One the markets that has been least easy to predict this year has been US bonds. The long term US bond bears, that are often monetarists at heart and believe QE will bring inflation, have been queuing up to short. Likewise, post-Keynesian’s have pointed at Japan and laughed about secular deleveraging and widow-maker trades.
The fact is, the bears have been wrong all year, and even with recent inflationary rumblings are still wrong.
Read more...Ambrose Evans-Pritchard makes a compelling argument in his latest article: that the $5.4 trillion of investment poured into fossil fuel exploration and development projects over the last six years includes quite a lot of investments that will never show an adequate return. He argues that when that sorry fact starts to be recognized, the losses could be the wake-up call to investors who have shrugged off risk as financial assets climb to ever-more-implausible valuations.
Read more...Despite unimpressive and often mixed economic data, market prices in a wide range of financial assets have continued to grind higher. And the results that cheered pundits are hard to square. For instance, Floyd Norris in the New York Times today scratches his head over how inconsistent recent employment gains are with the first quarter GDP contraction at an annualized 2/9% rate. It’s also hard to reconcile with reports of weak retail sales and falling in-store traffic. Similarly, China has become concerned enough about growth that it’s started pump priming again. Even so, car sales dropped by 3.4% in June. And in Japan, machinery orders plunged by 19% in May. And despite the recent discussion of Eurozone recovery, recent reports have put a dent in cheery forecasts.
Read more...Yves here. China is cracking down on flight capital, starting with Australian banks. As the most casual readers of the business press know, the international wealthy, particularly Russians and Chinese, have been using residential real estate in “world cities” as their favorite lockbox. As we’ve written, it’s stunning to see how much real estate has been hoarded in London. Mayfair was depopulated during the petrodollar recycling of the 1970s; now much of Belgravia, Chelsea near Sloan Square, and Kensington are visibly underpopulated. Vancouver has been bid to the sky by Chinese flight capital. New York is a big destination for Russian and Chinese investors, and Chinese money has been pouring into Australian real estate.
The Chinese move may be an admission of stress on the financial system.
Read more...Yves here. While IPO-related cheerleading is getting more stained than ever, also notice how lousy the mood is among retailers. This does not bode well for a consumption-driven economy.
Read more...In case you managed to miss it, the GDP revision yesterday morning was stunningly bad.
But after getting rattled, Mr. Market shrugged off the report. So what if we opened Schrodinger’s box and found out the cat was dead? That was first quarter’s cat. That cat might as well be dead for all we care now. Plus the weather was bad, so we’ll make all that up, and anyway, the Fed has our back, so if there really is something to worry about here, they’ll fix it, as least as far as security-owners are concerned. Right?
In addition to looking at the main elements of the GDP report, we’ve asked readers to report on what they see in their economy.
Read more...Yves here. It’s been astonishing to see members of the Fed in denial about their own handiwork, so when St. Louis Fed President James Bullard berates his fellow central bankers for their abject refusal to notice pre-crisis bubbles, it’s an all too rare departure from their usual insularity and willful blindness.
Read more...The ECB is expected to cross a Rubicon today by implementing negative deposit rates. What is the impact likely to be?
Read more...How the Fed has gotten itself caught in its own underwear by ignoring Hyman Minsky and in persisting in the clearly failed strategy of super lax monetary policy rather than calling for more government spending.
Read more...Wall Street earnings are running on hype, momentum, and earnings expectations gamesmanship. Investors beware!
Read more...I’m getting a bad case of déjà vu from reading the Financial Times over the last week.
Read more...The third industrial revolution is long in tooth. What does that portend for investments and the economy?
Read more...Internet stocks are down since March, so they must be a buy….right?
Read more...Leverage-on-leverage vehicles were the big driver of the global financial crisis. Some investors are going back to their overly-risky ways.
Read more...By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Originally posted at MacroBusiness From BofAML: Citi is in no doubt that retail has it right: • The DJIA posted a bullish outside month in April. This is only the 3rd time that has happened since […]
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