[Wilmot on AV] Beyond Shiller P/E
We have never been great fans of the “Shiller P/E” based on 10-year moving averages. Much, much better than spot P/E but still too short-term to cope with the sometimes outsize cyclical fluctuations in earnings.
[Wilmot on AV] Invisible Bubbles
The Global Composite Valuation Indicator combines a number of key valuation metrics. It covers US, European, Japanese and EM real equity returns, G5 equity-to-bond returns, BBB credit spreads and our World Wealth index.
[Wilmot on AV] John Law and Shadow Money
Another sign that shadow money “is as auld as the hills” comes from Niall Ferguson’s recent book “The Ascent of Money.”
In a chapter on bubbles, Ferguson amusingly describes “renegade Scotsman”
[Wilmot on AV] No Fuel For Inflation…
So far at least.
Taking our cue from Hayek we recently had a shot at measuring “shadow money” in the US — the counterpart of the credit created through the shadow banking system. In today’s securitised system the repo market helps make longer term debt securities supremely liquid — for a certain haircut they can be turned into cash at a moments notice.
[Wilmot on AV] Hayek on “Elastic Money”
There can be no doubt that besides the regular types of the circulating medium ….there exist still other forms of media of exchange which occasionally or permanently do the service of money.
Now while for certain practical purposes we are accustomed to distinguish these forms of media of exchange from money proper as being mere substitutes for money,
[Wilmot on AV] Markets After Momentum Peaks
Even after early cycle momentum peaks risk appetite tends to ebb, and risk assets tend to struggle for a while: developed equities usually under-perform bonds and emerging equities usually under-perform developed equities,
[Wilmot on AV] Post-panic Recoveries…
We called for a very strong bounce in global industrial production back in February/March.
Global IP (as we call it) is now roughly 9% above its March trough (on our estimates for October) and is already back to the pre-Lehman’s level.
[Wilmot on AV] BoJ on the spot – (much) more to do
Good deflation and bad deflation?
There’s nothing wrong with deflation when it’s a falling price boom we’re talking about. In modern times China comes closest: no one is stressing about the fact that Chinese non-food inflation is minus 1.5 per cent at the moment.
[Wilmot on AV] False idols: are US consumers really over leveraged?
If there is one axiom of today’s Pigovian pessimism it is the idea that after decades of decadent reliance on debt to goose up consumption, US consumers are structurally over leveraged. And that it may take a decade or more of pain to unwind the damage,
[Wilmot on AV] Slugging it out … (in a gentlemanly sort of way) …
In the meantime, Jim Grant is telling us all to keep an open mind…
From Bear to Bull in the Wall Street Journal:
As if they really knew, leading economists predict that recovery from our Great Recession will be plodding,
[Wilmot on AV] A short history of financial euphoria
Another favourite: J.K. Galbraith this time.
That the free enterprise economy is given to recurrent episodes of speculation will be agreed. These — great events and small, involving bank notes, securities,
[Wilmot on AV] One damn panic after another…
All the US bank runs and panics of the late 19th century — 1857, 1861, 1866, 1873, 1877, 1890, 1893, 1896 and 1907 — are clearly visible in the chart below of the call money rate — the rate for borrowing collateralised against equities.
[Wilmot on AV] The Pigou effect (but not as you know it)…
The error of optimism dies in the crisis, but in dying it gives birth to an error of pessimism. This new error is born not an infant, but a giant; for (the) boom has necessarily been a period of strong emotional excitement,
[Wilmot on AV] Further reading
- The BOJ – getting serious about deflation?
- Carbon Tax or Cap and Trade…Tim Harford makes it simple.
- Clever Robots and virtual worlds…beyond human intelligence.
- China is humming no longer speeding up.
[Wilmot on AV] Guest editing for the day…
We FT Alphavillers are (partially) writing ourselves out of the script for a day.
On Tuesday from 7am London time, Jonathan Wilmot, the chief global strategist at Credit Suisse’s investment banking division,