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E.g., 23-10-2018
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    Gavekal Research

    GaveKal Daily - Will Japan Default on its Large Government Debt?

    In the days that followed the Japanese earthquake, default swaps on Japanese debt surged and reached levels similar to those prevailing for South Korea (a country threatened with a massive bill the day re-unification with North Korea occurs) or Thailand (where people were shooting at each other in the streets of Bangkok just a few quarters ago). And of course, we received multiple enquiries as to whether the threat of a debt default in Japan was...

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    The Fragmentation of the PIGS

    One of the interesting similarities between the Eurozone crisis and the subprime crisis is how the contagion risks were initially downplayed. In 2007, Ben Bernanke tried to calm rising fears in the US housing market by estimating that subprime-related losses would hardly surpass a very manageable US$100 billion. Three years later, Jean-Claude Trichet argued that the Greek crisis was not a major issue for the Eurozone since Greece accounted for...

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    GaveKal Daily - Does the BoJ Intervention Mean the Age of the Carry-Trade is Back?

    We have often argued that there are three ways to make money in financial markets: through ‘return to the mean’ trades, ‘momentum’ trades or ‘carry’ trades. Of the three, we have historically been the most skeptical of carry-trades as carry-traders get carried out on monetary tightening, flattening of yield curves, and deceleration in growth. And right now, with the likelihood of tighter central banks growing by the day (note Fisher’s hawkish...

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    Gavekal Dragonomics

    The Renminbi Grows Up, Slowly

    After the 2008 global financial crisis, Chinese officials identified the US-dollar based monetary system as a contributor to the crisis and a source of systemic risk for the global financial system. In response, they began a program for internationalizing the renminbi, whose circulation was hitherto largely restricted to mainland China. This led to much excited commentary about the possibility that the renminbi might replace the dollar as the...

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    Gavekal Research

    Construction Quarterly - Q1 2011

    China real estate and construction market review: March 2011

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    Gavekal Research

    A Downbeat Chinese Consumer

    China’s consumers appear to be the most unhappy they have been since the depths of the global financial crisis. The NBS’ monthly consumer confidence index is at its lowest level since early 09. And that is not an isolated reading: an independent consumer confidence survey by Hyperlink Research of Shanghai is more volatile but shows a similar trend.

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    The Impact of China's Social Housing Plans

    Fears are mounting that the Chinese government’s promises to supply a massive 36mn units of social housing over the next five years will trigger a collapse in housing prices. Or, alternatively, that steel and cement prices will soar on the construction roll-out, thereby decimating margins for other developers. In our view, neither fear seems justified, for several reasons.

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    No Nukes in China?

    Japan’s nuclear emergency has caused a sharp sell-off in global nuclear energy plays on concerns the disaster in Fukushima could snuff out the recent renaissance in the sector. These fears were crystallized when China—a country with one of the world’s most ambitious nuclear programs—announced last week that it will suspend approvals for new nuclear plants until authorities complete a comprehensive safety review. In the short run this will slow...

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    Japan’s Reconstruction Bill

    In Thoughts on the Japanese Earthquake, we argued that the 1995 Kobe earthquake was not the right parallel to draw for how markets would react to the latest Japanese tragedy. Of course, this was written before the Tsunami hit and much before fears surrounding the Fukushima plant had developed. Since then, the scale of the devastation and the tragic losses of life have come clearly into focus.

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    GaveKal Daily - Our Recent Cautiousness on Equity Markets

    With the Dow capping its strongest three-day advance since September, and with the S&P 500 getting ready to challenge its own 50-day moving average, equity markets have lately been impressive in shaking off the potential threat of global supply disruptions linked to Japan, or the usually harmful economic consequences of higher energy prices. So what is behind this rally? Is it the promise of new central bank liquidity following the G7...

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    Gavekal Dragonomics

    DragonWeek - Nuclear Power Post Fukushima

    DragonWeek - An opinionated weekly guide to China's economic news

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    Gavekal Research

    GaveKal Daily - Should We Buy Japanese Equities

    The collapse, and subsequent rebound, in Japanese equities has left most investors scratching their heads: will recent events end up marking the lows for the Japanese equity markets and a tremendous buying opportunity? Or will Japan enter into a funk similar to the one that prevailed post the 1995 Kobe earthquake and deliver paltry returns for investors?

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    GaveKal Daily - Odd FX Movements and Disruptions to the Global Supply Chain

    The movement in the exchange rate markets have, in recent days, been somewhat counter-intuitive. Why should an overvalued Yen move higher on the face of utter devastation and the fear of economic gridlock? Why would the AUD head lower while Japan looks set to order more coal, iron-ore and copper in the future? The usual explanation of ‘capital repatriation’ is, we believe, unsatisfactory as Japanese institutions have already spent the past few...

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    GaveKal Daily - Don't Fight the BoJ?

    As everyone is acutely aware by now, there are innumerable uncertainties and questions regarding the situation in Japan, as the nation battles to cool down the damaged nuclear plant. Added to the list of questions is a comparatively pedestrian one: why has the Yen rallied so hard, even as investors are selling out of Japanese equities? Yesterday saw a breathtaking spike to a post-war high of JPY76.3 to the US$ before settling back some, but is...

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    Gavekal Research

    Nuclear Power in Asia

    Back in 2009, we wrote a Five Corners piece titled Just How Nuclear Will Asia Get?, detailing and outlining the various plans by individual Asian countries for nuclear power, the growth of which is strongest in this region of the world —of the 62 nuclear reactors currently being constructed around the world, 40 are in Asia, with many more planned. So where does the nuclear accident in Japan leave us now? China, which alone accounts for almost 60...

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    GaveKal Daily - Should Investors Buy on Dips?

    As investors think through the crucial question of whether to buy on dips amid the current turmoil, there are not too many comforts or certainties on which to cling. The price of oil is worryingly high and Middle East tensions remain heightened. And while most of the global media coverage from Japan has tended towards the hysteric, there is still a lack of clarity on the radiation threat in Japan and what a potential global “no-nuke” backlash...

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    GaveKal Daily - PIGS Do Well on a Risk-Off Day

    The future of Europe’s monetary union is one that the GaveKal team has debated vociferously (see EMU Debt Crisis, Part III), so it is no surprise that last weekend’s EMU deal was also received with various degrees of emotion. Indeed, our house views are in many ways a microcosm of the broader debate on the Euro. There are those who think this experiment will eventually fail, and good riddance when it does (Charles and Louis); those who think the...

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    Gavekal Research

    The New Threat in Media Markets

    In 1948, the US Supreme Court found major film studios in violation of the Sherman Anti-Trust Act. Their control of the production studios (content) as well as the theaters (distribution) allowed studios to force many venues to screen only “approved” films. The Supreme Court upheld the US government’s ruling that this vertically integrated business model limited progress and competition within the sector.

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    Gavekal Research

    Böhm Bawerk, Commodities and Monetary Policy

    Böhm Bawerk taught economics to both von Mises and Schumpeter, which should be enough for any reader to understand how great this man was. Among his many brilliant ideas, was his view that if one commodity price experienced a huge and abrupt rise, then other commodity prices would have to go down, since there is a limited amount of money which can be spent on commodities at any given point.

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    Gavekal Research

    False Prices, Unemployment & Asset Duration

    One of the most important prices in an economic system is the price of money. If the price of money is manipulated by a central bank, then money is no longer at a market price (see the works of Jacques Rueff). Furthermore, if we assume that any economic system typically has two kinds of assets, 1) those with zero duration (e.g., gold and silver), and 2) those with long durations (e.g., the S&P 500), then a non-market, or false price of...

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