The taper-driven bond selloff in May/June related to tightening in eurodollars and funding markets. As we know now, dollar conditions were extreme in some cases, leading to desperate turmoil across the globe. From the TIC flows, the pace of selling of dollar assets by foreign holders was epic back in June. What that tells us is foreign holders were unable [...]
If ever there was a case of “recession fatigue” it was Europe in the summer of 2013. There has been nothing but optimism from the Continent throughout, and sunshine purportedly reflected a burgeoning recovery that was far more broadly situated than the vagaries of Germany’s export economy. Spain and Italy were to be among those that could proudly proclaim, as [...]
The Banco do Brasil, Brazil’s central bank, announced that it is beginning to study market demand for rolling over the swaps it introduced this year to stem the depreciation in the real. As I noted back in August, the bank was playing with fire by appealing to the swaps market. The problem with using swaps as a currency supporting measure [...]
Well, that didn't take long. A couple of months ago, Ben Bernanke started the inevitable process of weaning the markets off his monetary methadone. He talked openly about the process of winding down quantitative easing, tapering bond purchases and eventually normalizing monetary policy - assuming the economy cooperated and sustained its feeble but forward momentum. Unfortunately, the markets threw a [...]
The Reserve Bank of India again intervened against the dollar last night, bringing the rupee off its historic low. The intervention, however, was dissimilar from previous moves as it took the form of restricting flow. According to The Hindu, the RBI took to, “ordering state-owned oil companies to purchase their dollar requirement from a single public sector bank for every [...]
The majority of investors that are attracted to gold are those that view the metal as real money. Money is a supposed to be a limited, scarce object that is not subject to the whims of human interference. But, to the dismay of true money believers, gold long ago lost the war of the modern evolution of the nexus between [...]
The most common question I receive about gold relates to the means through which an increase in leasing/lending activity is negative for gold prices. It appears that the mechanism by which this is accomplished is unclear and counterintuitive. By all accounts, an increase in the demand for gold as collateral to obtain “cash” should be positive for gold since it [...]
The volatility in yen markets, both stocks and credit, continued again with wild swings seemingly everywhere. The Bank of Japan also continued to promise measures aimed restoring calm, including outright purchases of ¥600 billion ($6 billion) JGB’s in the 5-10 year maturity range and an additional ¥300 billion ($3 billion) of maturities beyond 10-years. The focus remains on nominal yields, [...]
Lorenzo Bini Smaghi, a former member of the ECB’s executive board, raised some ire last month when he was quoted at the IMF’s spring meeting saying, “We don’t fully understand what is happening in advanced economies.” Such a statement drew so much attention largely because a significant number and proportion of investors, observers and professionals highly agree with him. Central [...]
The alchemists of Dark Ages lore had nothing on Wall Street. Like everything else in financial evolution, it begins as a good idea and gets warped and bastardized into a means of scalping “free money” for banks. This is particularly true in the age of prop accounts and banks masquerading as prudent intermediaries but operating as the largest hedge funds [...]
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