It doesn’t take much effort to find bearish sentiment about stocks or the economy right now. CNN’s Fear & Greed Index, an amalgam of seven discrete market sentiment indicators, is still in the “Extreme Fear” zone. Generally, market bottoms are associated with extreme fear while tops are associated with extreme greed. And it generally works; the gauge was pegged in [...]
Over the last five weeks, the Federal Reserve has been in crisis mode. As a consequence of all its balance sheet expansions, the expansive alphabet soup of programs, along with QE6, the level of bank reserves has risen by just over $900 billion. That’s the increase leftover for the banking system after everything adds up on the asset side and [...]
The Federal Reserve announced the Secondary Market Corporate Credit Facility (SMCCF) on March 23. The intent of this program was to calm the corporate bond market (secondary) then experiencing a massive blowout. Credit spreads of all kinds of corporate securities were exploding, the market in danger of completely shutting down.According to its latest balance sheet statement as of this afternoon, [...]
Gross FIMA misconduct. Jay says, not my problem! Fire the man. Immediately.
It used to be that at each quarter’s end the repo rate would rise often quite far. You may recall the end of 2018, following a wave of global liquidations and curve collapsing when the GC rate (UST) skyrocketed to 5.149%, nearly 300 bps above the RRP “floor.” Chalked up to nothing more than 2a7 or “too many” Treasuries, it [...]
A Prognosis for U.S. Stocks The future for U.S. stocks over the next decade appears ominous, regardless of the impact of the Coronavirus. Why? Because valuations matter. And stocks at the end of February were priced for perfection. Any significant negative development was poised to drive them lower. The COVID-19 Virus that shut down the U.S. economy has certainly qualified. [...]
India like many emerging market countries around the world holds an enormous stockpile of foreign exchange reserves. According to the latest weekly calculation published by the Reserve Bank of India (RBI), the country’s central bank, that total was a bit less than half a trillion. While it sounds impressive, when the month began the balance was much closer to that [...]
Stocks rose last week, a breathtaking, nearly 20% run off the recent lows before a pullback Friday trimmed the gain for the week to about 11%. That was certainly helpful but investors would be well-advised not to get too excited. This is what bear market rallies look like. They come out of nowhere, they run much further than anyone thinks [...]
It’s one of those crisis-level-of-illiquidity things that if you heard about it in normal times it would make you shake your head in disbelief. During a full-blown meltdown maybe it’s not standard stuff, but given the chaotic conditions it doesn’t seem so preposterous, either. Negative convexity is an otherwise benign phenomenon in fixed income that when combined with a lack [...]
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