Friday 21 April 2017

Hillary voters causing the data slowdown since the election

Hillary voters on strike/ freakout.

Tuesday 11 April 2017

ECB QE leaked into Treasuries in a xccy bank carry trade

ECB LTROs/ QE leaked into Treasuries in a x-currency carry trade. But as the Fed hikes there is potential for the carry to go negative between funding costs and US curve flattening.


Target 2 doomsday machine

If Italy's Target 2 imbalances went over 100% of GDP (currently about 22%), it would make the economic case for a Lira and deval quite difficult given much of the banking system's liabilities would stay in Euros... You could say this is Germany's doomsday machine to stop countries leaving.

Tuesday 4 April 2017

The US enters the fourth turning ushered in by Fed rate hikes

Fed rate hikes will bring forward the destructive consequences of the 'fourth turning' as positive regeneration is driven by wage growth and the Fed stays deliberately behind the curve as we enter a wage-inflation cycle. 

Yellen's replacement will be key to this playing out as will tax reform and infrastructure spending. Without these demand supports in the economy the rate hikes will trigger a debt deflation triggered recession, and the bond market seems to be still fixated on this downside scenario. 

From an investment standpoint you need to back the new structural winners, while getting out of the new structural losers, ie areas that have been the winners since the early '80s. 

You also have to wonder if Trump will attack North Korea or Yemen.