When we talk about the giant size of Apple, the fortune of Warren Buffett, or the massive amount of global debt accumulated – all of these things sound large, but they are actually extremely different in magnitude.
That’s why visualizing things spatially can give us a better perspective on money and markets.
How Much Money Exists?
This infographic was initially created to show how much money exists in its different forms. For example, to highlight how much physical cash there is in comparison to broader measures of money which include saving and checking account deposits.
Interestingly, what is considered “money” depends on who you are asking.
Are the abstractions created by Central Banks really money? What about gold, bitcoins, or other hard assets?
A New Meaning
However, since we first released this infographic in 2015, “All the World’s Money and Markets” has taken on a different…
Saxo Bank thinks a slowdown in credit growth is bad news
IF THERE is a consensus at the moment, it is that the global economy is finally managing a synchronised recovery. The purchasing managers' index for global manufacturing is at its highest level for six years; copper, the metal often seen as the most sensitive to global conditions, is up by a quarter since May.
First and foremost let me point out that Ray Dalio, founder of investment firm Bridgewater Associates, has joined Twitter so I encourage you to follow him here. Secondly I suggest you grab a cup of coffee or maybe the entire pot as he gradually lays out what he sees ahead for the market. Enjoy!
Big picture, the near term looks good and the longer term looks scary. That is because:
- The economy is now at or near its best, and we see no major economic risks on the horizon for the next year or two,
- There are significant long-term problems (e.g., high debt and non-debt obligations, limited abilities by central banks to stimulate, etc.) that are likely to create a squeeze,
- Social and political conflicts are near their worst for the last number of decades,…
Most economists surveyed by The Wall Street Journal expected Federal Reserve officials to begin winding down their $4.5 trillion portfolio of bonds and other assets this year.
Nearly 70% of business and academic economists polled in recent days expected the Fed will begin allowing the portfolio, also called the balance sheet, to shrink by allowing securities to mature without reinvesting the proceeds at some point in 2017. Of the economists who expected a shift in the Fed’s balance sheet strategy this year, the majority predicted the process would begin in December.
In last month’s survey, just 22.2% of economists expected the Fed to begin…
Stan Druckenmiller recently elucidated: “Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.”
Even with the bond market’s muted response to the Federal Reserve’s plan to begin winding down its almost $4.3 trillion portfolio of mortgage and Treasury securities, there are plenty of reasons why the calm probably won’t last.
Out of style for almost a…
Grab a cup of coffee, sit back and absorb this piece which I believe, will blow your mind. I had read a good deal on self-driving cars and the implications of what lies ahead but this piece by Ben Evans has completely re-written my belief of what life will be in ten years. Wowsa! I know what I'll be dreaming about tonight. *lol* Enjoy-
There are two foundational technology changes rolling through the…
I found this interesting (the rise) however I have my own reservations because of the possible change in rates and inflation in 2017. When inflation rises, interest rates also normally rise to maintain real rates within an appropriate range. PE ratios need to decline to reflect the increase in the earnings discount rate. Another way to look at it is that equities then face more competition for money from fixed income instruments. The cost of equities must therefore decline to keep or attract investors. Then there is the Rule of 20 to consider. Rule of 20 equals P/E + long term interest rates (average of 10 and 30 yr bond rates). If at or below 20 minus…
There is a global push by lawmakers to eliminate the use of physical cash around the world. This movement is often referred to as “The War on Cash”, and there are three major players involved:
1. The Initiators
Governments, central banks.
The elimination of cash will make it easier to track all types of transactions – including those made by criminals.
2. The Enemy
Large denominations of bank notes make illegal transactions easier to perform, and increase anonymity.
3. The Crossfire
President-elect Donald Trump suggested he would be open to lifting sanctions on Russia and wasn’t committed to a longstanding agreement with China over Taiwan—two signs that he would use any available leverage to realign the U.S.’s relationship with its two biggest global strategic rivals.
In an hourlong interview, Mr. Trump said that, “at least for a period of time,” he would keep intact sanctions against Russia imposed by the Obama administration in late December in response to Moscow’s alleged cyberattacks to influence November’s election. But he suggested he might do away with those penalties if Russia proved helpful in battling terrorists and reaching other goals important to the U.S.
“If you get along and if Russia is…
The constant flow of goods from Asia to the United States was briefly interrupted last month after Hanjin, the South Korean shipping line, filed for bankruptcy, stranding several dozen of its cargo ships on the high seas.
It was a moment that made literal the stagnation of globalization.
The growth of trade among nations is among the most consequential and controversial economic developments of recent decades. Yet despite the noisy debates, which have reached new heights during this presidential campaign, it is a little-noticed fact that trade is no longer…
As U.K.-based banks wait to see what life will be like after Brexit, one word -- passporting -- will speak volumes. If Prime Minister Theresa May can maintain the passporting rights of City of London banks, the U.K. stands to retain its status as a hub of global finance. If not, hope isn’t lost, but the alternative to passporting requires an arduous approval process and provides no secure basis for long-term planning.
1. What is…
A December Fed rate hike, uncertainty regarding the U.S. presidential elections, weak earnings growth, diminished buyback activity and concerns about European banks pose near-term risks to global equities. Comments in italics are mine.
The summer rally has left equity valuations looking stretched. The median U.S. stock now trades at a higher P/E ratio than even at the 2000 peak. The Shiller P/E ratio stands at 27, but would be 37 if profit margins over the preceding ten years had been what they were in the 1990s. The fact that interest rates are low gives stocks some support, but with the Fed likely to hike rates in December, that tailwind will begin to fade.
Lackluster earnings growth remains another concern. S&P 500 and economy-wide profit margins have rolled over. Granted, the collapse in profits in the energy sector has been the major…
This week’s EVA brings the second edition of our new Random Thoughts format. The goal with this approach is to cover several key, but often unrelated, topics in a quick overview fashion.
In this issue, we are looking at, once again, the powerful financial force known as credit spreads. Fortunately, they are not indicating financial stress at this time. We are also examining the supposed truism that this is one of the most detested bull markets of all time. Then, we wrap up with a look at the Fed’s and Wall Street’s forecasting track record (hint: both make a dart-board look good!).
As always, your feedback is welcomed and appreciated.
When the spread isn’t the thing. One of the themes this newsletter has emphasized most heavily this year has been the importance of the spread—or difference—between government and corporate bond yields. As we have repeatedly…
We’ve been bulls on 30-year Treasury bonds since 1981 when we stated, “We’re entering the bond rally of a lifetime.” It’s still under way, in our opinion. Their yields back then were 15.2%, but our forecast called for huge declines in inflation and, with it, a gigantic fall in bond yields to our then-target of 3%.
The Cause of Inflation
We’ve argued that the root of inflation is excess demand, and historically it’s caused by huge government spending on top of a fully-employed economy. That happens…
As German bond yields breach unthinkable levels, BK was struck by a chart from Deutsche Bank – it is a chart of German yields since 1807.
Take a moment to reflect on this chart – in over 200 years, German bond yields have never been lower. This period of time includes such notable and notorious events as:
- US Civil War
- The British Railway Mania Bubble
- The Panic of 1873 and The Long Global Depression
- Industrial Revolution
- Thomas Edison’s Invention of Electric Light
- Invention of the Automobile
- Stock Market Panic of 1907
- World War I
- 1929 Stock Market Crash
- The Depression of the 1930’s
- World War II
- Japan’s Real Estate Bubble and Crash
- The Dot-Com Bubble
- 1987 US Stock Market Crash
- 1997 Asian Currency Crisis
- 1998 Russian Default and Long…
Next week will be a historical one for both the United Kingdom and the global economy. On June 23rd the British people will decide whether to leave or stay in the European Union. Polls have been mixed over the last couple months, but the latest out show momentum for leaving, which is scaring the markets.
Loss of British sovereignty is the fundamental reason for leaving the EU, as many supporters want to take back control of U.K. borders in order to curb immigration. Those that wish to stay in the EU say there are severe short-term economic consequences that would make trade difficult and slow the economy. Even President Obama recently said that if there is a Brexit, the U.K. would go to the “back of the queue” in American trade deals.
While debate and speculation is running rampant, markets are watching the British Pound closely. Last week U.S. indices tracked and moved with the Pound tick for tick, showing that traders are very concerned about the upcoming…
Call it sustainable development, Agenda 21 or just an inevitable path of technology but this makes me wonder; is he right?.
We’ll start with the obvious: the number one export for many countries here is crude oil or related petroleum products. Middle Eastern countries made up a significant portion of global oil export revenues during 2015 with shipments valued at $325 billion or 41.3% of global crude oil exports.
Saudi Arabia, Iraq, United Arab Emirates, Kuwait, Iran, and Oman were all among the top 15 exporters of crude oil in 2015. Russia and Kazakhstan, countries on the Central Asian part of the map, were also members of that same group.
Regimes in the region found that there were many other corollary benefits from this economic might. Unrest could be stifled by rising wealth, and these countries would also have more influence than they otherwise would in global affairs. Saudi Arabia is a good example in both cases, though a…
Of course, no where does it say how long this can continue but it's important to be aware. No, it can't go on forever.
This has analysts lowering estimates. In fact, they’ve been lowered so far quarterly earnings now look to fall all the way back to 2009 levels.
For the trailing…
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