The Italian Doom Loop
With Rome appearing to square off with Brussels over its contentious budget, BTPs have faced considerable pressure and bank stocks have been hammered. This is the nefarious doom loop: Italian banks own a large chunk of Italian government debt and, given the lack of...Dollar Funding Shortage set to Continue
The widening of the cross-currency basis (JPY, EUR and GBP, in particular) against the US dollar provides further evidence of a structural dollar-funding shortage, which is set to worsen as the Fed tightens. Although the spread typically widens towards year end, the...Australian Banks: A Shorting Opportunity
The housing-driven downturn we have discussed through last year continues to develop, albeit at a slower pace than we originally expected. The situation is deteriorating, though, with building permits – the best leading indicator for housing – now falling...Financials Rally at Odds with Credit Cycle
Financials have been the biggest winners since the Trump election The S&P Bank ETF KBE has rallied 29% since the election. We’ve written about financials over the past few weeks, but it is worth highlighting again. While we may see financials rally in the short...Euro to Remain Better Supported
(from our Tactical of 18th October 2016) One currency that may buck the trend and remain supported against the dollar is the euro. Although tapering from the ECB does not look imminent, core inflation may start surprising to the upside in the eurozone. The chart...Negative Feedback Loop in Europe
While most of the attention post-Brexit has been on the UK, we are far more concerned about Europe. Markets and the economy operate in a feedback loop, and the performance of European banks relative to the stock market points to a fall in lending ahead in Europe. ...Company Story
