Another interesting bit on Chinese Monetary Policy:
There was also this interesting bit from JPM:
- The saving motive appears to have been mostly responsible for the large bond fund inflows seen over the past five years.Of the $2.5tr that was invested in bond funds over the past five years, $1.6tr or 2/3rds is explained by money market fund outflows. This saving motive is unlikely to go away as long as policy rates stay at zero.
- But even if retail investors are forward looking and start positioning for an early end of ZIRP, this is more likely to create a flow away from bond funds into money funds rather than equity funds.
- Our guess is that less than a third of the $2.5tr retail investors put into bond funds will rotate into equity funds over the coming years as the Fed normalizes policy.
Separately, I just wanted to add some thoughts on BoE guidance. Several brokers have noted that BoE’s forecasts have historically been quite poor, and Carney himself has hiked rates in Canada in May 2010 despite promising to not hike until mid 2010. These were all cited as reasons for the weak performance in sterling rates products last week. I’d posit one more reason as well. To the best of my knowledge, it is actually quite hard to reliably forecast UK unemployment, at least relative to other G10 countries. Of course, this could well be because I’m just not smart or educated enough to do it, but the BoE’s own poor track record suggests that I am not alone in this. As a result, to get the same level of credibility, BoE guidance needs to be strong than guidance elsewhere to achieve the same effect, irrespective of the other issues.
Finally: a couple of interesting links. First, a very interesting and funny story on MI5:
And along those lines, are we spending too much on these anti-terror initiatives?
And third: why are people not getting upset about the fact that residency slots are basically unchanged in 16 years?
For years the United States has been training too few doctors to meet its own needs, in part because of industry-set limits on the number of medical school slots available.
The biggest challenge is that an immigrant physician must win one of the coveted slots in America’s medical residency system, the step that seems to be the tightest bottleneck. That residency, which typically involves grueling 80-hour workweeks, is required even if a doctor previously did a residency in a country with an advanced medical system, like Britain or Japan. The only exception is for doctors who did their residencies in Canada. The whole process can consume upward of a decade — for those lucky few who make it through.
The residency match rate for immigrants is likely to fall even lower in coming years. That is because the number of accredited American medical schools, and therefore United States-trained medical students, has increased substantially in the last decade, while the number of residency slots (most of which are subsizided by Medicare) has barely budged since Congress effectively froze residency funding in 1997.
According to govtrack, a bill to relieve this has a 0% chance of being enacted, even though there are 63 co-sponsors:
- Japan Apr-Jun real GDP growth was weaker than expected at +2.6% QoQ SAAR (+0.6% QoQ, vs. Cons. +3.6% QoQ SAAR). The difference mainly came from the volatile inventory component (that reduced annualized real GDP growth by 1.1% pt), weaker capex, public investment, and residential investment.
- FT: Eurozone banks need to shed €3.2tn in assets by 2018 to meet Basel III. Versus nominal GDP of 9.5trn, that’s 33.7% of GDP, or 6.7% annualized. Assuming nominal GDP growth of 2%, that’s still almost 5% annualized. The deadline will probably get pushed back again, but this still gives us an idea of how much deleveraging remains, especially since banks usually front load these regulator mandated deleveraging moves!
- USDA WASDE report was fairly bullish for ag products. End stock estimates for all major grain products printed below expectations.
- Mon: UK RICS house price balance, Japan Machine Orders, Australia NAB Business Confidence
- Tue: UK Inflation, German Zew, US Retail Sales, Australia Consumer Confidence
- Wed: France GDP, Employment, BoE Minutes, UK Unemployment,
- Thu: UK Retail Sales, US Jobless Claims, CPI, NAHB Survey, Philly Fed
- Fri: US Labor Costs, Housing Starts