Via UBS: We expect a recovery in 2020 but a much weaker one than consensus Things will get worse before they get better. Assuming any Phase One US-China deal is limited (no tariff roll-back), the existing tariffs should continue to work their way into the data and create an air-pocket in US growth in H1-20`
Via the excellent Damein Boey at Credit Suisse: Another day, another set of US President Trump and China headlines. Overnight, we heard reports from Chinese officials that US officials were prepared to rollback existing tariffs as each phase of trade negotiations progressed. We later heard US officials confirm these reports from their perspective, although there
Via the Hartford Courant: Two hedge fund founders on Tuesday called for the reform of capitalism to combat economic inequality and stem political upheaval. Before a crowd of about 200 at the Greenwich Economic Forum, a two-day alternative investment industry conference, Ray Dalio, founder of Bridgewater Associates, and Paul Tudor Jones, founder of Tudor Investment
Via the excellent Damien Boey at Credit Suisse: Overnight, US equities rallied to new highs, bonds weakened and the yield curve steepened on positive trade headlines: US officials suggested that a deal with China is “almost there”. Chinese officials expressed doubt as to where phase I of the trade deal will be signed, questioned how
Not without justification: Billionaire Ray Dalio says the global economy faces a ‘scary situation’ https://t.co/UQTmCDqrRu pic.twitter.com/NvBofCJEno — Bloomberg Economics (@economics) October 29, 2019 A few points. The technology revolution is as much solution as it is problem. Productivity gains will lift income to deleverage private sectors. It is over to governments whether or not this
Via Nouriel Roubini: With the global economy experiencing a synchronized slowdown, any number of tail risks could bring on an outright recession. When that happens, policymakers will almost certainly pursue some form of central-bank-financed stimulus, regardless of whether the situation calls for it. A cloud of gloom hovered over the International Monetary Fund’s annual meeting
Via Morgan Stanley, the answer is nothing: Trade tensions between the US and China have been the single biggest source of uncertainty for the global economy over the past 18 months. After a protracted period of negotiations, some progress has been made towards a deal, with a potential Phase 1 to be signed in mid-November. How
Credit Suisse has released its 2019 Global Wealth Report, which reveals that the recent housing bust has pushed Australia down the wealth rankings, falling from second place to fourth: According to Credit Suisse: Household wealth in Australia grew quickly between 2000 and 2012 in USD terms, except during 2008. The average annual growth rate of
A nice video here from Ray Dalio covering many MB themes around the great global growth sag:
Via John Kemp comes weekly charts of hedge fund oil positioning which is definitely getting short: But has scope to get materially shorter yet: I still fear a Q4 price crash for oil as falling seasonal demand and wider global growth weakening combine to deliver another period of glut: It is my key trigger for
Via the excellent Damien Boey at Credit Suisse: Overnight, investors were buoyed by hopes of a trade deal, and apparent progress in Brexit negotiations: A possible narrow US-China trade deal: US President Trump suggested that talks with Chinese Vice Premier He were going well and that talks would not end prematurely as previously speculated. The
Via the EIA last night: Brent crude oil spot prices averaged $63 per barrel (b) in September, up $4/b from August and down $16/b from the September 2018 average. Brent spot prices began September at $61/b and increased to $68/b after attacks on major Saudi Arabian oil infrastructure disrupted the country’s crude oil production. However, Brent spot
The United Kingdom’s Conservative Party is seeking to emulate Australia’s points-based migration system, which it claims is the best in the world and would restore integrity to the United Kingdom’s borders: Addressing supporters at the Conservative party conference in Manchester, British Home Secretary Priti Patel said the government is working hard to make it happen.
Is there any difference? Via the excellent Damien Boey at Credit Suisse: What a wild ride it was for bonds overnight! In the Asia-Pacific time zone, bonds sold off aggressively outside Australia, as investors became worried about a potential slowdown in BoJ asset purchases in a fairly illiquid environment. But in the US time zone,
Via Rabobank: Summary The Democrats in the House of Representatives have decided to start impeachment proceedings against President Trump. While impeachment is possible as the Democrats have a majority in the House of Representatives, conviction is unlikely as long as the Republicans in the Senate continue to support their President. In this case the removal
Australia has again taken the silver medal for having the world’s second most indebted households according to the latest data from the Bank for International Settlements (BIS). The next table shows the ratios of household debt to GDP as at the March quarter of 2019. As you can see, Switzerland (130%) has again taken gold
Via Bloomie: European Central Bank President Mario Draghi said the Governing Council should be open to ideas such as Modern Monetary Theory, while noting they’re closer to fiscal policy and should be directed by governments. …“These are objectively pretty new ideas,” Draghi said. “They have not been discussed by the Governing Council. We should look
Via Nouriel Roubini at Project Syndicate: In the classic game of “chicken,” two drivers race directly toward each other, and the first to swerve is the “loser.” If neither swerves, both will probably die. In the past, such scenarios have been studied to assess the risks posed by great-power rivalries. In the case of the
Via Damien Boey at Credit Suisse: Trade war negotiations remain in the limelight, with investors fearing that US-China talks had collapsed again on Friday night following the cancellation of a Chinese delegation trip to Montana and Nebraska. However, over the weekend, it was revealed by Chinese officials that the trip was not cancelled because of
While Australian wages remain stuck in the mud, held down in part by the endless deluge of migrant workers, the lower immigration arising from Brexit continues to be a bonanza for UK workers, who are enjoying both strong wage growth and unemployment at 45-year lows: Wages have continued to grow at a strong pace and
The NewStatesman has published a terrific article on how Britain has been flooded with worthless university degrees: Over the past 30 years, successive governments, from Thatcher to Blair, to Cameron and May, have imposed a set of perverse incentives on universities. Their effect has been to degrade and devalue the quality of British degrees. Academic
Via Ray Dalio today: The most important forces that now exist are: 1) The End of the Long-Term Debt Cycle (When Central Banks Are No Longer Effective) + 2) The Large Wealth Gap and Political Polarity + 3) A Rising Work Power Challenging an Existing World Power = The Bond Blow-Off, Rising Gold Prices, and
A few tidbits on the US corporate bond market from BofAML: Summer 2019 snapshot of the US HG market. The US high grade (HG) corporate credit market has expanded to an $8.293tn asset class, including $7.959tn of bonds and $0.334tn of derivatives notional outstanding. Supply. HG new issuance volumes have averaged $1.258tn per
Via Michael Every at RaboBank: Despite the fact that the German IFO survey was ‘I-ful’, with the official word being that the outlook is “increasingly dire”, and that US core durable goods were -0.4% vs. flat expected, both of which confirm that the real economy is perhaps in real trouble, markets seemed to sigh with relief
Via Nouriel Roubini: There are three negative supply shocks that could trigger a global recession by 2020. All of them reflect political factors affecting international relations, two involve China, and the United States is at the center of each. Moreover, none of them is amenable to the traditional tools of countercyclical macroeconomic policy. The first potential shock
Morgan Stanley today: This past week, media reports have indicated that China, Germany and the US could be considering new fiscal stimulus measures. China may raise local government bond issuance to accelerate infrastructure spending, Germany is possibly considering steps to potentially run a budget deficit for the first time in years, and the US may
Via bearish legend Albert Edwards of Societe General: …investors are perplexed. How can government bond yields have fallen so low in such a short space of time…there is a lot more to come.” …when you see the creeping advance of negative bond yields throughout the investment universe, you really start to doubt your sanity. For
UK wages continue to boom, rising at their fastest rate since 2008, with unemployment also near the lowest level since the mid-1970s: In sharp contrast to the broader economic slowdown that has taken Britain to the brink of recession, the Office for National Statistics said annual average pay – excluding bonuses – rose by 3.9%
Via the new WEF: Global growth remains subdued. Since the April World Economic Outlook (WEO) report, the United States further increased tariffs on certain Chinese imports and China retaliated by raising tariffs on a subset of US imports. Additional escalation was averted following the June G20 summit. Global technology supply chains were threatened by the prospect of
We noted last week how UK wages have boomed to post-GFC highs on Brexit immigration cuts: This comes alongside the GBP crashing, driving huge competitiveness gains, de-bottlenecking Britain, lifting living standards, and even driving gains in productivity: And the tonic has been Brexit immigration cuts: The decline in EU immigration into the UK in the wake of
