It is easy to simply narrow the paradigm of the government showdown into party politics, thus pitting Democrats squarely against only Republicans. But that is only helpful in gauging political implications, should there actually be any (were there after 2011?). Rather than order the spectrum in terms of politics, it is more useful, for our purposes here, to align them [...]
Despite the title of this post, I won’t presume to call a market top for anything, particularly in an environment rife with artificiality. Asset bubbles include a regular feature of going a long way past any even semi-rational level of departure, before turning on some wholly unexpected event or parameter. However, if you were brave/foolish enough to look for one [...]
The last time Japan increased its sales tax rate in an effort to get its fiscal “stimulus” deficit under control was 1997. It was, in part, responsible for ZIRP and the perpetual QE that followed. These days Japan’s economy functions in a similar state of decrepitancy that has “forced” the Bank of Japan to reach further into the activist policy [...]
The Federal Reserve continues to test its Fixed Rate Reverse Repo program, where it “borrows” currency from the banking system collateralized by the UST’s in its immense SOMA portfolio. These reverse repo “tests” may continue until January 29, 2014 (at least under current authorizations). Because they are fixed rate, full allotment, the Fed had set $500mm maximum bid amounts for [...]
The National Association of Realtors estimated that pending homes sales declined 1.6% in August from July. In July, pending sales slipped 1.4% from June. That makes three consecutive months of slightly lower home sale contracts, mirroring the time frame, as expected, of interest rate behavior. The level of actual new home sales rebounded a bit in August, but the pace [...]
Risk evaluation, at the systemic level, for derivatives in banking is focused on credit risk as the primary measure. As I laid out last week, that is the wrong approach since defaults in derivatives are not the primary risk. In the example of John’s Hopkins Hospital (JHH) and its interest rate swaps with JP Morgan and Goldman Sachs, the primary [...]
With earnings season growing closer, banks are beginning to report on their initial estimates of how they fared during the “taper summer”. So far, it is not looking like they did well at all (not that that was a surprise). Despite all their elegant models and simulations, including risk/hedging systems, traditional statistical evaluation, no matter how complex, has trouble with [...]
This week is a perfect illustration of the absurdity of “investing” in this activist age. It wasn’t all that long ago the Chairman of the Federal Reserve was just some obscure bureaucrat that barely rated mention in any mainstream publication or conversation. His job (they have only been “he” to this point) was to make sure currency was stocked at [...]
I think that the initial impulse driving FOMC concerns over “too much” monetary stimulus tied closely to three factors: repo markets, junk bonds and housing. Home prices in previous bubble markets have been on fire again, and in no way do those prices reflect actual supply and demand factors (they very much ignore basics like demographic trends). Prices reflected and [...]
As early as September 11, the changing trend had already been spotted. In Indian finance, the epicenter of taper turmoil since May, the inflows of “money” were distinctly different than the combat for funding experienced over the previous months. “Forex dealers said the turnaround in the rupee was mostly led by dollar inflows from foreign institutional investors (FIIs) in the [...]
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