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War by other means – interest rates
War by other means? Forget the South China sea, Syria or Korea. If you haven’t noticed, the EU and China are locked in a high stakes game of chicken with the US over control of the World’s reserve currency, where the weapon of choice are interest rates. While much has been made of Trump’s attempts […]
Continue readingBrexit means Brexshit!
Confused? You certainly should be as the political game of betrayal over Brexit reaches its denouement. In the very short term, markets (both fx and equity) are unfazed by the ‘deal’ being foisted on them, as they have already been softened up by the project fear propaganda – ‘any deal is better than no deal’. […]
Continue readingPPG – rising costs exposes weak pricing power. An increasingly common story
Tax reductions, tariff walls and a trillion dollar plus increase in Federal debt to fund the party and one might have thought that bond markets would be fretting about inflation. Perhaps surprisingly and despite the absence of Fed price distortions as a buyer of its own junk, the inflation rate implied from the TIPS-fixed Treasury […]
Continue readingAre equities expensive?
The spike in US bond yields has implications for equities, but perhaps not as directly as one might imagine. Yes, long bond yields and particularly TIPS, provide an effective proxy for a risk-free return and therefore the essential anchor for valuing other asset classes, but only from a relative rather than absolute perspective. It may […]
Continue readingDangerous Waters
These are dangerous waters for investors. Not just from the visible reefs, such as the rising trade and military tensions, but to what remains hidden, as Trump positions himself ahead of what could prove to be the most important mid-term elections for a generation. This is a game however, where many of the key pieces […]
Continue readingJune US jobs data – surprisingly stable
Yes, its out; the US non-farm payrolls for June. In between love island, the World Cup footie and what counts as financial porn (endless tit-for tat negotiations on tariffs and Brexit) you might have missed these. For those fretting about interest rate rises on an overheating employment market, I shouldn’t worry too much that it […]
Continue readingDo they know something? Informative conformity and stocks
The herding instinct is strong in markets. Solomon Asch would characterise this as ‘informative conformity’ where the participant would disbelieve the evidence of their own eyes and yield to the group think. In Asch’s experiments, the results were remarkable, particularly given the exclusion of outside variables beyond the comparative data (the height of the columns […]
Continue readingWhining about US winning
So if Trump’s tariffs are going top hurt the US so much why is the US dollar going up by so much? If Trump’s tax reductions are going to increase the budget deficit, why are currency markets so unconcerned? It is because currency markets understand Trump is going to win. His tax cuts are […]
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