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    Gavekal Research

    New Century, New Structural Growth Rates

    In the second half of the last century, the US labor force was swelled by baby boomers and a surge of female participation. These major demographic forces shaped the economy and established growth expectations. But they have since changed dramatically. The structural growth rate of the labor force is now, and will continue to be, slow and steady. All else equal, this implies a slower and steadier structural growth rate of the economy.

    2
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    Gavekal Research

    Growth & Markets Monthly (April 2013)

    1
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    Gavekal Research

    A First Non-Euro Currency Debate

    Last Thursday the Bank of Japan stunned investors with a muscular monetary response that aims to break a deflationary cycle that had seemed to condemn Japan to permanent economic decline. In this piece we debate what the new policy settings mean for investors and crucially, seek to answer the trillion-yen question of where the Japanese currency is headed.

    3
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    Gavekal Research

    Why Does Velocity Fall In Spring?

    Tolstoy said that “spring is the time of plans and projects.” Obviously, Tolstoy did not manage money as for the fourth year in a row, spring appears to be the time when US growth indicators roll over, the euro project threatens suicide, and investor risk appetite falls out of bed. To be honest, we are still scratching our heads for a solid explanation (and very much welcome comments from our wise readers). But below are a few possibilities to...

    0
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    Gavekal Research

    Why Bond Yields Are Falling

    So much for the great rotation out of bonds. With the lone exception of Italy, ten-year G7 government bond yields have dropped to new lows for the year. And the simple average yield for all G7 bonds just made a new all-time low of 1.92%. Perhaps most crucially, US treasury yields have skidded to 1.75%, decisively below the critical level of 1.84%—which served as a resistance last year and then, thus far this year, a support (see chart). We see...

    0
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    Gavekal Research

    Riding A Bull Market With No Conviction

    The Irish poet WB Yeats wrote, “The best lack all conviction, while the worst are full of passionate intensity.” We see something similar in equity markets. With the S&P 500 on Tuesday hitting a new all-time high, we clearly remain in bull market territory. Central bank easing measures such as that just announced by the Bank of Japan mean we could push higher. And yet we see plenty of evidence that these new peaks have come on the back of...

    4
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    Gavekal Research

    Beyond The Sequester

    Newspaper headlines are focused on the sequester, but we are more interested in the recent positive developments in the private sector. After all, it is the private sector that truly drives the economy forward over the long run, not the government.

    1
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    Gavekal Research

    Is US Housing Cheap, Really?

    US homebuilder stocks were hit especially hard last week by the revelation that some Federal Reserve policymakers want an early end to quantitative easing. Such an investor response makes sense given that the US housing recovery has been fuelled by super low mortgage rates, so any “exit” from easy money must be a big negative. Follow this logic a little further and a thornier question is whether US housing, after an approximate 25% price decline...

    2
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    Gavekal Research

    The Fed In The Red

    QE3 has been dubbed “QE Infinity” because it does not have an expiration date. But a growing constituency at the Federal Reserve now appears to be asking whether a third quantitative easing program was one too many. According to the minutes of January 29-30 FOMC meeting, released yesterday: “A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or...

    8
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    Gavekal Research

    US Consumers: Death By Taxes?

    A slew of tax increases went into effect in the United State on January 1st, raising concerns that the death of consumption will follow. Nearly all US consumers will be affected—either by the 2 percentage point increase in the payroll tax, the 4.6pp rise of the top marginal tax rate, the new Medicare surtax, higher capital gain and dividend taxes, etc. Without a doubt, this is a significant headwind for US consumption. But there are two major...

    8
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    Gavekal Research

    US Dipping Into Recession? Not Yet

    US GDP just contracted for the first time since the 2007-09 recession. It was a mere –0.1% decline, but this is still rather unsettling given there is only one example to be found over the last 50 years, in 1977, when US GDP growth dipped below zero without marking the start of a recession. And yet markets shrugged off this shocking news—as they should have. Behind the poor headline number, the components indicate that underlying domestic growth...

    4
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    Gavekal Research

    Europe's Goldilocks LTRO Scenario?

    3
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    Gavekal Research

    The Big Cap Effect Is Not About To Ebb

    Small firms, and very often newly formed endeavors, have long fuelled job growth in the US. Indeed, it has become axiomatic in public discourse that the business of America is small business. Hence, a reduction in the number of startups and the tendency for small firms to employ fewer workers has sparked a predictable blame game: those with a “declinist” view contend that the US is losing its innovative edge, mainstream economists point to...

    4
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    Gavekal Research

    A Pulse From US Manufacturing

    Maybe the patient lives. 2013 has already started to deliver early indications that we are indeed at an inflection point in global growth. Canada reported yesterday that its Ivey PMI rebounded to an expansionary level of 52.8 in December, from 47.5; respondents to Germany’s IFO survey of business expectations (highly correlated to German exports) has risen for two straight months. And while less obvious, US data is also beginning to stir. Recent...

    0
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    Gavekal Research

    US Seminars: Charles & Anatole Debate, Plus Francois, Will, Nate and Tom

    We sent a big gang to Boston and New York for our pre-Christmas seminars this year. Charles and Anatole debated on Keynesianism and the true scope of government participation in OECD economies. Francois explained his nearly singular view within GaveKal that European growth is set for take-off (at least in some parts). Will Denyer examined the shifting drivers of the US economy. Nate looked at why shale gas has not taken off in China, and Tom...

    0
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    Gavekal Research

    A New Threat To The US Recovery

    Improvements in the US domestic sector have raised hopes that the US will pull the global economy out of its current funk. But what if the cycle is working in reverse—with weakness beyond American shores feeding back to undermine the nascent recovery at home? After 37 straight months of growth, employment in US manufacturing contracted in November for the first time since 2009, according to ISM. This raises the concern that weak growth in the...

    0
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    Gavekal Research

    Bernanke Turning Hawkish?

    Fed Chairman Ben Bernanke rattled markets yesterday when he explained why the potential growth rate of the US economy appears to have declined while the structural unemployment rate has risen. The initial reaction from equity markets was negative, for an obvious reason: If the chairman is now raising his target unemployment rate, this implies a shorter shelf-life for extremely easy monetary policies.

    0
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    Gavekal Research

    US Tax Changes In A Brave New World

    It is a common complaint that US corporations are sitting on exceptional piles of cash, while the domestic economy experiences lackluster growth in capital spending and employment. With weak growth comes lower tax revenues. As such, policymakers are looking at new ways to raise revenues from corporates and from individuals (mostly the wealthiest). But we live in a “Brave New World” of global operations, fragmented supply chains, and light,...

    3
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    Gavekal Research

    Four More Years

    The American electorate may share the same national bed, but they have vastly different dreams. Our take on the election’s significance is similarly bifurcated—a cathartic political cleansing allowing for a deal on the fiscal cliff (Anatole) to disaster (Charles). Arthur asks whether the Republican Party can win nationally without reconciling itself to America’s changed demographics and the realities of the new knowledge-intense economy. Will...

    5
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    Gavekal Research

    US Recovery Under New Leadership

    Friday’s 3Q GDP report tells a simple story about the US economy—namely that the recovery has come under new leadership. Step aside manufacturing and exports, enter US housing rebound.

    8
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    Gavekal Research

    US Tech: The Modern Day Safe Haven

    3
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    Gavekal Research

    The Fed's Money Tree

    QE3 has set off a debate not just over whether this is good or bad (most here agree it is bad) but on what are the short– vs long-term effects on economies as well as markets. Louis and Charles make the contrarian argument that open-ended and more aggressive quantitative easing will ultimately take away, rather than add, to global liquidity, and warn that investors should prepare for a dollar crisis further down the line. Anatole and Francois...

    8
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    Gavekal Research

    More Liquidity May Burst The Dam

    Whatever else you may think of Ben Bernanke you cannot accuse him of obfuscation—QE3 was telegraphed in his Jackson Hole speech and yesterday the Federal Reserve delivered with a promise to buy $40bn of mortgage backed securities a month while allowing its curve-flattening treasury purchase program (Operation Twist) to expire as planned in December. The short term impact on risk assets is fairly clear; what worries us is the longer term...

    10
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    Gavekal Research

    QE3: Now Or Later?

    4
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    Gavekal Research

    US Housing: It's The Inventory Stupid

    Here’s a conundrum for any economy watcher. The US housing recovery has gathered steam during 2012, and yet the broad economy remains weak as was highlighted by Friday’s 2Q12 GDP release which put growth at a measly 1.5%. So what gives?

    6
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    Gavekal Research

    The Next American Revolution

    Our little firm has spent much of the last decade telling investors to look east. Asia has thrived on the back of cheap labor which has cemented its status as an industrial powerhouse. But as countries such as China seek the good life, pushing incomes and consumption higher, other economies will be better placed to compete. We are increasingly convinced that the defining comparative advantage of the next decade will be having access to the...

    10
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    Gavekal Research

    ZIRP Goes To Europe

    Central banks have set the bar high for what is now considered “major monetary easing”. A bread-and-butter 25bp rate cut no longer qualifies, at least not usually. But last week the ECB not only cut the rate at which it lends to banks by 25bp to 0.75%, it also chopped the rate it pays on deposits by 25bp—to zero. The move focused attention on Mario Draghi’s assertive approach to policy, especially amid signs that deposits are fleeing the ECB....

    3
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    Gavekal Research

    No Environment For A Rerating

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    Gavekal Research

    A Big Week For US Growth Data

    This week will deliver some potential market-moving data releases from the world’s largest economy. The Institute of Supply Management’s manufacturing PMI is released today, the ISM non-manufacturing PMI and ADP’s private employment estimate Thursday, and official payrolls Friday. Unfortunately, a number of the early signs do not look good, especially in manufacturing.

    1
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    Gavekal Research

    Oil And Equities Part Ways?

    Oil and equity prices have risen and fallen in tandem since the market recovery started in March 2009. This was based largely on changes to the growth outlook and risk appetites (with the turns often marked by monetary or fiscal policy changes). But these two markets have not always exhibited such a strong correlation. This leaves open the question of when this relationship might break down: was it June 2012? After all, oil is now down -12% MTD...

    0
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    Gavekal Research

    Fed's Inflation Complacency Points To More Easing

    While we may not like it, the odds have risen that the Federal Reserve will provide additional monetary stimulus. This could take the form of longer rate guidance, an extension of Operation Twist, or even QE3, and could come as soon as next week’s FOMC meeting. The odds have risen for two reasons: 1) Vice Chair Janet Yellen says so, and 2) medium-term inflation expectations have slipped.

    1
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    Gavekal Research

    Staring Into An Abyss, Tax Rises Stare Back

    0
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    Gavekal Research

    Please-No More Liquidity Fixes--by Will Denyer

    As we hear talk of a global central bank coordinated action to solve Europe’s market malaise, we have to ask, to what purpose? Large liquidity injections once served to keep Europe’s financial system alive until the continent’s economies sputtered back to life. The problem is, this never happened. Now the ECB’s substantial liquidity programs instead serve the purpose of providing leaders more stall time before acting. The monetary union is...

    4
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    Gavekal Research

    US Corporate Profits: On The Roof Or In The Stratosphere?

    One of the biggest weights on US equity prices is, ironically, record profits. Based on the maxim that nothing good lasts forever, the fear is that record margins will inevitably be taken down a peg. A popular way to illustrate the situation is to show corporate profits’ “share” of gross national income (product). As the red line in the first chart below shows, the corporate profits to GNI ratio has gone through the roof recently. Many...

    20
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    Gavekal Research

    US GDP: Soft But Steady As She Goes

    Friday’s US GDP report offered bulls mild disappointment and raised concerns that the recovery is a sub-par affair. First quarter growth was 2.2% compared to expectations of 2.5% and a 3.0% expansion in the last quarter of 2011. The dull economic numbers contrasted sharply with what we are seeing in corporate earnings—75% of reported earnings thus far have beat expectations, with earnings up on average by 6.7% QoQ, or an annualized rate of +27...

    1
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    Gavekal Research

    Fiscal Cliffs And Political Guardrails

    5
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    Gavekal Research

    Markets Question Liquidity Flow

    The last few days remind us that markets are made at the margin. Central bankers are still far from being restrictive, or hawkish. But there has been a marginal shift in rhetoric from “aggressively dovish” to “reluctantly dovish”—for example, the ECB’s expressed concern about rising inflation after deciding to hold policy rates, while the Federal Reserve’s recent communiqué highlights growing reluctance within the FOMC for further monetary...

    0
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    Gavekal Research

    New Century, New Labor Market

    Stronger employment numbers and a falling jobless rate over the past several months have spurred hopes that the US economy is finally on the path to a broad-based recovery. The latest good news came from payroll processor ADP, which estimates that 216,000 new private sector jobs were created in February, bringing the 4-month moving average to 220,000 jobs a month, the highest rate of this cycle. The strong employment numbers support our call...

    9
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    Gavekal Research

    Sterilized QE?

    A WSJ article which quoted unnamed Fed officials as weighing another “novel bond-buying move” has unsurprisingly received a lot of attention. Any reader who glanced through our latest QSCB: The Global Bond Yield Conundrum, will know we think the US needs another round of QE like it needs a hole in the head. But the form of sterilization discussed in the WSJ article is actually long overdue, and could very well be implemented without further bond...

    2
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    Gavekal Research

    QSCB: The Global Bond Yield Conundrum

    2
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    Gavekal Research

    US Deleveraging: Still A Long Road Ahead

    It is three years since the nadir of the financial crisis that brought the US household credit boom to an abrupt stop. After the collapse in asset prices sent leverage ratios into the stratosphere in 2009, US consumers have been gradually reducing their debt; meanwhile the recovery in equity markets has done even more to bring leverage ratios back down. But US consumers have a lot more deleveraging to do. At best, household leverage is only...

    12
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    Gavekal Research

    Less Gov't, More Private Growth

    8
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    Gavekal Research

    The ECB’s 489 Billion Euro Christmas Gift

    After much anticipation, 523 banks tapped the ECB for €489bn of its new 3 year loans-significantly exceeding market expectations closer to €300bn. This confirms our initial take that this new facility, with longer duration loans and easier collateral requirements, is a major development. But what exactly does it accomplish?

    0
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    Gavekal Research

    Daily - Further Signs of a "Two Speed" US Economy

    The latest data from the US is comforting in two ways. First, with the shadow that Europe’s unresolvable crisis is casting over the global economy, any offsetting role that the US can play is obviously welcome. Second, the jobs data from the US fit the pattern of a “two-tiered” economic recovery; in other words, one which is led by the non-leveraged sectors (see our latest monthly chart book, USA: A Two-Speed Economy). This is crucial because...

    0
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    Gavekal Research

    Daily - US Swaplines: What a Difference a Few Basis Points Make

    It would be easy to write off this week’s news on USD swaplines as a bit of technical trickery aimed at boosting market sentiment without any real costs. In fact, the adjustment to the Fed’s swap facility changed the very nature of the program in a way that greatly enhances its significance in today’s global financial environment. At the prior cost of 100bp over OIS, the USD swaps were analogous to high-deductible, catastrophic insurance—only to...

    3
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    Gavekal Research

    The ECB Is Already Doing QE, Its Own Way

    The current pleas for the ECB to start “quantitative easing” often miss one important detail: the ECB is already conducting QE, in every way but in name. The two core elements of what is commonly referred to as QE are: 1) the expansion of the asset side of a central bank’s balance sheet, well beyond what is required to simply target short-term policy rates and with the aim of easing credit conditions; and 2) the expansion of a central bank’s...

    1
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    Gavekal Research

    The Fed's Exposure to Interest Rate Risk

    It goes without saying that the bold policy measures by the Fed and the ECB have increased risks for both central banks, and in turn both of their currencies. But the risks taken on each side of the Atlantic are very different in nature. The ECB is primarily vulnerable to “balance sheet risks” stemming from increasingly suspect outright holdings and collateral (see today’s Daily). This is a real concern in today’s environment of weakening EMU...

    0
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    Gavekal Research

    Daily - Looming Balance Sheet Risks for the ECB

    Lately, as the EMU crisis intensifies, many of our clients have wondered when the ECB is going to get serious and start actual quantitative easing? Our first response to this question is that, semantics aside, the ECB has already effectively done €260bn worth (or $350bn) of QE thus far, and that figure is growing every week. This of course pales in comparison to the Fed’s QE operations of closer to $2 trillion. And given what is happening in EMU...

    0
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    Gavekal Research

    Monthly Strategy Chart Book - USA: A Two-Speed Economy

    In the short term, it looks like the US will avoid recession once again. But there is the risk that the recovery could prove fairly anemic or short lived. The bigger question is what are the structural sources of growth that can get the US back on track to its long-term average growth rate of 3% plus?

    0
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    Gavekal Research

    Daily - A Two-Speed Economy in the US?

    Our regular readers will know that we have argued recently that the current rally is largely dependent on US economic performance, since Europe’s crisis is not going to be solved anytime soon. On that basis, Friday’s reports of mixed and lacklustre data for US employment may not seem overly confidence-boosting. The household survey showed the unemployment rate unexpectedly ticked down from 9.1% to a six-month low of 9.0% in October; but the...

    0
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    Gavekal Research

    Is the ECB Aiming for 'Stealth Cut' to 0.75%?

    Recent moves by the ECB are more significant than some may realize, and could prove significantly bearish for the Euro/USD as excess liquidity is flooded into the system by the end of the month. And yet the Euro has risen since the ECB announcements on October 6th, likely for the following reasons:

    0
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    Gavekal Research

    The US Needs Brent Below $90 and Gas Below $3

    Dark clouds loom—as US data teeters on the edge of recession territory, the EMU struggles to remain united and avoid its own recession, and Beijing continues to rein in credit growth despite evermore fears of a ‘hard landing’. But the silver lining to these dark clouds may be the resulting softness in oil prices. Along with developments in Libya, China tightening and lower global growth outlooks have killed the momentum in oil prices. But what...

    0
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    Gavekal Research

    This is Not 2010: The Context of this Fed Meeting

    As the Fed sits down to discuss monetary policy options, the environment seems, at least on the surface, to bear an uncomfortable resemblance to the 2010 “soft patch”, which of course brought us QE2. Indeed, regional manufacturing surveys have plummeted to levels that incite double-dip fears, while national data such as the manufacturing and services ISMs, factory orders and industrial production have also rolled over and now hover uncomfortably...

    0
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    Gavekal Research

    Central Banks Prepare for a Potential USD Squeeze

    When the Fed announced plans for US Dollar loans to a number of global central banks at last week’s meeting of finance ministers in Poland, it was easy to see this as confirmation that the long-awaited Dollar crunch was now upon us. Yet, while the USD has risen some recently, it has not yet shot up in the fashion of the late 2008 Dollar short squeeze. Likewise, USD LIBOR rates and spreads have ticked up some, but remain quite low, especially...

    0
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    Gavekal Research

    The Swiss Version of QE

    How far is the SNB willing to go to defend its new ceiling of 1.20 Francs per Euro, and for how long? The short answer is that, assuming the Euro remains, the SNB will likely defend the ceiling aggressively, so long as this is consistent with the SNB’s desired domestic monetary policy stance. Here is why...

    0
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    Gavekal Research

    A Big Week for the Euro

    Our readers know we have long been structurally cautious on Europe’s single currency, due to its significant design flaws. These flaws have of course come to the forefront in recent years, and yet the Euro has pushed higher (in nominal terms and on a PPP basis). Our best explanation for this Euro resilience is twofold: 1) The fiscal/political situation in the US has recently looked just as bad, if not worse; and 2) the ECB did not loosen as...

    0
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    Gavekal Research

    Daily - The ECB's Stealth Rate Cuts

    This week there seems to be an inordinate amount of focus on what Ben Bernanke might say at Jackson Hole on Friday, and whether we are due for another round of QE from the Fed. However, the real news on central bank policy actually comes from across the pond: not only has the ECB been more aggressively buying assets of distressed sovereigns as part of its “solvency management” policy, but significant liquidity provisions have resulted in stealth...

    0
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    Gavekal Research

    The Good & the Bad in Recent US Money Growth

    In the US, M2 has swung from a weak +1.5% YoY growth rate in mid-2010 to a frothy +10.2% today. And this is not due to a low base effect; M2 has grown at an annualized rate of +42% in the last month! This has raised quite a few eyebrows and we have received several questions on this topic. Should we be excited or cautious, in view of these impressive moves in money supply growth? Our answer is, well, both:

    0
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    Gavekal Research

    Daily - More Ugly Currencies Will Not Help

    Underlying the current market turmoil is a decline of confidence in the two main reserve currencies of the world, the USD and the Euro. While this may not yet be characterized as a fiat currency crisis, serious questions have clearly driven many to diversify into other fiat currencies (the CHF, Yen, AUD…), or move completely out of fiat currencies into zero-duration assets (gold, silver, fine wines…). This has driven the prices of these “...

    0
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    Gavekal Research

    Why We Have Not Seen a US$ Squeeze This Time

    As the last few days have made painfully clear, markets face a level of uncertainty that is high even on today’s standards. But one question that most investors (ourselves included) are struggling with is why, in this uncertain environment, the US$ is not faring better? Indeed, in recent months we have repeatedly laid out the case for of an international US$ Liquidity Crisis. This was largely based on the observation that the growth rate of US$...

    0
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    Gavekal Research

    A Review of Ben Bernanke's Latest Speech

    We received a number of questions on Ben Bernanke’s speech yesterday. Below is Will’s take on it:

    0
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    Gavekal Research

    Daily - Weaker EMU Data and Shakier Euro Fundamentals?

    After the last ECB meeting, the central bank ECB signaled that it would hike rates at tomorrow’s meeting (by using the “vigilant” phrase), in an attempt to pressure EMU CPI rates back down from the current +2.7% toward the ECB’s single medium-term target of +2%. In all likelihood, Jean-Claude Trichet will carry through with his promise (or threat). Yet we cannot help but wonder if he wished he had kept his intentions to himself, as recent...

    0
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    Gavekal Research

    The US$-Euro From Here

    In recent years, the USD’s path of least resistance has been lower, except at times of crisis and financial market stress. And undeniably today, a number of potential “fat tail-risks” could shake markets. These include another flair-up in the EMU crisis, a crisis in one of the several countries around the globe currently exhibiting a high combination of trade and budget deficits (see p. 35 of our Quarterly), a shortage of Dollars abroad to...

    0
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    Gavekal Research

    QSCB - 3Q11 - Life After QE2

    Many of the key risks in global financial markets can ultimately be linked to the Fed's enthusiasm for printing money (which even, to some extent, exacerbates the Euro crisis). Thus, the end of QE2 in June will likely bring the world economy to a cross-roads. For this reason, we have decided to focus our latest Quarterly on what the end of QE2 should entail.

    0
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    Gavekal Research

    A Roadmap For The Coming Changes In Fed Policy

    Following a typically anticlimactic FOMC statement, Ben Bernanke recently held his first post-meeting press conference ever and reviewed what the next steps in America’s unorthodox monetary policy might be. Will US monetary policy continue to weigh on the Dollar and support the already elevated Euro, commodity prices, commodity currencies, etc.? Or will the end of QE2 in June mark a change in trajectory for financial markets? Today, most market...

    0
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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...

    0
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    Gavekal Research

    A Catalyst for a Structural Shift in Japanese Trade?

    The 2001 recession was followed by a ‘jobless recovery’ in the US—at least in the US manufacturing sector, where basically all of the layoffs occurred (see chart). That jobless recovery was soon followed by another sharp decline, courtesy of the Great Recession. In a lunch we attended last week, Yale’s Dr. Peter Schott explained that leading up to the 2001 recession, the seeds were already sown for a wave of outsourcing of relatively low-end,...

    0
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    Gavekal Research

    QSCB - 2Q11 - A Structural Turning Point for Markets?

    We would first like to offer our readers an apology: not only are we publishing our Quarterly Strategy Chart Book just 24 hours after the publication of our China Economic Quarterly (with can't miss articles on alternative energy, insurance, RMB deregulation, Mongolia, and the property slowdown), but this quarterly is long as well: a full 74 pages!

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    Gavekal Research

    The ECB Hikes Rates Without Making Headlines

    Whether Fed and the ECB move together, or apart, matters greatly to forex rates. Bernanke and Trichet both responded to the global crisis by flooding their banking systems with excess reserves, thus driving overnight interbank rates down near their respective ‘floor rates,’ the rate paid by central banks for deposits of excess reserves. With the floor rate set at 0.25% in both systems, the short rate spread thus became negligible. However, one...

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    Gavekal Research

    GaveKal Daily - Signs of Returning Pricing Power

    Six months ago, the US was experiencing a ‘soft patch’ that many feared would turn into a ‘double dip’ recession. And with core price measures already quite weak, there were renewed fears of a deflationary spiral. Inflationary expectations according to TIPS were falling fast. In response, the Fed stepped in aggressively, providing QE1.5 in early August, and then talking up QE2 in late August. Inflation expectations started to recover, and are...

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    Gavekal Research

    A Quick Review of US Job Growth in 2010

    Going into 2011, the odds seem to be that the US$ will come out on top of the next round of the ugly contest between the euro, yen and pound (see The UK in 2011); if only because the current momentum of US economic growth should lead the Fed to soon start managing expectations about how much longer its extreme case of monetary incontinence can last (see Easy Money, Easy Fiscal…but For How Long?).

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    Gavekal Research

    It's Never a Good Time for Price Floors, Even Wages

    This document is part of our old archive. It was published on 2010-11-22.You can download it here: GKFiveCorners1011224.pdf

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    Gavekal Research

    QE2 - The Fifth Phase of the Fed's Crisis Response

    This document is part of our old archive. It was published on 2010-11-01.You can download it here: GKAdHocComment1011011.pdf

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    Gavekal Research

    Why QE Has Not Stopped the Yen's Ascent

    This document is part of our old archive. It was published on 2010-10-12.You can download it here: GKDailyReport1010122.pdf

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    Gavekal Research

    Some Real Improvements in US Personal Income

    This document is part of our old archive. It was published on 2010-09-06.You can download it here: GKFiveCorners1009064.pdf

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    Gavekal Research

    Lessons From Bernanke's Testimony

    This document is part of our old archive. It was published on 2010-07-26.You can download it here: GKFiveCorners1007261.pdf

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    Gavekal Research

    China Does Not 'Generally' Export Inflation

    This document is part of our old archive. It was published on 2010-07-12.You can download it here: GKFiveCorners1007122.pdf

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    Gavekal Research

    Quarterly Strategy Chart Book 3Q10 - The Great Rebalancing

    This document is part of our old archive. It was published on 2010-06-10.You can download it here: GKQuarterlyStrategy1006101.pdf

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    Gavekal Research

    The Collapse in M2 Growth

    This document is part of our old archive. It was published on 2010-06-01.You can download it here: GKFiveCorners100601.pdf

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    Gavekal Research

    The Fig Leaf Comes Off

    This document is part of our old archive. It was published on 2010-05-17.You can download it here: GKFiveCorners1005178.pdf

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    Gavekal Research

    Quarterly Strategy Chart Book 2Q 2010- The Return of Country Risk and What It Means

    This document is part of our old archive. It was published on 2010-03-03.You can download it here: GKQuarterlyStrategy1003031.pdf

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    Gavekal Research

    China's UST Sell-off: A Political or Cyclical Event?

    This document is part of our old archive. It was published on 2010-02-22.You can download it here: GKFiveCorners1002222.pdf

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    Gavekal Research

    Will This be a Jobless Recovery?

    This document is part of our old archive. It was published on 2010-02-08.You can download it here: GKFiveCorners1002085.pdf

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    Gavekal Research

    Bernanke & Trichet's Monetary Policy Experiments

    This document is part of our old archive. It was published on 2010-01-11.You can download it here: GKFiveCorners1001113.pdf

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    Gavekal Research

    The Fed Won't Raise Its Target Rate Until It Can Hit It

    This document is part of our old archive. It was published on 2009-12-15.You can download it here: GKAdHocComment091215.pdf

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    Gavekal Research

    Profits as a Leading Indicator

    This document is part of our old archive. It was published on 2009-11-17.You can download it here: GKFiveCorners0911172.pdf

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    Gavekal Research

    The Culture Code

    This document is part of our old archive. It was published on 2009-11-17.You can download it here: GKFiveCorners0911173.pdf

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    Gavekal Research

    DRAM Wars

    This document is part of our old archive. It was published on 2009-10-12.You can download it here: GKFiveCorners0910122.pdf

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    Gavekal Research

    The Fed's Exit Strategy

    This document is part of our old archive. It was published on 2009-09-07.You can download it here: GKAdHocComment0909071.pdf

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    Gavekal Research

    Measuring Risk in an Era of Big Government

    This document is part of our old archive. It was published on 2009-08-24.You can download it here: GKFiveCorners0908245.pdf

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    Gavekal Research

    Enter the Highest Minimum Wage Since 1983

    This document is part of our old archive. It was published on 2009-07-29.You can download it here: GKFiveCorners090729.pdf

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    Gavekal Research

    The Great Moderation Depends on Flexible Labor

    This document is part of our old archive. It was published on 2009-06-30.You can download it here: GKFiveCorners0906307.pdf

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    Gavekal Research

    Why is Broad Money Still Soaring, in a Credit Crisis?

    This document is part of our old archive. It was published on 2009-06-17.You can download it here: GKFiveCorners0906175.pdf

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    Gavekal Research

    The Great US Consumption Binge Was All Healthcare

    This document is part of our old archive. It was published on 2009-06-01.You can download it here: GKFiveCorners0906014.pdf

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    Gavekal Research

    Where to Stand When the Debt Gets Monetized

    This document is part of our old archive. It was published on 2009-05-18.You can download it here: GKFiveCorners0905187.pdf

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    Gavekal Research

    The Belated Bust in US Manufacturing Capacity

    This document is part of our old archive. It was published on 2009-04-07.You can download it here: GKFiveCorners0904071.pdf

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    Gavekal Research

    The Yen's Current Driver--Economic Growth

    This document is part of our old archive. It was published on 2009-03-24.You can download it here: GKFiveCorners0903245.pdf

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    Gavekal Research

    Tech-A Call Option on Growth

    This document is part of our old archive. It was published on 2009-03-10.You can download it here: GKEquityMarkets090310.pdf

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    Gavekal Research

    Starting the Printing Press in Earnest

    This document is part of our old archive. It was published on 2009-01-09.You can download it here: GKLiquidityGrowth090109.pdf

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    Gavekal Research

    Limited Upside, Unlimited Risk

    This document is part of our old archive. It was published on 2008-12-23.You can download it here: GKBondMarkets081223.pdf

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