Below the fold, you will find links to the detailed PDFs we have sent out, roughly on a monthly basis over, the course of the past two years.Lots of macro.Much about markets.Follow the money.
A look at Chinese monetary policy, US equities’ relative performance, the dollar and more
Chinese money and credit. Is the top in for bonds? Equity margin rising. Gas beating oil once more. Gold testing the trend
Japanese equities, the US dollar and sterling, yield curves good & bad, and what’s been happening in the US economy
Tech tremors, Musk magic and a rich US market. Ex-energy to give it some gas? The pounded sterling and taking aim at the TARGET
Falling returns in the US. Tight money in China. An upswing in Japan. Deflation in India. Gold goes cold. Falling CPI and a flattening curve? No need to panic, just yet.
An extended riff on Draghi’s self-congratulation. Bunds testing the channel. DAX with little cushion. US debt levels – amber alert. Gold vol cheap. Oil curve too flat
More central bank special pleading and economic misunderstanding. UK capital consumption. The rise in rates and its bearing on stock prices. Gold, Oil and the coming rerun of the 50s
Has the Fed all along been doing what many critics advocate it should – if in a form disguised by its underlying bias to ever lower rates – and what is currently implied for both policy & profits?
Is the tide turning for China? Japan: scarce workers +abundant cash => more capex => higher profits. USA hadngin tough – or hanging on? Whatever it Takes – please stop now.
Profits and revenues may have recovered from the 2015-16 slump, but low policy rates and over-anxious lenders have badly loosened corporate discipline and so weakened balance sheets
It has become almost a truism to say that the market is pricing in very little risk, but it takes a considered look at the parameters to see just how extreme things have in fact become. Not for the faint-hearted!
Bond returns flailing, vols crushed, stocks at record highs, yet at least two major central banks (and the lesser pack-followers who trail behind them) can’t get enough of it. A tough gig to put all that surplus money to work.
Signs abound that the stress on bank balance sheets about which we have been talking are finally beginning to bite. Find the complete argument here
Having forced real and nominal yields, credit spreads, and volatility measures to such low levels, central banks have boxed themselves into a corner where any quickening of the CPI measures on which they so unduly focus could prove highly disruptive.
Though no bull market ever ended purely because of stretched valuations, the more abnormal these become, the more we can be sure we are simply trading the market not investing in the businesses involved. What does the interplay of stocks, bonds, forex & commodities have to tell us about our current prospects?
In financial markets, we’re all big ones for gathering round our metaphorical camp-fire at night and telling ourselves reassuring and after-the-fact explanatory fables. But what if the current one is about to change?
Have we finally reached the high-water mark of the current bull run? Is all the good news in – and the last, most shaky, marginal buyer along with it, inveigled in by the bounce from February’s brief Vol-au-Vent? If so, what are the implications? Where are the trigger points? How will any weakness manifest itself?
The so-called ‘War’ over trade being conducted by the US & China has given rise to much ill-informed commentary. We try to set the record straight & look at implications of this – and of rising price pressures in the US – on various asset classes.
With the rise in bond yields exercising minds and many murmuring that the recovery has run its course, we set out a framework explaining the key areas to watch to gauge the health of the economy and the likely course of asset prices
All eyes are on the central banks and the ramifications of their decisions for the markets. Will the Fed continue to tighten? Will the ECB really announce an end to QE? How will China resolve the Catch-22 of its credit markets?
‘Trade Wars’ must be one of the few types of conflict where the participants routinely aim at those on their own side. The sustained attack on China comes at a moment where internal difficulties render the situation there dangerous and where rare voices of discord are being heard. Aside from that, the US is not yet showing any ill-effects and markets appeared poised to frustrate the sceptics, should the fraught political circus allow.
China’s guiding mantra at present seems to be lifted straight from Douglas Adams’ oeuvre: Don’t Panic!
Too many moving parts are likely to lead to bad outcomes in what is anyway an intractable-seeming tangle of problems.
Global liquidity is being throttled – not just by the stronger dollar – but so far the US itself seems oblivious.
Plus a technical look at stocks, bonds, credit, gold, oil – oh – and at a certain wannabe- car company.
Financial commentators are no less suceptible to herding than any other species of human while the curse of the Excel spreadsheet is that it is just too easy to superpose two squiggles, push back the chair, and smile at the depth of one’s graphical insights.
Especially when it comes to the complex interplay between money, credit and the real economy, this can be fraught with peril.
Meanwhile, the ECB and -more indirectly- the BOJ have been helping keep a lid on US yields, though the former’s influence may now be waning. Plus, US stocks stay rich & rising, bonds are bombing and commodities, thanks to energy, are surprise race leaders.
As markets teeter off their highs, there will be much self-gratification and not a few sighs of relief among the many who have tried so desperately, these past months, to get some expression of bearishness or some voicing of doubt into the public domain, as much for the purposes of later self-promotion as out of any genuine conviction that investment strategies should have been re-ordered well ahead of the slide.
But what we are facing does not look like it has overly much in common with 2008, nor with the other hot favourite of 1987.
As for those triggers, it is hard to resist the conclusion that, this time around, China’s largely self-inflicted woes will constitute the so-called ‘Grey Rhino’ – the danger of which we were all very well aware, but which we tended overly to discount.
Fed Chairman Jerome Powell’s use of that innocent little qualifier, ‘just’, has unleashed a frenzy of repositioning in markets while President Trump’s characteristic inconstancy has begun to disconcert their participants. In light of this, in a bonanza of more than 60 graphs and charts, we end the year’s series of in-depth analyses by taking a detailed look at the state of the US economy, pan out briefly to the wider world, and then discuss the implications for asset prices.
Out in the global Republic of Men-not-Laws, we are all back to trying to work out what exactly is in Jay Powell’s mind – a task not made any more simple by the fact that Mr. Powell himself may not be entirely clear on the matter. Meanwhile, far across a turbulent, blue hemisphere of ocean, all of the economic enormities committed by China during its storied rise from the ashes of Mao’s destructive dystopia may finally be bearing down too heavily on the chaos of pit-props, buttresses, scaffolding, and jerry-rigging frantically erected by his successors in the attempt to shore up their own, very particular pyramid. Where will we find the winners and losers amid all this, in 2019?
Gulled by the ease of combining disparate times series on, eg, the Bloomberg machine, it is too easy to let analysis lapse into a simple chart-jockeying whose strabismically overlapping squiggles give one the illusion they possess a modicum of predictive power. Nowhere is this more true than where this involves measures of money. Then again, given the authorities’ penchant for carpet-bombing the world with too much of the stuff, coupled with the vogue for rehashed inflationary hokums like MMT, this is all too easy to understand. We try to set matters straight in this regard.
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?
Often we hear the phrase, ‘the consumer is 2/3 of the economy’, or ‘we need the US/Chinese/EZ consumer to step up’. But is there such a thing as a ‘Consumer’ in isolation? Is a person’s role as producer not more important? What part do interest rates play? Capital? Entrepreneurs? The State?
Markets go into the meeting with everything staked on black. Record eurodollar longs for the spec crowd; record long-end position for asset managers. Bond yields at Lehman Crisis lows; 5y5y helpfully declining. Oil and base metals weak; gold testing resistance. Stock markets and high-yield at or near record highs are the only dissonant factors.
Powell & Co are going to have to disappoint SOMEBODY, here – and we don’t mean the man in the Oval Office!