Videos

Chinese credit growth picked up in September, which is good news at the margin for private sector liquidity. However, a continued crackdown on shadow finance and private firms’ difficultly rolling over bond obligations will retard capital spending and lead to more bond defaults into next year.

Having inverted over the summer, the US yield curve has steepened sharply. In the past such a move has often presaged recession—but not always. Twice since the 1960s an inversion and steepening was not followed by recession. Then, as now, the return on invested corporate capital was higher than the cost of that capital.

For the past few years, US treasuries, the US dollar and the oil price have all broadly traded in a range. In fact, the only bankable trend for investors has been the outperformance of US equities, without which global stock indexes would still be trading at 2006 levels. However, there are signs that the investment environment is changing.

A tweet by the Reserve Bank of India caused a bit of a stir last week, saying that the “…Indian banking system is safe and stable and there is no need to panic…”. It was after a small regional bank had been effectively put into receivership. While this doesn't pose a systemic risk, it's another consequence of Indian banks’ decade-old bad loan problem.

Investors are nervous about weak US data and a liquidity squeeze in the US repo markets. They are now looking to the Federal Reserve for reassurance. In this video, Will tells us what policy changes to expect from the Fed at the end of this month and why.

Hong Kong’s leader Carrie Lam today begins a process of civic engagement aimed at bridging the divide between an unpopular government and a diffuse movement that has engaged in 17 weeks of violent protest. Simon discusses whether economic goodies can buy off dissent and assesses the chances of a compromise political settlement.

Washington views China as a strategic competitor, and the White House has promised a “whole of government” effort to constrain China’s development of key advanced technologies. Dan examines the three ways in which the US is making life difficult for Chinese tech companies, and explores other weapons the US could deploy should the tech war escalate.

This week’s sacking of John Bolton as White House national security advisor triggered a fall in the price of oil as traders concluded the notorious war hawk’s departure paved the way for a relaxation of US sanctions on Iranian oil exports. That may be unlikely; US officials insist their policy of “maximum” pressure on Iran remains in force.

Yesterday Italy’s new government took office, the 66th since 1946. Meanwhile, Italian bond yields have reached record lows. Nick attributes this to two factors. First the global bond rally. Second, the shifting winds of Italian politics away from the Euroskeptics to the Europhiles, which bodes well for Italian-European budget negotiations.

As yields fall to record lows, bond markets seem priced for some sort of global economic calamity. With Europe in dire straits and the US-China trade war remaining live, there is certainly cause for worry. But when things look like they can’t get any worse, Will reckons, they often don’t. As the US growth outlook appears steady, equities and cash are the better bet.

Excerpt From Anatole Kaletsky's Hong Kong Seminar Presentation

What is the best way to sort through the complexities of China’s enormous, continent-sized economy? In this presentation to our seminar in Hong Kong, Andrew argues that if you understand what’s going on in the housing market, then you know pretty much everything you need to know about the Chinese economy.

This is the full recording from Gavekal's October Hong Kong seminar featuring Joyce Poon, Andrew Batson and Anatole Kaletsky as well as a Q&A session.