Bloomberg TV: the Fed and Horse Buggy Repair Manuals
Wednesday, July 26, 2017 //
All central banks are trying to move forward by squinting into their rear-view mirrors. Market implications.
- Fed preview: decision due the next day. No change expected but what are your thoughts on the Fed movements this year? Latest speech from Yellen seems not so hawkish on a rate hike. What about the balance sheet?.
- Yellen turning out to be a fence-sitter, just like Theresa May-Be
- The Fed is basing it decision-making by driving with a rear-view mirror
- The Fed is trying to repair a Tesla with a horse buggy manual
- Other central banks: ECB exit on QE? BOJ not keen to follow normalization?
- The ECB and BoJ are equally at fault, driving with rear-view mirrors/repairing Teslas with horse buggy manuals
- Contrary to America’s cyclical recovery, Europe’s welfare museum and Japan’s ossified labour markets are stuck in securlar decline. This means that even if there is a cyclical upturn, it will be “deeply shallow”
- Views on the Asian markets and economies in 2H; what are your top investment themes?
- The key one has to be to start buying in to China. Economic Time® improving, esp. ahead of the 19th Party Congress.
- This means that HK is a buy, too: we are the water skier off the back of the Chinese speed boat!
- Any contrarian view?
- My big contrarian view has to be that the Fed risks policy overshoot: given its anachronistic lens through which it view the economy, it very much risks raising real rates too much in the States. These very well could choke-off America’s brittle “clicks instead of bricks” consumer recovery.
- Markets will sense this imminent slowdown and crash 4Q17-1Q18.
- Anything you wish to flag for discussion?
- The key to America has to be her brittle consumer recovery.
- Consumption is important in that it accounts for about ¾ of any economy’s growth.
- But “clicks are replacing bricks”: online shoppers already account for 10% of consumption and are attacking the well being of physical dept. stores and thus of shopping malls .
- This means that the traditional multiplier effects of private consumption are waning, removing yet another plank to US growth….