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The Fama Puzzle at 40 (Econbrowser, 4 min read) Traditionally, FX carry trades have performed well, despite violating theory – uncovered interest rate parity (UIP) and rational expectations. The currency with higher interest rates should depreciate to wipe out the carry, but in reality that doesn’t happen. However, since the financial crisis, the theoretical relationship is correctly predicting the real-life direction of currencies. The trouble is that they are now too sensitive to interest rates. (Bearish FX carry trades)
Charting the World’s Major Stock Markets on the Same Scale (1990-2019) (Visual Capitalist, 3 min read) If you invested $100 in the U.S. market in November 1990, you would have over $1,000 today (+980%). However, if invested in Japanese stocks in 1990, you would have made $10 return (or 1%).
The Green Deal Will Make or Break Europe (Project Syndicate, 4 min read) The proposed “European Green Deal” by new EC president Ursula von der Leyen could lead the EU to dominate the issuance of “safe assets” and green bonds. This could help the euro become the top reserve currency. However, the path to this is fraught with politics. (Bullish green bonds and Euro)