If more people desire a certain thing, in a free market the price of that certain thing will go up regardless of any possible inherent value. Indeed, that is how market consensus is supposed to work, the backbone of efficient markets. I don’t believe that markets are or ever can be perfectly efficient, especially in the current age where assumptions [...]
With several parts of the “reflation” trade rolling over, it is worth noting that one of the last of them to join in what may be growing reconsideration or doubt is inflation breakevens. In the 5-year and 10-year maturities, breakevens were at their lowest point on February 9, 2016, and have been moving higher ever since. However, we have to [...]
On February 8, 2007, exactly one decade ago today, shares of New Century Financial, a former darling of not just Wall Street but the mainstream, plunged 37% in panicky trading. The day before, February 7, New Century reported expectations for loan production for 2007 to be 20% below 2006 levels. But the real bombshell was the reasoning for that guidance, [...]
With JPY pushing above its recent resistance (for whatever might have caused it), it is useful to determine if that is an idiosyncratic change or whether there are other “dollar” indications that support a possible breakout. This is especially true given what I think is causing the move in JPY, namely that “reflation” had been initially predicated on ideas of [...]
Then-Federal Reserve Chairman Ben Bernanke testified before Congress on May 22, 2013, that taper was for officials a strong consideration. Though QE4, the UST portion of the restored balance sheet expansion, wasn’t yet six months old and he had promised, sort of, at the start of QE3 that both would be open-ended, sort of, his message to the legislature was [...]
In 2003, Nobel laureate Robert Lucas wrote admiringly in his Presidential address for the American Economic Association that the field of economics was itself a put-forward solution to the Great Depression. Such was the calamity that enormous intellectual effort was expanded so as to never repeat it. Though with that belated task there is also, or there at least should [...]
The main policymaking body of the Federal Reserve, the FOMC, has had a tortured relationship with eurodollar futures during this past decade. As I chronicled here in greater detail, starting in early 2007 the committee members decided that the deepest, broadest market in terms of money in human history could not possibly reflect accurate expectations. Ben Bernanke had told Congress [...]
There bond selloff intensified the past few days in the wake of the election. I still believe that the potential Trump represents, rather than anything that has been specifically proposed, is the likely catalyst. I am also quite certain that goes along with the change in Chinese behavior where RMB are far more plentiful now than just a few weeks [...]
When I first started some years ago, the guy I worked for told me to prepare myself because this business is so often just stupid. It does make sense given the high stakes and pressure, where everybody is literally trying to outsmart everybody else every minute of every day. And those kinds of conditions, variable as they are, lead to [...]
In early July, the Bank of Japan may or may not have contemplated the mother of all “stimulus.” Rumors began to fly that the Japanese central bank was, in fact, seriously considering an actual monetary helicopter as a way to boost flagging confidence rightly suspicious of any more QQE (or NIRP). We won’t know for some time (when the meeting [...]
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