Money, Money, Money

March 4, 2015April 10, 2015 by CantillonCH

As the title of the blog suggests, we pay close attention to developments in money and credit since the twin precepts of our outlook are that ‘the credit cycle IS the business cycle’ and that ‘silver [i.e., money] is the true sinews of the circulation’.

It is all very well for both macro-economists and stock-pickers to look at flows, but unless a weather eye is kept on how they are being financed and what that implies for the future vulnerabilities of the contracting parties, a very important element is being overlooked.

Macro & Markets: The Bulls Cling On

February 23, 2015April 10, 2015 by CantillonCH

Avoiding for now all comment on the ongoing Eurozone schism, we start by taking a look at the UK where, conveniently in the run-up to the May election, everything seem to be coming up roses for the incumbents. Retail sales are strong, CBI output intentions are comfortably back inside the upper decile of the last 20 years’ readings and – perhaps most politically heartening of all – real wages are at last rising while both numbers employed and hours worked are making new, all-time highs with the ratio between the two suggesting the proportion of those working full-time is back at pre-crisis highs.

Macro & Market Update

February 17, 2015March 13, 2015 by CantillonCH

More than half a century ago, in his role as an advisor to the men responsible for trying to set Taiwan on the road to prosperity, a redoubtable economist called Sho-Chie Tsiang argued that the monetary authorities should stop suppressing interest rates and directly rationing credit and should move instead toward a more market-oriented system where real rates were sufficiently elevated to encourage productive saving.

His reasoning was that the existing combination of what we might call Z(Real)IRP with ‘macro-prudential’ control was plagued with several significant drawbacks.

How did we end up here?

February 3, 2015April 10, 2015 by CantillonCH

While money can be made in markets on the minutest of scales, sometimes it helps to have a broader sense of perspective. After all, if you can’t locate yourself on a map – without the aid of GPS, children! – you don’t know where you are and if you have no grasp of history, you don’t really know who you are either.

One Leg to Stand on

February 3, 2015April 10, 2015 by CantillonCH

Here’s a question for all the cheering QEuro fans out there. If you came across a country where both real and nominal money supply were growing at rates in the low teens – something its people had not experienced for almost a decade and close to the fastest seen in the last four – would you consider it to be a victim of ‘deflation’? If not, what help do you suppose an expansionary central bank would be to it?

Technical Update

January 28, 2015April 10, 2015 by CantillonCH

Wracked by the actions of the various central banks – which gave us another key reminder that volatility does not equate to risk – yet not wishing to start rethinking their entire thesis, a characteristic loss confidence has started to set in among those who were telling themselves over the Christmas trukey just what geniuses they were. We could have an interesting couple of weeks in store – not helped by the fact that we are about to enter the great Chinese data avoid as the lunar new year approaches.

The End of Exuberance?

December 17, 2014April 10, 2015 by CantillonCH

Back in the halcyon days of summer, it seemed nothing could go wrong.

Commodities were still things it was not utterly disreputable to own. Base metals had shaken off a springtime swoon to hit 18 month highs. Though still suffering from that enervating, post-bubble flatness, precious metals had just enjoyed a neat little 10% rally. Energy was threatening to print new 2 ½ year highs as WTI sold for more than $107 at the front and $86 at the back of the curve. Nor were people much interested in paying for downside protection: across the complex, options premia were as low as ever they had been in recent years.

Swings and Roundabouts

December 5, 2014April 10, 2015 by CantillonCH

For all those still clinging to the hope that today’s extraordinary level of equity valuation will soon reverse and what we fondly remember as ‘normality’ will again break out (and we confess that we are often to be found among their camp), we and they should never lose sight of the fact that this exaggeration is a direct result of the central banks’ deliberate move to destroy the market for time discount and so to provide the rentier class with a little assisted suicide (only fair since it was obviously all the savers’ fault that the previous period of central bank laxity had induced far too many people to borrow too much bank credit the last time around with predictably disastrous results). Continue reading …

Red Queen Investing

December 5, 2014April 10, 2015 by CantillonCH

It is rare these days to come across an investment manager or a strategist who will not proudly volunteer that he is either ‘Long the Nikkei, short the Yen,’ or is telling his clients to position themselves that way.

With all due caveats about crowded trades and the like, we cannot find the second part of this at all objectionable, having long been promoting the view that the USD would do what it has repeatedly done (in real effective rate terms) ever since the break up of the Gold Pool in 1968 signalled the imminent end of the Bretton Woods system – namely, decline then base out over the course of a decade to a point within +/- 2 1/2% of the same base level (95.5 on the BIS index), then reverse and rally for the next 6 1/2 years. Continue reading …

True Sinews

Commentary & Analysis by Sean Corrigan of www.cantillon-consulting.ch

Category Archives: Equities

Money, Money, Money

Macro & Markets: The Bulls Cling On

Macro & Market Update

How did we end up here?

One Leg to Stand on

Technical Update

The End of Exuberance?

Swings and Roundabouts

Red Queen Investing