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’The ‘depreciation doomsday machine’
There are prognostications of doom for the US economy, and there are highly specific prognostications of doom for the US economy.
Here is one, from Charles Dumas of Lombard Street Research:
The potentially
James Bullard on QE2 and the ‘global output gap’
James Bullard delivered an interesting, chart-rich speech on inflation, QE2 and global output gaps on Thursday. (And yes, ‘interesting’ is all subjective.)
The now non-voting St Louis Fed President was a strong advocate of QE2 as a way to reverse alleged deflationary pressures.
Six scenarios in search of a eurozone solution
Chart via Andrew Garthwaite’s global equities team at Credit Suisse:
Click to enlarge. Here’s a sentence that’s brimful of confidence:
Peripheral Europe has to undergo more deflation than we think clients realise…
Even more Spanish banking negativity
Lucky Spain.
Spanish banks’ funding via European Central Bank repo facilities dwindled late last year as the financials made use of a new (repo) agreement with LCH.Clearnet.
From Morgan Stanley:
Unlucky Spain.
The problem with Europe’s bail-ins
Here’s something to ponder while we wait for the European Commission’s consultation document on haircuts for senior investors in Europe’s banking debt.
It’s what all this talk of Basel III — plus burdensharing,
To the Japanisation of bonds, and back again
What a bad week for G7 bonds.
Gapping yields. Lacklustre US Treasury auctions. Failed German ones. And now news reaches us that the Bank of Japan started selling international bonds last week.
Via BNP Paribas’ currency strategists:
Eschatology in the market
Who knows: 2011 might just be an all right year for risk assets, especially if there’s a second stimulus goin’ round.
But how about that 2012 thing, eh?
This rang a little odd in an otherwise ‘stay overweight’ equities call from Credit Suisse strategist Andrew Garthwaite and his team:
Inflation, as (un)expected
The CPI numbers for October are out from the US Labor Department, with the monthly 0.2 per cent increase a bit lower than the expected 0.3 per cent.
But here’s the chart we usually focus on:
Over the last twelve months,
Stop stealing our yield!
We mentioned last week how HSBC’s analysts were beginning to worry more about quantitative tightening (QT) moves in emerging markets than further rounds of quantitative easing (QE) in the US and Britain.
The return of Godzilla QE – this time it’s unneighbourly
Willem Buiter is back — with more criticism of Japan’s monetary policies.
They are, Citi’s chief economist writes on Friday in an 88-page note, simply too small to fight off that decade-long deflation.
Commodities investing is against God, apparently
We just received the following note from the Interfaith Center on Corporate Responsibility:
I’m writing to share a story that might be of interest to your readers.
As active shareholders, members of the Interfaith Center on Corporate Responsibility (www.iccr.org) have been working with top U.S.
Godzilla QE
Either Willem Buiter is setting out to shock, or he really is worried about Japanese deflation this time.
Because Citi’s chief economist really is thinking BIG on what to do about it:
The 5trn yen ($60bn) additional QE announced recently by the BoJ is far too small to achieve anything,
Posen to surplus countries: easy money won’t inflate asset bubbles
Still fresh after his performance as the lone dissenting dove on the UK’s Monetary Policy Committee, Adam Posen has now used the expertise for which he is perhaps best known — Japan’s lost decade(s) — to argue in a speech that easy monetary policy doesn’t lead to asset bubbles.
Market wets itself over UK QE
Here’s one for the ‘weird QE effects on equities’ files. One for those already identifying higher inflation expectations even before QE is announced, too.
Presenting the incredibly inflating share prices of UK water companies, as noted by Evolution Securities on Monday (chart via the FT/Reuters):
Dylan Grice vs Emerging Markets
Société Générale strategist Dylan Grice is back on the Rudolf von Havenstein trail.
Grice first brought up von Havenstein back in March, noting the Prussian central banker’s penchant for monetising Germany’s debt during the First World War — leading to massive bouts of hyperinflation.
Auf QE-dersehen, pet
First time since May 2009, this. The five-year gilt yield has fallen under the yield on five-year Bobls (chart via Bloomberg, click to enlarge):
Meanwhile, 10-year gilts are trading the tightest to their bund peers since late 2009 (chart via Bloomberg,
And now for something extremely bearish…
… from John Taylor, the chairman of FX Concepts, one of the world’s biggest currency hedge funds.
Some of this stuff would make even Albert Edwards blanch, but given Taylor’s track record, he’s more than qualified to pontificate on the FX market.
Gilt-free bloodshed
In public policy terms, this will probably be the most important day of this parliament, possibly of this decade…
– The Guardian.
George Osborne is polishing his scythe… The Chancellor must now try to kill the rapacious £155bn deficit by a thousand cuts…
Nikkei 63,000,000
And to think the market shorthand has always been Japan = deflation.
Trust Société Générale strategist Dylan Grice to think of the Japanese future a little, um, differently. From Friday’s Popular Delusions note:
El-Erian: What did Bernanke tell us this morning?
Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, argues that Federal Reserve chairman Ben Bernanke’s latest speech has strengthened the case for QE2 – but also highlighted its costs .
You start a QE conversation, you can’t even finish it
The more central bankers comment ==> the more QE2 gets priced in, these days. Exhibit A: recent post-FOMC statement reaction.
No wonder that some central bankers want to rejig those comments to include more (how should we put it?) robust inflation targets,
Behold, Google’s view on inflation
It was bound to happen.
According to the FT, Google is mid-way through the process of creating its very own consumer price index — based (understandably) on its ability to access real-time price data from across the web.
Deflationary periods in US history
A chart from the St Louis Fed:
And what it shows:
The vertical lines on the chart mark the approximate dates of the 1890, 1893, 1907, and early-1930s financial crises. These crises led to bank failures and a reduced money supply as depositors withdrew money,
The inflationista returns
Is someone turning queasy on QE2?
Here’s a Bloomberg chart showing the (sizeable) spread between the five-year forward US break-even inflation rate and five-year Tips yields:
As we said, sizeable — and as we’ve noted before,
Tepco and ‘unusual price movements’ in Japan
Question: why would a stable, big Japanese company with huge cashflow, a high credit rating, a dividend yield on its shares of 2.9 per cent and ready access to debt markets — where its bonds trade at yields of under 0.5 per cent — want to launch a straight equity issue of Y555bn,
Eurozone M3 sharply on the rise
Here’s one for the inflation vs deflation debate.
According to the latest figures from the European Central Bank, there was an unexpectedly large bounce in eurozone M3 money supply in August.
This,
Dealing with disinflation
Plenty of pixels have been used here on the inflationista vs deflationista debate, but fewer about a third category that doesn’t get as much attention: the disinflationista.
Okay, no such thing. But we’ve previously discussed the work of the IMF’s André Meier,
The Fed cometh like a thief in the night
It’s increasingly not if, but when, as far the market is concerned over the Federal Reserve’s most recent pronouncements on reviving quantitative easing.
But when is when? And what might answering that tell us about inflation?
Morgan Stanley’s monetary analysts — long-time inflation contrarians — had a helpful if cautious guide to the first question on Thursday:
Those bund-lengthening pension funds
You remember the summer’s flattening of the yield curves, don’t you?
It was especially pronounced on bunds — as late as August 25, for instance, the 2-year and 30-year parts of the German yield curve flattened to about 215bps: