Japanese Equity Flows Diverge

October saw the BoJ’s announcement of increased stimulus, coordinated with the new targets for the GPIF, 25% each for foreign and domestic equities (up from 12% each), and a decrease in JGBs, from 60% to 35% of holdings.  Investors, both…


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UK Credit and Money Growth at Extremes

Easy monetary policy in the UK is looking ever more inappropriate.  Divisia money is a weighted money-supply measure.  Higher forms of money, eg notes and coins have greater weights than less liquid forms of money, such as building society deposits. …


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Higher Rents in the US are a Strong Support for CPI

Despite the subdued nature of US CPI, some large components are turning up.  Owners’ equivalent rent and rent of primary residence, which together account almost of a third of the CPI basket, are turning up strongly.  A low vacancy rate…


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BOJ Putting Pressure on Other Asian Central Banks

Further yen weakness, in an environment of slowing global growth, will put pressure on other central banks to ease policy.  Although attention is rightly focused on the ECB, Japan’s biggest trade partners, who derive significant parts of GDP from trade…


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Swiss Gold Referendum: A Spanner in the Works

As polls continue to swing around ahead of the Swiss gold referendum on 30th November, we expect increased volatility in the FX and gold market.  After the implementation of the EURCHF floor, gold’s share of the SNB balance sheet has…


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P/Es Waning As A Source of US Equity Returns

After some very strong years, multiple expansion in the S&P is struggling to contribute to returns in the index.  So far this year, P/E multiple expansion has only contributed 32% to S&P returns (top chart).  More reliance is being placed on top-line…


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Target2 Imbalances Widen Again – Watch Italy

Target2 – the payment system used for intra-eurozone transfers – has widened again, with the largest two-month move since mid 2012. A look into its breakdown reveals that it is Italy that is almost completely responsible for the increase in…


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Economic Downturn Evident in Chemical Prices

Chemical prices tend to provide a good lead on global economic conditions and the message at the moment is unambiguously negative.  Falling naphtha, polymer and Brent oil prices are indicative of very weak global economic conditions. Source: Variant Perception and…


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Pillars of Equity Rally Fall Away

Stock buybacks have been an important feature of the equity rally. Companies have used low rates and easy credit to borrow money and used it to buy their own shares back.


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Long-term Real Yields’ Decline Implies Stagflation

Yield curves almost everywhere have been flattening. At the long end of yield curves, bonds have been rallying all year. This is to be expected in Europe, where growth remains lacklustre, inflation is very weak, and the ECB is firmly in easing mode. However, even in the UK and the US, where the market has been gingerly pricing in the beginning of (perceived) hiking cycles, long bonds have been rallying.


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