Markets

(London)

Everyone is aware of the surge in asset prices for real estate and art—two Manhattan condos recently sold for $90m, and a Francis Bacon painting changed hands for a cool $142.4m—but less attention has been paid to the car market. This month, a 1962 Ferrari 250 GTO sold for an eye-watering $38.1m. The price is not a fluke either, as numerous records have been set recently in the collector car market, a sign that cars, like art, are becoming an alternative asset class. For instance, sale prices at Pebble Beach Concours d’Elegance, an annual car auction that is the premier venue of its kind, were up 28% this year to $400m. “Without exception, we’re seeing every segment of the market, and nearly every model, hitting new all-time highs,” said a major collector car insurance executive. The rise in prices has led to concerns that the market may be in a bubble, stoked my low interest rates and central bank manipulation.


FINSUM: One aspect that often gets overlooked when considering whether these alternative asset classes are in a bubble is the question of wealth concentration. According to the Economist, the number of American multi-millionaires has risen 70% since the Financial Crisis, while wages have remained flat on average. That means there are simply more people who can afford such cars—a sign that the market might be here to stay; unless of course you expect wealth stratification to revert.

(London)

The recent announcement that Scottish voters were rapidly joining the “yes” campaign, meaning they are in support of independence, has spooked UK markets. Sterling sold off, down 0.5% against the Dollar, and options buying surged for contracts near the September 18th vote. Analysts believe Sterling could trend down from the current 1.65 to the Dollar to near 1.50 should Scotland choose to leave. UK Gilt yields also rose a modest 4 bp on the news. Shares of UK and Scottish bank stocks also tumbled on the announcement, as well as those of the Scottish energy company, SSE. The market movements signify that investors are finally realising the threat that Scottish independence holds to the UK economy, and the country’s EU membership in general.


FINSUM: As it concerns financial markets, the real issue with Scottish independence is its ambiguity. Should Scotland vote “yes”, what would that mean exactly? What implications would it have for the country’s debt, North Sea oil revenues, banking supervision, Sterling etc.? These questions vex investors, and the fact that the UK government says it has “no contingency plans” only makes matters worse.

(Jakarta)

Unbeknownst to most, the Ukraine crisis has had a surprising effect on the important global palm oil market—it has caused it to tumble. Palm oil is an important ingredient in a wide range of products, from soap to food, but recently, a glut of sunflower oil has lowered wholesale demand for the substance. Ukraine and Russia have both seen bumper sunflower crops this year, and because of the turmoil in the region, have been eager to sell it immediately, creating a wealth of global supply that has hurt palm oil prices. That is bad news for economies like Indonesia and Malaysia, who together produce 80% of the world’s palm oil. The declining prices have huge implications for Indonesia, as much of the country’s banking portfolio is backed by palm oil, meaning the asset quality of the country’s banks is declining rapidly. Palm oil prices have fallen 30% this year.


FINSUM: While this news may be very poor for Southeast Asia, it is great news for European food suppliers like Nestle, who are seeing the lowest prices in years for one of their principal raw materials.

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