We often think of liquidation events exclusively in terms of price, but in the real economy there is volume to consider. When financing dries up as financial agents run for cover lest they receive only further margin or collateral calls, it enacts a short run disruption in economic flow. At the margins, some firms are forced to delay activity while [...]
It’s not just that there was an obvious and intense change in sentiment, as that is quite common among and within markets. It is more so that this repetition is a little too familiar. In January, the mainstream was taken aback as the world looked headed for a very dark place, all “unexpected” of course. Just a few months later, [...]
It was an impressive rebound from the doldrums of February 11. Stocks managed to get back nearly even, as the S&P 500 closed above 2,100 on successive days April 19 and 20. Since then it has been more of a struggle; sideways to slightly lower. Gold has remained near and above $1,250 while funding markets and UST’s have been bid [...]
The risk budgets are unchanged again this month. For the moderate risk investor, the allocation between risk assets and bonds remains at 40/60. It was tempting to raise the risk allocation this month and up our allocation to the weak dollar investments we've favored for some time. But the only indicator that really improved was credit spreads and it was not [...]
It is a myth of the modern age, particularly post-1930’s, that the American banking system needed a central bank in order to perform the function of currency “elasticity.” There were, of course, several severe bank panics that occurred in the decades before the Federal Reserve but they did not end with its imposition. The worst banking liquidation wave in history [...]
Japanese officials including those at the Bank of Japan have been acting very erratic of late, eschewing the more traditional financial setting of vagueness. First it was NIRP that immediately blew up in their face, leading to very loud rumors of additional bank “stimulus” to offset NIRP only to have the BoJ instead do nothing at its last policy meeting. [...]
The front end of the oil price complex continues to get all the attention because it seems to further the more optimistic narrative. It is the back end, however, that is most significant. The nearer maturities of the futures curve reflect more the funding environment than the fundamental view of oil and the economy. The lack of continued liquidation has [...]
By now most people have given up on IBM. I don’t mean that they have dismissed the company as a dinosaur on its way to extinction but rather it has been pulled down from the Pantheon of bellwethers, no longer important in helping us determine the actual state of the US and global economy derived from actual results (rather than [...]
Today was the third consecutive down day or selling in eurodollar futures. The June 2018 contract settled below 98.80 for the first time in April, almost unwinding the move higher at the start of this month. Even after the selling, the eurodollar curve remains as depressed as ever, discounting an entirely different set of future circumstances than stocks or junk [...]
There is little doubt as to Wall Street (and London) shrinking but nobody seems to be able to come up with an explanation for it. Typically willful blindness is the reason, as investment banks no longer want the duties but that just isn’t consistent with what is supposed to be a roaring economy. If anyone were to make out under [...]
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