ICYMI: Five Thought Pieces from July

1. Deep Dive: Surplus Capital Revisited:  Offers a different alternative narrative to the financial crisis from both the Keynesians and monetarists. While rooted in a historic intellectual tradition, it has fallen out of favor and this essay seeks to reintroduce it to investors and policy makers.  

2.  Global Investment Climate:  Identifies and discussed five characteristics of the investment climate at the start of Q3.  1) the Federal Reserve has begun a protracted exit from the extraordinary monetary policy; while 2) other major central banks are not ready to follow suit.  This is encouraging 3) an unwind of structural positions, that were predicated on low US interest rates, and 4) the replacement of the dollar as funding currency, which is leading to 5) portfolio adjustments away from fixed income, emerging markets and some commodities, including precious metals.   

 

3,  Bernanke Sets Cat among the Pigeons:   Both the the June FOMC minutes and comments from Bernanke was correctly understand as less hawkish and the dollar and interest rates reacted accordingly..   The Fed is not committed to tapering in September, although many observers think it well.  

4.  Don't Let China's Data Obscure Larger Story:  Yes, the world's second largest economy is slowing, but it is also engaged in a number of structural reforms.   The reforms seem to be more important than the high frequency data, which many doubt the veracity of in the first place.  

5 Why US and European Auto Sectors Continue to Diverge:   The US auto sector is strong with sales at multi-year highs.  Europe's industry is at multi-year lows.  The reorganization of GM and Chrysler helped rid the industry of some excess capacity.  Europe remains fragmented and unable to rationalize the industry.