Don’t Bank On It

On April 13th, a financial pundit with a wide media following made the following (loosely transcribed) proposition about US banking stocks: Banks won’t rally because rates -long and short- are too low; Japan is our marker – banks there falling while their US/EZ peers rose pre-GFC and have not made any ground since; vis-à-vis their EZ peers, US bank returns have long been anomalous, ergo their out-performance won’t be repeated.  We demur in the main.

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Money v Supply

With many commodity prices touching multi-year lows and with mounting fears for real estate valuations and car-lease residuals, numerous commentators seem convinced that ours is now a deflationary future. QE failed to raise CPI by anywhere near what the spin promised, they say, partly because it was ‘unsupported’ by fiscal policy. Therefore, if we don’t get Roosevelt, we’ll get Brüning, they conclude, and, meanwhile, we need the Fed to cut rates below zero, said one prominent pundit on April 5th. We replied:-

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Throw me a Lifebelt!

As governments took ever more drastic action to close markets and confine people to their homes, the question loomed of how to mitigate some of the worst consequences of this self-imposed state of siege. A Twitter thread of March 10th offered up some initial thoughts, here lightly edited.

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Fed’s a-Flutter

It was almost inevitable that, days after the front end of the US interest rate structure had undergone a 35 basis-point plunge, its sharpest one week fall in yield since the immediate aftermath of the Lehman Crisis, the key non-farm payroll data would also come in weak. [First published June 10th]
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Utterly Negative

Mario Draghi emerged last week from the much-awaited meeting of the ECB Governing Council meeting clutching a fairly bland official communiqué which extended the envisaged freeze on interest rates out to the latter part of next year (aka, ‘forward guidance’), pledged that there would be no shrinkage of the Bank’s securities portfolio (so-called ‘quantitative tightening’) for some considerable period after that ended, and gave details of the terms on which the next batch of loan socialization can be refinanced under the aegis of its TLTRO III programme. [First Published June 7th] Continue reading

Turnaround Tuesday

After the excitement of the past few sessions, it was not entirely unexpected that what we old market stagers used to call, ‘Turnaround Tuesday’, would deliver its traditional mix of reflection, position rebalancing, and general counter-trend moves of either the stop-profit or the ‘Why do I always buy the top?’, buyers’ regret kind. [First Published June 4th] Continue reading

Dog Chases Tail

The sharpening of the conflict between China and the US became all too apparent last week when Beijing released an official white paper in which it seemingly abandoned all hint of conciliation with a burst of accusations, exculpations, and a good deal of bluster. [First Published June 3rd] Continue reading

Behind the Curve

The phrase on everyone’s lips at the moment is ‘Yield Curve’ – largely for its supposedly unerring ability to predict a recession if not, as its most extreme devotees seem to imply, actually to cause one. But is that a valid interpretation of what is afoot in financial markets and does that jibe with how the real economy is developing?  To listen instead to my podcast on this issue, please go to CantillonCH at SoundCloud, or search Apple Podcasts and Spotify for ‘Cantillon Effects’. For an expanded PDF transcript of the yield curve discussion, complete with explanatory charts, please see 19-04-06 M4 No21

M4 Compendium (updated)

As a way of providing easy access to most of the regular work we have published over the past two years – and hence to getting a feel for what we do and how we do it – please see here for a collection in PDF form, offered in reverse chronological order. Continue reading

China Banking: Pigs Might Fly

There must be something in the air this winter – something that is besides the whiff of climate cant and manufactured eco-hysteria emanating from Davos and all the other organs of bien pensanterie. For, everywhere you look, someone is going less than quietly insane, either cooking up or Swedish chef rehashing glaring errors of economic idiocy or sweet-shop window socialism. Bork, bork, bork!

[This article can be heard as a podcast on Soundcloud under ‘CantillonCH‘ or iTunes under ‘Cantillon Effects‘] Continue reading