Tag Archives: newsletter

I had the privilege today to appear on Canada's Business News Network. It is a great source for information on the Canadian economy and markets.  I was interviewed by Michael Hainsworth.   We discuss the Bank of Canada's decision not to cut rates today, which seemed highly discounted in the interest rate and derivatives markets.   The market seems to have simply pushed the rate cut expectation out to the spring, by which time the Liberal government is expected to present its budget.  ...

This Great Graphic, composed on Bloomberg, shows two-time series.  The white line is the premium the US government pays to borrow over the Canadian government for two years.  The yellow line the US dollar against the Canadian dollar.   Even though it appears to be a good fit, our eyes can be deceived, and Bloomberg automatically aligns the scales to show the best bit.  However, here the fit is very good.   We ran some correlations to probe the robustness of the fit.  Over the last 60...

The World Economic Forum is underway in Davos.  The global capital markets are off to one of their worst years ever,  the threat of terrorism hangs over us, like the Sword of Damocles, GDP growth, except in a few countries, is not keeping pace with population growth.   As  2500 rich, powerful, and famous (mostly) men meet in the Swiss resort, one cannot help but wonder if Ayn Rand's Atlas is shrugging?    The movers and shakers have ensconced themselves during this, particularly turbulent...

The market meltdown is extending into the third consecutive week.  Once again, the attempt to stabilize has failed, and bottom pickers have been punished.   It is easy to line up poor news developments, including IMF cutting world growth on the same day that the IEA warns of an extended glut in the oil market, the world's largest mining company projecting further declines in iron ore prices and poor earnings from one of the largest oil companies.  At the same time, some keen observers,...

There are three important economic events tomorrow.    The UK will release its December employment report and November weekly earnings data.  The US reports December CPI.  The Bank of Canada meets, and is widely expected to be the first central bank from a high income country to cut rates this year.   Sterling has lost 5.6% against the dollar since December 28.  The key factor is that the economy is slowing, which pushes further out in time a Bank of England rate hike.  Anxiety over the...

(from my colleague Dr. Win Thin) Brazilian central bank President Tombini said it will take into account the IMF’s revised forecasts for a deeper recession when it meets this week to decide on policy. Sorry, but we don’t buy it. No central bank should ever be affected by IMF forecasts. Yes, the IMF has great economists and often has excellent advice for its member countries. But no policymaker worth their salt should base their decisions on updated IMF forecasts. We’d add that the...

The China-sponsored Asian Infrastructure Investment Bank was formally launched over the weekend.  Many observers have seen it as a rival to the World Bank.  Others saw in another vehicle that would be used to facilitate the internationalization of the Chinese yuan.  We have consistently argued that these ideas are a serious exaggeration. News that AIIB will lend only US dollars supports our claim.  It seemed obvious that most members would fund their quota in dollars.  It also seemed...

The relentless pounding that investors suffered in the first two weeks of the year has subsided.  It is too early to have much confidence that a turn is at hand.  By various measures, the sell-off had stretched the technical condition.     In any event, the stability of the yuan, gains in the Chinese stocks, and a bounce in oil prices appears to be giving the bears a day off.  Chinese economic data (Q4 GDP, retail sales, industrial output, and fixed asset investment were a little softer...

EM ended last week on a sour note. The most important factor for global risk appetite has become China, with the Fed tightening cycle now on the back burner.  Our base case remains that China muddles through, but policymakers there need to communicate better with the markets.  The PBOC fix and Chinese equity market performance will likely be the biggest drivers for global markets this week.  Commodity prices continue to slide, with oil and copper making new cycle lows last week and...

The market is trying to get its bearings today. The large decline in the US equities before the weekend has had modest spillover effects elsewhere.  Equity markets, barring the Shanghai and Shenzhen Composites, are mostly modestly lower.  The MSCI Asia-Pacific Index is off about 1% while the Dow Jones Stoxx 600 is less than 0.5% lower in late-London morning turnover.   Iranian oil sanctions were lifted.  Oil prices are off a little more than 1% today, with Brent and WTI briefly slipped...