Last week I attended the IMF’s Annual Meetings in Washington D.C, where I had a series of very interesting meetings with government officials and other world financial leaders. The underlying theme behind most of the discussions was that emerging market countries continue their adjustment into a new phase characterized by less abundant liquidity and lower commodity prices. This adjustment proce…Read the article
So now we know what the Bank of England intends to do about the UK’s housing market, a market that Governor Carney has previously referred to as the biggest risk to financial stability and therefore to the economic expansion (the IMF and the EC had similar warnings).The answer, in short, is not much at the moment – while Carney is not “happy” with the buoyant UK housing market, he is willing to…Read the article
With just under two months to go to the opening match and tensions already mounting within our team (we have 8 different participating countries covered – Australia, Brazil, England, France, Germany, Italy, Spain and USA), we thought it was time for a World Cup themed blog. Our prior predictor of the 2010 World Cup winner proved to be perfectly off the mark. Based on expected growth rates in 20…Read the article
We have written extensively on this blog in the last year about what we’ve termed ‘central bank regime change’ (eg see Jim’s article here from a year ago), where we have argued that in the years ahead, central banks would care less about inflation and more about growth and unemployment. We have since seen a number of examples of this playing out – the Federal Reserve has started targeting the u…Read the article
Ever since the Asian financial crisis in 1997, Asian economies have generally engaged in a policy of maintaining artificially cheap currencies in order to generate export-led growth. This led to substantial political pressure being placed on Asian countries, primarily from the US, to allow their currencies to appreciate.
The problem facing export dependent Asia is that this growth model has now…Read the article
The US dollar has been one of the worst performing currencies in the world in the last decade, but we think it is ripe for a rally. We expect the US dollar’s correlation with risky assets to steadily change (in fact this is already happening). We believe that the US monetary policy transmission mechanism is actually working fine. We are bullish on US growth, particularly in relation to other re…Read the article
Last month I commented on the long term headwinds facing Asia and tried to cut through the sales cheese (see here). The last few weeks have seen more evidence of a slowdown in Asia, and seemingly more people buying into the EMD story as valuations in a number of countries have hit extremely expensive levels. Taking one example, in the middle of last week the $2.25bn issue of Peru 7.35% 2025s re…Read the article
EM debt is a bit like Converse shoes; it seems almost everyone I speak to owns some.
Readers will no doubt be familiar with the EM ‘grand narrative’ (eg EM will surely outperform because of low debt levels, high growth, strong demographics etc etc). We’ve written an in-depth note, which is part of our Panoramic series for professional investors, in an attempt to bash away this EM ‘grand narrati…Read the article
Today is the day on which football is going to meet the Eurozone crisis when Germany and Greece compete in the Euro Cup’s quarterfinal. Spectators will be watching closely any gestures by Angela Merkel sitting in the stadium next to other political and executive representatives, any behaviour (and banners) of both team’s supporters inside and outside of the stadium, and any appearance and words…Read the article
In January I argued that negative German government bond yields would be a rational response to the rising probability that the euro breaks up and Germany reintroduces the Deutsche Mark (see here). This was because German government bonds have significant optionality. Assume that the Eurozone is forced to reintroduce national currencies – if you are living in Spain, then a German government b…Read the article