The teaser from this week’s missive is posted below as usual, but I have a few housekeeping notes to start the year. First off, I know that I am doing less market-oriented stuff recently; I apologise. The good news is that I am diverting my energy towards a long-form essay on fiscal policy. It’ll be in the same type of format as my two previous essays on the Life Cycle Theory and the Balance of Payment. In short, I am appalled by the level of debate about economic policy these days, so I am trying to inject some context and colour on the current flurry about fiscal policy, what it is—as in what it really is—how economists think about it, and what it can and can’t do. This potentially covers huge ground, but I reckon that I have managed to distill the story into a coherent argument. It’s 80% done, and I hope it will be worth the wait. I expect to have the first draft done next month, and then it goes to the editor for a ruthless take-down. The final version should be done in March, with a bit of luck.
Read MoreAnother year almost gone, and in this case a decade too. 2019 has been a great run for anyone with even random exposure to financial assets, and in my next few posts I’ll try to map out what I think will be the main themes for 2020. I will also update the portfolio page, and discuss what went right and what went wrong on that front in 2019. It’s been a good year overall—how couldn’t it have been?—with a few costly mistakes, as per usual. I have also recently updated my writer’s page, effectively internalising that part of my work fully on this site. Go have a look! In time, I will incorporate some of my non-fiction work on this platform too. I have plenty of ideas and projects rattling around in my head, though precious little time to finish them, which is just about as good as you get it as a writer, I guess. The Podcast and Video platforms will continue too, but I am yet figure out exactly how to leverage these in a way that makes sense.
Apart from that, all that is left for me is to wish all my readers a Merry Christmas and a happy New Year. They say that blogs are dying, but I don’t buy it. In any case, I’ll keep writing, and listening, because that is what I do. On that note, I also wish a Merry Christmas and a Happy New Year to my fellow narrative-warriors and collaborators on Twitter. The quality of conversation on that platform ranges from being counterproductive, stupid, and vicious to being indispensable for my work and thinking. Luckily, the latter characteristic still dominates, for now.
See you in 2020.
Read MoreEquities are still doing great, and vol-sellers remain in charge, driving the VIX steadily towards single-digit territory. In fixed income, a war of attrition is at play. The front-end is locked, but the long end can’t decide whether to sell-off. In preview, I think it will in due course, delivering the bear-steepener needed to sustain the burgeoning outperformance of value over growth—and cyclicals versus defensives—in equities. HSBC’s bond bull extraordinaire, Steven Major, is sceptical, but even he admits that the long bond might be in for a bit of pain in the near term. I’ll take that insofar as goes an endorsement for a self-proclaimed perma bond-bull. The devil as ever, however, is in the detail. Markets can probably be fairly certain that they have central banks exactly where they want them. Last week’s performance by Powell suggests that the Fed is kicking back from the table, with a dovish bias. Apparently, the Fed now wants to see a “persistent” and “significant” increase in inflation before hiking rates. This sounds an awful lot like the message from the ECB and the BOJ, and while I concede the BOE is in a different situation, but I’d imagine that Carney’s response to the facing the economy next year will be to do nothing. He seems to be quite good at that.
Read MoreMy efforts to produce content via sound and video remain stalled, due primarily to the scarcity of that most of important resource that is time. But what better way to make amends, if only slightly, than to let others do the heavy lifting. Last week, in my capacity as Chief Eurozone Economist for Pantheon Macroeconomics, I sat down with Martin Essex from DailyFX—a part of IGMarkets—to discuss global markets, Eurozone monetary policy and an update on my other work.
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