Leta i den här bloggen

2022-12-31

US Houseprices at MHFIN on Youtube

 Disclaimer: All videos are provided for informational purposes only. Nothing contained herein should be construed as an offer, solicitation, or recommendation to buy or sell any investment or security or to provide you with an investment strategy.





2022-12-30

Is Inflation Always and Everywhere a Monetary Phenomenon?

Milton Friedman famously said: “Inflation is always and everywhere a monetary phenomenon." 

Most people parrot Friedman because the quote sounds good. 

The actual quote is: “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

TCMDO is $92 trillion.  How the heck is that supposed to be paid back? 

This is not 2008. We do not have the degree of housing liar loans and people walking away from debt.

But we do have masses of zombie corporations that will go bust and all their debt with them. 

Mish 29 December 2022

https://mishtalk.com/economics/is-inflation-always-and-everywhere-a-monetary-thing


Why is it so hard to accept that speculative bubbles can burst?

Is the any escape? In aggregate no. For every seller there is a buyer. In this case a buy the dipper. 

Mish 23 February 2022

https://englundmacro.blogspot.com/2022/02/most-people-have-no-idea-how-much.html




Börsen 2022 i Stockholm och New York

 


 Stockholmsbörsen  –  åttonde sämsta året sedan 1871





Kommentar RE:
 Om kurserna skulle återgå till nivån före  pandemin
Då det fortfarande var låga räntor
Finns det en del fallhöjd kvar.


 The interest rate (A) is what is needed to stop inflation.

The interest rate (B) is the one that causes the housing market to collapse.

If A is higher than B, we have a big problem.

Rolf Englund blogg 22 maj 2022

https://englundmacro.blogspot.com/2022/12/the-threshold-interest-rate-above-which.html




Varför många tror att nedgången på börsen är tillfällig

De tror att det skall fortsätta som förut.

https://englundmacro.blogspot.com/2022/09/varfor-manga-tror-att-nedgangen-pa.html






Bra att Gardell väcker frågan om euron

Christer Gardell, grundare och vd för aktivistfonden Cevian Capital, vill att Sverige inför euron som valuta.

Ett av nej-sidans tyngsta argument i debatten om ett svenskt EMU-medlemskap för 20 år sedan var att en egen valuta gynnade den exportberoende svenska ekonomin. Den rörliga växelkursen kunde parera skarpa konjunktursvängningar. Gardell, som röstade nej till euron i folkomröstningen 2003, har tänkt om även på denna punkt.

”Det där fungerade för 20–30 år sedan. Man byggde saker här och skeppade ut det i världen. Men nu har vi fabriker i hela världen. Den gamla bilden av en krona som dopar gäller inte längre. Nu är den ett problem.”

Frågan om ett medlemskap i valutaunionen är numera en icke-fråga i svensk politik. Men vad händer om kronan blir ännu svagare? 

2022 visade att dramatiska förändringar i omvärlden kan leda till att heliga kor, som Sveriges alliansfrihet, slaktas. Att Christer Gardell nästan två decennier efter folkomröstningen gör ett försök att få igång en diskussion om för- och nackdelar med euron är hälsosamt och välkommet. 

DI Ledare Henrik Westman 28 december 2022



Denna sammanfallande förbannelse har sina rötter i Maastricht 

Rolf Gustavsson SvD 3 december 2022







Midvinternattens köld är hård, stjärnorna gnistra och glimma.

Viktor Rydberg, Ny Illustrerad Tidning 1881

https://sv.wikipedia.org/wiki/Tomten_(dikt)


68 procent av de nya bolånen tas med rörliga ränta

För ett år sedan låg styrräntan på 0 procent, och 46 procent av de nya bolånen togs med rörlig ränta. 

I dag, när styrräntan är uppe i 2,5 procent, är det 68 procent av de nya bolånen som tas med rörliga ränta.

Länsförsäkringars privatekonom Emma Persson är inte överraskad över trenden.

– En del kanske tänker att vi närmar oss en topp och att man vill följa med på en eventuell nedgång. Jag kan tycka att det är lite väl tidigt, med tanke på de flesta prognoser som görs nu och att vi troligen kommer att se fler höjningar från Riksbanken, säger hon.

SvD 29 december 2022

https://www.svd.se/a/nQGBoB/hojda-borantor-fler-valjer-rorligt-bolan


Vi har en hushållssektor som är mer räntekänslig än den någonsin varit tidigare, säger Stefan Ingves



US 30-year fixed mortgage rose to 6.42% 

It was 3.11% at the same time last year.




WSJ 29 december 2022






How EU Is Withholding Funding to Try to Rein in Hungary, Poland

 Dec. 22, the European Commission effectively froze almost €22 billion of Hungary’s 2021-27 cohesion funding, money set aside for poorer members to promote sustainable development. 

The reason: Hungary’s failure to comply with the Charter of Fundamental Rights, in particular in the protection of academic freedom, refugees and LGBTQ people

Poland is incurring a daily fine of €1 million a day for flouting an EU court order to dissolve a disciplinary chamber for judges, a sum that has grown to more than €400 million. Poland filed a complaint in December aimed at stopping the fines.

Bloomberg 30 december 2022



Hussman Reliable valuation measures remain near their 1929 and 2000 extremes

The chart below presents the ratio of nonfinancial market capitalization to gross value-added. 


MarketCap/GVA is our most reliable valuation gauge in market cycles across history, including recent decades. 

Notice how little impact the 2022 market decline to-date has had on valuations. Though recent market losses have removed the most extreme speculative froth, our most reliable valuation measures remain near their 1929 and 2000 extremes.

John P. Hussman December 2022

https://www.hussmanfunds.com/comment/mc221219/

 

When the walls come down, investors will scavenge the news for “catalysts.” Don’t fall into this trap. 

Undoubtedly, some “catalyst” will be found, but the mistake will be in believing that the collapse is caused by that piece of “bad” news. 

The important question to ask is “What drove the bubble?” That’s where the lessons are. 

John P. Hussman, Ph.D. President, Hussman Investment Trust July 2021

https://englundmacro.blogspot.com/2021/07/what-triggered-crash-hussman-funds.html



Italy Economist SPECIAL REPORTS - DEC 10TH 2022

 




2022-12-29

Bad news are good news - but how bad is it really?


Stocks advanced as data showed the number of Americans receiving more than a single week of unemployment benefits had climbed by 41,000 last week to 1.71 million.

Stocks are on track to finish what’s set to be the worst year since 2008 not far from their 52-week lows. The S&P 500’s 52-week closing low, reached 3,577.03, reached on Oct. 12.

MarketWatch 29 December 2022

https://www.marketwatch.com/story/stock-futures-strive-to-rally-after-latest-sell-off-11672306042


Stock market prognosticators nailed the earnings outlook but missed the mark on prices by a wide margin

At the start of the year, analysts were expecting about $221 a share in S&P 500 adjusted earnings in 2022, companies will probably end the year within 1% to 2% of that, for what may be the most accurate consensus forecast since 2014.

Unfortunately, equity markets are more than just a bet on earnings, and strategists got the other parts woefully wrong this year. 

In December of last year, the average estimate was for the index to end 2022 at around 4,950, and at 3,821.62 as of Tuesday’s close, it’s 23% below that level.

Jonathan Levin Bloomberg 21 december 2022

https://www.bloomberg.com/opinion/articles/2022-12-21/the-year-in-stocks-wall-street-got-2022-half-right-the-other-half-still-hurt


Wall Street’s Top Stars Got Blindsided by 2022 Market Collapse

https://englundmacro.blogspot.com/2022/12/wall-streets-top-stars-got-blindsided.html


Charles Grant, director of the Centre for European Reform

predicts the French, Italians and Germans, joined by the US, will eventually urge Ukraine to cede territory to reach a peace agreement, despite the tens of thousands of Ukrainians killed by Russia in its war. 

Stephanie Flanders Bloomberg 29 december 2022

https://www.bloomberg.com/news/articles/2022-12-29/podcast-the-stephanomics-guide-to-the-global-economy-in-2023


The Centre for European Reform is an award winning independent think-tank 

devoted to making the EU work better, and strengthening its role in the world. 

We are pro-European but not uncritical.

https://www.cer.eu/


To gauge what the EU's next big political fights will be, look at what Ursula Von der Leyen did not say in her annual speech to the European Parliament.

On September 15th, Commission President Ursula Von der Leyen delivered her annual State of the European Union address to the European Parliament. 

The address is the EU's answer to America's State of the Union speech and is meant to set the tone for the year ahead in Brussels. EU-watchers eagerly await the Commission President's pitch. Many were disappointed this year – Von der Leyen was noticeably silent on quite a few politically salient issues. 

The Commission President's 2021 address was a good bellwether of Europe's forthcoming problems: the less she mentioned something, the more likely it will become a thorn in the EU's side over the next few months. 

Instead, Von der Leyen's speech focused on matters the Commission think will be an easier sell to both member-states and European citizens.

https://www.cer.eu/insights/eus-future-or-everything-von-der-leyen-did-not-say




Bond yields have fallen, but some investors are skeptical

As it stands, interest-rate derivatives suggest that investors expect the Fed to raise rates from their current level between 4.25% and 4.5% to around 4.9% by the middle of next year. 

After that, however, investors expect slowing growth and easing inflation to quickly lead to looser monetary policy, with rates falling to 4.4% by the end of 2023 and roughly 3% by the end of 2024.

WSJ 19 December 2022

https://www.wsj.com/articles/treasury-rally-to-be-tested-by-feds-next-move-11671409396


Amerikanska 10 Y stiger
27 december


Wall Street’s Top Stars Got Blindsided by 2022 Market Collapse



Kolanovic, JPMorgan Chase's co-head of global research, predicted a broad rally. He and his team pinned the S&P 500 Index at 5,050 by the end of 2022. 

Stoltzfus, the chief investment strategist at Oppenheimer, was even bolder: 5,330.

They were off by more than 1,000 points.

With few exceptions, the best and brightest in stock and bond markets failed to appreciate how the inflation outbreak would upend the investing world in 2022. 

They failed to anticipate how the Fed would react — the rate increases came at a torrid, not measured, pace — and failed to foresee how that, in turn, would trigger the worst simultaneous rout in stocks and bonds since at least the 1970s.

There are 865 actively managed stock mutual funds domiciled in the US with at least $1 billion in assets. On average, they lost 19% in 2022.

Bloomberg 29 December 2022 

https://www.bloomberg.com/news/articles/2022-12-29/why-wall-street-got-inflation-interest-rate-predictions-wrong-in-2022


Much better off going with the herd

Some value managers lost their jobs — perhaps most famously Tony Dye, who refused to hold US equities in 1999 because they were so overvalued.

He was fired from his job heading Phillips & Drew Fund Management in early March 2000, just as he was about to be proved right. 

Asset managers are generally paid a percentage of their assets under management, rather than for their performance, so they’d have been much better off going with the herd.

John Authers Bloomberg 27 oktober 2022

NOBODY KNOWS ANYTHING

They don’t want to be what investor Mark Kritzman calls “wrong and alone.” 

https://englundmacro.blogspot.com/2022/10/much-better-off-going-with-herd.html


Den svenska fondbranschen lever gott på att förvalta drygt 6.000 miljarder kronor åt svenska hushåll och företag.

Hans Bolander DI 17 september 2022

https://englundmacro.blogspot.com/2022/09/sparekonomer-fondsaljare-hall-ut-borsen.html



During the wildest year for global markets since 2008, individual investors have been doubling down on stocks.   

U.S. equity mutual and exchange-traded funds, which are popular among individual investors, have attracted more than $100 billion in net inflows this year, one of the highest amounts on record in EPFR data going back to 2000. 

WSJ 18 December 2022

https://www.wsj.com/articles/individual-investors-hang-on-in-wild-year-for-stocks-while-pros-sell-11671322856





2022-12-28

Hushållens förmögenhet har fallit med 2 000 miljarder kronor under året

Utlåningen till hushållen bromsar in och är nu 4,1 procent i årstakt, den lägsta nivån sedan mätningarna inleddes 2006 enligt SCB.

Svenskarnas skuldkvot, lån i förhållande till inkomster, ligger strax under 200 procent och hör till de högsta i Europa. 

Genomsnittlig rörlig ränta nya bolån 3,21 procent.

Snittränta nya insättningar på bankkonto 0,64 procent

Hans Bolander DI 28 december 2022

https://www.di.se/nyheter/basta-nyarsgavan-saljare-och-kopare-hittar-varandra/


Den svenska fondbranschen lever gott på att förvalta drygt 6.000 miljarder kronor åt svenska hushåll och företag.

Hans Bolander DI 17 september 2022

https://englundmacro.blogspot.com/2022/09/sparekonomer-fondsaljare-hall-ut-borsen.html


Målet för Riksbankens penningpolitik

är att inflationen ska vara 2 procent, och inflationen mäts som förändringen i konsumentprisindex med fast ränta, KPIF. 

KPIF beräknas med samma data och på samma sätt som KPI, men utan att effekten av ändrade boräntor räknas med.

Riksbanken



Bostadpriser "from Sydney to Stockholm" China OECD

Surging prices and stagnant wages over the last few decades have pushed real estate out of reach for young buyers from Sydney to Stockholm. 

For 19 countries in the Organization for Economic Cooperation and Development, the average price-to-rent and price-to-income ratios are higher now than before the 2008 financial crisis.

China’s challenge is particularly daunting, even for an authoritarian regime with plenty of levers to pull. Home prices in Beijing and Shanghai have jumped tenfold and twelvefold, respectively, 

 “If you want to improve affordability without having a systemic crisis, you don’t actually want house prices to fall. You want them to stabilize and incomes to rise,” 

Bloomberg Businessweek 28 december 2022

https://www.bloomberg.com/news/articles/2022-12-28/-1-3-trillion-china-housing-crackdown-hasn-t-fixed-unaffordable-property-market 


Oscar Properties. Buy the dip?

 

DI 28 december  2022







After every bubble, we need to relearn the basics. Here is some essential reading

Robin Angus’s anthology of his own writings — “A Shared Journey: Extracts from Personal Assets Trust Quarterly Reports 1994-2021.” 

It is gorgeously written, quite funny and jammed with pure investing common sense. As a bonus you will find other books with utility value suggested along the way.“

“The End of the Everything Bubble” by Alasdair Nairn published it in October 2021 — that’s the kind of timing you don’t often see from fund managers. 

Next is “The Price of Time” by Edward Chancellor, the story of how negative interest rates, “the craziest innovation in finance” in 5,000 years, gave us one of the greatest asset bubbles ever, by taking out the anxiety (and hence care) that should be associated with borrowing. 

“The Money Game” by Adam Smith (actually George Goodman) was first published in 1967, but every word is as valid now as then. There’s much on the emotions and psychology of markets.

Merryn Somerset Webb Bloomberg 23 december 2022

https://www.bloomberg.com/opinion/articles/2022-12-23/after-crypto-bubble-some-books-to-restore-financial-common-sense-in-2023


While in all other areas learning is cumulative, in finance it is cyclical.

Merryn Somerset Webb FT 8 July 2022

https://englundmacro.blogspot.com/2022/07/holiday-reading-your-first-port-of-call.html



Bank of America CEO Brian Moynihan “responsible growth.”

It means that “market share is not the only thing,” 

What’s more important is profitable market share and profitable customers, he says.

For a big-bank CEO, it’s pretty radical thinking. It’s not that the bank is blasé about competing. It’s just not keen to take the types of risks often needed to reach No. 1 in market share. 

To Moynihan, steady revenue that avoids blowups is far preferable.

Bloomberg 22 december 2022




PATRIK ENGELLAU: Vad är det för märkvärdigt med Jordan B. Peterson?

Själva basen för hans stjärnstatus är nog att hans budskap är självklart. Han har inte tänkt ut någon ny teori om hur världen hänger ihop, typ den allmänna relativitetsteorin. 

Hans bok 12 livsregler som sålts i miljontals exemplar innehåller sådana enkla riktlinjer som ”Stå rak med axlarna bakåt”, ”Städa hemma innan du kritiserar världen”, ”Säg sanningen eller undvik åtminstone att ljuga” och ”Utgå ifrån att den person du lyssnar på kanske vet något som du inte vet”.

Hur kan det vara möjligt att unga män över hela världen känner sig andligt pånyttfödda av sådana budskap? 

Det goda samhället 28 december 2022

https://detgodasamhallet.com/2022/12/28/vad-ar-det-for-markvardigt-med-jordan-b-peterson-2/



Riksbankens räntehöjningar kommer med avsevärd sannolikhet att leda till en svår konjunkturnedgång

Som jag /Danne Nordling/ pekat på tidigare väntar en byggkrasch och nedgångar på andra områden. Följdverkningarna av detta kommer enligt min mening inte att bekämpas effektivt vilket förvärrar den initiala nedgången. 

Nu bekräftas mitt dystra perspektiv av en analys av Bloomberg och av chefekonomen på Danske Bank. Läs mer i TN.

Facebook 28 december 2022



“We are in a debt trap” - Nouriel Roubini on 10 ‘megathreats’

https://www.youtube.com/watch?v=ADh6QTp8798


The warning signs are already apparent 

in today’s high price-to-earnings ratios, low equity risk premia, inflated housing and tech assets, and the irrational exuberance surrounding special purpose acquisition companies (SPACs), the crypto sector, high-yield corporate debt, collateralized loan obligations, private equity, meme stocks, and runaway retail day trading. 

Nouriel Roubini Project Syndicate 30 June 2021

https://englundmacro.blogspot.com/2021/07/roubini-warning-signs-are-already.html


2022-12-27

Amerikanska 10 Y stiger

 


Wall Street’s Big Banks Score $1 Trillion of Profit in a Decade

In early 2020, analysts were writing obituaries for Wall Street’s run of record profits. Instead, the banks helped spark the boom of blank-check companies known as SPACs. Later, once regulators got jittery and prices soured, investors were left holding the bag.

Profits in 2021 also got help from an accounting move: The banks felt good enough about the economy, thanks to government intervention, to release some of the reserves they had set aside in case loans soured. 

Max Abelson and Hannah Levitt Bloomberg 27 December 2022

https://www.bloomberg.com/news/features/2022-12-27/wall-street-s-6-biggest-banks-hit-1-trillion-profit-in-10-years 


A special purpose acquisition company SPAC;, also known as a "blank check company",

is a shell corporation listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process 

https://en.wikipedia.org/wiki/Special-purpose_acquisition_company


The warning signs are already apparent 

in today’s high price-to-earnings ratios, low equity risk premia, inflated housing and tech assets, and the irrational exuberance surrounding special purpose acquisition companies (SPACs), the crypto sector, high-yield corporate debt, collateralized loan obligations, private equity, meme stocks, and runaway retail day trading. 

Nouriel Roubini Project Syndicate 30 June 2021

https://englundmacro.blogspot.com/2021/07/roubini-warning-signs-are-already.html


US Home Prices Fell in October for Fourth Straight Month, But...

On a year-over-year basis, the index rose 9.2% in October, down from a 10.7% annual rate the prior month.

The average rate on a 30-year fixed-rate mortgage was 6.27% as of Dec. 22, up from 3.05% a year earlier

The US median existing-home price rose 3.5% in November from a year earlier to $370,700

https://www.wsj.com/articles/home-prices-fell-in-october-for-fourth-straight-month-11672150911




Fredrik Warg SEB:s chef för rådgivande förvaltning. Efter regn kommer solsken

 ”Kortsiktigt ser det nattsvart ut, det kommer inte att komma bra siffror framöver”.

 Trots orosmolnen ser han en vändning, som kan ta sin början innan sommaren, framför sig. 

”Den kommer att drivas av lägre räntor och en lägre inflation, för inflationen kommer att bli betydligt mycket lägre”, säger han.

Även om Fredrik Warg tror på börsen på längre sikt så framhåller han att man som investerare ska vara försiktig.

DI 22 december 2022

https://www.di.se/nyheter/seb-chefen-spar-en-kraftfull-borsvandning/


U.S. trade deficit in goods narrows 15.6% to $83.3 billion

 In October, the deficit widened to $98.8 billion from $92.6 billion in the prior month.

MarketWatch 27 December 2022

https://www.marketwatch.com/story/u-s-trade-deficit-in-goods-narrows-sharply-in-november-11672148634


Here’s a plot of a measure of the average value of the dollar against other major currencies, adjusted for inflation, versus the real trade deficit as a percentage of G.D.P., in which I’ve lagged the exchange rate by eight quarters

Paul Krugman 28 October 2022

https://englundmacro.blogspot.com/2022/10/its-lagged-world.html


The Junk Bond Reckoning Is Coming in 2023

 While high-yield bond maturities still look manageable for the next 12 months, the wall of expiring debt looks much more daunting in 2024. 

Companies will have to start refinancing well in advance of that, and they’re likely to find that the cost has risen too high for otherwise flimsy business models to withstand. 

At today’s rates, all-in yields on high-yield debt sit around 8.67% at the time of writing, far above the 2017-2021 average, according to Bloomberg data.

Credit spreads for junk bonds typically head toward 800 basis points over Treasury bonds in a typical recession, and at the current 452, they’re nowhere near discounting a genuine downturn. 

Jonathan Levin Bloomberg 27 december 2022

https://www.bloomberg.com/opinion/articles/2022-12-27/the-junk-bond-reckoning-is-coming-in-2023


US junk bond sell-off resumes

FT 3 August 2022

https://englundmacro.blogspot.com/2022/09/us-junk-bond-sell-off-resumes.html



Storskogen sämsta aktien på storbolagslistan

 och den fjärde sämsta av alla aktier på huvudlistan. 

Av börsvärdet på 64 miljarder kronor vid noteringen återstår bara omkring 12,5 miljarder kronor.

DI 27 december 2022

https://www.di.se/nyheter/ankarinvesterare-kapitulerar-i-storskogen-saljer-allt/




Storskogen är en privatägd bolagsgrupp som förvärvar och driver bolag inom varierande sektorer.
Bolaget är uppdelat i tre affärsområden: tjänster, handel och industri.
Visionen är att vara en långsiktig ägare med kapacitet att stötta företagen med kapital och kompetens.

Bolaget fokuserar på förvärv av små- och medelstora företag inom Norden och Europa.

Storskogen grundades 2012 och har sitt huvudkontor i Stockholm.
Källa: SvD


Tack vare vår eviga investeringshorisont är vi unikt positionerade att identifiera, förvärva och utveckla marknadsledande företag med hållbara affärsmodeller.












Seriges känslighet för räntehöjningar

 beror i stor utsträckning på att svenska hushållens bolån – sammanlagt omkring 4 000 miljarder kronor – är ovanligt stora i förhållande till hushållens disponibla inkomster. 

Merparten av lånen, cirka 70 procent, har dessutom rörlig ränta – vilket gör att räntehöjningarna snabbt äter sig in i hushållens plånböcker.

– Sverige sticker verkligen ut, att så många har rörlig ränta. Genomsnittslöptiden för bolånen är omkring ett år i Sverige, säger Andreas Wallström, prognoschef på Swedbank.

Situationen ser snarlik ut i Norge och Baltikum, men i länder som exempelvis Frankrike sitter de flesta på bolån med löptider på 20-30 år, med fast ränta.

Joakim Goksör/TT SvD 27 december 2022

https://www.svd.se/a/eJadAl/darfor-ar-sverige-extra-sarbart-i-krisen


Housing prices downward one of the places fastest is Sweden

https://englundmacro.blogspot.com/2022/12/housing-prices-downward-one-of-places.html



2022-12-23

This Is the Dawning of the Age of Zeitenwende

Not Aquarius. A new-old period of realism has returned

The fall of the Berlin Wall in 1989 and the subsequent collapse of the Soviet Union ended the Cold War and prompted a false diagnosis of the “end of history.” Al-Qaeda’s attacks against the US on Sep. 11, 2001, seemed instead to debut a “clash of civilizations.” 

In this brave new-old world, military power will once again assert its primacy in international affairs, with economic, political and “soft” power lining up as its attendants. This will raise the profile of the martial — such as the US — and lower that of the meek, including the mercantile and post-heroic European Union. This is why EU members like Sweden and Finland will join NATO in 2023.

The main difference between this era of Realpolitik and previous ones — from Thucydides’ to Metternich’s and Bismarck’s — is instead the existence of a new and apocalyptic externality. This is anthropogenic climate change, with all its side effects — from zoonotic pandemics to floods, fires, droughts, famines and the rest. 

In an ideal world — that is, in a world governed by political idealism — humanity, facing a common threat, would put aside its internecine struggles and unite against the enemy. Under the banner of the UN or some other international structure, the world would cooperate to stop emitting greenhouse gasses and mitigate the havoc already wrought.

After the Zeitenwende, alas, that idealist world is gone.

Andreas Kluth Bloomberg 23 december 2022 

https://www.bloomberg.com/opinion/articles/2022-12-23/zeitenwende-could-be-the-name-of-our-era-as-germany-s-olaf-scholz-declared



2022-12-21

Dow up nearly 500 points

 


If markets remain optimistic, the central bank will just have to tighten more to achieve its inflation objective.

Bill Dudley Bloomberg 19 december 2022

https://englundmacro.blogspot.com/2022/12/if-markets-remain-optimistic-central.html






2022-12-19

The threshold interest rate above which the central bank triggers a problem of financial stability

 I cannot tell if Jay Powell, the Federal Reserve chairman, will heroically win his fight against inflation in 2023, or ignominiously /HUMILIATING, DEGRADING/ lose it.

In a conversation with my hirsute friend David Zervos of Jefferies LLC, I detected mounting excitement that Powell might pull off the mythical soft landing: a rapid decline in inflation without a recession.

But on the same day I also discussed the issue with former Treasury Secretary Larry Summers, who dismissed a soft landing as the economic equivalent of Captain Chesley “Sully” Sullenberger landing US Airways Flight 1549 on the Hudson River after bird strikes took out both engines.

Another relevant economics paper is Akinci et al. on “the financial stability interest rate” (which they call r**, not to be confused with r*, the neutral interest rate) — the threshold interest rate above which the central bank triggers a problem of financial stability.

“Persistently low real rates induce an increase in financial vulnerabilities and a consequent decline in the level of r**,” the authors write.

“As the banking sector becomes more leveraged, the financial stability interest rate becomes lower. This has implications for monetary policy, in that even relatively low levels of the real interest rate could trigger financial instability.”

Niall Ferguson Bloomberg 18 december 2022 

https://www.bloomberg.com/opinion/articles/2022-12-18/for-the-federal-reserve-a-warning-from-the-seventies-niall-ferguson



Englunds lag 3 (Inflation and the housing market)

Räntan (A) är vad som behövs för att stoppa inflationen.

Räntan (B) är den som gör att bostadsmarknaden kollapsar.

Om A är större än B har vi ett stort problem.


The interest rate (A) is what is needed to stop inflation.

The interest rate (B) is the one that causes the housing market to collapse.

If A is higher than B, we have a big problem.

Rolf Englund blogg 22 maj 2022

https://englundmacro.blogspot.com/2022/05/englunds-lag-3-inflation-and-housing.html


En sådan tur att det inte är en husprisbubbla i USA som det var 2008

The median home price almost tripled in the last 22 years

https://englundmacro.blogspot.com/2022/12/en-sadan-tur-att-det-inte-ar-en.html





If markets remain optimistic, the central bank will just have to tighten more to achieve its inflation objective.

 Despite the Fed’s clear warnings of more tightening to come, investors aren’t getting the message. 

Futures markets still suggest a peak federal funds rate of less than 5%, about 20 basis points lower than the Fed’s projections, with rate cuts beginning next summer. 

Perhaps markets doubt the Fed’s resolve, and expect it to capitulate as soon as the unemployment rate moves higher. If so, they’re wrong.

Household and business balance sheets are in very good shape, and there’s little risk of a financial cataclysm like what happened in 2008. 

Bill Dudley Bloomberg 19 december 2022

https://www.bloomberg.com/opinion/articles/2022-12-19/the-fed-s-inflation-objective-trumps-what-markets-want


That inflation having topped 8% will get back to 3% in barely 12 months looks far-fetched. 



The monthly Bank of America Corp. Fund Manager Survey, running for more than two decades, found that investors  were the most overweight in bonds compared to stocks since March 2009.

Bullishness about bonds, meanwhile, is rooted in bearishness about the economy, and by extension in a conviction that the central banks have this wrong and are tightening too much.

A growing majority of observers think inflation is at last at the point where it will come down without too much more help from monetary policy. 

Once inflation exceeds 8.0%, there’s a wide range of experiences, but it’s reasonable to expect a decade to get back to 3.0%.

The economy is constantly changing, of course, but on the basis of post-1970 history, the notion that inflation having topped 8% will get back to 3% in barely 12 months looks far-fetched. 

John Authers Bloomberg 19 december 2022

https://www.bloomberg.com/opinion/articles/2022-12-19/investors-are-losing-a-recession-shootout-against-the-fed-lbuear16



2022-12-18

Bank living wills ensure no bank’s failure can create systemic collapses

 Credit Suisse and BNP Cited by US for Issues in Living Wills

Fed and FDIC also identify shortcoming in BNP Paribas plan

The feedback letters are based on the watchdogs’ reviews of roadmaps submitted in 2021. These resolution plans were mandated as part of the Dodd-Frank legislation passed following the 2008 financial crisis.

Bloomberg 16 December 2200

https://www.bloomberg.com/news/articles/2022-12-16/credit-suisse-cited-by-us-for-deficiencies-in-living-will-plans


Living Wills (or Resolution Plans)

https://www.federalreserve.gov/supervisionreg/resolution-plans.htm


CNBC Explains: Bank living wills

A bank’s living will is a mandatory annual report required by regulators. 

The Federal Deposit Insurance Corp. and the Federal Reserve aim to ensure no bank’s failure can create systemic collapses elsewhere and living wills are supposed to provide a clear path through bankruptcy and possible liquidation.

APR 14  2016

https://www.cnbc.com/2016/04/14/cnbc-explains-bank-living-wills.html


Britain's major banks will have to tell investors in 2021 if they can be closed down without creating havoc in financial markets

https://www.reuters.com/article/us-britain-boe-banks-idUSKCN1UP1I9


Fed all but ended the formerly annual “living wills,” 

challenging banks to explain how, if they were failing, authorities could dismantle them quickly with minimal collateral damage. 

Now, for the largest institutions, the full plans are required only once every four years.

Imagine trying to wind down Lehman Brothers in 2008 using instructions drafted in 2004.

Bloomberg Editorial Board 14 september 2021

https://englundmacro.blogspot.com/2021/09/banks-consider-one-crucial-indicator-of.html

 

2022-12-17

Börsen Stockholm och New York en vecka och i år

 












Powell: Higher for Longer than You Can Imagine

 There is this constant argument that Jerome Powell (can I call you Jay?) is somehow going to pause after the next rate hike, and then begin to cut rates in the late spring or summer because the economy will soften and inflation will have returned to the Fed’s target range. 

Bottom line up front: I think that view is completely wrongheaded.

Rates will be higher for longer. The median Fed funds rate is expected to average 5.1% in 2023!

“'Changing our inflation goal is just something we’re not—we’re not thinking about and it’s not something we're going to think about. It’s—it—we have a two percent inflation goal, and we'll use our tools to get inflation back to two percent. 

I think this isn’t the time to be thinking about that. I mean there may be a longer-run project at some point but that is not where we are at all. The committee—we’re not considering that, we’re not going to consider that under any circumstances. We’re going to—we’re going to keep our inflation target at two percent and we're going to use our tools to get inflation back to two percent.’”

There is a quiet conversation in upper academic and economic policy levels that looks at the debt and thinks 4% inflation is what we need. 

This of course will slow the economy down but what if we are going to run deficits? They were worried back then US government debt was getting too high. Since debt is nominal, 4% inflation cuts it in half in 18 years.  

Sea Change

One of my favorite analysts is Howard Marks of Oaktree Capital. I read his quarterly letters quasi-religiously, generally 2‒3 times or more. His latest is one of his best. I am going to summarize a little and quote some, but you can read the full letter here. 

https://www.oaktreecapital.com/docs/default-source/memos/sea-change.pdf

“In my 53 years in the investment world, I’ve seen a number of economic cycles, pendulum swings, manias and panics, bubbles and crashes, but I remember only two real sea changes. I think we may be in the midst of a third one today.”

The first change he vividly describes was the creation of high-yield bonds and an increased appetite for balanced risk. 

Prior to Milken, et al., bonds rated below B weren’t considered investable. The only way a company could acquire another company was for cash or by borrowing, but borrowing was limited to the amount you could get without changing your rating.

The second sea change was Volcker’s breaking of inflation and then the beginning of a 40-year bond bull market.

But that brings us to where we were in 2020. Quoting Howard Marks again: ...

I highly suggest you read it but the conclusion is we’re not going back to ultra-low rates, barring a severe recession.

Let’s pause to think about that. Financial repression by central banks all over the developed world forced retirees, pension funds, endowments, etc. to take increased risks or miss their investment targets.

John Mauldin 16 December 2022

https://www.mauldineconomics.com/frontlinethoughts/higher-for-longer



En sådan tur att det inte är en husprisbubbla i USA som det var 2008

 



The median US home price to drop in 2023 - the first annual drop since 2012

The median home price almost tripled in the last 22 years

https://englundmacro.blogspot.com/2022/12/the-median-us-home-price-to-drop-in.html


2022-12-16

Is the “Washington Consensus" here again?

 



The “Great Moderation” is the name often given to the period from the mid-1980s to 2007, when the Federal Reserve kept inflation and economic growth relatively stable… until it all collapsed in spectacular fashion in the global financial crisis of 2008.

https://englundmacro.blogspot.com/2020/02/has-great-moderation-returned-and-is.html


What is the “Washington Consensus? Did it fail?

 These policies also had the backing of experts at Washington's international institutions—especially the International Monetary Fund and the World Bank, as well as the US Treasury—to help the recovery from the debt crisis.

After decades of turbulence in the global economy and countries' mixed successes at policy reforms, the phrase "Washington Consensus" raises red flags among some economists while providing enduring wisdom among others.

https://englundmacro.blogspot.com/2021/09/what-is-washington-consensus-did-it-fail.html