Joining me for my inaugural podcast to try to make sense of this GFC2 (and more) is my colleague and fellow monetary enthusiast Emil Kalinowski. We talk repo, collateral, and why there are only dudzookas from the Fed. It's also the start and tip of the ice berg for what we hope will become a much bigger project: an expansive, [...]
Why didn’t they think about this first? All of a sudden, with markets in the toilet (especially stocks), everyone is itching to get the economy back up and running. The first real peeks at what’s happened to it (as we’ll see in a minute) have definitely contributed to what seems to be an about-face. Many are starting to ask if [...]
Faced with severe economic distress and a global market meltdown, they promised that it would be big. Massive fiscal “stimulus”, however, might come at a price. In the short run it was necessary, according to the orthodox view. When a crisis shows up you don’t worry about how to pay for things. Once all is said and done, the current [...]
For several weeks now, the Federal Reserve has launched one bazooka after another. Officials there keep reassuring the markets, and the public, they’ve got an unlimited toolkit. However, the fact that they feel it necessary to keep showing you is a warning sign, especially how quickly each one is forgotten and overshadowed by the latest Big New Thing. The reason [...]
Stocks took another beating last week as the scope of the coronavirus shutdown started to sink in. The S&P 500 was down 15% last week with most of that coming on Monday after the Fed’s emergency rate cuts. Our accounts performed much better than that, but were still down on the week as corporate and municipal bonds continued to get [...]
I knew long before they came out that it was going to be a shitshow, pardon my French. You don’t screw up that badly and let the worst global monetary crisis in four generations happen on your watch with it having been any other way. So, when the FOMC transcripts for 2008 finally came out early in 2014, I knew [...]
The Federal Reserve conducts reverse repo operations (RRP) daily, and has for more than half a decade. These are very different from the “liquidity” operations the central bank has been deploying since last year’s rumble in the repo market; the latter merely mimic a repo transaction and are intended to push bank reserves the Fed creates on the spot out [...]
Forward-looking data is starting to trickle in. Germany has been a main area of interest for us right from the beginning, and by beginning I mean Euro$ #4 rather than just COVID-19. What has happened to the German economy has ended up happening everywhere else, a true bellwether especially manufacturing and industry. The latest sentiment figures from ZEW as well [...]
The front end of the yield curve is flattened out near enough to zero. While the bill yields I noted this morning did not finish the day session with a negative, they were close and several have traded that way in the after hours session (as of this writing, the benchmark 3-month bill is -1 bps). This thing doesn’t end [...]
Negative Treasury rates are here. The front end of the yield curve fell below zero for the first time, the equivalent yield for the 4-week T-bill at -0.025% as I write this. The benchmark 3-month yield is straddling zero (while 3-month LIBOR jumps, as noted yesterday). These are not surprising developments. They are to Jay Powell and the people who [...]
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