Markets Weekly June 24

Hello my friends, today is June 24th, my name is Joseph and this is Markets Weekly. This week we're going to talk about three things. First, we're going to explain what bank capital is and why so many bank lobbyists wanted to ask Chair Powell about it. Secondly, we're going to talk about what's going on in the UK where the Bank of England surprised the market with a 50 basis point hike because it seems like they are losing control with inflation. And lastly, we'll talk about what's going on in Japan, what the equity markets have gone parabolic, inflation remains high, and the Bank of Japan doesn't seem to do anything.

大家好，今天是6月24日，我是约瑟夫，这里是《市场周报》。本周我们将讨论三个话题。 首先，我们将解释什么是银行资本，以及为什么那么多银行游说者想要询问鲍威尔主席有关此事的问题。 其次，我们将谈论英国正在发生的事情，英格兰银行出人意料地进行了50个基点的加息，因为似乎他们正在失去对通胀的控制。 最后，我们将讨论在日本发生的事情，股票市场急速上涨，通胀高企，而日本银行似乎没有采取任何行动。

Okay, starting with bank capital. So this past week, Chair Powell did his periodic hearings with Congress. At these hearings, Chair Powell is asked a whole bunch of questions by a range of congressmen. Usually, these hearings are very boring and this time was no different. But what stood out to me though was how many, many congressmen were asking Chair Powell about bank capital requirements. It seemed very obvious to me that there was a full court press by the bank lobbyists to press their congressmen to ask Chair Powell about this. Many congressmen seem to simply have a piece of paper in front of them and read whatever was written on it. Increased capital requirements. Raised capital requirements by as much as 20%. Some of the capital requirements and how. Reading stricter capital requirements that. Some changes obviously in capital requirements. Read whatever was written on it.

首先，从银行资本开始。所以，上周，鲍威尔主席与国会进行了定期听证。在这些听证中，鲍威尔主席会被一系列国会议员问许多问题。 通常，这些听证非常无聊，这次也不例外。但是，让我感到惊讶的是，有很多国会议员问鲍威尔主席有关银行资本要求的问题。 我觉得这很明显是银行游说团体全力向国会议员施压，要求他们问鲍威尔主席这个问题。许多议员似乎只是在面前拿着一张纸，并阅读上面写的内容。增加资本要求，将资本要求提高高达20％。一些资本要求及其如何的内容。 读取更严格的资本要求。显然有一些资本要求的变化。只是阅读纸上写的内容而已。

So what is bank capital? Well, when we think about bank capital, it's different from how we think about capital in the more general sense. Generally, when we think of capital, let's say someone deploying capital or investing capital, we think of capital as an asset like money that can be invested. But for a bank, capital is a bit different. Capital is a liability that's used to absorb losses. So if you follow my work or if you're familiar with banking, you know that a bank creates money. When a bank makes a loan, it just kind of creates deposits out of the air. Being able to create money is a very powerful right of a bank, a privilege of a bank, but it's also highly regulated. And among the many regulations bank face are capital. So when a bank makes a loan, it has to hold some capital against that loan. The amount of capital a bank has to hold is in proportion to the risk of a loan. So if a bank buys a treasury security, for example, which doesn't have credit risk, it doesn't have to hold a bunch of capital against it. But if a bank makes a loan to a private sector corporation, it's going to have to hold more capital against it. Just for example, let's say a make makes a million dollar loan to a company. If the capital requirements for that type of loan was 10%, then the bank would have to have 10% capital against that loan. Now capital is expensive. So capital comes in different forms, but generally speaking, it's common equity. And common equity holders usually require a return on equity of at least 10%. So it's expensive for a bank to owe a lot of capital. But it also makes sense as well. Let's say, for example, the bank makes that million dollar loan and then just loses a whole bunch of money, loses all of that million dollar loan. So has to write it down completely. Who bears losses for that loan? The bank is definitely not going to shift the losses to their depositors. I mean, you don't put money in a bank and then suddenly the bank makes a bad loan and calls you up and say, hey, you had $100,000 on deposit with me. But because it makes them feel bad loans, you know, it's now you have to share the losses. So now your $100,000 deposit is only worth $90,000. That's not how it works. What happens is that the equity holders, that is to say, the people who put up capital in that bank, they take that million dollar loss. So it's riskier. So the more capital a bank has, the more the stronger the bank system is because banks have the capacity to absorb lots of losses. But also it makes a bank less willing to make loans because each loan will cost more capital. They have to cap those expenses. And if you have higher capital requirements, then loans become less profitable and banks are less likely, less willing to make them or at least they become more expensive. So there's this balance here between the safety of the banking sector and the availability of credit.

那么银行资本是什么？当我们谈及银行资本时，它的概念与一般情况下的资本不同。一般来说，我们将资本视为一种像金钱之类可被投资的资产。但对于银行而言，资本则有点不同。资本是一种负债，用于吸收损失。如果你看过我的作品或对银行业非常熟悉，那么你就知道银行创造货币，一张贷款就是从空气中创造出存款。银行能够创造货币是一种非常强大的权利和特权，但它也非常受监管。银行面临的众多监管措施之一就是资本。当银行发放贷款时，它必须对该贷款持有一些资本。银行需要持有的资本数量与该贷款的风险成比例。例如，如果银行购买了一种没有信用风险的国库证券，那么它就不必持有大量的资本，但如果银行向私营部门企业发放贷款，则必须持有更多的资本。例如，如果银行向一家公司发放了100万美元的贷款，而该类型贷款的资本要求为10％，则银行必须对该贷款持有10％的资本。资本是昂贵的。因此，资本有不同的形式，但一般来说，它是普通股权。普通股股东通常需要获得至少10％的股本回报率。所以银行欠有大量资本是昂贵的，但这在一定程度上也是有意义的。例如，银行发放了100万美元的贷款，然后损失了整个100万美元的贷款。银行需要完全写下这笔贷款。谁承担这笔贷款的损失？银行肯定不会将损失转嫁给存款人。你不可能将钱存入银行，然后突然间银行放贷并打电话给你说，“嘿，你以前在我这里存了10万美元，但因为我放了坏贷款，你现在要分担损失了。所以你的10万美元现在只值9万美元。”这不是它的工作方式。发生的情况是股权持有者，也就是在该银行中投入资本的人，他们承担着这个100万美元的损失。所以它是更加危险的。银行持有资本越多，银行系统就越强大，因为银行有能力吸收大量的损失。但同时，这也会让银行在发放贷款时不愿降低成本，因为每一笔贷款都需要更多的资本。他们必须控制这些开支。如果资本要求更高，则贷款变得不那么有利可图，银行也就不太可能发放贷款，或者至少它们会变得更昂贵。因此，在银行业的安全性和信贷可得性之间存在着这种平衡。

Now banks don't like having high capital requirements because it makes them less profitable. So at Congress, there is a full-core press to try to complain to JPOW about capital requirements. The context to this, of course, is that in March, there was a banking panic and Vice Chair Barr at the Fed, who is one responsible for banking supervision, is rumored to have a new proposal to raise bank capital requirements.

现在银行不喜欢高资本要求，因为这会降低它们的利润率。因此，在国会，有一个全方位的压力，试图向JPOW抱怨资本要求。当然，这背后的背景是3月份发生银行恐慌，负责银行监管的联邦储备委员会的副主席巴尔据称有一个提高银行资本要求的新提议。

Banks got rid of this and they're lobbying furiously to not increase your capital requirements. And the way they're phrasing this is that if you increase your capital requirements, that reduces the availability of credit and many small businesses, mom and pop shops and so forth, will not be able to get the loans that they want. There's some truth to that, but of course, banks just don't want to reduce their profitability. And we'll see how this plays out. My own view is that what happened in March was very clearly a liquidity event. And so I think if capital was more of a buffer against credit events, so when a bank makes a loan and someone is unable to pay back rather than a liquidity event, I suspect that at the end of the day, after all this lobbying, we'll probably end up with some increase in capital, but it'll be much smaller than is initially envisioned. And it's probably going to cover not the small banks, but the medium to larger banks.

银行们摆脱了这种要求，他们正在极力游说不增加您的资本要求。他们表达的方式是，如果你增加资本要求，那就会减少信贷资本的可用性，许多小型企业、家庭式商铺等将无法获得他们想要的贷款。这有一定的真实性，但当然，银行们只是不想降低他们的盈利能力。我们将看到这将如何发挥作用。我个人认为，三月份发生的事情非常明显是一次流动性事件。因此，我认为，如果资本作为信贷事件的缓冲，当银行放贷时，某人无法还款而不是流动性事件，我猜想，在所有这些游说之后，最后我们可能会得到一些资本的增长，但它将比最初想象的要小得多。它可能会覆盖的不是小型银行，而是中型到大型银行。

Okay. The second thing we'll talk about is what's happening in the UK. So this past week, the Bank of England surprised the markets by hiking 50 basis points. Now, the Fed, of course, started with 75 to 15 to 25 and paused, but we have the Bank of England seemingly accelerating to 50 basis points. Now the reason for this is actually pretty simple. Inflation in the UK remains high and seems to be accelerating and wages seem to be accelerating as well.

好的，我们将谈论的第二件事是英国正在发生的情况。本周，英格兰银行出人意料地提高了50个基点。当然，美联储一开始提高了75个基点，随后是15到25个基点，然后暂停，但我们看到英格兰银行似乎在加速提高50个基点。现在，这背后的原因其实很简单。英国的通货膨胀率仍然很高，并且似乎在加速增长，而工资也似乎在加速增长。

So in the US, for example, inflation has gone steadily lower. The same thing in the Eurozone, but not so in the UK. It seems like the Bank of England is losing control of inflation and inflation most recently was around 9%. So it's very, very high. The causes for high inflation are many. You have structural causes that we see in the US and the Eurozone where in part, due to demographics, there is a labor shortage, but like the Eurozone, there's also an energy shock and unlike the Eurozone and the US, they also had events relating to Brexit where it seems like it's more difficult to get immigrant labor and perhaps it affects the import prices as well.

在美国，通货膨胀率持续下降；欧元区也是如此，但英国却不同。似乎英格兰银行正在失去对通货膨胀的控制，最近的通货膨胀率约为9%。导致高通货膨胀的原因有很多。在美国和欧元区，存在结构性因素，部分由于人口结构，存在劳动力短缺；而像欧元区一样，存在能源冲击；而与欧元区和美国不同的是，英国还因与脱欧有关的事件导致难以获得移民劳动力，可能也影响了进口价格。

So, inflation is rising, but at the same time, many people in the UK are feeling squeaky and squeezed. Prices are rising and they're not able to afford as many things as they used to. So they are striking and trying to find, trying to obtain higher wages. Right now, there are strikes by doctors or strikes by academics. There are strikes in many sectors of the economy. There's a cost of living crises. So these strikes and these labor bargaining have been effective and wages in the UK are rising as well, but not as much as inflation. So what you're seeing is what seems to be the beginning of a wage price spiral.

通胀在上升，但与此同时，许多英国人感到财政拮据。价格上涨，他们买不起以前能买得起的东西。因此，他们开始罢工，试图获得更高的工资。目前，医生和学者举行罢工，经济的许多领域也在罢工。生活成本危机正在发生。因此，这些罢工和工资谈判已经产生效果，英国的工资也在上涨，但涨幅不如通胀。所以你所看到的是工资价格螺旋的开始。

In general, when prices rise, you wouldn't expect them to rise indefinitely because let's say everything goes up in price by 10%. Well, some people won't be able to afford those high prices. And so eventually businesses will be forced to cut prices and inflation. If not, reverts at least declines. So prices increase at a slower rate. But if you have, let's say, prices increasing at 8% or 9%, and wages also increasing at, let's say 7% to 8%, well, that means that people can continue to afford higher prices. And so companies can continue to raise prices at high rates, a wage price spiral. The Bank of England is desperately trying to get ahead of this by hiking rates aggressively. And the market seems to expect that Bank of England would ultimately go as high as 6%.

一般来说，当物价上涨时，你不会预期它们会无限制地上涨，因为假设所有物品都涨价了10％。那么，有些人将无法负担那些高价格。因此，最终企业将被迫削减价格和通胀率。如果不这样做，至少会下降。因此，价格上涨的速度会降低。但是，如果你有像物价上涨8％或9％，而工资也在上涨，比如7％到8％，那么这意味着人们可以继续负担更高的价格。因此，企业可以继续以高速度提高价格，这就是工资价格螺旋。英国银行正在拼命努力通过强烈加息来取得优势。市场似乎预期英国银行最终会达到6％的高点。

There are 5% right now. And that's going to be pretty painful for a lot of people there because in general, unlike the US, their mortgages tend to be shorter-dated. And so eventually when everyone renews their mortgages, they might end up with higher monthly payments. Although there is some legislation that seems to be trying to soften the pain a bit. What was most interesting to me in this episode was that when the Bank of England hiked rates, surprisingly by 50 basis points, the pound actually ended the day a bit weaker.

现在利率已经上升了5％。这对该地区的许多人来说可能相当痛苦，因为通常与美国不同，他们的抵押贷款期限倾向较短。所以最终当每个人更新其抵押贷款时，他们可能会面临更高的月供。虽然有一些立法似乎试图减轻一些痛苦。对我来说，在这一集中最有趣的是，当英国银行上调利率，惊人地上调50个基点时，英镑实际上在当天稍微走弱了一些。

Now usually you would expect that high interest rates be associated with the strength and currency and that's how it usually works unless of course, you are more the developing economy. And so in those contexts, you hike rates, but then people look at that high rates but also see the amount of distress in the economy and they actually sell your currency. And so that's a really interesting relationship we want to watch now where the Bank of England continues to hike rates but because the damage to the economy is a large that people began to sell the pound and get money out of the country instead.

通常情况下，人们会认为高利率与货币的强势有关，而这通常是正确的，除非您是一个发展中国家。因此，在这些情况下，您加息，但人们会看到高利率，但也会看到经济困境的程度，并且实际上会卖出您的货币。因此，我们现在需要注意一个非常有趣的关系，即英格兰银行继续加息，但由于对经济造成的损害很大，人们开始卖出英镑，并将资金带出国家。

Now the last thing I want to talk about is what's happening with Japan. Now I haven't been talking about Japan but there's been lots of really interesting things happening there.

现在我想要谈论的最后一件事是日本正在发生的事情。虽然我之前没有谈论过日本，但这里有许多很有趣的事情正在发生。

First off, let's look at the Japanese stock market index, the Nikkei. Then the Nikkei looks like it's going parabolic, just going straight up. But of course if you zoom out a bit, you'll notice that they still have it regained their all-time highs from quite some time ago.

首先，让我们看看日本股市指数——日经指数。然后，日经指数似乎呈现出抛物线增长的趋势，一路直上。但是，如果你把视野放宽一些，你会发现日经指数还没有回升到相当长时间前的历史高点。

Now if you look at their inflation, you also notice that Japan, like the rest of the world, is experiencing high inflation or high from a Japanese standard. For context, Japan struggled with low inflation or deflation for many, many years but only recently seems to be experiencing high inflation. They have an inflation target of 2% and today inflation is about 4%. So they are, their inflation is way above their target.

现在，如果您看一下日本的通货膨胀情况，您也会注意到，与世界其他国家一样，日本正在经历高通货膨胀，或以日本的标准来说是高。为了背景说明，日本多年来一直受到低通货膨胀或通货紧缩的困扰，但最近似乎开始经历高通货膨胀。他们有一个2％的通货膨胀目标，而今天的通货膨胀率约为4％。因此，他们的通货膨胀率远高于其目标。

And I suspect this is probably related to the rise in the Nikkei. So the Bank of Japan, unlike the rest of the central banks in the world, has actually kept rates unchanged since pre-pandemic. So their policy rate is actually negative and they have yield curve control where the 10-year is not to rise above 0.5%. So they are really standing out across the developed world and this has had two consequences.

我猜测这可能与日经指数的上涨有关。所以，与世界其他中央银行不同的是，日本银行实际上自疫情前就一直保持利率不变。所以他们的政策利率实际上是负利率，而他们有收益率曲线控制，其中10年期不得上升超过0.5%。所以在发达国家中，他们真的是突出的存在，这带来了两个后果。

One of course is that the yen has depreciated tremendously against other currencies. So you have rates at 5% in the US, have rates of negative in Japan, so it makes sense for some people in Japan to want to move money out of Japan and into the US, where they can get high interest rates and that process causes the yen to depreciate and it's depreciated significantly.

当然，其中一个原因是日元对其他货币贬值了很多。美国的利率达到了5％，而日本的利率则为负数，因此，一些日本人想把钱转移到美国，以获取更高的利率。这个过程会使日元贬值，而它确实贬值了很多。

But I imagine though, if you are a Japanese investor, you're sitting at home, you have a lot of cash, you notice interest rates are very low, you will notice that inflation is 4%, where do you put your money? Only one of the places that you want to put your money is in the stock market. And if everyone does this, it becomes a self-reinforcing cycle where people see prices going higher, there's a lot of momentum and everyone chases that, although it appears to be having a pullback right now.

但我想，如果你是一位日本投资者，你坐在家里有很多现金，你会发现利率非常低，而通货膨胀率有4%，那么你会将你的钱放在哪里？你只有一个地方可以选择——股票市场。如果每个人都这样做，那么这将成为一个自我强化的循环，人们看到价格上涨，市场动能很高，每个人都追逐这种趋势，尽管现在看起来似乎有一些回调。

So I think all these factors, inflation, loan interest rates are related. Now the big question in the market is, is the bank of Japan going to adjust their policy? Are they finally going to hike rates like the rest of the world? Everyone in the world is really watching this because if the bank Japan were to tweak their policy, say for example, adjust their yield curve control to be instead of 0.5%, maybe 1% and so forth, that's going to reverberate throughout the global financial system because global bond markets are tightly connected.

我认为通货膨胀、贷款利率等因素都是相关的。现在市场上的一个重要问题是，日本银行是否会调整它们的政策？它们是否终于像其他国家一样会提高利率？全世界的人们都在关注这个问题，因为如果日本银行调整政策，比如将他们的收益曲线控制从0.5% 调整到1%，那么这将会在全球金融体系中带来影响，因为全球债券市场紧密相连。

If the bank of Japan were to raise their interest rates, that could easily cause interest rates and the US and the Eurozone to rise as well. So any surprise there would imply higher rates for the rest of the world. What the bank of Japan is saying though is it doesn't seem like they're thinking or even suggesting that right now. In fact, when you look at their recent statements, it seems to suggest that they think that inflation is going to, even though it's 4% now, it's going to trend lower going forward in a world, inflation is transitory.

如果日本银行提高利率，那很可能导致美国和欧元区的利率也上涨。因此，任何惊喜都会意味着全球其他地区的利率会更高。然而，日本银行所说的是，他们目前似乎并不认为或者建议这么做。实际上，当你看看他们最近的声明时，似乎暗示着他们认为通货膨胀将会逐渐降低，即使现在是4%，在这个通货膨胀是短暂的世界里。

Now that sounds familiar, right? And maybe the bank of Japan will be correct. Japan of course is a very interesting economy. It's different from the rest of the Western world in a lot of key ways. But like them, they are experiencing high inflation and perhaps it'd be not a transitory. But so far though, if the bank of Japan believes it's transitory, then they're going to keep interest rates low. They're going to keep your current control on. And that suggests that whatever is happening now, the depreciation of the yen, rising stock market might persist.

现在听起来是不是很熟悉呢？也许日本银行会是正确的。当然，日本经济非常有趣。它在很多关键方面与西方世界不同。但与他们一样，他们正在经历高通胀，可能不是暂时的。但到目前为止，如果日本银行相信这是暂时的，那么他们将保持低利率。他们将保持现有的控制。这表明，现在正在发生的事情，日元贬值、股市上涨，可能会持续下去。

Definitely something to keep watching. One other note is that a very good observer of the bank of Japan, Western Nakamura of blockworts, has also suggested that part of the reason that the bank of Japan might be reluctant to raise interest rates is that in Japan, the debt level, the debt to GDP of public debt is very high. It's the highest in the developed world. And when you hike rates a little bit, you can cause the interest expense to go up a lot. And that makes the debt burden even less sustainable. So there could be some fiscal considerations as well. I'm not sure. But definitely something interesting to watch going forward.

这绝对是一个需要关注的问题。另外，西方纳卡穆拉（Blockworts）银行的一名非常敏锐的观察者也指出，日本央行可能不愿提高利率的部分原因在于日本的公共债务水平非常高，是发达国家中最高的。当你稍微提高利率时，就可能导致利息支出大幅增加，进而使债务负担更加不可持续。所以可能也存在一些财政方面的考虑。我不确定。但这绝对是一个值得继续关注的有趣问题。

Okay. So that's all I've prepared for today. If you like what I'm producing, please remember to like and subscribe. And if you're learning, I'm interested in learning more about the markets. You can check out my free online courses. And if you are a bit more experienced in the markets, you can also check out my blog, fitguy.com where I write weekly research pieces on what's going on in the markets. Thanks so much and talk to you guys soon.

好的，今天我就说这些。如果你喜欢我的节目，请记得点赞和订阅。如果你对市场有兴趣，可以去我的免费在线课程了解更多内容。如果你在市场方面有一定经验，也可以去我的博客fitguy.com，我每周都会写一些市场研究文章。非常感谢大家，我们很快再见。