Friday, 21 September 2018

A slow week going nowhere in a hurry

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Anthony Peters comments on the lack of consistent flow.

I had in some ways expected a bit more of Tuesday than I got. I should have known early on that it wasn’t going to be a humdinger as I observed in my own parochial way the number of “out of office” responses I received from direct recipients of this column.

Anyhow, it started quietly and tailed off from there. That is not to say that things were entirely dead, but there was nothing which could be termed to have been anything approaching a consistent flow.

Having appreciated that there really are still a lot of people absent from their desks, I’d have to assume that today will not be all that much better although the cousins across the puddle don’t appear to be anything as lethargic as us Europeans.

We should really have a clean run through to May 1 when the West of Europe goes into its annual public holiday frenzy but unless this week picks up, we’re through to April 13 before things can really get going. This will have Europe with the best part of a two-week gap which will need to be caught up on with all manner of market activity, not least of all corporate issuance, heavily backed up.

Such deluges of issuance offer the thinking portfolio manager – and I remain assured that there still are a few of those around – opportunities to pick up bits and pieces of bond issues which miss the headlines and which find themselves offered only in the aftermarket. There is nothing wrong with them; it is simply that they got swamped out by the big runners on that particular day. It requires a bit of courage to adopt the orphans but it often proves to be a much more rewarding investment tactic that chasing the hot deal of the day, many of which disappoint later.

But back to this week. As though Greece’s demand for €278.7bn in compensation from Germany for events which occurred 70 years ago wasn’t enough, Prime Minister Alexis Tsipras has been off to Moscow to snuggle up to Vladimir “put me in” Putin in an apparent attempt to extract a €5bn–6bn bridge loan.

The matter is not whether Moscow can currently afford to give away that kind of money – I doubt the Russians stand a better chance of ever being repaid than does anyone else – but whether Tsipras is doing anyone, his own country included, any good at all by fuelling the fire of existing East/West tensions.

Fifty shades

Fifty shades of Hugo Chavez, methinks. These are quite clearly the machinations of a desperate man who knows that he has no more than a few days in which to decide whether to either default on his loans or on his election promises. My guess is that he has only one way to go and it is one which the markets seem singularly reluctant to price in.

Although European equity markets enjoyed quite a chunky rally yesterday as they played catch-up with New York’s Monday move – quite what they were catching up with and why escapes me – the Dow and the S&P spent Tuesday going nowhere in a hurry. They are now, three and a bit months into the year still both within 1% of where they closed out 2014 which isn’t exactly a sparkling performance.

Minneapolis Fed President Narayana Kocherlakota, a fully paid-up dove, was on the wires yesterday urging the Fed to be “extraordinarily patient” and saying: “I anticipate that it would be appropriate for the FOMC to defer the initial interest rate increase until the second half of 2016”, although the currency and bond markets appeared to be more interested in the huge leap in non-revolving February consumer credit at US$15.516bn (forecast US$12.5bn, previous US$10.796bn) than it did in Kocherlakota’s suggestion that US rates should remain on hold for well over a year from now.

That neither recoveries nor slowdowns ever happen in a linear fashion barely needs to be repeated and ups and downs should not be too serious as I observed yesterday when looking to Friday’s disappointing employment data. Trends in the US data point to nothing more than a slowing in growth momentum and not to anything approaching a downturn.

Overall, global data actually don’t look at all too dusty although the questions remain as to whether Europe can regain speed while still being strapped to the ground by so much uncompetitive legislation which has its otherwise motivated and educated workforce running to stand still. France has been tripping over this for years and Britain looks to be heading towards a coalition which wants to steer it down the same road.

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