ridiculously low. Equites? Well maybe if economies do take off, but a lot of good news is already priced in. To be honest at the moment I'm struggling to find a good place to put money to work. I'm hoping for some results from start ups and early stage companies to boost returns.

Good luck.