Tag Archives: Featured

Summary: Perceptions of two trends shape the investment climate: reflation and nationalism. Fed rate hike set for next month, barring significant surprise. Japan’s trade surplus is growing even as imports and exports continue to contract. United States Around the middle of the year, St. Louis Federal Reserve President James Bullard revealed his new economic approach. He argued that during economic phases, or...

In this war of the rising and fading elites, there is no common ground or incentive to compromise. Historian Michael Grant identified profound political disunity in the ruling elite as a key cause of the dissolution of the Roman Empire. Grant described this dynamic in his excellent account The Fall of the Roman Empire. The chapter titles of the book illuminate the complex causes of profound political disunity in the...

Summary EM FX ended the week on a soft note, as higher US rates continue to take a toll. EM policymakers are getting more concerned about currency weakness, with Brazil, Malaysia, Korea, India, and Indonesia all taking action to help support their currencies. If the EM sell-off continues as we expect, more EM central banks are likely to act to slow the moves. Several EM central banks (Hungary, Malaysia, South Africa,...

Over the past few years, one of the recurring themes on this website has been an ongoing discussion of how the VIX has lost its predictive value as a market risk indicator. This culminated recently with a note by Russel Clark who explained in clear term why the “VIX is now broken.” Today, in a fascinating note Hyun Song Shin, head of research at the Bank for International Settlements, the “central banks’ central bank”...

Swiss Franc Currency Index The weeks after Trump’s election continue to see a weakening of the Swiss Franc, while the dollar index is on a steady rise. Still both the euro and the yen have seen worse performance than the Swiss Franc. The euro is currently under 1.07 CHF. Trade-weighted index Swiss Franc, November 18(see more posts on Swiss Franc Index, ) Source: FT.com - Click to enlarge Swiss Franc Currency Index...

Summary: Italy is the epicenter of the next potential populist “shock.” A defeat of the referendum is seen as intensifying the political risk. Renzi has wavered again regarding his political future if the referendum loses. Many investors are closely watching Italy. It is seen as the next flashpoint for the wave of populism after Brexit and Trump’s success. The constitutional referendum will be held on...

The net speculative position of the Swiss Franc did not change a lot. It fell from -23K contracts to -22k against the US Dollar. Speculators reduced their net euro and Sterling shorts. But they reduced their long yen position. What is most noticeable about the CFTC Commitment of Traders report for the reporting week ending November 15 is what is not there: Activity.  With the Australian dollar being the sole...

Summary: TPP may be dead, but China is spearheading an alternative regional free trade deal. It is not as ambitious as the US-led TPP. China and Russia are eager to re-establish spheres of influence. The US election results delivered the coup de grace to the multilateral trade agreement called Trans-Pacific Partnership.  It was initially championed by the Obama Administration as a key pillar of its pivot to...

Stumped by the Bust In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs. Businessmen themselves are confused...

Letzte Woche gab die Schweizerische Nationalbank (SNB) bekannt, dass sie für dieses Geschäftsjahr eine Milliarde Franken an Bund und Kantone ausschütten wird. Von der Presse wird dies unterschiedlich interpretiert. Einerseits nimmt man mit Genugtuung zur Kenntnis, dass die SNB überhaupt eine Milliarde ausschütten kann. Andererseits wird mit Blick auf drohendes negatives Eigenkapital der SNB gewarnt, diese müsse...