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Commodities, Supply-Chains and Structural Changes in Demand
COMMODITIES, SUPPLY-CHAINS AND STRUCTURAL CHANGES IN DEMAND Talk of a new commodity super-cycle may be premature Once GDP growth returns to trend, commodity demand will moderate Fiscal and monetary relief are key to maintaining growth and demand Structural changes in energy demand will prove more persistent As the spectre of inflation begins to haunt economists, […]
The Everything Bubble and What it Means for Your Money
The Everything Bubble and What it Means for Your Money In the aftermath of the Black Plague which swept across Europe between 1347 and 1353, wiping out between 30 and 60% of the population, the European economy changed dramatically. Source: Jeremy Norman – HistoryofInformation.com The Black Plague had a lasting socioeconomic impact; for example, towns […]
Low Yield, No Yield, Negative Yield–Buy Now But Don’t Forget to Sell
LOW YIELD, NO YIELD, NEGATIVE YIELD – BUY NOW BUT DON’T FORGET TO SELL The amount of negative yielding fixed securities has hit a new record The Federal Reserve and the ECB are expected to resume easing of interest rates Secondary market liquidity for many fixed income securities is dying Outstanding debt is setting all-time […]
Interest Rates, Global Value Chains and Bank Reserve Requirements
INTEREST RATES, GLOBAL VALUE CHAINS AND BANK RESERVE REQUIREMENTS Interest Rates, Global Value Chains and Bank Reserve Requirements Global Value Chains have suffered since 2009 Despite low interest rates, financial costs remain too high Bank profitability has not recovered, yet banks are still too big to fail In a recent speech, Hyun Song Shin, Head […]
Debasing the Baseless–Modern Monetary Theory
DEBASING THE BASELESS – MODERN MONETARY THEORY Populist politicians are turning to Modern Monetary Theory Fiscal stimulus has not led to significant inflation during the last decade MMT is too radical to be adopted in full but the allure of fiscal expansion is great Asset markets will benefit over the medium-term A recent post from […]
Capital Flows–Is a Reckoning Nigh?
CAPITAL FLOWS – IS A RECKONING NIGH? Borrowing in Euros continues to rise even as the rate of US borrowing slows The BIS has identified an Expansionary Lower Bound for interest rates Developed economies might not be immune to the ELB Demographic deflation will thwart growth for decades to come In Macro Letter – No 108 […]
Sustainable Government Debt–An Old Idea Refreshed
SUSTAINABLE GOVERNMENT DEBT – AN OLD IDEA REFRESHED New research from the Peterson Institute suggests bond yields may fall once more Demographic forces and unfunded state liabilities point to an inevitable reckoning The next financial crisis may be assuaged with a mix of fiscal expansion plus QQE Pension fund return expectations for bonds and […]
A World of Debt–Where Are the Risks?
A WORLD OF DEBT – WHERE ARE THE RISKS? Private debt has been the main source of rising debt to GDP ratios since 2008 Advanced economies have led the trend Emerging market debt increases have been dominated by China Credit spreads are a key indicator to watch in 2019 Since the financial crisis of 2008/2009 […]
How Are Chinese Stocks Responding to Tariffs With the US and a Slowdown in Asian Growth?
HOW ARE CHINESE STOCKS RESPONDING TO TARIFFS WITH THE US AND A SLOWDOWN IN ASIAN GROWTH? Despite US tariffs, China’s September trade balance with the US reached a record high A number of China’s Asian neighbours have seen a deceleration in growth The Shanghai Composite has fallen more than 50% since 2015, the PE ratio […]
Canary in the Coal-MIne–Emerging Market Contagion
CANARY IN THE COAL-MINE – EMERGING MARKET CONTAGION Emerging market currencies, bonds and stocks have weakened Fears about the impact of US tariffs have been felt here most clearly The risk to Europe and Japan is significant Turkey may be the key market to watch As US interest rates continue to normalise and US tariffs […]
Italy and the Repricing of European Government Debt
ITALY AND THE REPRICING OF EUROPEAN GOVERNMENT DEBT The yield spread between 10yr BTPs and Bunds widened 114bp in May Populist and anti-EU politics were the catalyst for this repricing of risk Spain, Portugal and Greece all saw yields increase as Bund yields declined The ECB policy of OMT should help to avoid a repeat […]
Is the US Exporting a Recession?
IS THE US EXPORTING A RECESSION? The Federal Reserve continue to raise rates as S&P earnings beat estimates The ECB and BoJ maintain QE Globally, corporations rely on US$ financing, nonetheless Signs of a slowdown in growth are clearer outside the US After last week’s ECB meeting, Mario Draghi gave the usual press conference. He confirmed […]
Inflation or Employment
INFLATION OR EMPLOYMENT Inflationary fears are growing and US rates continue to rise Employment has become more flexible since the crisis of 2008/2009 Commodity prices have risen but from multi-year lows During the next recession job losses will rapidly temper inflationary pressures Given the official policy response to the Great Financial Recession – a mixture […]
What to Expect From Central Bankers
WHAT TO EXPECT FROM CENTRAL BANKERS The Federal Reserve continues to tighten and other Central Banks will follow The BIS expects stocks to lose their lustre and bond yields to rise The normalisation process will be protracted, like the QE it replaces Macro prudential policy will have greater emphasis during the next boom As financial […]
Are We Nearly There Yet? Employment, Interest Rates and Inflation
ARE WE NEARLY THERE YET? EMPLOYMENT, INTEREST RATES AND INFLATION Rising interest rates and inflation are spooking financial markets Unemployment data suggests that labour markets are tight Central Banks will have to respond to a collapse in the three asset bubbles There are two factors, above all others, which are spooking asset markets at present, […]
