Tuesday, April 21, 2015

Some Tuesday morning news

Here's some stuff:

Real Time Economics - the economy has slowed because the Fed has already tightened. The Krugginator would love this, if only he ever read the WSJ: the Fed has tightened by shifting forward expectations, and the US dollar rise has also produced some tightening.

FT Alphaville - low number of defaults. This bit I found interesting:
Taking defaults by borrowers rated single B as a proxy for high yield, Deutsche finds high yield default rates have been below the long term average for 12 of the last 13 years. Between 1983 to 2002 the average default rate was 6.9 per cent. Since then it has averaged 1.5 per cent a year, and falls below 1 per cent if you exclude the upward blip in 2009.

Or to put it another way, modern risky borrowers haven’t been very risky.
So in other words, there's a perfectly good reason for HY yields to be so low: no risk premium is required. As for the rest of the article, you can ignore it: it's attempting to predict the future based on what's probably a flawed conception of the market cycle. After all, what is going to make HY defaults rise in 2017-2018? Oh, a stock market crash? Aren't we a bit too early in this cycle, growth-wise, to expect a crash? Fed hasn't even started raising rates yet.

Gavyn Davies - the oil shock is a global monetary shock. Good chart in here that shows deflation concerns were at a maximum in January 2015, and have dwindled since, while inflation expectations are finally threatening to pick up again after dwindling since 2012. Wonder if that'll mean anything for gold....

Real Time Economics - India's central bank chief looks for more accommodation. He lays out his longer-term (2 years) path for interest rate cuts. It'd be interesting if India manages to grow strongly in the next few years, what with me being all EM secular bear and all.

Chronicles of Brodrick - gold miners look good here. He thinks gold miners have put in a convincing double bottom and it's all up from here.

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