Tag Archive: newsletter

Eastern Monetary Drought

2018-10-26

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2018-10-26

Looking back at the past decade, it would be easy to conclude that central planners have good reason to be smug. After all, the Earth is still turning. The “GFC” did not sink us, instead we were promptly gifted the biggest bubble of all time –  in everything, to boot. We like to refer to it as the GBEB (“Great Bernanke Echo Bubble”) in order to make sure its chief architect is not forgotten.

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FX Daily, October 25: ECB Overshadowed by Equity Market Drama

2018-10-25

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2018-10-25

The Dollar Index broke above 96.00 yesterday and is consolidating today. Provided the 96.00 area holds, the next target is the year's high near 97.00. The euro has been confined to a little more than a quarter of a cent. Players seem reluctant to sell it below $1.14 and note there is a 570 mln euro option at $1.1420 that expires today.

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Tax System Problems Result in CHF 1.8bn Shortfall

2018-10-25

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2018-10-25

The Federal Tax Administration’s IT project Insieme was a financial disaster and its replacement isn’t much better, according to the Swiss Federal Audit Office (SFAO). Systems are unreliable and underperforming, with billions in tax demands still outstanding.

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Gloomy Signals for Euro Area Manufacturing

2018-10-25

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2018-10-25

Euro Area Composite PMI and GDP growth, 2003 - 2018
The euro area economy started the fourth quarter on a weak note; the flash composite PMI dipped to 52.7 in October from 54.1 in September. Both manufacturing and services showed a notable loss of momentum. A common feature in France and Germany was the weakness in manufacturing, where both countries posted similar declines.

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UBS Warns Trump’s Trade Fights Are ‘Reversing 15-Years Of Global Progress

2018-10-25

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2018-10-25

UBS Hard Brexit
Protectionism has cross-party support in the U.S., and nationalist parties continue to gain traction in Europe. Where there is inequality, there is a surge in protectionism; a risk that could trigger the next global economic crisis sometime around 2020.

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FX Daily, October 24: Disappointing Flash PMI Weighs on Euro

2018-10-24

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2018-10-24

The US dollar is firmer against the major currencies and most emerging market currencies.  While the seemingly fragile equity markets are still the center of investors' attention, the weakness of the eurozone flash PMI is disconcerting and has sent the euro closer to $1.14.  China's officials continue to unveil initiatives to minimize the disruption of the equity and debt markets while seemingly adding to moral hazard risks. 

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Mountain regions to benefit from digital push

2018-10-24

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2018-10-24

A campaign has been launched to promote digitalisation in small companies based in Swiss mountain regions. On Wednesday, the Federation of Adult Learning and Swiss Mountain Aid presented a project for companies with fewer than 50 employees to allow for training in internet technology.

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Monthly Macro Monitor – October 2018

2018-10-24

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2018-10-24

Economic Growth & Investment
Stocks have stumbled into October with the S&P 500 down about 6% as I write this. The source of equity investors’ angst is always hard to pinpoint and this is no exception but this correction doesn’t seem to be due to concerns about economic growth. At least not directly.

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Europe Challenged

2018-10-24

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2018-10-24

Europe is in an untenable position. It is being challenged on many fronts. A weaker euro need not result, but it is the path of least resistance. The economy has lost its momentum. What was first written off as a soft patch, now looks a bit more serious.

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FX Daily, October 23: Stock Slump Pushes Yields Lower and Buoys Yen

2018-10-23

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2018-10-23

There is one main story today, and that is the resumption of the slide in equities. It is having a ripple effect through the capital markets. Bond yields are tumbling. Gold is firm. The dollar is narrowly mixed, though the yen stands out with almost a 0.5% gain. Most of the large equity markets in Asia, including Japan, China, Hong Kong, Korea, and Taiwan were off mostly 2%-3%.

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Cool Video: Bloomberg Discussion of Late US Cycle

2018-10-23

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2018-10-23

An assessment of the US economy is an important input into the expectations of the dollar's behavior in the foreign exchange market. As a currency strategist, my views of the US economy are often subsumed in discussions or talked about indirectly by talking about Fed policy.  However, in this clip with Alix Steel and David Westin, I have an opportunity to sketch outlook for the US economy.

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The Coming Inflation Threat

2018-10-23

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2018-10-23

Inflation, consumer prices for US 1970-2010
Falling asset inflation plus rising cost inflation equals stagflation. Inflation is a funny thing: we feel it virtually every day, but we’re told it doesn’t exist—the official inflation rate is around 2.5% over the past few years, a little higher when energy prices are going up and a little lower when energy prices are going down.

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Useless But Not Worthless, Report 21 Oct 2018

2018-10-22

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2018-10-22

Price of Franc vs Swiss M0
Let’s continue to look at the fiasco in the franc. We say “fiasco”, because anyone in Switzerland who is trying to save for retirement has been put on a treadmill, which is now running backwards at –¾ mph (yes, miles per hour in keeping with our treadmill analogy). Instead of being propelled forward towards their retirement goals by earning interest that compounds, they are losing principal.

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FX Daily, October 22: Collective Sigh of Relief?

2018-10-22

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2018-10-22

After a slow start in Asia, the US dollar has turned better bid. The euro recovered from $1.1430 before the weekend to $1.1550 today, where an option for almost 525 mln euros expires today. There is another option (1.6 bln euros) at $1.1500 that also expires today.

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Swiss Banks Curb China Travel After UBS Banker Arrested

2018-10-22

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2018-10-22

Asia HNW Population, 2010 - 2017
Two major Swiss banks imposed restrictions on staff travel to China after a UBS employee was detained in the country, underscoring the challenges of doing business in a country which is a mecca for banks eager to capture and manage (for a generous fee) the fastest growing fortunes in the world, yet are challenged by a regime that tramples over civil rights.

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FX Weekly Preview: What Can Bite You This Week?

2018-10-22

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2018-10-22

Several major central banks will meet next week, including the European Central Bank, but it is only the Bank of Canada that is expected to hike rates. The flash PMIs and the first official estimate of Q3 US GDP are among the data highlights. Beyond the events and data, the volatility from global equity markets from Shanghai to New York will continue to have a strong influence on other capital markets.

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Mutiny, Class, Authority and Respect

2018-10-22

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2018-10-22

Humiliation and fear of a catastrophic decline in status foment mutiny and rebellion. I recently finished The Bounty: The True Story of the Mutiny on the Bounty, a painstakingly researched history of the mutiny, but with a focus on how the story was shaped by influential families after the fact to save the life of one mutineer, Peter Haywood, and salvage the reputation of the leader, Fletcher Christian, via a carefully orchestrated character...

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Swiss Rail plans to test free WiFi on trains

2018-10-21

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2018-10-21

Swiss Rail announced on Thursday that it would test free WiFi, named FreeSurf, on certain routes next year with a plan to extend the offer to all major routes from 2020, according to RTS. Train passengers benefiting from the tests in 2019 will be those travelling on InterCity trains between Lausanne and St. Gallen, Geneva and Zurich, and Bienne and Basel.

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Switzerland Retains Top Spot in Global Wealth Ranking

2018-10-21

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2018-10-21

Despite a slight decline in fortunes, the Swiss still enjoy the highest mean wealth per adult, according to the 2018 Credit Suisse Global Wealth Report. The reportexternal link, released on Thursday, estimated the average fortune of a Swiss adult to be $530,240 (CHF527,707) compared to $537,600 the previous year. The Alpine nation still comes out on top, followed by Australia ($411,060) and the United States ($403,970).

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Is the Greatest Bull Market Ever Finally Ending? (Hint: Follow the Money)

2018-10-21

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2018-10-21

Global wealth CSa
The key here is the gains generated by owning US-denominated assets as the USD appreciates. Is the Greatest Bull Market Ever finally ending? One straightforward approach to is to follow the money, i.e. global capital flows: assets that attract positive global capital flows will continue rising if demand for the assets exceeds supply, and assets that are being liquidated as capital flees the asset class (i.e. negative capital flows) will decline in...

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