Submitted by Michael Every of Rabobank
Subterranean Joe, Sick, Blues
“There’s no way I can lose.” That is the title of a Bloomberg article today looking “Inside China’s Stock-Market Frenzy”. It notes ‘Leo Li, a 28-yar old freelance screenwriter in southern city of Kunming, says he’s “pretty much all-in” on stocks but isn’t borrowing to maximize returns – yet. “With leverage, it only makes sense to add it when you can be 100% certain of gains,” said Li, adding that his family sold property last year to buy stocks, “That usually happens when the old grannies start rushing in during the mid-to late stage of a rally. We are not there yet, but when the time comes I will be ready.”’ It’s nice to see young investors with such a keen understanding of the fundamentals of this rally – which are not related to Chinese CPI and PPI at 2.5% y/y (as expected) and -3.0% y/y (slightly better than the consensus), which is a very bad combination for many firms.
Yet that’s good news: it means more need for central banks to get the grannies to dive in to stocks. As do two contrasting Anglo-Saxon fiscal developments.
In the UK, Chancellor Sunak has gone kitchen sink with a mini-budget including no stamp duty on house purchases up to GBP500,000; VAT cut from 20% to 5%; paying firms GBP1,000 per head to bring back a furloughed worker; paying employers to create jobs for 16-24 year olds; green grants for households; and government meal vouchers for 50% off a sit-down-meal (up to GBP10 per head) from Mondays to Wednesdays. 10-year gilts sit just off record lows of 0.15%.
In the US, Joe Biden is largely eschewing Sanders’ radical policy agenda. No Medicare for all, tuition-free public college, or the Green New Deal in his released policy proposals. There are green targets, prohibiting government contracts to firms that pay less than USD15 per hour, and a pledge public procurement will buy American (which is Trumpian). Yet what we do not see is a kitchen-sink fiscal approach: the message is “gradualism”. Likewise, there is still no Trump fiscal plan to speak of. 10-year Treasuries sit at 0.66%.
Meanwhile, global virus cases are now 12 million and rising – which gives me the blues. Allow me to respond in song, with apologies once again to Bob Dylan.
Trump’s on the pavement; Mixing up his virus medicine
Biden’s in the basement; Talking ‘bout the lack of government
CIA man in the trench coat; Badge out, laid off
Says he’s got a bad cough; there was a Russian pay off
Look out kid; It’s somethin’ they did
God knows when; But even China’s doing it again
Bears better duck down the alley way; Lookin’ for a new friend
The man with the yield cap; More swill for the pig pen
You want one dollar bills, they only got ten
Maggie/Ronnie fleet foot; No mo’ miners full of black soot
Then the Greenspan put; Planted all the bed-rot
The phone’s tapped anyway; So’s TikTok many say
Can’t bust no matter what you trade; Orders from the D.A.
Look out kid; It’s what they all did
Don’t need to walk on tip toes; Don’t worry about your trade flows
Better stay away from those; That talk about a fire hose
Don’t need to keep a clean nose; Or even wear the plain clothes
You don’t need a weather man; To know which way the S&P blows
Oh, get sick, get well; It’s still the central-bankers’ ink well
Hang bail, sure can tell; That everything is gonna sell
Try hard, get barred; Get back, write braille
Get jailed, jump bail; Paid by the government, if you fail
Look out kid; You’re gonna get hit;
But losers, cheaters; Six-time users; Hanging round the central-bankers;
Powell by the whirlpool; Lookin’ for a new fool
But have to follow leaders, watchin’ vol parameters
Oh, get woke, keep warm; Long pants romance
Day traders get blessed; Everyone’s a success
Please her, please him, free gifts; Legal steal, don’t lift
…Or twenty years of schoolin’; And they put you on the day shift
Look out kid; They don’t try to keep it all hid
It’s ‘trade’ or jump down a manhole; Light yourself a candle;
Drop-out and wear sandals; It’s such a bloody scandal
Sell-out or be a bum; They’re sharks; you’re chum
Monet’ry pumps don’t work
‘Cause central-vandals took the handles