Does the Fed understand QE? Over the time the Fed has been conducting QE, there has been and continues to be much talk of its failure to achieve its aims*. In this post, I'll look at those criticisms and ask why perhaps the Fed continues to conduct the same policy year after year despite openly...Continue reading
Given the title, this may seem a strange starting point. Bear with. The below is a chart of Tesla. Love it or hate it, it doesn't change the fact this company has seen stellar growth in its share price. The chart below shows a price increase from around $4 in 2010 to over $800...
This is more of a sci-fi type prediction of some dystopian society and hence hopefully very unlikely to play out for real! Here is how events may play out. There is a need for massive fiscal and monetary support whilst the virus is spreading; Governments and central banks work together to stimulate spending, round after...Continue reading
Whilst 2020 was a tough year for many, that does not mean 2021 cannot be even more extreme. Monetary policy will continue to be extremely easy throughout 2021 unless the virus is beaten back and inflation shows up very quickly. Whilst the Dems took both Houses, they do not have a majority that would allow...
Bitcoin rose above $28,000 today. It seems to be gaining wider acceptance in the traditional finance community. If it is to become an accepted asset class, it has only just started the journey and hence its price is likely to see continued gains. Unfortunately, Darwinex no longer supports cryptocurrency so I cannot add to my...Continue reading
We are approaching the end of a very long tunnel. Volatility has re-emerged but is not anything like what we saw in March. See daily chart of S&P500 and 20 day historical volatility below. Historically, the Fed has always added stimulus when equities started to roll-over - it’s why they are in such...Continue reading
Jerome Powell's recent announcement of the change in Fed policy to target inflation at 2% on average was not a surprise. Powell has previously tried to communicate that the Fed is indifferent between missing on the upside as they are missing on the downside. This policy statement tries to build on those previous statements. The...Continue reading
This article aims to offer a solution to the weakness in consumption, productivity deficit and debt burden of the country. No small task. The answer I offer to our ills is to create an investment account for every voting member of society (i.e. they must vote, not simply be registered to vote). That investment account...Continue reading
Forefront in my mind over the next month is central bank policy and the narrative from Powell and other FOMC members from now up to and including their next meeting in September. Yields rose last week in reaction to signs of rising inflation. That then pushed down on the price of gold. The risk for...Continue reading
Yesterday saw a large sell off in gold and silver. Reasons for the fall were abound including rising inflation, increasing yields and the Russian vaccine approval. All of them valid reasons why gold and silver would fall after sitting in overbought territory for so long. But what has changed? The reason I hold gold is...Continue reading
LWE and SKI have held very similar positioning over the last couple of weeks. That reflects my view that the short and medium term opportunities are aligned. However, I expect as the Summer moves on we will see increased volatility due to fiscal incentives being reduced and the momentum trade on gold getting more overbought....Continue reading
When equities sold off in March the risk-off mode also took down gold and strengthened the US dollar. It was clear that investors were not positioned for such a downturn as they were forced to liquidate positions. Most recently however this correlation between equities and assets has broken down. As equities fell toward the end...Continue reading
Positive news for the Euro as after many days of negotiations EU leaders finally agree to 390 bn Euro of grants alongside loans of 360 bn Euro. Whilst EURUSD has gained to the high end of its recent range, the Euro has not outperformed other currencies than the dollar. I don’t think this level of...Continue reading
Have you had your free money yet? As a resident of Jersey, I've just been told I will receive £100 by September to spend in Jersey. Of course, it's not only me, every man, woman and child will receive a £100 by voucher or pre-paid card with an expected time limit of November before the...
Darwinex pivot First, a word on the Darwinex pivot changing their fee structure from commissions to performance and management fee. Overall I support the change since it allows Darwinex to focus on growing AUM and performance instead of encouraging trading turnover. What’s good for investors in all 3 Stokes Bay Darwins is that there is...Continue reading
You may have said to your kids, "no screens before midday". Then one busy day when you're too occupied to give it the necessary thought, your kids pick up a screen after breakfast and you say nothing. Then, over time as the event re-occurs, the rule without being spoken, gets re-written. What we all agreed...Continue reading
The narrative begins to switch from ‘return to work’ to trying to understand what the economy will look like in the weeks and months ahead. I think most people understand (and even the politicians admit) we are not returning to anything like normal in terms of economic activity. Even if we get a bounce...Continue reading
The debate continues amongst politicians and medics about how best to return the world to work. I don’t think we know enough about the virus to return in anything other than a slow and phased approach. What I do know is that wearing masks will become as accepted in the West as it is now...Continue reading
*you know as I write this, Trump keeps mis-speaking, talking about ‘billions’ and needing to correct himself to ‘trillions’ and that is a great introduction to the below. This week was not about the markets. Prices are not relevant right now. I am not thinking here that markets are not important. We are traders and...Continue reading
Every so often, we get an opportunity to reflect, rethink and perhaps reset. Covid-19 could be one great opportunity. Are we really happy with our lives and the way society conducts itself. If humans have one fault, it is that we share too much DNA with sheep. That is, we herd, we follow and lack...Continue reading
Bloomberg had a miserable debate showing this week and was taken apart by Warren. He may well spend far beyond the other candidates but he appears too easy to attack. Bernie is building a base - see the chart below - and with most of the other candidates in-fighting he may well emerge with most...Continue reading
Whilst the coronavirus will likely last at least a few more months and have a noticeable impact on global GDP, the economy will recover once the antidote is developed. Bernie Sanders on the other hand could be a long term problem for those wanting business as usual. A self-described 'democratic socialist', Bernie represents change in...Continue reading
The possible impeachment against President Trump was a remote chance but has ended sooner than the Democrats would have liked. It looks as if Trump is set to be acquitted in his impeachment trial after senators voted against calling witnesses or admitting new evidence. We can now expect him to focus on attacking Democrats and...Continue reading
The recent coronavirus outbreak and the negative market reaction is all part of the path to slower growth. Clearly, this outbreak could not be predicted but US 10 year yields have struggled to make any headway to reach 2%. The selling on Friday in equities and move into bonds was met with little resistance. Whilst...
Central banks have been expanding the money supply hoping to raise inflation to their arbitrary 2% target. The theory they are working from is that increasing money supply generates aggregate demand through encouraging lending and investment. The problem they face however is that money is not in short supply. Indeed there is too much money...Continue reading
The Fed and other central banks across the globe are printing more money. Even India is buying their government bonds at a sharper pace. The globe is monetising debt. That is to say, under this fiat money system, we are printing cash to spend on (currently) financial assets relative to producing assets and services. Governments...Continue reading
The majority of central banks focus on a 2% inflation target. In the developed world, we are experiencing inflation well below this level. I argue this is creating a debt spiral which is completely unnecessary if the true objective should be to increase GDP per capita and equality of income and wealth. Over the past...Continue reading
When a child misbehaves the best method is to correct their behaviour immediately, little and often. This keeps them 'honest'. Not doing so only enforces a message that misbehaviour is acceptable. Giving in to bad behaviour is even worse, it condones bad behaviour. As banks are required to hold reserves at the Fed under capital...Continue reading