Taper Delayed; The Economy Is Just A Modeled Concept
The FOMC picked up another dissenter in its St. Louis branch, but the real consequences of trying to talk down bubbling, frothy markets are beginning to show up. Like the JGB market, UST volatility is dramatically higher (Bank of America Merrill Lynch’s MOVE index jumped from a record low/complacent 48.87 in May to 84.75 in .. read more
School Is Out In Brazil Too
While currency temptations run high in countries with more active central banks, there has been, as I noted yesterday, growing illegitimacy in trying to create academic conditions in the real world. The primary manifestation of the instability created by believing currencies can and should be actively managed has been an outbreak of “inflation”. I use .. read more
Real Estate Construction May Be Shifting
I had a conversation with Joe Calhoun yesterday regarding an uptick in construction activity in Miami and some other places in the Southeast. He mentioned that some of his contacts had in the past few months begun to see a huge increase in the number of bidsheets for construction work that was ready to break .. read more
School Is Out In Japan
The operative theory behind QE relates to the academic exercise of overcoming the real world constraint of nominal interest rates, called the zero lower bound (ZLB). Once the offending central bank has pushed rates to the ZLB, conventional monetary science posits only extraordinary means to overcome this limitation. After all, central banks cannot be impotent .. read more
Repos, Collateral and the Unhappy Swaps Elephant
Following up on the repo warning from two weeks ago, we have gotten confirmation in the form of repo fails. In the US treasury repo market, the primary liquidity conduit in the US dollar wholesale money, we have been seeing indications of dramatic shortages in available collateral for some time. It was first noted back .. read more
Glimmers Of Hope For The Economy?
We have been pointing out for over a year now that the trend in the economic data has been negative and we’ve taken some grief for that as the stock market has marched higher. Jeff Snider, in particular, has been raked over the coals by some commenters (public and private) for his reporting on the .. read more
Nobody Is Paying Attention To Junk?
Just over a month ago we noted the clear exuberance in the junk bond space in the context of the growing usage of the word “bubble”. At the time, various junk or high yield indices had seen yields fall laughably below or near 5%. It was not all that long ago that short-term US bills .. read more
Overall Trade Activity Does Not Bolster Taper Optimism
Coincident to the relatively boring retail sales report, the Census Bureau estimated declining trade fortunes across the whole goods supply chain. In the seasonally adjusted data, total trade sales fell 0.1% in April after declining 1.2% in March. Compared to April 2012, total sales were up only 1.5% (meaning they declined on a real basis). .. read more
