Englund

Fed governors are ALL part of the same inbred, arrogant, frequently wrong but never in doubt, Soviet nomenklatura-esque priesthood of central economic planning and control. More than FOUR HUNDRED PhD economists with a budget of literally hundreds of millions of dollars—got the 2021 transition to an embedded inflationary environment completely and utterly wrong, it’s also that Mester et al. got the prior embedded deflationary environment completely and utterly wrong. Since early 2009, the Fed has provided the most accommodative monetary policy in human history with the express purpose of stimulating inflationary expectations and behaviors to something close to their 2% target.  This effort was based on an essentially linear model of the macroeconomic relationship between the price of money and the velocity of money. Does lowering the price of money from 8% to 7.5% create more risk-taking?  Does it increase the velocity of money through the real economy as corporate and househol...

“Our institutions are malfunctioning because of the way that social media amplifies performance and moralism and mob dynamics, which brings the normal process of dissent to a grinding halt,” “Why the Past 10 Years of American Life Have Been Uniquely Stupid” in The Atlantic. In the essay, which he /Jonathan Haidt/ calls “the most important thing I’ve ever written”, Haidt argues that social media is having a devastating impact on society.   He invokes the parable of the Tower of Babel, in which God, “offended by the hubris of humanity”, makes the people unable to communicate. https://www.theatlantic.com/magazine/archive/2022/05/social-media-democracy-trust-babel/629369/  “I cannot imagine voting Republican because the Republican party has completely lost all sense of constitutional responsibility and has lost all touch with conservatism. I have a lot of respect for liberalism, but there’s a lot of illiberalism on the left, and I have a lot of respect for conservatism, but t...

  Nasdaq dropped 4.2% Friday, bringing its losses for the month to more than 13%, its worst showing since October 2008.  The S&P 500 has fallen for four consecutive weeks to drop 8.8% in April.  https://www.wsj.com/articles/global-stocks-markets-dow-update-04-29-2022-11651217787 As Stocks Fall, Economic Fears Rise, Along With Inflation - The New York Times (nytimes.com) Did You Catch What Happened To the Stock Market? The Money GPS 1 May 2022 https://www.youtube.com/watch?v=OnnFndxH6Kg

The job of braking the economy seems to be under way already. But we still need to explain exactly why growth ran negative. The decline was driven by the trade balance That leads to the issue of currency: A strong currency is good for inflation, because it makes imports cheaper, but is bad for growth, as it makes exports less competitive in both the home and foreign markets.  We find that the greenback’s surge has brought it to its strongest valuation in 20 years The prospect of higher rates is attracting fund flows to the U.S. Emerging countries are far less dependent on dollar debt now than they were in the 1990s, but this will still hurt. The carry trade — borrowing in a currency with low interest rates and parking in a higher-rate currency — is appealing. So far, it’s working. The problem with carry trades, as was learned in 2008, is that when they turn, they can turn with a vengeance. John Authers Bloomberg 29 april 2022 https://www.bloomberg.com/opinion/articles/2022-04-29/u-...

 Fyra av de fem senaste handelsdagarna har slutat neråt U.S. stocks rose sharply on Thursday, with technology stocks in the lead, after Meta Platforms posted solid earnings despite high U.S. inflation. U.S. GDP Falls 1.4% as Economy Shrinks for First Time Since Early in Pandemic Many economists think that the economy can withstand higher interest rates and return to modest growth in the second quarter and beyond, in part because consumers and businesses are continuing to spend. WSJ 28 April 2022 https://www.wsj.com/articles/us-economy-gdp-growth-q1-11651108351 US GDP fell at a 1.4% annualized rate The median projection in a Bloomberg survey of economists called for a 1% increase.  Bloomberg 28 april 2022 https://englundmacro.blogspot.com/2022/04/us-gdp-fell-at-14-annualized-rate.html

 The median projection in a Bloomberg survey of economists called for a 1% increase.  The contraction was due to a jump in imports and a drop in exports, coupled with a slower buildup of businesses’ stockpiles. On a year-over-year basis, the economy grew 3.6%.  Bloomberg 28 april 2022 https://www.bloomberg.com/news/articles/2022-04-28/u-s-economy-contracted-in-first-quarter-on-surge-in-trade-gap Global Supply Chain Crisis Flares Up Again Ports are already snarled, with the $22 trillion trade in global goods facing months of severe disruption. Bloomberg 25 april 2022   https://www.bloomberg.com/news/features/2022-04-25/china-s-covid-crisis-threatens-global-supply-chain-chaos-for-summer-2022

 och bara tre trodde att reporäntan skulle höjas.  Johan Hellekant SvD 28 april 2022 https://www.svd.se/a/QyzJO8/analytiker-overraskade-av-rantebesked-hokaktigt-av-riksbanken Riksbanken förlänger perioden med nollränta åtminstone fram till tredje kvartalet 2024 RE: Är dom alldeles från vettet? Englund blogg 27 april 2021 https://englundmacro.blogspot.com/2022/03/stefan-ingves-och-anna-breman-gick-ut.html  ”Epoken med extremt låga räntor är över”  Riksbanken höjer räntan från 0 till 0,25 procent Inom tre år väntas reporäntan ligga på 1,8 procent. SvD 28 april 2020 https://www.svd.se/a/bGxGG3/riksbanken-lamnar-besked-om-rantan Sweden’s Riksbank raises rates in policy U-turn The Riksbank reversed the stance it had adopted at its previous meeting in February, when it said it would only lift interest rates from zero towards the end of 2024.  https://www.ft.com/content/9c9fee24-54df-4358-857a-5911e2089104

Sensommaren 1989 visade svensk tv dag efter dag bilder från bilköerna vid gränsen mellan Ungern och Österrike. Dit hade hoppfulla östtyskar på semester kört i hopp om att bli utsläppta. Jag minns av någon anledning detta förebådande fjärilsslag bättre än murens fall.  Jag var 21 och kunde inte tro det. Ingen kunde tro det. Not one inch – America, Russia and the making of post-cold war stalemate Mary E Sarotte Yale university press https://www.aftonbladet.se/kultur/bokrecensioner/a/KzmXwE/recension-av-mary-sarottes-not-one-inch Habsburgs picknick och slutet på järnridån och kommunismen https://englundmacro.blogspot.com/2009/08/habsburgs-pcknick-och-slutet-pa.html

 It may be the latest political and financial obsession, but cryptocurrencies remain something with no inherent value Jemima Kelly FT 27 April 2022 https://www.ft.com/content/f220f44f-3627-4797-b6fe-9253563db49d Jemima Kelly, Cryptocurrencies and all that (Bitcoins, Tulips, South Sea Company) Englund: Jemima Kelly, Cryptocurrencies and all that (Bitcoins, Tulips, South Sea Company) (englundmacro.blogspot.com)

  Årets börsutveckling har inte varit något för de nervsvaga Englund: Årets börsutveckling har inte varit något för de nervsvaga (englundmacro.blogspot.com)

Shortfall widened almost 18% to $125.3 billion in March The figures, which aren’t adjusted for inflation, far exceeded all estimates in a Bloomberg survey of economists. Bloomberg 27 april 2022 https://www.bloomberg.com/news/articles/2022-04-27/u-s-goods-trade-gap-soars-to-record-surpassing-all-estimates

  Home-Price Growth Accelerated in February WSJ 26 April 2022 https://www.wsj.com/articles/home-price-growth-accelerated-in-february-11650978070

Falling further than during the worst of Covid panic in March 2020  A weak euro, which tends to make imports more expensive, is exactly what the ECB doesn’t need.  Import price inflation in the major European economies is already easily at its highest since the creation of the euro in 1999  Unemployment throughout the eurozone continues to run on a different scale from the U.S. The sovereign debt crisis a decade ago, and the desperate austerity measures that accompanied it, have left a joblessness problem that remains unvanquished John Authers Bloomberg 27 april 2022 https://www.bloomberg.com/opinion/articles/2022-04-27/fang-stocks-and-the-euro-crash-into-crises-of-investor-expectations ECB Must Act Soon to Avoid a Currency Crisis The euro. The slide this time is worrisome.  https://englundmacro.blogspot.com/2022/04/ecb-must-act-soon-to-avoid-currency.html

At the peak of the pandemic surge the FANGs traded at almost double the multiple of the S&P.  That gap is now as narrow as it has been since the FANGs have been a thing.  That in turn implies that assumptions they can keep minting money in perpetuity are at last coming into question John Authers Bloomberg 27 april 2022 https://www.bloomberg.com/opinion/articles/2022-04-27/fang-stocks-and-the-euro-crash-into-crises-of-investor-expectations   Roughly four in every 10 companies on Nasdaq market values cut in half from their 52-week high Bloomberg 2022-01-07 https://englundmacro.blogspot.com/2022/01/roughly-four-in-every-10-companies-on.html

Stockholmsbörsen bjöd på en ordentlig nedgång under måndagen och har nu handlats ned över 4 procent under de senaste två handelsdagarna. Allt började däremot bra och så sent som i början av januari rådde stor börseufori med börsrekord och 2000-talets hittills största julrally.  Risken för fortsatt börsoro och kraftiga kursfall är överhängande så länge som aktiemarknaden inte är i stånd att se slutet på ränteuppgången.  DI 25 april 2022 https://www.di.se/nyheter/risken-for-nya-kursras-ar-overhangande-avgorande-besked-pa-vag/ Tisdag These 21 large-cap stocks have now crashed at least 50% Pummeled stocks include Netflix, PayPal and Facebook parent Meta Platforms MarketWatch 26 April 2022    https://www.marketwatch.com/story/these-21-large-cap-stocks-have-now-crashed-at-least-50-11651006807

A new IPCC report says the window to meet UN climate targets is vanishing  Pursuing 1.5°C means that global use of coal must decline by 95% by 2050. Oil use must drop by 60% and gas by 45% over the same period The time for meaningful action to avert the worst effects of global warming is running out. The Economist 4 April 2022 https://www.economist.com/the-economist-explains/2022/04/04/a-new-ipcc-report-says-the-window-to-meet-un-climate-targets-is-vanishing The international goal to limit global heating to 1.5° Celsius https://englundmacro.blogspot.com/2022/04/the-international-goal-to-limit-global.html

What an end to quantitative easing means for Italian debt Ms Lagarde emphasised the bank’s philosophy of “flexibility”, in the name of ensuring that borrowing costs in weaker (ie, southern) parts of the euro area do not deviate too much from those for the rest of the bloc.  In 2018 the formation of a populist coalition led the spread between Italian and German bond yields to double within days to nearly three percentage points. The fate of Italian bonds, in other words, ultimately rests with Rome. The Economist 23 April 2022   What an end to quantitative easing means for Italian debt | The Economist

—thought to be about 2-3%—by more than the rise in underlying inflation. That points to a federal-funds rate of 5-6%, unseen since 2007. Rates that high would tame rising prices—but by engineering a recession. Does the Fed have the stomach to inflict such economic pain?  Many economists advocate higher inflation  There is nothing special about 2%, except the fact that the Fed has promised it in the past. Editorial The Economist 23 April 2022 https://www.economist.com/leaders/2022/04/23/why-the-federal-reserve-has-made-a-historic-mistake-on-inflation Powell wants to get closer to neutral. But what’s that?  Think between 5% and 6% MarketWatch 3 May 2022 https://www.marketwatch.com/story/powell-wants-to-get-closer-to-neutral-but-whats-that-think-between-5-and-6-former-top-fed-staffer-says-11651566417 Fed Officials’ plans for their $9 trillion asset portfolio  reflect many similarities—and differences—from earlier experiment to shrink holdings In 2017, when the Fed concl...

A number of history’s most notorious crashes occurred on a Monday reopening after a bad Friday, so it’s understandable this provoked concern It’s possible that the market has over-reacted. After both the Fed and the market were too relaxed for too long, the course of rates now embedded in prices suggests the kind of tightening that’s almost bound to bring about a recession. Will the Fed really be able to go through with it? Governor Ingves of Sweden – an outspoken dove until a few weeks ago —  threw “low for long” out of the window.   Netflix Inc., down a third after not particularly disappointing results, demonstrates what could lie in wait.  Investors are uncomfortably aware that equity valuations have for years been predicated on historically low interest rates. If rates really are rising, that assumption is no longer any good, and — as Netflix discovered — there’s a long way to fall for companies that look optimistically priced. John Authers Bloomberg 25 April 2022 ht...

According to the annual report published by the Copernicus Climate Change Service (C3S), the temperature in Europe was 1 degree Celsius above the 1991-2020 average. Globally, the last seven years have been the warmest on record Deutsche Welle 22 April 2022 https://www.dw.com/en/europe-saw-hottest-summer-on-record-in-2021/a-61561679

https://www.nytimes.com/2022/04/22/business/stocks-tumble-interest-rate.html Dow Jones Industrial Average posted its worst one-day percentage change since October 2020, losing 981.36 points, or 2.8%, to close at 33811.40.  The S&P 500 dropped 121.88 points, or 2.8%, to 4271.78, while the  Nasdaq Composite fell 335.36 points, or 2.5%, to finish at 12839.29.  WSJ 22 April 2022 Dow Tumbles Nearly 1,000 Points as Stocks Extend Selloff - WSJ US stocks tumble 2.8% as investors gird for higher interest rates The US 10-year break-even — a closely watched gauge of market inflation expectations over the next decade — climbed to 3.08 per cent on Friday, its highest level in at least two decades. FT 22 April 2022 https://www.ft.com/content/9c9e1211-4864-4965-a916-4a633a37bbf7 SvD | Sveriges kvalitetssajt för nyheter What If Stocks Don't Always Go Up? Bloomberg  31 October 2020 Englund: What If Stocks Don't Always Go Up? (englundmacro.blogspot.com)

 Sanctions alone — at least any sanctions that European countries would be willing to now consider — will not bring Russia to its knees any time soon.  The West has turned to sanctions as a tool with growing frequency since World War II — in places as varied as South Africa, the Soviet Union, Cuba, Venezuela, North Korea and Iran. It is relatively easy to apply sanctions, and they nearly always satisfy the domestic political need to “do something” short of military engagement. Sanctions are often sold as an alternative to war. But they can also be a precursor to war, as seen with the institution of the American oil embargo against Japan and the freezing of Japanese assets about five months before the attack on Pearl Harbor.  As it is wise to have definite goals and an exit strategy when a country enters a military conflict, the same is true for waging economic warfare. New York Times editorial 22 April 2022 https://www.nytimes.com/2022/04/22/opinion/sanctions-russia-ukrai...

 If one considers these excess savings alongside the persistence of low interest rates through most of 2021, a rising stock market, pent-up demand, and additional fiscal support, the magnitude of the increase in nominal GDP is not particularly surprising. Jason Furman MarketWatch 20 April 2022 https://www.marketwatch.com/story/this-inflation-is-driven-by-strong-demandnot-kinks-in-supply-chainsand-will-likely-persist-11650466483 Jason Furman, a former chair of President Barack Obama’s Council of Economic Advisers, is professor of the practice of economic policy at Harvard University’s John F. Kennedy School of Government and senior fellow at the Peterson Institute for International Economics. Inflation is, of course, unacceptably high.  Some of this reflects disruptions — supply-chain problems, surging food and energy prices from the war in Ukraine — that are likely to fade away over time.   But inflation, which used to be mainly confined to a few sectors strongly aff...

 The message in this tome that grabbed most attention this week was that the world faces rising inflation, high debt and stalling growth — stagflation, in other words, although the IMF tactfully downplays that term. But on page 62 of the report there was also an intriguing little sidebar about the “Saving Glut of the Rich”.  Western central bankers have limited incentive to study these issues too publicly, since many feel privately embarrassed that quantitative easing has made inequality worse. Gillian Tett FT 21 April 2022 https://www.ft.com/content/90404d0b-57aa-4163-b612-6e6ac594afe7 Hunger and Blackouts Are Just the Start of an Emerging Economy Crisis Fed hikes and pandemic debt piles add to the risks for developing nations. Some are already sliding into turmoil The IMF, in its latest World Economic Outlook, likened the war’s impact to “seismic waves” rolling over the global economy. It also warned of the possible return in emerging markets of the sort of “doom loop” that ...

 Netflix har visat första avsnittet av framtiden Det nya är vilka hävstänger som de senaste decennierna satts under bedömningarna och drömmarna. Den viktigaste ekonomiska hävstången är förstås räntan. Satsa 100 kronor i eget kapital och låna 900 Det började på 1990-talet, och det är ingen tillfällighet att rasen i Netflix och andra teknikaktier påminner om när it-bubblan sprack i början av 2000-talet. Nästa gång, fem-sex år före 2008, kom en ytterligare urkraft, billig kinesisk arbetskraft. Inflationen tycktes utrotad och när smällen kom vräkte kinesiska makthavare in stödpengar och räntan sänktes igen, inte konstigt att börserna repade sig oväntat snabbt. Det är därför som chocken blir så stor när alla krafter plötsligt och samtidigt verkar åt fel håll - kriget, räntan, globaliseringen och samarbetena. Men den viktigaste lärdomen är att försöka förstå hävstängerna och svängningarna.  Ledare:Torun Nilsson DI 21 april 2022 https://www.di.se/ledare/netflix-har-visat-forsta-avsni...

WSJ 20 April 2022   https://www.wsj.com/articles/dollars-upward-march-reaches-a-nearly-two-year-high-11650471466

U.S. Home Prices Hit a Record of $375,300 Median price for existing homes  WSJ 20 April 2022 https://www.wsj.com/articles/u-s-home-prices-hit-a-record-of-375-300-in-march-11650463861 9.40 x 375.000 = SEK 3.525.000 https://www.maklarstatistik.se/pressmeddelanden/bostadspriserna-fortsatter-uppat-3/

When bond yields rise, their prices fall, which means a loss for the owners if they mark them to market. For a bank, those losses eat into its capital base, the foundation of its balance sheet.  In the euro-zone crisis a decade ago, weak government finances, especially in Italy and Greece, led investors to sell their bonds, which local banks also owned in spades.  Bond prices tumbled and local banks suffered heavy losses, raising the risk they might need to be bailed out. That threatened a further strain on government finances, making their debt more risky, pushing yields higher and feeding back into more losses for banks. It’s a vicious circle that still haunts Europe. Big banks like JPMorgan Chase & Co. did suffer losses on U.S. government bonds in the first quarter, which led some to slow their stock buybacks, disappointing investors. Is the doom loop coming to America? The short answer is no, at least not the euro-zone version. Paul J. Davies Bloomberg 20 april 2022...

The euro. The slide this time is worrisome.  The euro has declined steadily for the past year from above 1.22 per dollar to within close range of the 1.0640 low of March 2020, when the pandemic first hit. The only logical answer is for the ECB to raise its official deposit rate from the current super-stimulatory negative 50 basis points. Marcus Ashworth Bloomberg 20 april 2022 https://www.bloomberg.com/opinion/articles/2022-04-20/euro-weakness-may-lead-to-a-currency-crisis-if-the-ecb-doesn-t-act-soon  

 Enligt skolboken ska en centralbank inte bry sig om prisförändringar på sådant som energi och livsmedel, säger Viktor Munkhammar i en fråga till Stefan Ingves. Ändå höjer centralbankerna världen över nu ränteläget (utom ECB som först måste hitta på en metod att höja räntan utan att Italien går i konkurs och spräcker euron). Varför? Headline inflation är nu hög och svider i konsumenternas plånböcker. Alla vet att nu är det inflation. Se där ett gyllene tillfälle för centralbankerna att höja räntan och därmed sätta stopp för den långvariga skuldökningen hos hushåll och företag.  --- Stefan Ingves ”Vi har haft en lång diskussion i många centralbanker på temat att många av de prisuppgångar vi har sett har varit av övergående karaktär. Men det här övergående har dragits ut i tid väldigt mycket mer än vad vi trodde tidigare. Dessutom har inflationen blivit högre än vi trodde tidigare. Då har jag och flera av mina kolleger sagt att det uppenbara med facit i hand är att vi är någon a...

SEB:s chefsstrateg Johan Javeus: Bostadspriserna är i någon mening dopade av att vi har haft sju år av nollräntor.  Om de räntehöjningar som marknaden nu ser komma blir verklighet spår Johan Javeus att det får störst påverkan på bostads- och fastighetspriserna.  DI 19 April 2022 https://www.di.se/nyheter/strategen-dopade-bopriser-tar-smallen-fran-rantechocken/

 Mortgage rates — and long-term rates for business borrowers — have already shot up more or less to prepandemic levels, even though the Fed has just begun to hike Since about 2014, the cost of shelter has been rising considerably faster than the overall cost of living. I’m not talking about house prices; I’m talking about rental rates for apartments and “owner’s equivalent rent,”  We need higher interest rates, at least for a while, to bring inflation down. But higher rates will “work” largely by depressing housing construction, which was already too low. Paul Krugman NYT 19 April 2022 https://www.nytimes.com/2022/04/19/opinion/inflation-interest-rates-housing-mortgage-loan.html

The nearest the world has come to one was a British gilt-edged security during the gold standard era.  But then in the 20th century Britain abandoned the gold standard, demonstrating that super-safety in gilts was illusory. Before the financial crisis, these global creditors also invested in supposedly safe private assets, namely triple-A rated mortgage-backed securities. Their claim to safety was blown in the credit crunch of 2007.  Richard Nixon, then president, break the dollar’s link with gold — a de facto sovereign default. John Plender FT 18 april 2022 https://www.ft.com/content/0603172c-7eae-4e18-ad80-a21b3559f18d Englands beslut att lämna guldmyntfoten 1931 framkallades av att det rådde myteri inom Royal Navy, ett myteri framkallat av de lönesänkningar som regeringen beslutat om. https://englundmacro.blogspot.com/2013/10/hur-det-kom-sig-att-england-overgav.html On August 15, 1971, US President Richard Nixon announced in a televised address that he was “closing the gold...

So-called 10-year real Treasury yields have soared more than 1 percentage point since early March, hitting a high of minus 0.04 per cent on Tuesday, in a sign bond payouts are coming close to exceeding medium-term inflation expectations. The jump in real yields has been triggered by the Federal Reserve’s bid to slow intense price growth by aggressively tightening monetary policy.  The move is already eroding one of the pillars that has underpinned a powerful rally in stocks and riskier corporate bonds from the depths of the coronavirus crisis two years ago.  FT 19 April 2022 https://www.ft.com/content/300de65b-e3de-463b-975f-9d25f1c28783 The yield on so-called 10-year TIPS rose   Positive U.S. Real Yields Will Rip Up Global Markets Playbook Rising real rates, a crucial barometer of true interest costs for corporations, have come as traders raise their aggressive bets on policy tightening from the Federal Reserve and central banks around the world to combat still-hot ...

Olof Palme-citatet från 1985 när den svenska kreditmarknaden avreglerades med hans välsignelse: ”Gör som ni vill. Jag begriper ändå ingenting”.  Cervenka pekar ut den här avregleringen som ett startskott för den utveckling som tog fart kring mitten av 1990-talet. Bostadsmarknaden skenar hejdlöst och vi undsätter gång på gång bankerna när de hamnar i kris. Staten och kapitalet sitter i samma båt.  Therese Eriksson SvD Kultur 18 april 2022 https://www.svd.se/a/Rre19W/svindlande-att-rakna-pengar-med-cervenka   Den 21 november 1985 vid ett-tiden fick jag - som chef för Stadshypotek - meddelandet om att Riksbanken hade upphävt alla utlåningsrestriktioner. Jag tittade på mina medarbetare och undrade om man på Riksbanken verkligen förstod vad man gjorde. Lars Wohlin i Ekonomisk Debatt nr 1/1998 Men just som jag /Feldt/ började tro att han tänkte säga nej till hela idén reste han sig och sade: Gör som ni vill. Jag begriper ändå ingenting. Varpå han återgick till att grubbla över ...

 It was France that gave the world the concepts of the left and right in politics  Now it is France that is leading the way in the destruction of this divide and its replacement by a new politics, one in which the two dominant camps are nationalists and internationalists. Gideon Rachman 18 april 2022 https://www.ft.com/content/c2a1f0eb-cb31-4f7c-a445-f06ff0974942

Estimates that bringing inflation down to the Fed’s target of 2% could push unemployment to nearly 10%. Fed will eventually “choose to live with inflation,” said Alex Brazier Data this week showed that U.S. consumer prices rose by 8.5% in March, the most since 1981. Bloomberg 14 april 2022 https://www.bloomberg.com/news/articles/2022-04-14/blackrock-strategists-say-traders-are-wrong-on-fed-s-rate-path Den tongivande medelklassen i Sverige skulle inte klara av någon mer omfattande ränteuppgång Henrik Mitelman DI 11 april 2022 https://englundmacro.blogspot.com/2022/04/den-tongivande-medelklassen-i-sverige.html

En del av mitt liv har utspelats här. Min barndoms somrar var här

Overall it seems obvious that this house price boom must end — and soon.  Or not.  The last time inflation was this high, the base rate was 10 per cent.  Today, if you have a deposit of 40 per cent or more you can get a 10-year fixed-rate from Halifax at 2.48 per cent.  Have 25 per cent and the rate goes to 2.58 per cent. Long-term borrowing at 5.5 percentage points below the rate of inflation? That is as close to free money as you are going to see this year. House prices to fall? Definitely, but not quite yet. While values are high, real interest rates are negative, making homes surprisingly affordable. Merryn Somerset Webb FT 15 April 2022 https://www.ft.com/content/54f979d1-5d71-4e0b-88d9-ba6f2c8eb745 Min gissning är att  de rörliga boräntorna toppar på 3-3,5 procent.   Det blir kännbart, men vi överlever. Räntechocken uteblir. Henrik Mitelman DI 11 april 2022 https://englundmacro.blogspot.com/2022/04/den-tongivande-medelklassen-i-sverige.html

Only weeks ago Pécresse, a seasoned politician and former minister, seemed to have a chance of becoming France’s first woman president.  Yet here she was, pleading for cash outside party headquarters after taking on €5mn of personal debt and realising the state would not reimburse €7mn of campaign expenses because she unexpectedly secured less than 5 per cent of the votes. FT 14 April 2022 https://www.ft.com/content/2ea03c22-e34e-4776-b9b1-3c066c5815c7

 Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, warning that recent resilience in stocks could be “nothing more than a bear-market rally, fueled by wishful thinking and excess liquidity,”  MarketWatch 13 April 2022 https://www.marketwatch.com/story/why-the-stock-market-rally-may-be-nothing-more-than-wishful-thinking-according-to-morgan-stanley-cio-11649889894 - There is no such thing as rational expectations.  There is wishful thinking, or panic. Rolf Englund, many years ago (probably in 1997) https://www.internetional.se/nosuchthing.htm

Which is alarming. Why is there so much talk of recession when fewer people are claiming unemployment insurance in the U.S. than at all other times since 1970? Why are corporate credit spreads so tight when at all other times that interest rates are rising, they have widened? Why are emerging markets investments performing so badly when at all other times, strong commodity prices have helped them? Why have stocks risen, and bond prices fallen, since the Russian invasion of Ukraine when at other times of war, investors have sheltered in bonds? Two of the great religious traditions are about to come together for a day. Friday is both Good Friday, when Christians commemorate the crucifixion of Jesus, and the first night of Passover, when Jews commemorate their exodus from Egypt. It’s unusual for the two to fall on the same day, but they did originate on the same day.  The Last Supper, after which Jesus was betrayed, was a Passover seder — the highly stylized meal that Jews eat to memo...

 Every country produces its own elites, but in today’s western world possibly only France, where the École Nationale d’Administration educated four of the last six presidents, has a ruling caste as small as the UK’s. (And France recently abolished the ENA and replaced it with the Institut National du Service Public.)  “To understand the man, you have to know what was happening in the world when he was 20.” Simon Kuper 14 April 2022 https://www.ft.com/content/2fa1e436-a5c7-43b1-9e5a-b1e1b43b8c3a

Fiscal policy, Purchasing power has been sapped by inflation, Rising interest rates. Greg Ip WSJ 13 April 2022 https://www.wsj.com/articles/after-rapid-recovery-watch-for-sudden-slowdown-11649851606

11april 2022 https://www.dagensps.se/investerardygnet/se-upp-for-falskt-borsrally/

 You are allowed to purchase $10,000 of such bonds each year ($20,000 per married couple) and an additional $5,000 per year with your tax refund.   Zvi Bodie has done as much as anyone, if not more, to champion I-Bonds. Bodie, now retired, was for four decades a finance professor at Boston University. MarketWatch 12 April 2022 https://www.marketwatch.com/story/the-silver-lining-of-surging-inflation-i-bond-yields-should-climb-above-9-11649784459

The feel-good days for global markets at the end of March are firmly over. Everything from stocks to bonds is falling -- even oil has pulled back from near records -- in a concerted cross-asset selloff with echoes of the rate-spurred rout of October 2018. With the Fed mired in what’s expected to be the most aggressive tightening cycle since 1994, the drumbeat of recession warnings is getting louder. Lu Wang Bloomberg 11 april 2022 https://www.bloomberg.com/news/articles/2022-04-11/world-markets-are-falling-again-with-echoes-of-the-2018-rout

För det är vi alltför skuldsatta. Vi har helt enkelt bakbundit centralbankscheferna.  Min gissning – och efter 25 år i prognosbranschen är man mer ödmjuk än 25-åringen – är att  de rörliga boräntorna toppar på 3-3,5 procent.  Det blir kännbart, men vi överlever. Räntechocken uteblir.  Henrik Mitelman DI 11 april 2022 https://www.di.se/analys/darfor-slipper-vi-en-rantechock/  Bill Gross warns Fed rate rises will ‘crack the US economy’ Former Pimco ‘bond king’ predicts central bank will be unable to go above 2.5% to 3% “We’ve just gotten used to lower and lower rates and anything much higher will break the housing market.” https://englundmacro.blogspot.com/2022/03/bill-gross-warns-fed-rate-rises-will.html Can the Fed shrink its $9tn balance sheet without causing market mayhem? https://englundmacro.blogspot.com/2022/04/can-fed-shrink-its-9tn-balance-sheet.html

Sees a risk of stagflation if central bank policymakers continue to misjudge factors driving up prices. His criticism that the ECB is being too slow to raise interest rates underscores the fractious debate in Germany and much of the 19-country euro area about how fast it should reverse eight years of ultra-loose monetary policy — including negative rates and €4.9tn of bond purchases. Axel Weber, the outgoing chair of UBS and former head of Germany’s central bank,  told financial newspaper Handelsblatt it was “incomprehensible” the ECB was taking so long to turn its policy around. FT 12 April 2022 https://www.ft.com/content/145b6795-2d21-48c6-984b-4b05d121ba16 Otmar Issing är sannolikt, vid sidan av USA:s Volcker, världens mest respekterade centralbanksperson.  https://englundmacro.blogspot.com/2014/03/otmar-issing-ar-sannolikt-vid-sidan-av.html Jag har en gång i London lyssnat på ett föredrag av Otmar Issing och jag kan intyga att han ser ut som, och låter som, en engelsk...

Fund managers have been tripped up by global stocks and bonds falling in tandem in the first quarter. The two key markets underpinning global finance are seldom correlated and such moves tend to be rare and brief. This year’s quarterly slump — the worst synchronised decline since both benchmarks have been available FT 11 April 2022 https://www.ft.com/content/a18b5d8c-e92d-475c-a3c1-96a4a3a43b5b The Nasdaq 100 Stock Index sank more than 2% Monday, adding to losses sustained last week that have erased over $1 trillion in market value in the past five sessions. Bloomberg 11 April 2022 https://www.bloomberg.com/news/articles/2022-04-11/big-tech-swept-into-rout-that-zaps-1-trillion-from-nasdaq-100

 Trots att långräntan väntas klättra blir alltså realräntan (nominell ränta minus inflation) negativ för hela perioden om prognosen slår in.  Nu är den tioåriga räntan 1,2 procent, vilket med KI:s inflationsprognos för året ger en negativ realränta på hela 4 procent (5,2-1,2 procent). En bransch som gynnas av negativa realräntor är fastighetssektorn då i stort sett alla kommersiella hyreskontrakt i Sverige är länkade till inflationen. Magnus Dagel DI 11 april 2022 https://www.di.se/analys/ny-chocksiffra-vantar-har-ar-vinnarna-pa-inflationen/  Den 50-åriga statsobligation som Riksgälden sålde i juni förra året. Obligationer till ett värde av 10 miljarder kronor emitterades då med en ränta på 1,386 procent. Räntan nådde som lägst 1,00 procent under slutet av sommaren. Den senaste dryga månaden har räntan stigit med omkring 1 procentenhet till strax under 2,40 procent. Obligationen har under samma period tappat cirka 25 procent av sitt värde. Det är en mycket kraftig rörelse...

Svenskarna har lånat nästan 4 000 miljarder kronor till bostäder enligt siffror från statistiska centralbyrån SCB från i februari i år.  Det är en ökning med nästan 2 000 miljarder kronor på tio år.  Denna skuldexplosion har dock inte märkts så mycket i svenskarnas plånböcker eftersom boräntorna samtidigt har sjunkit stadigt.   I slutet av 2021 betalade svenska hushåll enligt SCB  i genomsnitt 1,47 procent på sina bolån - både bundna och rörliga. Det är de lägsta nivåerna någonsin. I slutet av 2011 var siffran 4,1 procent.  Räknat i pengar innebär det att svenskarna betalade sammanlagt mindre i bolåneräntor under 2021 (före skatteavdrag) än 2011, trots att skulden dubblats.  Andreas Cervenka Aftonbladet 2 april 2022 Andreas Cervenka: Svenskarnas räntesmäll kan bli 100 miljarder (aftonbladet.se)

 Who Will Buy Bonds the Fed No Longer Wants? Much as the alleged benefits of quantitative easing resist quantification, it’s impossible to calculate the repercussions of the exit plan in advance. U.K. hedge fund manager Crispin Odey: “Everybody knows that the West is bankrupt somewhere around interest rates of 3%, so the fight now is how can 0.5% interest rates slow down inflation which is potentially on its way through 10%.” Marcus Ashworth and Mark Gilbert Bloomberg 8 April https://www.bloomberg.com/opinion/articles/2022-04-08/bond-market-woes-are-flashing-danger-ahead-for-stocks Fed may end up pushing into a recession an economy that,  for too many years, has been conditioned to live with near-zero rates and ample liquidity injections.  Stocks after having benefited significantly from Fed-induced conditioning that made valuations a function of TINA (there is no alternative to stocks), FOMO (the fear of missing out on yet another move higher for stocks) and, therefore, ...

 The urge to do something should not be so intense that it overpowers analysis as to whether any actions can possibly work. Eurointelligence addressed the issue in a post simply called It's Complicated  What we do see instead of a Russian defeat is that Ukraine and the west will eventually cut a dirty deal with Putin. Mish 8 April 2022 https://mishtalk.com/economics/sometimes-the-best-thing-to-do-is-nothing

 Yves here. While the West is busy fixating on the war in Ukraine, and fossil fuel companies salivate over being allowed to ramp up greenhouse gas emissions, ever-grimmer warnings from the IPCC are being ignored.   Yves Smith 8 April 2022  https://www.nakedcapitalism.com/2022/04/ipcc-adaptation-report-its-later-than-you-think.html The international goal to limit global heating to 1.5° Celsius is officially on life support https://englundmacro.blogspot.com/2022/04/the-international-goal-to-limit-global.html

  Lidingö har tagit emot 191 asylsökande – Lidingö Nyheter (lidingonyheter.se)

Federal Reserve Bank of St. Louis President James Bullard favors raising interest rates sharply  “I would like the committee to get to 3-3.25% on the policy rate in the second half of this year, Bullard cited a version of the Taylor Rule that uses inflation, the unemployment rate and an estimate of the neutral interest rate -- a rate neither contractionary nor expansionary -- to come up with his estimate for how high rates should go. Bloomberg 7 April 2022 https://www.bloomberg.com/news/articles/2022-04-07/fed-s-bullard-says-rates-may-still-need-to-rise-300-basis-points Who’s Afraid of Rules-Based Monetary Policy? John B. Taylor Project Syndicate 16 October 2020 https://englundmacro.blogspot.com/2020/10/whos-afraid-of-rules-based-monetary.html

 More than 10 Chinese property firms have defaulted on their dollar debt since last year, and more are likely to follow. WSJ 7 April 2022 https://www.wsj.com/articles/as-property-downturn-drags-on-chinese-developers-see-an-uncertain-future-11649323802

The sanctions on Russia’s central bank use the omnipresence of the US dollar to penalise an American adversary The plan agreed by Yellen and Draghi to freeze a large part of Moscow’s $643bn of foreign currency reserves was something very different: they were effectively declaring financial war on Russia. FT 6 april 2022 https://www.ft.com/content/5b397d6b-bde4-4a8c-b9a4-080485d6c64a Financial warfare: will there be a backlash against the dollar? The sanctions freezing Russia’s foreign currency reserves have created an incentive for countries to bypass the US currency FT 7 April 2022 https://www.ft.com/content/220db8f2-2980-410f-aab8-f471369ac3cf   “Dollar Hegemony Ended Last Wednesday“    Every country in the world now realizes its reserves and assets in foreign banks are subject to seizure  I’m not arguing that’s bad; I am suggesting it’s new.  John Mauldin 4 March 2022   https://englundmacro.blogspot.com/2022/03/dollar-hegemony-ended-last-wednesday.html T...

One move of that size would bring the deposit rate to zero, ending eight years of negative borrowing costs Bloomberg 7 April 2022 https://www.bloomberg.com/news/articles/2022-04-07/economists-wonder-if-ecb-could-kick-off-with-half-point-hike Money markets see ECB rate climbing to zero by October Bloomberg 30 mars 2022 https://englundmacro.blogspot.com/2022/03/money-markets-see-ecb-rate-climbing-to.html  

Above 5.75%, says UBS. But don’t expect a 2008-style meltdown in housing even if the interest rate on the benchmark 30-year loan hits that level MarketWatch 5 April 2022 https://www.marketwatch.com/story/how-high-do-mortgage-rates-need-to-climb-before-its-time-to-worry-above-5-75-says-ubs-11649201957   Home prices in Canada have soared more than 50% over the past two years Benchmark price of a home $693,000.  Bloomberg 6 April 2022 https://www.bloomberg.com/news/articles/2022-04-06/canada-to-ban-some-foreigners-from-buying-homes-as-prices-soar   Canada ranks as the word's second most overheated market Sverige på tredje plats före Norge och UK. Bloomberg 24 Januari 2022 https://englundmacro.blogspot.com/2022/01/canadian-homeowners-gamble-could.html

That’s the key takeaway from a noteworthy speech by Agustín Carstens, general manager of the Bank for International Settlements. The financial crisis was rooted in the assumption that markets are largely self-correcting, and individual firms and sectors could collapse without consequences for the broader financial system. The return of inflation was almost universally unexpected, including by the BIS.  Second, the return of inflation, while most pronounced in the U.S., is global.  Whether we are now shifting from a low-inflation environment to a high-inflation environment is the biggest question facing central banks.  Greg Ip WSJ 6 April 2022  https://www.wsj.com/articles/what-the-2008-financial-crisis-tells-us-about-todays-inflation-surge-11649263077 The return of inflation Speech by Agustín Carstens, General Manager of the BIS at the International Center for Monetary and Banking Studies, Geneva, 5 April 2022. https://www.bis.org/speeches/sp220405.htm Interest rates...

Vid årsskiftet utmanade Di:s ”börsapa” fjolårets mest framgångsrika Sverigefonder med en slumpmässigt sammansatt portfölj.  Nu står det klart att apan slagit både index och fondförvaltarna under årets första kvartal. DI 7 april 2022 Di:s ”börsapa” slår fjolårets bästa Sverigefonder och index   “A blindfolded monkey throwing darts at a newspaper’s financial pages  could select a portfolio that would do just as well as one carefully selected by experts.”– Burton Malkiel, author of “A Random Walk Down Wall Street”  Burton Malkiel’s metaphor has been one of the most controversial in Wall Street. It questions an active manager’s ability to outperform the market and reduces outperformance to sheer luck.  Although the book “A Random Walk Down Wall Street”  was initially published in 1973, this quote still remains one of the most controversial among active asset managers.  “Any monkey with a dart may possibly earn money in a rising market.”. Well, this stands ...