One swallow doesn’t make for a Summers wake-up call
Larry Summers told Americans on a live TV interview this morning, “It’s sort of OK to say in twenty-ten or twenty-eleven that the world’s had a nasty shock, but when things are still giving off all the wrong signals in twenty-sixteen, well….it’s not just a transient thing….For me, it feels like we’re going to pay for things we really should’ve done at least a decade ago”.
Asked if he thought the US Fed would have to volte-face on its rate hike, he answered “Of course it will….people too often talk about the US being immune to the rest of the world, but we aren’t…..”
On commodities, he was equally forthright: “You know, you can talk around all the contributory factors, but it’s pretty obviously a lack of demand.”
Across the Pond, a successful and very highly regarded UK futures trader told me, “I agree with Summers about the US, but there are plenty of us who see just as big a pantechnicon heading for Osborne….the latest figures for UK industrial output were bad, bad, bad – Sterling is down everywhere….that can be a bonus for exports, but not when there just isn’t the money or confidence to buy in the first place. Osborne has flunked the test”.
Citing Brexit as a further element in Sterling’s wobble, the FT yesterday bluntly headlined ‘Britain’s industrial base is in recession’.
After the Summers interview, Bloomberg Go had an asset management big wheel on the show, who told them “It’s going to be bloody until at least the Autumn, that’s our view”. Asked what he thought of Monday’s RBS paper, he said “They’re right – sell everything, at least for the time being.”
The recent decision by prominent London hedgie Nevsky to close down was accompanied by a typically frank statement from its owners: “With our focus being largely on the emerging markets, we do not see any way we can offer clients reasonable returns on their money. This isn’t about lost money, is about giving it back to our clients before they lose it”. In no sense is Nevsky anywhere near insolvent: it was a straightforward case of watching the weather and deciding to up sticks to somewhere else.
Three days ago, Summers wrote a piece in The Washington Post (not his favourite newspaper) effectively telling the Fed it should accept the insanity of rate hikes and get radical while there’s still time. Although he often sounds like it, he is not a GOPher damning the Democrats in an election year: his low rating of Janet Yellen in private is well known, but this isn’t sour grapes about not getting the job: of late he sounds genuinely concerned about the state of the Union, and has already publicly endorsed Bernie Sanders appeal for “root and branch reform” at the Fed. This is a horse Larry Summers has been riding for the lest few months, but I would rate the Bloomberg session his most outspoken statement yet.
There is other news too suggesting people being cautious in sight of the end game. A feisty London estate agency specialising in rich City and overseas multinational clients told The Slog yesterday evening that “All sectors of our niche are dead. Nobody is even looking”. A similar operation has said the same about Paris.
We’ve heard it all a hundred times before, although my view remains that had we harkened a hundred times ago, we wouldn’t be in an almighty mess now. But this start to the year in terms of both market nerves and Establishment opinion is different. Twelve months ago, some major players were offering up bromides about ‘lost value’ and ‘false hopes’ here and there. What we’ve got now is serious warnings from those who have clearly decided, “Enough with the up is down and blue is Tuesday bollocks – if it lands, flaps, wobbles and sinks like a dead duck, chances are it’s a dead duck”.
Notably absent from Cameron’s PMQ exchanges this lunchtime were the words ‘strong economy’ and ‘further proof that our long-term economic plan is working’. Mind you, for the second week running, also absent was a single answer to any of the questions put to him by the Opposition Leader Jeremy Corbyn. It was also a rerun of last week’s bunfight in that Cameron tried to recover his position with puerile gags. Perhaps the BBC is now even running repeats of Prime Minister’s Question Time: either way, one increasingly feels that Dave’s toffee-nosed cracks are misjudging the mood of the country.
Unusually for me, I have two predictions for you. Observe closely as, over the next three weeks, the Osborne-Cameron-May machine turns the bad news to advantage by stressing that a falling Pound and lousy exports are down to Brexit fears…..and this isn’t the time to be out in the cold blah blah blah. Hat-tip to Camerlottery for that one.
Second, read some class-act Indian newspapers and websites. India doesn’t have the same problems as China, it just has different ones that are more urgent. I think we are going to see India on the ER radar before too long.