No Time To Die

Submitted by Michael Every of Rabobank

I expect we will be seeing a lot of mentions of “No time to die” today. First, it’s the title of the 25th film in the James Bond film series. Fans are already wondering if James Bond will actually die – and jaded critics are wondering if the whole series will.

If so, one has to note the irony. After all, we live in the ‘Bondest’ of times with: territorial seizures; military re-armament; nuclear missiles; assassinations in broad daylight; charismatic leaders with ‘big hair’; billionaires dominating our lives and markets – or killing themselves while on suicide watch; devices in our homes that listen to everything we say; a Chinese telecom brand that is allegedly a threat to the West’s national security; high-level spying, and a spate of detentions; the US wanting to buy Greenland (and now cancelling a state visit to Denmark on news that it isn’t for sale); and mutterings about democratic elections being subverted by dark forces.

If Bond is going to die it’s perhaps because ‘Bondian’ things don’t seem to matter anymore in our markets-obsessed world. Today, Otto Goldfinger would just set up a gold hedge fund and Ernst Blofeld would start a tech unicorn and give TED Talks. Regardless, we are still going to hear “No time to die” in other key regards.

Partly because we still live in an age of ‘big politics’, where France’s Macron talks to Russia’s Putin (who is Bondian and knows it) about a Europe that runs “from Lisbon to Vladivostok” - when actually it is whether it runs from Dover to Calais that matters more near-term, i.e., Brexit. That as PM BoJo’s new backstop proposal has been rejected yet again. (By the way, back in 2010 Putin made exactly Macron’s recent offer to Europe: Russia joining the EU in a free-trade and free-movement zone. It was shot down like a US drone near Iran.) Markets will be watching closely how this pans out.

Partly it’s about intra-EU politics. “No time to die” for the Italian government will be the key issue given PM Conte resigned yesterday following pressure from Deputy PM Salvini: do we get new elections or a new government, however? Markets will be watching closely again.

Partly it’s the “global recovery”, a phrase almost as long-running as Bond, and just as jaded. The latest data point there is South Korea’s 20-day August exports -13.3% y/y, which confirms the trade dislocation underway. Meanwhile, Donald Trump (who would also have fitted in perfectly in any number of Bond films), is saying that he can and will cut either capital gains or payroll taxes after all if that is what it takes to keep the US economy ticking along into November 2020.

More importantly, “No time to die” is being asked about the USD. Although key USD crosses are not breaking out to new levels, and the DXY index likewise remains slightly below its year peak, a look at the US trade-weighted broad dollar index from the Fed shows that the greenback is now at a new high going all the way back to 1973. And, as we keep repeating, that is before any new global downturn or EM debt crisis, etc., kicks in. Yes, Gold(finger) is doing very well too: but so is USD.

No time to die” is also relevant with news of those proposed US tax cuts, No time to die” is also being asked over our recent bond rally. Clearly, in many respects we are all becoming ‘Japan’: yield curves make that painfully clear. However, the question then becomes: if we are all Japan, are we therefore not all Japan? In short, will massive fiscal and monetary stimulus joined at the hip, if undertaken in Japan and the UK and the US and China (though not Europe: they are still too Goldfinger for that) prove enough to shift at least the long end of yield curves higher? Perhaps. But don’t forget we keep pointing out that it is likely to come with bad side-effects that dampen optimism and globalism. Moreover, it could also come with yield curve control.

Finally back to Bond as No time to die” is also applicable for the EU and Huawei. October 1 is going to be the date Europe announces what it will or won’t do about Huawei and its alleged security threats - and hence also the date that China will decide what it will or won’t do about the EU in response.