For the first edition of 2018 we will look at how we expect the key themes of last year to play out in 2018. Probably the most critical issue is if and when inflation will emerge and what this means for the stock and bond markets. The second is whether crude oil prices will finally break out of the five-year old range. Finally, will 2018 be a positive year for the dollar? A Watched Pot Never Seems to Boil The tax package enacted in December has arguably made the market see inflation as a serious risk for the first time

Need and yield are making cat bonds roar. Low interest rates and a hunger for uncorrelated returns are fueling investor demand for bonds insuring against hurricanes, pandemics and other catastrophes, pleasing insurers eager to lay off risk. Yields on these instruments have fallen even as issuance has soared. Disaster, if it strikes, may only increase their popularity.In a typical cat bond, an issuing insurer or government agency pays a healthy interest-rate premium to investors over about three years. If a pre-specified event happens, the buyer forfeits some or all of the principle. So if, say, an earthquake above a certain

Like a cinematic vision of Frankenstein’s monster, German utilities RWE and E.ON have just been given a reviving jolt of electricity. The country’s top court ruled on Wednesday that they can reclaim their payments of a nuclear fuel tax to the tune of more than 6 billion euros. Thus re-animated, they can now start looking for a mate. German power companies have scored two strikes against Chancellor Angela Merkel’s energy policy in the past six months. In December, the court ruled they should be compensated for Germany’s abrupt decision to shut down nuclear power plants after the Fukushima disaster in 2011. Now

Dissecting France’s productivity performance Emmanuel Macron has convincingly defeated Marine Le Pen to become President of France. Although we have not passed peak protectionism, we can shift our focus back to worrying about the actual economics – at least in France’s case for now. According to Nobel laureate Paul Krugman: “Productivity isn’t everything, but in the long run it is almost everything.” We concur.   What explains France’s ‘productivity puzzle’, i.e. the country’s outperformance of its peers on the GDP per hour measure, but not the GDP per capita measure, and the divergence between the two gauges of productivity in

Daniel Loeb may be spinning his Honeywell International story a bit too far. The activist investor wants the $100 billion conglomerate to hive off its aerospace unit. That could be an option, but Loeb’s pitch that it would boost shareholder value by $20 billion is a stretch. Aerospace is Honeywell’s largest business, accounting for around 37 percent of the company’s $39 billion of revenue last year. But the unit’s sales have on average grown at just 0.6 percent annually over the past five years, according to Credit Suisse. Loeb says this is why Honeywell trades at 18.5 times estimated earnings