Later today is the main event of the week, will the ECB move on interest rates or will they stick? We have expressed our view at Frank Investments, if you are going to act what is to be gained by waiting another month? There is an old saying about putting 10 economists together in one room; you'll get 11 different opinions. Surprisingly there seems to be unity about this event, as only 2 of the 58 analysts polled by Bloomberg believe the ECB will act today by cutting rates. The bond market has seen continued demand for European bonds as French, Spanish and Italian bonds as yields have fallen to a new 12-month low.
We continue to live in strange times, bond investors appear to be buying bonds in anticipation of a central bank moving to a more inflationary stance, seemingly defying conventional wisdom. One has to wonder if bondholders view buying European bonds as a win-win situation, whatever the outcome. If the ECB moves and introduces QE, then bond investors already have a buyer for their bonds. Whereas if the ECB doesn't move, thereby making the threat of deflation greater, then bonds in turn become a more attractive.
Alibaba, a Chinese Internet retailing company, has applied for a listing in the US that could potentially give it a market value of $200bn. Staggeringly, the company was only founded 15 years ago. Jack Ma, the founder, will apparently turn out to be worth $9bn as the company becomes public. The Internet has become so integral to everyday life that it feels like the world would collapse if it no longer existed. It is hard to think of any other invention that has had that sort of impact on the human population. The development of the Internet has also created huge opportunities for wealth creation that feels unique in history, and along the way destroyed industries that existed long before the internet was thought possible. The United Nations International Union says that there are nearly 3 billion users of the Internet now, around 40% of the world’s population. That figure feels like one that underestimates the Internet's reach, if it collapsed overnight one gets the sense it would impact more than 40% of the world’s population.