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E.g., 23-02-2019
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    Gavekal Research

    GaveKal Daily - It's Time for the Banking Subsidy to End

    There has been a lot of talk about when the period of extreme profitability for US companies will inevitably come to an end, as all good things apparently must. Indeed, some in the industry have unofficially named 2011 as the Year When Margins Will Get Clipped. Unfortunately, there are signs that this trend is already underway. A close look at broad-based 4Q10 earnings shows that, with the exception of financial companies, profits have already...

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    Gavekal Research

    Revisiting the Rumors of Tech-Sector Fizz

    Only months ago we commented on the bubble alarm bells tripped by Goldman’s investment in Facebook which valued the company at US$50bn (over 12x 2011’s projected US$4bn in ad revenue)—that valuation is now reportedly hovering somewhere north of US$85bn, based on private secondary market transactions. And with private enterprise firms Bessemer (Skype), IDG and Accel (Baidu, Tencent) having just recently raised a combined US$2.9bn to funnel into...

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    Gavekal Dragonomics

    DragonWeek - Industrial Profits & Inflation

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

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    Gavekal Research

    Where the Fed Stands on its Mandates

    When Bernanke took the job as Chairman of the Fed, he took on the legal mandate "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." While the desirability of these multiple mandates is debatable, one can see why, in 2008-09, the Fed Chairman felt compelled to aggressively cut rates and buy long-term MBS and UST. Bank loans were contracting, unemployment soaring, CPIs and price...

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    Gavekal Research

    Where the Fed Stands on its Mandates

    When Bernanke took the job as Chairman of the Fed, he took on the legal mandate "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." While the desirability of these multiple mandates is debatable, one can see why, in 2008-09, the Fed Chairman felt compelled to aggressively cut rates and buy long-term MBS and UST. Bank loans were contracting, unemployment soaring, CPIs and price...

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    Gavekal Research

    Modeling the Fed

    Without wanting to state the obvious, we stand at an important point in Fed policy. Does the Fed keep interest rates at the current ultra-low level, or is the FOMC getting confident enough in the recovery to start moving from panic mode, to merely very accommodative on the path to normalization? Our experience is that the Fed is usually driven by the patterns of four important, and distinct, elements. These are:

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    Gavekal Research

    In Europe, What is Priced In?

    I have a number of reservations about Charles’ arguments in his piece, An Old Man's Doubts. But rather than discussing all his points, I will focus on one question only: what is priced in? Charles and Anatole, along with the FT, believe that European markets are complacent about risks. Meanwhile, since the end of last year, I have argued that European markets offer attractive valuation in relation to risks. Indeed:

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    GaveKal Daily - The Implications of Iceland's No Vote

    Eighteen months ago, the gallows humour of bond trading floors was that the only difference between Ireland and Iceland was one letter and about six months. The timing may have proven a little off, and the end result may yet prove very different. However, the questions on the similarities between the two countries may be re-opened by this weekend’s overwhelming “No” vote from Icelandic voters who, for the second time around, have shown little...

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    GaveKal Daily - Important Recent Developments

    Every three months, we publish our Quarterly Strategy Chart Book and go on the road to meet as many clients as possible. This process allows us to identify new research themes, discover where our clients’ main concerns lie, and test our own premises. Meanwhile, markets continue to evolve and before we know it, events have taken over. This is definitely the case today as the past month has witnessed some very important developments. Specifically:

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    Gavekal Research

    GaveKal Daily - The Coming ECB Interest Rate Increase

    Today’s important question is not whether the ECB will tighten, but whether it is right to tighten? After all, the last time the ECB decided to tighten in the face of Fed dovishness, namely in July 2008, the ECB soon regretted its actions and had to rapidly back-track. Of course, back then, the world was entering into a financial sector meltdown. Meanwhile, today, the question is one of longer-term fiscal sustainability. And in that regards,...

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    Gavekal Research

    GaveKal Daily - Is Oil the New Interest Rate?

    With Brent oil at US$122, and other commodities (gold, silver, corn…) making new highs, the single most important question confronting investors is whether oil has become the new interest rate. In a typical cycle, interest rates rise along with economic activity until nominal rates move above nominal GDP growth, triggering a slow-down in growth. However, in this cycle, the dovishness of central banks appears so deeply ingrained that commodity...

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    Gavekal Research

    GaveKal Daily - Is Oil the New Interest Rate?

    With Brent oil at US$122, and other commodities (gold, silver, corn…) making new highs, the single most important question confronting investors is whether oil has become the new interest rate. In a typical cycle, interest rates rise along with economic activity until nominal rates move above nominal GDP growth, triggering a slow-down in growth. However, in this cycle, the dovishness of central banks appears so deeply ingrained that commodity...

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    Gavekal Research

    GaveKal Daily - Is Oil the New Interest Rate?

    With Brent oil at US$122, and other commodities (gold, silver, corn…) making new highs, the single most important question confronting investors is whether oil has become the new interest rate. In a typical cycle, interest rates rise along with economic activity until nominal rates move above nominal GDP growth, triggering a slow-down in growth. However, in this cycle, the dovishness of central banks appears so deeply ingrained that commodity...

    0
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    Gavekal Research

    S.Korea’s Nuclear Industry- The End of Cheap Electricity?

    Two weeks ago, we briefly reviewed why Japan’s nuclear emergency was unlikely to derail China’s nuclear ambitions, but rather just raise the price tag (see No Nukes in China?) of new plants. South Korea offers a similar story of continued commitment, but at a higher price.

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    Gavekal Research

    Subsidies - Pushed Beyond the Tipping Point? - Gaving Bowring

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    Gavekal Research

    Will China Enter the Corn Trade?

    As US corn prices make new highs, and global supply remains tight, rumors of significant Chinese corn imports have once again become a hot topic. Speculation that China had re-entered the market for US corn sparked a +14% rise in Chicago corn futures two weeks ago. On March 25, the USDA reported a number of deals to export 1.25mn tons of corn, or about 3% of total 2010 exports; many traders believe these exports are destined for China. Sinograin...

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    Gavekal Research

    Hong Kong’s Favourite Hedge

    With prices for shoddy apartments reaching eye-watering heights, it is hard to go out in Hong-Kong without every other conversation rapidly turning to the increasingly prohibitive price of real estate. And the main question is always how much higher can prices go? As we write, the mortgage repayment to income ratio is back on its long term moving average, highlighting that if interest rates move up from their current rock-bottom levels, the...

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    Gavekal Research

    Two Reasons the HKD Peg Will Not Go Away

    Like wine, inflation numbers for Hong Kong come in three colors, with the red (in this case property prices) far more important than either white (CPI) or rosé (PPI). Now the current acceleration in HK inflation, and the fact that Hong Kong real estate prices continue to make new highs (thereby helping make Hong Kong one of the most expensive cities to live), is not that surprising. As our friend Simon Ogus from DSG Asia puts it: “Hong Kong is...

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    Gavekal Research

    GaveKal Daily - The Yen, the BoJ and Japanese Banks

    The weakness of the Yen in the face of recent developments is hardly surprising. For a start, Japan’s trade balance in the coming months is bound to deteriorate sharply as imports surge and exports collapse (for example, Lloyd’s List reported that inventories of finished vehicles for exports have run out in Japan, leaving nothing to be loaded onto the container ships that usually carry some 350k+ Japanese cars every month). Secondly, pressure on...

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    Gavekal Research

    GaveKal Daily - The Irish Hot Potato

    Last night brought a lot of news from the Euro Crisis front—currently in Ireland.

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