Tag Archives: 5) Global Macro

Doing more of what’s failed for ten years will finally fail spectacularly.. It was a huge relief to see the charts of the Baltic Dry Index (BDI) and the U.S. retail sector ETF (RTH): both have soared to the moon, signaling that both the U.S. and global economies are booming: the BDI is widely regarded as a proxy for global shipping, which is a proxy for global trade and economic activity. Batic Dry Index, 2018-2019 - Click to enlarge Amazon is 18% of the RTH...

US-China relations appear to be thawing Trading was volatile after the ECB decision; we are still dollar bulls EM has benefitted from the shift in the global backdrop this week The US data highlight is August retail sales Vietnam cut rates 25 bp to 6.0%; Turkey reported July current account and IP The dollar is mostly softer against the majors ahead of the US retail sales data. Sterling and Swissie are outperforming, while Kiwi and Loonie are underperforming. EM...

All of America’s bubbles will pop, and sooner rather than later. Financial bubbles manifest three dynamics: the one we’re most familiar with is human greed, the desire to exploit a windfall and catch a work-free ride to riches. The second dynamic gets much less attention: financial manias arise when there is no other more productive, profitable use for capital, and these periods occur when there is an abundance of credit available to inflate the bubbles. Humans...

The thing about R* is mostly that it doesn’t really make much sense when you stop and think about it; which you aren’t meant to do. It is a reaction to unanticipated reality, a world that has turned out very differently than it “should” have. Central bankers are our best and brightest, allegedly, they certainly feel that way about themselves, yet the evidence is clearly lacking. When Ben Bernanke wrote for the Washington Post in November 2010 announcing somehow the...

Turkey central bank meets September 12 and is expected to cut rates 275 bp.  With Erdogan talking about single digit rates and inflation, it’s clear that rates are headed significantly lower.  At some point soon, we think the risk/reward for investing in Turkey will send investors fleeing for the exits.POLITICAL OUTLOOK President Erdogan sacked central bank Governor Murat Cetinkaya on July 6, ostensibly for not cutting rates quickly enough.  In early August, several...

If Mario Draghi wanted to wow them, this wasn’t it. Maybe he couldn’t, handcuffed already by what seems to have been significant dissent in the ranks. And not just the Germans this time. Widespread dissatisfaction with what is now an idea whose time may have finally arrived. There really isn’t anything to this QE business. But we already knew that. American officials knew it in June 2003 when the FOMC got together to savage the Bank of Japan for their lack of...

The last time was bad, no getting around it. From the end of 2014 until the first months of 2016, the Chinese economy was in a perilous state. Dramatic weakness had emerged which had seemed impossible to reconcile with conventions about the country. Committed to growth over everything, and I mean everything, China was the one country the world thought it could count on for being immune to the widespread economic sickness. That’s why in early 2016 authorities...

For every action there is a reaction. Not only is that Sir Isaac Newton’s third law, it’s also a statement about human nature. Unlike physics where causes and effects are near simultaneous, there is a time component to how we interact. In official capacities, even more so. Bureaucratic inertia means a lot more than just resistance to change, it also means, at times and in certain capacities, all sorts of biases. When the bureaucracy predicts one set of circumstance,...

Give stimulus a chance, that’s the theme being set up for this week. After relentless buying across global bond markets distorting curves, upsetting politicians and the public alike, central bankers have responded en masse. There were more rate cuts around the world in August than there had been at any point since 2009. And there’s more to come. As Bloomberg reported late last week: Over the next 12 months, interest-rate swap markets have priced in around 58 more...

Despite some positive developments last week, we think the three key issues for risk assets have not been resolved yet.  Hong Kong protests continue, while reports suggest the US and China remain far apart.  Even Brexit has likely been given only a three month reprieve.  We remain negative on EM until these key issues have been ultimately resolved.  China reports August money and loan data this week but no data has been set.  With the recently announced cuts in...