Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>This market panic could further squeeze Global Liquidity
</li>
<li>Large debt overhang means US$50 trillion needs to be re-financed each year</li>
<li>
Debt/ GDP is 310%, but more worrying Global Liquidity is lagging rising debt</li>
<li>Problem is not interest rates, but capacity of capital, i.e. balance sheet size</li>
<li>Policy makers need to use fiscal policy to boost the economy; monetary policy for financial stability, and leave China to look after the World inflation rate!</li>
</ul>


This market panic could further squeeze Global Liquidity

Large debt overhang means US$50 trillion needs to be re-financed each year

Debt/ GDP is 310%, but more worrying Global Liquidity is lagging rising debt
Problem is not interest rates, but capacity of capital, i.e. balance sheet size
Policy makers need to use fiscal policy to boost the economy; monetary policy for financial stability, and leave China to look after the World inflation rate!


<ul>
<li>Sharp downward move in risk appetite positioning since coronavirus alert</li>
<li>Sell-off and risk aversion is equivalent to 2007-08 GFC</li>
<li>At these levels, equities have historically been a ‘buy’</li>
<li>Panic seems exaggerated by social media?</li>
</ul>


Sharp downward move in risk appetite positioning since coronavirus alert
Sell-off and risk aversion is equivalent to 2007-08 GFC
At these levels, equities have historically been a ‘buy’
Panic seems exaggerated by social media?


<ul>
<li>China’s PBoC undertakes huge liquidity boost to counteract economic effects of virus scare</li>
<li>Size equivalent to half of entire huge US stimulus from early September, but in one single day</li>
<li>Chinese reserve money now growing at near-30% annualised clip
</li>
<li>This matters since China now represents 28% of Global Liquidity, compared to 6% in year 2000</li>
</ul>


China’s PBoC undertakes huge liquidity boost to counteract economic effects of virus scare
Size equivalent to half of entire huge US stimulus from early September, but in one single day
Chinese reserve money now growing at near-30% annualised clip

This matters since China now represents 28% of Global Liquidity, compared to 6% in year 2000


Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

We continue to see coronavirus concerns as helping correct the excess bullish sentiment across global equity markets in the short-term. Additionally, considering the dearth of breakdowns, we continue to believe this is a bull market until proven otherwise and a “buy the dip” strategy remains warranted. We recap importat technical levels across markets and highlight opportunities within the Services, Technology, Financial Services, and Staples Sectors.

We continue to see coronavirus concerns as helping correct the excess bullish sentiment across global equity markets in the short-term. Additionally, considering the dearth of breakdowns, we continue to believe this is a bull market until proven otherwise and a “buy the dip” strategy remains warranted. We recap importat technical levels across markets and highlight opportunities within the Services, Technology, Financial Services, and Staples Sectors.

Global Equity Strategy: Growth Over Value

<ul>
<li>Global Liquidity surging, led by US Federal Reserve</li>
<li>Cross-border flows switching from safe havens to riskier markets</li>
<li>Parallel with 1985-87 period which started with Plaza Accord and ended with 1987 Crash</li>
<li>Danger points to watch are skidding bond markets; commodity price inflation; Central Bank policy reversal, and especially collapsing cross-border flows</li>
</ul>


Global Liquidity surging, led by US Federal Reserve
Cross-border flows switching from safe havens to riskier markets
Parallel with 1985-87 period which started with Plaza Accord and ended with 1987 Crash
Danger points to watch are skidding bond markets; commodity price inflation; Central Bank policy reversal, and especially collapsing cross-border flows


United States

The MSCI World Index is a free-float weighted equity index. It was developed with a base value of 100 as of December 31, 1969. MXWO includes developed world markets, and does not include emerging markets. MXWD includes both emerging and developed markets.

MSCI World Index (MXWO INDEX)

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Global Equity Strategy: Growth Over Value

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