Risk is just around the corner:
You might recall that just four weeks ago in Hedge Clippings (22 February) we referred to the fact that volatility was at historically low levels, and that all too frequently this preceded market pullbacks. That article by our Research Manager Sean Webster ended with the advice: "Potential risk is always around the corner, or bubbling just beneath the surface. Ignore it at your peril."
If you needed further proof of this just ask Kevin Rudd, who until Wednesday seemed to be Australia's Prime Minister in waiting before one of his so called supporters, Simon Crean intervened, and Rudd's nemesis Julia Gillard put him on the spot. Again.
This week's political fun and games is local history now, but who would have predicted that Cyprus, a geographic and financial spec on the world map, would in just a few days take centre stage and throw risk back into the global investment equation?
Unlike Gillard's government it looks as if the Cypriot saga still has some way to run before the result is known. Meanwhile the reverberations of both Gillard, and Cyprus' banking crisis will probably continue for years to come.
The short term effect of Cyprus for Australian investors is probably a timely reminder that exuberant markets can readjust. Having said that, to date at least the damage is not too great and the hunt for yield will still continue. Investing in this environment remains testing for many fund managers, with only the best absolute return funds able to adjust effectively to both rising and falling markets.
Meanwhile something completely different for this week with this clip being submitted by one of our loyal readers. Something completely different - not the two Ronnies!
Meanwhile have a good week-end.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
