Global Macro

1

How far can the risk rally get?

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

5

Ray Dalio is the new Dr Doom

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

25

Dr Doom hoses MMT

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

1

What will a trade war pause fix?

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

14

Australia tumbles down global wealth rankings

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

0

When will oil crack?

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

2

Global recession or inventory cycle?

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,

13

Trump impeachment scenarios

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

7

ECB mulls MMT

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

1

Dr Doom: The four horsemen of recession

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

6

India prints to cut taxes

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

2

UK workers still enjoying Brexit bonanza

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

5

The great university con

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

24

Ray Dalio warns again

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

0

Beware the Trump departure trade

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

17

Dr Doom does the coming recession

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

0

Morgan Stanley: No fiscal rescue coming

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

9

The Ice Age returns to sink yields

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

7

UK wages boom from cuts to cheap foreign labour

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%

0

IMF cuts global growth again

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

10

British bosses demand migrant slaves to lower wages

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

0

Horseman does lessons from Japan

Via Horseman Global’s Russell Clarke: Japan pioneered many of the monetary policies that we now find common in the Western world. Despite the Bank of Japan (“BOJ”) taking monetary policies to ever more extreme levels, including negative interest rates and very large purchases of Japanese government bonds, the Nikkei still languishes well below the all-time

76

Hypocrite Guardian bemoans population “crisis”

Nothing encapsulates the Fake Left’s hypocrisy better than the below whinge by The Guardian over the world’s population “crisis”: …there has been a deep and potentially catastrophic failure by the west in promoting a measure on which the future health of our planet depends: limiting numbers of our species. Until this basic task is achieved,