Global View March 2016: Will A Lack of Borrowers End The US Dollar Boom?

by Michael J. Howell4. March 2016 15:18

Time to buy Gold?

A strong performance from gold bullion so far in 2016 hints that fundamentals may be finally turning against the US dollar. In fact, January saw the largest drop for three years in US private sector cash flow growth, and latest capital flow data appear to show a low in gross activity in late-2015. On top, some rebound in World Central Bank liquidity injections (i.e. QE) later in 2016 still seems likely in our view, given the weakness of wholesale market funding and the plain fact that, over the past year, both China’s PBoC and the US Fed have been unhelpfully tightening liquidity. Gold and (later) commodities are already our conviction investments for 2016. Moreover, flow data for the Aussie and Canadian dollars have coincidently turned positive. If our projections prove correct, expect a US$2,000/oz. gold price by mid-2017.

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Global View March 2016: The World’s Biggest Credit Bubble Meets the World’s Biggest Policy Error

by Michael J. Howell2. March 2016 13:47

The bear market in global risk assets is gathering pace. It follows in the wake of last year’s lurch downwards in Global Liquidity. Looking ahead, the two key issues are: (1) the collapse in China’s asset bubble, hastened by the PBoC’s tight policy response to the huge capital outflows, and (2) the latest Central Bank error of negative interest rates plus reverse repos. We reiterate our conviction that gold and US Treasuries will be 2016’s best asset choices.

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Global Liquidity Conditions (Liquidity) Emerging Markets, February 2016

by Michael J. Howell29. February 2016 14:57

The investment outlook remains challenging, with EM equities and forex markets likely to suffer heightened volatility. The low level of the broader GLI™ is consistent with future World economic weakness but it remains above the critical 30-level which has traditionally signalled World economic recession.

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Global Liquidity Conditions (Risk) Emerging Markets, February 2016

by Michael J. Howell29. February 2016 14:54

The Emerging Market component of our Global Risk Index fell to 74.5 in January 2016, its lowest level in two years and significantly below the recent peak of 91.4 a year ago. Not surprisingly, given recent events in markets, the single biggest contributor to lower overall risk was Exposure Risk which has plunged to 23.7.

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Global Liquidity Conditions Major Markets, February 2016

by Michael J. Howell29. February 2016 14:51

Weak liquidity points to volatile asset markets and future economic weakness. The US dollar bull market is likely to peak later in 2016. Gold looks an increasingly interesting alternative.

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Global View February 2016: Goodbye Global Liquidity... Hello Black Hole

by Michael J. Howell13. February 2016 12:46

Could this be the week when the World’s two most celebrated General Theories were proved correct? Keynes’ General Theory of Money and Einstein’s General Theory of Relativity. Both spell out the dangers of black holes. But whereas the risk of Earth disappearing into a cosmic black hole may be hypothetical, the liquidity black hole in global credit markets is here-and-now. Watch-out, we are being sucked in!

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Global View February 2016: What Do Negative Japanese Interest Rates Really Mean?

by Michael J. Howell8. February 2016 18:45

The Positives in Japan's Negative Rate Decision

Japan’s surprise shift to negative policy rates looks a carefully scripted attempt to deliberately weaken the Yen, possibly because policy-makers fear a much lower Chinese Yuan. Since this further delays what we see as an inevitable (Yen positive) fiscal policy easing, we now expect more near-term Yen weakness. Looking more broadly, the BoJ move signals that negative rates have become an acceptable policy-option and one that the US Fed could also embrace. A higher gold price may be the obvious winner from this general breaking of the zero lower bound (ZLB).

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Global Liquidity Latest, February 2016

by Michael J. Howell8. February 2016 18:43

 More Global Liquidity Troubles

The GLI™ (Global Liquidity Index) fell heavily again in January 2016 to 35.1 (‘normalised’ range 0-100) from 42.2 at end-2015. Liquidity is a leading indicator, predating the real economy by 12-15 months and financial markets by 6-9 months.

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Emerging Markets Latest GLI, February 2016

by Michael J. Howell8. February 2016 18:37

 Emerging Market Liquidity may be bottoming? 

The EMLI™ (Emerging Market Liquidity Index) sub-component of our GLI™ rose in January 2016 to 27.0 (‘normalised’ range 0-100) from 23.8 at end-2015. This EMLI™ rise contrasts with the slump in the overall GLI™ to 35.1, highlighting the worsening picture for the Developed Markets.

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Global Liquidity Conditions (Liquidity) Emerging Markets, January 2016

by Michael J. Howell26. January 2016 14:16

The Emerging Market Liquidity Index (EMLI), our forward-looking indicator of investment risk and future economic prospects, ended the year at a low 30.2, or barely changed on the month and only a tad higher compared to end-2014. The GLI™ (Global Liquidity Index) and the EMLI™ both warn of continued tough investment markets and slower economic activity ahead.

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