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Good Morning: The Long & the Short of it and The Bigger Picture - 21 May 2019 - ADM ISI


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Ostwald, Marc
08:47 (11 minutes ago)

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- Meagre schedule of data features UK CBI Industrial Trends survey, US
Existing Home Sales and Philly Fed services index; BoE testimony, OECD
forecast update and Fed speak follow hefty June rate hint from RBA

- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-21-may-2019/

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** EVENTS PREVIEW **
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Central bank events dominate the calendar of scheduled data and events, with the data schedule offering precious little - Singapore final Q1 GDP, UK CBI Industrial Trends and in the US the Philly Fed's monthly Services survey and Existing Home Sales. In event terms, politics and trade war tensions headlines will continue to render other items rather moot, though the overnight May RBA minutes and accompanying Lowe speech warm the plate for Carney & Co to testify about the BoE's Q2 Inflation report, the latest OECD Economic Outlook and some Fed speak. The Netherlands will be the country of note to sell bonds via way of a re-opening of its 2040 DSL. As discussed in today's audio preview, politics is now unavoidably front and centre for financial markets, above all in terms of what has now to be called the US / China trade war, which is now very much focussed on technology and very much a Thucydides trap as the two countries vie for leadership of the global economy. Trump's comments on auto imports and the heightened tensions between the USA and Iran only serve to exacerbate the cloud of malign influences for financial markets. It is not really surprising that the key US/China battleground is the technology sector, given that it has been and indeed remains the key driver of global growth, but equally this effectively also brings to an end the post "Cold War" peace dividend era, a process that has been probably work in progress since 9/11. The fact that the world is still struggling to shake off the shackles of the financial repression imposed after the Global Financial Crisis only serves to exacerbate the headwinds for the global economy, and reminds me of the two quotes below that I frequently deploy. The fact that the developed world appears bereft of any real statesmen and stateswoman is a major concern, perhaps above all from the aspect that it raises the probability of one or more key actors making an error of judgement.

Einstein: "We cannot solve our problems with the same thinking we used when we created them."

William Pfaff and the concept of 'dead stars' in reference to the guiding principles of the American political system and hierarchy. The 'dead stars' he defines as "ideas that people want or need to be true", "they are ideas about political change, about the correlation between political and economic progress, and about the universal relevance of certain values and political institutions, which are held to merely because it would be bewildering to be without them. Theoretical formulations that are generally conceded to be false but have become conventional, and for which no replacement is evident, continue to be employed by people who certainly know better. .... There is a real dissociation of perception from analysis and decision. " (Barbarian Sentiments: How the American Century Ends, 1989).
 
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