The CrossBorder Capital Blog

The Treasury-Fed ‘Accord’ And Why Are We Still (Very) Cautious?   We have taken a lot of risk off. We fear stock markets are headed lower. Global Liquidity is already falling and slated to fall much further. Investors still have high exposure to equities within portfolios, and these levels, even now, are out-of-line with skidding economic activity. On top, we figure that the US authorities are getting far tougher about high street inflation and more focussed on controlling the domestic and international supplies of the US dollar. The dollar ‘wrecking-ball’ is already swinging.     See our latest published research, Global View – The Treasury-Fed ‘Accord’ And Why Are We Still (Very) Cautious? - April 2022    

How The West Was One   Bretton Woods, the original set of international currency arrangements devised in 1944 and integral to the International Liberal Order, remains largely intact. There was no Bretton Woods II, and there will be no Bretton Woods III as some claim. Bretton Woods is wrongly seen as an accounting system with units fixed to the US dollar, whereas, in practice, it underpins a global funding system, based around the US dollar, that allows capital to circulate Worldwide. We argue here that the system is likely to become less elastic, not because of the rise of rival units, but from tighter US controls as new loans are directed towards ‘friends’ and away from ‘foes’. In fact, much like its 1960s heyday when The West faced-off ‘The Rest’.       See our latest published research, Global View – How The West Was One - April 2022    

China and Emerging Market Liquidity: Too Much Risk   ·                 Strong private sector liquidity, powered by soaring commodity prices, is being dragged down by pre-emptive monetary tightening by Emerging Market Central Banks ·                 There has been a sea-change in Chinese economic policy away from ‘growth at all costs’ towards stability of the Yuan currency       See our latest published research, China and Emerging Markets Latest GLI™ – April 2022  

Global Liquidity Latest: Weaponizing the Fed   ·          We are in a downswing that is fast-approaching the investment phase we dub ‘Turbulence’, characterised by slowing and sub-par liquidity   ·          Investors are positioned too ‘risk on’ based on their asset holdings, with extreme risk positioning seen across the Eurozone (ex-Germany) and Asian Emerging Markets         See our latest published research, Global Liquidity Latest – April 2022  

The High Convexity Conviction –  Is The Yield Curve Really Distorted?   This report re-examines the US Treasury yield curve. There are two take-aways. First, what drives the yield curve is unambiguously liquidity, and the latest flattening is entirely consistent with the peak and recent fall-back in US liquidity conditions. Second, the efficacy of the yield curve slope as a predictor of the business cycle is improved enormously when it combines, like now, with high convexity. In short, the fixed income markets are exactly on-track and already starting to discount an upcoming US recession.   We have also included an article that was later published in the Journal of Fixed Income (Spring 2018).     See our latest published research, Global View – The High Convexity Conviction –  Is The Yield Curve Really Distorted? - March 2022    

China and Emerging Market Liquidity: Russia Unplugged?   ·            Ukraine’s invasion is without doubt a major negative for World markets, but it may be even eclipsed by Chinese tightening and higher oil prices? US$130/bbl. oil could smash Global Liquidity lower by up to 30%, driving the World economy into recession   ·            China is again squeezing domestic liquidity conditions. Even ignoring soaring oil prices, based solely on the low ebb of PBoC liquidity injections, World business activity is set to slow further over coming months         See our latest published research, China and Emerging Markets Latest GLI™ – March 2022  

Global Liquidity Latest: Russia Unplugged   ·            Worryingly, the Ukraine Crisis is happening against the backdrop of falling Global Liquidity. Inflation-obsessed policy-makers are unlikely to be deflected.   ·            Each doubling of crude prices cuts Global Liquidity by an average of 25-30%. And, each 10% rise in the US dollar reduces it by a further 12-15%. These are BIG impacts.       See our latest published research, Global Liquidity Latest – March 2022