Industrial Production Recovers in Brazil amid Gloomy Sentiment

Our leading indicator for Brazil continues to imply significantly higher growth in Brazil and the economy is starting to respond. Of course, recent positive growth surprises have taken a backseat to the increase in EM market volatility . The Brazilian real has weakened, equities have sold off and yields have risen driven by a rise in US 10y yields. That together with a hawkish central bank has added to the squeeze on economic activity.


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Bonds and Stocks are Still Mispriced

No-one ever said that investing was easy, but when textbook correlations start to break down it can be outright painful. Such of course has been the environment in recent couple of months with stocks and bonds falling in unison. It won’t last forever, but it may persist for a while longer.


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Crash and Volatility Warning

We have been warning clients in the past few months that volatility was set to rise towards the middle of the year. We have been flagging the almost parabolic increase in margin debt as well as our leading indicator for equity volatility.


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Structural Inflation Pressures Intact in the US

The underlying outlook for inflation in the US continues to point to upside risks in the coming years. Endless discussions between hyperinflationists and deflationists are boring and unproductive. We prefer to look at the data and the data is pretty clear.


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Eurozone countries given more time to adjust their budget deficits

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Variant Perception’s Claus Vistesen was on BBC World Business this week talking about the eurozone periphery and how governments will be given more time to adjust their budget deficits.


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Asset Bubbles, Spain, Monetary Policy – Bloomberg Television

Jonathan Tepper - Bloomberg

May 30 (Bloomberg) — Jonathan Tepper, chief executive officer at research firm Variant Perception, talks about asset bubbles, the Spanish economy and monetary policy. He speaks with Mark Barton and Anna Edwards on Bloomberg Television’s “Countdown.” (Source: Bloomberg)


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Anti-QE in Japan

Last week’s BoJ meeting did not meet expectations of trying to soothe the Japanese bond market.  Yields have shot up, with 10y yields 50% higher in May as of this morning, largely a consequence of the BoJ succeeding in raising…


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The Credit Bubble and the Calm Before the Volatility Storm

The developed world remains mired in the debt crisis that roiled the global economy in 2008. Growth is low, and deleveraging is an ongoing process. However, the response by policymakers has been strong, and free money is leading to bubbles, the misallocation of capital and excess leverage. In this note, we lay out a framework and road map for investors to look at the rise and inevitable bursting of the bubble in global corporate bonds. The Fed and the rest of the G4 central banks have created a bubble in the corporate bond market.


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Where Japan Rate Vol Leads, Others Follow

Volatility in general is still falling, with both equity and commodity volatility lower than their 2005/06 trough.  However, we are seeing signs of life in interest rate volatility.  US rate volatility has recently pipped up, and this has been led…


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Structural labour market issues in the US point to looser for longer at the Fed

Employment in the US is closely watched, especially as the Fed has marked it out as an important factor in how it will judge its stance in monetary policy. Payrolls have improved and the unemployment rate has declined, but structural issues stubbornly remain. The Fed will be alert to these issues, and thus the bar for the removal of stimulus is very high, despite repeated murmurings of ‘tapering’ and a tightening in monetary conditions.


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