Thinking Outside Of The
Russ Koesterich thinks “the good news/bad news dynamics will get worse as the Fed rate hike draws closer. Watch out for greater amplification of this volatility…markets will probably see more peaks and valleys this year, but for investors with a long time horizon, remaining invested pays off.” Meanwhile, “the US, the UK and Japan all witnessed sharp equity market rallies when they launched quantitative easing (QE) programs. The exact same thing has happened in the euro area…equities may no longer be cheap. But we believe they still look relatively attractive when compared with regional sovereign bonds, which increasingly offer zero or negative yields.” Also, “the ECB’s elephantine sovereign bond-buying scheme is happening at a time when the big euro area countries have negligible borrowing needs. But euro area investors that need to own a lot of bonds — banks, insurers, and pension funds, to name a few — have to park their money somewhere. Nowadays, ‘somewhere’ increasingly means America, in the form of US corporates taking advantage of European desperation for yield…Whether any of this will actually boost investment in the single currency bloc is anyone’s guess, but at least US companies hurting from the stronger dollar can console themselves with the easier financing conditions.” Meanwhile, Ben Bernanke thinks “the availability of profitable capital investments anywhere in the world should help defeat secular stagnation at home. The foreign exchange value of the dollar is one channel through which this could work: if US households and firms invest abroad, the resulting outflows of financial capital would be expected to weaken the dollar, which in turn would promote US exports…Increased exports would raise production and employment at home, helping the economy reach full employment. In short, in an open economy, secular stagnation requires that the returns to capital investment be permanently low everywhere, not just in the home economy.” Meanwhile, “as developing countries grow more quickly, they will also have to grow more sustainably, [so] leaders in Portland are targeting rapidly expanding cities for exports of sustainable services. This brought them to Changsha…mayors of the two cities signed a trade partnership that will provide access to ‘green’ services for Changsha, while giving Portland firms a foothold in the challenging Chinese market.”
Also, John Hussman on eating our seed corn.
Also, Bill Gross on layups and fed funds.