Markets Weekly May 11, 2024

Hello my friends, today is May 11th and this is Markets Weekly. So this week was a good weekend markets, we ended the week up nicely. And it looks like we're just a little bit below all time highs. I'm guessing that when we finally close above all time highs, a lot of the bears will have to cover and that will fuel the next leg up. But let's see how that turns out. So today I want to talk about three things. First, I want to talk about this super interesting article in Bloomberg about the per capita recession, where on a national level, it looks like GDP is growing. But when you break it down on a per capita level, for many countries, GDP has been declining for a few quarters. Secondly, I want to continue and talk about the ongoing global rate cut sector we're in, where we had a new entrant Sweden cut rates last week. And it looks like the Bank of England at their most recent meeting the past week strongly suggested that they're going to cut rates soon as well. And lastly, I want to talk about this very interesting report from the IMF that suggests that although on the surface, it looks like there isn't really any decoupling in global trade, when you look beneath the surface, there are signs that the world is bifuricating into a more pro-US block, a more pro-China block, and some people who are in between. And that seems to be impacting things such as foreign reserves, and of course, the demand for safe assets.

大家好，今天是5月11日，这里是每周市场报告。本周市场表现不错，我们收市时赚得很不错。看起来我们距离历史最高点只有一点点距离。我猜想当我们最终站在历史最高点以上时，许多空头可能会被迫平仓，这将推动下一个上涨阶段。但让我们拭目以待。今天我想谈论三件事。首先，我想谈谈彭博撰写的有关人均衰退的超级有趣文章，在全国范围内，GDP似乎在增长。但当你分析人均水平时，许多国家的GDP已经连续几个季度下降。其次，我想继续谈论我们正在经历的全球降息行动，上周瑞典成为新成员降息。看起来英格兰银行在他们最近的会议上强烈暗示他们也很可能会很快降息。最后，我想谈谈国际货币基金组织发布的一份非常有趣的报告，该报告表明尽管表面上全球贸易看起来没有分离，但当你深入分析时，有迹象表明世界正在分裂成更加支持美国的集团、更加支持中国的集团，以及一些人处于中间。这似乎影响到了外汇储备以及对安全资产的需求。

Okay, let's start with the per capita GDP recession. Now let's level set a little bit first. So what is GDP? GDP is just basically the amount of goods and services produced in a country in a year. So in order to increase GDP, you can either have more inputs or you can have more productivity that is to say, get more output for the same level of inputs. Let's look at a car factory as an example. Let's say I have a car factory where I use 10 tons of steel and create 100 cars. If I wanted to make more cars, what I could do is I could just use more steel. Maybe I would use 11 tons of steel and get 110 cars. Or maybe I upgraded my technology, whereas with the same 10 tons of steel, I get 110 cars. Now over the past few years, of course, we've had some increases in productivity. Obviously technology is improving, but for a lot of countries, GDP growth has been fueled by increases in people, more migration, more inputs.

好的，让我们从人均 GDP 的衰退开始讨论。现在先稍微调整一下基准。那么什么是 GDP 呢？GDP 基本上是一个国家在一年内生产的商品和服务的总量。为了提高 GDP，可以增加输入，也可以提高生产率，也就是说，在相同程度的输入下获得更多产出。让我们以汽车工厂为例。假设我有一个汽车工厂，我使用 10 吨钢材制造了 100 辆汽车。如果我想生产更多汽车，我可以增加使用钢材的量。也许我会使用 11 吨钢材，生产 110 辆汽车。或者我升级了技术，只用同样的 10 吨钢材就可以生产 110 辆汽车。在过去的几年中，当然我们已经看到了一些生产率的提高。显然技术一直在进步，但对于许多国家来说，GDP 增长是由人口增加、更多移民以及更多输入推动的。

Now looking at, say, Canada, Australia, the UK, and even in the US, migration over the past few years has notably increased. Canada in particular, the last year, looks like they increased their population by 2.5% are running a mass migration experiment that no one in the world is coming close to matching. Now if you add a lot of people into your country, obviously you're going to be, you have more workers, you're going to be producing more goods and services. It looks like your GDP is growing. But on a per capita basis, it's telling a very different story. Now on a per capita basis, it looks like for these countries, GDP per capita has been declining for at least a couple quarters. And that means that the living standards of the average person is not being actually represented in these national GDP data because their either been though GDP is growing on a personal basis. They're not doing as well.

现在看看加拿大、澳大利亚、英国，甚至美国，过去几年移民显著增加。特别是加拿大，去年看起来他们增加了2.5%的人口，正在进行一场全世界都无法与之匹敌的大规模移民实验。现在，如果你将大量人口引入你的国家，显然你会有更多的工人，会生产更多的商品和提供服务。看起来你的国内生产总值（GDP）在增长。但是从人均的角度来看，故事却完全不同。现在从人均角度看，这些国家的人均GDP至少已经连续下降了几个季度。这意味着，普通人的生活水平实际上在这些国家的国民GDP数据中没有得到体现，因为尽管GDP在增长，但个人的状况并不如意。

Now migration has many economic impacts. As you add more people, you get more GDP growth. You also put downward pressure on wages, which many people in government, who are concerned about inflation, would like to see. But you also put upward pressure on other things. For example, when people move to a country of obviously they need housing, they need healthcare, they need schools and so forth. And the supply of those things are relatively inelastic over a short period of time. It takes time to build a house. You need a lot of permits, for example. Takes time to train doctors, takes time to train school teachers and so forth. And what we've seen in many of these countries is that even as migration has put downward pressure on real wages, it's put upward pressure on things like house prices. So in Canada, for example, you can see in this chart, real wages haven't grown all that much over the past few years, but house prices in real terms have gone to the moon. You can see to some extent this happening in New Zealand and Australia as well. So what's been happening in these countries has really hurt the living standards of the normal person where mass migration decreased their wages, made their housing rent more expensive, made their schools more crowded and of course made them have to wait even longer to see a doctor.

现在移民对经济有很多影响。随着人口增加，GDP增长也会相应增加。但同时也会对工资施加下行压力，这是许多政府官员担心通货膨胀的原因。另一方面，移民也会对其他方面施加上行压力。例如，当人们移居到另一个国家时，他们显然需要住房、医疗保健、学校等。这些资源在短期内相对不那么弹性，建一所房子需要时间，例如，你需要很多许可证。培训医生、培训教师等也需要时间。我们已经在许多国家看到，即使移民对实际工资施加下行压力，却对房价等事物施加上行压力。例如，在加拿大，你可以看到在这张图表中，近年来实际工资没有增长太多，但房价却实际上已飙升。在新西兰和澳大利亚也可以看到这种情况在某种程度上发生。因此，在这些国家发生的情况实际上损害了普通人的生活标准，大规模移民导致他们的工资减少，让他们的住房租金更加昂贵，使他们的学校更加拥挤，当然也让他们不得不等待更长时间才能看到医生。

Now in the US, the past year we had also significant amounts of migration, the CBO estimating it about 3 million. Most of it is illegal, so we don't really know for sure. But it's happening to a much smaller extent in the US is a large country. So it hasn't been felt as much in the US as well. Although if you look at New York City, for example, which has been a big destination for migrants, vacancy rates there are at multi-decade lows and so rents are going to the roof as well. The policies run by these governments, you know, on the surface looks like they're boosting GDP, but actually have been not been helping their people.

现在在美国，过去一年我们也有大量的移民，国会预计大约有300万人。其中大部分是非法的，因此我们并不确定确切数字。但在美国这个大国家，这种情况发生的程度要小得多。因此在美国也没有像其他地方那样感受到这种现象。不过如果你看看纽约市，例如，作为一个吸引移民的重要目的地，那里的空置率是几十年来最低的，因此房租也水涨船高。这些政府实施的政策，表面上看起来像是在推动国内生产总值（GDP）增长，但实际上并未真正帮助他们的人民。

Now as a counter example, I would point to Japan, which as we all know is famously not open to migration. Now over the fast few decades, the GDP growth of Japan has been growing slower than other countries. No surprise, their population has been shrinking. And if you have fewer people, obviously you're not going to be able to produce as many goods and services. And also you don't need as many goods and services obviously.

作为一个反例，我想指出日本，众所周知，日本是出名不开放移民的国家。在过去的几十年里，日本的GDP增长速度比其他国家慢。毫不奇怪，他们的人口一直在减少。如果人口减少，显然就不能生产出那么多的商品和服务。而且显然也不需要那么多的商品和服务。

Now over the past few decades, what you can also see is that GDP per capita in Japan has actually continued to go up trend higher. And so you know the people there seem to be fine looking at housing prices. What's really surprising when compared to many Western countries is that on a real basis, housing prices in Japan really haven't gone anywhere over the past few decades. Part of that is due to a bust in the 1980s where they had a big property bubble. Part of it also is due to their decreasing population less demand for housing. So obviously rents don't go up as well. So I would think that their living standards for the typical person there has actually been fine. And if you over go there, you'll notice that they have a very safe and cohesive country simply because it's so homogenous. And so people there seem to be doing quite well and it seems like a great place to live. So their government did different policies and I think that it made their country better. And hopefully I think many other governments will become aware of this. What I see is that there is I guess more backlash about some of these large migration policies run by Western governments. I know in Canada for example Prime Minister Trudeau is talking about reducing the amount of foreign students. So again, not that migration is bad but you can have too much of it and that would hurt the native population which is already happening over the past few quarters.

过去几十年来，您可以看到日本的人均 GDP 实际上一直在不断提高。所以你知道那里的人们似乎对房价并不太担心。与许多西方国家相比，真实基础上，日本的房价在过去几十年并没有大幅上涨，这真的令人惊讶。这部分原因是因为上世纪80年代的房地产泡沫破裂。另一部分原因是由于他们的人口逐渐减少，对住房的需求也在下降。因此，房租也没有上涨。所以我认为他们普通人的生活水平实际上还可以。如果你去那里，你会注意到他们拥有一个非常安全而有凝聚力的国家，仅仅因为人口构成比较同质化。所以那里的人们似乎过得相当不错，看起来是一个很棒的居住地。所以他们的政府采取了不同的政策，我认为这使他们的国家变得更好。希望其他许多政府也会意识到这一点。我注意到有关一些西方国家推行的大规模移民政策的反对声音正在增加。我知道例如在加拿大，特鲁多总理正讨论减少外国学生的数量。所以，不是移民不好，而是可能会有太多移民，这会伤害到本国人口，而过去几个季度这种情况已经在发生。

Okay, the next thing that I want to talk about is the ongoing global rate cut cycle. So as we've talked about before, the Swiss National Bank kicked off the global rate cut cycle a few weeks ago simply because inflation had gone down significantly and there was no reason for them to keep rates where they were. Now a new entrant this past week is Sweden. Now Sweden as you can see here, inflation has also been coming down significantly. So the Reich's bank, the Swiss National Bank over there realized that they really didn't need to keep inflation. They really did not need to keep rates where it was and cut rates.

好的，接下来我想要谈论的是正在进行中的全球降息周期。正如我们之前提到的，几周前瑞士国家银行启动了全球降息周期，只是因为通货膨胀显著下降，他们没有理由保持利率不变。而这周的新面孔是瑞典。正如你在这里所看到的，瑞典的通货膨胀也显著下降。所以瑞典国家银行意识到他们真的没有必要将通货膨胀控制在目前水平，于是也降息了。

Now something interesting to note about Sweden is that their mortgages there are mostly short-term. And so because their mortgages are short-term as people renew their mortgages every few years, they get hit by higher interest rates really quickly. So the monetary policy there is much more effective than it would be in a country like US where everyone has 30 mortgages. And so as more and more people renew their mortgages, their interest repayments have gone up and so they began to few the squeeze and maybe that made the Swiss Sweden Sweden the Reich's bank's job a bit easier. Now similarly the Bank of England the past week also strongly suggested that they're going to be cutting rates soon as well. Now their monetary policy decision left rates unchanged but there were two descents wanting to cut rates. Now when you look at data in the UK it becomes clear that it would make sense for them to begin to cut rates. On the one hand you do see unemployment rising. On the other hand it does seem like inflation is coming down towards their target. It's been steadily coming down and now is even below that of the US. Now the UK like Sweden is also a country where a lot of the mortgages are short dated. So I think that in these countries you can definitely have monetary policy become more effective, higher interest rates quickly squeezing households and thus temping down on demand getting inflation under control. This structure is also what you see in Australia and Canada and parts of the European Union as well. So I think it's no surprise that you can also see that the ECB is also strongly suggesting that they're going to cut rates in June as well.

现在有一件有趣的事情要注意，瑞典的抵押贷款大多是短期的。因此，由于人们每隔几年就要更新他们的抵押贷款，他们很快就会受到较高利率的打击。因此，那里的货币政策比在美国这样每个人都有30年的抵押贷款的国家要有效得多。随着越来越多的人更新他们的抵押贷款，他们的利息偿还额也增加了，因此他们开始感到压力，也许这就使得瑞典央行的工作变得更轻松了。类似地，英格兰银行上周也强烈暗示他们也会很快降息。现在他们的货币政策决定让利率保持不变，但有两位成员想要降息。当你看英国的数据时，清楚地看到他们开始降息是有道理的。一方面，你会看到失业率上升。另一方面，通胀似乎正在逐渐趋向他们的目标。通胀一直在稳步下降，现在甚至低于美国的通胀率。英国像瑞典一样也是一个很多抵押贷款都是短期的国家。因此，我认为在这些国家，货币政策肯定能够更加有效，高利率很快挤压家庭，从而抑制需求，控制通胀。这种结构在澳大利亚、加拿大和欧盟的一些地区也可以看到。因此，我认为并不奇怪，你也可以看到欧洲央行也强烈暗示他们也会在六月降息。

Now the Bank of England, Governor Bailey keeping open the door for a June cut but not fully committed to it and I think that the market is pricing cuts a little bit after June. So what's really interesting happening right now is that although on the way up we were all kind of on the same boat trying to get inflation down now that we've been holding rates relatively high for over a year we're beginning to see more of a divergence in the stance of monetary policy across the advanced economies in part because well monetary policy is more effective in these countries that have more floating rate mortgages and less fiscal spending. So it seems like we're heading into a world where the Fed is going to be keeping rates higher than other people and that's leading to a bit of dollar strength.

现在英格兰银行行长贝利敞开了6月降息的大门，但并未完全承诺，在我看来市场在六月之后适当地定价出现了降息。所以目前真正有趣的事情是，尽管在上升过程中我们都在努力降低通货膨胀，但现在我们已经将利率保持相对较高超过一年，我们开始看到在先进经济体中在货币政策立场上出现更多分歧，部分原因是因为在这些国家中货币政策对于拥有更多浮动利率抵押贷款和更少财政支出的国家更有效。因此，看起来我们正步入一个美联储将维持比其他国家更高利率的世界，这导致了美元略微走强。

Now it's hard to see how long this will continue but we do see this in the market pricing over the past few months and if the Fed really does stick to their guns and just really keep cutting rates less than other people that I can see the dollar continue to strengthen going forward. Otherwise I've discussed before I'm not sure if the Fed can really hold out as long as the market thinks it will. Okay the last thing I want to talk about is this really interesting paper from the IMF talking about global decoupling.

目前很难预测这种情况会持续多久，但我们在过去几个月的市场定价中看到了这一点。如果美联储真的坚持他们的立场，继续比其他人更少地降息，我认为美元可能会继续走强。否则，就像我之前讨论过的那样，我不确定美联储是否能像市场预期的那样坚持下去。好了，我想谈的最后一件事是IMF的一篇非常有趣的论文，谈论全球脱钩问题。

So as we all know over the past few years starting with President Trump's trade wars on China there's been a movement to friendship and try to bifurcate the world between say a US, Europe, Western bloc and a bloc that's more China friendly be that China, Russia, North Korea, some countries in the Middle East and so forth. But when you look at the aggregate trade data it's not super clear because global trade seems to be doing quite well. Now some scholars at the IMF looked into this in a different way. So they looked at voting data in the United Nations to try to parcel out countries into blocs, some blocs that are more China friendly and some blocs are more US friendly. And based on these blocs what they're finding is that there actually has been some rewiring in global trade and global finance.

正如我们都知道的那样，从特朗普总统对中国的贸易战开始的几年来，出现了一种友好的趋势，试图在美国、欧洲、西方集团和更亲华的集团之间划清界限，可能是中国、俄罗斯、朝鲜、中东一些国家等。但是当你看着总体贸易数据时，并不是非常清楚，因为全球贸易似乎正在做得相当不错。现在IMF的一些学者以不同的方式研究了这一问题。他们从联合国的投票数据中尝试将国家划分为更亲华的集团和更亲美的集团。根据这些集团，他们发现实际上全球贸易和全球金融已经发生了一些重组。

So it seems like what's happening is that the world is being divided into three blocs pro-China, pro-US and countries that are non-aligned. Now there seems to definitely be less trade between the pro-US bloc and the pro-China bloc. But you don't see that in aggregate statistics because trade is actually happening through these third non-aligned blocs. So for example, instead of a Chinese company selling directly to the US what they would do is they could sell to a non-aligned country like Vietnam and then Vietnam would turn around and sell to the US. So global trade continues to happen but it's going through I guess longer channels now.

因此，看起来正在发生的情况是世界正在分为亲华派、亲美派和不结盟国家三个阵营。现在，亲美派和亲华派之间的贸易明显减少。但你在总体统计数据中看不出来，因为贸易实际上是通过这些第三个不结盟阵营进行的。例如，一家中国公司不直接向美国销售，而是可以销售给越南这样一个不结盟国家，然后越南再转手销售给美国。因此全球贸易仍在继续，只不过现在经过了更长的渠道。

These non-aligned blocs are benefiting from some degree of this polarization in the world. Now when it comes to these financial channels I think it's really interesting to note that financially speaking these pro-China countries really are moving away from the dollar in trying to use more and more RMB. So again this is happening at a small scale but it's definitely happening. So what we could see is maybe beginning, again early stages of a beginning of some kind of a segmentation in global finance. Another interesting to note is of course these countries that are in the pro-China bloc obviously worried about US sanctions have been buying more gold and that might be part of the reason gold is as well bid and that's what I'm going to write about in my blog today and how I think that I think things are going to be quite good for gold going forward.

这些非对齐集团正在从世界的这种极化中获益。现在，就这些金融渠道而言，我认为非常有趣的是，从财务角度来看，这些亲华国家确实在摆脱美元，试图更多地使用人民币。因此，尽管规模较小，但这种情况确实存在。因此，我们可能会看到全球金融开始出现某种程度的细分。另一个有趣的一点是，当然，这些属于亲华集团的国家显然担心美国的制裁，因此一直在购买更多黄金，这可能是黄金价格上涨的原因之一，这也是我今天博客要写的内容，以及我认为未来黄金情况会非常乐观的原因。

Now one thing to note though when we think about these tensions between the China and the US is that it's really hard to have a sudden delinkages. Everyone is hedging but it's quite hard to have sudden delinkages. Now Brad Satsar who was an expert on these topics had a really good paper on this just recently published and he charts out how the China has actually for some time been aware of their vulnerabilities to US sanctions. It wasn't something that suddenly they realized after what happened with Russia. Now even as early as the great financial crisis China was very worried that they would be losing a lot of money on their large investments in agency mortgage-backed securities. For them it was in part worrying about, you know, it wasn't so much about sanctions although that was always a possibility.

然而，需要注意的一点是，当我们考虑中美之间的这些紧张局势时，突然脱钩是非常困难的。每个人都在进行对冲，但突然脱钩是相当困难的。最近发表的一篇论文，由专家Brad Satsar撰写，详细阐述了中国长时间以来对美国制裁的脆弱性意识。并非突然之间才意识到，乌克兰危机之后发生的事情只是一个明显迹象。甚至早在金融危机期间，中国就非常担心他们在机构抵押贷款支持证券上的巨额投资会造成损失。对他们来说，他们一部分担心的是，并不完全是关于制裁，尽管制裁始终是一个可能性。

For them it seemed to be a domestic political concern whereas the government is seeing basically funding bad policies in the US and potentially losing money in case they lose value on their agency and BS or their security securities. So there's been a big effort for them to diversify over the past decade and they've been doing this by lending money to a lot of other countries. For example the China created all these development banks and right now it looks like these development banks have lent over a trillion dollars to countries say in Africa or other developing countries to basically in part build relationships have more influence over the politics of those countries but in part to diversify their tremendous amounts of dollars outside of US Treasuries, outside of US agency and BS and into these bilateral loans. And some of them are multilateral as well but I think what they've learned is that they have less power when the loan is multilateral.

对他们而言，这似乎是一个国内政治问题，而政府基本上是看到美国的政策资金风险，可能会在美国机构和国债或其证券价值下跌的情况下失去资金。因此，他们在过去十年里一直在努力多样化，通过向许多其他国家贷款来做到这一点。例如，中国建立了所有这些发展银行，目前看来这些发展银行向非洲或其他发展中国家贷款超过一万亿美元，基本上是为了建立关系，对这些国家的政治产生更大的影响，但也在一定程度上为了将大量美元多样化到美国国债之外，到美国机构和国债之外的双边贷款中。其中一些还是多边的，但我认为他们学会的是当贷款是多边时，他们的权力较小。

So this diversification thing has been happening for some time but it's also something that it's unlikely to suddenly I think to break down because Brad also makes a point that let's say that one day China invades Taiwan and the US turns around and freezes all of China's dollars. Again, that would be really catastrophic for China but on the flip side there's also strong dependence of the US on China. You would basically overnight lose all your cell phones and I think the US and the American public would not like suddenly losing access to new cell phones because all that stuff is in some way either assembled in China or there are a lot of components made there. So this mutual dependence is real and it also makes it less likely for there to be sudden disruptions between the two countries.

因此，这种多样化的事情已经发生了一段时间，但我认为它不太可能突然就崩溃，因为布拉德也指出，假设有一天中国入侵台湾，美国转身冻结了中国所有的美元。这对中国来说会非常灾难性，但另一方面美国对中国也有很强的依赖。你基本上会在一夜之间失去所有的手机，我认为美国和美国公众不会突然失去获得新手机的途径，因为所有这些东西在某种程度上要么在中国组装，要么那里生产了很多零部件。因此，这种相互依赖是真实存在的，这也使得两国之间突然发生破裂的可能性降低。

That being said, they also have to hedge the US is building more chip factories and the China is diversifying outside of US assets. So anyway, that's all I prepared for today. If you're interested in hearing my thoughts be sure to check out my blog at fengai.com and if you're interested in learning more about markets check out my online courses at centralmaking101.com. I'll talk to you guys next week.

话虽如此，他们还必须对冲美国正在建立更多芯片工厂和中国正在把美国资产多元化的情况。总之，这就是我今天准备的全部内容。如果你对听我说的想法感兴趣，请一定要查看我的博客fengai.com，如果你对了解更多关于市场情况感兴趣，请查看我在centralmaking101.com上的在线课程。下周再和大家交流。