Nell’ottobre del 2020, ovvero 12 mesi fa, noi scrivemmo ai lettori del Blog che erano maturi i tempi per mettere da parte il vecchio slogan “Don’t fight the Fed” e sostituirlo invece con “Fight the Fed!”.

Nell’ottobre 2020, quella nostra affermazione fece, probabilmente, sollevare qualche sopracciglio. Immaginiamo anche qualche risatina di sufficienza.

A distanza di 12 mesi possiamo però ritrovare quella nostra affermazione, formulata con parole diverse, in numerosi commenti e analisi di operatori e studiosi dei mercati finanziari.

Nel corso degli ultimi tre mesi, in questo Blog, vi abbiamo documentato che si è rafforzata, sui mercati finanziari ma pure tra il pubblico, la perplessità sull’atteggiamento scelto dalla Federal Reserve, che a tutto oggi è quello di negare l’evidenza, di chiudere gli occhi, di affermare che non esiste ciò che tutti possono vedere che esiste.

Lo scetticismo sulle capacità della Federal Reserve di gestire senza difficoltà questa fase, con in particolare un’inflazione che fino a marzo 2021 “non esisteva” e che successivamente è diventata “transitoria” per poi finire per essere oggi “qualcosa che durerà almeno due anni”, si manifesta anche nelle tensioni sui mercati finanziari (oltre che nelle dichiarazioni contradditorie degli stessi Governatori della Federal Reserve).

Oggi regaliamo al nostro lettore un recente commento su questa situazione, articolo che in modo molto informale ci restituisce però il clima che si respira tra le famiglie degli Stati uniti, stordite prima dall’ondata (abnorme) di aiuti e di guadagni di Borsa, e successivamente della comparasa dei cosiddetti “effetti non desiderati e non intenzionali”..

Per Recce’d si tratta però, lo ripetiamo, di un argomento del passato, a proposito del quale i nostri portafogli ed i nostri Clienti sono pronti ormai da mesi.

In an attempt to take advantage of the housing bubble, in 2005 we sold our home in Jacksonville Beach, Florida and rented a home in Ponte Vedra Beach, Florida. After home prices fell, we bought a house in Ponte Vedra, where we live today. In addition to being a great place to live and raise a family, Ponte Vedra is also a popular retirement destination. In fact, most of our neighbors are elderly or retired. While we couldn’t ask for better neighbors, the supply of children on our street is limited, making it difficult for our kids to make friends.

The most common solution for finding something for kids to do in Ponte Vedra is to either join a country club or enroll your children in activities where they can meet and play with other kids. We went with the activities or sports route—specifically, travel baseball and softball.

Before spending much of our free time at baseball and softball fields, our social circle consisted of mostly white-collar professionals. As the years have passed and we’ve made friends with a growing number of travel ball parents, our social circle has shifted.

Travel ball parents are a unique group. They’re passionate, determined, competitive, and for the most part, very hard working. Many of their occupations are essential to the economy, such as nurses, electricians, plumbers, truck drivers, IT technicians, and construction workers. They are on the economy’s front line and have been a great source of information for me regarding current business trends.

While we see each other less frequently, I’ve remained in touch with my former social circle, which mainly consists of lawyers, marketing executives, real estate specialists, asset allocators, and business owners. Interestingly, over the past few months I’ve had an unusually high number of conversations with old friends. Historically, these well-to-do friends typically contact me during sharp declines in the stock market, asking me when their net worth is going to rebound! However, much of their recent uneasiness is related to soaring asset prices. Increases in their net worth have been staggering and, in many cases, life altering.

For those wondering why so many people have not returned to work, look no further than my friend who sold his business and house for enormous gains and is now retired. Instead of being a productive member of the workforce, he’s roaming the beach searching for shark teeth! Another friend recently asked me about his retirement account. He wasn’t bragging—he was just in disbelief about how much money he’s made and was wondering if he should take profits. Another friend asked if it’s a good time to trade in some of his unrealized gains for a new pool. I said, “Sure, but good luck finding an available pool construction crew!” He joked and said, “What’s the point of having all of this money if it doesn’t buy anything.” He pointed to the product and service shortages he’s experiencing personally, noting that it’s no longer just about price, but about availability.

While my wealthy friends riding the asset inflation wave have seen their net worth increase considerably, there is growing apprehension that their gains, and the trajectory of asset prices, are unsustainable and possibly artificial. “When does it end?” is a common question, followed by, “Should I cash in and retire?” and “Where can I invest my cash? Currently I’m getting nothing!” And my favorite, “Where is all of this money coming from?” For those that understand where the money is coming from, they ask, “They can’t keep printing forever, can they?”

As my professional friends ponder what to do with their growing investment portfolios, the mood and concerns within my travel ball social circle is far different. While they too feel that something isn’t quite right, they are much more focused on getting through the workweek than contemplating the direction of the financial markets. Instead of telling me about their equity portfolios, they enlighten me on labor and supply shortages, growing backlogs, and a succinct description of the current operating environment—“We’re slammed!”

Examples include a contractor who told me he can name his price on home renovations. He said he’s backed up six months just giving quotes and said a lady recently hugged him for simply showing up! A window and door distributor had similar stories, saying she’s backed up six to nine months on deliveries and is having trouble obtaining product. Another parent, a nurse, recently arrived to practice late. She was exhausted and saddened after losing two middle-aged patients to COVID during her shift. An owner of a smoothie store informed me about his difficulty finding labor, causing him to work longer hours and weekends. He said finding and keeping workers at the new unofficial minimum wage ($15/hour) has been practically impossible. Another parent who works for UPS just laughed when I asked if he was busy. After a plumber told me about his hectic day, I advised him to ask for a raise. I informed him of the generous signing bonuses plumbers were receiving for job hopping. And that’s been my advice to every person I speak with who is doing the heavy lifting in today’s economy—ask for a raise or promotion. And for business owners with overwhelming backlogs, I suggest increasing prices until some sense of control is regained, or business is lost. A travel ball parent who owns a home restoration company told me that’s exactly what he’s been doing. He said he can’t keep up with his workflow and is so far behind he’s raising prices and turning away business. And for what it’s worth, he said if you’re in the market for new cabinets, good luck!

Regardless of the social circle I speak with, one thing is clear—the economy and financial markets could use a break from the Federal Reserve’s “full-throttle” monetary policies. Stress is building with the economic and asset price wheels spinning so fast there is a sense that at any moment something could break. The Federal Reserve, in our opinion, has “QE’d” so hard and for so long that their policies have become counterproductive. Meanwhile, Fed members attempt to justify current policies by claiming there is too much slack in the labor market and inflation is transitory. The Fed’s views conflict with some of the most pressing challenges workers and business owners are experiencing. In fact, if you want to hear a good laugh, tell a business owner there is too much slack in the labor market! And if the business owner isn’t laughing hard enough, tell them inflation isn’t a problem and is transitory.

As we watch inflation build throughout our opportunity set of small cap businesses, we believe the odds of inflation being the catalyst for the next bear market are increasing. Instead of being transitory, we see signs of inflation persisting, with many of the companies we follow announcing additional price increases heading into 2022. Assuming current trends continue, we expect the transitory inflation narrative will eventually succumb to reality and threaten the Federal Reserve’s ability to monetize debt and maintain negative real interest rates. Without the Fed’s intrusive interference in the free markets, interest rates would once again move freely, allowing asset prices to properly reflect their underlying fundamentals. Ironically, instead of the Federal Reserve saving us from inflation, we believe it will be inflation that saves us from the Federal Reserve.

Although there are many uncertainties in the current environment, we’re certain of one thing—the economy and financial markets do not need more money stuffed into their gears. Based on conversations with friends, parents, business operators, and investors, money creation is no longer the solution—it is the problem. Considering money creation is currently the only thing the Federal Reserve has to offer, we believe further “help” will only add to the challenges facing our economy and its exhausted workforce. If Fed members are having difficulty seeing this, we suggest they step away from their Bloomberg screens and tightly knit social circles. To get a clearer picture of what’s happening in the real economy, attending a youth baseball or softball game this weekend would be a good start!

Come abbiamo detto anche in un altro dei Post odierni, il nostro atteggiamento di gestori di portafoglio verso la vicenda Lehman è il solo che a noi pare possibile: giorno dopo giorno seguiamo, insieme al nostro Cliente, lo sviluppo di questa vicenda, appunto parlandone con i Clienti, e avendo in mano un portafoglio titoli che già tiene conto dei diversi scenari possibili da oggi in avanti.

Commenti di carattere generale ne avrete letti già anche troppi, e non vi faremo perdere altro tempo. A noi sembra che i termini della questione siano ormai chiari, e li riassumiamo con l’immagine che segue.

El Erian spiega benissimo che il problema è tutto politico: il Governo cinese può scegliere la strada del salvataggio, che però lo obbligherebbe a salvare un certo numero di altri grandi gruppi del settore edilizia, oppure può scegliere la strada del fallimento e del segnale da mandare a tutto il sistema economico cinese (ed oltre).

Abbiamo messo opportunamente in evidenza, in un secondo Post, che tutta l’industria del risparmio e della Finanza, con in testa le banche globali di investimento e i gruppi che vendono Fondi Comuni, è schierata in modo compatto a favore del salvataggio.

Anche perché sono loro ad avere in mano i titoli di Evergrande, e degli altri gruppi avviati al fallimento in Cina.

Goldman Sachs qui sopra esprime una assoluta, e cieca, fiducia nel fatto che il Governo “sa che cosa fare”. ma lo sa veramente? E che cosa vuole fare?

La linea di Goldman Sachs per ora ha prevalso: lo dimostra la reazione dei mercati finanziari globali nella settimana del 20 settembre 2021.

Nelle chat e sui siti di trading si spera (sogna) di rivedere le vicende di Gamestop e AMC; l’Azienda è fallita, ma il titolo sale ugualmente, e sale magari del 100%.

Ovvio che si tratta di ragazzini, o comunque di investitori con la psicologia dei ragazzini, che credono nelle storie con i Supereroi.

Questa di Evergrande invece non è una storia con l’Uomo Ragno e Superman: è una storia vera ed una storia grave.

Il nostro compito di gestori professionali è proprio quello di soppesare tutti i possibili scenari, ed attribuire ad ogni scenario un coefficiente di probabilità, sulla base dei fatti e non delle favole con i supereroi. E neppure sulla base di ciò che dice Goldman Sachs.

Ed è questo che facciamo ogni mattina per i nostri Clienti. Per voi lettori, offriamo in lettura un interessante articolo, nel quale un notissimo gestore di portafoglio esprime un modo di vedere le cose alternativo a quello dominante tra le banche di investimento.

Vi sarà utile fare entrare, nel vostro processo di decisione, un po’ di aria fresca.

Kyle Bass: President Xi Wants Evergrande Blowup To Help Lower Housing Prices

Tuesday, Sep 21, 2021 - 07:45 PM

Shortly before two Evergrande creditors confirmed to Bloomberg (under the guise of anonymity) that the Chinese developer-giant had missed bond payments due Monday, Hayman Capital founder Kyle Bass returned to CNBC for an interview Tuesday morning for a telephone discussion with CNBC's Joe Kernen to discuss the toxic Chinese economy and its unsustainable debt pile.

Bass, one of the most vocal China hawks on Wall Street, has said it's important to understand what, exactly, President Xi is looking for. According to Bass, China is "experiencing similar problems that we are in the US" when it comes to housing prices.

Xi has been managing a broad-based crackdown on the Chinese economy all summer. Now, it's time to confront the issue

Now, China is entering this period of weakness with over $50 trillion worth of credit in their system, with their annual GDP at around $15 trillion.

Compared with China, the US had GDP of $17 trillion with another $12 trillion off-balance-sheet when Lehman collapsed. China is at 3.6x ahead of its "Lehman moment", while the US was only about 1.7x.

What's more, China is still a relative newcomer to the capital markets business, Bass said. China adopted a western-style financial system in 2001 after they joined the WTO.

Around the same time, Beijing's population-control policies started to really bite, as China saw its birth rate dwindle.

There are now 1.3 births per woman in China and you need to be at 2.1 to actually just sustain your population, Bass said. So for many working-age Chinese males, population dynamics are at a critical level and the reason being is the Chinese men can't afford houses so they're all living with their parents and the fact that Evergrande went on a credit binge and built all of the housing and Chinese property took off because their central bank continued to print so much money. Now, it's trying to rein in property prices and he's trying to do it as quickly as possible because China's on an unsustainable path lower.

"Right now," Bass says, everyone who believes China's going to grow at 6% a year ad infinitum "is just dead wrong," but if we just divorce ourselves from any value judgments about China and think about the the future of the plan of the globe - if we always think about the Chinese consumer and we all at one point wanted to move forward in a symbiotic way where we sell things to China, and their consumers buy things from us.

It's nice to think about, but this unfortunately just isn't how China works. Investors must realize that they're not investing  "in a real market."

Bass added: "You still have an economy with a closed capital account they have one-way capital flows dollars in. Now, imagine if dollars start heading out."

Nella Commedia dell’Arte, da sempre c’è un posto per il servo sciocco, c, personaggio ricorrente perché gradito al grande pubblico perché capace di suscitare la risata. Un tipo divertente perché sciocco.

A volte con frasi sciocche, a volte con atteggiamenti goffi, a volte con interventi fuori tempo e fuori luogo, altre volte per affermazioni sconclusionate. Comunque, fa ridere.

Nelle diverse regioni d’Italia, a questo personaggio della Commedia dell’Arte sono stati dati nomi diversi, tra i quali Arlecchino a Bergamo e Zanni soprattutto Roma

La Finanza globale è, da molti anni, scivolata nella Commedia: si vedono e si sentono cose sconclusionate, prive di senso, prive di agganci con la realtà. Noi di Recce’d le abbiamo messe alla vostra attenzione più e più volte, utilizzando anche questo Blog che state leggendo.

Nella commedia della Finanza globale del Nuovo Millennio, il ruolo dello servo sciocco se lo sono attribuite, da sole, le banche globali di investimento.

Istituzioni cresciute con una velocità che ha pochi termini di paragone dagli Anni Ottanta agli Anni Duemila, sono tutte di fatto fallite con la crisi dei subprime tra il 2006 ed il 2008. Con i soldi del pubblico (e quindi, anche con i vostri soldi: che li abbia stampati la Banca Centrale fa nessuna differenza) queste Istituzioni hanno continuato a vivere, o meglio a sopravvivere, a patto di diventare una cinghia di trasmissione dei desiderata del potere politico dominante.

Accade così che Istituzioni un tempo prestigiose, proprio perché capaci di IMPORRE un criterio critico nella valutazione degli asset finanziari si sono trasformate in servi sciocchi del disegno politico in quel momento prevalente.

Noi di Recce’d abbiamo regalato, attraverso questo Blog, una serie di documentate analisi che sostengono questa lettura dei fatti: episodi del passato nei quali le banche globali di investimento hanno supportato, fino all’ultimissimo momento, scelte azzardate, emittenti fragili o peggio dannosi, e Governi alla deriva che compiono scelte ai danni del pubblico degli investitori.

Oggi, il solo imperativo al quale queste banche globali di investimento rispondono è: vendere qualsiasi cosa ai risparmiatori, vendere comunque e dovunque, piazzare nei portafogli degli investitori anche la spazzatura, e sempre a prezzi elevatissimi.

In questo Post Recce’d vi regala un esempio ulteriore.

Noi in Recce’d non abbiamo la minima idea, di come andrà a finire la vicenda Evergrande. Ci pare però sia una vicenda di grande dimensione , di grande complessità, e poco decifrabile proprio perché si svolge in Cina.

La vicenda viene seguita per i Clienti ogni mattina attraverso il The Morning Brief: a noi sembra utilissimo effettuare un monitoraggio quotidiano, anziché tentare di arrivare a conclusioni (campate per aria) in anticipo su tutti, e prima che si conoscano le mosse dei giocatori che oggi stanno intorno al tavolo.

C’è al contrario che, ogni mattina, si presenta al Mondo raccontando che “lui lo sa già, come andrà a finire”.

A noi sembra notevolissimo il fatto che non solo tutte le banche globali di investimento la vedono esattamente allo stesso modo, ma pure che il modo in cui tutte leggono questa vicenda porti tutte le banche del mondo alla medesima conclusione (almeno, in pubblico): “il Governo cinese ha il pieno controllo, non c’è alcun rischio che la cosa degeneri, e tutti gli investitori devono soltanto stare tranquilli ed attendere che le cose vadano a posto”.

Tutte queste banche sanno, con anticipo, quali saranno le decisioni della Banca Centrale di Cina, e del Presidente Xi.

Un esempio, concreto, di ciò che significa l’espressione “cervelli mandati all’ammasso”.

Ovvio ed evidente che le grandi banche globali, le Goldman Sachs, le Morgan Stanley, le UBS e le BNP Paribas e le JP Morgan (soltanto per citarne alcune) ma pure i gestori di Fondi Comuni come Blackrock e Fidelity, fanno tutti affari con il Governo cinese, e fino a ieri facevano grandi guadagni proprio piazzando il debito di Evergrande.

Per documentare quello che abbiamo scritto fino a qui in questo Post, vi invitiamo a leggere questa sintesi delle opinioni espresse dalle grandi banche di investimento su Evergrande la settimana scorsa. La sintesi è stata pubblicata sul sito di Bloomberg. Fatevi la vostra opinione in merito.

Wall Street analysts are putting their faith in the Chinese Communist Party.

After a harrowing Monday that saw risky assets tumble globally on fears of a collapse in China Evergrande Group, some of the world’s biggest banks and money managers raced to assure investors that this is no Lehman moment.

The message from firms including Citigroup Inc., Fidelity International Ltd. and AllianceBernstein Holding LP: Evergrande may indeed default, but Chinese authorities will take steps to prevent the property giant’s crisis from destabilizing the financial system and the economy.

Here’s a sampling of what strategists and money managers are saying about the prospect of contagion:

Ajay Rajadhyaksha, Barclays

So, is this China’s Lehman moment? Not even close, in our opinion.

Yes, Evergrande is a large property firm. And yes, there could (probably will) be spill-over effects on China’s property sector, with economic implications. And yes, it comes at a time when China’s growth has already started to disappoint. But a true ‘Lehman moment’ is a crisis of a very different magnitude. One would need to see a lenders’ strike across large parts of the financial system, a sharp increase in credit distress away from the real-estate sector, and banks being unwilling to face each other in the interbank funding market. And with all that, we would also need to see massive policy mistakes on the part of Chinese authorities. In our view, the conditions are simply not in place for even a large default to be China’s Lehman moment.

Judy Zhang, Citigroup

We do not see the Evergrande crisis as China’s Lehman moment given policy makers will likely uphold the bottom line of preventing systematic risk to buy time for resolving the debt risk, and push forward marginal easing for the overall credit environment.

We believe regulators may buy time to digest Evergrande’s NPL problem (e.g., guiding banks not to withdraw credit and extend interest payment deadline).

Kenneth Akintewe, Aberdeen Standard Invest Asia 

Our base case is that there will be a relatively orderly restructuring, it’s not in the interest of policy makers, economy or the market to go into a destabilized uncontrollable spillover, and have this impacting other parts of the economy.

Near term there will be uncertainty and volatility, but outside of Evergrande, policy makers will be able to engineer some sort of recovery from this.

Bhanu Baweja, UBS

I don’t think this is a Lehman moment. I think when you try to reduce moral hazard after four major credit cycles, it is going to be messy. The biggest risk out here is not what happens to suppliers or what happens to the financial system in the near term, I don’t think that’s an issue. I think China has managed that reasonably well. Default levels are pretty low in the overall economy and the capital adequacy for banks, particularly the large banks, is quite high.

I think the most important issue is what this does to the collateral of the entire credit boom -- which is property prices -- and therefore confidence in property itself. 

Catherine Yeung, Fidelity International

If we look at the past three years, we have seen restructuring that the government or regulators have been involved in, whether it’s Huarong, China Fortune Land, and other single credit events. So they have the confidence in terms of this potential restructuring. 

The likely scenario is that they will avoid bankruptcy when it comes to Evergrande [and] seek restructuring with strategic investors or bridge investors. The priority from a domestic perspective and a sentiment perspective is projection completion and supply chain cash settlements.

Vishwanath Tirupattur, Morgan Stanley

The expectations of a broad contagion may be overdone. Clearly the impact on growth is there. But I think the key point here is I continue to believe this is not a moment like what we had in 2008. There has certainly been a subtle change of signal from the policy makers in China. A lot of that we think is already reflected in price.

Marko Kolanovic, JPMorgan Chase

[The market sell-off] is primarily driven by technical selling flows (CTAs and option hedgers) in an environment of poor liquidity, and overreaction of discretionary traders to perceived risks. Our fundamental thesis remains unchanged, and we see the sell-off as an opportunity to buy the dip.

Risks are well-flagged and priced in, with stock multiples back at post-pandemic lows for many reopening/recovery exposures. We look for cyclicals to resume leadership as delta inflects.

Shujin Chen, Jefferies

Against the market view, we see regulators keeping a close eye on Evergrande and think it could soon put forward a plan or meaningful progress to reduce the impact.

We expect a plan to resolve the issues, or help make meaningful progress to be out by the end of the year (also possible within 1-2 months) as China will focus on boosting 1Q22 economic growth starting from 4Q21.

Larry Hu, Macquarie

A major concern is the contagion risk for other high-leveraged developers, as banks, suppliers and homebuyers would all turn more cautious in view of the Evergrande saga. As the result, a self-fulfilled liquidity crunch could happen to other high-leveraged developers. That said, the government has the will and capability to intervene, if the market goes panic. 

It could break the negative feedback loop by easing liquidity, as what it did during the interbank credit crunch in 2013. Moreover, given property policy is unprecedentedly tight at this moment, policy makers have plenty of room to loosen if they want. It seems that they are willing to wait a bit longer to reduce the moral hazard in the future, but they could step in anytime for the sake of financial and social stability.

John Lin, AllianceBernstein

There is very little likelihood of default spilling over into a systematic crisis. First, Chinese regulators are the ones triggering the most recent fall of Evergrande.  The regulators have prepared for it, and they will be able to manage through it.

Because there is low likelihood of a systematic crisis, many of the Chinese developers – particularly the higher quality companies with strong balance sheet, capable management and good product reputation – will survive this round of correction.  In the market panic over the last two weeks, their valuations have already overshot on the down side.  In our opinion, these select quality developers present compelling return opportunities for long-term minded investors.

Tommy Wu, Oxford Economics

Concerns over the rising default risk of Evergrande, the property developer, have roiled financial markets over the last week. While we think the government doesn’t want to be seen as engineering a bail out, we expect it to step in to conduct a managed restructuring of the firm’s debt to prevent disorderly debt recovery efforts, reduce systemic risk, and contain economic disruption.

— With assistance by Abhishek Vishnoi, Chloe Lo, Sofia Horta e Costa, Jan Dahinten, Ishika Mookerjee, and Low De Wei

Il lavoro di Recce’d è essenzialmente questo: anticipare per conto del Cliente ciò che nella realtà sta per accadere, a distanza di qualche mese o magari di un anno, e modificare il portafoglio in titoli nel modo più redditizio, più profittevole e più performante. Il vostro portafoglio deve essere preparato ed organizzato PRIMA degli eventi. Dopo, non servirà più a nulla.

Recce’d agisce in modo tale da mettere il proprio Cliente almeno un passo avanti agli altri investitori, consulenti, private banker, banche globali di investimento, wealth manager e robot advisor.

Per questa ragione i nostri Clienti ci riconoscono le commissioni di gestione.

Recce’d scrisse quindi mesi fa di stagflazione, in sede pubblica (ad esempio qui in questo Blog, e poi anche su Soldionline.it ed in altre sedi pubbliche), ma soprattutto ai propri Clienti

Poi nella pratica abbiamo fatto del tema stagflazione il tema centrale della nostra gestione del portafoglio: così che oggi, 25 settembre 2021, i nostri portafogli sono perfettamente posizionati per ciò che adesso tutti leggono sul proprio quotidiano o settimanale .

Perché oggi, nel settembre 2021, chi ha un minimo, ma proprio un minimo, di conoscenza delle economie e dei mercati finanziari, e chi ha un minimo, ma proprio un minimo, di competenza e decenza professionale, oggi parla di stagflazione.

E questo è precisamente il nostro lavoro quotidiano. Parlarne con un ampio anticipo con i nostri Clienti.

Considerato il fatto che oggi, nel settembre 2021, quel tema che noi abbiamo messo alla vostra attenzione nell’estate del 2020 è diventato il tema al centro di ogni dibattito e discussione sui mercati finanziari, noi preferiamo non ripetere i nostri (forti e solidi) argomenti già pubblicati qui nel Blog ed offrire al lettore qualche squarcio su quello che si dice appunto dui mercati in questi giorni.

Pochi commentatori oggi dispongono dell’autorevolezza, della credibilità e dell’influenza di Mohamed El Erian, nel mercato internazionale.

Ecco la ragione per la quale noi oggi vi proponiamo in lettura il suo più recente articolo, che (non a caso) è dedicato proprio al tema della stagflazione.

El Erian dice nell’articolo: visto che la stagflazione ormai è arrivata qui ed ora, vediamo quali sono le mosse da fare e le iniziative che andrebbero prese.

El Erian si concentra sulle iniziative, sulle mosse e sulle contromisure da prendere a livello di politica monetaria e di politica fiscale: per ciò che riguarda invece le mosse più opportune in termini di gestione del risparmio e del proprio portafoglio titoli, noi siamo ovviamente disponibilissimi a dialogare coi lettori che ci contatteranno attraverso il sito.

Sep 22, 2021 Mohamed A. El-Erian

Rising inflation and declining growth are more likely to be a part of the global economy’s upcoming journey than features of its destination. But how policymakers navigate this journey will have major implications for longer-term economic well-being, social cohesion, and financial stability.

CAMBRIDGE – A stream of recent data suggests that the global economy is showing signs of stagflation, that odd 1970s-style mixture of rising inflation and declining growth. Those who have noticed it – and there are still too few of them – fall into two broad camps. Some see the phenomenon as temporary, and quickly reversible. Others fear that it will lead to a renewed period of unsatisfactory growth, but this time with unsettlingly high inflation.

But a third scenario, which draws on both of these views, may well be the most plausible. Stagflationary winds are more likely to be a part of the global economy’s upcoming journey than a feature of its destination. But how policymakers navigate this journey will have major implications for longer-term economic well-being, social cohesion, and financial stability.

The much-needed global economic recovery has recently been losing steam as growth in its two major locomotives, China and the United States, has undershot consensus expectations. The more contagious Delta variant of the coronavirus has dampened spending in some sectors, such as leisure and transportation, while hampering production and shipments in others, particularly manufacturing. Labor shortages are becoming more widespread in a growing number of advanced economies. Add to that a shipping-container shortage and the ongoing reordering of supply chains, and it should come as no surprise that the headwinds to a strong and sustainable global recovery are being accompanied by higher and more persistent inflation.

Higher inflation is putting pressure on those central banks that wish to maintain an exceptionally loose monetary policy. At the same time, decelerating economic growth presents a problem for central banks that are more inclined to scale back stimulus measures. All this also risks eroding political support for much-needed fiscal and structural policies to boost productivity and long-term growth potential. Some economists, and the majority of policymakers, believe that current stagflationary trends will soon be muted by a combination of market forces and changes in human behavior. They point to recent declines in previously spiking lumber prices as indicative of how competition and increased supply will dampen inflation. They think the sharp fall in Delta-variant cases in the United Kingdom foreshadows what lies ahead for the US and other countries still in the grips of the latest COVID-19 wave. And they take comfort from multiplying signs of booming corporate investment in response to supply disruptions. Others are more pessimistic. They argue that demand headwinds will intensify due to reductions in fiscal schemes that were supporting household income, citing the expiration of supplementary unemployment benefits and direct cash transfers. They also worry about the gradual exhaustion of the cash buffers that many households unexpectedly accumulated as a result of exceptionally generous government support during the pandemic.

On the supply side, the stagflation pessimists welcome higher business investment but fear that its benefits won’t come fast enough, especially as supply chains are redirected. Supply disruptions will therefore persist for much longer, in their view, and central banks will fall behind with the needed policy response.

I suspect that neither of these scenarios is likely to dominate the period ahead. But they will influence the alternative that does materialize. Ideally, policymakers would respond in a timely and self-reinforcing manner to the increasing evidence of stagflation. The US would lead by progressing faster on a policy pivot, with the Federal Reserve already unwinding some of its ultra-loose monetary policy and Congress enabling President Joe Biden’s administration to advance its plans to enhance US productivity and longer-term growth by boosting investments in physical and human infrastructure.

Meanwhile, national and international financial authorities would coordinate better to strengthen prudential regulation, especially as it pertains to excessive risk-taking among non-bank market participants. These measures would lead to declining inflationary pressures, faster and more inclusive growth, and genuine financial stability. And such a desirable outcome is attainable provided the needed policy response proceeds in a comprehensive and timely manner. Absent such a response, supply-side problems will become more structural in nature, and therefore more prolonged than the transitory camp expects. The resulting inflationary pressures will be amplified by the higher wages that many firms will have to offer to attract the workers they currently lack and retain the ones they have. With central banks lagging in their policy response, inflationary expectations risk being destabilized, directly undermining the low-volatility paradigm that has helped push financial-asset prices ever higher.

Because the Fed would then be forced to hit the policy brakes, higher inflation would be unlikely to persist. Unfortunately, reducing it would come at the cost of lower and less inclusive growth, especially if the Biden administration’s plans remain stuck in Congress (which would be more likely in the high-inflation scenario). Rather than prolonged stagflation, the global economy would repeat what it experienced in the aftermath of the 2008 global financial crisis: low growth and low inflation.

The recent appearance of stagflationary tendencies serves as a timely reminder of the urgent need for comprehensive economic-policy measures. The faster such a response materializes, the greater the probability of anchoring economic recovery, social well-being, and financial stability. But if policymakers delay, the global economy will neither be saved by self-correcting forces nor pushed into a prolonged stagflationary trap. Instead, the world will return to the previous “new normal” of economic underperformance, stressed social cohesion, and destabilizing financial volatility.

In Recce’d sono poche le occasioni nelle quali la nostra visione dello stato delle cose coincide con quella di Nouriel Roubini, notissimo commentatore di ampia fama anche sui media tradizionali, al quale è stata attribuito il merito di “avere previsto la Grande Crisi Finanziaria 2007-2009”.

Non entreremo nel merito delle capacità di previsione di Nouriel Roubini, ma ripetiamo che negli anni precedenti e successivi alla GCF noi di Recce’d ci siamo spesso trovati in disaccordo con lui, soprattutto per i toni (catastrofisti) utilizzati, ma pure di frequente nel merito delle analisi e delle conclusioni.

Se oggi vi presentiamo un recentissimo articolo di Roubini, pubblicato la settimana scorsa, è perché a nostro giudizio contiene alcuni spunti originali, che sono degni di approfondimento e che possono aiutare i lettori di Recce’d a rendersi conto di quale è, oggi, lo stato delle cose sui mercati finanziari. Che non è lo “scenario Panglossiano” offerto, ancora oggi, dalle Reti dei private bankers, che sono rimasti ancora oggi fermi al “boom economico” che andava di moda fino ad aprile 2021. Allora “vendeva bene” ma oggi “non vende più”.

In particolare, ci sembra utilissima la classificazione offerta da Roubini, che chiama lo scenario nel quale ci troviamo oggi una “moderata stagflazione” e che poi etichetta i quattro possibili (secondo l’autore) scenari futuri come:

• Boccoli d’oro

• surriscaldamento

• piena stagflazione

• recessione

Che cosa c’è di utile in questa classificazione, per noi investitori? Suggeriamo un processo in tre stadi:

1. primo stadio: scorrendo le caratteristiche dei quattro scenari, ogni investitore potrà fare un confronto e scegliere quale è lo scenario che giudica più probabile (ad esempio: giudicate sostenibili le previsioni OCSE che leggete nell’immagine? e perché sono così tanto diverse da quelle di inizio 2021?)

2. sulla base dello scenario che all’investitore risulta più probabile, non sarà difficile stimare il comportamento dei diversi asset finanziari proprio in quello scenario

3. infine, l’investitore potrà prendere in mano il proprio portafoglio, e calcolare (applicando le previsioni di cui al punto 2) quanto potrà perdere, o guadagnare, nello scenario da lui prescelto, da qui a fine 2021 e poi nel 2022.

Se l’investitore non si sentisse in grado di effettuare queste (semplici) operazioni, potrà quanto meno chiedere al proprio private banker, personal banker, al wealth manager, al promotore finanziario, e anche al robot-advisor: “quale dei quattro scenari ritieni più probabile? e come si sposa questa visione con il portafoglio di Fondi Comuni che mi hai appena venduto, al modico prezzo del 3% l’anno fatto di commissioni che io pago senza che mi vengano esplicitate?

In alternativa, può contattare Recce’d e risolvere ogni problema oggi esistente nel suo portafoglio titoli, e per sempre.

Given today’s high debt ratios, supply-side risks, and ultra-loose monetary and fiscal policies, the rosy scenario that is currently priced into financial markets may turn out to be a pipe dream. Over the medium term, a variety of persistent negative supply shocks could turn today’s mild stagflation into a severe case.

How will the global economy and markets evolve over the next year? There are four scenarios that could follow the “mild stagflation” of the last few months.

The recovery in the first half of 2021 has given way recently to sharply slower growth and a surge of inflation well above the 2% target of central banks, owing to the effects of the Delta variant, supply bottlenecks in both goods and labor markets, and shortages of some commodities, intermediate inputs, final goods, and labor. Bond yields have fallen in the last few months and the recent equity-market correction has been modest so far, perhaps reflecting hopes that the mild stagflation will prove temporary.

The four scenarios depend on whether growth accelerates or decelerates, and on whether inflation remains persistently higher or slows down.

Wall Street analysts and most policymakers anticipate a “Goldilocks” scenario of stronger growth alongside moderating inflation in line with central banks’ 2% target. According to this view, the recent stagflationary episode is driven largely by the impact of the Delta variant. Once it fades, so, too, will the supply bottlenecks, provided that new virulent variants do not emerge. Then growth would accelerate while inflation would fall.

For markets, this would represent a resumption of the “reflation trade” outlook from earlier this year, when it was hoped that stronger growth would support stronger earnings and even higher stock prices. In this rosy scenario, inflation would subside, keeping inflation expectations anchored around 2%, bond yields would gradually rise alongside real interest rates, and central banks would be in a position to taper quantitative easing without rocking stock or bond markets. In equities, there would be a rotation from US to foreign markets (Europe, Japan, and emerging markets) and from growth, technology, and defensive stocks to cyclical and value stocks.

The second scenario involves “overheating.” Here, growth would accelerate as the supply bottlenecks are cleared, but inflation would remain stubbornly higher, because its causes would turn out not to be temporary. With unspent savings and pent-up demand already high, the continuation of ultra-loose monetary and fiscal policies would boost aggregate demand even further. The resulting growth would be associated with persistent above-target inflation, disproving central banks’ belief that price increases are merely temporary.

The market response to such overheating would then depend on how central banks react. If policymakers remain behind the curve, stock markets may continue to rise for a while as real bond yields remain low. But the ensuing increase in inflation expectations would eventually boost nominal and even real bond yields as inflation risk premia would rise, forcing a correction in equities. Alternatively, if central banks become hawkish and start fighting inflation, real rates would rise, sending bond yields higher and, again, forcing a bigger correction in equities.

A third scenario is ongoing stagflation, with high inflation and much slower growth over the medium term. In this case, inflation would continue to be fed by loose monetary, credit, and fiscal policies. Central banks, caught in a debt trap by high public and private debt ratios, would struggle to normalize rates without triggering a financial-market crash.

Moreover, a host of medium-term persistent negative supply shocks could curtail growth over time and drive up production costs, adding to the inflationary pressure. As I have noted previously, such shocks could stem from de-globalization and rising protectionism, the balkanization of global supply chains, demographic aging in developing and emerging economies, migration restrictions, the Sino-American “decoupling,” the effects of climate change on commodity prices, pandemics, cyberwarfare, and the backlash against income and wealth inequality.

In this scenario, nominal bond yields would rise much higher as inflation expectations become de-anchored. And real yields, too, would be higher (even if central banks remain behind the curve), because rapid and volatile price growth would boost the risk premia on longer-term bonds. Under these conditions, stock markets would be poised for a sharp correction, potentially into bear-market territory (reflecting at least a 20% drop from their last high).

The last scenario would feature a growth slowdown. Weakening aggregate demand would turn out to be not just a transitory scare but a harbinger of the new normal, particularly if monetary and fiscal stimulus is withdrawn too soon. In this case, lower aggregate demand and slower growth would lead to lower inflation, stocks would correct to reflect the weaker growth outlook, and bond yields would fall further (because real yields and inflation expectations would be lower).

Which of these four scenarios is most likely?

While most market analysts and policymakers have been pushing the Goldilocks scenario, my fear is that the overheating scenario is more salient. Given today’s loose monetary, fiscal, and credit policies, the fading of the Delta variant and its associated supply bottlenecks will overheat growth and will leave central banks stuck between a rock and a hard place. Faced with a debt trap and persistently above-target inflation, they will almost certainly wimp out and lag behind the curve, even as fiscal policies remain too loose.

But over the medium term, as a variety of persistent negative supply shocks hit the global economy, we may end up with far worse than mild stagflation or overheating: a full stagflation with much lower growth and higher inflation. The temptation to reduce the real value of large nominal fixed-rate debt ratios would lead central banks to accommodate inflation, rather than fight it and risk an economic and market crash.

But today’s debt ratios (both private and public) are substantially higher than they were in the stagflationary 1970s. Public and private agents with too much debt and much lower income will face insolvency once inflation risk premia push real interest rates higher, setting the stage for the stagflationary debt crises that I have warned about.

The Panglossian scenario that is currently priced into financial markets may eventually turn out to be a pipe dream. Rather than fixating on Goldilocks, economic observers should remember Cassandra, whose warnings were ignored until it was too late.