Friday, 21 September 2018

Pick-and-mix outlook as vacuous August draws to a close

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“The week started positively on expectations of further stimulus and will end on a weak note due to concerns that Europe is not getting its act together. Swings and roundabouts! At least we can count our dividends while we watch the market rise and fall.” So says my old chum Alex Moffatt of Joseph Palmer & Sons (Vic) in Melbourne.

Anthony Peters, SwissInvest Strategist

Once again he hit the nail on the head with the “Obiter Dictum” to his daily market comment today in which he summed it all perfectly. Having traded in global markets before deciding to cook on the smaller flame of private wealth management, Moff has a wonderful ability to cut through the white noise of market trading and to distill the essences of day to day investing. Nice work, Digger.

I was reminded of a joke I read many years ago about a cub reporter who is sent to Capitol Hill to interview one of those tough and seasoned old Senators. The Senator looks at him and says “Young man, I have nothing to say…” to which the reporter replied “I know that, sir, so can we now please get on with the interview…”

Perhaps this should be remembered by those all who expect something really special from Fed Chairman Ben Bernanke’s keynote speech at the annual central bankers’ off-site at Jackson Hole today. I would have thought that after five years of crisis most of us would have worked out that the monetary authorities are just as clueless as we are and that pretty much every speech appears to be made up out of random components of the “Pick ’n Mix” rack of central banker’s best lines.

Having also read Mario Draghi’s OpEd in Die Zeit this week, I do wonder whether there is anything new to say? Perhaps the best statement of the week came yesterday from Dennis Lockhart, president of the Atlanta Fed and a voting member of the FOMC, when he came across the wires yesterday with some pertinent comments on QE and the prospects of a further round on the part of the Federal Reserve.

The line that caught the eye was that if job growth were to fall persistently “well below 100,000 a month” or there were “signs that disinflation could lead to falling prices, then there wouldn’t be much of a question about policy”.

Neither of these appear to be on the cards imminently unless next Friday’s payroll report disappoints dramatically so markets should really sit back and relax for the next few days.

However, there has been ample volatility and prices have been under pressure for several days now. I suspect this is as much a matter of innocent profit-taking after the vacuous run-up through August as for any more nefarious reason. To be honest, I don’t blame investors who want to reset the exposure to neutral ahead of the re-opening of the markets in September.

ECB action

Draghi’s decision not to attend Jackson Hole has the tongues wagging. There is quite some expectation in terms of the ECB launching the much vaunted bond buying programme. The silly thing is that if it does come in, then it confirms that the peripherals really are up said creek without a whatnot and utterly helpless. So does that make ECB action good news or bad?

We still have no firm evidence that QE does anything other than delay the inevitable or proof that it deals with causes rather than just the symptoms. In actual fact, no one has ever, to my knowledge, tried to reverse QE yet and hence so far we only appear to know to get into the hole but we seem to have no particular road map as to how to get out of it again.

I was sent a cartoon yesterday about the “Owe-lympics” with Spain, Greece and Italy standing on the podium with their respective medals and a rather anaemic Uncle Sam watching on saying, “I’ll be there in 2016”.

Nomura cuts and Barclays’ Jenkins

Elsewhere, Nomura is in the headlines this morning with the announcement that it is to cut US$1bn of cost by downsizing its non-domestic presence. Most of that will, no doubt, be at the expense of the late lamented Lehman Brother’s business it bought in Europe. At the same time, Bob Diamond’s successor as CEO at Barclays has been named as Antony Jenkins, a quiet and modest retail banker. He will in turn have to take decisions about the long-term future of Lehman’s New York operations within the UK bank’s structure. It has taken a few years longer than I had expected, but the message is getting through that investment banking has an important and valuable role to play in the greater global financial infrastructure but that it is not the be all and end all of life, the universe and everything. What took them so long?

Alas, it is that time of the week again. All that remains is for me to wish you and yours a very happy and peaceful weekend. I understand that last night was the coldest August night on record in the UK so, if you light the barbecue this weekend, may it be to cook the steaks and not to defrost them.    

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