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Gavekal Research
Cedric Gemehl, Charles Gave, Tom Miller, Anatole Kaletsky
Apr 03rd 2019
London Seminar — March 2019
Cedric Gemehl examined the possibility of a European rebound; Charles Gave argued the world is splitting into three distinct monetary zones; Tom Miller presented on the state of the US-China trade talks and the health of the Chinese economy; Anatole Kaletsky examined the risks to the bull market, and arrived at a bullish conclusion.
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Gavekal Research
Udith Sikand
Apr 01st 2019
A Tactical Opportunity In Turkey
Turkey has long been a market to steer well clear of, with investment opportunities poisoned by toxic politics and an ever-depreciating local currency. However, with the US Federal Reserve adopting a more dovish stance and following the weekend’s municipal elections, Turkish lira assets may now offer an attractive tactical opportunity.
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Gavekal Research
Louis Gave
Mar 29th 2019
A Week Is A Long Time
Harold Wilson, the former British prime minister’s, quip that “a week is a long time in politics” has become an over-used cliche. Still, in the last week, there has been good reason to dust it off.
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Gavekal Research
Louis Gave, Charles Gave
Mar 29th 2019
Beyond The Yield Curve Inversion
The current yield curve inversion and softness in growth data are curious developments, given that the four prices that matter most for the global economy—long bond yields, corporate credit spreads, the oil price, and the value of the US dollar—are all relatively favorable. Louis and Charles weigh five different explanations for what may be going on—from bullish to highly bearish—and examine the investment implications.
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Gavekal Research
Cedric Gemehl
Mar 27th 2019
The Case For A Cyclical Pick-up In Europe
As of last week, short positions in European equities were deemed to be the world’s most crowded trade and recent news has not lightened the market mood. The question is whether such information is in the price, for any marked improvement in cyclical conditions may spark a strong rally.
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Gavekal Research
Nick Andrews
Mar 19th 2019
A New Era For European Banks
European banking stocks have been battered for much of the last four years by negative interest rates and a Brussels plan to impose market discipline through shareholder bail-ins rather than public bail-outs. This approach is now in question as Germany embraces a new industrial strategy that will rely on strong state-backed banks taking political direction.
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Gavekal Research
Louis Gave
Mar 18th 2019
A Marxist Take On The Gilets Jaunes
The "yellow jackets” still protesting in France have so far received only tepid support from the country's usually vocal trade unions. Similarly, left-wing parties have also been very slow to take to the street. This begs the question of what the oracle of the French intelligentsia, Karl Marx, would have made of this protest movement.
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Gavekal Dragonomics
Tom Miller
Mar 18th 2019
The End Of China's ODI Party
Beijing’s decision to use foreign acquisitions as a tool of state industrial policy has badly backfired. With advanced economies stiffening their resistance to Chinese investment, China’s decade-long outward direct investment spree looks spent. In this piece, Tom explains how the boom ended and where funds will flow in the future.
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Gavekal Research
Cedric Gemehl
Mar 15th 2019
The Trouble With Champions
When last Sunday, Angela Merkel’s heir-apparent published an opinion piece on the EU’s future, she left the door open to an EU industrial strategy and competition policy focused on creating European champions intended to compete in global markets. Such a policy may be attractive to politicians, but it is less appealing to investors.
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Gavekal Research
Anatole Kaletsky
Mar 13th 2019
The Brexit Impasse
Political commentators and European leaders are bewailing Britain’s descent into ungovernability after the UK parliament again rejected the new and supposedly improved Brexit deal. But markets reacted calmly. In fact, for investors, the seemingly chaotic Brexit saga is unfolding roughly along the bullish lines suggested here since early January.
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Gavekal Research
Charles Gave
Mar 12th 2019
The Locus Of Capital Destruction
Germany is going through one of its periodic bouts of angst as its industrial economy faces up to cyclical headwinds, unwanted structural change and the threat of protectionism. I too have concerns about the fate of corporate Germany, but would approach the problem from the perspective of an equity investor.
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Gavekal Research
Nick Andrews
Mar 08th 2019
When You're In A Hole, Stop Digging
The first law of holes states: when you are in one, stop digging. It’s sound advice, which central bankers would do well to heed. Unfortunately for Mario Draghi and his colleagues at the European Central Bank, things are not so simple. It is one of the quirks of negative interest rates that the longer rates remain in negative territory, the less accommodative policy becomes.
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Gavekal Research
Charles Gave
Mar 08th 2019
Not Modern, Not About Money, And Not Really Much Of A Theory
Charles has had enough of all the talk going round about Modern Monetary Theory. In this forceful polemic he lets fly with both barrels at the proponents of MMT, arguing that they have no knowledge of financial history, little understanding of the nature of money, and are clueless about what constitutes a theory.
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Gavekal Research
Charles Gave
Mar 07th 2019
Keynes Is Dead; This Is The Long Run
“In theory, there is no difference between theory and practice. In practice, there is,” Yogi Berra said. Take cutting interest rates as an example. According to Keynesian theory, reducing interest rates is a way to borrow from future demand in order to prevent a recession today.The theory is sound, but then comes the practice. And in Europe today, we are in practice up to our necks.
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Gavekal Research
Cedric Gemehl, Nick Andrews
Mar 04th 2019
A Potential Lifeline For Europe's Banks
As the members of the European Central Bank’s governing council prepare to meet in Frankfurt this Thursday, they face the unsettling possibility that their policy settings may risk compounding, rather than alleviating, the eurozone’s economic weaknesses.Unfortunately for members of the council who may be inclined to dither, doing nothing is not a viable option.
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Gavekal Research
Louis Gave
Feb 20th 2019
Three Odd Things
Reserves held by foreign central banks at the Fed are shrinking, which implies there aren’t enough US dollars in the system. This would make sense: the Fed has been draining excess US dollars for the past couple of years. So with shrinking central bank reserves and a shrinking US monetary base, the US dollar should be going up, and most risk assets should be hurting. Oddly, this isn’t happening.
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Gavekal Research
Anatole Kaletsky
Feb 19th 2019
The Biggest Investment Story Of 2019
Now that stock markets around the world have recovered from the year-end panic of December 2018, it is worth returning to the question I posed here on the first trading day of 2019: was the disappointing performance of equities and other risk assets in 2018 the prelude to a deep and protracted bear market, or a contrarian opportunity to “buy the dip”?
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Gavekal Research
Cedric Gemehl, Nick Andrews
Feb 14th 2019
What Europe’s Political Ructions Mean
European politics is again heating up. Yesterday saw the Spanish government fail to pass its budget in a move likely to spur fresh elections. Populists in Italy and yellow vests in France are keeping up their campaign of disruption. Given that few of these issues directly threaten the structures of the EU, the question for investors is: Does any of this matter?
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Gavekal Research
Nick Andrews
Feb 12th 2019
The UK's Limits To Growth
For the British economy, it has been a case of “mustn’t grumble” since the 2016 Brexit referendum. However, the effect of a weak fourth quarter GDP report was to debunk any illusion that Brexit uncertainty has been weathered. Such a reckoning was inevitable with or without Brexit, as the UK has in effect hit limits to its growth.
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Gavekal Research
Cedric Gemehl
Feb 11th 2019
Not Such An Ugly Duckling
A spate of weak data releases last week confirmed Europe as the ugly duckling of key economic regions, and things may soon get worse. The worry is that a weakening external sector negatively impacts the domestic recovery through lower investment and job creation at a time when policymakers face both technical and political constraints.
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