Category Archive: 5) Global Macro

Emerging Markets: Week Ahead Preview

EM FX ended Friday on a mixed note and capped off a soft week overall. Best performers last week were ZAR, CLP, and PHP while the worst were TRY, ARS, and IDR. Fed Chief Powell’s testimony to Congress will likely draw market attention back to Fed policy.

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Venezuela’s New Cryptocurrency: Just Another Form of Control Fraud

The broke and broken country of Venezuela appears to be the first nation-state to issue a cryptocurrency token (the petro) as a means of escaping the financial black hole that's consuming its economy: Maduro Launches Oil-Backed Crypto "For The Welfare Of Venezuela".

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Emerging Markets: What Changed

China regulators have taken over Anbang Insurance. Group for at least one year. RBI minutes from this month’s meeting were more hawkish than expected. The RBI is reportedly reviewing its process for allowing local companies to issue debt overseas. Effective June 1, IDR-denominated debt becomes eligible for the Barclays Global Aggregate Index.Israeli Prime Minister Netanyahu is coming under increasing pressure.

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The End of (Artificial) Stability

The central banks'/states' power to maintain a permanent bull market in stocks and bonds is eroding. There is nothing natural about the stability of the past 9 years. The bullish trends in risk assets are artificial constructs of central bank/state policies. As these policies are reduced or lose their effectiveness, the era of artificial stability is coming to a close. The 9-year run of Bull-trend stability is ending as a result of a confluence of...

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US-China Trade War Escalates As Further Measures Are Taken

US-China Trade War Escalates As Further Measures Are Taken. Trade war between two superpowers continues to escalate. White House likely to impose steep tariffs on aluminium and steel imports on ‘national security grounds’. US may impose global tariff of at least 24% on imports of steel and 7.7% on aluminium. China “will certainly take necessary measures to protect our legitimate rights.”

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Our Approaching Winter of Discontent

The tragedy is so few act when the collapse is predictably inevitable, but not yet manifesting in daily life. That chill you feel in the financial weather presages an unprecedented--and for most people, unexpectedly severe--winter of discontent. Rather than sugarcoat what's coming, let's speak plainly for a change: none of the promises that have been made to you will be kept.

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Emerging Markets: Week Ahead Preview

EM FX ended on a mixed note Friday, but capped off a very strong week overall. Best performers over the past week were RUB, ZAR, and COP, while the worst were PHP, CNY, and TWD. There is not much happening this week that could disrupt the weak dollar narrative, and so EM FX should continue to rally.

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US IP On The Other Side of Harvey and Irma

Industrial Production in the US was revised to a lower level for December 2017, and then was slightly lower still in the first estimates for January 2018. Year-over-year, IP was up 3.7%. However, more than two-thirds of the gain was registered in September, October, and November (and nearly all the rest in just the single month of April 2017).

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Our emerging market currencies scorecard gives good marks to real and rouble

The scope of this note is to present a score card for Emerging Market (EM)currencies, designed to assess the attractiveness of a given currency over the coming 12 months. The scorecard (see chart), constructed using a rules - based methodology, suggests that the Russian rubble and the Brazilian real are currently among the most attractive EM currencies.

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Emerging Markets: What Changed

The National Stock Exchange of India will end all licensing agreements and stop offering live prices overseas. Philippine central bank cut reserve requirements for commercial banks. Egypt cut rates for the first time since 2015. Israeli police recommended that Prime Minister Netanyahu be charged. South Africa President Zuma resigned before a no confidence vote was held.

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China: Inflation? Not Even Reflation

The conventional interpretation of “reflation” in the second half of 2016 was that it was simply the opening act, the first step in the long-awaiting global recovery. That is what reflation technically means as distinct from recovery; something falls off, and to get back on track first there has to be acceleration to make up that lost difference.

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What Just Changed?

The illusion that risk can be limited delivered three asset bubbles in less than 20 years. Has anything actually changed in the past two weeks? The conventional bullish answer is no, nothing's changed; the global economy is growing virtually everywhere, inflation is near-zero, credit is abundant, commodities will remain cheap for the foreseeable future, assets are not in bubbles, and the global financial system is in a state of sustainable...

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Bi-Weekly Economic Review

Personal income for December was better than expected at up 0.4% on the month and 4.11% year over year. Wages and salaries were up 0.5%. Unfortunately, that rate of rise is not even up to the lower end of the range we’ve seen in past expansions when 5% income growth was a precursor to recession. Still, it is, sadly, about average for this expansion.

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Emerging Markets: The Week Ahead, February 12

EM FX ended Friday on a mixed note, as risk assets recovered a bit from broad-based selling pressures. Best EM performers on the week were ZAR, PHP, and CNY while the worst were COP, RUB, and ARS. Besides the risk-off impulses still reverberating through global markets, we think lower commodity prices are another headwind on EM.

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Three Crazy Things We Now Accept as “Normal”

How can central banks "retrain" participants while maintaining their extreme policies of stimulus? Human habituate very easily to new circumstances, even extreme ones. What we accept as "normal" now may have been considered bizarre, extreme or unstable a few short years ago.

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China: CNY, Not Imports

In February 2013, the Chinese Golden Week fell late in the calendar. The year before, 2012, New Year was January 23rd, meaning that the entire Spring festival holiday was taken with the month of January. The following year, China’s New Year was placed on February 10, with the Golden Week taking up the entire middle month of February.

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Emerging Markets: What has Changed

Reuters reported that China may loosen controls on outbound capital flows (QDLP). Samsung chief Lee was set free in an unexpected court reversal. Romania central bank hiked rates by 25 bp and raised its inflation forecasts for the next two years. South Africa President Zuma appears to be on the way out. Ecuador voters approved a referendum that reinstates term limits for the president. Venezuela central bank restarted FX auctions for the first time...

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Before You “Buy the Dip,” Look at This One Chart

There's a place for fancy technical interpretations, but sometimes a basic chart tells us quite a lot. Here is a basic chart of the Dow Jones Industrial Average, the DJIA. It displays basic information: price candlesticks, volume, the 50-week and 200-week moving averages, RSI (relative strength), MACD (moving average convergence-divergence), stochastics and the MACD histogram. These kinds of charts are free (in this case, from StockCharts.com).

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COT Blue: Interest In Open Interest

For me, the defining characteristic of the late nineties wasn’t the dot-coms. Most people were exposed to the NASDAQ because, frankly, at the time there was no getting away from it. It had seeped into everything, transforming from a financial niche bleeding eventually into the entire worldwide culture. We all remember the grocery clerks who became day traders.

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Global Asset Allocation Update:

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. Despite the selloff of the last week I don’t believe any portfolio action is warranted. While the overbought condition has largely been corrected now, the S&P 500 is far from the opposite condition, oversold. At the lows this morning, the S&P 500 was officially in correction territory, down 10% from the...

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