In today’s briefing:
- The End of Cheap Money: Banking Systems Face Varying Challenges
- A Cyclical Rebound Mirage?
- Waiting For Clarity From the Nov. 30 Powell Speech
- All They Told You About Money Printing Is Really, Really Wrong
- Malaysia: PM Anwar Ibrahim Has a Lifetime of Experience to Deliver Unity & Progress
The End of Cheap Money: Banking Systems Face Varying Challenges
- The inexperience of the current generation of central bankers towards fighting inflation was brutally exposed in 2022, but financial markets have been reluctant to punish them in an overly-harsh manner.
- The extended period of global monetary accommodation had negative consequences for banking profitability, particularly in the Eurozone and Japan, but ending cheap money will have different outcomes across regions.
- Tighter monetary policies in the Asia Pacific region and softening external demand mean that banking systems could face asset quality concerns when profitability has not fully recovered to pre-pandemic levels.
A Cyclical Rebound Mirage?
- Technical internals have been pointing to a shift in leadership to value and cyclical sectors, indicating the emergence of cyclical green shoots.
- Further analysis of technical internals, as well as the macro picture, indicate that hope of a cyclical rebound may be an illusion.
- Macro and valuation risk are weighing on equity prices and downside risk remains.
Waiting For Clarity From the Nov. 30 Powell Speech
- The markets reacted with a minor risk-on tone after the release of the November FOMC minutes, but it could be an over-reaction.
- Fed Chair Jerome Powell is scheduled to speak on the economy and labour markets on November 30.
- That speech is likely to set the tone for the markets for the coming weeks.
All They Told You About Money Printing Is Really, Really Wrong
- Without properly understanding money, it’s basically impossible to connect the countless dots of the global macro puzzle.
- Yet, we assume we know all about money: universities and mainstream economic courses teach us that governments need money to fund their spending, Central Banks have the authority to print money we use, and commercial banks lend and multiply customers’ money in a fractional reserve banking system.
- That’s literally all wrong. Our monetary and credit system envisages two distinct tiers of money: real-economy money (potentially inflationary) and financial-sector money (potentially asset-price inflationary).
Malaysia: PM Anwar Ibrahim Has a Lifetime of Experience to Deliver Unity & Progress
- Markets are right to hail Anwar’s appointment as PM, as his multi-racial vision fits perfectly with the federalist ideas that Sabah-Sarawak desire, which will lend stability to his government.
- Anwar should have been Malaysia’s 5th PM, not its 10th. But his multi-racial approach, and commitment to fighting cronyism, support of the poor and simplicity among ministers have been consistent.
- Anwar seeks a cleaner, more internationally-linked and fiscally responsible Malaysia. With the levers of power in his hand, he will deliver this during a single 5-year term. We are bullish.
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