Recap 2014-09-19


NB: No updates thru mid week

First, a few notes on equities:

Next week is the seasonally weakest week of the year for equities, using median returns. However, the bias is up afterwards. The negative bias continues using mean returns, which are skewed by historical recessions: (numbers do not line up with YTD figures because returns are relative to the close on the last Friday of the previous year. The 2014 figure, for example, is relative to 1841.40, rather than 1848.36)

Second, the recent decline in long run inflation expectations, which was not driven by risk off, is quite positive for long duration financial assets if they hold here. That makes sense – a longer inflation premium should lower the discount rate and increase the present value. The chart below highlights the last several times 10y breakeven yields fell without a risk off move, and then stabilized:

Brent Donnelly had a good note today observing that both Kuroda and Amari (who holds cabinet-level position of Minister of State for Economic Revitalization) said overnight that they did not want abrupt moves in the currency. This suggests that they are not especially happy about the rapid move in the Yen the past few weeks. Amari made very similar comments in May 2013 which marked the high in USDJPY. This coincides with the results of a Reuters poll – ¾ of Japanese firms are concerned that the yen is hitting levels that are too low and will cause input costs to rise. 47% of companies prefer to see the yen within the 100-104 range while 28% would prefer 99 or stronger. Only 25% wanted a yen below 105.


  • Scotland rejects independence 55% to 45%.
  • Canada CPI was stable at 2.1% YoY as exp, but the core measure jumped to 2.1% vs 1.8% exp and 1.7% prev
  • In the US more than 40% of households pay no income tax while the highest paid 1% of workers contribute 46% of all income taxes collected (that 46% number was 18% back in ’79). The Economist
  • AliBaba listed at 68, the high end of its raised range.


  • Mon: US Existing Home Sales, EU Consumer Confidence, Dudley speaks, HSBC China Mfg PMI
  • Tue: EU PMI, US FHFA House Price Index, US Markit Mfg PMI, Japan Mfg PMI
  • Wed: German IFO, Italy Consumer Confidence, US New Home Sales,
  • Thu: EU Money Supply, US Jobless Claims, Durable Goods Orders, Markit Services PMI, Japan CPI