Thanks very much to my old friend, Steve Sedgwick at Squawk Box Europe for the chat this morning. We looked at Growth v Value, the US v ROW, we touched on bonds and borrowing, money supply, inflation, lockdown, commodities & gold – all in under 10 minutes!
To fill out what all might seem a bit rushed on the soundfile, here are the notes I sent to accompany our chat, complete with a little extra gloss for you to read at your leisure:-
Markets have paradoxically both been on edge – and in the throes of euphoria – since the repo shock in mid-September, being at the same time alarmed and yet strangely reassured by the Fed’s frantic backpedalling and the $400+ billion boost to its balance sheet which this entailed.
However, at a time when an already faltering flow of business revenues across the major nations has now to weather the unquantifiable, but potentially far-reaching, disturbance spread by the China coronavirus outbreak, the margin for error seems slim, indeed. Extreme levels of overstretch are everywhere apparent.
To download as a PDF, please click here: 20-02-21 Overstretch
One of the truisms of the current market is that volatility – both historical and implied – is historically low, but just how extreme is it? How does this manifest itself in the bond, as opposed to the stock, market? What does it tell us about the risks we may be running by maintaining naked exposures?
Please follow the link to find a brief, but instructive overview of this most burning of issues:-
The more our would-be Philosopher Kings attempt to display the awesome panoply of their intellectual armour, the more we think, not of the Greek sage from whom they seem to draw inspiration, but of Mickey Mouse’s dopey canine friend.
In bonds, the Bears are mounting another one of their forlorn hope charges against the central bank ramparts which is, in turn, rendering equities a little more expensive in relative, as well as absolute, terms. Commodities, meanwhile, are firmly rooted in mean reversion mode.
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Regular readers will know that the articles published here are but a small subset of the detailed work I undertake to analyse economic and political developments and their effects on markets. In order to give some idea of the scope of this, presented below is an archive of past issues of the Austrian School-informed, in-depth monthly publication, ‘Money, Macro & Markets’ in addition to which I compile twice monthly updates as the ‘Midweek Macro Musings’ which are also made available on a complimentary basis to subscribers to the former letter.