It is becoming increasingly clear that the Fed’s taper, the slowdown in the central bank’s balance sheet growth (chart below), is unlikely to damage credit expansion in the US.Fed’s balance sheet (YoY)In fact – and many economists find this counte…
Earlier this week, CNN Money ran a story on JPMorgan’s quarterly results. Instead of focusing on the earnings, the author’s (Stephen Gandel) discussed the fact that JPMorgan’s loan-to-deposit ratio (LTD) hit a new low.FORTUNE: – The nation’s large…
Loan growth in the US continues to slow. Credit expansion is certainly not nearly as bad as what has transpired in the Eurozone (discussed here), but the slowing trend is unmistakable. The current rate of loan growth is now significantly below the nominal GDP expansion.
Here is a simple question: what percentage of US banks’ balance sheets is taken up by loans to businesses? The answer may surprise some. It’s just under 11.5%, down from about 16% some 10 years back. Banks began preferring real estate loans (particular…
We’ve received a number of questions regarding the recent post on the trajectory of the US loan-to-deposit ratio (see post). Many are wondering how such fluctuations are even possible. That’s because the classic view in economics is that deposits …
The chart below shows US total loan balances relative to bank deposits over the past couple of years. The total loan growth rate continues to deteriorate while deposits grow.Source: FRED (5/4/2011=100)In fact the ratio of these two measures, the so-cal…
Recently the IMF made it clear that the current euro area leadership needs to address its ongoing banking problems. The Eurozone’s banks are continuing to deleverage, with total loan balances to euro area residents now at the lowest level in 5 years. What makes the situation even more troubling is that many Eurozone banks banks are repeating the Japanese experience of the 90s. They are carrying poor quality and often deteriorating assets on their balance sheets, refusing to take writedowns that will require recapitalization.
The decline in euro area banks’ excess reserves has been quite spectacular. Excess reserve levels are back to 2011 levels.Source: ECBSome are attributing this to banks “no longer hoarding cash” and therefore lending. That’s nonsense. This decline in ex…
Greece is frozen in a political stalemate. Youth unemployment is running at over 50%. And there has been a $1 billion run on Greek banks.
From near and afar, there appears to be no easy way out, especially now that the Eurozone is heading back into a recession.
It’s times like these when investors pour into the U.S. dollar for its “perceived safety.”
With commodities priced in U.S. dollars, this spike in the greenback has sent commodities-including gold prices-into a tailspin since early March.
That has many doubters asking: “Has the commodities super-cycle ended?”
It’s a reasonable question considering the Continuous Commodity Index (CCI) is back down to levels it last saw in September 2010.
What’s more, gold prices have backed off to near $1,500/oz., and oil prices have fallen from $110 to $90/barrel.
But as you’ll see, the commodities coin does have another side.
The Other Side of the Commodities Story
In fact, a recent article by Frank Holmes, CEO and chief investment officer at U.S. Global Investors, pointed out how China and other emerging nations are in better fiscal shape than much of the West.
Even if China is slowing somewhat, it is still growing at an enviable 8% per year, with only 42% debt to GDP ratio. So rather than go for more outright stimulus, it’s expected that China will target new loan growth and its M2-money supply growth to around 14%.
Meanwhile, India and Australia have just lowered interest rates while other central banks are basically refusing to raise rates.
It means the world will keep turning, people will keep consuming and annual demand of raw materials is likely to remain elevated.
As for gold prices, let’s cut right to the chase.
The best ways to play it? Goldman’s 5 favorite trades are as follows:
1. Short $/CNY via 2yr NDFs currently 6.41, expected return 6%: The current account positions in the US and China remain at the core of the global imbalances debate. We remain of …