A dead cat bounce is a price pattern used by technical analysts. It is considered a continuation pattern, where at first the bounce may appear to be a reversal of the prevailing trend, but it is quickly followed by a continuation of the downward price move. It becomes a dead cat bounce (and not a reversal) after the price drops below its prior low.
Frequently, downtrends are interrupted by brief periods of recovery, or small rallies, when prices temporarily rise. This can be a result of traders or investors closing out short positions or buying on the [INCORRECT] assumption that the security has reached a bottom.
We face a global economic crisis. And no one knows what to do about it
Back in February, plenty of investors were betting that the buildup of Russian troops on Ukraine’s border was no more than an elaborate bluff.
The Russian and Ukrainian currencies appreciated in value as hedge funds and private equity firms, signalling their faith in some form of peace deal emerging, confidently bought roubles and the Ukrainian hryvnia.
Today there is a war going on that has effectively locked up the raw materials and food usually exported by both nations, and no one knows when the conflict will end.
It is clear from the collapse in global stock markets and sliding cryptocurrency values that investors are panicked by the uncertainty. Shares in the US, where the S&P 500 index is down by almost a quarter since January, have suffered their worst start to a year for 60 years.
We have seen panics before, notably after the 2008 crash. Investment firms, despite their reputations as the clever custodians of pension fund money, always press the sell button at the first sign of trouble. Collectively, it leads to a rout.
Seasoned policymakers know how to react in such uncertain times, and that is to do whatever it takes to reassure investors that their money is safe. Western governments have dipped into their reserves, and when that well of cash has run dry, borrowed heavily to maintain a stable outlook for their economies. Vital support has arrived in the form of cheap borrowing from central banks. With low interest rates acting like the cavalry in a John Wayne film, everyone has been able to rest assured the panic will be shortlived.
Not any more. This time there is a real war, not just a financial one, and no one quite knows what to do. The major powers cannot agree about how to fight it and policymakers cannot agree about how to handle the fallout, especially the shortages of raw materials and food from Ukraine and Russia that are pushing inflation to 10% and beyond.
Ticking crypto timebomb could spark another financial crisis
From the outside, the world of crypto and the emerging decentralised finance (DeFi) space might just look like a fresh take on replicating and streamlining centuries of stuffy banking systems.
But for American-Australian financial regulatory scholar Professor Hilary Allen the rapidly growing DeFi market looks more like a bomb waiting to go off, one which she believes could threaten to set off another global financial crisis.
According to Allen, the rise of DeFi and the increasing interest from banks in the crypto space – including local banks ANZ and CBA – is hugely worrying, with the expert urging regulators to step in before it’s too late.
The Age and The Sydney Morning Herald spoke to Allen for our new weekly series You, Me and Web3, which aims to examine, challenge and demystify the ideas behind the emerging industry by speaking to the people who live and breathe it.
"Founders of $10 Billion Crypto Hedge Fund Have ‘Ghosted’ After Bets Go Bad
Three Arrows Capital, founded by two high school friends, is MIA as firms scramble to assess the damage amid indications the fund has been wiped out." #ThreeArrowsCapital t.co/k9e4H6O4z9
— Zero Shorts (@zeroshorts) June 19, 2022
Why This Global Economic Crisis Is Different: This is the first time since World War II that there may be no cooperative way out
One of the remarkable things about the global economic order since World War II has been the flexibility of governments in responding to serious crises. From stagflation and the collapse of the Bretton Woods currency regime in the 1970s to the Asian financial crisis of the 1990s to the global financial crisis in this century, the world’s major economies have proven surprisingly adept at finding ways to cooperate to address serious challenges.
This time around, that lucky streak may finally break. The current concatenation of problems—the Russia-Ukraine war, inflation, global food and energy shortages, unwinding asset bubbles in the United States, debt crises in developing countries, and the lingering impacts of COVID-19-related shutdowns and supply chain bottlenecks—may be the most serious crisis of them all, not least because central banks can’t print wheat and gasoline. Yet there are few signs of the collective responses that will be needed to meet these challenges. Global cooperation has never been more urgent—and seemed less likely.
Fraying cooperation is, ironically, mostly a consequence of past successes. The world’s past ability to manage crises, transcend disruptions, and restore the trajectory of global growth means that many more countries today have become rich enough to wield influence and demand their interests be considered. Others are pursuing territorial or ideological goals they consider more urgent than immediate economic priorities. As a result, consensus has become almost impossible to find. The upshot is that in this crisis, the world will be condemned to a series of competing and partial responses rather than again finding a way to come together to address the challenge.
El-Erian: Things are getting worse by the day
CNBC, Released on 6/17/22
Mohamed El-Erian, Allianz chief economic advisor, joins ‘Closing Bell’ to discuss what he makes of the Fed decision to boost rates by 75 bps, how he interprets the recent economic data and thoughts on potential defaults around the world.
Mohamed El-Erian is the Chief Economic Adviser of Allianz, a multinational financial services company. He is the former CEO and co-Chief Investment Officer of PIMCO, a global investment firm and one of the world’s largest bond funds in the world. Dr. El-Erian also served as a member of the faculty of Harvard Business School. Before joining PIMCO, Dr. El-Erian was a managing director at Salomon Smith Barney/Citigroup in London and before that, he spent 15 years at the International Monetary Fund in Washington, D.C. His latest book is The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.
Global stock markets are still not cheap when measured by the Warren Buffett metric: The global market cap to GDP ratio has dropped to 114% but is still above the 100% threshold. pic.twitter.com/w14LkTkhuk
— Holger Zschaepitz (@Schuldensuehner) June 19, 2022