Best Posts from Q1 on Marc to Market

Here is our selection of our best posts from the first quarter.  We have not included the commentary on the short-term price action.  Instead, we have focused on the more interpretative pieces that seek to contribute to the understanding of the larger framework.

1.  Currency Wars:  Causes and Consequences:  We look closely at this concept that is bandied about in the press.   We argue that the tensions in the currency markets are not unusual and that there are circuit breakers, like the WTO, that prevent the tension from spilling over and sparking trade wars.  

2. The Importance of the G20:  Not What You Think:  The G20 meeting lent credence to our argument and denied that countries pursuing monetary and fiscal policies to achieve domestic objectives was tantamount to a currency war.  The important development at the meeting, which was largely overlooked, was what could be the start of the first significant reform in the international corporate tax regime in almost a century.  

3.  Deep Dive:  Financial Repression Reconsidered:  We argue that capital is not being repressed by lower interest rates.  That what interest is being foregone is being offset by higher profits, rising equity markets and stronger home prices.  Before, during and after the financial crisis, wealth and income have become more concentrated.  As a corollary, we argue that central banks have never been as independent as some of the ideologues claim.  Moreover, the power wielded by central bank should be help accountable by checks and balances.  

4.  Abenomics:  Japan's Thermidor:  We explore the three-prong strategy of  Abenomics--fiscal and monetary stimulus coupled with nationalism.  

5.  Abenomics:  Where the Rubber Hits the Road:  It is here we begin to sketch out the limitations of Japan's economic strategy.  In particular, we are concerned about the lack of structural reforms and the worry that the liquidity trap will be aggravated.  

6.  France's Firebreak Weakens:  One of our thematic points is that France shares many important characteristics of the periphery in Europe.  However, its bonds continue to trade like higher yielding German bunds. 

7.  Italy:  The Dragon and the Cricket:  A look at the rise of the 5-Star Movement in Italy as well the why the ECB's Outright Market Transaction scheme may not be able to address the threat it poses. 

8.  Cyprus:  The Unique Template in Nine Theses:  We review the recent developments in Cyprus.  We argue against the interpretation that see the capital controls as the introduction of a Cypriot euro.   Many investors continue to under-estimate the political will of the European elite to sustain EMU.  Institutional capacity is growing through the crisis.  

9.  The Dollar and S&P Relationship Re-Examined:  The correlation between the dollar and the S&P 500 has been the subject of much debate.  Some economists, looking simply at the level of the Dollar Index and S&P 500 argue that we have entered a new phase and that the dollar and the S&P 500 are now positively correlated.  We look at the correlations based on the percentage change of the Dollar Index and the percent change of the S&P 500 and find to the contrary, after having tightened, the correlation between the Dollar Index and the S&P 500 has actually weakened most recently.