201411.25
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CBO: QE Failed As It Has Shown Nothing For The Economy

As I have said before, the handoff from Bernanke to Yellen was significant not just in terms of background but also in philosophy and viewpoint. Both were strictly academic statisticians (they call themselves economists) but there was an immense shift about QE. To be fair, there is some evidence that thoughts about QE had changed…

201411.25
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Home Sales Not Enough For Prices And Inventory?

Price momentum is usually the key factor in any asset bubble, as it takes sustained ascent to draw in more and more participants. If price acceleration begins to falter, the discussion and bemusement (for some) about who might end up the Greater Fool becomes paramount. But that is not a straight-line process either, nor is…

201411.25
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Contours of the Cliff

I usually ignore sentiment surveys as, to reiterate one more time, they do not mean what people think they mean (and certainly not how they are used). The ISM Manufacturing Survey, for example, has been on fire for most of 2014 in an almost exact mirror of 2011. And just like 2011, that told us…

201411.24
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There Will Be Other Exits Apparently

There were already operational problems in September when the Fed capped the limit on its reverse repo program, so in retrospect it isn’t all that surprising that it is being downplayed now. As the FOMC supposedly moves toward a rate increase, it is confronted with a very real problem in that the federal funds rate,…

201411.24
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Another Year of Christmas ‘Cold Feet’

If payrolls were indeed expanding at a robust clip, then we should be able to look forward to a Christmas retail season more like pre-crisis than anything of the past few years (especially last year). Of course, most initial indications of expectations for spending actually seemed favorable to such an outcome, which may not have…

201411.23
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The Return of Conundrum

co·nun·drum – noun: A confusing or difficult problem; a question or problem having only a conjectural answer Merriam-Webster Back in the last Fed tightening cycle, Alan Greenspan described the refusal of long term rates to follow short rates higher a conundrum, something he couldn’t really explain. Unlike past periods of tightening, long term rates refused…

201411.21
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Corporate Evidence For Liquidity Regime Change

Adding to the repo observations from this morning regarding illiquidity and more importantly gathering risk aversion, the behavior of corporate bonds and spreads matches that overall sketch very closely. The key point is how different the corporate bond space, like the UST curve, has behaved in 2014 in relation to 2013. In past periods just…

201411.21
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More Evidence For Liquidity Regime Change

There is so much depth that is missing from the ongoing discussion about the state of “markets” as the Federal Reserve purportedly moves toward “normalizing” its regime. That isn’t all that surprising given that most people still have never heard of these various moving parts, and certainly cannot easily grasp the concepts without some degree…

201411.20
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The Dead Parrot FOMC

As the FOMC gathered only a week after October’s unusual UST “experience”, they faced an oddly familiar problem. The entire focus, at least externally, has been on how to exit extraordinary “accommodation.” Yet there is clearly a market difference between 2013’s discussions in that direction and 2014’s. As noted previously, credit markets in 2014 seem…