5/10/2012: Did Economic Fundamentals trump QE

Two effects of QEs and LTROs - the drivers of temporary inflation - were to boost returns on commodities and reallocate funds into Emerging Markets early on, followed by the fundamentals taking over once again, bidding down commodities and re-diverting EM inflows to developed markets...

Put differently, you can't fight fundamentals with money when the real transmission mechanism is broken. So far, we had this theme powerfully reverting returns back to the 2010 norm. It remains to be seen if the recent firming up of the US growth is going to be sustained.

5/10/2012: China's "This Time..." Moment?

T'is the night for charts folks... another pretty one:

This time it's different pic comes via Citi Research and illustrates Chinese property price indices...

5/10/2012: How you spell easy money?

Nice chart from Citi Research:

Easy Money - US Treasuries & German Bund 10year yields:

Pretty much times equities too...

5/10/2012: Couple interesting points on gold

Some very interesting research on gold from BNP Paribas (link) and some snippets from it:

Take a look at this chart:

Gold showing lower downside volatility compared to all comparatives and gold showing the upside premium too. Why wouldn't it if inflationary expectations are 'anchored' up?

"We expect central bank accommodative actions, and their impact on inflation expectations and currencies, to be supportive of gold for most of 2013. The US 5yr/5yr breakeven rate, an indicator of inflation expectations, rose on the announcement of QE3 to above 3% from 2.6%. It has since  retreated to 2.9% (Chart 3).

Part of the rationale behind further monetary easing by the Fed is precisely to support inflation expectations and avoid a deflationary environment. Another key objective of QE is to boost risky assets by increasing liquidity and reducing Treasury yields."

"The upcoming round of quantitative easing should also put downward pressure on the US dollar. The currency may lose ground against currencies such as the Yen or the Sterling until mid-2013. Euro appreciation will likely be capped by ongoing uncertainty linked to the sovereign debt crisis. While depreciation in the US dollar tends to be positive for gold, it is difficult to read much into this. The correlation between gold and the EURUSD is variable
and unstable. It currently stands around 65% on a 30-day basis (Chart 4)."

And in case you've been thinking that all the talk about gold as the 'barbaric relic' and the power of the central banks worldwide to right the crisis and protect us from catastrophic risks is true, ask yourself then why this:

In other words, why are Central Banks and Treasuries suddenly buying gold when they keep telling us all that everything is fine in the world of fiat money? Answer is - in part, being prudent, they are insuring against catastrophic risks. Which is a good practice. The bad practice, of course, is to simultaneously lie to their people that 'barbaric relic' is irrelevant in the age of fiat they so well control.

5/10/2012: Eurasian Economic Commission

A very interesting and, in my view, on-the-money discussion of the Eurasian Economic Commission - the build-up on customs union between Russia, Belarus and Kazakhstan from the Carnegie Endowment for International Peace: here.

Disclaimer: I would be a long-time supporter of the idea of the customs union within the CIS and the expansion of this union to include other neighboring states, with the Eurasian Economic Commission gaining capacity to negotiate functional trade and capital and people mobility agreements with the EU.

5/10/2012: Endaffo - a Magic Celtic Dragon

So this... link ... is the latest twist of spin PR tumble & dry news cycle with the Time Magazine ca 2012. And it has triggered somewhat of a surfing waves weather in the websphere. On the one hand, the FGers and Green Jerseyists are cheering the coup that has led to the declaration on the magazine cover of the return of the Celtic something. Obviously in green. On the other hand it is triggering memories of the not-so-distant past: link and link.

Oh, putting aside the fact that Time Magazine clearly doesn't bother reading actual data (otherwise what comeback?), all I can say about the 'good news' is that while Enda 2012 now does Biffo 2010, Time Magazine 2012 does Newsweek 2010.

And here's a priceless, poignantly telling lunacy of the Times 'interview' (italics are mine):

"And why do you think a gulf exists between the Irish and international perceptions of Kenny?
Politicians are often more popular abroad than they are in their own countries. That’s partly because familiarity breeds contempt. You could say it’s because the Irish know him better. But it’s also because the Irish focus on the smaller picture, and sometimes you really can see things better from a distance. It’s exactly the same if you think about what goes on in Washington or Westminster."
http://world.time.com/2012/10/05/behind-the-story-times-catherine-mayer-discusses-irish-prime-minister-enda-kenny/#ixzz28Q4VfaCJ 

Yes, Irish voters, residents, taxpayers, people - you are small-minded. Better listen to the Big Picture folks in the Times magazine who can't even check IMF WEO database to see, just what a marvelous Celtic Comeback Enda Kenny has triggered in the country his Government runs. Oh, sorry... but that would be 'focusing on the smaller picture', right?

So with Washington & Westminster in mind, I give you a new Tiger of Global Politics: Endaffo combining "endearing and ...slightly childlike quality to his enthusiasm" features of Times-cover Enda and "razor-sharp intelligence" of Newsweek-ranked "The Fiscal Taskmaster" Biffo.

Update: In the latest of the series of powerful endorsements from international media, our Taoiseach was credited - via selective quotations from the Time article - by the Irish Times (here) as follows: ""He didn’t do anything that one would think of as particularly foolish..." 
Ms Mayer said..."

It never occurs, in the duration of her interviews, for Ms Mayer to ask the obvious: 'Given the gravity of the crisis that Ireland is going through, is talking to a man who sets for his Government lowest possible targets and then fails to achieve them worth the paper and ink?'

"Ms Mayer said it was her belief politicians in Ireland are less insulated from reality than in other countries."

Distance from reality, of course, is a matter of perspective. Given the degree of detachment from that concept that Ms Mayer seems to exhibit, she might be onto something there.