Anatole Kaletsky

Articles from Anatole Kaletsky


    Did yesterday mark the beginning of the end of the euro crisis? The German Constitutional Court judgement removing the legal obstacles to the European Stability Mechanism (ESM), followed by the big win for pro-euro and pro-austerity parties in the Dutch general election, surely provided some good news for europhiles. Yet by the end of the day, the market euphoria was waning, and committed eurosceptics were already arguing that this was just another brief diversion on the road to an inevitable euro breakup.   In reality, the recent political developments in the euro zone are un ... more

    Wall Street, with its overwhelming preponderance of Republican voters, might have had the common courtesy to feign some excitement about Mitt Romney’s big speech last night. But for most investors the only big speech this week is the lecture on monetary theory to be delivered by Ben Bernanke today at Jackson Hole.   It is a mystery why the markets look forward with such excitement to a tedious and predictable restatement of Mr Bernanke’s boundless confidence in the power of monetary policy to stimulate growth and create employment. After all, experience has shown that t ... more

    Sooner or later it was bound to happen. Having disappointed the markets for four straight months in a row, the US payroll report on Friday finally produced a decently robust gain of 163,000, which was much better than the consensus expectation for about 100,000. The market reaction was immediate and powerful. The S&P 500 surged 1.9%, one of its best days of the year, and appropriately enough returned to 1,390 which was exactly the level it hit just before dismal payroll figures in April and May signalled the US soft patch. Meanwhile, the US Treasury bond futures fell by two full point ... more

    Mario Draghi’s combative remarks at the global investment conference in London last week are a must read—not because they change the European game, but for how they illustrate the tension between the ECB chief’s tough-guy talk and the limited armoury under his command.   Draghi got off to a bad start with a bumbling metaphor apparently inspired by Oscar Wilde’s feckless Dr Chasuble: “The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does. So the euro was a bumblebee that flew very well for several y ... more

    Now that the Greek election is over, with the pro-bailout parties gaining enough seats for a slim majority, Europe can return to the regular cycle of panic, relief, disappointment and renewed panic, that we have observed for the past two years. This time, however, the relief rally may be even shorter than usual, since the market’s attention will soon shift from Athens to Madrid, Paris and, above all, Berlin. Since Greece has no chance of meeting its financial targets, the new government will soon need significant new concessions from the troika. Assuming that Germany resists such co ... more

    As my colleagues and I at GaveKal go through the few scant details of the bank bailout offered to Spain, we cannot help but shake an uneasy feeling of deja-vu all over again:       - Banks confronting a deposit flight = check.     - Sovereign shut out from debt market = check.     - Loans provided to help sovereign deal with the situation = check.     - Potentially pushing current sovereign debt investors into a subordinated position = check. It is on this last point that the Spanish “bailout” could prove t ... more

    Last month, when Britain surprised the markets by sinking into a double-dip recession, we warned that the two successive quarters of negative GDP figures were not just a temporary statistical aberration, as many investors and the Cameron government preferred to believe. We argued that the GDP report, which was much worse than expected, would encourage an overdue reassessment of the British economy, of monetary policy and of sterling’s dubious status as a “safe haven”.   Our view, in a nutshell, was that the British economy was weak and getting weaker, that the Ban ... more

    The double-dip recession so dreaded last summer has happened, but not where investors had expected and certainly not with the predicted market results. The announcement of a -0.2% fall in UK GDP (against the expectation of an 0.1% increase) confirmed that Britain is now the largest economy officially in recession, having suffered GDP declines in two consecutive quarters, averaging an annualised rate of -1.0%. Yet sterling did not budge from its strongest trade-weighted level since August 2009 and its best level against the dollar since the US double-dip scare last summer. The sto ... more

    We may have our doubts about Ben Bernanke’s skills in monetary policy, but he certainly has a yen for memorable phrases. The latest term he has coined — the “fiscal cliff”—describes what would happen to the US budget if current law played out with no political intervention. On January 1, 2013, the Bush tax cuts expire, the 2% payroll and other tax holidays expire, and at the same time as these effective tax hikes, automatic spending cuts are scheduled to kick in as a result of last year’s Budget Control Act and the failure of the committee to produce a ... more

    Investors continue to have some strange obsessions when assessing the outlook for growth, inflation and resulting US policy responses. Ben Bernanke’s fairly anodyne comments in a TV interview last week on the need for harder empirical evidence to verify that the US economy is on a sustainable growth track sparked the markets into a renewed obsession with QE3. The dollar fell and bonds rebounded on speculation that the Federal Reserve would soon print even more money. These fairly self-evident remarks persuaded investors that 10-year bonds were a bargain at yields of about 2.25%. An ... more

    Yesterday’s budget in Britain was treated by the markets as a non-event --and that was a correct assessment of its macroeconomic impact. But George Osborne’s package of tax and spending changes, which was presented as more or less fiscally neutral, could nevertheless turn out to be a political and financial milestone. The good news is that, by cutting Britain’s top rate of income tax from 50% to 45%, with hints that it would be further reduced to its pre-Lehman level of 40% before the end of the present parliament, Osborne was trying to send the signal that Britain was o ... more

    As the world-wide stock markets' recovery matures and risk assets continue to perform well, the controversy about equity valuation is almost certain to intensify during the year ahead.   Are equity markets cheap or expensive? There has always been a kaleidoscope of opinions about the aggregate valuation question because there is no agreement about what's the right method of analysis. Should we focus on actual or trend corporate earnings, and using which calculation method. Is Price/Earnings the best valuation yardstick or should we rather use price-to-book values or other a ... more

    It has become conventional wisdom that the 2000s were marked by massive misallocations of capital led by a generalized credit bubble in America and in Europe. This in turn explains why our malfunctioning governments (excuse the redundancy) are now going bust, as they initially tried to absorb the shock once this bubble burst. But the past decade’s large-scale globalization also forced the private corporate sector to spearhead an opposite, more virtuous trend of an efficient re-allocation of its capital. This Ricardian process led to record profitability and net wealth creation of hi ... more

    Another month, another failed Euro-summit – the seventeenth in the two years since the Greek crisis, according to a Reuters count. Monday’s summit failed to agree on policies for growth and on details of a new austerity pact. Angela Merkel embarrassed everybody with a plan to impose euro-Viceroys on Greece and other debtor countries. Financial markets concluded that Portugal would inevitably follow Greece into debt default. And with Merkel administering the kiss of death by to Nicolas Sarkozy by saying that she would campaign for him in May’s French election, the probabl ... more

    The world watched with horror and fascination this week as investigators sought the cause of an entirely avoidable shipwreck in Italy that could have cost as many as 40 lives. Meanwhile, the cause of a much greater wreck - that of the good ship euro - is heaving into view. As Greece moves towards default, as France, Italy and Spain suffer credit downgrades, and as negotiations on last month's fiscal treaty reach deadlock, the euro is heading for the rocks. And the negligent captain is neither Greece, Italy nor France. It is Germany.   Germany has been responsible for almost all ... more

    This is undeniably the question that, over the weekend, every investor has had to ponder. On the one hand, it could be argued that rating agencies are, as always, a "day late and a Euro short" and simply telling the market what it already knows. After all, the yield on the Eurozone debt-weighted average 10-year bond yield rose considerably in October and November, to over 6%. The OAT-BUND spread also reached new record highs and has fluctuated between 100bp and 200bp since mid-September. So the market has been saying for a while that France and Germany were not quite the same cr ... more

    One of the main themes of my research since last summer has been the possibility of a sharp improvement in the US economy and the likelihood that US economic conditions, whether good or bad, would set the tone for financial markets in 2012, even while investors and policymakers remained obsessed with the chaos in Europe. The US economy would produce the signal for markets, while Europe would create a lot of random noise. This outcome now looks increasingly probable. While a recession in Europe is now inevitable, the real risks from Europe are more financial than macro-economic. While a br ... more

Recently Editor-at-Large of The Times, Anatole Kaletsky is the author of Capitalism 4.0: The Birth of a New Economy, a recently published book on the global economy after the financial crisis.  He is also a founding partner and chief economist of GaveKal Dragonomics, a Hong Kong-based research group which provides macro-economic analysis, commentary and asset allocation services to over 500 financial institutions around the world.

Since 1976 Anatole has been an economic and political journalist for The Times, Financial Times and The Economist, during which time he was recognised as Commentator of the Year (1992), European Journalist of the Year (1995), Economic Journalist of the Year (2001) and Financial Commentator of the Year (2010). He is a director of several investment companies and a co-founder, with George Soros, of the Institute for New Economic Thinking.

Anatole was educated at Cambridge University, where he graduated with a first class honours degree in Mathematics, and at Harvard, where he was a Kennedy Scholar and gained an MA in Economics. He is an honorary Doctor of Science from the University of Buckingham. Anatole was born in Moscow, Russia in 1952 and lives in London with his wife, a film producer, and their three children.

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