Though most of Russia’s territory belongs in Asia, it would be difficult to characterize Russian finances as “Asian.” Most of the dirty work is done in the financial centers of Moscow, but in the past year and a half under the “rising dollar” paradigm, Russian financial existence may be more Asian than geography alone might permit. The similarities are perhaps [...]
In addition to global “dollar” markets, the treasury curve and “inflation” trading both suggest more so disruptive potential than the optimistic path forward laid out by the FOMC’s policy decision. Upward monetary policy adjustments are in anticipation of “overheating” or an economy in the predicate position for its imminent take off. Since credit markets are discounting mechanisms in a manner [...]
Repo rates were once again today above the upper “ceiling” of the FOMC’s intended corridor, marking three consecutive trading days exploring territory not meant to be reserved for secured overnight lending. The MBS GC rate hit 60 bps, surging with agency GC likewise nearing 60 bps. The UST rate fell slightly but remained just above the 50 bps upper limit. [...]
Japan has a history of revising its economic figures all over the place. The QQE era seems to have made GDP accounting something of an art form rather than the quantitatively determined “science” of how it is presented. For example, last December the Japan Times ran a story on December 2, 2014, under the headline Japan’s Recession May Be Shallower [...]
The federal funds rate applies to a range of actual trades in unsecured overnight lending. What you see as the calculated “effective” rate is an average of those trades. Under the ZIRP/QE paradigm, there has been very little dispersion since there isn’t much volume in that corner of the money market. By theoretical definition, repo rates should come in under [...]
From the perspective of foreign economies, the primary economic problem is US consumers. That sets up a contradiction as noted earlier today with durable goods estimates; economists think US consumers are quite healthy and the contraction in manufacturing is due to foreign economies. The inventory imbalance, or bloat as it was aptly described, cannot be an overseas problem and therefore [...]
Durable goods estimates were somewhat better in November than they have been in recent months. Year-over-year, orders contracted by less than 1% in the latest month after contracting more than 2.7% in each of the prior six. In September, durable goods orders (ex transportation) were down almost 5.5%. While that counts as improvement it may not count as meaningful. The [...]
Major Asset Classes with Positive Total Returns US Reits - 2.62% US Large Caps (SP500) - 2.2% Munis (3yr) - 1.16% Emerging Market Bonds - 1.08% US Bonds - 0.76% Cash - 0.02% Unfortunately, 2015 was not a great year for diversified portfolios. Kudos to those who owned Japan, Europe, US Large Cap Growth, Foreign Small Caps, Preferred Stock and [...]
Not long ago, I wrote that it was somewhat odd that more attention wasn’t being paid to sovereign wealth funds. This was only somewhat surprising given that oil prices were still thought “transitory” and thus the mainstream clearly felt there wasn’t anything deeper to be assembled from that. However, now that it has finally dawned that oil isn’t likely to [...]
This isn’t surprising, but events in China are accelerating. Just as the West heads into year-end coma, there is much to be concerned about on the other side of the Pacific. For, one, either the PBOC has taken off whatever means it has been using to suppress SHIBOR or the strain has become too much to bear. As much as [...]
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