Friday, 24 January 2014

Friday charts - QE, bonds, the weighing machine and nat gas

A few charts that said something to me this Friday.

I always enjoy a Central Bank balance sheet chart, but this was suitably different to warrant inclusion.  I have talked lots of times in the last few weeks about the need for the Bank of Japan and European Central Bank to up their 'support' levels...but it is interesting to see that the Central Bank's of Australia and Singapore have also been relatively light users.  That's been the historic benefit of jumping off the back of Chinese growth - and periodic Chinese QE. 


I struggle to see value in bonds but noted in my year end macro preview that period of concern and volatility in markets would lead to some tactical strength...and this is what we have seen in recent days.  Not a fundamental shift but it is going to pay to stay active in 2014. 


'Weighing machine' investors always follow GMO's 7 year asset class forecasts.  Nothing is gospel but this reiterates to me another theme I touched on in my above-linked '14 macro themes for 2014': the better value in the emerging indices.  Of course the most striking aspect of the below chart is the dearth of assets generating returns above the long-term historical US equity return rate.  Tracker funds may be cheap but when markets go nowhere...that is what you will track. 
 


Finally, in the commodity world, I am watching natural gas prices, which have been helped by the cold North American winter

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