Hedge fund managers on President Trump’s economic policies

After Donald Trump won the presidential election 2016, the financial markets have reacted very dynamically, but investors also do not seem very determined about what the political shift would mean to the global markets.

Yet they would not be to blame, especially when even the world’s greatest hedge fund managers have diversified, different views. Some foresee rapid growth, whilst others still remain cautious. We introduce both in this article.

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President Trump could cut rates and restart QE to fight against secular stagnation

Donald Trump won the presidential election in 2016. Then the next question is: what does it mean to the financial markets? As Mr Trump plans to increase the federal debt to invest in infrastructure, the markets now expect high interest rates worldwide, but if you look at President Trump’s policies more carefully, you might assume something different could take place: rate cuts and QE.

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Fed rate hikes would seriously hurt the US economy, as 3Q GDP shows

The US GDP data for the third quarter of 2016 is what investors, including us, have been waiting for, because it is much more relevant for future rate hikes than the job data, which the Fed claims to be caring about.

The job data has already been very strong for a long time, and thus if the Fed’s preoccupation is indeed the labour market, it must have already raised rates this year, which is not the case.

So the Fed, or at least Janet Yellen, is caring about the slowdown of the US GDP growth, and the new data showed that the slowdown is indeed ongoing, and rate hakes, if any, would put an end to the already weak growth.

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Fed rate hikes: Janet Yellen is aware of secular stagnation

Although the US labour market has already been very tight for a long time, the Fed has been hesitating to raise interest rates.

The Fed insists that its policy depends on the labour market, supposing that the strong job data leads to high inflation, but despite almost full employment in the US economy, there has been no rate hike since the first rate hike in December 2015. The reason is obvious: the Fed is not seeing the job data but seeing something else.

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Benefiting from the financial crisis: gold and US Treasury bonds in 2008

We continue to research how the financial markets moved amid the subprime-loan crisis in 2008. In the previous article, we illustrated that the fall of the US house prices had actually warned investors several months before the stock markets collapsed.

Many asset classes suffered from the crisis. In such a situation, bonds and commodities are sometimes the keys to benefit from the adversity.

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How you could have predicted the financial crisis in 2008

It is not always easy to predict a collapse of a financial bubble, but there often is something that indicates it in advance.

In the case of the subprime mortgage crisis in 2008, some famed fund managers such as George Soros or John Paulson knew it could be as serious as it eventually happened to be. This article explains the economic situations during the crisis and shows the statistics that preceded to imply the timing of the collapse of the stock markets.

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Lord Rothschild buys gold, says low interest rates are ‘the greatest experiment in the history’

RIT Capital Partners published a half-year report for early 2016, in which Jacob Rothschild, the chairman of RIT and the head of the Rothschild household of England, explains his investment view for 2016.

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The dollar to fall as the GDP growth in 2Q radically weakens, secular stagnation looms

The US Bureau of Economic Analysis published the GDP data for the second quarter of 2016, and the real GDP growth turned out to be 1.23% (year-on-year), slowing down from 1.57% in the previous quarter. The US economy has been significantly slowing down in 2016 as we predicted last year, when it was growing more than 2%.

However, the published data this time suggests more detailed interpretation is necessary to predict the upcoming future of the US economy.

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Brexit reveals the bureaucratic ambition of the OECD

In the EU referendum the UK said no to the EU’s bureaucracy, and that was indeed the people’s refusal of any bureaucratic failures in general, in which the OECD should be counted, as proven by its own reactions to Brexit.

As a result of the referendum, the UK regained several rights of freedom, one of which is fiscal freedom. The EU imposes austerity to its member countries, and they are required to maintain their budget deficit below 3% of their GDP, and thus the UK is now ready to enjoy their freedom outside the EU.

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The break-even point of the US shale oil industry and its production decline

The earning releases of the US shale oil firms have been published in May 2016, whilst the oil price is rebounding from its bottom. The following is the chart of the WTI crude oil futures:

2016-5-30-WTI-crude-oil-weekly-chart

Then, how are the financial situations of the US shale oil industry? Would the financial results justify the recent rebound?

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Analysis and Practice in the Global Markets