It's little over a year ago that that I almost choked on my coffee when I read in the FT that Blackrock, one of the world’s largest asset managers, was recommending investors to increase their allocation to Chinese equities and bonds. This wasn’t because I thought this was a bad investment, per se, The comment by Wei Li, chief investment strategist at Blackrock, that Chinese assets are under-represented in portfolios given the relative size of China’s financial market is probably true. More interestingly, in a world where (some) economists are worried about the imbalanced trade relationship between the US and China—due mainly to subdued Chinese domestic demand and excessive savings—a reversal in capital flows between the world’s major economies is exactly what the doctor ordered. This is especially the case if, as is customarily hoped, it coincides with a liberalisation of and the opening of China’s capital account, and more freely floating CNY.
Read MoreThere are a lot of things we don’t know about Russia’s attempt to invade Ukraine, but there are also some things we do know. Mr. Putin’s gamble, and the West’s response, has brought into view one of the few existential tail risks that isn’t a Black Swan, which is to say, it is a known unknown: The risk of an escalation into war between Russia and NATO, and the exchange of nuclear weaponry. The continued call on NATO from Ukraine president Volodymyr Zelensky to impose a no-fly zone his country is an alarming case in point. I have no idea how to quantify such a risk, and it is fair to assume that markets don’t either, at least not with any accuracy. BCA’s suggestion that you might as well be long stocks on a 12-month basis, even if you think an ICBM is headed your way is probably a fair reflection of the level of analysis you can expect from your favourite sell-side researcher. Take everything you read with a heap of salt.
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