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Why China cares about Japan’s negative rates

Why China cares about Japan’s negative rates

By Frances Coppola originally posted at Coppola Comment Japan has just introduced negative rates on reserves, following the example of the Riksbank, the Danish National Bank, the ECB and the Swiss National Bank. The Bank of Japan has of course been doing QE in very large amounts for quite some time now, and interest rates have been close to zero […]

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My thoughts on the US Q4 2015 GDP numbers

My thoughts on the US Q4 2015 GDP numbers

The US economy is not in a recession right now and the latest numbers on US GDP confirm this view. And while the headline growth number was weak, the consumer spending and personal income numbers are supportive of 2%ish growth into 2016. Some brief comments below U.S. GDP growth came in at a very weak 0.7% annualized pace for Q4 […]

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Is there a US Goldilocks scenario possible for 2016?

Is there a US Goldilocks scenario possible for 2016?

The jobs report today was a strong one, underscoring the ability of the US economy to power through. Am I uneasy about where we are in the economic and credit cycle and the accuracy of the Fed’s forward guidance? Yes – and I tend to think most of the risk is to the downside. Even so, there is a Goldilocks scenario […]

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The Saudis as the driving surplus oil producer

The Saudis as the driving surplus oil producer

As Brent crude hits 11-year lows, it’s worth thinking about why it is so low and what the likely outcomes will be. Warren Mosler has a view I think works regarding the Saudis as swing producer, targeting quantity instead of price and I want to run this concept by you to understand where this is headed. I believe oil is […]

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The Fed rate hike and the potential for US recession

The Fed rate hike and the potential for US recession

I am uneasy about where we are in the economic and credit cycle and the accuracy of the Fed’s forward guidance. I think we are above stall speed now. But I also think global policy divergence, slowing earnings growth and poor capex numbers could combine to bring on recession in 2016.

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When market contagion occurs, this is how it will happen

When market contagion occurs, this is how it will happen

Editor’s note: This post was originally published yesterday at Credit Writedowns Pro. I have been pretty sanguine about the markets and the US economy. Yes, the commodities complex is worsening, but that doesn’t mean this feeds through enough into other sectors to force the market down. And the real economy isn’t at stall speed yet either.We just aren’t there yet. Nevertheless, […]

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Asset allocation in a period of wealth mean reversion

Asset allocation in a period of wealth mean reversion

Mean Reversion of Wealth is one of the six structural mega-trends that we have identified. As is pretty obvious when looking at chart 2, wealth creation during the great bull market of 1981-2000 was quite extraordinary and, in our opinion, unlikely to be repeated anytime soon. Wealth simply cannot outgrow GDP indefinitely, as it has done in most years since the early 1980s. It is only a question of time before mean reversion kicks in.

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The mess in Portugal is negative for debt sustainability

The mess in Portugal is negative for debt sustainability

Portugal’s election on 4 October was inconclusive, without any party winning an absolute majority of the votes. The President of the country, a former Prime Minister, allowed his own party, led by incumbent Prime Minister Pedro Passos Coelho to form a new minority government as has been done in the past. However, the way he has gone about doing so has created a controversy, which has made Portugal the new focal point of the still virulent European sovereign debt crisis. While I don’t think this is a coup by any stretch, as some are saying, I do think Portugal has a tough road ahead regarding debt sustainability.

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Jensen: How long bonds could actually outperform equities

Jensen: How long bonds could actually outperform equities

Editor’s note: This was originally published by Absolute Return Partners in late August. So we are a little late in releasing it. Apologies. It is still good reading. The Absolute Return Letter, August/September 2015: Doodles from an eventful summer “There is something deeply troubling when the unthinkable threatens to become routine.” Bank for International Settlements Incidents of the summer 2015 […]

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Profit mean reversion and recession

Profit mean reversion and recession

Yesterday I retweeted an interesting tweet by Business Insider’s Henry Blodget which references an article on data compiled by Barclays on profit mean reversion and recession. The gist of the article is that a profits recession generally presages a real recession except perhaps to the degree the profit downturn is caused by the volatile oil sector. While I am not […]

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Credit Writedowns is ending paid subscriptions for now

For nearly four years now, Credit Writedowns has been run using a freemium model, with most of the content behind a firewall. But over the past two years, the amount of time I have been able to devote to the blog and newsletter has declined. This week, I have been unable to write an in-depth note on the economy and markets. And for some time now, I have not been able to keep up a regular schedule of posts. As a result, I have decided to end all paid subscriptions and make the Credit Writedowns Pro newsletter free.

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If we don’t understand both sides of China’s balance sheet, we understand neither

If we don’t understand both sides of China’s balance sheet, we understand neither

These debt-related shocks will occur regularly for many more years, and each shock will advance or retard the rebalancing process so that it affects the way future shocks occur. There are only a few broad paths along which the Chinese economy can rebalance, and if we can get some sense of the China’s institutional constraints and balance sheet structures, we can figure what these paths are and how likely we are to slip from one to another. In order to get Chinas right I would argue that above all we must understand the dynamics of debt, and of balance sheet structures more generally.

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