Monday, November 9, 2015

OECD fears global slowdown; King dollar and global currencies; Suu Kyi heading for big win in Myanmar

1 OECD fears global slowdown (Katie Allen in The Guardian) A sharp slowdown in global trade on the back of China’s troubles poses a threat to economic growth and calls for richer countries to step up investment while keeping monetary policy loose, a leading thinktank has warned.

In its twice-yearly outlook, the Organisation for Economic Co-operation and Development (OECD) highlighted risks from emerging markets and weak trade. The thinktank cut its forecast for global economic growth to 2.9% in 2015 and 3.3% in 2016, down from 3.0% and 3.6%, respectively, pencilled in at an interim update in September.

Presenting the outlook, OECD secretary general Angel Gurría said: “The slowdown in global trade and the continuing weakness in investment are deeply concerning. Robust trade and investment and stronger global growth should go hand in hand.”

The thinktank edged up its forecast for economic growth in the group of 34 OECD countries this year to 2.0% from 1.9% in June’s outlook, when it had noted a sharp dip in US growth at the opening of 2015. For 2016, it has cut the forecast for OECD countries’ growth to 2.2% from 2.5%.

The group repeated earlier recommendations that governments increase investment to help support growth. Such spending did not have to come at the expense of debt reduction given the likely boost to growth, it added. Policymakers and economists have been divided over whether cutting spending will eventually bring down countries’ debt piles or in fact prove counter-productive because it dents economic growth.

In the meantime, with global trade weak the OECD raised the spectre of recession. Catherine Mann, OECD chief economist said: “Global trade, which was already growing relatively slowly over the past few years, appears to have stagnated and even declined since late 2014.”


2 King dollar and global currencies (Matein Khalid in Khaleej Times) There is no doubt in my mind that we are only in the first year of a secular US dollar uptrend reminiscent of the Clinton superdollar of the late 1990s, a period that saw Russia default, Thailand lost its baht peg, Indonesia went bankrupt, South Korea begged for a $57 billion IMF loan, crude oil plunged to $10 and capital surged into Silicon Valley.

Déjà vu? Yes. The world of late 2015 looks eerily similar to me since monetary divergence between the Yellen Fed and the Draghi ECB guarantees the epic fall in the euro will continue next year.

The ECB policy conclave in December will set the operational metrics of its quantitative easing and euro money market intervention regime. This means a replay of Q1 2015 as Planet Forex aggressively bids down the euro to well below parity. Sentiment, positioning, politics (the migrant crisis, the end of Frau Merkel, Kremlin intervention in Syria, VW scandal, Deutsche Bank losses) all tell me that the euro is vulnerable to spasms of selling.

Chicago futures markets data tells me that investor nibble at sterling longs at .52, though lower highs on cable since summer make me nervous as King Dollar will not spare even the Great Britain pound. Best to go long sterling against petrocurrencies and the euro. With negative Swiss interest rates out to 10 years, the Swiss franc is priced for deflation and headed to 1.04 against the greenback.

The Indian rupee will be victim of Fed tightening and offshore fund liquidation on Dalal Street. While the rupee was spared the free fall of the Turkish lira or the ringgit/real/rupiah/rand relative inflation rates alone argue for 68 against the US dollar in the next six months. Capital flight, sanctions, external debt redemptions, crude oil, Syrian/Ukraine geopolitical risk all tell me the Russian rouble will fall to 72-74 by early 2016.

Gold? Down $80 an ounce on the eve of Diwali as petrocurrency-central banks dump reserves to service external US dollar debt while Chinese/Indian bullion demand evaporates. Gold is down 40 per cent since 2011. Sublime store of value, Sirji!


3 Suu Kyi heading for big win in Myanmar (San Francisco Chronicle) Myanmar's military-backed ruling party was headed Tuesday for a massive rout at the hands of opposition leader Aung San Suu Kyi, who was set for a historic electoral victory that could give her party the presidency and loosen the military's grip on the country.

With official results from Sunday's general elections slow to come, Suu Kyi's National League for Democracy started announcing its victories late Monday -- by midnight it had declared it had won virtually every seat in four of 14 states where counting was complete.

The NLD said it had won 44 of the 45 lower house seats and all 12 of the upper house seats from the party stronghold of Yangon, Myanmar's biggest city. It also won all 38 seats in Ayeyarwaddy state, all but one of the 40 in Bago, and 11 out of 19 lower house seats and all 10 upper house seats in Mon state. The trend was expected to continue in Myanmar's remaining 10 states.

Even without official results, it was clear that the Union Solidarity Development Party was facing a rout. The party is made up former junta members who ruled the Southeast Asian country for a half-century and as a quasi-civilian government since 2011. Many of its leaders conceded personal defeats in their races.

Suu Kyi, the Nobel Peace Prize laureate and pro-democracy icon, has urged supporters not to provoke losing rivals who mostly represent the former junta in the country also known as Burma.A constitutional amendment bars anyone with a foreign spouse or child from being president or vice president, meaning Suu Kyi is not eligible for those posts. Her two sons are British, as was her late husband.

Suu Kyi has said, however, that she will act as the country's leader if the NLD wins the presidency, saying she will be "above the president."


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