We continued our TMIDITW series in London this month at Hush, tucked away in a hidden courtyard in the historic heart of Mayfair. We gathered together in The Sir Roger Moore Room, named after the man who played the role of James Bond from 1973 to 1985. The private dining room offered a discreet setting to discuss some of the most important macro themes as we begin a new decade.
As is customary at our dinners, each participant was requested to bring a chart to discuss with the diverse group. This is a summary of the charts and conversation.
Chart 1: The Rise and Fall of Empires It would be a mistake to bet America’s future will be like its glorious past.
Chart 2: China’s Wooing Foreigners The Speaker sees China’s 10-year sovereign bond yield converging to US rates on the way to zero.
Chart 3: Growth Decomposition The recession in the global manufacturing sector may now be ending.
Chart 4: Credit Dispersion, Got Protection? The US high yield default rate finished 2019 at 3.3 percent, the highest level since 2016 and above the non-recessionary 2.4 percent level.
Chart 5: Mean Reversion is a Powerful Force Given historically low yields, bonds are losing their ability to effectively hedge against a large equity market fall.
Chart 6: The Coronavirus Trade The coronavirus will weigh disproportionately on Thailand’s economy.
Chart 7: Going Nowhere Rather than a melt-up, what comes next is an ominous churning pattern followed by a truly cleansing downside correction.
Chart 8: Last Bastion of Value! High yield EM sovereign credit should deliver double digit returns this year.
Chart 9: Risk Happens Fast “It’s a cliffhanger for countries... The crisis comes slowly, slowly, slowly, then all at once.”
Chart 10: The Future is Electric While most investors are beguiled by the run up in Tesla, the Speaker believes the market is simply waking up to the reality that global warming and the changing regularity environment around the world makes it pretty clear that the future is electric.
Chart 11: It’s not dead, it’s resting “Buy and hold.”
Chart 12: The Most Interesting Man The British pound is historically cheap making UK assets very attractive.
Chart 13: “Who am I?” “The way to learn is to shed your ego. This means be open to defeat.”