Do we in Europe really need to go into this Black Friday malarkey? We’ve already been hyped into getting excited about Halloween and Fathers’ Day, two very American excuses to go shopping for stuff nobody needs.
Now we’re supposed to get all hot and bothered about what is otherwise a normal Friday at the end of November that follows the largest family event in the American calendar but which means nothing over here in the old countries. No Thanksgiving, no Black Friday. Enough!
The repricing of the bond markets, the canaries in the socio-economic coal-mine, might well be reflecting something far deeper than just questions concerning short-term central bank policy. And even within the monetary authorities, especially within the ECB, there are debates going on as to whither next. After two thirds of a year of month-over-month deflation, Japan today reported its first return to positive inflation. One swallow a summer doth not make and Prime Minister Shinzo Abe would be well advised not to parade around declaring that his reflationary fiscal and monetary policy intentions are working. If there is one country that cannot afford higher debt servicing costs, then it has to be Japan with its 230% debt/GDP ratio. Though the Nikkei is, at 18,381.22, again higher overnight which is no great surprise as the dollar’s trip to the moon continues – it is now back around ¥113.00 – it is still down over 3% on the year. That said, it is also up 23% from the June lows. How much do we learn about an economy from a stock market which, chart-wise, looks like little more than a proxy trade for another country’s currency?
Poll dancing
While I’m thinking of it, look at the recent failure of pollsters to predict outcomes. On that basis, and given the consistent lead of the No camp in the Italian constitutional referendum, wouldn’t the smart move have to be to lay a cheeky bet on a Yes? Or might one not even go one step further and position the books that way? The BTP market has had an absolute stinker but at 187bp spread over Bunds, 10-year Italy might be worth a punt. Italy at 55bp over Spain doesn’t look too bad either; if the referendum were to give Italy a jolt, many of the old questions concerning Spain’s underlying fiscal strength might re-emerge.
So where’s the good news? At 490.22, the CRB index, the full title of which is Commodity Research Bureau BLS/US Spot Raw Industrials and which used to be the measure of all things commodity, is at the high for the year. Not only that but its 12-month low was a year ago yesterday at 397.31. That is a cool rise of 23.28%. I can think of few trades which have been so blatantly missed in the past 12 months as that of being long commodities. But then again, it was hard to live with all the central banks’ tutt-tutting justifications for maintaining ZIRPs and NIRPs while holding bullish positions on commodities. Maybe we should desist from weighing up every spit and lisp of regional Fed presidents and focus more on what we can learn from the guys with drills in hard hats.
Alas, it is that time of the week again and all that remains is for me to wish you and yours a happy and peaceful weekend. It’s been another brutal week for bond markets and I think we have all earned a rest. The heavy weather of the past week has brought down most of the rest of the leaves and all but a few of the apples on the trees. Why not take out some of your frustrations on a leaf rake and then calm down again by making a spot of fresh apple juice? So much better than chasing fatuous so-called bargains on either the internet or, god forbid, the local shopping mall or high street. How many 46” TVs does one really need?