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…

201411.23
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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…

201411.17
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Shortening The Road With ‘QE’ Speak

Sovereign debt is the tangible pivot by which everything in Europe depends. That speaks not just to persistent fiscal imbalances that remain, years later, unresolved, but the unspeakable financial equivalent to a doomsday scenario. The damage to the European economy from the last financial panic is slowly being revealed (as with the unrequited and un-criticized…

201411.16
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Bubble Behavior?

I really hate the term bubble. With regard to markets, frankly it has no meaning. One man’s bubble is another man’s rational bull market. There is no agreed upon valuation metric which, once exceeded, pegs a market or a sector or a stock as a bubble. My view on the matter is that “bubbles’ are…

201411.14
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Trying A Little Too Hard

Apparently St. Louis Fed President James Bullard is aiming toward the myth of the FOMC as “data dependent.” It wasn’t all that long ago that he suggested a pause in rate “normalization” as credit markets were signaling the “dreaded” disinflation appearance. A few weeks is all it has taken to change his mind and put…

201411.13
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Better Be A Shovel-Ready Future

In reviewing commentary about all the posturing in Japan preparing for what looks like, to me, an end of the recovery idea, there was one very alarming passage that I think may be important (and not just widely ridiculous) that ties together failure and the possible future course: Abe said yesterday he hadn’t decided whether…

201411.13
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China Falters Again, Though Commentary Carefully Avoids Full Recognition

There was not much good news from China last night, particularly as there were no PMI releases to allow the media and economists to project uncorrelated optimism. Everything from industrial production to retail sales came in under “estimates”, with industrial production in October particularly worrisome as the second worst month (only better than August) since…

201411.12
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Why Bubbles Are Being Recognized

The nature of liquidity under the eurodollar standard is to essentially link “markets” that outwardly seem to have little or no relation. You can see the synchronized ups and downs quite clearly but miss the ultimate connection, especially under the orthodox assumption of the world’s economies and their “natural” finance as mostly closed systems with…

201411.11
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Throwing in the Towel On Japan

In what can only be an intentional trial balloon, the Abe government in Japan is making noise about delaying the next scheduled tax increase. Considered to be one of the important “arrows” in Abenomics, this is an especially stark admission that orthodox economics has not (yet again) delivered on its promise. When QQE was started…